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Q: How can I get old credit card statements?

If someone didn’t save their old credit card statements, they can look for them in their online account or can call their credit card issuer to request them.

Q: Do you need to keep credit card receipts?

The ideal timeline for how long to keep credit card statements depends on the individual’s needs. It can be a good idea to keep old credit card statements for up to seven years if someone is going to use them for tax purposes. Holding onto them for at least one year is helpful when it comes time to review spending habits and create a budget.

Q: How long should you keep credit card statements with tax-related expenses?

If someone uses their credit card statements to help them figure out tax deductions, they should keep old credit card statements for up to seven years. That way, if the IRS has questions about their deductions, they can have the documentation to back them up.

Q: How can you keep digital credit card statements safely?

If someone downloads a digital copy of their statement, it’s best to store them in a password-protected file on their computer. Once you no longer need the statements, fully delete the files from your computer.

Jun

2024

How Long to Keep Your Credit Card Statements: What You Should Know

By Jacqueline DeMarco | Credit, Financial Independence | Comments Off

Typically, you only need to keep credit card statements for 60 days, unless they are tax-related. It can be wise to keep copies in the short-term so you can scan the charges and wrangle your budget.

Keep reading for more insight if you’re wondering how long you should keep credit card statements. Different situations may require differ guidelines on the timing.

Why Should You Keep Your Credit Card Statements?

Aside from sharing your credit card statement balance or current balance, your credit card statements contain some pretty helpful information that can come in handy down the road — especially come tax season. If payments are made by credit card, it’s possible to review old statements to look up business expenses (perhaps Ubers taken for work purposes) or other write-offs like mortgage, student loan, or tuition payments that you put on your card.

It can also be helpful to keep credit card statements in case so you can review them for errors or signs of fraud. It’s easy to overlook mistakes when quickly reading a credit card statement while sorting the mail. It can be valuable to take the time to look more closely.

Online vs Hard Copy Statements

If you want to avoid holding onto a lot of paperwork, you also have the option to access online statements for your credit card. Credit card issuers may store this information for a while — though they won’t necessarily hold onto old statements forever.

The length of time your records are stored will vary by financial institution. Some credit card issuers only provide the past 12 months of statements, while others hold onto them for up to seven years. In many cases, five years is a common timeline.

If an old statement isn’t appearing online, the account holder may be able to call their credit card issuer and request a copy of an older statement. Still, there’s no guarantee that this will work; you might not be able to get what you’re searching for. It can also cost money to get a copy of an older statement if it is accessible.

Factors That Determine How Long to Keep Credit Card Statements

Like the rules around keeping financial documents in general, how long to keep credit card statements depends on each consumer’s unique needs. That being said, a good rule of thumb is to keep them at least 60 days, to have time to scan them for signs of erroneous charges or fraud and to reconcile your budget.

If you use your credit card for purchases that might be tax-deductible, then it can be wise to at least hold onto them until it’s time to prepare taxes for the year. (Again, you may not have to keep hard copies since you may be able to download statements from your credit card issuer’s website or app.)

If you do use your credit card statements to help prepare your taxes, you should hold onto them for at least seven years just in case the IRS (Internal Revenue Service) comes knocking with any questions.

How Long Should You Keep Your Credit Card Statements?

It’s worth noting though that consumers may have different needs than business owners when it comes to holding onto old credit card statements. Here’s a closer look.

For Consumers

How long consumers should keep credit card statements depends on how someone uses their statements. In general, it’s wise to keep your credit card statements for 60 days due to credit card rules. Under the Fair Credit Billing Act (FCBA), credit card issuers must receive written notice of any errors within 60 days of them sending the consumer the statement containing the error.

However, it might be smart to keep your statements for longer in the following scenarios:

• If you use your statements to make deductions on your taxes: In this case, it’s wise to keep statements for seven years. That way, if you’re ever audited by the IRS, you’ll have those statements handy as supporting documentation for deductions.

• If you decide to dispute charges: If you’re disputing charges on your credit card, it’s best to hold onto the statement in question for 90 days, as that’s how long the dispute process can take.

• If you want to track your spending: Those looking to learn more about their spending habits and create a better budget may find that holding onto a year’s worth of statements is helpful. That way, they can sit down on January 1 and get a clear picture of how you spent your money in the last year and where you can cut back. This can help with using a credit card responsibly.

• If you have an extended warranty: It’s also helpful to hold onto statements that contain purchases that came with extended warranties. For example, if you buy a TV with a three-year warranty, the credit card issuer may offer an extended one-year warranty as a cardholder benefit. Keep that statement at the ready as a proof of purchase in case that extended warranty is needed.

For Business Owners

Similar to consumers, business owners can benefit from holding onto credit card statements for at least a year in order to track business expenses. If referenced for tax purposes, it’s wise to keep credit card statements stored away for seven years to help resolve any future tax issues that may arise.

