SoFi

A credit card can be a useful tool for managing your money. But before tapping into the benefits, the first thing to know is how to get a credit card. There are some requirements, and some tips that can help when it comes to getting approved.

Here’s the lowdown on the key things to know to apply for a credit card — and most importantly, to get approved for a credit card.

What to Consider When Applying for a Credit Card

Before you worry about how to get a credit card, it’s helpful to first understand what a credit card is. As the first word in its name suggests, a credit card is a line of credit, which is a type of flexible loan that enables you to borrow money up to a fixed limit.

When an individual charges a transaction at a business that accepts credit card payments, the credit card company pays the merchant. The cardholder must then pay back the credit card company by a designated date. Otherwise, they’ll incur interest charges.

This basic premise of how credit cards work means the card company is taking a risk when extending credit to any individual. They assess that risk via an application that determines not only whether the individual gets approved for a credit card, but also factors like their credit card limit and annual percentage rate (APR) on a credit card.

Before applying, there are some important considerations that can help improve your chances of getting approved for a credit card.

Recommended: Tips for Using a Credit Card Responsibly

Learn About the Terms Associated with Your Credit Card

Evaluating different credit cards can feel overwhelming for a newbie, so it’s a good idea to get familiar with some basic credit card terms that are common across all credit cards. Here are some common terms you might run into in a credit card application and as you begin to use your new card:

•   Balance: Your balance is the amount of money you owe on your credit card. This can include purchases (even paying taxes with credit card) as well as any fees, balance transfers, and cash advances.

•   Balance transfer: A balance transfer is when you move money from one credit card to another credit card, ideally one with a lower APR. This can allow you to pay off your debt more easily, though you’ll often pay a balance transfer fee to move over the balance.

•   Billing cycle: A credit card billing cycle is the period of time between the regular statements you receive from your credit card company. Usually, billing cycles occur on a monthly basis.

•   CVV: The card verification value, or CVV number on a credit card, is a three- to four-digit number that appears on a physical credit card. It serves as an additional layer of security in transactions that occur over the phone or online.

•   Expiration date: A credit card expiration date represents when a credit card is valid until. Usually shown as a month and a year, you can use your credit card up until the last date of that month in that year.

•   Late fee: The late fee is a charge you’ll incur if you miss making at least your minimum payment by your payment due date. To avoid this fee, it’s important to alway pay on time, even if you’re in the midst of disputing a credit card charge, for instance.

•   Minimum payment: The credit card minimum payment is the least amount you must pay each month on your outstanding balance. This can be a flat amount or a percentage of your outstanding balance.

•   Purchase APR: The APR for purchases represents the total annual cost of borrowing money through purchases made with your credit card. This APR applies only on remaining balances after the statement due date.

Decide on the Type of Credit Card You Need

There are a number of different types of credit cards out there that can serve different needs. For instance, there are:

•   Travel rewards credit cards

•   Cashback credit cards

•   Credit-building credit cards

•   Balance transfer credit cards

While most of the above types of cards are unsecured credit cards, meaning no deposit is required, there are also secured credit cards. These do require a deposit, though they may also be more accessible to those with limited or low credit.

Different types of cards offer different benefits, and they may also vary when it comes to things like annual fees or average credit card limits.

There may also be differences in the requirements for getting approved. It’s not so much a question of how old you have to be to get a credit card — rather, different cards may have varying requirements for minimum income or credit score needed to qualify.

Before applying, it’s a good idea to do some comparison shopping to find a card that not only fits your needs but also that you’re eligible for.

Check Your Credit Score

Your credit score is a number that indicates the likelihood that you’ll repay a debt. It’s based on your credit history, and banks use it as a tool for evaluating credit card applications and deciding whether to approve them.

Here are some common factors that can affect your credit score:

•   Payment history, including on-time payments, missed payments, and having an account sent to collections

•   Credit utilization, or how much one owes relative to their total available revolving credit

•   Length of credit history

•   Types of credit accounts

•   Recent activity, such as applying for or opening new accounts

Generally, the higher an individual’s credit score, the more creditworthy they’re considered. If using the FICO scoring model, here’s a general breakdown of what various scores mean:

•   Less than 580: Poor

•   580-669: Fair

•   670-739: Good

•   740-799: Very good

•   800+: Exceptional

It’s a good idea for an individual to know their score and their chances of getting approved before applying for a credit card. The minimum credit score for a credit card will vary depending on the type of card it is.

