SoFi

Applying for credit cards isn’t something you should take lightly because it can lower your credit score with each application you submit. Reviewing a credit card application typically involves a hard credit inquiry, which usually lowers a score by perhaps five points or so. If you were to fill out several credit card applications at one time, that could have a significant impact on your score.

Still, while applying for a credit card can hurt your credit, there are a number of potential pluses to credit cards, from allowing you to build your credit history to earning rewards. Here’s how to navigate the effects of applying for credit on your credit score, as well as some alternatives to consider if you don’t think your score can currently weather it.

Hard vs Soft Credit Inquiries

To understand how applying for a credit card can hurt your score, it’s first important to know the difference between hard and soft credit inquiries.

A hard inquiry, also known as a hard pull or hard credit check, generally occurs when a lender is determining whether to loan you the funds you’ve applied for. This might happen if you’ve applied for a mortgage or a new credit card, for example.

On the other hand, a soft inquiry, or soft credit pull, tends to happen when someone runs a credit check to gather information without the express purpose of lending you money. For instance, a credit card issuer may do a soft pull in order to make a preapproval offer, or a potential employer might perform a soft inquiry as part of the application process. A soft credit inquiry also may happen when you check your credit report.

Perhaps the most important difference between a hard pull vs. a soft pull is how it impacts your credit scores. While hard credit inquiries show up on your credit report and affect your score, soft inquiries do not. Further, while soft pulls can be done without your consent, creditors need your approval to do a hard inquiry.

How Applying for Credit Cards Can Hurt Your Score

While your credit score won’t take a huge hit when you apply for a credit card, it will get dinged. Why? When you apply for a credit card, the card issuer will perform a hard inquiry to determine whether you’re a good candidate to lend money to.

Hard inquiries can lower your credit score because a new application can represent more risk for the card issuer. According to FICO®, a hard credit inquiry will generally affect the score on your credit report by five points or less. Those with few accounts or a thin credit history can experience a greater impact on their score. Additionally, multiple inquiries within a short period of time can exacerbate the negative effect on your credit score.

Hard pulls stay on your credit report for two years, though their impact on your credit scores typically vanishes after a year. It’s important to note that your score will see an impact whether or not you’re approved, as the hard inquiry is conducted either way.

Should You Apply for Multiple Credit Cards at Once?

Simply put, probably not. Applying for multiple credit cards at one time is likely to have a negative impact on your credit score. While it might make sense to apply for more than one job at a time, that’s not the way to go with credit cards. Instead, you should approach applying for credit cards strategically.

By applying for several cards over a short period, you might send the signal that you’re desperately seeking funds and headed for — or already in — trouble. You’ll appear risky to lenders and that will likely be reflected by a dip in your credit score.

Of course, this doesn’t mean you can’t have multiple credit cards. You’ll just want to take your time and space out your acquisitions. If you get rejected for a card, pause to figure out why, and then take steps to address the suspected weak spots. Once you’ve had time to build your credit, consider trying again.

How Often Can I Apply for a Credit Card Without Hurting My Credit?

Per Experian, one of the three major credit bureaus, it’s wise to wait at least six months in between credit card applications. If you apply for a number of credit cards within a few months, you could see more than the usual ding to your score that new credit inquiries typically cause. While the effects may be brief, Experian states that you could see a “potentially significant drop” in your score.

While six months is the minimum waiting period suggested, how often it’s appropriate to apply for new credit cards also depends on your financial specifics. For instance, if your application was denied due to your credit score and you still haven’t built it, then it may not make sense to apply again, even if six months have passed. Similarly, you might not choose to apply for a new card if you know you have another big lending application coming up, such as for a mortgage.

On the other hand, if you have a strong credit profile, your score may not take as much of a hit if you decide to apply for another card sooner to try to cash in on generous rewards or a hefty welcome bonus offer. Those who don’t yet have a credit history and are beginning to build a credit profile may also find it’s worthwhile to wait less time between applications.

Recommended: What Is the Average Credit Card Limit?

Can Applying for Credit Cards Help Your Score?

There are two sides to a coin and so it goes with applying for credit cards — there can be some upside when you apply for a new card.

