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With the average annual cost of college now $36,435, figuring out how to pay for college as a low-income student can be daunting. It’s important to keep in mind, however, that students from low-income backgrounds often qualify for grants and scholarships (which you don’t have to pay back), as well as student loans.

Federal student loans are available to all college students, regardless of income, and don’t require a credit check. If you still have gaps in funding after tapping financial aid and federal loans, you may also be able to qualify for private student loans, even with a low income.

Read on to learn more about the financial aid options available to you if you qualify as a low-income student and how to apply for student loans.

What Are Student Loans?

Student loans are an often-used option to help pay for college. In fact, nearly 52% of students who complete their undergraduate programs take out federal loans at some point during their college years, according to the Education Data Initiative.

Student loans can be used to pay for tuition, room and board, and other fees, as well as other associated costs of college like books and rent.

Students can use either federal or private student loans to pay for college. Students who take out federal student loans borrow money from the government, through the U.S. Department of Education. Federal student loans typically offer low, fixed interest rates and other benefits, such as income-driven repayment plans and access to forgiveness programs.

Private student loans, by contrast, are available from banks, credit unions, and other private lenders. These lenders set their own interest rates and conditions for their student loans. To qualify for a private student loan, you need to fill out an application and disclose personal financial information, such as your income and credit score.

Since students typically don’t have well-established credit histories, many private student loans require a cosigner. A cosigner is someone who agrees to pay back the loan if the primary borrower is unable to do so. Because private student loans don’t offer the same borrower protections that come with federal student loans, you generally only want to consider them after you’ve depleted all of your federal student aid options.


💡 Quick Tip: You’ll make no payments on some private student loans for six months after graduation.

Can You Get Student Loans With a Low Income?

Yes, you can get student loans if you have a low income. If you can’t cover the full cost of college with scholarships and grants, student loans can help you take care of the remaining costs of college.

You can access federal student loans no matter your income level, but you do need to meet specific qualifications. You must:

•   Have a high school diploma or a recognized equivalency, such as a GED, or have completed a state-approved home-school high school education.

•   Be a U.S. citizen or an eligible noncitizen

•   Have a valid Social Security Number

•   Be enrolled or accepted for enrollment as a regular student in an eligible degree or certificate program

•   Maintain satisfactory academic progress in college

You may also be able to qualify for some private student loans if you have a low income (more on that below).

Recommended: Finding Free Money for College

Low-Income Financial Aid Options

Students and their families pay for college in a variety of ways, including savings, scholarships, grants, work-study, and student loans. Indeed, paying for college often looks like a puzzle — all the pieces fit together in different ways to make everything “fit.”

Here’s a look at how to access low-income student aid options.

FAFSA

Every student (whether they’re low-income students or not) can file the Free Application for Federal Student Aid (FAFSA). The FAFSA is the free form you can fill out to apply for financial aid for undergraduate or graduate school, and is one of the most important steps students and their families can take to pay for college.

In conjunction with the school you plan to attend, the FAFSA determines your eligibility for need-based and non-need-based financial aid. The FAFSA results determine the amounts you receive for federal grants, scholarships, work-study, and/or federal student loans. In addition to subsidized federal student loan (which are need-based) and unsubsidized federal student loans (which are not need-based), there are two other types of federal aid low-income students may qualify for based on the FAFSA:

•   Federal grants Students who demonstrate financial need may qualify for federal grants, which you do not need to pay back. Some examples of federal grants include Federal Pell Grants, Federal Supplemental Educational Opportunity Grants (FSEOG), Iraq and Afghanistan Service Grants, and Teacher Education Assistance for College and Higher Education (TEACH) Grants. Each grant has its own eligibility requirements. Some, like the TEACH Grant, even have requirements you must fulfill after you attend school. Look at each grant’s eligibility requirements to determine whether you qualify.

•   Work-study Colleges and universities offer part-time work-study opportunities through the Federal Work-Study program. Graduate and undergraduate students who demonstrate financial need can get it whether they are part- or full-time students, as long as your school participates in the Federal Work-Study Program.

