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The Federal Reserve’s recent data says the average credit card interest rate for all accounts is 21.39%, which is a high number by most standards. If you never carry a balance or take out cash advances, it may not be a big deal for you, but if you do, it’s worth paying attention to the average credit interest rate. Doing so could help you anticipate and potentially budget for increased interest payments.

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

What Is the Average Credit Card Interest Rate?

The average interest rate for credit cards is 21.39%, as mentioned above, as of August 2025. Those accounts that carry a balance and accrue interest showed a still higher rate averaging 22.83%. Rates have been steadily increasing in recent years — in November 2021, the average rate for credit cards was 14.51%, and back in November 2017, for example, it was 13.16%.

Amid increasing rates, some have proposed putting a cap on credit card interest rates. A bipartisan bill proposed a temporary 10% cap on credit card interest rates to help curb debt, though there is debate about the pros and cons of this measure. Individuals may also pursue other options for securing lower interest rates, such as fixed-rate personal loans.

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

💡 Quick Tip: Credit card interest caps have become a hot topic, as the total U.S. credit card balance continues to rise. Balances on high-interest credit cards can be carried for years with no principal reduction. A SoFi personal loan for credit card debt may significantly reduce your timeline, however, and could save you money in interest payments.

Interest Rates by Credit Quality Types

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

The report measures what’s called an effective interest rate — meaning, the total interest charged to a cardholder at the end of the billing cycle. Here are rates as of October 2025 for new credit card offers:

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

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

Recommended: Revolving Credit vs. Line of Credit, Explained

Interest Rates by Credit Card Types

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

Here are details as of October 2025:

Prime Rate Trend

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

As of September 18, 2025, the prime rate is 7.25%. On March 17, 2022, the prime rate was 3.50%. This can be considered an example of how variable this rate can be.

Delinquency Rate Trend

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

As economic conditions rebound or the economy builds itself up, delinquency rates tend to go down, as consumers can afford to make on-time payments. According to the Federal Reserve, the delinquency rate for the second quarter in 2025 was 3.05%, down from 3.23% a year earlier.

Credit Card Debt Trend

Credit card debt has risen from its previous levels of $926 billion in 2019 and $825 billion at the end of 2020. The United States currently leads the world in outstanding credit card debt, which recently reached a total of $1.23 trillion.

This shows an ongoing surge in credit card debt, and these statistics can make individual cardholders think twice about their own balance and how to lower it. Fortunately, there are other options borrowers can pursue to obtain lower interest rates and potentially pay down their down faster, such as fixed-rate personal loans.

Recommended: How Does Credit Card Debt Forgiveness Work?

Types of Credit Card Interest Rates

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

Purchase APR

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

Balance Transfer APR

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

Penalty APR

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

Cash Advance APR

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

Introductory APR

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

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

Factors That Affect Interest Rate

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

Credit Score

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

Credit Card Type

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

•   Travel rewards credit cards

•   Student credit cards

•   Cash-back rewards credit cards

•   Balance transfer cards

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

The Takeaway

The current average credit card interest rate is 21.39%, according to data from the Federal Reserve. However, your rate could be higher or lower than the average APR for credit cards based on factors such as your creditworthiness and the type of card you’re applying for. Your best bet is to pay off your entire balance each month on your credit card so you don’t have to worry about how high the interest rate for a credit card may be. That way, you can focus on features you’re interested in.

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

Looking for a new credit card? Consider credit card options that can make your money work for you. See if you're prequalified for a SoFi Credit Card.

FAQ

What is the average credit card interest rate?

The average interest rate for credit cards is 21.39%, according to the latest data from the Federal Reserve as of August 2025.

How do you get a low credit card interest rate?

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

What is a bad APR rate?

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

Photo credit: iStock/MicroStockHub

SoFi Credit Cards are issued by SoFi Bank, N.A. pursuant to license by Mastercard® International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

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 Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

SoFi Credit Cards are issued by SoFi Bank, N.A. pursuant to license by Mastercard® International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

SOCC-Q425-012

Whether you’re buying a home or getting a college education, taking on debt can allow you to invest in your future. The downside? Whatever you borrow will eventually need to be repaid, and that can add up to a considerable portion of your monthly expenses. Add in credit card bills or an unexpected financial emergency, and getting out of debt could start to feel like an overwhelming task.

Fortunately, it’s possible to break the debt cycle. Here are some steps you can take now to help get your finances in order.

Review Your Credit Card Statements

Credit card debt prevents many people from breaking the debt cycle. Reviewing your credit card statements closely can be a great first step.

Make note of your expenses and see exactly where all of your money is going. Are you spending hundreds of dollars a month on take-out? Are there a few subscriptions you enrolled in but have since stopped using? Be honest with yourself as you assess your spending, and note any areas where you can adjust or cut back.