This is partly because opening a new account effectively increases your credit limit. In turn, this can lower your credit utilization ratio, which is your outstanding balances compared to your overall credit limit. Credit utilization accounts for 30% of your credit score and is second in importance only to your payment history.

Another potential plus to opening a new card is that if you make on-time payments on your new card, your positive payment history can build your score over time. However, if you’re a credit card newbie and still working on establishing credit, you may not see the uptick in your score as quickly. This is because FICO requires you to have at least one account that’s been open for six months and one account that’s been reported to the credit bureau within the last six months to qualify for a credit score.

If you don’t already have a handful of credit card accounts, a new card also can positively impact your score because it’s adding another revolving account to your lineup. While your mix of account types only comprises 10% of your credit score, credit scoring models do look at and reflect this.

Recommended: When Are Credit Card Payments Due?

Does Applying for a Credit Card and Not Getting Approved Hurt Your Credit?

Your credit will be affected whether or not you’re approved for a credit card. That’s because when you submit a credit card application, a hard credit inquiry is conducted to determine if you’re eligible. The effects of that hard pull will apply regardless of the results.

However, your credit won’t face any consequences for the fact you were denied a credit card. That information won’t be reflected in your credit score, nor will it show up on your credit report.

Recommended: Tips for Using a Credit Card Responsibly

Things to Consider Before Applying for a Credit Card

Before you rush to apply for credit, make sure you’re ready. Here’s what to consider doing prior to applying.

•   Check your credit report: The first step is to get a copy of your credit report. To get your free report each year, go to AnnualCreditReport.com . As you review your credit report, look for any errors. If there are any, take steps to fix them before you approach a credit card issuer. Also check to see if you’ve had any other recent hard inquiries.

•   Consider any other upcoming credit applications: Be mindful about what’s on your horizon before moving forward with applying for a new credit card. For example, if you think that you will be applying for a mortgage or car loan soon, you may not want to apply for a card and rack up multiple inquiries at once. It may make sense to get your mortgage or car loan first and wait for a little while to go after the credit card.

•   Don’t plan to ditch your old cards: Just because you hope to get a new card, don’t start canceling the other cards in your wallet. Remember, length of credit history makes up 15% of your credit score. By canceling old cards, you’d also reduce your total available credit, which could drive up your credit utilization ratio if you have hefty balances on other cards.

•   Think about why you want to apply for a credit card: Lastly, have a little talk with yourself. A credit card rule of thumb is just because you can get a credit card doesn’t mean you need one. If you already have a credit card, what’s driving you to apply? How are you managing your existing credit card? If you’re not 100% sure you’ll be able to pay off the balance in full each month, think twice about getting it. When balances linger from month to month, it becomes costly due to interest racking up.

Recommended: How to Avoid Interest On a Credit Card

Alternatives to Credit Cards

If you’re worried about the effects that applying for a credit card may have on your credit score, know that you have other options. Instead of getting a credit card, you may also consider the following alternatives for financing:

•   Debit card: If you’re simply looking for another way to easily make purchases and avoid carrying around a wallet full of cash, consider a debit card. While a debit card does not allow you to build your credit score, applying for one does not require a hard pull and is often as easy as opening a bank account. Do note that debit cards tend to have less robust security protections on purchases compared to credit cards though.

•   Loan from a family member or friend: If you’re wary of weathering a hard credit inquiry right now, consider approaching a close family member or friend about borrowing the funds you need. Make sure to clearly agree to the terms of the loan agreement, including when you’ll pay back the money. Also realize the potential implications for your personal relationship if you don’t make good on paying this person back.

•   Salary advance: Another option may be to ask your employer if you can borrow funds from a future paycheck. This can allow you to borrow money in a pinch without needing to go through the formal credit application process. Employers typically won’t charge fees or interest, though you may have to pay an administration fee or interest if your employer relies on a third party for the service.

The Takeaway

Applying for a credit card may be a simple process in terms of filling out the forms, but that doesn’t mean it’s something to take lightly. It can have very real effects on your credit score due to the fact that a formal application requires a hard credit inquiry. Thus, applying for a credit card is always something you should consider carefully and do 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

How much does my credit score go down when I apply for a new card?

Typically, when you apply for a new credit card, your score will only go down temporarily by five points or even less. This will, however, depend on other factors related to your credit status.

How bad does a credit application hurt your credit?

