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When you swipe, tap, or otherwise use your card to pay for a purchase, credit card payment processing is set into motion to authorize and complete the transaction. On the surface, credit card processing may seem instantaneous, but in reality, it’s a complex, multi-step process. It also can be expensive for a merchant, which is why some may have a minimum requirement for a credit card payment or a discount for cash.

Read on to learn about what credit card processing is and the different ways it can work.

What Is Credit Card Processing?

Credit card processing refers to the series of operations so that a charge can get authorized and a merchant can be paid when a consumer pays with a credit card. It is a critical part of how credit cards work to make payments.

While the process takes only seconds, it involves multiple steps and entities as well as fees. The costs associated with credit card processing are incurred by the merchant, but they can be passed along to consumers through credit card surcharges or a slightly higher price of goods.

Stages of Credit Card Processing

The time between tapping your credit card and being asked if you’d like a copy of your receipt are action-packed. While the steps may not impact you directly as a consumer, being familiar with them can help you understand what happens if a payment is declined or you’re prompted to re-enter your information (and have a generally better grasp of what a credit card is).

Payment Authorization

When a credit card is tapped or swiped, authorization occurs. The merchant collects the payment information, such as the CVV number on a credit card.

This information is then sent to the credit card processor, who then sends it to the card network. From there, the information is passed to the issuing bank, which confirms the consumer has the funds or credit to complete the transaction.

Sometimes, a merchant may conduct preauthorization. This is a common practice at hotels, where a small amount is charged and held. It may also occur at gas stations.

At this point, the merchant still does not actually have the money. An authorization functions as a kind of IOU, confirming to the credit card company and the merchant that your credit line can cover the charge. (This is another reason it can be beneficial to pay more than your credit card minimum payment each month, as it will free up more of your available credit.)

Payment Settlement

Settlement occurs when money transfers from the issuing bank to the merchant bank through the card network, and the funds are then deposited into the merchant’s account. This process generally takes several days from the point of sale.

The amount deposited into the merchant account is minus any fees that are deducted from the merchant’s payments. Fees may get deducted once a month for all activity that’s taken place during the previous cycle, or the merchant may opt to have them deducted every time settlement occurs.

From the cardholder’s perspective, this is the point in the process when a charge on their credit card account may shift from “pending” to “posted.”

Recommended: What is a Credit Card CVV Number?

Who Are the Players in Credit Card Processing?

Credit card processing depends on a chain of connections to get the job done. Here’s who’s doing what when it comes to credit card processing.

The Cardholder

When you choose to pay with a card, you trigger credit card payment processing. Because different cards charge merchants varying fees, you may find that not all merchants take all cards. If you know there’s a card that is frequently not accepted, this could be a consideration when you apply for a credit card.

The Merchant

The merchant accepts credit card payments in exchange for the goods or services they provide. They have control over which credit card processing services or processing system they use. Often, a processing system is combined with a point of sale (POS) system — the actual mechanism by which a person enters their payment information.

The Merchant Bank

The merchant bank, also known as the acquiring bank, is responsible for sending the card and transaction information to the credit card network. Once approved, funds are deposited into the merchant account, minus any processing fees. The merchant bank may also provide equipment for credit card transactions, such as card readers.

The Issuing Bank

The issuing bank is also known as the cardholder’s credit card issuer. It authorizes the card information, pays the merchant bank, and charges the cardholder for the purchase. It may also attach fees, including international transaction fees, to the purchase.

The Payment Processor

The payment processor is the vendor that facilitates communication between the merchant bank and the issuing bank. It essentially manages all of the processes that have to occur between a card being swiped and a payment being deposited into a merchant’s account. The processor will charge a fee for this service.

The Card Association

A credit card issuer or card association is the card brand on the credit card, such as Visa, Mastercard, Discover, and American Express. You may also hear this called a credit card network. While a credit card is attached to a specific bank, it also has a specific brand; in the case of Discover and American Express, they are both card networks and card issuers.

The card association collaborates with card issuers, merchants, and processors to help facilitate transactions. It will also receive part of the fee for a credit card transaction, called an interchange fee.

Charges Associated With Credit Card Processing

Just like consumers have to worry about APR on a credit card, merchants have to consider charges associated with credit card processing. Many merchants bake the cost of credit card processing fees into their payment structure.

Payment Processing Fees

The processing fee for a credit card transaction goes to the processor, which is the company that is responsible for accepting the credit card payment and sending the information to the payment network.

Interchange Fees

Interchange fees go to the issuing bank. These fees are generally a percentage of the transaction, plus a standard flat-fee per transaction. The amount of interchange fees can vary depending on the type of card used, whether the transaction was completed in-person or online, the amount of the transaction, and the type of business that the merchant is.

Service Fees

Also known as an assessment fee, a service fee is a monthly fee that is charged by the payment network. The amount of this fee can depend on the merchant’s transaction volume as well as their calculated risk level.