For example, rewards credit cards, which come with big perks, tend to require a good credit score. But some types of credit cards, such as secured credit cards, may be more accessible to those with lower credit scores because they pose a lesser risk to lenders. This can make the latter category more appealing if, for instance, you’re getting your first credit card.

It’s worth noting that pulling one’s own credit information is considered a “soft inquiry” and does not reduce their credit score. When you apply for a new credit card, however, it will generate a “hard inquiry,” which can lower your credit score temporarily.

Where to Apply for a Credit Card

Credit cards are offered through banks, credit unions, retailers, airlines, colleges and universities, and a host of other institutions. This means that there are a variety of places where one can apply for a credit card — and often a number of ways to apply.

You can apply for a credit card in person, such as at a bank branch or retail location. Or, you may apply over the phone. Most credit card issuers also offer online applications, which add convenience to the process.

How to Apply for a Credit Card in 3 Steps

Ideally, by the time you sit down to actually apply for a credit card, you’ll have done the necessary homework to determine if you should get a credit card. This includes checking your credit score and potentially getting preapproved (though more on that later).

1. Gather the Necessary Information

The application process will be easier — and likely quicker — if you’re prepared. This means gathering any necessary documentation (more on what you’ll usually need in the next section) and having reverent information on hand, such as your income and Social Security number.

2. Fill Out and Submit an Application

Next, it’s time to fill out the application. There are a few ways you can do this: online, over the phone, or through the mail. It’s generally quickest to complete an application online.

You’ll need to fill in the requested fields and upload (or make copies of) any necessary documents. Once you submit your application, you should hear back within a few weeks at the most — sometimes, you’ll hear back almost the same day.

3. Be Ready for the Credit Impact and Repayment

As you wait for your credit card to arrive in the mail, you should take stock of the recent hit you took to your credit from the hard inquiry. It’s generally advised to avoid applying for multiple credit cards or loans within a short period of time to minimize the credit impact.

Also start to consider your strategy for how you’ll repay your credit card balance once you start swiping. Consider setting up automatic payments from your bank account each month to make sure you’re not late, or you might set a reminder on your phone or in your calendar.

What Do You Need to Apply for a Credit Card?

While application requirements will depend on the credit card issuer, what you need to apply for a credit card generally includes:

•   Annual income

•   Address and length of time at that address

•   Date of birth

•   Phone number

•   Social Security number

•   Employment status and sources of income

•   Financial accounts and/or assets

•   Financial liabilities

•   Country of citizenship and residence

Credit Card Preapproval and Prequalification

Getting prequalified or preapproved for a credit card means you’ve been prescreened for a credit card and meet at least some of the eligibility requirements. The two terms can be used interchangeably, though preapproval might carry slightly more weight in terms of your odds of eventual approval.

You’ll still need to go through the formal application to get approved for a credit card though, as neither preapproval or prequalification means you’ve been approved. The formal application process will involve a hard inquiry, whereas prequalification and preapproval generally only involve soft inquiries.

Still, preapproval or prequalification can be a good way to suss out potential credit card options and likelihood of getting approved before you move forward with an application and risk the impact to your credit.

What Happens If Your Application Is Turned Down?

Getting turned down for a credit card is indeed disappointing. When a credit card application is declined, you have the right to know why. You can request details about your application in the form of an adverse action letter, which includes the reason for the denial, details about your credit score, and notice of the right to dispute the accuracy of information provided by the credit reporting agency.

This can serve as helpful context for understanding why an application was declined. It can also help in determining what the appropriate next steps are for improving one’s chances of approval, if and when you apply for another credit card. For instance, you may consider applying for a credit card that has less stringent credit requirements, or you may take steps to improve your credit score and try again at a later date.

Secured and Prepaid Credit Cards

If you were turned down for a credit card, you might take some steps to improve your credit before trying again, or you might consider other options. Two alternatives you might look into are secured credit cards and prepaid credit cards.