When You Should Keep Credit Card Statements Longer

As mentioned earlier, if you are going to use your credit card statements to help you prove deductions on your taxes, you’ll want to keep your own copies of your credit card statements (whether you save them on paper or digitally) for seven years. This is generally the longest you might need to keep statements for.

Recommended: What is the Average Credit Card Limit

Different Ways to Store Statements

Because credit card statements contain sensitive personal and financial information, it’s important to keep them safe. Here are a couple ways to store them:

• In a password-protected file on your computer: If you download a digital copy of your statement, you can store them in a password-protected file on your computer.

• In a safe: If you want to hold onto hard copies, keep them in a locked, fireproof safe to protect them from both theft and damage.

Different Ways to Dispose of Statements

Once you are ready to dispose of your credit card statements, it’s important to destroy the documents so no one can find them and glean information from them. Here are your options to get rid of your old credit card statements:

• Shredding or cutting them up: Shredding old documents is ideal, but if you don’t have a shredder, you can cut the statement up into very small pieces using scissors. Then, throw away the various pieces into different garbage cans.

• Deleting all files: For digital copies, simply delete the files fully from your computer — including any backup copies — once you no longer need them.

Managing Online Statements: What to Know

When it comes to online statements, you can easily save those digitally if you don’t like storing paper documents or if you’ve opted to receive paperless statements. All the cardholder has to do is download their statements and keep them stored in their digital files, ideally with password protection.

Recommended: What is a Charge Card

The Takeaway

How long you should keep your credit card statements depends on your unique needs, but 60 days is a good rule of thumb. If you have extended warranties through your credit card issuer, you may keep statements for the length of their warranty in case you need a reference. Or, if you use the statements to help with your tax deductions, it can be a good idea to hold onto them for up to seven years in case any questions arise.

Further, holding onto your credit card statements can help you easily see your spending habits and how well your credit card is serving you.

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 get old credit card statements?

If you didn’t save your old credit card statements, you can look for them in your online account or can call your credit card issuer to request them. A charge may be involved for this service.

Do you need to keep credit card receipts?

Often, a credit card statement will give you a record of the information you need without needing to keep receipts.

How long should you keep credit card statements with tax-related expenses?

If you use your credit card statements to help figure out tax deductions, you should keep old credit card statements for up to seven years. That way, if the IRS has questions about any deductions, you can have the documentation to back them up.

How can you keep digital credit card statements safely?

If you download a digital copy of your statement, it’s best to store them in a password-protected file on their computer. Once you no longer need the statements, fully delete the files from your computer.

Photo credit: iStock/Rawpixel

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Jun

2024

Guide to Choosing a Credit Card

By Bob Haegele | Credit, Fresh Out of School, money | Comments Off

With so many options available, choosing a credit card isn’t as simple as signing up for whichever card happens to be popular at the moment. Instead, you should consider things like your credit score, preferred features, and spending habits.

After all, there are many different types of credit cards meant for different purposes. Making the best choice is about not only knowing your approval odds, but also how you intend to use the card after signing up. Using a step-by-step approach for how to choose a credit card will help you make the right decision for your situation.

Where To Begin When Choosing a Credit Card

Choosing a credit card is a matter of understanding which type of credit card works best for you. You’ll want to consider a number of factors, including:

• Your credit score

• How you plan to use your new credit card and which features you’ll need

• How the card stacks up to other options

• The card’s interest rates and fees

• Which rewards you want

• Any sign-up bonuses offered

Read on to learn more about each of these items and what specifically to look for.

Checking Your Credit Score

Checking your credit score should be one of the first steps you take before applying for a new credit card. One of the best ways to know your approval odds is to check your score.

One way to do so is to use AnnualCreditReport.com . This website allows you to request a copy of your credit report from each of the major credit reporting bureaus: Experian^®, Equifax^®, and TransUnion^®. Federal law allows you to request one copy of your credit report from each reporting bureau per year.

However, you may want to check your credit score more often than once per year, especially if you are in the process of building your credit. Fortunately, several big banks allow you to check your FICO^® score — the most widely used credit score — on a monthly basis.

There are several credit scoring models available, but most lenders use FICO, so getting this score can be a good way to gauge your chance of approval. These checks won’t guarantee you’ll get approved for a credit card, but they can help you get a better sense of where you stand. Plus, pulling your credit report won’t hurt your credit score.

Identifying the Features You Need

There are many different types of credit cards, each of which has its own set of features. Identifying the features you need can help you find the right credit card, as how credit cards work varies depending on the type.

Credit Builder Credit Cards

Some credit cards are meant for those who are working on building their credit. This could include college students, those trying to repair their credit, or anyone with little to no credit history.

In those cases, you might need a secured credit card or a student credit card. Secured credit credit cards require a security deposit, usually around a couple or a few hundred dollars, that is fully refundable. Your credit limit is usually equal to your security deposit, so the card issuer has little risk of losing money. Student credit cards, on the other hand, are usually unsecured and may have special perks for students.

Here are some features to look for in credit builder credit cards:

• No annual fee: If you are working to build your credit, annual fees could make things more difficult.