How Do You File the FAFSA?

Typically, the FAFSA becomes available on October 1 for the following academic year. The 2024-2025 academic year, however, is an exception. Due to upcoming changes to the FAFSA (and some adjustments to how student aid will be calculated), the application will be available some time in December 2023.

Since some aid is distributed on a first-come, first-served basis, it’s a good idea to complete the FAFSA as soon after its release as possible. Here’s how:

1.    Create your Federal Student Aid ID, also called an FSA ID. You can do this in advance of getting your materials ready and filing the FAFSA.

2.    Make a list of schools you’d like to attend. You can add up to 20 schools on the 2024-2025 FAFSA.

3.    Gather financial documents you’ll need. You’ll need information for both yourself and your parents, such as your Social Security numbers, Alien Registration numbers (if you’re not a U.S. citizen), most recent federal income tax return, W-2s, details of any untaxed income you’ve received, current bank statements, records of any investments you have.

4.    Complete the FAFSA. Using your FSA ID, log in to the website, read the directions, and submit your information.

5.    Review your FAFSA Submission Summary to make sure your information looks correct. The FAFSA Submission Summary, formerly known as the Student Aid Report (SAR), is a document that summarizes the information you provided when filling out the FAFSA. It includes your Student Aid Index (SAI), previously called Expected Family Contribution (EFC). Colleges and universities receive your SAI to determine your eligibility for federal and nonfederal student aid.

Federal Pell Grant

Your SAI will determine your eligibility for a Federal Pell Grant, so you have to file the FAFSA in order to qualify.

Undergraduate students who qualify for a Federal Pell Grant must show exceptional financial need. These grants are usually reserved only for undergraduate students, though some students enrolled in a post-baccalaureate teacher certification program might qualify.

How much can you receive from a Pell Grant? The amount varies, depending on your SAI, the cost of attendance of your school, whether you are a part-time or full-time student, and whether you will attend for a full academic year or not. The maximum Pell Grant award for the 2023-2024 academic year is $7,395. (The amount for 2024-2025 has not been announced yet.)

Scholarships for Low-Income Students

Colleges and universities may offer need-based scholarships. The money is yours to use for education — you do not need to pay it back. The results of the FAFSA help colleges and universities determine your eligibility for need-based scholarships and scholarships for low-income students.

You can also find need-based scholarships through employers, individuals, private companies, nonprofit organizations, religious groups, and professional and/or social organizations. There are a number of online scholarship search tools that can help you find scholarships you might qualify for.

Student Loans for Low-Income Families

As mentioned above, you can tap into either federal or private student loans for low-income students. Here’s a closer look at both.

Federal Student Loans

Based on the results of the FAFSA, you may qualify for a few types of federal student loans. Subsidized federal loans are need-based, while unsubsidized federal student loans are available to all students regardless of income or financial need.

Here’s a quick overview of three main types of federal loans:

•   Direct Unsubsidized Loans can go to undergraduate, graduate, and professional students. They are not need-based but you are responsible for paying all interest, which begins accruing as soon as the loan is dispersed.

•   Direct Subsidized Loans are for undergraduate students who demonstrate financial need. The government pays the interest on these loans while you’re in school, during any deferment, and during the six-month grace period after you graduate.

•   Direct Plus Loans are available for graduate or professional students or parents of undergraduate students and are not need-based or subsidized. Borrowers must undergo a credit check to look for adverse events, but eligibility does not depend on your credit scores.

Private Student Loans

Federal student loans don’t fully cover the cost of attendance for many students, and some students may consider tapping into private student loans as well.

Private lenders set their own requirements, however, and some students may find it challenging to qualify for a private loan if they have:

•   Little to no income

•   A negative credit history

•   A bankruptcy on file

•   A low credit score

How do you get around these issues? You may need to get a job while in school to prove you have some income. You may also want to work on building your credit before you apply for a private student loan. While you may be able to qualify with low income and low credit, you may make up for it by paying more in interest.