With a secured credit card, you put down a deposit, which serves as collateral and usually acts as the card’s credit limit. Because there’s collateral there for the credit card issuer to fall back on if you fail to make your payments, secured credit cards are generally easier to get approved to than the more traditional, secured credit cards.

Prepaid debit cards don’t let you work on building your credit, as you’re not actually borrowing funds. Rather, you load the card with funds that you can then use in person or online. This can offer some of the convenience that a credit card offers over cash, without the application and approval process.

The Takeaway

Applying for a credit card can be a simple three-step process of gathering the required details, submitting an application, and handling the likely credit impact. You will probably have many options when selecting a card, so take your time to find the right fit.

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 choose a credit card?

Choosing a credit card is a personal decision that depends on your needs, preferences, financial habits, and eligibility. Before applying for a credit card that appears to fit your needs, it’s a good idea to check your credit score and any other requirements, such as minimum income, to improve your chances of getting approved.

How long does it take to get a credit card?

The length of time it takes to get a credit card can depend on a number of factors, including the eligibility requirements and how an application is submitted. Some online credit card applications offer fast or even instant approval, although it can take some additional time for the credit card to arrive in the mail.

Does your credit get pulled when applying for a credit card?

Generally, a credit card company will do a hard credit inquiry before extending final approval. However, there may be some scenarios where a credit card issuer may only do a soft inquiry, such as if an individual has been preapproved for a credit card or already has a banking relationship with the credit card issuer.

What are the requirements needed to get a credit card?

The requirements to get a credit card will typically vary from card to card. However, you’ll generally need to provide information on your annual income, your employment status, and your current debt obligations. Your creditworthiness also comes into play, though credit score requirements will differ depending on the card.

Can you get a credit card with no credit history?

It is possible to get a credit card with no credit history, though your options may be more limited. You may have an easier time getting approved for a secured credit card or a basic, no-frills credit card.

Photo credit: iStock/Dome Studio

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

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 .

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.

SOCC0222003

There are millions of credit card accounts in the United States alone, and it’s estimated that 84% of adults in the U.S. have at least one credit card. Yet, many people don’t have a firm grasp on the basics of what a credit card is and how credit cards work.

If you have a credit card account, or plan on ever using one, it’s important to understand the fundamentals of credit cards. This ranges from what a credit card is to how credit card interest works to how credit cards relate to credit scores.

Recommended: Tips for Using a Credit Card Responsibly

What Is a Credit Card?

A credit card is a type of payment card that is used to access a revolving line of credit.

Credit cards differ from other types of loans in that they offer a physical payment card that is used to make purchases. Traditionally, credit cards are made of plastic, but an increasing number of credit card issuers now offer metal cards, usually for their premium accounts that offer travel rewards.

But a credit card account is much more than a plastic or metal payment card. A credit card account is a powerful financial tool that can serve many purposes. For starters, it can be a secure and convenient method of payment anywhere that accepts credit card payments. It also can be used to borrow money in a cash advance or to complete a balance transfer.

Additionally, credit cards can offer valuable rewards, such as cash back and travel rewards like points or miles. Cardholder benefits can also include purchase protection and travel insurance policies.

If used responsibly, a credit card can help you to build your credit score and history, which can open up new borrowing opportunities. Of course, credit cards can also damage your credit when used irresponsibly. If you rack up debt on your credit card, it can be hard to get it paid off and back in the clear (here, for instance, is what happens to credit card debt when you die).

Recommended: Does Applying For a Credit Card Hurt Your Credit Score?

How Do Credit Cards Work?

Credit cards offer a line of credit that you can use for a variety of purposes, including making purchases, completing balance transfers, and taking out cash advances. You can borrow up to your credit limit, and you’ll owe at least the minimum payment each month.

You can apply for a credit card from any one of hundreds of credit card issuers in the U.S. Card issuers include national, regional, and local banks, as well as credit unions of all sizes. Card issuers will approve an application based on the credit history and credit score of the applicant, among other factors.