In most cases, a hard credit inquiry as part of a credit card application will temporarily decrease your credit score by five points or less.

How often can I apply for a credit card without hurting my credit?

Typically, hard inquiries stay on your credit report for two years, but only impact your FICO score for one year. You might therefore want to space out applying for a credit card and do so only once every six months or so.

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

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

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

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.

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.

SOCC-Q324-023

Paying interest can be a fact of life for many credit cardholders. In most cases, carrying a balance month to month on a credit card will trigger interest charges, which is essentially the cost of borrowing money from a credit card company. Compared to other types of debt, such as mortgages and car loans, credit cards tend to have higher rates of interest, which can make them an expensive way to borrow money.

One thing that people who use credit cards to their advantage have in common? They know how to avoid paying interest on credit cards. You can learn how, too. Here are some ways you might avoid interest on credit cards.

What’s an APR?

To understand how to avoid paying interest on credit cards, it helps to start by learning about credit card APR, or annual percentage rate. Basically, the APR is the rate of interest you’ll pay if you carry a credit card balance. Unlike the APR for other loan products, the APR for a credit card does not include any fees you may owe for using the card — it’s simply your interest rate.

Your APR on a credit card will depend on your creditworthiness as well as the current prime rate. Generally, borrowers with better credit will have better credit card APRs, meaning they may fall below the average credit card interest rate.

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

When Is Interest Charged?

Credit card interest is charged if you don’t pay off your balance in full each month. If cardholders pay their entire statement balance by their due date, interest charges are typically waived.

When you carry a balance, interest accrues on a daily basis. Your daily interest charge is determined by dividing your APR by 365, the number of days in the year. Then, at the end of each day, the interest is calculated based on your average daily balance. Because this continues throughout the billing cycle, the interest you’re charged yesterday then becomes part of the balance on which interest is charged today.

Your lender will then tally up all of your daily interest charges at the end of the month and put that amount onto your card as a finance charge.

Recommended: When Are Credit Card Payments Due?

How to Avoid Interest on a Credit Card

There are several strategies you can use to help avoid credit card interest.

Pay Off Your Balance in Full

If you’re wondering how to avoid credit card interest, one of the easiest methods is simply paying off your credit card balance in full each month. So long as you don’t carry a balance from month to month, you should never face purchase interest charges on credit cards.

To make paying off your full balance easier to do, you might consider making multiple payments throughout the month. That way, you don’t have to fork over one lump sum on your statement due date. One technique to consider is what’s known as the 15/3 credit card payment method.

Or, you could plan to check in on your balance regularly to ensure you’re going to be able to pay it off in full. The other benefit of paying off your full balance each month is that it can help you to build credit over time.

Take Advantage of Your Grace Period

Paying off a credit card in full each month creates an additional opportunity to avoid interest on a credit card. To help avoid paying interest, you can take advantage of your card’s grace period, the stretch of time between the end of your billing cycle and when a payment is due. During this time, no interest is charged on new purchases.

Here’s a hypothetical example:

•   A cardholder’s billing cycle for the month ends on January 15.

•   Say the cardholder pays their credit card bill on February 10. On February 10, they are only required to pay the “statement amount,” which includes only the purchases made from December 15 to January 15.

•   However, the grace period applies to any purchases that are made after January 15, but that won’t technically require payment until March 10. 

•   In this way, a purchase could remain interest-free for longer than just one billing cycle.

Credit card issuers aren’t required to offer a grace period, but plenty do. However, many require the balance to be paid off in full during the previous one or two billing cycles to qualify. If you lose your grace period because you haven’t paid your balance in full, you’ll be charged interest on any unpaid portion of the balance. In addition, you’ll lose your grace period, and all new purchases will accrue interest beginning from the date the purchase is made.

Utilizing the grace period to its full extent is one way to avoid paying interest on a purchase for longer than just one month (or whatever the billing cycle happens to be). Before going this route, just make sure your card has a grace period, and second, that you qualify. If you have questions, never hesitate to call your credit card issuer to ask how and when you’re billed.

Recommended: Tips for Using a Credit Card Responsibly

Use a Balance Transfer Offer or 0% Interest Credit Card

A balance transfer credit card, or a credit card that temporarily offers a 0% APR (or a very low rate), could be an enticing option for those who want to make major headway toward paying down a credit card balance. Keep in mind, however, that good credit (meaning a score of 670+) is typically needed to qualify for these offers.