Another way to qualify for a private student loan with a low income and/or poor (or limited) credit is to apply with a cosigner. A student loan cosigner is a creditworthy adult who signs for a loan along with you. It’s a legally binding agreement stating that they’re willing to share the responsibility of repaying the loan on time and in full. Many borrowers turn to a family member for cosigning.

How to Apply for Student Loans

How to apply for student loans will differ depending on whether you are interested in federal or private student loans.

To apply for federal student loans, the first step is to fill out the FAFSA. Once you’ve filed the FAFSA, you basically sit back and wait to see what the school you’re planning to attend will offer you in federal aid, which may include a mix of grants, scholarships, and federal student loans. Your school will tell you how to accept all or a part of the loan.

Before you receive your loan funds, you will be required to complete entrance counseling, a tool to ensure you understand your obligation to repay the loan, and also sign a Master Promissory Note, agreeing to the terms of the loan.

Applying for private student loans involves directly going to a lender website or simply talking to your college or university’s financial aid office. Many institutions put together what they call “preferred lenders.”

Even if your school makes it easy for you to apply for a private student loan, it’s a good idea to do your research outside of the preferred lender list to find low interest rates and compare interest rate types (fixed or variable), repayment schedules, and fees. You want to find the terms and conditions that best fit your needs.

As you are researching private student loans, you’ll want to make sure that you (or your cosigner) meets the requirements to qualify for the loan.


💡 Quick Tip: Federal student loans carry an origination or processing fee (1.057% for Direct Subsidized and Unsubsidized loans first disbursed from Oct. 1, 2020, through Oct. 1, 2024). The fee is subtracted from your loan amount, which is why the amount disbursed is less than the amount you borrowed. That said, some private student loan lenders don’t charge an origination fee.

The Takeaway

Even if you’re a low-income student, you can access student loans. To find out what federal student loans you are eligible for, you’ll need to fill out the FAFSA. As a low-income student, you may qualify for subsidized federal student loans, which won’t accrue any interest while you’re in school and for six months after you graduate. This makes them more affordable than unsubsidized federal student loans and private student loans.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

FAQ

What qualifies as a low-income student?

The U.S. Department of Education defines a low-income student as an individual whose family’s taxable income for the preceding year did not exceed 150% of the poverty income level established by the Census Bureau. For example, a student from a family of four living in the contiguous U.S. with a household income of $45,000 or less is considered low-income.

Do low-income students get free college?

Some low-income students are able to go to college for free through financial aid or merit scholarships. But even without a full ride, low income students can often pay for college through a combination of scholarships, grants, and loans.

Does FAFSA help low-income students?

Yes. Filling out the Free Application for Federal Student Aid, better known as the FAFSA, gives low-income students access to financial aid, including grants, scholarships, work-study programs, and federal student loans.

Photo credit: iStock/Souda

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SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

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

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

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

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

What Is the Average Credit Card Limit?

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

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

How Credit Card Issuers Determine Your Credit Limit

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

Your Credit Scores

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

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

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

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

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

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

Your History With the Card Issuer

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

The Card Issuer’s Policies and Goals

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

Current Economic Conditions

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

How to Increase Your Credit Limit

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

Update Your Income Information

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

Build Your Credit

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

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

Request an Increase

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

Transfer Your Available Credit

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

The Takeaway

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

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

What is a reasonable credit limit?

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

Can lenders change credit limits?

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

What is available credit?

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

Photo credit: iStock/RgStudio

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

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

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

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Average credit card processing fees can range anywhere from 1.5% to 3.5%. While a few percentage points may seem low, these fees can add up and impact your business’ bottom line.

Whether you’re a merchant who runs your own business or someone with a side hustle, if you accept credit card payments, fees are likely going to eat into your gross profit. Read on to learn more about credit card processing fees and how you can reduce them.

What Is a Credit Card Processing Fee?

A credit card processing fee describes all of the fees charged to accept credit cards as a form of payment. These, which are incurred by merchants that accept credit card payments, can include interchange fees, payment processor fees, and assessment fees.