• Credit limit increases: Credit limits often start low with these cards; some offer credit limit increases if you use your card responsibly.

• Free credit score: Some credit builder cards offer free credit score monitoring to let you know where you stand.

Balance Transfer Credit Cards

Balance transfer credit cards are ideal for consolidating and paying off debt. Thus, the key with this type of card is finding one that keeps fees as low as possible:

• 0% introductory APR: Balance transfer credit cards may come with low or 0% balance transfer APR for a specified introductory period, sometimes lasting a year or more. Some even have a separate 0% APR introductory period for purchases. This can allow you to avoid paying much in interest for a certain period of time and instead put your money toward paying down the principal balance.

• Balance transfer fees: These cards often charge separate balance transfer fees, which you should be aware of if you plan to transfer large balances.

Rewards Credit Cards

Credit card rules say that you shouldn’t get a card just for the points. However, rewards credit cards may come with a variety of benefits. These include cash back, points and miles, and various perks, such as rental car insurance and airport lounge access. You can redeem points and miles for statement credits, gift cards, flights, and hotels, so you’ll have to decide what’s most important to you.

Here are some rewards credit card features to consider:

• Sign-up bonuses: Some rewards credit cards include sign-up bonuses that can be worth hundreds of dollars.

• Low or no annual fee: While some of these credit cards have annual fees, not all of them do.

• Rewards categories: Rewards credit cards generally let you earn a percentage of your purchases in cash back or points/miles. Some have higher earning rates for certain categories, such as groceries or travel. Look for one that earns a lot of points where you normally spend the most.

• Other perks: These cards can come with a variety of other perks, from UberEats credits to free hotel nights. If you never travel, for example, you may not be interested in free hotel stays.

Narrowing Your Choices by Doing Research and Asking Questions

The key to how to pick a credit card is understanding how you want to use it. While some credit cards are more like generalists, doing many things somewhat well, others are niche cards that are great in certain scenarios. Consider what’s most important to you and how much you need certain features.

Once you’ve decided which type of credit card you want, the next step is to compare some of the best options. For instance, if you want a rewards credit card and don’t want to pay a high annual fee, look for no annual fee rewards credit cards. For balance transfer credit cards, you can look for ones with the lowest fees, including a lengthy 0% introductory APR. Also keep in mind you don’t need to rely on one card to meet all of your needs — here’s a primer on how many credit cards you should have.

Identify a handful of cards that look like good candidates based on your research. Once you have two to three cards that seem like the right fit, you might want to submit a prequalification form. This process will give you a hint about whether you might qualify — and it won’t affect your credit score. Prequalification doesn’t guarantee approval, but it will help you know where you stand.

Familiarizing Yourself With the Interest Fees and Rates

Having a basic understanding of interest rates and fees will help you avoid paying more than expected to use your new credit card.

Different types of credit cards tend to come with varying interest rates. For instance, the minimum annual percentage rate (APR) for travel cards tends to currently range between 18.24% and 29.99%. However, the maximum APR for these credit cards can be slightly lower than the maximum for 0% APR and low-interest credit cards.

Of course, fees also matter. Balance transfer cards might have a 0% introductory period, but a fee may apply every time you initiate a balance transfer. Depending on the card, other fees may be involved, such as late fees and penalties, annual fees, and foreign transaction fees. Be sure to review all relevant fees before signing up for and using a credit card.

Deciding Which Rewards You Want

You also may need to decide which type of rewards you’ll want to earn. There are a few different types of rewards that credit cards can offer:

• Cash back: With a cash back rewards credit card, you will earn a percentage in cash on each eligible purchase you make with your card. You could get a flat rate across categories, or you may earn a higher rate in specific categories. Or you might see offers for unlimited cash back. If you want to earn rewards across spending categories and don’t want to worry about calculating and converting, cash back might be the right rewards option for you.

• Points: Another way to earn credit card rewards is through points. You’ll earn a certain number of points for every dollar spent, with the rate and redemption options varying depending on the issuer. The perk of points is that you can redeem them in a number of different ways, including cash back, travel, charitable donations, statement credits, gift cards, and more.

• Miles: If you’re a frequent flier, you might prefer earning airline miles. Credit cards that allow you to earn miles let you redeem your rewards for flights and other travel-related perks, such as hotel stays or access to airport lounges.

Looking at Sign-Up Bonuses

Some credit cards feature sign-up bonuses to attract new customers. Usually, you have to spend a certain amount in the first three or four months of opening the card. If you meet the minimum spending threshold within that time frame, you’ll receive cash, points, or miles as a reward. The trick is to ensure you can meet the spending threshold on time.

There can be a wide range of bonus amounts; for instance, the Chase Freedom® Student credit card has a $50 bonus for making a purchase in the three months. On the other end of the spectrum is the American Express Platinum Card, which at the time of writing offers 125,000 points after spending $8,000 in the first six months. Most sign-up bonuses, however, fall somewhere in between.