Types of Credit Card Processing Models

Beyond the various fee types, there are different types of pricing models that a credit card processing company may offer. While this won’t matter much on the consumer side, a business should consider which pricing model might work best. These options generally aren’t as straightforward to evaluate as identifying a good APR for a credit card.

Flat Rate

With this credit card processing model, the processor charges a fixed fee for all credit and debit card transactions. This rate will include interchange fees. This model keeps things simple; a business owner knows how much will be charged. However, credit card fees can be higher under the flat rate model.

Tiered

In a tiered model, the fee charged per credit or debit card transaction will depend on its classification. Often, this processing model will have the following tiers: qualified, mid-qualified, and non-qualified, with qualified having the lowest fees and non-qualified having the highest. Because of all the nuances, this model can be complex and potentially confusing for merchants.

Interchange Plus

This is the most common credit card processing model for pricing. With this model, fees are kept separate, making this a transparent and often cost-effective method. The merchant is charged a percentage of the transaction plus a fixed fee per transaction, with the wholesale fee and the markup fee clearly distinguished.

Subscription

With the subscription pricing model, which charges a flat monthly fee, one has to sign up for this service. Merchants will also pay a low per-transaction fee, as well as a very small payment processor fee. Monthly fees tend to be more than the transaction fees in this model, making it most suitable for businesses with high sales volumes.

Recommended: How Do Credit Card Companies Make Money?

Selecting a Credit Card Processor

Picking a credit card processor is an important choice for a business and one that should involve an assessment of what your business needs and what different credit card processors offer.

•   Just as you’d consider average credit card interest rates if you were choosing a credit card, you’ll want to think over the fees different credit card processors charge.

•   Look at what the fee model is, as different models may be more suitable depending on the type of business. Also consider what cards the processor will allow you to accept.

•   Review the processor’s reliability and customer service availability. You might also think about additional features that are offered, such as a bundled or integrated point-of-sale system or a guarantee of next-day funds.

The Takeaway

Understanding credit card processing is helpful even if you’re not a merchant or entrepreneur. Once you know the costs of credit card processing, you may have insight into why some merchants may give cash discounts, for instance.

However, although fees are involved in these transactions, there are benefits to cardholders for using cards to complete their purchases, such as rewards and protections.

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 much does credit card processing cost?

On average, credit card processing can cost anywhere from 1.5% to 3.5% of the transaction amount. The exact cost will depend on a number of factors, however, including the banks, the credit card network, and the payment processor involved. Merchants’ costs can also depend on the credit card processing model they choose.

Is credit card processing secure?

Yes, it is generally secure. Credit card processing security has come a long way, with innovations on both the processing end as well as the credit card companies that create systems for security, whether people buy in-store or online.

Can I lower my credit card processing fees?

Yes, there are a number of ways you can explore to lower your credit card processing fees. Comparing processors and credit card processing models can be one way to secure lower fees. You might also apply a surcharge to pass on costs to customers. Or, you could simply ask your current processor if there’s any room to negotiate fees.

Photo credit: iStock/Demkat

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.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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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The Federal Reserve’s recent data says the average credit card interest rate is 21.47%, which is a high number by most standards. If you never carry a balance or take out cash advances, it may not be a big deal for you, but if you do, it’s worth paying attention to the average credit interest rate. Doing so could help you anticipate and potentially budget for increased interest payments.

Here, you’ll learn more about credit card interest rates and how they can impact your financial life.

What Is the Average Credit Card Interest Rate?

The average interest rate for credit cards is 21.47%, as mentioned above, as of the start of 2024. Rates have been steadily increasing in recent years — in November 2021, the average rate for credit cards was 14.51%, and back in November 2017, for example, it was 13.16%.

Keep in mind, however, that the interest rate for your credit card could be higher or lower than this average depending on factors such as your credit profile, given how credit cards work. So what’s a good annual percentage rate (APR) for you may be different from what a good APR for a credit card is for someone else, as you’ll learn in more detail below.

Interest Rates by Credit Quality Types

Credit card interest rates, or the APR on a credit card, tend to vary depending on an applicant’s credit score. The average interest rate for credit cards tends to increase for those who have lower credit scores, according to the CFPB’s most recent Consumer Credit Card Market Report.

The report measures what’s called an effective interest rate — meaning, the total interest charged to a cardholder at the end of the billing cycle.

What this table shows is that the lower your credit score, the more you will be paying in interest on balances you have on your credit cards (meaning, any amount that remains after you make your credit card minimum payment).

Keep in mind that these rates don’t include any fees that may also apply, such as those for balance transfers or late payments, which can further increase the cost of borrowing.

Recommended: Revolving Credit vs. Line of Credit, Explained

Interest Rates by Credit Card Types

Interest rates may vary depending on the type of credit card you carry. In general, platinum or premium credits have a higher APR — cards with higher interest rates tend to come with better features and benefits.