If this is an approach you’re interested in, calculate how much you’d need to pay off each month in order to eradicate your balance. For example, if you have $6,000 you want to pay off during a 12-month 0% offer, you’d need to pay $500 each month. You’ll want to make sure you can realistically pay off the full balance before the promotion ends and the standard higher APR kicks in.

Also note that many balance transfers carry a balance transfer fee, which is usually around 3% to 5%of the amount transferred. Using our example from above, a $6,000 balance transfer with a 3% balance transfer fee would cost $180. Generally, this amount is added to the card’s total outstanding balance. Before pulling the trigger and transferring a balance, analyze how much you’d save in interest compared to the cost of the balance transfer fee.

There are a couple other potential pitfalls to balance transfers to keep in mind as well. For one, a balance transfer won’t get to the bottom of why you’ve racked up credit card debt in the first place. Some might find it too tempting to keep spending, and if more spending were to occur on top of the balance transfer, it could lead to unwanted interest charges. This could make it even harder to escape high-interest credit card debt.

Avoid Overspending

This may sound obvious, but it’s worth mentioning: To put yourself in a position where you can pay off your credit card balances every month, make sure your monthly spending doesn’t exceed your income.

This is easier said than done sometimes, but once you start racking up credit card interest, it can become even harder to pay off your full balance. You might consider making a budget and then vowing to stick to it to ensure you stay on track with your spending each month.

Plan Out Major Purchases

On a similar note to budgeting, another method for how to avoid paying interest on credit cards is by planning ahead for big purchases. If you know you have a pricey purchase coming up that you may need to spread out in smaller payments across a period of time, be strategic about how you’ll do it.

This could mean simply saving up ahead of time until you have enough stashed up to promptly pay off your balance. Or, you might time opening a credit card with a 0% promotional APR with completing your major purchase.

Tips for Reducing Interest

Sometimes you can’t avoid interest entirely. Even in those instances, you shouldn’t give up entirely and give into interest. Here are some tips for reducing the amount of interest you pay.

Taking Out a Personal Loan

Though not an interest-free option, there are other ways to potentially lower how much you’re paying in interest on your credit card debt. One such option is taking out a debt consolidation loan that has a lower rate of interest.

A debt consolidation loan allows you to roll your debts into one monthly payment that’s a set amount and stretched over a predetermined amount of time. This can make budgeting easier. Plus, if you manage to secure a lower interest rate, you might be able to pay off your debt faster, thanks to saving money on interest.

Making Multiple Payments Each Month

Another tactic to reduce the amount of interest you pay is to make payments on your credit card balance throughout the month, instead of waiting until the due date, as mentioned above. This helps because credit card interest is calculated on a daily basis, based on your average daily account balance. If you lower your balance with more frequent payments throughout the month, your average daily balance will be lower, thus reducing the amount of interest you’re charged.

Trying the Debt Avalanche Method

If you find yourself staring down a mountain of debt, you might consider trying a popular debt payoff strategy: the debt avalanche. With this approach, you focus on paying off your debt with the highest interest rate first. Over the long run, this can save you on interest.

The debt avalanche method instructs that you apply any extra funds to your highest-interest debt, while maintaining minimum monthly payments on your other debts. Then, once that debt is paid off, you’ll move your focus to paying down your debt with the second-highest interest rate.

The Takeaway

There are several ways to not pay interest on a credit card. These range from paying your balance off in full each month to taking advantage of a 0% APR offer. And even if you can’t avoid interest entirely, there are ways to reduce the amount of interest you pay on a balance you’ve accrued.

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 best strategy to avoid paying interest on your credit card?

There are several different ways you can avoid paying interest on your credit card, but among the most common are paying your credit card bill in full every month, consolidating debt with a balance transfer card, and being strategic about major purchases.

When should I pay my credit card to avoid interest?

You should pay your credit card as soon as you get it to avoid interest. There can be interest charged on the previous month’s balance between when the bill is issued and the due date. By making a prompt payment, you could avoid paying that.

How can I get my credit card company to waive interest?