There are credit cards designed for people with nearly every credit profile, from those who have excellent credit to those with no credit history or serious credit problems. As with any loan, those with the highest credit score will receive the most competitive terms and benefits.

Once approved, you’ll likely receive a credit limit that represents the most you can borrow using the card. Whether your limit is above or below average credit card limit depends on a variety of factors, including your payment history and income.

The credit card is then mailed to the account holder and must be activated before use. You can activate a credit card online or over the phone. So long as your account remains in good standing, it will be valid until the credit card expiration date.

Once activated, the card can be used to make purchases from any one of the millions of merchants that accept credit cards. Each card is part of a payment network, with the most popular payment networks being Visa, Mastercard, American Express, and Discover. When you make a payment, the payment network authenticates the transaction using your card’s account number and other security features, such as the CVV number on a credit card.

Every month, you’ll receive a statement from the card issuer at the end of each billing cycle. The statement will show the charges and credits that have been made to your account, along with any fees and interest changes being assessed.

Your credit card statement will also show your balance, minimum payment due, and payment due date. It’s your choice whether to pay your minimum balance, your entire statement balance, or any amount in between. Keep in mind that you will owe interest on any balance that’s not paid back.

If you don’t make a payment of at least the minimum balance on or before the due date, then you’ll usually incur a late fee. And if you pay more than your balance, you’ll have a negative balance on your credit card.

Credit Card Fees

There are a number of potential fees that credit card holders may run into. For example, some credit cards charge an annual fee, and there are other fees that some card issuers can impose, such as foreign transaction fees, balance transfer fees, and cash advance fees. Cardholders may also incur a late fee if they don’t pay at least the minimum due by their statement due date.

Often, however, you can take steps to curb credit card fees, such as not taking out a cash advance or making your payments on-time. For a charge like an annual fee, cardholders will need to assess whether a card’s benefits outweigh that cost.

3 Common Types of Credit Cards

There are a number of different kinds of credit cards out there to choose from. Here’s a look at some of the more popular types.

Rewards Credit Cards

As the name suggests, rewards credit cards offer rewards for spending in the form of miles, cash back, or points — a rewards guide for credit cards can give you the full rundown of options. Cardholders may earn a flat amount of cash back across all purchases, or they may earn varying amounts in different categories like gas or groceries.

The downside of these perks is that rewards credit cards tend to have higher annual percentage rates (APRs), so you’ll want to make sure to pay off your full balance each month.

Balance Transfer Credit Cards

Balance transfer cards allow you to move over your existing debt to the card. Ideally, this new card will have a lower interest rate, and often they’ll offer a lower promotional rate that can be as low as 0% APR. However, keep in mind that this promo rate only lasts for a certain period of time — after that, the card’s standard APR will kick back in.

Secured Credit Cards

If you’re new to credit or trying to rebuild, a secured credit card can be a good option. Generally, when we talk about credit cards, the default is an unsecured credit card, meaning no collateral is involved. With a secured credit card, you’ll need to make a deposit. This amount will generally serve as the card’s credit limit.

This deposit gives the credit card issuer something to fall back on if the cardholder fails to pay the amount they owe. But if you’re responsible and get upgraded to a secured credit card, or if you simply close your account in good standing, you’ll get the deposit back.

How Does Credit Card Interest Work?

The charges you make to your credit card are a loan, and just like a car loan or a home loan, you can expect to pay interest on your outstanding credit card balance.

That being said, nearly all credit cards offer an interest-free grace period. This is the time between the end of your billing period and the credit card payment due date, typically 21 or 25 days after the statement closing date. If you pay your entire statement balance before the payment due date, then the credit card company or issuer will waive your interest charges for that billing period.

If you choose not to pay your entire statement balance in full, then you’ll be charged interest based on your account’s average daily balance. The amount of interest you’re charged depends on your APR, or annual percentage rate. The card issuer will divide this number by 365 (the number of days in the year) to come to a daily percentage rate that’s then applied to your account each day.

As an example, if you had an APR of 15.99%, your daily interest rate that the card issuer would apply to your account each day would be around 0.04%.