Choosing the Card With the Highest Overall Value

There are several credit cards available that offer similar benefits. In those cases, you will want to compare them directly to one another and find features that give one card the edge. Here are a few things to consider for each type of credit card:

Student and secured credit cards:

• Credit limit increases: Some student credit cards will automatically increase your credit limit if your account remains in good standing.

• Flexible credit lines: Some secured credit cards give you access to a larger credit line than your deposit.

0% introductory APR or balance transfer credit cards:

• No late fees or penalties: Some credit cards waive these fees, which might be helpful when transferring balances.

• Installment plans: Some balance transfer cards offer installment plans to help you repay your balance over time.

Rewards or travel credit cards:

• Low spending threshold: Requirements to earn sign-up bonuses can vary; look for one that’s well within your budget.

• Points transfer: Some travel credit cards let you transfer points to airlines or hotels, which can lead to better redemption rates in some cases.

How Your Credit Score Affects Your Chance of Approval

Your credit score is one of the biggest factors in determining whether you’re approved for a credit card. If you have poor or no credit, you probably won’t get approved for a card that requires very good to excellent credit, regardless of other factors, given what a credit card is and how the approval process works.

Luxury credit cards, for example, may require a credit score of 670 or higher. If your score is higher, you might be approved for one of these cards (though approval is not guaranteed). If your credit score is below 670, however, your approval odds will probably be quite low.

While a credit score and credit card offers are intertwined, that may not be the only factor a card issuer considers. Issuers might also look at things such as your employment status and income. This is one of the reasons that a good credit score doesn’t guarantee approval.

Still, a better credit score can help you secure the credit card you want. As such, you might consider taking steps to build your credit score before applying for a credit card, such as by making on-time payments or lowering your credit utilization ratio.

What Comes Next After Choosing a Credit Card?

If you’ve already submitted prequalification forms, you should have some idea about your approval odds for each card. As mentioned, those forms do not guarantee approval but can serve as a valuable guideline.

Once you have chosen a credit card, it’s time to apply. Some general steps are to:

1. Visit the card issuer’s website and click apply.

2. Fill in the required information.

3. Submit your application.

In some cases, you may receive instant approval (or denial). In others, the card company will need more time to review your application. If approved, you can usually expect to receive your card in the mail in seven to 10 business days.

If you are denied, you can call the card’s reconsideration line and provide additional information. Perhaps you forgot some additional sources of income that could help your case. Anything that may help is worth mentioning.

The Takeaway

Deciding which credit card is best for you can be a long and arduous process. However, once you have a better understanding of what you need, the process of choosing a credit card doesn’t have to be so complicated. Some credit cards are simply better than others, and picking them is a surprisingly easy choice after comparison shopping.

FAQ

How does your credit score determine the card to choose?

Your credit score is one of the most important factors in deciding which credit card to choose. For example, if your credit score is poor, you probably won’t be approved for a premium card with excellent rewards that requires good to excellent credit.

How do you choose a credit card for the first time?

In most cases, the best choice for your first card should have no annual fee. Some good choices are student credit cards (for students) or secured credit cards. These cards are ideal for building credit and often have low fees.

What is the most important factor when choosing a credit card?

The most important factor when choosing a credit card is probably how you intend to use it. For example, a premium credit card may offer excellent benefits for the frequent traveler, but someone who just wants to earn cash back on groceries may not benefit from travel perks.

Photo credit: iStock/Eva-Katalin

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

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

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

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.

SOCC-Q224-1910756-V1

Jun

2024

Can You Overdraft a Credit Card?

By Bob Haegele | Credit, Family Finances, money | Comments Off

In most cases, it isn’t possible to overdraft a credit card, or spend above your credit limit. If you opt in to over-the-limit charges, it may be possible to exceed your limit. However, “overdraft” usually refers to overdrawing a bank account, not a credit card.

It’s more likely that your purchase will be denied rather than your account “overdrawn.” If the charge does go over the limit, you might get hit with additional fees, and your credit could suffer as a result.

What Does It Mean to Overdraft a Credit Card?

Each time you use your credit card, your balance increases, which is part of how credit cards work. If you aren’t making payments against that balance, it will move closer and closer to your credit limit. Eventually, your balance could get high enough that you run up against that limit.

Usually, though, you won’t be able to go beyond your credit card spending limit. Instead, your card will be declined if you attempt to make a purchase that would put you over the limit. This is the result of the CARD Act of 2009.

Since the CARD Act, you can’t go over your card’s limit unless you specifically opt in to allow overages. In that case, it may be possible to go beyond your credit card’s limit.

The average credit card limit is the U.S. is currently approximately $29,855.

Recommended: When Are Credit Card Payments Due?

What Happens If You Overdraft Your Credit Card

What happens when you try to overdraft your credit card depends on whether you have opted in to over-limit charges. If you haven’t, your card will likely be declined; otherwise, you could incur fees and a hit to your credit.

Declined Transactions

By default, most credit cards today should not allow you to go over your credit limit. Instead, your card will probably be declined.

