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When you apply for a credit card, the credit card issuer will ask you for your annual income. They want to be sure you have the means to pay your bills on time. Issuers may ask you to calculate your income in specific ways. For example, they may ask for net income or gross income when filling out an application.

If you’re single and work a salaried job, this may be fairly easy to figure out. However, for many people, income can be complicated and comes from a wide variety of sources. It also might be shared with a spouse.

Here’s a look at what you need to know about what annual income means on a credit card application, and how to know what types of income to include if you have multiple sources.

What Counts as Income?

For the most part, any money that is paid to you directly and that you have reasonable access to counts as income. This includes money you received from an employer or, if you’re self-employed, from clients. It can also come from other sources, such as investments or retirement benefits. Note that income tends to vary by age, and it is not the same as net worth.

The following are some examples of types of income credit card issuers may consider:

•   Salary and wages

•   Commissions

•   Tips

•   Bonuses

•   Income from a spouse or partner

•   Pension benefits

•   Social Security benefits

•   Public assistance

•   Alimony and child support payments that you receive

•   Interest

•   Dividends

You may not have to include alimony or child support payments as income on a credit card application. The reason? Credit card issuers understand that those payments may already be earmarked for the support of an individual.

What Is the Difference Between Gross and Net Income?

When it comes to calculating income, it’s helpful to know what gross income and net income mean.

Your gross income is the total amount of money you make before any other deductions are taken from it. Deductions may include things like taxes, 401(k) contributions, and health insurance premiums. Your gross income represents income from all sources.

Your net income, on the other hand, represents how much money you have once all deductions have been made. For individuals, this is their “take-home” pay, which can be considerably smaller than their gross income. Credit card issuers may ask for net income as it represents money that you can access and isn’t earmarked for other purposes.

Tools such as spending apps can help you organize and manage the money you earn.

How to Calculate Your Gross Annual Income

Calculating gross income is relatively simple. You’ll need to add up income from all sources. For tax purposes, this will include wages, tips, bonuses, commission, capital gains, dividends, alimony, pension payments, interest, and rental income. You can find your adjusted gross income by subtracting above-the-line tax deductions, such as contributions to 401(k)s and traditional IRAs.

Credit card issuers can look at other income that’s not necessarily taxed, such as life insurance payouts or gifts. So be sure to include that in your calculation for a credit card application.

How to Calculate Your Annual Net Income

Calculate your net income by taking your gross income and subtracting deductions, including taxes, such as income taxes, capital gains tax, and employment taxes. You’ll also need to subtract contributions to retirement accounts and insurance premium payments.

If you receive a paycheck, there may be a line that spells out net income.

Recommended: How to Calculate Your Net Worth and Wealth

What Types of Income Don’t Count on a Credit Card Application?

There are some types of income that you can’t include on a credit card application. Generally, these are forms of income that you don’t have access to. For example, if your wages are being garnished to pay off a debt, you cannot include that amount of the garnished wages as income, as that money belongs to your creditor. Similarly, you can’t include money that goes toward alimony or child support payments or that you need to use to pay off tax debt.

What Happens If I Lie About My Income on a Credit Card Application?

It may be tempting to fudge your income on a credit card application. After all, tacking on a few thousands dollars to your income may be the difference between being approved for a credit card and being rejected. That said, you should never lie about your income on a credit card application. If you do, you’re committing fraud, and it’s a federal offense. So while it may not seem like a big deal to give your income a little boost, if you’re caught, you could face up to 30 years in prison and a fine of up to $1 million.

What Other Information Does a Credit Card Application Require?

In addition to income, you can expect a credit card issuer to ask for the following information on a credit card application:

•   Legal name and a valid U.S. address

•   Housing costs, which help the issuer determine how much debt you can afford to pay back

•   Your Social Security or Individuals Taxpayer Identification Number, which is needed for the credit card issuer to make a hard pull on your credit report to check your credit score

Issuers consider your credit score when they determine whether to extend credit to you. A high credit score shows lenders that you have a history of responsibly managing debts and paying your bills on time. Lower credit scores indicate that a borrower is less likely to make on-time payments, and lenders may be less likely to approve them for a card.

The best way to maintain a healthy credit score is to always pay your bills on time. You can receive a free credit report each year from the three major credit reporting bureaus: Experian, TransUnion, and Equifax. Check your credit report regularly to ensure there are no mistakes that could be dragging down your score. Report mistakes to the credit bureaus immediately.

Recommended: How Do I Check My Credit Score?

The Takeaway

Credit card companies look at your annual income to determine how much credit you can afford and to assess their risk in extending you credit. Some may specify how they wish you to calculate your annual income, frequently asking for gross or net income. Gross income is the total amount of money you make before any other deductions are taken from it. Net income represents how much money you have after deductions have been made. To calculate either figure, you’ll need to gather information about all your income sources.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

FAQ

What does it mean when a credit card application asks for annual income?

Credit card companies may specify how they want you to report your annual income. They may ask for gross income, which includes all income before taxes and deductions, or net income, which is income after taxes and deductions have been subtracted.

What counts as annual income?

Annual income includes all money that you can say you reasonably have access to. This typically includes salary and wages, commissions, tips, bonuses, income from a spouse or partner, pension benefits, Social Security benefits, public assistance, alimony and child support payments, interest, and dividends.

What doesn’t count as annual income?

You cannot include income that you don’t have access to, such as garnished wages, alimony and child support payments you’re required to make, or money that must be used to pay off tax debt.

