Credit Archives | Page 44 of 89

Apr

2024

How to Pay a Credit Card Bill With Cash

While many people use cash less often today, you can still use it to pay a credit card bill at some ATMs and retail locations or by using mail technique (money orders; no $20s in the envelope).

You might want to pay your credit card in cash if you work in a cash-based business, or a relative hands you an envelope of $20 bills as a birthday gift. It’s good to know that you can pay your plastic with that money at some ATMs and retail locations or by sending a money order.

Here, you’ll learn more about paying a credit card bill with cash and other ways to pay, as well as tips for keeping your credit card account in good standing.

When Should I Pay My Credit Card Bill?

Before diving into ways to pay your credit card bill, consider gaining some knowledge about the billing cycle so you can better understand how and when to pay a credit card bill.

• A credit card’s billing cycle is the time between two statement closing dates. This period is usually anywhere from 28 to 31 days.

• Another important tidbit about credit cards: A grace period for a credit card exists between the end of the statement closing date and your credit card payment due date. During a grace period, you aren’t charged any interest.

• You always want to pay your credit card bill (at least the minimum payment) by your payment due date — for good reasons that you’ll learn about next.

Why You Should Pay Your Credit Card Bill on Time

As mentioned, you should always pay your credit card bill by the payment due date to avoid negatively impacting your credit score. Here’s what you need to now:

• Payment history is usually the largest single contributor to your credit score at 35%. Your score may dip if you fall behind on your credit card payments.

• If you continue being late paying your credit card, your account could enter delinquency and then default. After you’ve defaulted on a credit card, your card will likely go to collections, which can seriously injure your credit score.

• If you can manage to pay your credit card on time and in full, you won’t owe any interest charges. So those purchases you put on your card won’t cost anything in interest.

A sober truth: Americans dole out an average of $120 billion in credit card interest fees a year. Paying off your balance in full each cycle puts your share of that money back into your pocket.

Why You Should Pay Your Credit Card Early

You’ll carry a lower balance when you pay your credit card before the due date. This means more available credit, which reduces your credit utilization ratio. (That’s the percentage of your credit limit that your current balance accounts for.) And the lower your credit utilization, the better.

Your payment history gets reported to the credit bureaus, and a lower credit utilization figure could help build your credit score.

If you’re carrying a balance, you’re charged interest daily on your balance. So, a lower balance by making an early payment means you’ll be paying less on interest fees.

Another reason why it’s a good idea to pay your credit card before the payment date is that it increases your available credit. If you were planning to make a major purchase on your card, you’ll usually have to spend within the credit available.

How Can I Pay My Credit Card Bill?

There are several main ways you can pay your credit card bill. Take a closer look at your options here.

Online Payments

Many credit card networks and companies offer the option to pay online. You can do this either through the card’s mobile app or by logging on to your account on your computer.

To make sure you’re always on top of your payments, you can opt for auto payment, which you may see called autopay. You can link a bank account, which sets you up for recurring monthly payments. You can choose whether you want to pay the minimum, full, or custom amounts each month. That way, you won’t have to quibble over whether you’ll remember to pay your bills. You just want to be sure you have enough money in your account to cover that payment so you can avoid the headache and fees that overdraft can trigger.

Over the Phone

Another way to pay your credit card bill is to call the number on the back of your credit card (or look for the customer service number online) and make a payment over the phone. Usually, this is an automated service, and you provide your bank routing and account number.

While this is a fairly convenient way to make a credit card payment, it’s easy to forget a payment due date and let it slip. There may also be a surcharge for paying this way.

By Mail

If you get paper credit card statements in the mail, you can also send payment via a check. Should you decide to go this route, you’ll need to be sure the check arrives to the credit card issuer before the cutoff time. It needs to arrive by 5pm the day it’s due or be deemed late.

With Cash

Yes, when your credit card bill is due, it’s entirely possible to pay using cash. If you’re wondering how you can pay a credit card with cash, there are typically three ways:

• By making a cash payment through an ATM. You probably can only do so at the credit card issuer’s ATM. You select the option to send cash, then deposit the money at the ATM.

• In-person, provided the credit card issue has physical branches.

• By sending a money order (this is the secure mail technique alluded to above; don’t put cash in the mail).

Can You Pay a Credit Card With Another Credit Card?

Typically, you can’t use a credit card to pay off another credit card. In other words, you can’t link your credit card and make an online payment, nor can you swipe a credit card to make an in-person payment.