You can call your credit card company’s customer service and request that interest be waived. You will likely have to explain the situation that led to this request. You might get a one-time waiver on some or all interest charges, depending on the situation and the issuer’s policies.

SOCC-Q324-024

There are many reasons you might consider signing up for a new credit card. Many people look at their credit card as simply a financial tool to help them meet their goals. For others, a particular credit card can be a status symbol. Meanwhile, others view the credit card they use as an extension of their personality. For these individuals, many credit card issuers allow you to personalize the design and appearance of your credit card.

Generally, if you want to get a customized credit card, you can do so when you sign up. However, if you already have your card and are wondering how to get a custom credit card, you may still be able to ask your issuer for a new card design.

What Is Credit Card Personalization?

Credit card personalization is the ability to design and personalize the appearance of your credit card. Many issuers allow you to customize the appearance of your credit card in different ways, such as by selecting a unique background, uploading a photo to serve as your card’s backdrop, or adding the logo of your favorite sports team. 

That way, when you’re using a credit card, it can become a conversation starter rather than simply a way to pay for purchases.

Keep in mind that the way your credit card looks won’t in any way impact what a credit card is and how it functions — customization is simply for appearance’s sake.

Banks That Allow Personalized Credit Card

The list of banks that allow personalized credit cards can change as different issuers update their policies. Here are a few banks that are known to allow personalized cards:

•   Discover: Discover allows you to customize any card to “show your true colors.” You simply need to log into your online account to select a new design for yourself or any authorized users on your account.

•   American Express: Sometimes American Express offers different options for some of their credit cards. For instance, the Art x Platinum collection features artwork from Kehinde Wiley and Julie Mehretu.

•   Wells Fargo: Wells Fargo allows you to use one of your own photos or a photo from their library to serve as the face of your credit card.

•   Chase Bank: The Chase Disney Visa and Chase Disney debit feature favorite motifs on your card.

Because policies change, your best course of action is to contact your issuer directly, either through your online account or the phone number listed on the back of your card.

Different Ways to Customize Your Credit Card

There are several different ways you might be able to customize your credit card. This includes:

•   Selecting from a limited number of design options offered by the issuer

•   Getting a credit card featuring your favorite professional sports team

•   Taking advantage of limited time designs

•   Uploading a personal photo to use as the face of your credit card

While some issuers will allow these options, keep in mind that how credit cards work and their specifics will vary by issuer. As such, some issuers do not allow for any credit card customization.

Guide to Getting a Customized Credit Card

There are particular credit card requirements and steps that you should follow when trying to get a customized credit card.

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

Verify Your Account

Sometimes, you can choose your credit card customization as part of the initial application process, such as if you’re getting a credit card for the first time. In other cases, you’ll need to log in and verify your account in order to get a personalized credit card.

Choose a Design

Once you’ve been verified and are either in the credit card application process or account screen, you will choose your design. Some credit card issuers present you with a list of images or designs to choose from, while others allow you to upload a completely custom design.

Confirm Your Design

Once you’ve chosen your design, you will have to confirm your design to make sure that it’s what you want and that everything looks good. Your new customized credit card will then arrive at your house through the mail.

From there, the regular credit card rules — like the importance of making on-time payments — will apply, though you can feel like you’re swiping in style.

Recommended: When Are Credit Card Payments Due

The Takeaway

If you want to use your credit card as a way to express yourself, some credit card issuers allow you to customize the design of your card. You might be able to choose between a set of options, while others will allow you to upload an image of your choosing to serve as the face of your 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 long does it take to get a customized credit card?

You shouldn’t have too much of a delay for getting a customized credit card as compared to any other credit card. The one scenario where there can be a delay is if you’re using your own uploaded image. In most cases, issuers will have someone personally review each uploaded image to make sure it meets their standards.

Can an authorized user get a custom card?

While an authorized user can sometimes get a custom card, it will usually have to be managed through the primary cardholder. Policies differ by card issuer, so check with the primary cardholder and/or issuer to see what might work for you.

Can you change your credit card design?

In many cases, you can change your credit card design. You can find out if this is possible — and if it is, start the process of getting a personalized credit card — by contacting your credit card issuer.

Photo credit: iStock/MStudioImages

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.