Recommended: Average Credit Card Interest Rates

Credit Cards vs Debit Cards

Although they look almost identical, much differs between debit cards vs. credit cards. Really, the only thing that debit cards and credit cards truly have in common is that they’re both payment cards. They both belong to a payment network, and you can use them to make purchases.

With a debit card, however, you can only spend the funds you’ve already deposited in the checking account associated with the card. Any spending done using your debit card is drawn directly from the linked account. Because debit cards aren’t a loan, your use of a debit card won’t have any effect on your credit, positive or negative.

But since it isn’t a loan, you also won’t be charged interest with a debit card, nor will you need to make a minimum monthly payment. You will, however, need to make sure you have sufficient funds in your linked account before using your debit card.

Another key difference between credit cards vs. debit cards is that credit card users are protected by the Fair Credit Billing Act of 1974. This offers robust protections to prevent cardholders from being held responsible for fraud or billing errors. Debit card transactions are subject to less powerful government protections.

Lastly, debit cards rarely offer rewards for spending. They also don’t usually feature any of the travel insurance or purchase protection policies often found on credit cards. You likely won’t be on the hook for an annual fee with a debit card, which is a fee that some credit card issuers do charge, though you could face overdraft fees if you spend more than what’s in your account.

To recap, here’s an overview of the differences between credit cards and debit cards:

Pros and Cons of Using Credit Cards

Beyond knowing what a credit card is, it’s important to familiarize yourself with the pros and cons of credit cards. That way, you can better determine if using one is right for your financial situation.

To start, notable upsides of using credit cards include:

•   Easy and convenient to use

•   Robust consumer protections

•   Possible access to rewards and other benefits

•   Ability to avoid interest by paying off monthly balance in full

•   Potential to build credit through responsible usage

However, also keep these drawbacks of using credit cards in mind:

•   Higher interest rates than other types of debt

•   Temptation to overspend

•   Easy to rack up debt

•   Various fees may apply

•   Possible to harm credit through irresponsible usage

How to Compare Credit Cards

Since there are hundreds of credit card issuers, and each issuer can offer numerous individual credit card products, it can be a challenge to compare credit cards and choose the one that’s right for your needs. But just like purchasing a car or a pair of shoes, you can quickly narrow down your choices by excluding the options that you aren’t eligible for or that clearly aren’t right for you.

Start by considering your credit history and score, and focus only on the cards that seem like they align with your credit profile. You can then narrow it down to cards that have the features and benefits you value the most. This can include having a low interest rate, offering rewards, or providing valuable cardholder benefits. You may also value a card that has low fees or that’s offered by a bank or credit union that you already have a relationship with.

Once you’ve narrowed down your options to a few cards, compare their interest rates and fees, as well as their rewards and benefits. You can find credit card reviews online in addition to user feedback that can help you make your final decision.

Important Credit Card Terms

One of the challenges to understanding how credit cards and credit card payments work is understanding all of the jargon. Here’s a small glossary of important credit card terms to help you to get started:

•   Annual fee: Some credit cards charge an annual fee that users must pay to have an account. However, there are many credit cards that don’t have an annual fee, though these cards typically offer fewer rewards and benefits than those that do.

•   APR: This stands for annual percentage rate. The APR on a credit card measures its interest rate and fees calculated on an annualized basis. A lower rate is better for credit card users than a higher rate.

•   Balance transfer: Most credit cards offer the option to transfer a balance from another credit card. The card issuer pays off the existing balance and creates a new balance on your account, nearly always imposing a balance transfer fee.

•   Card issuer: This is the bank or credit union that issues the card to the cardholder. The card issuer the company that issues statements and that you make payments to.

•   Cash advance: When you use your credit card to receive cash from an ATM, it’s considered a cash advance. Credit card cash advances are usually subject to a much higher interest rate and additional fees.

•   Chargeback: When you’ve been billed for goods or services you never received or that weren’t delivered as described, you have the right to dispute a credit card charge, which is called a credit card chargeback. When you do so, you’ll receive a temporary credit that will become permanent if the card issuer decides the dispute in your favor.

•   Due date: This is the date you must make at least the credit card minimum payment. By law, the due date must be on the same day of the month, every month. Most credit cards have a due date that’s 21 or 25 days after the statement closing date.