Recommended: What Is a Credit Card Interest Cap?

Set a Budget

After you’ve reviewed your spending, consider making a budget. You can start by tallying your monthly income and monthly expenses. Don’t forget to include savings goals, and be sure to set up new limits for your discretionary spending.

If you’re new to budgeting, there are several different methods to consider. The 50/30/20 budget rule, zero-based budget, and the envelope budget system are three common examples. Whatever method you decide to use is up to you — what really matters is that you find a system that works for you.

Accelerate Your Repayments

If you’re paying off debt, one way to speed up your repayment is paying more than the monthly minimum. Making additional payments on your debt each month could not only help you eliminate your debt more quickly, it could also potentially reduce the money you spend in interest in the long term. Even just $25 a week could have an impact on your repayment.

There are a couple of debt repayment strategies that could help get you back on track. One is the debt snowball method, which prioritizes paying off the smallest debt first while making the monthly minimum payment on all other debts. Once the smallest balance is paid off, you’d focus on the next-smallest debt.

While this method may not reduce the money you spend in interest, the rewarding feeling of seeing your debt dwindle could encourage you to stick with your repayment plan.

Another debt repayment strategy is the debt avalanche, or debt-stacking method. Here, you’d make a list of all your debts by order of interest rate, highest to lowest. While making your minimum monthly payments on all the debts, “attack” the highest interest rate loan with as many extra payments as you can.

Unlike the snowball method, the avalanche method is about streamlining your debt repayment so that you save the most money on interest. It can require more discipline, but keeping track of how much you are saving in interest can be a great motivator.

Establish an Emergency Fund

You can’t predict the future, but you can do your best to prepare for it. Having an emergency fund can help cover unexpected costs and avoid having to use a credit card, which could send you deeper into debt.

Using a windfall, like a bonus at work or your tax refund, is a good way to start an emergency fund. You can put this money in a dedicated savings account or another cash equivalent, if you prefer.

Then each week, aim to save a specified amount of money in your emergency fund. Even saving just $10, $15, or $20 a week can help you be more prepared when a financial emergency strikes. If possible, plan to save somewhere between three and six months’ worth of living expenses.

Recommended: Emergency Fund Calculator

Pay For Things With Cash or Check

While you’re paying down debt, consider storing your credit cards somewhere safe and instead paying for purchases in cash or by check. Doing so can help you keep tabs on how much you’re spending and spot areas where you may be able to cut back.

If you must use a credit card to make a purchase, consider what it might cost you in interest if you aren’t able to pay off your balance at the end of the month. A credit card interest calculator can help you estimate how much interest you will pay on the debt.

Live Within (or Below) Your Means

It can be easy to get swept up in having the best of everything, but living in debt to sustain that lifestyle can ultimately add stress. You can rise above this by living below your means. This means spending less money than you make, which in turn can allow you to focus on preparing for a rainy day, building wealth, and achieving financial freedom.

Determine Needs vs. Wants

Is that new pair of shoes or the latest video game really a must-have?

As you’re trying to break your debt cycle, it’s a smart move to evaluate your wants against your needs. For example, before you make a purchase, carefully think about whether you need it or simply want to have it. If it’s something you can live without, consider holding off until you’re on firmer financial ground.

Breaking out of a debt cycle requires discipline and determination. While skipping out on wardrobe upgrades or the newest tech gadgets now can seem like a huge sacrifice, when you start making headway on paying down what you owe, odds are you’ll feel the reward.

Recommended: Personal Loan Calculator

Get a Side Hustle

Another great way to help end the debt cycle: find some extra income by getting a side hustle. You could use money you earn from your new gig to make extra payments on your debts.

Not sure where to look for work? Take a look at your skills and interests and see where you may be able to find an extra job or make some passive income.

Consolidate Debt with a Personal Loan

If you’re juggling multiple high-interest debts, you may want to explore a debt consolidation loan. Typically, this involves using a new personal loan or line of credit to pay off existing debts, consolidating several payments into one.

By consolidating those debts into a single loan — ideally one with a lower interest rate — you can streamline payments and potentially reduce your monthly payments or save on interest.

💡 Quick Tip: Everyone’s talking about capping credit card interest rates. But it’s easy to swap high-interest debt for a lower-interest personal loan. SoFi credit card consolidation loans are so popular because they’re cheaper, safer, and more transparent.

The Takeaway

There are strategies that can help you get ahead of your debt and regain control over your finances, which in turn can lower your money stress. Being more mindful about where your money goes, building up savings so you’re prepared for unexpected expenses, and paying for things with cash instead of credit cards are all good steps you can take now. And if you’re trying to pay down multiple high-interest debts, you may want to explore whether a debt consolidation loan is right for you.