For example, imagine you have a credit limit of $5,000 with a current balance of $4,800. If you try to spend $250, in most cases it will not result in a $5,050 balance on your card. Because your limit is $5,000, your card will probably be declined when you attempt to complete the transaction for the $250 purchase.

Over-Limit Fees

Since the CARD Act of 2009, you can’t be charged over-limit fees unless you opt in to them. In that case, you will be charged an over-the-limit fee that is usually up to $35. However, the fee is limited to the amount you exceed your limit. For example, if you go $15 over your credit limit, the over-limit fee can’t be more than $15.

The CARD Act also says that banks must disclose over-limit fees in your credit card contract. If for some reason you have opted into over-limit fees, you should be able to opt out of these fees at any time.

Impact on Credit Score

If you go over the limit for your credit card, your credit score might take a hit. While there’s no magic number for credit utilization, the rule of thumb is usually that you should limit your utilization to 30%. Many financial experts suggest keeping it closer to 10%.

Your utilization is your outstanding balances divided by your credit limit. Because your balance for the credit card in question is greater than the limit, your ratio would exceed 100%. That might negatively impact your credit score until you lower the ratio.

One thing to keep in mind is that credit utilization is calculated using all of your outstanding credit. In other words, if you have five different credit cards, your utilization takes all of their balances and credit limits into account. If you have many credit cards and most of them have no balances, going over the limit on one credit card won’t necessarily hurt your credit score significantly.

Either way, it’s best to avoid this situation due to the over-limit fees. This is also why it’s important to discuss spending habits with any authorized users on a credit card to avoid hitting your limit.

Recommended: Pros & Cons of Charge Cards

How to Avoid Overdrafting Your Credit Card

If you go over the limit on your credit card, there are several steps you can take to rectify the situation.

Make Additional Repayments

One of the most important credit card rules is that you should pay more than the minimum amount due each month. Indeed, paying more than you normally pay might be a good idea, especially if the credit card that’s over its limit is a significant part of your total credit picture.

Perhaps you have a minimum payment of $40, and you might normally pay that amount each month. In that case, consider upping your payment to $50 instead. Anything you can pay above the minimum will help you reduce your credit utilization; the more you can pay, the better.

This can also help you from falling into credit card debt, which can be a hard situation to get out of.

Request a Credit Limit Increase

Another way to reduce your credit utilization is to request a credit limit increase. For instance, if you have a total credit balance of $5,000 and a total credit limit of $10,000, your utilization is 50%. If you currently have a credit card you don’t use often with a limit of $3,000 and no balance, your utilization there is 0%. Your total credit utilization is therefore $5,000 out of $13,000, or 38.5%.

You could request an increase to that unused card’s limit to $5,000. In this case, your total credit limit becomes $15,000, and $5,000 out of the new combined $15,000 limit brings your utilization down to 30%. Hence, even if your balances stay the same, your credit utilization ratio will drop.

Contact Your Provider

Sometimes, credit card issuers will increase your credit limit automatically, such as you if you’ve used your credit card responsibly over time. If not, you can call your card issuer and ask them to increase your credit limit. Usually, it’s best to do this after you’ve had the card for at least a few months.

When you make the request, the credit card issuer may review one or more of your credit reports. Keep in mind that this could result in a hard inquiry into your credit history; these checks cause a temporary dip in your credit score. The card issuer may also request proof of income, employment status, or monthly rent or mortgage payments.

The Takeaway

It usually isn’t possible to overdraft a credit card. Your card is typically declined if you try to charge above your credit limit. You may be able to go over the credit limit, but only if you opt in to over-limit fees. If you do opt in, your credit could take a hit, and you might have to pay additional fees if you exceed your credit card’s limit.

FAQ

Do credit cards allow overdrafts?

Credit cards usually do not allow overdrafts. In fact, “overdraft” is usually a banking term that refers to your checking or savings account balance dropping below $0. With credit cards, it may be possible to go over the limit if you opt in to over-limit fees.

Can you overdraft with no money on your card?

With credit cards, your balance increases as you make purchases. Hence, in this scenario, it would only be possible to overdraft a credit card if a single purchase would put you over the limit. And even then, you must have opted in to over-limit charges; otherwise, the transaction will simply be declined.

Can you overdraft a credit card at an ATM?

In most cases, you won’t overdraft a credit card at an ATM. You might be able to overdraft when requesting a cash advance, but even then, it may not be possible unless you have opted in to overdraft protection.

How can you ask for a credit limit increase?

Sometimes, credit card companies will increase your limit automatically. If that doesn’t happen and you want an increase, you can call your credit card issuer directly and ask for an increase.

Photo credit: iStock/AsiaVision

Jun

2024

What Is a Credit Card Sign-up Bonus and How Does It Work?

By Austin Kilham | Credit, Financial Independence | Comments Off

A credit card sign-up bonus, aka a credit card welcome bonus, can come in the form of cash back, discounts on purchases, or other rewards, such as airline miles that you can put toward travel. These bonuses are a way for card companies and branded partners — such as airlines and other merchants — to incentivize you to sign up for a new card.