Prime Rate Trend

The prime rate is the interest rate that financial institutions use to set rates for various types of loans, such as credit cards. Most consumer products use the prime rate to determine whether to raise, decrease, or maintain the current interest rate. That’s why for credit cards, you’ll see the rates are variable, meaning they can change depending on the prime rate.

As of March 6, 2024, the prime rate is 8.50%. On March 17, 2022, the prime rate was 3.50%. This can be considered an example of how variable this rate can be.

Delinquency Rate Trend

Credit card delinquency rates apply to accounts that have outstanding payments or are at least 90 days late in making payments. These rates have fluctuated based on various economic conditions. In many cases, rates are higher in times of financial duress, such as during the financial crisis in 2009, when it was at 6.61%.

As economic conditions rebound or the economy builds itself up, delinquency rates tend to go down, as consumers can afford to make on-time payments. According to the Federal Reserve, the delinquency rate for the fourth quarter in 2023 was 3.20%, up from 2.34% a year earlier and 1.63% for the same time period in 2021. This may be due to the pandemic, when consumers were more wary of discretionary spending or from negotiating payment plans with creditors.

Credit Card Debt Trend

Credit card debt has risen from its previous levels of $926 billion in 2019 and $825 billion at the end of 2020. It has climbed to $1.129 trillion for the fourth quarter of 2023, a new high.

This shows an ongoing surge in credit card debt, and these statistics can make individual cardholders think twice about their own balance and how to lower it.

Recommended: How Does Credit Card Debt Forgiveness Work?

Types of Credit Card Interest Rates

Credit cards have more than one type of interest rate. The credit card interest rate that applies may differ depending on how you use your card.

Purchase APR

The purchase APR is the interest rate that’s applied to balances from purchases made anywhere that accepts credit card payments. For instance, if you purchase a pair of sneakers using your credit card, you’ll be charged the purchase APR if you carry a balance after the statement due date.

Balance Transfer APR

A balance transfer APR is the interest rate you’ll be charged if you move a balance from one credit card to another. Many issuers offer a low introductory balance transfer APR for a predetermined amount of time.

Penalty APR

A penalty APR can kick in if you’re late on your credit card payment. This rate is usually higher than the purchase APR and can be applied toward future purchases as long as your account remains delinquent. This is why it’s always critical to make your credit card payment, even if you’re in the midst of requesting a credit card chargeback, for instance.

Cash Advance APR

A cash advance has its own separate APR that gets triggered when you use your card at an ATM or bank to withdraw cash, or if you use a convenience check from the issuer. The APR tends to be higher than the purchase APR.

Introductory APR

An introductory APR is an APR that’s lower than the purchase APR and that applies for a set amount of time. Introductory APRs may apply to purchases, balance transfers, or both.

For instance, you may get a 0% introductory APR for purchases you make for the first 18 months of account opening. After that, your APR will revert to the standard APR. (Note that the end of the introductory APR is completely unrelated to your credit card expiration date.)

Factors That Affect Interest Rate

When you apply for a credit card, you may notice that your interest rate is different from what was advertised by the issuer. That’s because there are several factors that affect your interest rate, which can make it higher or lower than the average credit card interest rate.

Credit Score

Your credit score determines how risky of a borrower you are, so your interest rate could reflect your creditworthiness. Lenders tend to charge higher interest rates for those who have lower scores. Your credit score can also influence whether your credit limit is above or below the average credit card limit.

Credit Card Type

The type of credit card may affect how much you could pay in interest. Different types of credit cards include:

•   Travel rewards credit cards

•   Student credit cards

•   Cash-back rewards credit cards

•   Balance transfer cards

Most likely, the more features you get, the higher the interest rate could be. Student credit cards may have lower interest rates, but that may not always be the case. That’s why it’s best to check the APR range of credit cards you’re interested in before submitting an application.

The Takeaway

The current average credit card interest rate is 21.47%, according to data from the Federal Reserve. However, your rate could be higher or lower than the average APR for credit cards based on factors such as your creditworthiness and the type of card you’re applying for. Your best bet is to pay off your entire balance each month on your credit card so you don’t have to worry about how high the interest rate for a credit card may be. That way, you can focus on features you’re interested in.

With whichever credit card you may choose, it’s important to understand its features and rates and use it responsibly.

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 is the average credit card interest rate?

The average interest rate for credit cards is 21.47%, according to the latest data from the Federal Reserve for the fourth quarter of 2023.

How do you get a low credit card interest rate?

You may be able to get a low credit card interest rate by building your credit score, as this will encourage lenders to view you as less risky. Otherwise, you can also aim to get a credit card with a low introductory rate, though these offers are generally reserved for those with good credit. Even if the APR is temporary, it could be beneficial depending on your financial goals.