Credit cards have an average APR of 20%–25%, and your balance can sit for years with almost no principal reduction. Personal loan interest rates average 12%, with a guaranteed payoff date in 2 to 7 years. If you’re carrying a balance of $5,000 or more on a high-interest credit card, consider a SoFi Personal Loan instead. See your rate in minutes.

FAQ

How to get out of the cycle of debt?

There are various ways to get out of the cycle of debt. Smart budgeting, debt consolidation loans, and using techniques like the snowball or avalanche method to pay off what you owe can be among them.

What is the 15/3 payment trick?

The 15/3 payment method is a credit card strategy that involves making two payments each month: a larger one about 15 days before the statement closing date and a smaller one three days before the due date. This can help lower your credit utilization ratio by reducing the balance reported to credit bureaus.

Is $20,000 in debt a lot?

Whether $20,000 in debt is a lot depends on your income and financial situation, but it’s typically considered to be a significant amount, especially if it’s high-interest credit card debt.

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SOPL-Q425-014

A credit card balance is the amount of money you owe to a credit card company from month to month. This is an important number to keep track of because if you don’t pay off your balance by the end of the billing cycle, you’ll owe interest. And, as you may know, credit cards usually have a high interest rate, which can lead to credit card debt.

That said, when you go to manage your credit card bill, you might get tripped up on the difference between your statement balance and your current balance. Read on to learn more about each type of credit card balance and how carrying a balance can affect your credit score.

What Is a Credit Card Balance?

A credit card balance is the amount of money you owe to your credit card company, as well as interest and any fees.

When you look at your credit card bill, you may see two balances posted: your current balance and your statement balance.

•   Your statement balance is the amount of money you owe from the previous billing cycle.

•   Your current balance, on the other hand, is how much you owe at this moment in time. This amount could be higher or lower than your statement balance, depending on whether you’ve paid your credit card bill, charged more items to your credit card, or requested a credit card chargeback.

But when your billing cycle closes with a balance, what does that mean? It depends on your credit card issuer. Many card issuers have a grace period between when the credit card billing cycle closes and when payment is due. That means, if you pay your statement balance in full when payment is due, you will not accrue interest on any of the charges billed from the previous cycle.

Recommended: Pros and Cons of a Charge Card

How Is a Credit Card Balance Calculated?

Your credit card balance is more than just whatever you’ve purchased during the previous month. A credit balance also consists of:

•   Any accrued interest

•   Late payment fees

•   Foreign transaction fees

•   Annual fees

•   Cash advances

•   Transfer fees

•   Any statement credits

•   Any payments made to the account

If you carry a balance, you’ll have to pay interest on the balance owed. The only exception is if you have a card with a 0% annual percentage rate, or APR, which is the interest rate charged when you carry a balance on your card. (This 0% might be a promotional or introductory rate, for example.)

But generally, your credit card will have a grace period, during which interest will not accrue on the balance.

💡 Quick Tip: With credit card interest rates rising in recent years, calls for credit card interest caps have been in the spotlight. Those carrying high-interest credit card debt, however, may find debt relief by switching to a fixed, lower-interest personal loan. A SoFi personal loan for credit card debt may provide a cheaper, faster, and predictable way to pay down debt.

Differences Between My Credit Card Balance and Statement Balance

The meaning of your credit card balance can vary depending on whether you’re discussing your statement balance or current balance.

•   Your statement balance is how much you owe at the end of the billing cycle.

•   Your current balance is a continuous tally of any credit card activity.

Here are some points to know about this:

•   You will have a due date by which you’ll need to pay your statement balance.

•   When your statement balance is paid, there may be activity on your balance as you continue to use your credit card throughout the month.

•   The charges made after your statement balance is available will show up on your next statement balance.

•   These charges, as well as any remaining amount from your statement balance, constitute your current balance.

Here’s the information on this topic in chart form:

Your Credit Card Balance and How It Affects Your Credit Score

Some people believe that carrying a balance may build their credit score, but that’s not true. Credit card companies do like to see credit card usage, but paying your balance in full is what can positively impact your credit score.

One of the largest determinants of your credit score is your credit utilization ratio. This is the amount of money you’ve borrowed across credit cards compared to the amount of credit you have available. If you had a card with a credit card limit of $10,000 and you charged $3,000 on the card, for instance, your credit utilization ratio would be 30%.

In general, the lower your credit utilization ratio, the more helpful it is in building your score. It’s recommended to keep your credit utilization below 30%, though 10% is ideal. By paying off as much of your credit card balance as you can in a statement period, you’ll lower the amount of money you owe, thus decreasing your credit utilization ratio. This can be part of using a credit card responsibly.

How to Check Your Credit Card Balance

There are many ways to check your credit card balance. You can do so online, over the phone, through an app, or simply keep an eye out for monthly statements, which may be mailed to you or securely delivered through email.

Through an App

Most credit card companies have an app in which you can check your credit card balance. The app also may offer additional features, such as a breakdown of spending and your most recent credit score.