Photo credit: iStock/max-kegfire

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.


Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Freezing your credit involves contacting the credit bureaus online, by phone, or by mail to lock down your information for free.

Credit cards and personal information can (and do) get hacked or stolen. Because of this unfortunate reality, it’s important to know how to freeze your credit. A credit freeze can help prevent identity theft or obstruct bad actors from taking out new loans or accounts in a borrower’s name.

Once you know how to freeze (and unfreeze) your credit, it can be quite useful in the right situations.

What Is a Credit Freeze?

A credit freeze, also known as a security freeze, allows individuals to limit access to their individual credit report. By freezing their credit, the person makes it more difficult for an identity thief to open a new credit account or loan in their name. This is due to the fact that creditors generally review credit reports before okaying new lines of credit, known as a hard credit inquiry.

However, freezing one’s credit does not prevent a person from viewing their free annual credit report. Moreover, it won’t restrict a person from opening a new account in their own name. They’ll simply need to unfreeze their credit to do so (more on unfreezing later).

Recommended: What’s the Difference Between a Hard and Soft Credit Check?

What Does Freezing Credit Actually Do?

A credit freeze does not actually freeze all outstanding accounts, such as credit cards and loans. Instead, it simply limits others from viewing a person’s credit reports. Under a credit freeze, only a limited number of entities will still be able to view a person’s file, including creditors for accounts that individual already holds and certain government agencies.

This means that credit bureaus can’t give out personal information about a borrower with a frozen account to new lenders, landlords, hiring managers, or credit card companies. Typically, this halts the lending, renting, and hiring process — as well as anyone attempting to steal a person’s identity and open a new account in their name.

Freezing Credit: What’s the Process?

If a person wants to freeze their credit, they need to reach out to at least the three major credit bureaus:

•   Equifax : 1-888-298-0045

•   Experian® : 1-888-397-3742

•   TransUnion® : 1-888-916-8800

People can take it one step further by reaching out to two lesser-known credit bureaus, Innovis (866-712-4546) and the National Consumer Telecom & Utilities Exchange (866-349-5355).

Typically, the agencies will ask for a Social Security number, birth date, and other information confirming a person’s identity prior to freezing their account. The bureaus will then give the person a password, which they may use to unfreeze their account. Make sure to store this information in a safe place.

Recommended: Biweekly Savings Challenge

Does Freezing Credit Cost Anything?

It costs nothing to freeze and unfreeze one’s credit. This is thanks to the Economic Growth, Regulatory Relief, and Consumer Protection Act, which mandates that credit bureaus must offer the service free of charge to everyone.

The credit bureaus must fulfill the request within one business day when a consumer requests a freeze through any method aside from mail. When consumers request to lift the freeze by phone or online, however, the credit bureaus must do so within one hour. This frees up the consumer to quickly do what they may need to do, whether that’s applying for a new apartment or one of the various types of personal loans.

Differences Between a Credit Lock and a Credit Freeze

A credit lock works in much the same way as a credit freeze, allowing consumers to protect their credit reports against bad actors and scammers. But, a credit lock can come with a bit more convenience, as borrowers can opt to open and close their locked credit via an app (rather than needing to reach out to each credit bureau with their password to unfreeze it).

While a credit freeze is complimentary thanks to the federal mandate, a credit lock may require paying a small fee. For example, Equifax offers credit locks for free, while Experian offers credit lock as part of a paid subscription.

Just as you’d crunch the savings numbers with a personal loan calculator, make sure to weigh the costs and benefits between these two options as well.

When to Consider a Credit Freeze

It’s really up to individual consumers and their own risk tolerance to decide when it’s time to freeze their credit report. That being said, if a person isn’t actively shopping for a personal loan or a new credit card, for instance, it may be a good idea to freeze their credit preemptively. This way, a consumer can feel a bit more confident that their credit information is in safe hands.

Another time to consider a credit freeze is when a borrower believes their personal data may have been breached, or if their Social Security number was recently disclosed, made public, or stolen.

How to Unfreeze Your Credit

Unfreezing credit is simple. All a consumer has to do is reach out to the credit bureaus by phone or online and plug in the password or PIN provided to them when they first froze their credit. Generally, it takes a few minutes for the account to become unfrozen.

A person can choose to unfreeze their report at one or all of the credit bureaus, but they will have to contact each individual credit bureau separately. They also need to go through the entire process again if they ever want to refreeze their credit down the road.

Individuals can ask to unfreeze their credit for a specific amount of time, such as if they are applying for and hoping to get approved for a personal loan or need someone else to access their account temporarily. Then, the freeze should return automatically when that period ends.

Alternatives to Freezing Credit

While not overly complex, freezing and unfreezing one’s credit can be time-consuming. Additional options are available to consumers.

Setting Up Credit Monitoring

Those who aren’t interested in freezing their accounts might instead consider signing up for a credit monitoring service. While these services charge a fee, they’ll alert users to any and all activity on their credit report. So, any time someone requests information, the person would find out and could then confirm or deny the authenticity of the request.

This could help stop any potential identity theft in its tracks. Still, it should be noted that this service cannot fully prevent theft, and the consumer may not know their identity was stolen until after the fact.

Requesting a Credit Report

For those interested in monitoring their credit for free, it’s possible to get a free copy of one’s credit report each year from all of the major credit bureaus, and possibly even more often. The consumer might then review the report, in detail, to ensure they recognize all of the activity and accounts described.