•   Payment network: Every credit card participates in a payment network that facilitates each transaction between the merchant and the card issuer. The most common payment networks are Visa, Mastercard, American Express, and Discover. Some store charge cards don’t belong to a payment network, so they can only be used to make purchases from that store.

•   Penalty interest rate: This is a separate, higher interest that can apply to a credit card account when the account holder fails to make their minimum payment on time.

•   Statement closing date: This is the last day of a credit card account’s monthly billing cycle. At the end of this day, the statement is generated either on paper or electronically, or both. This is the day on which all the purchases, payments, fees, and interest are calculated.

Credit Cards and Credit Scores

There’s a lot of interplay between credit cards and your credit score.

For starters, when you apply for a new credit card, that will affect your score. This is because the application results in a hard inquiry to your credit file. This will temporarily ding your score, and it will remain on your credit report for two years, though the effects on your credit don’t last as long.

Further, how you use your credit card can impact your credit score — either positively or negatively. Having a credit card could increase your credit mix, for instance. Or, closing a longstanding credit card account may shorten the age of your accounts, resulting in a negative impact to your score.

Making timely payments is key to maintaining a healthy credit score, as is keeping a low credit utilization rate (the amount of your overall available credit you’re currently using). If you max out your credit card or miss payments, that won’t bode well for your credit score. Conversely, staying on top of payments can be a great step toward building your credit.

The Takeaway

Credit cards work by giving the account holder access to a line of credit. You can borrow against it up to your credit limit, whether for purchases and cash advances. You’ll then need to pay back the amount you borrowed, plus interest, which is typically considered to be a high rate vs. other forms of credit. For this reason, it’s important to spend responsibly with a credit card.

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 does a person shop for a credit card?

To shop for a credit card, start by looking at your credit score to determine what cards you may be able to qualify for. Then, decide what kind of card is best for your needs, such as a card that has a low interest rate, one that will allow you to build credit, or a card that offers rewards. Finally, compare similar products from competing card issuers to assess which is the most competitive offer available to you.

Can I use my credit card abroad?

Yes, most credit card payment networks are available in most countries. As long as you visit a merchant that accepts cards from the same payment network that your card belongs to, then you’ll be able to make a purchase.

How do you use a credit card as a beginner?

If you’re new to credit and working to build your score, you’ll want to make sure you’re as responsible with your card as possible. Pay your bill on time, and aim to pay in full if you can to avoid interest charges. Use very little of your credit limit — ideally no more than 30%. And make sure to regularly review your credit card statements and your credit report. But don’t let any of that scare you away from using your card either — it’s important to regularly use your card for small purchases to get your credit profile built up.

How do credit cards work in simple terms?

Credit cards offer access to a line of credit. You can borrow against that, up to your credit limit, for a variety of purposes, including purchases and cash advances. You’ll then need to pay back the amount you borrowed.

How do payments on a credit card work?

At the end of each billing cycle, you’ll receive a credit card statement letting you know your credit card balance, minimum payment due, and the statement due date. You’ll then need to make at least the minimum payment by the statement due date to avoid late fees and other consequences. If you pay off your full balance, however, you’ll avoid incurring interest charges. Otherwise, interest will start to accrue on the balance you carry over.

Photo credit: iStock/Katya_Havok

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

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

SOCC0323006

A hotel credit card is a type of credit card that’s co-branded with a major hotel group. They work just like any other credit card, and you can use them to make purchases anywhere that a particular credit card network is accepted. The main difference is that when you use the card for purchases, you earn points, which allow you to save money on hotels. You can redeem those points for free hotel stays and additional perks with that hotel group.

Deciding which hotel credit card is right for you entails more than just finding a hotel you like. To know if a hotel credit card is worth it, you’ll want to know what to look for in a hotel credit card and the pros and cons involved, as well as how redemption rates can vary.

What Are Hotel Credit Cards?

As mentioned, a hotel credit card is a type of card that’s offered through a partnership between a credit card issuer, such as a bank or credit card network, and a major hotel. Hotel credit cards are considered open-loop cards, which means you can use the card to make purchases anywhere that type of card is accepted. This is in contrast to a private label credit card, which you can only use at a particular store.