Processing fees can run over 3% of a total transaction. Rates can vary based on the size and location of a business, as well as the types of transactions and cards that are accepted.

Generally, businesses bake credit card transaction fees into their pricing in the form of credit card merchant fees. However, some businesses may provide a discount if a customer pays with cash. Others may set a minimum payment amount they’ll accept by card. Understanding how credit cards work can give insight into why some businesses don’t accept credit card payments.

Types of Credit Card Processing Fees and Costs

Credit card processing fees actually combine several fees. When talking about credit card processing fees, merchants are generally talking about the following:

•   Interchange fees

•   Assessment fees

•   Payment processor fees

Some of these fees, like payment processor fees, can vary depending on the credit card processor a merchant chooses. Others, like interchange fees, are set by the credit card companies and depend on the cards used.

Recommended: Charge Cards Advantages and Disadvantages

Interchange Fees

Interchange fees are collected by credit card issuers from the merchant when a credit card or debit card is used. Interchange rates vary depending on:

•   The type of card used

•   The type of business

•   The amount of the transaction.

Interchange rates can also vary depending on whether the payment was made online or in store.

Generally, interchange rates are presented as a percentage of the sale, plus a flat fee. For example:

•   If Hailey buys $50 worth of groceries with XYZ card, the grocer would have a set interchange rate based on XYZ card, which may be slightly different than ABC card.

•   XYZ card may have a 1.15% interchange rate, plus a flat fee of $0.30. That would mean that, from Hailey’s transaction, the store would owe $0.88 as an interchange fee.

Assessment Fees

An assessment fee is levied by the credit card network (the brand name on the card a cardholder uses, such as MasterCard or American Express). This fee may vary depending on whether the card is a credit card or debit card, as well as on the volume of transactions a business makes. There also may be larger international fees.

Unlike the interchange fee, an assessment fee is standard across transactions. It is also generally lower in amount than an interchange fee.

Card Processor Fees

Payment processor fees go to the payment processor, which facilitates the transaction. The card processor is the intermediary that communicates between the card issuer and the merchant bank. It may also include the point of sale (POS) system and provide the devices to take credit card payments.

The merchant does have some control over the amount of these fees. Credit card processing fees vary depending on the payment model selected. Costs could include per-transaction fees, a monthly service fee, and equipment rental fees.

Average Card Processing Fees in 2024

As mentioned above, card processing fees in 2024 depend on several factors, including whether payments are primarily processed in person or online. That said, average credit card processing fee ranges are provided below for the major credit card networks:

In addition, there can typically be a per-use charge (say, 10 to 22 cents) which varies depending on, say, whether the transaction was in-person or online or over the phone.

Note that American Express is considered a bit differently than other credit card companies. Unlike the other three credit card companies in the table above, American Express is a closed-loop network. This means that it is not backed by another financial institution, which gives it more control over its practices and charges. American Express calls the fees it charges “discount fees,” which operate similarly to interchange fees.

If you do have an American Express card, this wouldn’t have any impact on things like your credit card limit or credit card minimum payment, but it may affect where your card is accepted due to generally higher fees.

Recommended: What Is a Credit Card Minimum Payment?

Factors That Determine Interchange Fees

Adding to merchant confusion, interchange fees vary depending not only on the merchant, but also depending on what sort of credit card is used in a transaction. Interchange fees are usually between 1% and 3.5% of the overall sale, but the actual percentage varies on a host of factors that are discussed below.

Credit Card Type

Credit card type plays a role in determining the amount of the interchange fee — even if all cards fall under the same brand. In general, debit cards have lower interchange rates than credit cards, which are unsecured debt.

Part of how a rate is assigned is based on risk level. For a merchant bank, a debit card can be less risky because the money is already accounted for within your account. (This is also why the process of how to apply for a credit card is more involved than it is for a debit card.)

Merchant Category Code

Shopping at a supermarket? Then you may be paying a different interchange rate than you would at the hardware store or dry cleaners. Every merchant has a category code, and those merchants within the same category will have the same fees.