If the consumer spots anything out of line, they can then take steps to flag and fix it.

Consolidating Credit Card Debt

Another way that some consumers choose to keep track of their credit is by consolidating credit card debt with a personal loan from a private lender. Taking out an unsecured personal loan could help substantially lower the amount a person pays each month to different credit card companies.

By consolidating credit card debt into a single personal loan — one of the common uses for personal loans — a borrower may be able to take advantage of a single fixed-rate debt rather than juggling several high-interest rate cards. Additionally, having a single loan to repay each month can make it easier to monitor payment activity.

Recommended: Personal Loan Calculator

The Takeaway

If you are considering freezing your credit, this can be done for free with the credit bureaus. This can help protect your credit from unauthorized access and identity theft. Typically, you can freeze your credit online, by phone, or by mail and unfreeze it as well, with your file being accessible within an hour. Freezing your credit can help if you are seeking to protect your personal data and better control your personal finances.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

FAQ

Is freezing your credit a good idea?

If you think your personal information or identity has been compromised (say, through a data breach), it could be wise to freeze your credit to protect you from unauthorized access to your credit report.

What is the easiest way to freeze my credit?

You can freeze (and then unfreeze) your credit report with each of the three major credit bureaus. You can do this online, by phone, or by mail. Of these options, online may be the fastest option.

How much does it cost to do a credit freeze?

It’s free to freeze your credit with the credit bureaus Equifax, Experian, and TransUnion.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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A credit card is a small, rectangular piece of plastic or metal that lets you make purchases. Whether you’re buying lunch or a new piece of furniture, a credit card enables you to borrow funds from a credit issuer to pay the merchant. Then, every month, you’ll receive a statement in the mail with your balance, which you’ll want to pay off every billing cycle. Otherwise, you’ll owe interest on the remaining amount.

While the concept sounds simple, it’s easy to rack up debt if you’re not careful. With that in mind, here’s credit cards explained in-depth.

Credit Card Meaning

Banks and other financial institutions issue credit cards to consumers to extend revolving lines of credit. A revolving line of credit means the cardholder can borrow money up to their credit limit and then repay it on a continuing basis.

With other lines of credit, like a personal loan, you take out a lump sum amount and agree to repay it within a specific timeframe. During this timeframe, you make fixed installment payments. On the other hand, with a credit card, you can repeatedly borrow against the limit, which gives you more flexibility to use the card as needed.

When you receive your credit card, you’ll note several different numbers on it. There’s the credit card account number, alongside your name and the credit card issuer’s logo. Also on a credit card are the credit card expiration date, which marks when the card is valid through, and the CVV number on a credit card, which offers an extra layer of security in purchases made online or over the phone.

Recommended: What Is a Credit Card CVV Number?

How Does a Credit Card Work?

While there are different types of credit cards, this is the basic way they work. Once you have a new credit card in hand, you can use it to make purchases at places that accept credit card payments. Then, every month, you’ll receive a statement either electronically or in the mail, depending on your preference. The statement will include all purchases, your outstanding balance, and the minimum monthly payment due.

You’re required to make at least the minimum payment on your account to keep it open and in good standing. However, you also can opt to pay your entire balance in full or decide on another amount (as long as it meets the minimum payment requirement). If you were to pay an amount that exceeds your total balance, then you’d end up with a negative balance on your credit card.

If you aren’t able to make the minimum credit card payment, the outstanding balance will roll over to the next month and begin accruing interest and fees — which can significantly add up over time. Therefore, it’s best to get in the habit of paying off your credit card every month to avoid paying an extremely high amount of interest. But, if your finances don’t allow you to pay the entire balance, you could make smaller payments throughout the month to minimize the amount of accumulating interest.

To ensure you make your monthly payments, you can usually set up autopay for the minimum payment. This way, you won’t miss a payment and get charged a late fee. Unfortunately, late payments also can end up on your credit report, which can negatively affect your credit score.

How Does Credit Card Interest Work?

Every credit card comes with an annual percentage rate (APR), which represents the annualized cost of borrowing including interest and fees and marks an important part of how credit cards work. In general, credit cards are considered to have high interest rates vs. some other forms of credit, such as personal loans.

Some credit cards have more than one APR, such as a balance transfer APR, an introductory APR, or a cash advance APR. While introductory APRs are usually lower than the standard rate but only last for a promotional period, cash advance APRs are typically higher than the standard purchase APR.

You will pay interest based on the APR on a credit card if you have an outstanding balance that carries over from one month to the next. Credit issuers use your average daily balance, interest rate, and the number of days in the billing cycle to calculate the interest amount.

Usually, credit issuers offer a grace period where interest will not accrue. This period is typically between the statement date and due date, commonly 21 days.

Credit vs. Debit Cards

They may look alike, but there are notable and important differences between credit cards and debit cards. For starters, you’re not borrowing funds with a debit card. Instead, you’re drawing on funds in the bank account attached to the debit card. As such, you can’t incur interest charges, nor can you rack up debt. However, you can’t use a debit card to help establish your credit.

In general, debit cards offer less robust consumer protections against financial fraud and theft than credit cards do. They also don’t typically offer rewards or other benefits that credit cards can have.

6 Common Types of Credit Cards

Now that you understand how credit cards work, here are some available credit card options.

1. Reward Cards

You can earn cash back, points, or miles when you spend money using a rewards credit card. Some credit cards may also offer a sign-up bonus. For example, a credit card could offer 100,000 points when you spend $4,000 or more within the first three months of enrolling.