Online

An easy way to check your credit card account balance is to go online to your card issuer’s website, where you can set up your online account. You can then log onto this account to check your balance, pay any bills, and otherwise perform any account maintenance.

As with any sensitive information, make sure you keep your user information secure.

Recommended: When Are Credit Card Payments Due

Over the Phone

Your credit card company likely has a number that you can call to learn your balance, often from an automated voice that reads it off to you. It can also be helpful to know the number to your credit card company in case you want to dispute a credit card charge you don’t recognize or have questions about fees or anything else that appears on your statement, or have lost your card.

Through Regular User Notifications

Depending on how you’ve set up your account, you may receive user notifications and statement balance updates through text message, email, or the mail, or a combination of all three.

Should You Carry a Credit Card Balance?

In general, carrying a credit card balance has the potential to hurt your finances and your credit score.

Sometimes, however, carrying a credit card balance can happen. Perhaps you had a big dental bill or had to buy a new refrigerator. Or maybe you used your card to pay for plane tickets for next summer’s vacation.

Here are some ways to potentially minimize the negative effects of carrying a balance if you end up in a situation where you need to do so:

•  Look for a card with low APR. The lower the APR, the less interest you’ll pay on purchases. A good APR is one that’s below the current average— which is between 20-25% currently, though what’s considered competitive can also vary depending on the type of the card and the individual’s credit score and history.

•  Pay more than the minimum balance due. Even if you can’t pay the full balance, paying as much as you can above the credit card minimum payment will help keep your credit utilization ratio low. It will also minimize the amount of interest you’ll pay over time.

•  Make a budget. Look through your expenses and find ways to pay down the card over a set amount of time. (There are a variety of budgeting methods available; try a couple and see what works best for you.) Some cards may offer the option to pay off certain purchases in installments, at a different interest rate than the overall card.

•  Treat your credit card as you would cash. If you don’t have the money right now, don’t whip out your card. Using a debit card instead can help you stay within the bounds of your available funds.

The Takeaway

A credit card can be a powerful tool — but carrying a balance can make it harder to achieve financial goals. Keeping track of your current balance and making a plan to pay off your statement balance in full each month can be helpful. Doing so can allow you to make the most of your credit card and minimize credit card debt, which can be important money moves.

Looking for a new credit card? Consider credit card options that can make your money work for you. See if you're prequalified for a SoFi Credit Card.

FAQ

What does a negative balance mean on a credit card?

A negative balance means the card company owes you money. This might occur due to a statement credit, a return, or you overpaying your bill. A negative balance won’t affect your credit score. When you make a charge on your credit card, the negative balance will be used to cover the payment.

Is it good to carry a balance on a credit card?

No. While it is good to use a credit card regularly and pay it off on time as a means of building your credit history, carrying a balance won’t help build your credit score. In fact, if you rack up too much of a balance that it increases your credit utilization ratio, it could hurt your credit score.

What happens if you cancel a credit card with a balance?

If you cancel a credit card with a balance, you’ll still be responsible for payments, interest, and card fees. There may be downsides to canceling the card, too. That’s because your credit score factors in how long you’ve had open accounts.

Can I transfer my credit card balance to another card?

Yes. This is called a balance transfer. In a balance transfer, you’ll put your current balance on a new credit card. This can save you money on interest if you’re moving your balance to a lower-interest card. However, be aware that there are balance transfer fees involved. Also, a balance transfer may affect your credit utilization ratio.

Can I make partial monthly payments instead of settling the entire balance?

You can. Paying more than the minimum each month can minimize the effect of interest and lower your credit utilization ratio. To avoid interest entirely, however, you’ll want to pay off your statement balance in full each month.

Photo credit: iStock/Roman Novitskii

SoFi Credit Cards are issued by SoFi Bank, N.A. pursuant to license by Mastercard® International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

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 Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

SOCC-Q425-007

Looking to start your own business? You’re not alone. Some 71% of Gen Z and millennials dream of being their own boss, according to a 2024 JustWorks/Harris Poll survey.

While launching your own business allows you plenty of professional freedom, the costs of setting up a business can be expensive. As you’re creating your business plan, one question you’ll likely face early on is, how much does it cost to start a business?

The average small business owner spends around $40,000 in their first full year. But that amount can vary significantly based on a number of factors, including the size, type, and location of the business.

Let’s take a closer look at the startup costs of different types of businesses and common ways to cover the expenses.

Typical Small Business Startup Costs

The adage is true: You have to spend money to make money. And unfortunately, some of the biggest business costs can come during the startup phase, when you are defining your business goals, finding a location, purchasing domain names, and generally investing in the infrastructure of your new company.