Method of Processing

How a payment is processed will also affect the rate of interchange fees. Card companies assess the risk of the transaction, considering the potential for fraud, chargebacks, and other things that may go awry.

For this reason, they may assign different interchange rates based on whether a purchase was completed online, in person, or even whether the purchase was made via swipe or tapping technology.

Network

Each credit card network sets its own fees based on the type of merchant. While the majority of the fee goes to the bank that issued your card, a small amount will go to the card network itself. This money will then be used to fund credit card rewards, perks, and protections offered by the card — all key parts of what a credit card is.

Pricing Models for Processing Fees

There are various pricing models for processing fees, and merchants can assess which one works best for them based on how they do business. There are three common models to consider: flat rate pricing, interchange plus pricing, and tiered pricing. Here’s a closer look:

Flat Rate Pricing

Like the name suggests, flat rate pricing provides a fixed rate for all transactions, which is inclusive of processing fees and interchange fees. This can be convenient, as it makes it easy to predict costs. However, it also could mean that your business is overpaying for transactions that have lower interchange rates, such as purchases made with a debit card.

Interchange Plus Pricing

Interchange plus pricing provides a detailed analysis of fees by breaking out interchange fees, assessment fees, and processor fees. This can be great for businesses looking for a level of detail into the fees they’re paying, and it can also help ensure that you’re not overpaying fees. However, some businesses may find this level of detail overwhelming.

Tiered Pricing

With tiered pricing, prices for interchange rates are separated into one of three tiers: qualified, mid-qualified and non-qualified. Tiering is dependent on how payment occurs (for example, in person or online) as well as how the card processing occurs (a payment may be downgraded based on how the card is processed).

While statements can be easier to read with this model, there’s less transparency than with interchange plus pricing. Additionally, because merchants can’t separate interchange fees from processing fees, it can be challenging to see a fee breakdown and understand the costs at a greater level of specificity.

Other Credit Card Processing Fees and Costs

In addition to the credit card processing fees outlined above, you also may pay a monthly subscription fee for processor use. This is independent of the number of transactions and may include customer service, POS equipment, and more. Sometimes, a higher subscription fee may result in a lower fee per payment.

You may also pay a fee for the initial setup when you sign up for a credit card processing company. What’s more, you could owe fees for if a customer disputes a credit card charge, in the instance of any chargebacks, and for non-sufficient funds.

How Often Do Payment Networks Update Their Interchange Fees?

Interchange fees are typically updated twice a year, though some might only do so annually or could refresh their fees more often.

Typically, rates have been rising by a fraction of a percentage point for payments made by credit card. This may not sound like a lot, but this can add up significantly — especially as more consumers are using cards over cash. Just think if your annual percentage rate (APR) on your credit card was to inch up; it’s a similar situation.

Recommended: When Are Credit Card Payments Due

The Takeaway

Credit card processing fees typically amount to between 1.5% and 3.% of a total transaction. Understanding credit card processing fees isn’t only helpful for entrepreneurs and small business owners. It can also help consumers understand why there might be an additional fee charged for certain payments made with cards. It’s all part of being a knowledgeable cardholder and using credit responsibly.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

What is the typical fee for credit card processing?

The typical fee for credit card processing in 2024 is 1.5% to 3.5% for transactions. The rate is dependent on the type of transaction (in general, debit cards cost less to process than credit cards) and the processing system the merchant chooses. The actual percentage per swipe varies based on a host of factors.

Can I avoid credit card processing fees?

There are no ways to entirely avoid credit card processing fees, but there may be ways to make fees more manageable. One common way for businesses to manage credit card processing fees is to bake them into pricing and to offer cash discounts. Another way to potentially avoid credit card processing fees is to accept ACH payment methods for services.

Can the type of credit card determine processing fees?

Yes, the type of credit card is one factor that determines processing fees. For example, different categories of cards, such as reward cards, can have different fees than other cards, like debit cards.