What is a bad APR rate?

A bad APR is generally one that is well above the average credit card interest rate. However, what’s a good or bad APR for you will depend on your credit score as well as what type of card you’re applying for.

Photo credit: iStock/MicroStockHub

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.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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Credit cards are handy financial tools, thanks to the credit card issuers who offer, provide, and manage them. A credit card issuer is a type of financial institution that supplies credit cards to consumers.

Read on to learn more about how these businesses operate.

What Is a Credit Card Issuer?

Credit card issuers are financial institutions responsible for making credit cards, managing the application and approval process for credit cards, and keeping credit card accounts running smoothly. If you needed to check your credit card balance, pay your bill, or request a replacement credit card, you’d turn to your credit card issuer.

Recommended: Guide to Credit Card Purchase Protection

How Credit Card Issuers Work

The financial institutions that offer credit cards can be lending institutions, banks, credit unions, or fintech companies. The cardholder borrows money from the credit card issuer each time they make a purchase, and when they pay their credit card bill, they’re paying the credit card issuer back for some or all of the credit they have used. This makes credit card issuers integral to what a credit card is.

A credit card issuer is the one to determine an applicant’s credit card interest rate and limit, the type of cardholder benefits offered, and the fee structure for the credit card. Generally, credit card issuers aren’t the ones to process merchant transactions, but they do decide whether to approve or decline a charge.

When questions about their credit card arise, account holders can call the number on the back of their credit card to connect with their credit card issuer’s customer support line.

Why Are Credit Card Issuers Important?

Understanding why credit card issuers are so important can help consumers to better manage their relationship with their credit card issuer and choose the right credit card for their needs once they’re old enough to get a credit card.

The issuer is responsible for determining a credit card’s terms and features. All credit card issuers have different policies, customer support approaches, and types of rewards offerings. Before choosing a credit card, it’s helpful to carefully research not just how a credit card works but how the credit card issuer runs its operations, in terms of fees and rates you will be subject to.

Recommended: How Do Credit Cards Work?

Common Credit Card Issuer Fees

What the fees look like for a specific credit card will vary by credit card issuer, but the following credit card issuer fees are fairly common to come across.

Annual Fees

An annual fee is a charge that’s paid once a year for having the credit card. These fees can often range from $95 to $500 or more per year. Not all cards charge this fee, but those that do tend to come with more valuable perks and rewards.

Before signing up for a credit card with an annual fee, it’s important to crunch the numbers to see if the rewards that come with using the credit card (like cash back or travel points) will outweigh the cost of the fee. Even if you get a good APR for a credit card, a high annual fee could make the offer less sweet.

Late Payment Fees

Late payment fees apply when someone is past due on paying their bill. Usually, these fees go up each time a payment is missed. The late fee won’t ever cost more than the minimum payment due on the payment the cardholder missed, but these fees can still add up. The current average fee is $32, but it may soon be lowered to $8, pending legislation.

Balance Transfer Fees

When someone transfers their credit card balance from one card to another (usually to a balance transfer card with a lower interest rate), they can potentially owe a balance transfer fee. This fee can be either a percentage of the transferred amount or a fixed fee.

While consolidating debt through a balance transfer can make it easier to pay off credit card debt, make sure to take into consideration any fees involved.

Foreign Transaction Fees

Making purchases when traveling abroad can lead to paying a foreign transaction fee, which is usually around 1% to 3% of the purchase.

However, there are plenty of credit cards — especially travel rewards credit cards — that don’t charge foreign transaction fees. If someone travels internationally often, they could save a lot by choosing a credit card with no foreign transaction fees, which is worth considering when applying for a credit card.

Credit Card Issuer vs Credit Card Payment Networks

It’s easy to confuse credit card issuers and credit card payment networks. While a credit card issuer creates and manages credit cards, a credit card payment network is the one that processes transactions between credit card companies and merchants.

Here are the key differences between credit card issuers and credit card payment networks:

Differences Between Credit Card Issuers and Co-branded Partners

A co-branded partner is a merchant that works with a credit card issuer to create a co-branded credit card with their name on it. This is a common arrangement with store, airline, and hotel credit cards.

Here’s a breakdown of how credit card issuers and co-branded partners differ:

Finding the Credit Card Issuer Number

If someone looks closely at their credit card, they’ll be able to learn a lot about their credit card issuer, including what their credit card issuer number is and how to contact their issuer.

Credit Card Issuer Phone Number

It’s always possible to learn how to contact a credit card issuer by going to their website, but cardholders also can find their card issuer’s phone number on the back of their credit card or on their monthly statements.

Credit Card Issuer Identification Number

To find a credit card issuer number, all a cardholder has to do is look at the string of numbers on a credit card. The first six to eight digits on the card represent the Bank Identification Number (BIN), or the Issuer Identification Number (IIN). This number is what identifies the credit card issuer. The following digits on the card are what identify the cardholder.