In order to make sure your business is on firm financial footing, you’ll need more than just a business checking account and a small business credit card. What’s important is to estimate your small business startup costs in advance so that you have a good understanding of what you’ll need and why. Here are some common ones to keep in mind:

Payroll

Many small businesses start out as a company of one. But if you’re planning on having employees, salary will likely be one of the biggest costs you’ll face. After all, offering an attractive pay and benefits package can help you recruit and retain top talent.

In addition to wages, you may also want to budget for other payroll costs, such as overtime, vacation pay, bonuses, commissions, and benefits.

Office Space

No matter what your business is, you’ll need somewhere to work. Are you leasing a storefront, or will you buy a membership to a coworking space or startup incubator? Even if you’re planning to work from home, you’ll want to consider whether your new business will increase your internet bills.

And don’t forget about the supplies you’ll need to do the work. Depending on your business, this could include computers, phones, chairs and desks, paper supplies, or filing cabinets.

Recommended: Best Cities to Start a Business in the U.S.

Inventory

How much it costs to start a company varies a lot, and one major factor in that variance is inventory. If you’re starting a business that sells products, you’ll need to have some inventory ready to go. Calculating stock as part of your startup costs helps ensure that you can buy your product in advance so that you’re ready to serve customers from day one.

Licenses, Permits, and Insurance

Some businesses, especially storefronts and restaurants, require more legal legwork than others.

For example, if you’re starting a native-plants landscaping business, will you need a permit? If you’re opening a new bar, will you have to get a liquor license? Licenses and permits vary by city and state, but most require an application fee.

Likewise, your new business may need one or more insurance policies to protect you in case of future litigation, so be sure to factor in the cost of monthly premiums.

And don’t forget about the costs associated with registering your business. Whether you plan to set up shop as a corporation, limited liability corporation or other business entity, you’ll often need to pay a nominal fee. The amount will depend on the state where you operate.

And if you plan on enlisting the help of a lawyer, accountant, or tax professional to get your business up and running, add those potential costs to your budget as well.

Advertising

Getting the word out about your new business is one of the most important things you can do to ensure that your business starts off strong. Whether you want to advertise on social media or rent a billboard, your startup costs should reflect money you plan to put toward taking out ads for your business.

Technology and Software

No matter what kind of business you have, technology is likely to play a key role. If you’re creating a product, you’ll probably need equipment to make it, but also software to track inventory, payment processing tools, and possibly workforce management and payroll programs. Internet startups are reliant on the e-commerce software they’re using to sell their products and services. And retail and restaurants generally need payment processing tools, as well as software to manage scheduling and payroll, among other things.

As you’re planning, consider what tech you’ll need to manage your operation. A realistic budget will include costs for setting up and maintaining your technology systems.

If there’s a major piece of tech or manufacturing equipment you need to run your business, you may be able to use equipment financing. This kind of funding can be easier for new companies to get since the equipment itself acts as collateral for the loan.

Professional Services

As mentioned earlier, from time to time, you may need specialized professional help for various tasks associated with your business. In many of these cases, you may want to hire someone with expertise on a project basis rather than as a full-time employee.

For example, you may want to use an accountant for bookkeeping and tax preparation; a lawyer when you need to initiate or approve a contract; or an IT expert to help with maintaining computer systems and cybersecurity. Depending on your company’s growth, you may even need to hire a human resources specialist to help you with hiring.

As you look at your business plan, think about what kinds of professional services you might need at various points in your company’s progress and add those costs to your budget.

Utilities and Operational Costs

Whether your business is in your home or in a dedicated building, you’ll need to consider the additional costs of supporting your office and operations. These may include utilities such as electricity, water and sewer charges, gas, heat, trash pickup, and internet access. If you’re working solo from home, you may not be spending much extra on these, but if you’re starting up a restaurant, for instance, these costs could be significant.

Unexpected Expenses and Emergency Funds

While you can’t expect the unexpected, you can prepare. Generally, it can be a good idea for small businesses to have between three and six months worth of their expenses set aside. That way, they’ll be able to cover costs if they hit a lull or experience equipment breakdowns. You may also find this fund helpful if, for instance, you need to replace a major piece of equipment, like a delivery truck.

Coming up with this reserve may be daunting, but you can build it up over time. Having a business line of credit may also help access funds you can draw on when you have an emergency.

Differences in Startup Costs Based on Industry

The actual cost of starting a small business can vary by business and industry. Here’s what you might be looking at if you want to start one of these common types of small businesses.

Online Business Startup Costs

As with brick-and-mortar stores, the cost of doing business online varies depending on the type of business you have. But in general, you’ll need to budget for things like:

•  Web hosting service and domain name

•  Web design and optimization

•  E-commerce software

•  Payment processing

•  Content creation and social media

If you’re selling products, you’ll need to invest in inventory and shipping. If you’re providing services, you may need to hire employees. All of these costs can be significant.