Sign-up bonuses can be a great way to get extra value out of a credit card in its first year. Just beware that there may be strings attached. Here’s a closer look at how sign-up bonuses work, their pros and cons, and how to make the most of them.

How Do Sign-Up Bonuses Work?

Rewards are offered through a variety of credit cards, including co-branded cards and even prepaid credit cards. In order to receive your credit card sign-up bonus you must open a new account. Then, depending on the reward you’re being offered, you’ll usually have to meet one of three criteria:

• First, and most simply, you may receive your bonus after your application is approved or after your first purchase.

• If your new card is from a branded retailer, you may need to make a purchase with them before you can earn your sign-up bonus.

• Finally, you may have to spend a certain amount of money over a set period to trigger the bonus. For example, you may have to spend $500 on purchase within the first three months of account opening.

Sign-up bonuses vary by card, as will the amount you’ll have to spend and the timeframe within which you have to do it. You may have to spend thousands of dollars in a short period of time to earn your bonus on some cards, while other cards may have no spending requirement.

Earning Sign-Up Bonuses

Spending requirements to earn a sign-up bonus on a credit card can be high, ranging into the thousands of dollars. The amount usually must be charged to your card within a set period of time, often the first three months after opening your account.

Make sure you can afford to meet these spending requirements before you decide on a particular card. Even if you technically can afford to meet the requirement, avoid the temptation to overspend on things you don’t need just to earn rewards.

Also, it may take a month or two for your bonus cash or points to appear in your account. If you’re planning to use them for something specific, say to buy a plane ticket to a friend’s wedding, be sure to take this timeframe into account.

Recommended: What is a Charge Card

Types of Credit Card Bonuses

There are different credit card rewards, depending on the card company and on branded partnerships. An airline is much more likely to offer points toward a flight, while a big box store is more likely to offer you an in-store discount. Here’s a look at some of the most common bonus types.

Cash Back and Bonus Points

Perhaps the two most common sign-up bonuses are getting cash back with a credit card or rewards points that you can use toward booking a hotel room or buying an airline ticket. For example, you might earn 50,000 points after spending $4,000, or you might receive a cash credit after you make your first purchase.

You may receive the bonus all at once, or there may be a tiered system in place with different eligibility requirements you’ll need to meet to earn the full reward.

Purchase Discounts

Another common sign-up bonus is a discount on a current or future purchase. For example, a retailer might offer you 20% off your next purchase when you sign up for their in-store credit card. These cards are often co-branded with a major credit card issuer, and they may be offered by brick-and-mortar stores or online retailers.

Your reward may come in the form of an immediate discount when you’re approved for the card. You could also receive a coupon or discount code. Or you might get a credit when you make your first purchase with the retailer.

Additional Spending Rewards

In addition to rewarding you for spending in the months shortly after opening your account, your credit card company may offer rewards for spending throughout the first year.

Waived Annual Fee

Rewards cards can be a little bit tricky with their various requirements, and there can be credit card costs involved. Often, rewards cards charge an annual fee that helps to offset the cost of the rewards they provide. As part of the sign-up bonus, some rewards cards will waive the card’s annual fee for the first year.

Pros and Cons of Sign-up Bonus Credit Cards

When determining whether or not you want to open a credit card with a sign-up bonus, it’s important to consider both the pros and cons:

Pros	Cons
Sign-up bonuses may include cash back, rewards points, or discounts on purchases made with co-branded partners.	You may be limited in how you can use your bonus. For example, you may be able to use airline points online only at certain airlines.
Annual fees may be waived for the first year.	Cards may have steep annual fees and high interest rates to help credit card companies offset the cost of rewards.
The right card can allow you to reap benefits from purchases you’d make anyway.	There may be high spending requirements you must meet before you can claim your bonus.
Using your credit card responsibly can help you build credit.	If you can’t pay off your credit card bill each month, you may miss payments, which can damage your credit.

Making the Most Out of Your Credit Card Bonus

Before choosing a credit card with a sign-up bonus, consider these ways that you can take advantage of credit card bonuses.

Recommended: How to Avoid Interest On a Credit Card

Pick the Most Suitable Card

Reward cards often offer flashy bonuses that are real attention-grabbers — but make sure the card you choose has a bonus you’ll actually use. For example, sign up for a card with an airline you fly often or a retailer you frequent. Or, make sure that you’ll receive cash back rewards on purchases that you already make or will need to make in the future. It doesn’t make sense to sign up for a card that gives you a bonus you won’t actually use.

You also may want to consider applying for cards with a high spending requirement in the first three months when you’re planning to make a series of big purchases anyway. That way, you won’t be buying anything that you don’t need already, and you’ll be rewarded for the purchases you were going to make. For example, maybe your car is scheduled for major maintenance or repairs, or perhaps you’re planning a wedding and will put some of the costs on your credit card.