Hotel credit cards feature a rewards program, which allows you to earn points for purchases made with the card. You can use the points you earn toward stays at hotels, allowing you to save money on hotels. These cards may also come with automatic elite status, which might include free wifi, extended checkout, and complimentary breakfast.

Keep in mind that hotel credit cards are different from a hotel loyalty program, which incentivizes guests to stay at hotels. In return for their stays, guests can earn rewards like free nights and complimentary meals. Hotel credit cards allow you to earn rewards more quickly by making purchases on your card.

How Do Hotel Credit Cards Work?

Hotel credit cards operate how credit cards work usually. You’re given a credit limit and can use your card to make purchases to that limit. You can pay your balance in full each month, or you can opt to pay it back over time, though this will lead to interest charges accruing.

The main draw of hotel credit cards is that there’s a rewards program and various extra perks offered. You rack up credit card points for using your card, and then can redeem them for free hotel rooms. Think of it like the hotel version of an airline credit card, which allows you to earn credit card miles for flights.

Each hotel credit card has a different rewards program and awards points at different rates. The amount you earn hinges on the hotel’s rewards policy as well as your card’s tier. That’s because the same card can have different tiers, with higher tiers enabling you to earn rewards faster.

What to Look for in a Hotel Credit Card

With so many hotel credit cards to choose from, here’s what you’ll want to pay close attention to when researching and comparing your options:

•   Hotel brand: As hotel credit cards only allow you to redeem credit card points for that particular hotel or group of hotels, which major hotel group the card is co-branded with is important. Where are their hotels located, and how many hotels are there? Can you redeem points for any of their hotels? Are there blackout dates?

•   Rewards program: You’ll want to look at the earning rate for the rewards program. Also investigate where there other perks, such as automatic upgrades, complimentary wifi and breakfast, and extended checkout. Some hotel credit cards even feature an anniversary bonus.

•   Sign-up bonus: Some cards feature an attractive sign-up bonus. For instance, you might earn a free night’s stay for simply signing up, or points if you spend a certain amount within the first few months after opening your account.

•   Additional perks: Beyond the basics, a hotel credit card might offer extras like credit card travel insurance and airport lounge access.

•   Credit card tier: As mentioned, a single hotel credit card might have several tiers to choose from. The higher the tier, the quicker you can earn points, and the more opportunities to earn points. Plus, higher tiers usually come with more perks. However, higher-tier credit cards also can be harder to qualify for. You might need a stronger credit score, higher income, and lower debt-to-income ratio than you would to qualify for a lower-tier card. Plus, a higher annual fee might apply.

•   Annual percentage rate (APR): If you plan on carrying a balance on your card, it’s particularly important to understand the APR of the card. Further, look at the terms and fees. What will you be charged for a late payment? Are there foreign transaction fees? Some credit cards, such as SoFi’s credit card, charge no foreign transaction fees.

•   Fees: If the hotel credit card comes with an annual fee, will you use it enough to offset the fee? Take the time to crunch the numbers before committing.

Recommended: Credit Card Miles vs. Cashback

Advantages of Hotel Credit Cards

When weighing whether hotel credit cards are worth it, consider some of these potential advantages:

•   Faster rewards earning: Compared to a hotel’s loyalty program, you’ll earn points faster with a hotel credit card. Plus, with a hotel credit card, there are usually more opportunities to earn rewards, as you rack points whenever you purchase something with your card. You might also earn additional points for booking at the hotel using your card.

•   Additional perks: As mentioned, a hotel credit card might come with added benefits, such as free internet, extended checkout, complimentary breakfast, and room upgrades.

•   Travel-related benefits: You might be able to take advantage of trip protection, credits that you can use to pay for room service or spa treatments, and credit toward Global Entry or TSA PreCheck.

•   Automatic upgrade to elite status: If a card offers an automatic upgrade to their hotel program’s elite status, you might be privy to room upgrades, credits toward room service, or concierge services.

Recommended: What Is an International Credit Card?