Examples of Some Major Credit Card Issuers

There are many different credit card issuers, but these are some of the biggest ones in the U.S.:

•   American Express

•   Bank of America

•   Capital One

•   Chase

•   Citi

•   Discover

•   U.S. Bank

•   Wells Fargo

The Takeaway

When you’re choosing a credit card, looking at the credit card issuer matters. This is the financial institution that creates and manages credit cards, determines a card’s fees, interest rate, and rewards offerings, and also approves (or denies) credit card applicants. Knowing that you have a well regarded issuer with fair policies is an important step in securing a credit card that suits your needs.

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 I know my credit card issuer?

If someone is unsure of who their credit card issuer is, they can look at the credit card number on their card. The first six to eight digits on a credit card — called either the Bank Identification Number (BIN) or the Issuer Identification Number (IIN) — identify the card issuer.

What is the difference between a credit card issuer and a credit card network?

Credit card networks, unlike credit card issuers, are the party that processes the credit card transaction directly with merchants. Credit card networks have digital infrastructure that allow them to facilitate transactions between merchants and card issuers in exchange for an interchange fee.

What do credit card issuers do?

Credit card issuers create, distribute, and manage credit cards. They decide what the interest rates and fees of a credit card are, who is approved for one and how much they can spend, and how the card’s rewards structure works.

Photo credit: iStock/Luke Chan

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.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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.

SOCC0224016

Credit card fraud added up to $246 million last year, rising 12% from the prior year. As scammers come up with new ways to get sensitive credit card information and prey upon consumers, it can be a smart move to acquaint yourself with tactics they commonly use, from phishing scams to credit card reader scams to threats of arrest.

Read on to learn about 10 of the most popular techniques and find out what to do if you do end up getting scammed.

What Are Credit Card Scams?

A credit card scam is when an unauthorized individual uses your credit card to make fraudulent purchases or steal money from the account. While some credit card scams will take your credit card information right out from under you, others use strategies to entice you to hand over your information.

Given what a credit card is and how easy they are to use, it can be easy for a scammer to rack up debt under the cardholder’s name.

Common Scams and How to Avoid Them

Becoming familiar with the top credit card scams can increase your awareness and help you better protect your identity from fraud. Here are some of the most common credit card scams to look out for. (As you’ll see, some can involve debit cards as well.)

1. Overcharge Scams

With an overcharge scam, you’ll receive an email, call, or text stating that a retailer or merchant overcharged your card. The scammer will request your personal information to complete a refund for the overcharge. They will then use this information to gain access to your credit card.

Here’s how these scams can work:

•   Usually, the scammer identifies a product or service that you already use, so it may not seem as suspicious when they request this information. But, the fraudster may also use a standard service that many people use, such as Netflix or Spotify, so that it won’t raise red flags.

•   While it’s always good to scrutinize your incoming calls, it’s especially important to do so when you receive a call from an unidentified number, though scammers are getting more sophisticated at spoofing phone numbers and making it seem as if they are calling from legitimate businesses.

•   If you answer, the caller may tell you that you must take immediate action to get a refund, or that it’s your last chance to do so. The urgency should be an immediate sign something is amiss; that’s a common scam warning sign.

•   Also, if you do get a call from, say, Netflix saying your account is suspended, it can be wise to hang up and contact the business directly to see if there’s an issue with your account.

•   If you receive a suspicious email, compare the email to past emails from the merchant or retailer. Scammers are often good at disguising a false email address, so look carefully for differences in the sender’s address. They may add “pay” or “support” to make the address look legitimate.

•   You may also find subtle or major misspellings and incorrect grammar in the email.

The best way to avoid this potential credit card scam is to either hang up the call or exit the email. Again, if the call says it’s from your credit card issuer, you can call them directly to see if this request was legitimate or a scam. You can find your creditor’s number on the back of your credit card or credit card statement.

2. Interest Rate Scams

One of the most common credit card scams that occurs over the phone is a fraudster calling to tell you that they can reduce your credit card interest rate and potentially save you significant money on interest payments. They will typically state that their company has a relationship with your credit card company; therefore, they can negotiate reduced interest payments.

However, to entice you to act now, they’ll say the offer is only available for a limited time. Then, the scammer will request your credit card information, such as your account number and CVV number on a credit card, for the alleged service.

Legitimate debt relief companies seldomly cold call consumers to get their business. Also, they cannot charge a fee upfront until they reduce your interest rate or settle a portion of your debt. Therefore, this kind of call should set off alarm bells.

If you want to reduce your interest rate, contact your credit company directly. As the cardholder, you have a better chance of reducing your rate than a third-party company with no relationship with the creditor. If you do receive this call, simply ignore it like you would other credit card scams.

3. Gas Station Credit Card Scams

Scammers can use credit card skimmers to lift your credit card information at gas stations. They do so by attaching an external device to the credit card machine at a pump. When you swipe your card, the device can save your information instantly.