However, one benefit of starting your small business online is that you may be able to keep other costs low. For example, if you can conduct business from home, you may not need to rent office space, which can be a major savings. If you’re able to do the work without purchasing inventory or hiring employees, the startup costs can be even lower.

Average startup cost: $2,000 to $20,000 or more (depending on your business)

Storefront Startup Costs

If your business idea requires a physical space, your startup costs might range from $50,000 to $1 million, depending on how large a store you’re planning and what the stock will be. A medium-sized clothing store or boutique, for instance, might cost between $50,000 and $150,000.

Although $150,000 might seem like a daunting number, remember that many smaller, independently owned stores began with a much smaller budget.

Average medium-sized retail startup cost: $80,000-$150,000

Restaurant Startup Costs

If you’re planning to start earning money by selling your grandma’s famous bánh mì, you could be looking at startup costs of anywhere from $30,000 to $100,000 for a used food truck or cart to up to $2 million to buy a franchise restaurant. Typically, costs for small restaurants, including coffee shops, fall somewhere in the $275,000 to $425,000 range.

Average startup cost: $375,000

Recommended: 15 Types of Business Loans to Consider

How to Finance Your Startup Business

Many people who want to start a business are overwhelmed by the initial costs, but there are several ways to fund your passion project.

Friends and Family

Perhaps one of the most common ways to raise money for your small business is to ask friends and family to invest in you.

Friends and family loans can be ideal for financing a new small business because you can negotiate low-interest rates, set up flexible pay-back schedules, and avoid bank fees. Of course, borrowing money from friends and family can quickly become complicated by family drama, so make sure to agree on conditions before taking out a loan from a relative.

Outside Investors

When we’re discussing startup companies, we frequently hear about so-called “angel investors” sweeping in to fully fund new businesses. But there are other practical ways to fund your small business with outside investors.

Some small businesses use crowdfunding platforms to find investors who each contribute a small amount, and others use startup funding networks to find investors looking to fund their specific type of business.

Outside investors will want to know that your business is likely to succeed, so you’ll need a solid business plan to land outside funders.

Personal Savings and Investments

Most people end up covering some of their small business startup costs out of their own personal savings. Self-funding your new business venture can be the most convenient option. After all, if you’re your own funder, you don’t have to worry about family drama or picky investors. And putting your own money on the line can be an extra motivation to make sure that your business is set up to succeed.

Of course, it can seem overwhelming to save up enough money to fund your small business. Luckily, there are simple strategies to effectively manage your money.

Business Loans

If you’re looking to purchase equipment, buy inventory, or pay for other business expenses, a business loan might make sense for you.

There are various types of small business loans available, each with different rates and repayment terms.

Note that in some cases, lenders may be reluctant to give loans to a brand-new business because they want to see at least a year of revenue. You might need to put up some type of collateral to qualify for funding. Or it may sometimes be easier to qualify for startup business loans, which are designed specifically for younger companies.

When you’re considering a loan, a small business loan calculator can be useful to help you estimate what your monthly costs might be, as well as the full costs over the life of the loan.

You may be able to get a Small Business Administration (SBA) loan. SBA loans are partially backed by the government and often come with more advantageous terms than other loans, though they may require more paperwork upfront.

Using an SBA loan calculator can help you understand what the monthly costs of an SBA loan would be.

Recommended: Business Term Loans: Everything You Need to Know

Personal Loans

A personal loan can be used for just about any purpose, which can make it attractive for entrepreneurs who want to turn their passion project into a reality. These loans are usually unsecured, which means they’re not backed by collateral, such as a home, car, or bank account balance.

Personal loan amounts vary. However, some lenders offer personal loans for as much as $100,000. Most personal loans have shorter repayment terms, though the length of a loan can vary from a few months to several years.

While there’s a great deal of latitude in terms of how you use the funds, you might need to get your lender’s approval first if you intend on using the money directly for your business.

Recommended: How to Get a Small Business Loan in 6 Steps

The Takeaway

Going into business for yourself can be personally and professionally fulfilling. But it can also be expensive, especially if you’re starting from scratch. Estimating your startup costs early on can help ensure you’re on solid financial ground from the get-go. Labor, office space, and equipment are among the biggest expenses facing many entrepreneurs, but there are also smaller fees and charges you’ll likely need to consider.

Fortunately, small business owners have no shortage of options when it comes to covering startup costs. Dipping into personal savings and asking friends and family to invest are popular choices. Taking out a business loan or personal loan is another way to help finance a new business. The money can be used for a variety of purposes, and that flexibility can be especially useful when you’re just starting out.

If you’re seeking financing for your business, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your business in minutes.

FAQ

What are the average startup costs for a small business?

Startup costs can vary significantly based on factors like the company’s type, industry, and location, but on average, a typical small business owner spends around $40,000 in the first year.

Can I start a business with no money?