It’s always worth considering how signing up for a new card will affect your credit. Applying for a new card will trigger what’s known as a “hard inquiry,” which can bring down your credit score temporarily. The damage to your credit may not be worth it, especially if you’re unlikely to use the bonus, you won’t really need the credit card later, or you’re planning to seek out other loans in the near future.

Look for Special Offers

From time to time, credit cards may offer special sign-up bonuses that are much bigger than usual. Keep an eye out for these, and make sure that you hit the application deadlines. These are usually limited-time offers, so be sure the offer is still valid before you sign up.

Ensure You’re Eligible for the Bonus

In some cases, you may not be eligible to sign up for a credit card and receive its bonus. For example, if you’ve had a specific card and canceled it in the past, you likely won’t be able to sign up for that card again and receive the bonus.

Before you apply, make sure you read the terms and conditions to understand your eligibility and to see if there’s any reason you might not receive your bonus if you sign up. Also, know that if you’ve recently opened several new credit cards, you may be declined automatically for a new bonus card.

Make Sure You Can Pay Down Your Debt

Before signing up for a bonus card, it’s crucial that you understand your ability to pay your bills on time. Bonus rewards cards often carry extremely high interest rates, meaning that any balance you carry from month to month can end up costing you a lot of money, quickly outweighing the rewards you earned initially.

Consider, too, that carrying a high credit card balance can have a negative impact on your credit score. Ideally, you should keep your credit card utilization ratio — calculated by dividing your total credit card balance by your total loan limit — below 30%. If you can, aim to keep your ratio at 10% to give you the best shot at maintaining a high credit score.

You’ll also want to be sure that if you pick up a rewards card, you’ll still be able to make on-time payments on all of your other obligations, as this is another crucial component of a healthy credit score.

Recommended: When Are Credit Card Payments Due

Redeeming Your Bonus Reward Points

Depending on your card, you may have a variety of options to redeem your rewards. For example, if you sign up for a card with a co-branded retailer, you may receive a coupon or rebate for a purchase at the store. Meanwhile, airline or hotel points may need to be redeemed by booking flights on certain airlines or rooms at certain hotel chains.
Cash back rewards could be received as a credit card refund by having your rewards applied to your credit card balance, transferred to a bank account, mailed to you as a check, or converted into rewards points.

Check your card’s terms and conditions to find out rules for redeeming your points so you can start to put them to use.

The Takeaway

Sign-up bonuses can offer credit card users a lot of value. However, it’s important that you do your research before jumping on an offer. Make sure the bonus is actually something you’ll use and that you have the means to meet eligibility requirements without damaging your overall financial health and credit score. Read all terms and conditions carefully before you sign up.

FAQ

When do you get a credit card sign-up bonus?

When you sign up for a bonus rewards card, you’ll receive your bonus when you meet the card’s eligibility requirements. This could mean simply making a purchase, or you may need to spend a certain amount over a set period of time. The card could also require you to spend money with a particular merchant.

Are sign-up bonuses taxable on credit cards?

The bonus rewards that you receive are not taxable. They’re considered a rebate as opposed to taxable income. That simplifies things come tax time, when you will not have to claim your bonus as income.

Can you open multiple cards to get more sign-up bonuses?

Technically, you can open multiple cards to receive more signing bonuses, but there are limitations. You won’t be able to open the same card multiple times, though you may be able to open a number of different cards. However, you eventually may get automatically declined if a card company sees that you’ve opened several recent accounts. Opening several accounts also may not be a good idea, as hard inquiries when you apply for credit have a negative impact on your credit score.

Photo credit: iStock/nuchao

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Jun

2024

Tips for Handling Incorrect or Fraudulent Credit Card Charges

By Austin Kilham | Credit, Financial Independence | Comments Off

It’s never a good feeling to look at your credit card statement and wonder, “What is this charge on my credit card?” When it comes to fraudulent credit card charges, your bank has often got your back. They have methods for spotting activity that isn’t normal, and they’ll usually alert you when a charge seems suspicious.

That said, your bank might not catch everything, and there may be a charge that’s valid but the amount is incorrect. So it’s important that you, too, keep an eye on your credit card statement to catch these errors and report anything that’s amiss immediately.

Here’s what to watch out for and tips for handling a dispute.

What Are Fraudulent Credit Card Charges?

Credit card fraud can happen if someone steals your card or the information on your card, or hacks into your account. Someone could do so by stealing your physical card, skimming your card information at a credit card terminal, through phishing scams via text or email, or by stealing your mail. Fraudsters then use the information they’ve stolen to make unauthorized purchases on your credit card.

Most cards offer zero liability on fraudulent charges, meaning you won’t be responsible for covering charges you didn’t authorize. This is an important feature of how credit cards work. However, it’s important that you catch fraudulent charges early so you can report them quickly and minimize your liability.