So, before you swipe your card, check to see if the credit card reader you’re using at the pump looks the same as all the other ones. If it doesn’t, that can be a tipoff. You also can tug at the reader to see if it easily detaches. Since skimmers are temporary, they’re usually only attached with double-sided tape, making them easy to remove. Don’t insert your card if you can remove the skimmer with little effort. Instead, go to another gas station to get your gas.

Make sure to inform authorities about the skimmers so they can handle it accordingly.

4. Prepaid Credit Card Scams

Prepaid credit cards, also known as prepaid debit cards, allow you to load money onto them and make purchases. When prepaid credit card funds are depleted, you can no longer use them (unlike credit cards, there is no credit card limit for prepaid cards). You can usually purchase prepaid credit cards at retail stores or online.

Scammers use prepaid credit cards in many different ways to take your money. For example, a scammer may call and say you won the lottery. However, to get your winnings, you must pay the taxes. They may tell you that you can do so by loading a prepaid credit card with a certain amount of funds and sending the card number to the caller. After this is done, they promise to send you your winnings — but, in this case, the scammer may take the card money and never be seen again.

If someone is requesting a prepaid credit card, that’s a red flag. It’s best not to proceed with this transaction as it may be a prepaid credit card scam.

5. Hotel Front-Desk Credit Card Scams

This scam takes place in a hotel room, where the scammer will call up stating they are a hotel employee. They will inform you that there is an issue with your credit card, and you must verify your credit card information. Usually, these calls take place early in the morning or late at night so that you will be thrown off guard.

If this happens to you, it’s best to handle the matter in person. You can hang up and then visit the front desk to ensure your credit information isn’t exposed to the wrong person.

6. Arrest Phone Call Scams

The objective of this scam is to convince you to give out your personal credit card information to pay off a debt, fine, penalty, or ticket. While arrest scams may seem unrealistic, the scammer relies on scare tactics to try to get the target to hand over their credit card information. They may target seniors with this scam.

Some points to know:

•   Usually, the scammer claims they are from a federal agency like the IRS, FBI, or other government agency that suggests there’s a connection to law enforcement.

•   Then, they threaten that if this bill, fee, or ticket goes unpaid, you will be arrested, or other legal action will be taken immediately.

•   It’s doubtful that actual law enforcement or federal agencies would request sensitive information during a phone call, especially an abrupt one.

•   Another sign that this is a scam is that the call may sound like a robot or like it’s pre-recorded.

•   The caller may also have a sense of urgency, claiming authorities are on their way to arrest you.

•   Even if you do owe outstanding fees, have a ticket, or were a part of some similar activity recently, authorities or federal agencies wouldn’t request payment information over the phone in this manner.

Don’t share any personal information with the caller. Just like with other scams, the best way to address your concerns is to hang up and call the alleged agency directly to get any information straight from the source.

Charity Scams

When nonprofit organizations ask for donations, it may pull at your heartstrings. But scammers can use this strategy to swipe your credit card information right out from under you.

Scammers who use this strategy usually call you pretending to be a part of a nonprofit or other charitable organization. They will then request donations using everyday anecdotes or narratives designed to influence their targets. It’s also common for scammers to use this tactic when a natural disaster strikes or another current event requires aid.

Although it’s common for nonprofits to solicit donations over the phone, you should still be wary when receiving one of these calls. If you want to donate to the organization, jot down information from the caller, such as their phone number and the name of the charity. Then, you can look up the phone number online to determine if it’s already identified as a scam.

If it isn’t, you can visit the IRS’s Tax Exempt Organization Search and CharityNavigator.org to research the organization to determine its legitimacy.

Overall, it’s wise to avoid donating to unsolicited callers. Instead, consider visiting an organization’s actual website to determine the best way to donate.

8. Hotspot Scams

Whether you’re connecting to a public WiFi hotspot via your phone or on your computer, scammers can try to access your credit card information when you sign on. In fact, they may prompt you to enter your credit card information to access a particular hotspot. Given how credit cards work, this is very risky. This can mean the scammer gets access to your card’s credentials.

So, when attempting to access the internet in public, be wary if you’re asked to enter your credit card information. Instead, if you’re at a restaurant or retail location, ask an employee to share the establishment’s hotspot or wifi information. Check that the connection is secure. This way, you’ll know you’re not exposing yourself to credit card fraud. But remember, it’s always wise to avoid conducting financial business on public WiFi.

9. Skimming Scams

Like gas pump skimmers, scammers can also use skimmers at ATMs to obtain credit card information.

The only way to identify a skimmer is by checking the scanning device. For example, if the card reader easily detaches, it’s likely a card skimmer. In addition, you can spot other things to identify a skimmer, such as graphics that don’t align or colors on the machine that don’t match the reader. Another clue is if the keypad seems cheap or too thick.