However, with a balance transfer, you move the balance from one card to another, usually to save on interest. In this way, you are technically using a new credit card to nix the balance from an older card, then paying the balance on the new card. This might be helpful if you are paying off a large credit card bill.

Another option could be getting a cash advance on one credit card to pay another. This, however, will usually involve a high interest rate and fees, so proceed with caution.

Should You Carry a Balance on Your Credit Card?

Carrying a balance means shouldering interest fees. Plus, you’re increasing your credit utilization, which can reduce your score. In a perfect world, you should aim to pay off your balance in full each billing cycle.

However, if you need to carry a balance on your credit card, make it a top priority to make the minimum payments and pay on time, all the time. Getting that bill paid on time, as noted above, can help build your credit.

When Do You Receive Your Credit Card Bill?

If you get paper statements, you can expect to receive your credit card statement at least 21 days before your bill is due. This is legally required of credit card issuers. In some cases, they might send you your bill before the 21-day mark.

If you opt for paperless statements, you can view your bill as soon as the billing cycle ends. Downloading your credit card bill from your card issuer’s app at the end of a billing period is also an option — and can be the most convenient one.

Tips for Paying Credit Card Bills

Staying on top of your credit card bill is an important part of your financial life. Credit card debt carries high interest in most situations and can spiral upward if you aren’t diligent about monitoring and paying your balance.

• Set up autopay. The easiest way to make sure you pay your credit card on time is to set up automated credit card payments. You only need to do it once, and you can choose either to make the minimum payment, pay your monthly statement balance in full, or pick a specific amount.

• Monitor your accounts. Mistakes can and do happen. To make sure there are no errors or fraudulent activity, comb through your transactions regularly. When looking over your statements, besides transactions you should see any refunds, credits, fees, your minimum payment, and how much of your balance remains.

• Document cash payments. If you do decide to pay with cash, remember to get a receipt and make sure the payment shows up on your credit card statement.

• Always pay on time. Make it a top priority to stay on top of your credit card bills. If you’re struggling to keep up, consider reaching out to your credit card issuer and seeing if they’re able to move your payment due date or temporarily lower your minimum monthly payment.

• Make early payments. You can also break up your credit card payments in chunks, and pay a portion before your due date. This will increase your available credit limit, and lower your credit usage, which can help your credit. Plus, you’ll be paying less on interest.

One method you can try is the 15/3 credit card payment method. You split your credit card payment in half. Then, you pay half 15 days before the due date, and the remaining half three days before.

For example, your bill is due on the 24th of the month. And this month’s balance is $700. In this case, you pay $350 on the 9th of the month, and the other $350 on the 21st of the month. This can help you knock down your debt faster plus lower your credit utilization.

• Make more than the minimum payment. To pay off your debt quicker and cut down on how much interest you pay, aim to pay more than your minimum. If you receive a tax refund or a work bonus, lucky you! When wondering what to do with a windfall, why not commit to putting at least part of it toward your credit card payments?

• Take action if your credit card debt is getting too high. If you are struggling to pay off your debt or even the minimum due, it can be a wise move to look into such options as a balance transfer credit card, which will give you a period or no or low interest to play catch-up; using a lower-interest personal loan to pay off the card’s balance; or working with a nonprofit, well-regarded credit counseling agency to find solutions.

The Takeaway

It is possible to pay a credit card bill with cash. To do so, you will likely want to find the card issuer’s ATMs or branches, or you could use a money order. That said, whenever dealing with high-interest credit card debt, it’s wise to educate yourself about how the billing cycles and due dates work, so you can pay off the debt as well as possible and avoid snowballing interest charges. That can help protect your financial status.

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 credit cards can you pay in cash?

Can you pay a credit card bill with cash? Yes: Most major credit card issuers accept cash to make your credit card payments. These include Chase, Capital One, Citibank, Discover, Bank of America, Wells Fargo, U.S. Bank.

How do I pay a bill with cash?

You can typically pay a credit card bill with cash in one of three ways: by visiting the card issuer’s physical location and making a payment, depositing a cash payment at a card issuer’s ATM, or purchasing a money order with cash, then mailing it to the credit card company.

Can I pay cash at an ATM for a credit card?

Yes, you can pay cash for a credit card, provided you are accessing your card issuer’s ATM. Then you’ll need to insert your card at the ATM, select the correct payment option, and follow the on-screen directions about how to proceed. You’ll need to insert the cash payment into the ATM and get a receipt for your transaction.

Photo credit: iStock/Abdullah Durmaz

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.