It is possible to start a business without money, though it depends on the kind of business you have in mind. Some service-based businesses, such as pet care or being a virtual personal assistant, often don’t require money to start, and you may also not need funds to start selling hand-crafted goods. Dropshipping could be another option.

What business has the lowest startup cost?

Some of the businesses with the lowest startup costs are service-based companies that rely on skills you already have. For example, tutoring or freelance editing businesses can be relatively inexpensive to set up.

How long does it take for a business to become profitable?

You may see online that startups on average take as long as three to five years to become profitable. Bear in mind, however, that the amount of time it takes a business to achieve profitability can vary enormously, and low-overhead companies may be able to reduce that time.

What are the hidden costs of starting a business?

Costs that entrepreneurs may forget to take into account when they’re starting up a business can include utilities, office supplies, WiFi, and printing and mail charges.

Photo credit: iStock/Wavebreakmedia

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Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.

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.

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

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If you’re experiencing a temporary financial setback and have fallen behind on your credit card debt, you’re not alone. According to the Federal Reserve Bank of New York, credit card balances rose to $1.23 trillion in the third quarter of 2025, a $67 billion increase over the previous year.

Having to repay credit card bills when you’re struggling financially — whether due to an emergency expense or a job loss — can be a challenging burden. In this difficult situation, it’s worth contacting your credit card company to see if it has a credit card hardship program.

What Is a Credit Card Hardship Program?

A credit card hardship program, sometimes referred to as a credit card assistance program, is a repayment plan that’s created based on your hardship circumstances. (This type of modified repayment option was commonly offered by credit card issuers for customers who were financially affected by COVID-19, for example.)

However, credit card issuers aren’t required by law to offer hardship assistance programs, and not all card companies provide this option. Those that do might offer a variety of ways to temporarily ease your repayment burden, if you’re eligible. For instance, it might adjust your credit card payment due date, waive late fees that have accrued, lower your interest rate, or reduce your minimum payment required over a period of time.

Again, these changes are temporary and only designed to get you caught up on your outstanding credit card balance. Once you’ve completed the program, your original terms will be enforced if your account is still active.

Why Is High Credit Card Debt a Concern?

Credit cards tend to have higher interest rates than other types of loans. According to Federal Reserve data, credit card interest rates averaged 22.30% near the end of 2025. In addition, credit card interest is compounded, typically daily, which essentially means you pay interest on the accumulated interest. As a result, your debt can grow quickly over time. High interest rates in the U.S. have recently prompted some to propose a temporary 10% cap on credit card interest rates.

Opinions on the prospect of credit card caps are divided, and it’s unclear they will ever come to be. However, there may be other options available to those struggling with credit card debt, such as a credit card hardship program, if applicable, or a non-revolving loan, which typically has lower (fixed) interest rates, and a predictable end date.

💡 Quick Tip: Credit card interest rates average 20%-25%, versus 12% for a personal loan. And with loan repayment terms of 2 to 7 years, you’ll pay down your debt faster. With a SoFi personal loan for credit card debt, who needs credit card rate caps?

Who Is a Credit Card Hardship Program For?

Credit card hardship programs are for consumers who are experiencing an unexpected hardship. Generally, the hardship directly or indirectly impacts the consumer’s ability to make on-time credit card minimum payments.

For example, hardship assistance plans might be offered to those who are unexpectedly facing:

•   An income reduction

•   Job loss

•   Death of a primary earner

•   Natural disaster

•   Divorce

•   Severe illness

•   Other emergency

Eligibility for credit card hardship programs varies among credit card companies. Generally, at the very least you’ll need to provide proof of the hardship; however, credit issuers don’t publicly share much information about eligibility since it’s approved on a case-by-case basis.

How to Apply for a Credit Card Hardship Program

If your credit card company offers a hardship program, prepare for your conversation by taking a few steps.

1. Review Your Budget

For starters, evaluate where your finances stand today. Compare your non-negotiable bills, like rent or your mortgage payments, a child’s tuition, groceries, gas, etc., against your monthly income.

Determine how much you can comfortably put toward your credit card payments. Make sure the amount is realistic since you’ll want to make positive strides toward your hardship program, if it’s available to you.

Write out your budget and the amount you’ve determined that you can reasonably afford to make toward your credit card bill each month. Have this information ready for your phone call with your card issuer in the next step.

2. Call Your Issuer

Contact your credit card company by calling the phone number listed on the back of your card. Explain your hardship situation and note that it will impact your ability to repay your outstanding credit card balance. Ask them if they offer a temporary credit card assistance or hardship program.

3. Agree Only to Terms You Can Afford

If they offer this option, this next step is your opportunity to negotiate the terms of your hardship plan. Ultimately, the company would likely rather work alongside you to get repaid, rather than risk you delaying credit card payments and later defaulting on your debt.