You can usually find a card offering rewards that coincides with your spending habits. For example, if you love shopping at a particular store, retail-branded cards have lucrative benefits for frequent shoppers.Some programs, like SoFi Plus, provide exclusive benefits that go beyond standard rewards, offering additional perks for members who qualify.

Keep in mind that you typically have to have a good credit score to qualify for a rewards credit card. But, even if you do qualify, it’s essential to keep your spending habits in check. Reward cards incentivize you to spend money, so you don’t want to end up overspending and getting into a pile of debt you can’t climb out of.

2. Credit Builder Cards

If you have little to no credit or need to build your credit, a credit builder credit card is a viable solution. You’ll likely start with a lower credit card limit and an APR that’s higher than the average credit card interest rate to reduce the credit card issuer’s risk.

Credit builder credit cards usually don’t come with the bells and whistles that rewards cards offer. Instead, the card can help you build your credit. With that said, you’ll want to use your credit card responsibly, making on-time monthly payments and paying off your balance every month. Not doing so could negatively impact your credit history and cost you a lot of money.

3. Balance Transfer Cards

Do you have a high-interest outstanding credit card balance? Using a balance transfer credit card is one solution for helping you tackle your debt. Balance transfer credit cards let you move your current credit card debt to a new account with a lower interest rate. Additionally, transferring your balance can mean you’ll only have to stay on top of one payment a month, rather than multiple.

Having a good credit score can help you qualify for a balance transfer credit card. If you qualify, you could receive a lower ongoing rate or even a 0% introductory rate, which usually will last for six to 18 months. You’ll want to try to pay off your balance within that promotional period, before the higher APR kicks in.

Note that balance credit cards often charge a fee for transferring a balance — usually 3% or so of the amount transferred. So, make sure you factor in the additional fees before you move over your existing balance.

4. Secured Credit Cards

Another option for those with little to no credit or poor credit history is a secured credit card. With a secured credit card, you make a refundable deposit, which protects the card issuer from defaulted payments. If you default, the credit card issuer can use the deposit to recoup the loss.

Your deposit is usually the amount of your credit limit. For example, if you are approved for a $500 limit, you may need to put down $500. Though your deposit will be tied up while the account is open, a secured credit card can allow you to build your credit when used responsibly. Just keep in mind that while secured credit cards are generally easier to qualify for, they also tend to have higher APRs and fees.

If you decide to close a secured credit card account, you can usually get your deposit back. The card issuer may also give you the option to upgrade to an unsecured card if you’ve proven your creditworthiness. In this case, you’d receive a refund as well.

5. Travel Credit Cards

If you’re a frequent flier or visit hotels often, a travel credit card can be a lucrative choice. Many airline and hotel brands have credit cards that let you earn miles, points, or rewards to use toward your travel adventures. Some credit cards may also come with a sign-up bonus or extra perks such as free checked bags, access to VIP airport lounges, and travel insurance.

When selecting a card, you’ll want to find the card that makes sense for the way you travel. That way, you can get the most out of your credit card. Travel credit cards usually require applicants to have good to excellent credit for approval. So, before applying, make sure to check your credit score to see if it’s acceptable.

6. 0% Introductory APR Credit Cards

If you’re getting ready to make a big purchase, a 0% introductory APR credit card might be worth considering. With this type of credit card, the card issuer gives you a 0% introductory rate to make purchases during a specific time frame. This way, you can make the purchase without paying interest on the expensive item(s).

However, you’ll want to make sure you repay the entire amount before the introductory period ends to avoid interest. Before you swipe, make sure you have a plan to pay off the balance within that time frame.

Also note that to qualify for a 0% introductory APR credit card, you usually must have good to excellent credit.

Pros and Cons of Credit Cards

Here’s an overview of the pros and cons of credit cards, which are helpful for anyone just getting familiar with the credit card definition to be aware of:

Pros

Reasons a credit card can be worthwhile include:

•   Convenience. A credit card offers much greater convenience than, say, carrying around a wad of cash. You can easily swipe or tap your card at any merchant that accepts credit card payments, which the vast majority do.

•   Pay over time. Another benefit of a credit card is that it allows you to pay over time for a purchase. Say you’re in an emergency and need to access funds immediately, but know you’ll be good to pay back the amount soon. Or maybe you’re making a big purchase and don’t want to have to shell out for it all at once, instead spreading out payments throughout the month.

•   Build positive credit history. Credit cards give you the means to establish a strong payment history, which can help boost your credit score. When you need to apply for a personal loan or mortgage in the future, a higher credit score can help you qualify for better terms and rates.

•   Track spending. Credit cards are valuable tools for budgeting since many cards let you track your spending on an app or online. Also, some credit cards give you the ability to categorize your expenses to see where your money is going and make adjustments accordingly.

•   Get fraud protection. If your debit card information is stolen, fraudsters can directly access your bank account. But, if you use a credit card, you usually have more fraud protection benefits in places such as purchase protection and identity theft protection. For instance, you can dispute a credit card charge and even receive a credit card chargeback.

•   Earn rewards. Many credit cards offer a reward program like SoFi Plus that gives you points or cash back when spending money. For example, you could earn money for traveling, shopping, or even statement credits.

Cons

Remember, while credit cards are a valuable financial tool, they can also hinder you if not used responsibly. Here are some downsides to keep in mind:

•   Potential to damage credit. Just as you can positively impact your score with a credit card, you can also negatively affect it.