Disadvantages of Hotel Credit Cards

Here are some downsides of hotel credit cards to consider:

•   Limited uses: Because hotel credit cards are co-branded with a specific hotel brand, you can only use the rewards and perks when you stay at that particular hotel. Plus, there might be blackout dates, meaning you can’t use your benefits on those particular days, which are usually during times of high demand.

•   Possible annual fee: A card might come with an annual fee. The higher the tier, the higher the annual fee, if one applies. However, there’s a chance you could dodge this by focusing your search on no annual fee credit cards.

Who Should Open a Hotel Credit Card?

Wondering if a hotel credit card is worth it? If you’re someone who travels frequently and enjoys staying at major hotels as opposed to an Airbnb, then a hotel credit card could be a good idea. You’ll want to make sure you use the card enough to rack up points accordingly, and understand all the perks so you can make the most of them.

If the card comes with an annual fee, determine first whether the cash value of your points is enough to justify the cost. This could influence whether opening a hotel credit card makes sense.

How Redemptions and Earning Rates Vary on Hotel Credit Cards

The “earn and burn” rates for this category of rewards credit cards can vary greatly. Some offer 0.5 cents a dollar, while others over 5 cents a dollar and upwards. Plus, higher-tiered cards typically make it easier for you to earn points more quickly.

As no two hotel credit cards are alike, before deciding on a hotel credit card, look carefully at how you can earn points and how many points you can earn for certain types of purchases. By looking into how you can redeem your rewards and if there are any restrictions, you can also figure out how to make the most of your card.

How to Find a Hotel Credit Card

You might receive a hotel credit card offer via mail or in your email inbox. But your options aren’t limited to offers you’re preapproved for. Rather, the easiest way to find a hotel credit card is by way of an internet search. You can start by searching for your favorite hotel brands to see if they have a co-branded credit card available.

From there, you’ll want to narrow it down to a few options and compare how those hotel credit cards stack up against one another.

The Takeaway

Hotel credit cards are a category of rewards credit cards that allow you to earn hotel points through your spending on the card. You can then use those points toward hotel stays and other perks at the hotel chain affiliated with the card. When shopping around, you’ll find that there are a slew of options for hotel credit cards. It’s important to review details like the card’s rewards programs and other perks, as well as the APR and fees involved.

In some cases, after weighing the advantages and drawbacks of hotel credit cards, you might decide a hotel credit card isn’t worth it for you. Instead, a more general rewards credit card could be a better fit. The SoFi Credit Card, for instance, allows you to earn cash-back rewards on all eligible purchases that you can then use to save, invest, or pay down eligible SoFi debt.

FAQ

Does my marital status matter in a hotel credit card?

By law, credit card companies cannot consider your marital status when determining whether to offer you a credit card. By extension, whether you’re married or not doesn’t affect your odds of getting approved for a hotel credit card, nor should it impact your terms, rates, or benefits.

How much is charged by hotels on your credit card?

A hotel might charge your credit card when you book a room, check in, or at checkout. When your card is charged might depend on how you made your reservation and the hotel’s policies. If in doubt, read up on the hotel or booking platform’s policies.

Is your credit card charged when you check out?

If you’re booking for a prepaid stay, your credit card will be charged at the time you make your reservation. If it’s a standard booking, then the hotel will charge your credit card at checkout. Any incidentals — think room service, massage treatments, and meals at the hotel — will be charged at checkout.

Photo credit: iStock/Prostock-Studio

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.


Members earn 2 rewards points for every dollar spent on purchases. No rewards points will be earned with respect to reversed transactions, returned purchases, or other similar transactions. When you elect to redeem rewards points toward active SoFi accounts, including but not limited to, your SoFi Checking or Savings account, SoFi Money® account, SoFi Active Invest account, SoFi Credit Card account, or SoFi Personal, Private Student, Student Loan Refinance, or toward SoFi Travel purchases, your rewards points will redeem at a rate of 1 cent per every point. For more details, please visit the Rewards page. Brokerage and Active investing products offered through SoFi Securities LLC, Member FINRA/SIPC. SoFi Securities LLC is an affiliate of SoFi Bank, N.A.

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.

SOCC0223010