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 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.

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Apr

2024

Why Does Higher Credit Utilization Decrease Your Credit Score?

Your credit utilization ratio is a factor that represents how much of your available credit that you have already used; the higher it goes, the closer you are to maxing out your credit limit, which can negatively impact your credit score.

Granted, there are several factors that make up your credit score, which is an important three-digit number that can impact your ability to borrow funds and at what interest rate. While the exact makeup and percentage of each factor varies depending on the company calculating the score, there are a few commonalities.

Since your credit utilization is one of the more important contributors to your credit score, it’s important to understand it. Here, you’ll learn what credit utilization is, how it impacts your credit score, and how to manage it.

What Is a Credit Utilization Ratio?

Credit utilization, history of payments, length of credit history, credit mix, and number of recent inquiries are among the factors that make up a credit score.

A simple way to calculate your credit utilization ratio is by dividing your current outstanding balance by your total credit limit. Your credit utilization ratio can be anywhere from 0% (you have a $0 balance) to 100% (your credit cards are all maxed out).

Generally, a low credit utilization ratio is viewed as a positive factor in determining your credit score. It can show that you aren’t living beyond your means and are managing debt well.

What Is Utilization Rate?

Your utilization rate is another name for your credit utilization ratio. In other words, it is determined by the amount of available credit you have and your current credit card balance. You can calculate your utilization rate by dividing your current balance by your total available credit. Lowering your utilization ratio can be a great way to maintain a good credit score.

How Utilization Rate Affects Credit Scores

Your utilization rate is one of the factors that makes up your credit score, along with other factors like your payment history, number and type of accounts, and your average age of accounts.

Having a low utilization rate is a positive factor in making up your credit score, so it can make good financial sense to keep your utilization rate down.

Financial experts typically recommend keeping your credit utilization at no more than 30%. While that’s not a rule, it’s a wise guideline to keep in mind.

Why Utilization Rate Affects Credit Scores

The reason your utilization rate affects your credit score is that it is explicitly named as a factor by the companies that calculate credit score. Having a higher credit utilization can decrease your credit score.

It makes a bit of sense, after all: If your total balance is approaching the available limit on your credit card, you may not have the financial cushion to weather an emergency. Having a balance too close to your credit limit might also indicate that you are struggling with cost of living or impulsive buying. That can give lenders pause if you are applying for additional credit.

How Can You Calculate Your Credit Utilization Ratio?

It’s fairly simple to calculate your credit utilization ratio, as long as you know the outstanding balance and your total credit limit for all your credit cards. Then it’s just a matter of basic math. Here’s how to find your number:

• Add up your total balances across all of your cards.

• Divide it by your total credit limit. The result is your credit utilization ratio.

Examples of Credit Utilization

Here are two examples of calculating your credit utilization ratio:

• You have one credit card with a $10,000 credit limit, and you have a current balance of $2,000. Your credit utilization ratio is 20% ($2,000 divided by $10,000).

• You have two credit cards, both with a $7,500 credit limit. You have a balance of $1,000 on one of your cards and a balance of $4,000 on the other card. Your credit utilization rate is 33.3% (a total balance of $5,000 divided by a total limit of $15,000).

How Can You Lower Your Credit Utilization Ratio?

There are a few ways that you can lower your credit card utilization. Consider these ideas:

Keep Credit Card Balances as Low as Possible

One of the best ways to lower your credit utilization ratio is to keep your card balances as low as possible. One way to do that is by following the 15/3 credit card payment strategy. This strategy has you make an additional credit card payment each month to keep your average balance as low as possible.

Pay Off Your Balances

In a similar vein, one way to keep your credit utilization ratio low is to start the habit of paying off your credit cards in full, each and every month. While there are differing opinions on whether you should pay off your credit card in full, there’s no doubt that doing so will help keep your utilization rate low.

Request a Credit Limit Increase

In addition to keeping your total credit card balance low, you can also lower your credit utilization ratio by increasing your total credit limit. Many credit card issuers will increase your credit limit after you have shown a positive usage history or if your underlying financials have changed.

If you have recently gotten a salary increase or paid down other debt, consider asking your issuer to increase your credit limit. This is not to say you should spend up to that limit, however (which could cause a decrease in your credit score). Rather, the goal is to make any balance you are working on paying down yield a lower credit utilization vs. the newly higher limit.