•   Possible to rack up debt. Credit cards can make it easy to rack up a mountain of debt that can continue ballooning, thanks to interest. It’s not easy to get rid of credit card debt either (for instance, here’s what happens to credit card debt when you die).

•   Interest. Credit cards generally have higher APRs compared to other types of debt — usually well into the double digits. It can make purchases much more expensive if you’re paying a hefty amount of interest on top of the actual cost.

•   Fees. Another downside of credit cards is the potential to incur fees. Some are avoidable, like late fees or cash advance fees, while others can be harder to avoid, such as if your credit card of choice charges an annual fee.

How to Apply for a Credit Card

Before you apply for a new credit card, you’ll want to check your credit score. You can pull a free copy of your credit report at AnnualCreditReport.com. Knowing your credit score will help you determine whether you meet the approval requirements for the cards you’re interested in.

Once you decide on some card options, you can usually get prequalified online. If you prequalify for a card, your approval odds could be in your favor (though you’re still not actually approved). Also, when companies process your preapproval, they only complete a soft credit inquiry, which won’t impact your credit like a hard inquiry does. However, when you’re ready to apply, the credit issuer will conduct a hard credit inquiry.

If you’re approved for the card you apply for, you should receive your credit card in the mail within 14 days.

The Takeaway

A credit card, in simplest terms, is a physical card you can use to make purchases and pay bills. A credit card typically comes with a credit limit, and you’ll receive a statement each month that details your purchases, the outstanding balance, and the minimum payment due. You’re required to pay the minimum amount due each month in order to remain in good standing with the credit card issuer and avoid negatively impacting your credit score. Paying off your balance in full each month enables you to avoid interest charges.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

What are the main differences between credit and debit cards?

Debit cards use the money in your checking account to pay for purchases. When you make a purchase using a credit card, on the other hand, you’re using a line of credit to borrow money. Therefore, you usually have to pay interest on your transactions with a credit card if you don’t repay your balance right away.

How do I choose a credit card?

It’s helpful to select a credit card that matches your needs and financial habits. You’ll also want to make sure you meet the card issuer’s approval criteria. For example, if a credit card requires a credit score of 700 and your score is 650, you may have to explore other options or take steps to build your credit before applying.

How long does it take to get a credit card?

Once you submit a credit card application, it may take just minutes before you’re approved. Usually, you’ll receive your credit card within 14 days of approval. You can call the credit issuer and request expedited processing if you need your credit card sooner.

Photo credit: iStock/Nodar Chernishev

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

This content is provided for informational and educational purposes only and should not be construed as financial advice.


Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Third Party Trademarks: Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

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There are various ways to maximize your credit card rewards for travel, including timing large purchases strategically and using shopping portals. These techniques can help you hit your travel goals more quickly and get you off on your next adventure. Learn more about travel rewards from credit cards and making the most of them.

Types of Credit Card Rewards for Travel

Just as there are many different types of credit cards, rewards from credit card use come in several varieties. When it comes to using rewards for travel, consider these options to find what best suits your needs:

•   Airline points and miles cards: With these credit cards, you typically earn miles or points on purchases made with the card. These can be redeemed with the particular airline’s rewards programs. Examples of airline credit cards include the Citi AAdvantage Mastercard and United Explorer Card.

•   Hotel credit cards: With this kind of travel credit card, you typically rack up points that can be used for rewards (such as upgrades or free nights) at a particular hotel chain. For instance, the Marriott Bonvoy Boundless Credit Card, Hilton Honors American Express Card, and IHG ONE Rewards Premier Credit Card are all examples of these cobranded cards.

•   Flexible currency cards: With these cards, you are not locked into a single airline or hotel chain. The points/miles and rewards you earn can be transferred to different programs, via Ultimate Rewards, ThankYou Points, and Membership Rewards.

You might use a conventional rewards credit card that earns cash back and lets you redeem your rewards for cash in the form of a statement credit, bank transfer, or check. You can then apply this toward travel-related expenses. The best rewards credit card for travel will be the one that suits your needs and spending style.

Credit cards that earn points typically let you redeem those points for things like travel, cash back, gift cards, and merchandise. The value of points will vary, but generally, a point is worth about $0.01. However, you may get better value when you redeem points for things like travel.

There are many factors to consider when deciding between credit card miles vs. cash back vs. points cards. Cash back cards often have low or no annual fees, and you can redeem your cash back for any purpose. However, they don’t usually have high-value welcome offers and may not offer as many benefits as other rewards cards. Credit cards that earn points or miles offer travel-related benefits and can help reduce the cost of travel, but they may charge large annual fees, and the value of the points and miles may vary.

Recommended: What Is the Average Credit Card Limit and How Can You Increase It?

5 Steps for Using Rewards for Travel

Here are five easy steps for using your rewards for travel.

1. Set a Travel Goal

First, set a travel goal. Decide where you want to go and when. If you are flexible on dates, you can save money or points. For example, flying a few weeks before Christmas instead of a few days before can save you a lot of money.

Is there a certain hotel or resort you dream of staying in? Do a little research to see what their rates are like. You might see that your target dates are at a time of high demand and cost due to a special event at that moment. You can then move your date a bit to avoid those extra-high prices. Or perhaps you are looking for just a two-night stay at a hotel near Lake Como, Italy, but all the lodging there has three-night minimums in summer. This kind of intel can be very useful as you plan.