Photo credit: iStock/tdub303

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

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

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

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The United States is more than a little dog crazy: The percentage of households with a canine stands at 44.6%, meaning almost one out of two have a pooch. Owning a dog can be one of life’s great pleasures, whether you choose a tiny Chihuahua puppy or a mega, full-grown Great Dane as your new best friend.

But amid imagining all the cuddles and sloppy kisses, many prospective dog parents aren’t fully prepared for the expense of owning a pet.

This can indeed be an important question because not only can dog ownership be a major personal commitment, it can also be a considerable financial investment,g too. The initial first-year investment has been estimated at between $1,135 and $5,155.

If you’re considering bringing home a new pooch, here’s the information you need to know about budgeting for a dog and how much it’s likely to really cost.

8 Costs of Owning a Dog

It’s easy to fall in love with an adorable dog and feel as if you just must make it yours ASAP. But it’s wise to do a little research first about potential bills before bringing home your pooch.

Doing so can not only prepare you for the costs of pet ownership but potentially save you money on your pet as well. Knowing the expenses involved can help you budget, prioritize, and comparison-shop as you move ahead with getting your new best friend. Read on for eight costs that are likely to crop up.

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1. Adoption Costs

The initial cost of adopting a dog can vary greatly depending on if the dog comes from a shelter or purchased from a breeder. As a range, however, Animal Humane Society sets its standard dog and puppy adoption fees between $255 to $414.

The fee cost varies, as some dogs (such as purebreds) are in higher demand and the organization needs to cover the cost of caring for animals who may take longer to adopt out (such as older dogs).

At many pet rescues, adoption fees also cover the cost of extra services, like a pet physical exam, deworming, spaying or neutering, or common vaccinations.

Adoption vs Buying

If you’re wondering how adoption costs compare to buying a dog, consider that purchasing a Goldendoodle from a breeder costs an average of $2,200. What’s more, buying a pet from private breeders often does not come with the extra services that some non-profit rescues cover. So, if an owner is considering the breeder route, the out-of-pocket cost of future medical visits may be one more dollar sign to add to the eventual pet budget. This can help you know how much to allocate towards your new companion so you can avoid ending up with credit card debt.

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2. Food and Treats

Some of the tiniest puppies can morph, in just a few months or years, into heftier eating machines. Young puppies can grow quickly. And, all that fast growth can mean they’ll eat…A lot.

So, food and treats can also play a significant role in your personal budget when you bring home a furbaby. Individual dog budgets can vary based on the size of the pooch and type of food each owner opts to feed their pet. Food choices might include dry kibble, wet food, a raw food diet, or some mix of each.

What to feed a dog is all a personal choice between the owner and their veterinarian. However, if someone is looking to estimate the potential cost of feeding a new dog, estimates range from $250 to $700 for food and treats. This will vary with what kind of food you buy (organic? bulk?), where you live, and how much your pet eats.

Recommended: Ways to Save Money on Food

3. Toys

Toys may seem like a silly little add-on, but they can play an important role in puppy development and adult dogs’ mental stimulation.

Toys can help dogs fight boredom when they are left at home alone and comfort them if they’re agitated. (With toys to gnaw on, dogs may be less likely to turn to shoes for a midday distraction.) Rather than investing in pricey toys, a simple tennis ball will satisfy many dogs. And, a dog owner can grab a can of three, fun-to-chase tennis balls on Amazon for about $4.

However, the cost here can also depend on just how quickly an individual dog chews through the balls. Some doggos do a great job of tearing them apart. So, a pet owner may want to budget a small amount, say $50 or $75 a year or so, to buy their pooch some toys.

4. Pet Sitters or Walkers

Taking a vacation with a pet? Then pet sitting isn’t an expense. But for many people who work outside the home or travel without Fido, it may be a good idea to consider a dog walker or pet sitter. This person can be a trusted friend or family member, a neighbor, a kid down the street, or a professional service.

Even if it’s a friend, a new pet owner may want to budget in some dollars to pay this person. Doggie daycare can run $40 or more per day (higher in certain areas, such as major cities), so it can be helpful for owners to know how many days each month they might need a dog sitter.