Apply for a New Credit Card

Because your utilization rate is calculated based on your total available credit, another way to improve your ratio is by applying for a new credit card. If you are approved, the credit limit on your new card will then be used in making the calculation. If nothing else changes, that will lower your utilization ratio.

This same concept is why it may not make sense to cancel unused credit cards. However, it could wind up negatively impacting your credit score as it could lower the length of your accounts on record, which is part of the score calculation.

The Takeaway

Your credit utilization ratio is defined as your total outstanding credit card balance divided by your total credit limit. This utilization ratio is one of the key factors that contributes to your credit score. Generally, a higher credit utilization leads to a lower credit score, and vice versa. If you are trying to build your credit score, lowering your utilization ratio can be a great way to make that happen.

FAQ

Does high credit utilization lower credit score?

Yes, your utilization ratio is one factor that makes up your credit score, and a high credit utilization can lower your credit score. If you’re looking to build your credit score, one thing you can do is lower your utilization ratio by paying down your balance on existing credit cards or by increasing your total credit limit.

Why did my credit score drop when my credit utilization decreased?

While credit utilization is a major factor that makes up your credit score, it is not the only factor. Even if your credit utilization decreases, that may be offset by changes in some of the other factors (such as late payments) that make up your credit score, causing an overall decrease.

How does high credit utilization affect credit score?

Your credit utilization percentage is among the biggest factors that make up your credit score. A high credit utilization can be a negative factor that drags your credit score down. One way to build your credit score is to lower your utilization ratio, either by increasing your credit limit or paying down your existing balances.

Photo credit: iStock/Xsandra

Apr

2024

What Are the Benefits of Credit Cards with Clear Membership?

By Jamie Cattanach | Credit, credit card | Comments Off

A Clear Plus membership — the paid kind — can be a valuable credit card perk since it can help you get through airport security more quickly and easily by using biometric identification.

An individual Clear Plus membership currently costs $189 a year, plus $99 for each additional person, so getting a credit card that has a Clear Plus membership as a perk might save you money. However, such cards do usually carry annual membership fees that may be comparable (or even higher).

Here’s the information you need to understand if Clear would benefit you and make the right decision about a credit card offer that includes Clear membership.

What Is Clear?

Clear is a for-profit technology company that allows members to use biometric data (such as fingerprint, eye, and face scans) to verify their identity for entry into stadiums, venues, and — in the case of their paid membership — through airport security.

Clear Plus can help frequent travelers verify their identification at the airport more quickly than with a traditional ID, but those who do not have a TSA PreCheck membership or Global Entry will still need to go through regular security. (Even people who do have these memberships are still subject to a more pared-down security check.)

There’s also a free version of Clear, but it’s only used in sports stadiums and other venues to speed entry, not at the airport.

Benefits of a Clear Membership

Essentially, a Clear Plus membership allows you to skip the security line, but not the security process. Instead of getting in line and getting out your boarding pass and ID, you’ll approach a Clear Plus kiosk and an attendant will help verify your identity using biometric markers.

You’ll then be escorted to the front of the security line to go through either the pared-down TSA PreCheck security screening, if you also have that membership, or the regular security screening.

Keep in mind, too, that not every airport is retrofitted with Clear kiosks. Although the technology is in more than 50 airports across America, that’s not every domestic US airport. And the service is not yet international either.

Recommended: Different Types of Credit Cards

Clear Requirements

To get a Clear Plus membership, you’ll need to be a US citizen or permanent resident at least 18 years old, and provide one of the following forms of photo identification:

• U.S. driver’s license

• U.S. passport

• U.S.-issued permanent resident card

• U.S.- or state-issued military ID

• Global Entry card

Recommended: Store Cards vs. Credit Cards

How Much Does Clear Plus Cost

Clear Plus, which is the type that gets you through airport security lines, costs $189 per year and then an additional $99 per person for up to three adults on a family plan.

Although it’s called a family plan, both friends and family members are allowed to share a membership in this way, whether the group or family travels together or separately. Plus, children under the age of 18 can travel with you in the Clear line for free.

Examples of Travel Credit Cards With Clear Membership

Credit card issuers come up with new credit card reward programs all the time. That can be one of the benefits of using a credit card.

Most of the credit cards that come with a free Clear Plus membership — or a statement credit in the amount of the purchase price of your Clear Plus membership — are travel credit cards designed to help people earn rewards for flying, staying in hotels, renting cars, and other travel-related activities.

For example, airline credit cards often come with Clear membership perks.