Also, once you determine your goal, you can begin to develop a travel budget and start a travel fund to keep your money secure as you save and earn some interest.

2. Figure Out the Miles and Points You Need

Once you know where you want to go and when, you should see which miles and/or points you will need to get there. Scope out which airlines fly to your destination from your home airport (or another nearby), and which airlines they might partner with.

As you research routes that you might take, get a rough idea of how many miles or points the flights might cost. Be aware of blackout dates and other special considerations.

3. Research Airline and Hotel Loyalty Programs

Most hotels and airlines have loyalty programs in which you earn and redeem points and miles with that hotel or airline. Every hotel and airline has its own point system, though some have networks of partners, in which rewards can be used at multiple brands.

Airline partners within the same airline alliance allow you to redeem miles on flights operated by their partners. For example, Star Alliance includes airlines such as Air Canada, TAP Portugal, United Airlines, and many more. If you are looking at a flight, you may want to look up potential partners, as it is sometimes cheaper to book that flight with miles from a different partner.

4. Shop for Credit Cards That Will Help You Meet Your Goal

Once you know which airlines and hotels will work best for your travel goal, you can figure out which credit card rewards can help you reach that travel goal.

Credit cards with rewards can be an example of how families afford to travel. You can earn points and miles every time you swipe or tap and then redeem them for travel expenses, like flights and hotels.

You may want to apply for a credit card with the specific airline or hotel, or one that offers points that are transferable to airline and hotel partners (like Chase Ultimate Rewards or American Express Membership Rewards). Be sure to research which airlines and hotels these rewards programs partner with. You should also compare things like annual fees, welcome offers, earning structures, and benefits like travel insurance. Make sure you understand how credit card travel insurance works; that can be an important perk.

5. Track Your Progress

Once you have signed up for the credit card(s) that will help you meet your travel goal, there are a few things that you will need to track. If your credit card has a welcome bonus after spending a certain amount, you will need to track your progress toward that minimum amount. Some banks track this for you in your account, but others do not. Some other things that you may want to consider tracking include:

•   Spending requirements

•   Spending goals

•   Deadlines

•   Bonus reward categories

•   Points expiration dates

•   Hotel points to help save on hotel costs

•   Frequent flier miles

Recommended: Getting the Most Out of Your Credit Card Rewards

Tips for Maximizing Your Cards

Maximizing your cards is important to get the most rewards that you can. Follow this advice to help squeeze every last drop of value from your cards.

Label Your Cards

If you have multiple credit cards, it can be difficult to remember which one to use for which purchase. You may have one card that earns more on dining, another that earns more on gas, and a third that earns more on groceries. Some credit cards have rotating bonus categories that change throughout the year and may offer a short-term bonus earning opportunity, like extra points on gas purchases for the next few weeks.

If you have trouble remembering which card to use for which purchase, you can try using stickers or tape on the card with words like “gas” or “dining.” This can help you find the right card at the right moment. This strategy can also offer some helpful guidance if you have a partner who is not as invested in maximizing their cards as you are.

Time Large Purchases Strategically

If you know that you will have a large or several large purchases coming up in the near future, you may want to plan your credit card strategy around them. You might apply for a new credit card with a welcome offer shortly before making the large purchase. Some credit cards have welcome offers that require you to spend a certain amount during the first few months. If you would not otherwise spend that amount of money, timing it around the large purchase could help you meet this minimum spend and earn a hefty bonus (say, extra points).

Utilize Shopping and Dining Portals

Shopping and dining portals can give you extra miles, points, or money when you complete an eligible purchase. This involves going through a certain platform when making a purchase so that you can earn extra cash back, points, or miles. In this way, you can stack these portal rewards with other rewards, like the ones that you are earning on purchases on your credit card.

•   Portals can be through an airline, credit card, or independent cash back company. Some popular airline portals include American Airlines’ AAdvantage eShopping and AAdvantage Dining, Southwest Airlines’ Rapid Rewards, and Delta Air Lines’ SkyMiles programs, among others.

•   Credit card companies that offer their own online shopping portals include Chase, Capital One, and Barclays. Popular cash-back portals include Rakuten, Mr. Rebates, and Top Cashback.

•   To use a shopping or dining portal, you would sign up for an account with the specific portal program. When you are ready to make a purchase at a retailer, you can go to the portal program’s website first, and click through there to the retailer to complete your purchase. You could also download a browser button for the program, and then click on the button before you complete your purchase.

•   If you want to compare which portal will give you the best return for a retailer, CashbackMonitor.com lets you search by stores or rewards types.

Try Apps

If you find yourself with points and miles in a variety of reward systems (like various airlines, hotels, and credit card companies), you may have a hard time keeping track of it all. Apps, like Travel Freely and MaxRewards, can help you organize your credit cards, rewards, points, and miles. Apps can help you easily see which credit card to use for which purchase, how many rewards you have in various systems, view upcoming annual fees, and more.

Recommended: Understanding Purchase Interest Charges on Credit Cards

The Takeaway

Credit card rewards can help make travel more affordable. Once you have figured out which credit card can enable you to reach your travel goals, learning how to maximize your cards will likely boost the rewards you reap. By labeling your cards, timing large purchases, utilizing shopping and dining portals, and using apps, you may get closer to your dream vacation that much more quickly.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

What are some tips to maximize credit card rewards?

Some tips to maximize your credit card rewards are to label your cards, time your large purchases for maximum impact, and use shopping and dining portals, as well as apps.