SOCC-Q324-016

Typically taking between five and 14 days, credit card refund timing can vary based on a number of factors. This includes the speed at which the merchant processes the refund, how soon you requested the refund, and the length of time it takes for your credit card issuer to credit the amount to your account.

If you’re feeling antsy about how long it takes for a refund to appear on your credit card, however, there are ways that you can speed up the process.

How Do Credit Card Refunds Work?

When you make a purchase on a credit card, your credit card issuer pays the merchant and the amount will go onto your account for repayment. Since the issuer technically paid for the purchase, any requests for a refund will go back to the credit card account. In other words, you won’t receive other forms of payment like cash for refunds when you use a credit card since you didn’t directly pay for the purchase.

There are two types of refunds — one for purchases and ones due to fraud.

•   In the case of purchases, you’ll deal with the merchant with whom you made the purchase. Once the merchant approves the refund, the credit card company will process it. Then, the amount refunded will show up on your credit card statement. The credited amount may not appear in the current billing cycle if you made a return in between billing cycles (the end of a billing cycle also tends to be when credit card companies report to credit bureaus).

•   As for fraud, these are charges to your account that you didn’t authorize. Most credit card companies will offer some form of fraud protection as long as you notify them within a certain period of time, usually 60 days. Once the issuer is notified of the fraudulent transaction, it will reverse the charges. You’ll then receive a credit for the amount charged, or the charge will get taken off your account completely, assuming you’re not falsely disputing a credit card charge.

Do All Credit Card Refunds Take the Same Amount of Time?

Not all credit card refunds will take the same amount of time. To get an idea of how a particular merchant accepts and processes returns, you can look at the merchant’s refund policy. Some items to note in this statement include:

•   Types of refunds offered: Some merchants may be lenient on their return policies, while others may only offer store credit for returns, for instance.

•   Refund times: Merchants typically state when they’ll issue a refund, such as within a few business days or weeks.

•   How to make a return: Check to see whether you can make a return in person or if you can ship back the item. If you’re shipping, make sure to see if you or the merchant pays for shipping.

After the refund is processed, you’ll need to wait for your credit card company to post the refund or credit to your account. How long this takes will also vary depending on the issuer.

How Long Does a Credit Card Refund Take?

A credit card refund usually takes between five and 14 days after the customer makes the request.

Keep in mind that the rules for refunds can vary depending on your credit card issuer and how long it takes the merchant to process the refund. The faster the merchant processes the refund, the faster it will hit your account.

However, the above timeframe assumes that the merchant agrees to process the refund. If you were to dispute a credit charge, the process of getting a refund could take much longer. Notifying your credit card company as soon as you can is helpful because it could take some time for them to complete their investigation — they have up to 90 days to do so.

Recommended: What is a Charge Card

Factors That Determine How Long a Credit Card Refund Takes

The two main factors that determine how long a credit card refund takes is the type of refund you’re requesting and where you made the purchase.

The Type of Refund It Is

As mentioned before, credit card disputes — whether for fraud or a credit card chargeback request for a product you never received — may take longer compared to refunds for purchases. Plus, you’ll need to make sure you contact the credit card company within 60 days of the billing or fraud dispute. From there, the issuer should have the dispute resolved within two billing cycles, or up to 90 days.

Where You Made Your Purchase

Different merchants have varying refund policies — the longer it takes the merchant, the longer it will take for the refund request to reach your credit card issuer. Here’s a sampling of some of the refund policies at popular retailers:

•   Amazon: It can take up to 30 days to process a refund. After an item arrives at the fulfillment center, credit card refunds are typically processed within three to five days. Once a return is processed, the funds will appear in your account, usually within three to five business days.

•   Square: Any merchant that uses Square to accept purchases will take two to seven business days to process a refund. It can then take an additional two to seven business days for the refunded amount to appear in your account, resulting in a total credit card refund time of nine to 14 business days.

•   Walmart: Refunds tend to take up to 10 business days to process.

How to Speed up the Refund Process

The good news is that there are some ways you can help to speed up the refund process.

Get It There Faster

Some retailers have multiple ways to return items, and certain methods have faster processing times than others. For instance, many major retailers process refunds faster (in some cases, immediately) if you make a return in-person at one of their store locations instead of mailing back the item.