Keep in mind that these credit cards often come with substantial annual fees; they may be premium or no-limit credit cards. For instance, the American Express Platinum Card offers a $189 Clear Plus membership credit, along with many other travel-related perks, but it also has an annual fee of $695.

For frequent travelers, the perks may easily pay for themselves, but, for occasional travelers, it might make more sense to simply purchase a Clear Plus membership. Deciding which kinds of credit card rewards are best for you is a very personal decision.

How to Use Clear

Once you enroll in Clear Plus, using it is easy: You simply walk up to a Clear kiosk at the airport instead of getting into the security line, and the technology as well as the attendants will help you verify your identity. You’ll then be escorted to the front of the security line in order to go through your appropriate security lane.

Where to Use Clear

Clear is not available in all American airports, but it is available in more than 50 of them, including popular destinations like:

• Chicago Midway International Airport

• Dallas/Fort Worth International Airport

• Denver International Airport

• Harry Reid International Airport (Las Vegas)

• Hartsfield-Jackson Atlanta International Airport

• John F. Kennedy International Airport (New York)

• LaGuardia Airport (New York)

• Logan International Airport (Boston)

• Los Angeles International Airport

• Miami International Airport

• Newark International Airport

• O’Hare International Airport

• Ronald Reagan Washington National Airport (Washington D.C.)

• San Francisco International Airport

The Clear membership can also be used in many sports stadiums and concert venues across the country. You can find the full list at Clear’s website. And worth noting: Clear Plus strictly helps a person move through airport security; it doesn’t have any benefits (at least not at this time) in terms of the cost of airfare or other aspects of transportation.

The Takeaway

You may see offers of credit cards with Clear Plus membership included as a perk and wonder if it’s right for you. If you’re a frequent flier, a Clear Plus membership may help you save time at the airport. Depending on its other benefits and its annual membership fee, a credit card that comes with a Clear Plus membership may be a money-saving way to access this service.

FAQ

Is it worth it to get a Clear Plus membership?

It depends on whether or not you’re a frequent traveler — and whether or not the airports you frequently travel through are equipped for Clear identity verification. If you travel very frequently, Clear Plus may help you save time at the airport security line, but it doesn’t exempt you from needing to go through security clearance.

What are the benefits of being a Clear member?

When you purchase a Clear Plus membership, you are able to skip the photo identification verification process, which can be time consuming. Instead, you’ll head straight to the Clear kiosk, where your identity is verified using biometric markers such as eye scans and fingerprints. You also get to skip the security line, though you and your baggage still have to go through the security screening process.

What is the difference between Clear and Clear Plus?

Clear is the free version of the service, which allows you to use Clear technology to verify your identity at stadiums and arenas. Clear Plus is the paid service that allows you to verify your identity biometrically and skip the security line at the airport.

Photo credit: iStock/damircudic

Apr

2024

Why Are Credit Cards Useful

By Jason Steele | Credit, credit card | Comments Off

Buying with a credit card can offer such benefits as convenience, safety, and rewards. Whether you’re shopping for shampoo or a new sofa, there are many ways that you can pay for goods and services. You can use cash, checks, electronic payment, debit cards, or credit cards. Not every merchant may accept each of these forms of payment though, but credit cards are one very popular and useful option.

Here, you’ll learn more about the benefits of credit cards vs. other forms of payment, so you can know when to break out the plastic and when to spend with something else.

What Is a Credit Card?

What is a credit card? First, to be really, really literal: A credit card is a rectangle made of plastic or metal issued by a financial service company. It allows cardholders to borrow money to pay for goods and services with merchants that accept credit card payments.

Credit cards are different from debit cards in that they don’t whisk money out of your checking account right away. They also vary from a personal loan or a personal line of credit.

• When comparing a personal line of credit vs. credit card, both are types of revolving credit, report your balance and payment info to the major credit bureaus, and charge interest. But unlike credit cards, personal lines of credit don’t offer rewards, can have a lengthy application process, and can have a lower borrowing limit than credit cards sometimes.

• When comparing credit cards vs. personal loans, they both allow a borrower to access money that they have to pay back later, and they are both usually unsecured. However, credit cards are a form of revolving debt (meaning you can borrow money repeatedly, up to a limit), while personal loans are not.

Why Are Credit Cards Useful

Credit cards are incredibly useful for paying for everyday purchases, however big or small. In a minute, you’ll learn more about specific credit card benefits.

But, to look at the big picture of why credit cards are useful, consider the following:

• They are convenient to carry and use.

• They can allow you to spend and then pay off your debt over time.