How do I get the maximum benefits from my credit card?

Getting the maximum benefit from your credit card rewards can be about understanding when and how to spend to get the most points or cash back; timing purchases properly; and labeling your cards so you use each one when it’s most effective.

What is the smartest way to redeem credit card points?

The smartest way to redeem credit card points is the way that uses them most effectively to reach your goal. You can redeem them for high-value uses, such as flights or hotel stays, but it’s wise to do so in a way that gets the most bang for your buck. For instance, avoid prime travel periods (like holidays) and know how to maximize earning points, such as using shopping portals or timing big purchases properly.

Photo credit: iStock/martin-dm

**Terms, and conditions apply: This SoFi member benefit is provided by Expedia, not by SoFi or its affiliates. SoFi may be compensated by the benefit provider. Offers are subject to change and may have restrictions, please review the benefit provider's terms: Travel Services Terms & Conditions.
The SoFi Travel Portal is operated by Expedia. To learn more about Expedia, click https://www.expediagroup.com/home/default.aspx.

When you use your SoFi Credit Card to make a purchase on the SoFi Travel Portal, you will earn a number of SoFi Member Rewards points equal to 3% of the total amount you spend on the SoFi Travel Portal. Members can save up to 10% or more on eligible bookings.

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A joint credit card can impact each cardholder’s credit positively or negatively, depending on how the account is managed.

Opening a joint credit card with someone you trust — meaning a spouse, partner, trusted friend, or family member — can seem like a good idea, but it’s important to be aware that you’re both 100% financially responsible for paying off the balance on the card. Plus, you both share privileges of making changes to the account, earning rewards, and using the card much the way you would as a primary cardholder of a solo account.

Learn more about joint credit cards and their pros and cons.

What Are Joint Credit Cards?

Just as the name suggests, a joint credit card is one that permits two users to share a single credit line. In turn, as primary cardholders, each individual is able to make purchases on the card, as well as update and manage account information. Plus, they’re each 100% responsible for paying off the card balance.

When applying for such a card, both individuals’ credit scores, and credit histories are reviewed. So if you both have strong credit scores, it could boost your odds of getting approved for a credit card with higher credit limits and favorable rates, terms, and perks.

But what might happen when one of you has a lower credit score? In that case, it could potentially hurt the odds of your getting approved for a credit card. Or it might lead to your being offered less favorable rates, terms, and lower credit limits. However, it could benefit the person with the lower score, as they’re piggybacking off the co-applicant’s higher credit score.

How Do Joint Accounts Work for Credit Cards?

As mentioned, both people will need to apply for a credit card. This means that the credit card issuer will review your respective credit scores and profiles. You both are equally responsible for paying off the balance on the card, and you each also have full rights to manage and make changes to the account. Plus, you can each make credit card charges, swiping or tapping at will.

A common misconception is that if you share a joint credit card account, your credit histories and scores will be merged. Not at all: Credit scores will always be looked at on an individual basis. In other words, the credit card payments on joint accounts will be reported to the credit bureaus, and this will be reflected on each user’s credit history.

Recommended: Credit Card Network vs Issuer: What’s the Difference?

How to Manage a Joint Credit Card Account

How you manage a joint credit card account is largely up to you and the co-owner on the account. While you both have full privileges to the account and can make changes, do you want to touch base before making any changes? Do you want to establish a monthly spending limit? It can be wise to agree to how you will use the account and what guardrails you may want in place before applying.

As for payments, you have decisions to make about who pays the bill. For instance:

•   You might decide it’s best to have one co-owner make payments and have the other person pay them back.

•   You could alternate making payments. That is, one account holder pays the January bill; the other takes care of February, and so forth.

•   Another payment guideline could be that you tally who bought what during each billing cycle and have each person be responsible for their fair share.

Recommended: What Is a Credit Card Chargeback and How Does It Work?

Impact of a Joint Credit Card on Your Credit Score

Joint accounts can affect your credit score. Here are a few scenarios to consider:

•   As all credit card payments on a joint account are reported to the credit bureaus, if you stay on top of payments, a joint account can help establish your credit. They can also help build your credit history.

•   On the flip side, if you fall behind on payments or the account goes to collections, that can negatively impact your credit scores. Debt gone to collections will stay on your respective credit reports for seven years.

•   Another way joint credit cards can impact your credit is credit utilization. If you run up a high balance and are using close to your credit limit, then it could depress your score. But if you keep a low credit usage ratio, then it could help establish or build credit from scratch.

•   Opening any credit card can affect your credit card history, which is another factor that plays into your credit score as tracked by the three credit bureaus.

Open too many credit cards in a short time period, and that may not be a positive thing; it looks as if you are trying to quickly access a lot of credit. But if you open a joint account and stay in good standing, it can lengthen each of your credit histories, which can be good.

Joint Credit Card vs Authorized User vs Cosigner

You might’ve heard the terms “authorized user” and “cosigner” tossed around when considering credit cards. While they both imply a level of joint usage on a credit card, they actually mean very different things.

•   An authorized user is a person you add to your account. They can use the card to make purchases. However, you remain the account holder and are fully responsible for paying off the card. And as the account holder, you are the only person authorized to manage and make changes to the account.

Your credit card payments are also reported on the authorized user’s credit file. So if you stay on-time with your debt payoff, this could establish or build your authorized user’s credit score.