Make sure that any terms they initially offer are what you can realistically manage financially. If it still feels too costly, tell them that those terms don’t work for you and ask for further relief. It’s important to make sure to only agree to what’s realistic, given the consequences of credit card late payment.

If you arrive at a credit card hardship plan that you can confidently complete, get all of the terms in writing and read the agreement carefully before signing.

Factors to Consider Before Agreeing to a Credit Card Hardship Plan

One significant impact that credit card assistance programs typically have is a freeze on your credit card activity — meaning using the credit card is no longer an option. Although a credit card freeze doesn’t negatively impact your credit score, that’s spending power that you’ll immediately lose. Though, given your financial hardship, it’s a practical requirement until you can regain your footing.

Some credit card companies might even require that you close your card account entirely while participating in the program. This is what can impact your credit score the most.

Further, closing your account reduces yourcredit utilization ratio, which is the percentage of credit you’ve used compared to your available credit line. According to the Consumer Financial Protection Bureau, it’s best to keep this ratio below 30%. However, if you suddenly have a reduced overall credit line due to a closed account, your credit utilization ratio will increase.

Additionally, a closed credit card can lower your score since you’re losing the benefits of a matured credit card account. ForFICO® credit scores, for example, the average age of all of your credit accounts makes up 15% of your score.

Finally, closing your account can also impact the mix of credit in your credit profile, especially if you’re losing your only revolving account, which is what a credit card is. Having a mix of installment (e.g. car loans, mortgages, etc.) and revolving credit (e.g. credit cards) comprises 10% of your FICO score.

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

Pros and Cons of Credit Card Hardship Program

There are a handful of benefits associated with a credit card hardship program. However, you should also consider the drawbacks before moving forward.

Alternatives to Credit Card Hardship Programs

If a credit card assistance program isn’t right for you, there are a few other options for getting through financial hardship.

Balance Transfer Credit Card

If your credit is still in good standing and your account isn’t delinquent yet, consider a balance transfer card. It lets you transfer one or more credit card balances onto a low- or temporarily 0% APR card. A balance transfer fee might apply.

Debt Consolidation Loan

This option lets you combine multiple debts — installment and revolving — into a new installment loan. Ideally, the debt consolidation loan offers a much lower APR with one simple payment to help you chip away at payments. A non-revolving line of credit like a personal loan, for example, tends to have lower interest interest rates, fixed payments, and a transparent schedule. Fees might apply.

If you’re struggling with other payments as well, you could consider another type of loan — a hardship loan. While this could help you continue to make your rent or mortgage payments or stay on top of other necessary daily living expenses, be mindful before assuming additional debt.

Recommended: When Are Credit Card Payments Due?

Debt Management Plan

Debt management plans are typically offered through credit counseling organizations. A credit counselor facilitates an agreement with your creditors on a payment plan.

Generally, a debt management plan requires you to make monthly payments to the counseling service, which will then make payments to your creditors on your behalf. It’s best to work with a nonprofit organization, such as the National Foundation for Credit Counseling.

Recommended: Credit Card Debt Forgiveness: What It Is and How It Works

The Takeaway

If you anticipate falling behind on your credit card payment, a credit card hardship program may help you avoid spiraling debt and future default. Remember, you still owe the debt, but it’s worth talking to your credit card issuer to see how it can help you through this difficult period.
After successfully completing a credit card hardship program — and regaining financial stability — your card issuer might offer to unfreeze your credit card account, based on your hardship agreement.

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.

Looking for a new credit card? Consider credit card options that can make your money work for you. See if you're prequalified for a SoFi Credit Card.

FAQ

Do credit card hardship programs affect your credit?

Credit card hardship programs, in and of themselves, don’t directly affect your credit. However, the requirements to participate in a hardship program, like closing the impacted account during the hardship plan, or other credit reporting might have an adverse effect on your credit score.

Does credit card debt count as a hardship?

No, credit card debt doesn’t typically qualify as a hardship. Uncontrollable factors like a major illness or injury, disability, sudden unemployment, loss of your household’s primary earner due to divorce or death, or other significant unexpected expenses typically fall under hardship.

What are my options if I can’t pay my credit card?

If you can’t pay the minimum amount due on your credit card bill, contact your card issuer to learn more about your repayment options. Based on your unique situation, it might offer a manageable path forward to repay your debt, whether that’s simply changing your monthly due date or putting you on a credit card hardship program.

Can you ask for forgiveness of credit card debt?

You might be able to secure debt forgiveness on the total outstanding credit card debt that you owe through your card issuer. Some credit card companies might be willing to settle the debt at a lower amount, which you’ll need to pay in a lump sum. The remainder of the debt is then “written off.”

Photo credit: iStock/PeopleImages

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.

SoFi Credit Cards are issued by SoFi Bank, N.A. pursuant to license by Mastercard® International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

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