• There’s typically a grace period before you begin paying back the debt, an advantage over debit cards.

• They can offer rewards, such as cash back.

• Credit cards typically offer fraud protection.

• Credit cards can help you build your credit history.

Credit Card Benefits

There are many benefits to having and using a credit card. As long as you use your credit card responsibly, these perks can be incredibly useful. Benefits to having a credit card include safety, rewards, tracking your spending, security, convenience and building credit. Here’s a closer look.

Safer to Carry and Use

If you lose a credit card or it gets stolen, you most likely won’t be held financially responsible for fraudulent purchases that someone else may make with your credit card. In some cases, you might be liable for no more than $50, even if someone charged much more on your card. Credit cards may also protect you when you have a dispute with a merchant.

On the other hand, if you lose cash or it gets stolen, there is almost no way to track that cash down and get it back. If you lose a debit card or it’s used fraudulently, you most likely will get the money back, but it can be a more difficult process than a credit card. And you may have to wait longer to get your cash refunded than if the situation occurred with a credit card.

Credit Card Rewards

Credit card rewards can be incredibly lucrative and useful. Some credit cards offer a flat-rate percent back on every purchase you make. Others have bonus categories where you can earn a higher rate of rewards on those purchases.

Credit card rewards can come in the form of cash back (say, 2% cash back on purchases), miles, or points that you can use for travel or other things. However, while the promise of rewards can be enticing, don’t spend more than you normally would just to get additional credit card rewards.

Track Spending

Credit cards can help make it easier to track your spending. If you use cash or check, you might have to keep track of your spending yourself (it’s basic math, but many people don’t want to deal with it), whether by paper or by creating your own electronic system or file.

With a credit card, all of your spending shows up online in your account, and within a few days of making the purchase. Plus, many credit card issuers automatically categorize your purchases into different types of spending, which can make it easier to stick to your budget. You can see how much you have spent in different categories each month, and you can export the data to some popular budgeting apps.

Security

As briefly noted above, most credit card issuers offer zero fraud liability to cardholders, which can add a layer of security. Zero fraud liability means if you report fraudulent activity on your account to your card issuer right away, you likely won’t be liable for those fraudulent activities. The issuer will usually refund any amount fraudulently charged to the card and issue a new card and card number to the cardholder.

Plus, many card issuers have alert systems that notify cardholders via email, text, or phone call when suspicious activity is detected. Cardholders can confirm or deny that they made these purchases. This allows any potentially fraudulent activity to be caught right away.

These protections are not available for most debit cards and obviously not when you are using cash.

Convenience

Visa and Mastercard, two of the most common credit card networks, are accepted nearly everywhere worldwide. American Express and Discover, the other two credit card networks, are widely accepted in the United States and occasionally in other countries. Wide acceptance makes credit cards convenient to use for everyday purchases.

Credit cards can be used in person, online, or over the phone to make purchases. They are also easy to carry with you all the time, and you don’t need to think about replenishing your money like with cash.

Building Credit

Responsible use of a credit card can actually help you build credit. If you pay at least your minimum amount due on time each month, you may build your credit score over time. (You’ll want to avoid, however, letting your credit utilization, or the percent of your credit limit that you spend, get too high.) Having good credit is important for many reasons, including getting a mortgage, applying for a job, or renting an apartment.

Recommended: Do Store Cards Help Build Credit?

When Not to Use a Credit Card

Even though credit cards are incredibly useful, there are times when it doesn’t make sense to use a credit card.

• If you have to pay an extra fee to use the credit card, it may make more sense to pay by another method that doesn’t come with a fee, like cash, check, or debit card. Merchants pay processing fees when customers use credit cards and sometimes merchants pass along those processing fees to the customer. Unless the credit card rewards are high enough (like if you are working on a credit card sign-up bonus) that it offsets the fees, you are better off avoiding those fees.

• Also, if you are carrying a balance and don’t expect to pay it off this month, you are likely paying not just for your purchase but for interest charges as well. So it could be wiser, if possible, to use a debit card when making a purchase.

• Credit cards may also not be the best choice for you if you have a hard time controlling your spending. Since purchases made with a credit card don’t come directly out of your bank account, it may be tempting for some people to spend more than they can really afford to. If you’re an impulse shopper, proceed with caution. Swiping or tapping with a credit card can be so easy, it may make some people forget that, yes, the bill will actually be coming their way.