Make Use of Loyalty Benefits and Store Credit

You may be able to receive expedited shipping for returns or faster refund processing times if you belong to a merchant’s loyalty program. Often, you also may be able to get a refund faster if you opt to receive a store credit instead of getting a refund issued to your credit card.

How Does a Refund Affect Your Credit Card Account?

Refunds are typically treated as an account credit. There’s no credit card refund issued in the form of cash since you borrowed the money from the credit card issuer to make the purchase in the first place.

While the purchase is still billed to your account, you’re technically responsible for payment. If you made the purchase, paid it off once the billing cycle ended, and then requested a refund, you’d get a credit to your account. Due to credit card rules, the refund does not count as a partial payment.

No matter how long you wait for a refund, it’s important to manage your account wisely and make sure you’re using a credit card responsibly so you don’t end up overextending yourself. As long as you pay your bill by the due date, you won’t risk hurting your credit score while you’re waiting for your refund.

Recommended: When Are Credit Card Payments Due

Refunds on Rewards and Fees

Credit card companies usually won’t refund any interest or fees you may have paid because you carried a balance for a purchase that you’re now trying to get a refund for. Similarly, if you made a purchase while you were overseas and were charged a foreign transaction fee, you most likely won’t get a refund for that either.

When it comes to rewards, whatever you earned for the purchase will get deducted from your earnings after the refund is processed and posted to your account. You end up with a negative rewards balance if you redeemed all of your points before requesting a refund.

The Takeaway

Credit card refunds typically take between five and 14 days. Being aware of how credit refunds work helps you to understand how to keep better track of your credit card statements and rewards earnings. It can also help you to determine which credit cards are better used for certain situations.

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 happens to my rewards if I request a refund?

Your rewards will be deducted from your current balance after your request for a refund is processed.

How long does it take for a refund to appear on a credit card?

A refund may take up to seven or even 14 days to appear on your credit card statement. This timeframe can vary depending on your card issuer, the merchant, and what type of refund request it is.

Are credit card refunds instant?

Credit card refunds typically aren’t instant. This is because it takes time for the merchant and credit card company to process it.

Will a delayed refund hurt your credit?

A delayed refund typically won’t hurt your credit as long as you continue to make on-time payments and are generally responsible with your credit card usage.

Photo credit: iStock/MBezvodinskikh

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.

SOCC-Q324-017

Your credit utilization is the percentage of your overall credit limit that you’re using, and it can have a major effect on your credit score. As your credit usage decreases, it can positively affect your score since it shows you’re responsible with credit. On the flipside, high credit utilization can ding your score as it suggests you’re overspending

If you’re wondering how to lower credit card utilization, there are some steps you can take to do so and help build your credit score.

What Is Credit Card Utilization?

Credit card utilization, or simply credit utilization, is how much of your credit limit you’re using on your revolving credit accounts. You can calculate this percentage by taking the total of your credit card balances and dividing it by your total credit limit.

For instance:

•  Say you have two credit cards with limits of $3,000 and $5,000 respectively.

•  You have a balance of $600 on the first card and $1,000 on the second card.

•  By taking the total of your balances — $1,600 — and dividing it by your overall credit limit — $8,000 — and then multiplying by 100 to get a percentage, you’d end up with a credit utilization rate of 20%.

Why Does Your Credit Utilization Matter?

When it comes to your credit score, scoring models look at various factors, including your credit utilization on both individual accounts and overall. In other words, if your overall credit utilization is high, or one of your revolving accounts has a high balance, your score could be negatively affected.

Considering that credit utilization determines 30% of your FICO® score, which is the scoring model used by most lenders, it’s a major factor that affects your credit score.

What Is a Good Credit Card Utilization Rate?

As a credit card rule, you should aim to keep credit utilization under 30%. While this is the baseline, the lower your credit utilization is, the better. Many financial experts recommend keeping that figure closer to 10%.

A lower credit utilization rate demonstrates to lenders that you are responsible with your credit and don’t appear to rely on credit too heavily.

Tips for Lowering Your Credit Card Utilization

The good news is that you can raise your credit score relatively quickly just by lowering your credit utilization. Here’s how to lower credit utilization.

Paying Down Your Balance

Making payments before the due date arrives or the billing cycle ends could mean your balance goes down before your credit card issuer reports the amount to the credit bureaus. You could even make a payment right after your purchase goes through.