Before entering your card into a reader, investigate for a skimmer. Familiar places skimmers hide are usually in high-traffic areas (a mall or a sports stadium, say) or tourist locations. Don’t use your credit card if you’re unsure whether a skimmer is present or have a feeling something may be off, potentially indicating a credit card reader scam.

10. Phishing Scams

Like the name suggests, a phishing scam involves fraudsters phishing for your personal information. Scammers contact their targets through the phone or over email, posing as an honest company. They then provide fraudulent links or instructions to help them access your personal credit card information.

For example:

•   The scammer may impersonate your credit card company (simply saying they are “calling from your bank and there’s a problem”) and state that your account details must be updated due to a compromised card.

•   They will request your card information (your credit card number, expiration date, and CVV code) over the phone or email to resolve this issue.

•   The scammer may request the answers to your security questions for protection purposes.

Don’t provide any of this information. Even if they suggest this is a sensitive matter and must be addressed immediately, it’s best to hang up, and call your credit card company right away.

Recommended: Common Reasons Why Credit Cards Get Declined

How to Protect Yourself From Credit Card Scams

To keep your credit card information safe, here are some steps you can take:

•   Select a credit card with 0% liability on unauthorized purchases. The Fair Credit Billing Act (FCBA) limits your financial responsibility for credit card fraud to up to $50. In other words, you will only have to pay $50 if you’re a victim of one of these credit card scams and request a credit card chargeback. However, some credit card companies offer 0% liability as a perk, which means you aren’t responsible for any fraud.

•   Keep tabs on your credit card activity. Regularly looking at your credit card activity and checking your credit card balance can help you spot any suspicious activity. If you do notice anything, contact your credit card company right away.

•   Request transaction alerts. Usually, credit card companies let you sign up for transaction alerts, such as for balance transfers, large purchases, and international purchases. Using alerts is a great way to monitor your card activity.

•   Ensure your information is secure. When making purchases online, over the phone, or in person, ensure your information is secure. For example, only use sites with “https” in the URL when shopping online. Also, avoid using public WiFi where your personal information may be in jeopardy.

What To Do If You’re a Victim of Credit Card Scam: Reporting Credit Card Scams

If you’re a victim of a credit card scam, follow these steps:

•   First contact your credit card company to let them know about the fraud. Per the Fair Credit Billing Act, you have 60 days after receiving your billing statement to report any fraudulent activity on your card.

•   After informing your creditor of the incident, make sure to change your password for your account.

•   You may also want to contact the three major credit bureaus: Equifax, Experian, and TransUnion. Request verification of your identity, and ask for a fraud alert to get linked to your report.

•   Additionally, if you’re a credit card scam victim, you can contact the Federal Trade Commission (FTC) to report the crime. You can report your incident online or over the phone at 1-877-382-4357 (FTC-HELP).

•   If you’ve discovered a fraudulent website, email or another internet scam, report it to the Internet Crime Complaint Center (IC3).

•   Unfortunately, not all scams originate in the US; if you believe you’re a victim of an international scam, report it through econsumer.gov.

All reports help consumer protection agencies pinpoint trends and prevent other consumers from falling victim to credit card scams.

The Takeaway

Unfortunately, it can be easy to become a victim of credit card scams. But, if you monitor your account, set fraud alerts, and keep your information confidential, you’ll have a better chance of avoiding getting duped. Pay attention to what kinds of protection your credit card issuer may offer, too.

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

Who is liable for a credit card scam?

Under the Fair Credit Billing Act (FCBA), you’re only liable for up to $50 of credit card fraud reported within 60 days. However, if your credit card has 0% fraud liability protection, you may not be liable for any fraudulent charges.

What counts as credit card fraud?

When an unauthorized person makes a charge with your credit card or steals your credit card information, this is considered credit card fraud.

How do I report credit card fraud?

Contact your credit card issuer ASAP. Then go to the Federal Trade Commission’s website to report the incident. Law enforcement agencies will then use these reports to investigate criminal activity to prevent future fraud. Once you submit a report, you can follow up with local law enforcement, if your creditors suggest it’s wise to do so.

Photo credit: iStock/fizkes

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.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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For Americans, the average credit limit currently sits at $28,930, according to Experian. That’s the typical maximum amount that a cardholder can spend on the card before needing to pay the credit card’s balance. A credit limit is sort of like a loan maximum — the higher the credit limit, the more money the cardholder can charge on the credit card.

If you know your credit limit, you may be wondering how it compares to the average credit card limit. Read on to find out, and to learn how you may be able to increase your credit limit if you need access to more buying power.

What Is the Average Credit Card Limit?

The average credit card limit for Americans was $28,930, according to a recent report by Experian. However, individual credit card limits can vary depending on a variety of factors, and can be as low as $300. For instance, there’s variance in the average credit card limit by age, as well as by creditworthiness.