Examples of Credit Card Usage

Credit cards can be used to pay for goods and services. You can also finance purchases with a credit card. Also, you can use your credit card benefits such as travel insurance and purchase protection. And it can be used for purchases big and small.

• Say that you see a $1,200 plane ticket to your friend’s destination wedding. It looks as if prices are only going to rise, but you don’t have that sum of money available. You could use your credit card to book the flight, and then pay it off over time.

• Or you might be out for a run and, on your way home, remember that you’re out of coffee. If you have your credit card zipped into a pocket, you can easily pay for your coffee vs. having to go home, grab your wallet, and head out again.

Examples of Credit Card Issuers

A credit card issuer is the company that provides the credit card to the consumer. Issuers approve or deny a credit card application, decide how much credit to extend to the customer, determine the terms and benefits, and collect cardholder payments.

Some of the major credit card issuers include:

• American Express

• Bank of America

• Capital One

• Chase

• Citi

• Discover

• U.S. Bank

• Wells Fargo

Examples of Credit Card Networks

Credit card networks facilitate transactions between merchants and card issuers. They charge merchants fees for processing consumers’ card transactions.

The four major credit card networks are:

• American Express

• Discover

• Mastercard

• Visa

American Express and Discover are also credit card issuers. The other credit card issuers typically use either Visa or Mastercard networks.

Credit Card Tips

Understanding how credit card payments work is important so that you can maximize the credit card’s benefits.

• Only charge what you can afford, and pay your bills on time each month.

• Pay the full balance if you are able to, or aim for at least more than the minimum amount.

• Review your credit report regularly to make sure everything about your credit card account is accurate.

• Don’t share your card number, CVV, or additional details with anyone else.

The Takeaway

Credit cards have many benefits. They can be convenient; reward you with perks like cash back; and offer protection in case of loss, fraud, and disputes. Many people find them a convenient way to make a large purchase and pay it off over time. However, if you don’t use your credit card responsibly, the benefits may not outweigh the downsides.

FAQ

Do credit cards help your credit score?

Responsible use of a credit card can help you build credit. If you pay at least the minimum due every month, you can establish an on-time payment history, which is a positive thing. However, you need to watch your credit utilization ratio, the amount of your credit card limit that you are spending.

Can store credit cards help you build credit?

Most credit cards will help you build credit, as long as you are paying your debt on time and the card reports data to the credit card bureaus. Even store credit cards build credit as long as the card meets this criteria.

What are the benefits to credit cards?

There are many benefits to having and using a credit card. These can include safety, rewards, tracking your spending, convenience, and building credit.

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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.

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.

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 .

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Apr

2024

Will Credit Card Companies Lower Your Interest Rate if You Ask?

By Jason Steele | Credit, credit card | Comments Off

Some credit card companies may lower your rate if you ask. Which can be a good thing given that the current average interest rate is currently hovering over 20%. Getting that “yes” answer could be a simple way to shave money off your bill if you don’t pay the balance in full every month.

Given that it can’t hurt to ask, read on to learn more about this topic, including tips for requesting a lower credit card interest rate.

How to Lower Your Credit Card Interest Rate

First, a bit of vocabulary. Your credit card interest rate is also called an annual percentage rate, or APR. Credit card APRs vary across cards and cardholders. The APR that you currently have on your credit card is not set in stone.

It is often possible to lower your credit card interest rate. To do so, you will need to contact your credit card issuer directly. Although the credit card issuer is not required or guaranteed to agree to lower your APR, it is likely worth the time and effort to try. The worst that can happen is they say no, right?

Plus, you might be pleasantly surprised to learn that they can decrease the interest rate a bit. For instance, if you let them know you are shopping for a better rate elsewhere, they might lower your rate a bit to keep your business.

Why Try to Get Your Rate Lowered

If you carry a balance on your credit card, you have to pay the interest on your balance. If you have a high interest rate, it can make it more difficult to get out of debt if you get behind on the payments.

When you make payments on a card with a high interest rate, more of the money will go toward interest, which means it will take longer to pay off the actual balance amount.

Trying to get your rate lowered is actually easier than it may seem. There is no risk to trying, so if you carry a balance on your card, you might as well try to see if you can get your rate lowered.

What Is a Good Interest Rate on a Credit Card?

You have to qualify for the interest rate on a credit card. The credit card interest rate that you wind up with can depend on your credit score, market conditions and the credit card issuer. The average credit card interest rate as of November 2023 according to the Federal Reserve was 22.75%.

Some might say that a good interest rate on a credit card is anything other than that figure. Others might have a particular lower number in mind that they saw advertised by a given financial institution.