Detecting Unauthorized Credit Card Charges Early

The key to spotting unauthorized charges on your credit card is remaining vigilant and always checking your credit card statement each month. When you receive your statement, follow these steps:

• Review statements immediately. Avoid letting a few months of credit card statements accumulate before checking them. Whether you look them over online or via hard copy, do so ASAP so you can catch errors and head off fraud as quickly as possible. Going through your statements regularly will also offer a clearer understanding of how credit card payments work.

• Check every purchase. Fraudsters know that small unauthorized credit card charges are less likely to get flagged. Go down the list of purchases you’ve made on your card over the last month and make sure you recognize the merchant and can match the sale with an item or service you bought.

• Keep receipts. Hang on to receipts from credit card purchases so you can match them up to the items in your statement. This can also help if you’re unsure of how to identify a credit card transaction.

Fraudulent Credit Card Charges vs Billing Errors

Fraudulent charges are a result of theft. However, sometimes you may be charged for something that was due to a billing error. For example, perhaps you were charged twice for an item, or you were charged for goods or services that you never received.

Other billing errors could include:

• Unauthorized charges, for which federal law limits your liability to $50

• Charges that list the wrong date or amount

• Errors in math

• Charges for goods or services that you didn’t accept or weren’t delivered as agreed

• Failure to post payments or credits, such as after you’ve returned an item.

You can correct these errors using procedures laid out by the Fair Credit Billing Act (FCBA). If a charge is found to be made in error, your credit card company will carry out a credit card chargeback, reversing the charges.

Reporting Unauthorized Credit Card Charges

Procedures for reporting fraud and billing errors are slightly different.

If you suspect fraud, you’ll take the following steps:

• Contact your card issuer immediately. Tell them you suspect that you’ve been a victim of fraud. Your issuer can then investigate the charge.

• Ask for your accounts to be suspended or closed, and ask to be issued a new card. Change passwords and personal identification numbers (PINs) on your accounts.

• File an identity theft report with the Federal Trade Commission (FTC). You can do so at Identitytheft.gov .

• Contact the three credit reporting bureaus, Equifax^®, Experian^®, and TransUnion^®. Confirm your identity with them and check your credit reports for any other fraudulent activities. Consider having a fraud alert connected to your accounts.

If you’re disputing a billing error, first call your credit card company and alert them to the error. The credit card company will investigate. If they find there was an error, your account will be corrected, and you will not pay credit card purchase interest charges on the amount for which you were billed.

In addition, send your credit card company written notification of an error. Use FBCA procedures to dispute the credit card charges, including the following steps:

• Contact the creditor at the address they provide for billing inquiries. This address may be different from the one to which you send payments. Include your name, address, and account number, as well as a description of the billing error you’ve spotted. You may be able to proceed online or by phone as well as through the mail. The FTC provides a sample letter that you can use as part of the process.

• Include copies of receipts and other supporting documents.

• Be sure to mail your letter within 60 days of the first bill you received that contained the error.

• Send the letter by certified mail and ask for a receipt so you can be sure your creditor received it.

• Keep a copy of the dispute letter.

How to Read Your Credit Card Statement

It’s important to get familiar with how to read your credit card statement. The Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act) requires that each of your credit card statements includes certain pieces of information.

• First, there should be a section that includes your account information. This is where you’ll find your name, account number, and the date of the billing cycle.

• Next, the account summary is an overview of transaction information on your card. This section will include the payment due date, any payments or credits that have been applied to the account, any fees that have been charged to you, and the total amount of your account balance.

• Following this summary is a detailed account of the purchases you’ve made over the billing period. Each line item will include the vendor name, the date the purchase was made, the category (such as “groceries”), and the amount that was charged to your card. Go through this section carefully as you look for fraudulent charges or charges in error. This is how to find who charged your credit card.

• Your statement will include other sections that detail payment information, interest or credit card finance charges, rewards, and account fine print.

Credit Card Security and Fraud Protection

When you apply for a credit card, carefully look at the security measures the card issuer has in place. Credit cards, such as the credit card offered by SoFi, can have a variety of measures to keep your information safe and protected from fraud.

Fraud protection limits your responsibility and liability for fraudulent charges. Many banks offer $0 liability. The FCBA limits liability to $50 for card-present fraudulent charges, and $0 if the card is not present, such as for online charges made with stolen credit card information.

The Takeaway

Fraudulent charges or billing errors can be an unfortunate part of having a credit card. Your bank may catch them, but it’s also important to be proactive and keep an eye out for fraud and errors on your credit card statement. Bringing them to the attention of your credit card company will help you get the issue sorted faster and head off potential future fraud.

FAQ

How do I file a fraudulent charge claim with my credit card company?

If you spot a fraudulent charge on your credit card statement, call your card company immediately and ask them to investigate. They can guide you through the process of disputing the charge.

How do I find out where a charge came from?

You can see where a charge was made in the detailed purchase information provided on your credit card statement.

How do I look up a charge from my credit card statement?

If you’re unsure about a charge on your credit card statement, call your credit card company, which may be able to do a credit card charge lookup by the merchant.

Photo credit: iStock/Pekic