Whatever your credit limit may be, it’s a critical part of understanding what a credit card is. Knowing your credit limit will help you to be aware of how much you can spend at places that accept credit card payments.

How Credit Card Issuers Determine Your Credit Limit

When you apply for a credit card, your initial credit limit depends on a variety of factors, including your credit scores, your income and debt-to-income ratio (DTI), your history with the card issuer, the card issuer’s policies and goals, and the current economic conditions. Every card issuer has its own process for determining an applicant’s credit limit. Here, some more specifics:

Your Credit Scores

Your credit score is a large factor in determining your credit limit. Just like your score can affect your APR on a credit card, the higher your credit score, the more likely you are to receive a higher credit limit.

In addition, the average credit limit increases with the age of the credit history. Generally, the longer someone has had credit, the more likely they are to use it responsibly. That’s why credit companies may be more likely to offer a higher credit limit to applicants with an older line of credit and a higher credit score. Obviously, the age of your oldest line of credit is limited to your own age, so be sure to be aware of how old you have to be to get a credit card.

Your Income and Debt-To-Income Ratio (DTI)

Due to how credit cards work, card issuers are taking a risk when they extend credit to cardholders. If they think the applicant is a riskier customer, they may offer them a lower credit limit. A high income can indicate that you are able to repay what you borrow. Therefore, a high income can help you get a higher credit limit.

However, credit issuers will also consider your existing debt obligations when deciding your credit limit. Specifically, they will look at your debt-to-income ratio (DTI), which compares the amount of money you owe each month to the amount of money you earn each month.

Your debt-to-income ratio can also affect factors like whether your interest rate is above or below the average credit card interest rate.

Your History With the Card Issuer

Your history with a card issuer can also influence your credit limit. If you have an existing positive relationship with the card issuer, it may help you to get approved for a higher credit limit. However, if you have too many existing cards with an issuer, the card issuer may not want to extend you additional credit, even if you meet other criteria like having an excellent credit score.

The Card Issuer’s Policies and Goals

The credit card issuer has the authority to determine your credit limit, based on how risky they think you are as a customer. Each card issuer has its own policies and goals that it uses to determine what credit limit is afforded to each customer. In other words, your credit limit will also depend on your credit issuer.

Current Economic Conditions

One factor that’s completely out of your control when it comes to your credit limit are the current economic conditions. Since it relates to risk, the current economic environment does play a role in how credit card issuers determine your credit limit. For example, some credit card issuers lowered card limits at the start of the COVID-19 pandemic due to global economic uncertainty.

How to Increase Your Credit Limit

There are several ways to increase your credit limit. Sometimes, your card issuer will offer you a revised credit limit after you update your income information or build your credit. Other times, you may need to be more proactive by directly requesting an increase or transferring your available credit.

Update Your Income Information

One way to increase your credit limit is to keep your income information up to date with your card issuers. Sometimes your card issuer may periodically ask you if your income has changed. If not, you may need to let them know when your income rises, as a higher income can lead to a higher credit limit.

Build Your Credit

One of the best ways to increase your credit limit is to increase your credit score. You can do this by paying your bills on time, keeping your balances low by making more than your credit card minimum payment, and maintaining a low credit utilization rate.

Although this method may take the longest, it may have the most benefit because it could help you in many other financial aspects as well. For instance, it may make it possible for you to secure a good APR for a credit card.

Request an Increase

Most card issuers allow you to request a credit limit increase online. If this option is not available, you also can call your credit issuer to request an increase. However, be aware that a request for an increase sometimes results in a hard credit inquiry, which may hurt your credit score.

Transfer Your Available Credit

If you need a higher credit limit for a specific card (like for a large upcoming purchase), you may be able to transfer available credit from another card from the same card issuer. To check if this is an option for your cards, call your card issuer’s customer service line to request the transfer.

The Takeaway

Your credit limit represents how much you can spend on your card before you’ll need to pay off your balance. While the average credit card limit was recently found to be $28,930, credit limits can vary widely depending on age, creditworthiness, your credit card issuers, current economic conditions, and more. Plus, there are ways you can increase your credit limit.

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 is a reasonable credit limit?

A reasonable credit limit may depend on a variety of factors, including your credit score, your income, and the current economic conditions, among others. The current average credit limit is $28,930, but many people will have a significantly higher or lower cap.

Can lenders change credit limits?

Lenders can change credit limits after you have been given an initial credit limit. Sometimes the card issuer will offer you a new credit limit after you update your income information or build your credit. Other times, you may need to directly request an increase. You can also consider transferring your available credit to increase your limit on a specific card.

What is available credit?

Available credit is the amount of money that is available to you to borrow, considering the current balance on your account. Credit limit, on the other hand, is the total amount that you can borrow.

Photo credit: iStock/RgStudio

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.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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