Having a lower credit card balance lowers your credit utilization, even if your credit limit remains the same.

Cutting Down on Spending

Budgeting carefully and reducing your spending could prevent you from racking up excessive credit card debt and getting stretched too thin financially.

However, that’s not to say you can’t use your credit card. Rather, limit your spending to what you can afford to pay off in full that billing cycle. Additionally, if you find your debt starting to balloon, consider pausing your credit card usage until you’ve gotten your balance under control so your credit utilization isn’t pushed higher.

Paying off Credit Card Balances With Personal Loans

If you’re carrying a balance on a credit card, one option to pay it off is taking out a personal loan. You could qualify for a lower interest rate, which can make the debt easier to get a handle on paying off. Plus, a personal loan is an installment loan, which means it won’t count toward your credit utilization.

However, you need to make sure you can still afford the payments and can qualify for competitive rates and terms. Some lenders may charge an application or origination fee — take this amount into consideration when deciding whether it’s worth going this route.

Requesting a Credit Limit Increase

Increasing your credit card limit can lower your credit utilization even if your outstanding balance remains the same. To get a credit limit increase, contact your credit card issuer to request one, either by calling the number listed on the back of your card or logging onto your online account.

Keep in mind that your credit card issuer may not approve your request. You may have to meet certain criteria to qualify, such as having a history of on-time payments and responsible credit usage.

Opening a New Credit Card

Opening a new credit card can increase your overall credit limit and therefore potentially lower your credit utilization. Keep in mind that you most likely won’t know what your credit limit will be until you’ve been approved for the card. 

Plus, submitting an application generally triggers a hard credit inquiry, which could have an effect on your credit score.

Avoiding Closing Unused Cards

It might sound logical to close credit cards that you haven’t been using, but doing so could have negative consequences. More specifically, closing a credit card lowers your overall credit limit, which could increase your credit card utilization even if your credit card balance remains the same.

Recommended: What is the Average Credit Card Limit?

Becoming an Authorized User

You could ask your spouse, family member, or close friend to add you on their credit card as an authorized user. If the primary cardholder maintains a low balance and has a high credit limit, it could lower your overall credit utilization.

Before going this route, however, speak with the primary cardholder to determine whether becoming an authorized user will help your credit score. You’ll also want to be clear on how you plan on using the card, or if you’d rather be a cardholder in name only.

Finding Out Whether Your Issuer Reports to Credit Bureaus

Most credit card issuers will report your payment activity and account balance every 30 days to the credit bureaus, though the reporting date might not coincide with your payment due date. If your card issuer reports your payment activity before you make a payment, it could look like you have a high balance, which could increase your credit utilization rate.

To remedy this, contact your card issuer to determine when it reports to the credit bureaus. Aim to pay off as much of your balance as you can before that, or request a new due date that’s ahead of when your issuer reports to the bureaus.

How Will Lowering Credit Utilization Affect Your Credit Score?

If you lower your credit utilization, you could build your credit score. Remember, your credit utilization is one of the major factors that affects your credit score. Aim to keep your credit utilization well below 30% — try using any of the methods mentioned above to do so — in order to help maintain your score.

The Takeaway

Credit utilization — the percentage of your overall credit limit you use — can have a major effect on your credit score. It’s best to keep your utilization as low as possible, but the benchmark generally recommended is that it should reach no higher than 30%. If your credit utilization rate has crept up, there are some tactics you can try to lower it, from paying down your balance to getting a new 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 can I fix high credit utilization?

You can decrease your credit utilization by paying off your balances early, asking for a credit limit increase, applying for a new credit card, and cutting down on spending.

How can I keep my credit utilization below 30%?

You can keep your credit utilization below 30% by watching your spending and balances across all your credit cards.

How low should I keep my credit utilization?

It’s best to keep your credit utilization below 30%. That being said, the lower your credit utilization rate, the better.

Does zero utilization hurt your credit score?

Zero utilization doesn’t hurt your credit score. However, 0% utilization doesn’t necessarily help your credit score either, as you can’t demonstrate on-time payments and other positive credit behavior.

Photo credit: iStock/Farknot_Architect

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

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

SOCC-Q324-020