•   A cosigner is someone who agrees to share financial responsibility on a credit card account. If you have a low credit score or are building credit from scratch, a lender will take into consideration the cosigner’s credit. A cosigner’s strong credit could help you get approved for a credit card you might otherwise not be granted. Furthermore, should you fall behind on payments, the cosigner is financially responsible for your paying off the balance.

Benefits of Joint Credit Card Accounts

Here’s a look at some of the advantages of having a joint credit card account:

•   Can help you land better credit card offers. If you both have strong credit scores, then it could potentially improve the chances of getting credit cards with higher credit limits and better terms and rates.

Should one of you have a lower credit score, it might help that person get approved for a better credit card.

•   Shared financial responsibility. If both co-owners of the credit card account are responsible and do their share to pay off the balance, it can help you stay on top of payments.

•   Streamlines bills. Instead of having two separate credit cards, putting both people’s transactions on a single account could simplify payments. You have one fewer bill to manage.

•   Can help build credit history. If one applicant is starting from scratch in terms of building a credit history, a joint account can help them establish themselves if payments are made on time and the credit utilization is kept low.

Disadvantages of Joint Credit Card Accounts

Now, consider the potential downsides of a joint account:

•   Shared financial responsibility. This is one of those “could be a pro, could be a con” factors. Why’s that? Well, if one person is doing most of the spending, you’re both on the hook for making payments. This could potentially get complicated if one person isn’t pulling their weight, financially speaking.

•   Potential personal complications. Should your relationship change or you end up fighting over transactions and other financial matters, a joint credit card could wind up being a difficult thing. Also, having a shared account could lead to each of you scrutinizing one another’s spending habits, for better or for worse.

•   Confusion over who pays for what and when. Even if you set up some basic guidelines, you might find yourself in a quandary as to who pays for what. Or maybe one of you overspends and it becomes challenging to pay off the balance or even the minimum payment due. A joint credit card could become a source of stress or arguing in this way if you can’t develop a good, fair system for responsible usage and timely payments.

Factors to Consider Before You Open a Joint Account

Before making a decision on whether to open a joint credit card account, you’ll need to decide on how doing so can benefit both parties. It can be wise to work through the following points:

•   Can a joint credit card help boost the odds of getting a credit card with better rates, terms, and more attractive perks? How can it help build both people’s credit histories?

•   Another important consideration is the payment arrangement. Who is responsible for making the payments? Or will you set it on autopay and link it to one person’s account? Who will be responsible for going through each billing statement and figuring out which transaction belongs to which user?

•   If you’re sharing a joint account with someone, it might be a good idea to have a savings account that serves as a cash cushion. You could each contribute a small amount every week, so it’s there in case money gets tight and you need help covering a credit card bill.

Do You Trust the Joint Account Holder?

As a joint credit card can impact your credit and financial situation, you likely need to truly trust the other party involved. If you’re relying on the other person to make payments on your behalf, can you count on them to do so? Also, it’s important that both parties are in a financially sound place where they can cover their share of the bill.

You also want to feel reassured that the co-account holder isn’t the type to splurge and put an extravagant purchase on the card. For instance, if you usually put, say, $250 a month on your credit card, you will likely want to know how much the other person usually rings up, as well as if they ever go buying sprees.

Are There Other Options to Consider?

Understanding exactly how a joint credit card works, what your respective responsibilities are, and how it impacts your finances and credit is important.

If a joint credit card doesn’t seem like the right fit, you can look into alternatives. These include keeping separate credit cards and possibly, if one person is building their credit from scratch, using a secured credit card.

Or the individual with a stronger credit history could add the other as an authorized user on their credit card account, as described above.

Recommended: Understanding Purchase Interest Charges on Credit Cards

Tips for Removing a Partner From Your Accounts

Unlike an authorized user, where you can simply remove someone from your account, you usually can’t remove one co-owner on a joint credit card. Typically, you need to close the account entirely.

Either person has the power to close the account. However, both parties will be responsible for making payments until the balance goes to zero. So, you’ll likely want to have a discussion before doing so. When would be a good time to close the account, and how will you go about handling paying off the remaining balance? Communication is key to making sure that closing the account doesn’t become a difficult situation.

The Takeaway

Opening a joint credit card can impact your credit, both positively and negatively. Typically, both applicants’ credit histories will be reviewed when seeking one of these cards, and each party, if given this kind of access to credit, will have full use of the account and full responsibility for the balance. If handled well, this can help establish and build your credit. If handled poorly, it can negatively impact your credit.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

How do shared finances affect my credit rating?

Sharing your bank accounts and budgets doesn’t inherently impact your credit rating. But when you open a joint credit card account, it can impact your credit histories, credit history length, and credit usage. With both parties responsible for the balance, it’s wise to think carefully about this kind of account. Another option is to be an authorized user on someone’s account who makes on-time payments and keeps their credit usage low.

Do both users on a joint credit card have the same credit score?

While both users on a joint credit card can be affected by the payment history and credit usage on the joint account, credit histories are always on an individual basis.

In other words, there’s no such thing as a shared credit account, and many factors go into someone’s credit score. So having a joint credit card doesn’t merge your scores or mean you’ll have the exact same score.

Is it advisable to open a joint account with my friend?

While you can open a joint credit card account with a friend, whether it’s a good idea depends on your financial habits and the level of trust between you two. Can they be trusted not to overspend and to do their part in paying off any credit card balance? A lot of discussion will need to take place before making this decision.

Photo credit: iStock/Jelena Danilovic

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Third Party Trademarks: Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

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