Also, if you are taking a vacation and aren’t traveling with your pet, know that a typical pet sitter will charge at least $30 a day to attend to your pup.

5. Incidentals

A lot of smaller expenses can come with owning a dog. Incidentals to budget for include things like, collars, leashes, dog beds, cleaning supplies, crates, pet bath products, and the all-important groomer. Many pet owners like buying their dogs clothes, which can add up as well. It can be wise to build in another cushion in a pet budget to cover the above-mentioned items, too.

Pet I.D. tags and registering a pet with the city are extra costs to bear in mind. (For reference, it can cost between $8.50 and $34 a year to obtain a dog license in New York City.)

💡 Quick Tip: An emergency fund or rainy day fund is an important financial safety net. Aim to have at least three to six months’ worth of basic living expenses saved in case you get a major unexpected bill or lose income.

6. Medical Visits

Dogs, like humans, need regular medical check-ups, so “How much will it cost?” is a wise question to ask when budgeting. Just like a human exam, dogs need blood drawn to check for diseases, routine vaccinations to prevent disease, and a general physical exam once a year to make sure their health is in working order.

The cost of health care for a dog can vary greatly depending on where the person and the pup live (and the age or breed of the dog). Recent estimates say routine visits can cost anywhere from $50 to $250, and overall vet costs can run from $700 to $1,500 or more per year.

Beyond vet visits, pet parents may also want to add in a budget for preventative medicine. Depending on where an owner lives, a veterinarian could recommend a monthly flea and tick medication, along with regular heartworm medication, to prevent the dog from becoming afflicted. Flea and tick meds can range from $40 to $200 a year while heartworm medication averages $5 to $15 a month, and treatment, if your pet is diagnosed, can cost $400 to $1,000.

7. Pet Insurance

While pet insurance won’t cover routine veterinary visits, it could come in handy if an emergency occurs with the pup.

For example, a new dog could eat something that causes it to get sick — like, ingesting pieces of a chew-toy or snatching food with bones in it off an owner’s plate (or street).

Many pet insurance plans will cover a portion of medicines, treatments (including surgeries), and medical interventions that aren’t tied to a pre-existing condition.

Paying monthly for pet insurance, while the dog is young, could save an owner hundreds or thousands of dollars as a dog continues to age as well. (Generally, pet insurance costs less when a dog is younger). This kind of policy typically costs between $38 and $56 per month.

Pet insurance may cover things like ingesting harmful items or food, accidents, urgent care, and — in some cases — preventative medicine. The cost of pet insurance can vary significantly by your pet’s breed, age, and any other health history.

8. Emergency Fund

It can be wise to save up an emergency fund for pet-related expenses. Things just tend to happen with dogs around. They can accidentally knock things over with their tails, swallow objects. and need an emergency vet visit. Dogs can do a lot of damage in a short amount of time (ahem, chewed up leather shoes).

But, guess what? Having some financial discipline can be worth it for a lick on the face, a little playtime, and coming home to a happy dog. Planning ahead for a pet budget can help new owners focus on those tail-wagging moments with Fido instead of stressing over canine costs.

The Takeaway

More than 44% of US households have dogs as pets, which shows how beloved they are. But before you get a pet, it’s important to know the costs involved (which can add up to thousands per year) and budget wisely. Saving in advance can make adopting and then caring for a dog easier. You might look for a high-yield checking and savings account to help your money grow for this purpose.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

How much does it cost to buy a new dog?

Costs can vary tremendously. Adoption fees are often estimated at between $255 to $414, and buying a dog from a breeder can run into the thousands.

What is the monthly cost of owning a dog?

The costs of owning a dog can vary greatly, from $40 to $290 a month, depending on factors such as the dog’s breed, age, health, and your location.

Can pet insurance save me money?

Pet insurance can save you money, but it really depends on your particular pet, the policy, and your specific situation. If the premiums and out-of-pocket insurance costs exceed what you expect to spend on your pet’s care, it may not be a wise buy.

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