Rates change, so it can be smart to check the prevailing percentages before you talk to your card issuer, so you can negotiate more effectively. You may find some promotional credit card interest rates being offered in some cases.

Understanding Your Credit Card Company

While it may seem counterintuitive from how consumers feel, your credit card company may prefer customers who carry a large balance, as opposed to someone who is avoiding interest on credit cards by paying their balance in full every month.

Credit card companies make the most profit from charging interest to people with unpaid balances. If you are one of those people, your card issuer probably doesn’t want to lose you or your balance. This may give you a little leverage for negotiating your APR.

It is also important to know that while credit card companies can agree to lower your APR if you ask, they can also increase your APR for certain reasons.

• If you are often late on payments, your rate can be hiked up. The credit card company must give you 45 days of advance notice before doing this.

• Credit card companies are usually not allowed to increase your interest rate on new transactions during the first year of your credit card account, but they can do so after the first year.

How to Negotiate a Lower APR

Learning how to lower APR on your credit card involves learning how to negotiate with your card issuer. To do this, you just need to assess your situation and ask the right person at the credit card company. Here are tips.

Assess Your Situation

Before you approach your card issuer, you should assess your own situation and decide what your goal is. If you have a decent credit score, you may be able to collect competing offers with lower interest rates to bring to your credit card issuer. This may include cards that have credit card promotional interest rates, like balance transfer credit card offers or intro 0% APR offers.

Ask the Right Person

Next, call the customer service number on the back of your credit card. Once you are speaking with a live person on the phone, explain your situation. Tell them about the other offers for lower APRs from other credit card companies, but you would prefer to stick with your current company.

If the customer service representative that you are speaking with says that a lower rate isn’t possible, ask to speak to their supervisor. If they don’t comply with that request, you might hang up and call back again.

What to Do After a Decision

If you were able to get your APR lowered, congratulations. Now, there are a few next steps to take.

• First, get the credit card issuer’s agreement to lower your rate and the related fine print in writing. Have them mail or email you it.

• Be sure to read the fine print to understand any conditions that come with the offer. If you have a credit card payment delay or don’t keep your balance under the credit limit, the card issue may be able to raise your APR to the previous rate or an even higher rate.

• Knowing what can increase credit card APR is important in this instance. Do educate yourself on this topic.

• Also, consider using the money that you save on interest toward reducing your credit card debt or other debt. By continuing to make payments in the same amount you were making before your rate was reduced, you can work to reduce debt and improve your overall financial situation.

• If you were not able to get your APR lowered, you can ask your card issuer about their procedures for rate reduction. There may be a time period for consideration or reconsideration. Or you could look into balance transfer promotions with another company.

Credit Card Tips

If you have a credit card, you should have a general understanding of some of the credit card rules.

• Honor your bill’s due date with at least the minimum payment. On-time payments are the single biggest contributor to your credit score.

• One of the most important is to only spend what you can afford, and pay your balance in full each month if you are able to. That way, you won’t even have to worry about the APR.

• If that’s not possible, keep an eye on your credit utilization ratio, or the percentage of your credit limit that you have accrued. If this figure gets too high, it can negatively impact your credit score.

• Also take steps if your balance is getting too high. You could look into balance transfer cards, a personal loan to pay off your credit card, or working with a nonprofit debt counselor.

The Takeaway

It is possible (but not guaranteed) to get your credit card company to lower the interest rate on your credit card if you ask. When speaking to a representative, be courteous, come armed with information about prevailing interest rates and other offers, and ask to speak to a supervisor if necessary. A lower APR on your credit card can save you a lot of money if you carry a balance, so it can be worth the time and effort.

FAQ

Can I ask the credit card company to lower the interest rate?

Yes, you can always ask the credit card company to lower the interest rate on your credit card. You can call the customer service number on the back of your credit card.

How can I get my credit card interest rate down?

You may be able to get your credit card interest rate lowered by contacting the credit card company directly. You should do research on competing offers to use as examples when speaking with your card issuer. Your credit card issuer may not want to lose you as a customer, so they may be able to offer you a lower interest rate.

Can a credit card company change your interest rate without telling you?

Credit card companies can increase your interest rate, but they must give you 45 days of advance notice. Credit card companies are usually not allowed to increase your interest rate on new transactions during the first year of your credit card account, but they can do so after the first year. The credit card company may want to raise your interest rate if you are often late on payments.

Photo credit: iStock/Ridofranz