A 5.2% increase in the conforming loan limits for 2025 raised the baseline loan limit for a single unit to $806,500 in most counties in the United States.
The adjustment is a result of a change in the average price of a home nationwide from the third quarter of 2023 to the third quarter of 2024. Home prices increased an average of 5.21%, and the baseline conforming loan limit kept pace.
Conforming loans may be cheaper than nonconforming loans like jumbo mortgages, but jumbo loans have their place.
Key Points
• For 2025, the conforming loan limit for one-unit properties in most of the U.S. is set at $806,500.
• In high-cost areas, the limit for a one-unit property reaches $1,209,750.
• Staying within these limits enables buyers to secure lower-cost mortgages.
• Loans within these limits can be acquired by Fannie Mae and Freddie Mac.
• This arrangement reduces risk for lenders and lowers costs for consumers.
Conforming Loan Limits for 2025
The conforming loan limits set by the Federal Housing Finance Agency can vary based on area and the number of units in the property.
In most counties, that number increased to $806,500 in 2025 for a one-unit property. In high-cost areas, the limit is $1,209,750 for a one-unit property.
In general, here’s how the baseline conforming loan limits break down for 2025.
Maximum baseline loan limit for 2023
Units
Many counties in the contiguous states, District of Columbia, and Puerto Rico
Staying under a conforming loan limit means you’ll most likely obtain a lower-cost mortgage. Mortgages that “conform” to the limits can be acquired by Fannie Mae and Freddie Mac, government-sponsored enterprises.
Because these mortgages can be bought by the agencies and then sold to investors on the secondary mortgage market, they represent a lower risk to the lender and a lower cost to the consumer.
If you need to finance more than the conforming limit, you’ll need to look at jumbo mortgage loans.
Getting a jumbo loan involves clearing more hurdles than a conforming loan. The rate will usually be similar to conforming loan rates, but sometimes it can be lower. How jumbo can a loan be for a primary residence, second home, or investment property? It’s up to each lender.
Government-backed mortgages are also nonconforming loans, and although they serve certain homebuyers, they also may be more expensive than conforming conventional loans because they usually come with additional fees.
Loan limits are higher in counties where the average home price is above 115% of the local median home value. The loan ceiling is 150% of the baseline value.
For 2025, the high-cost-area loan limit increased from $1,209,750 to $1,209,750 on a one-unit property. Alaska, Hawaii, Guam, and the U.S. Virgin Islands also have a baseline loan limit of $1,209,750.
The following is a chart of counties (and some cities) in high-cost areas with an increased baseline loan limit. The increased amount for high-cost areas maxes out at $1,209,750 in select areas.
State
County
2024 limit for a single unit
2025 limit for a single unit
% change year over year
Alaska
All
$1,209,750
$1,209,750
5.21%
California
Los Angeles County, San Benito, Santa Clara, Alameda, Contra Costa, Marin, Orange, San Francisco, San Mateo, Santa Cruz
$1,209,750
$1,209,750
5.21%
California
Napa
$1,017,750
$1,017,750
0%
California
Monterey
$920,000
$970.600
5.50%
California
San Diego
$1,006,250
$1,077,550
7.09%
California
Santa Barbara
$838,350/td>
$913,100
8.92%
California
San Luis Obispo
$929,200
$967,150
4.08%
California
Sonoma
$877,450
$897,000
2.23%
California
Ventura
$954,500
$1,017,750
6.63%
California
Yolo
$806,500
$806,550
5.21%
Colorado
Eagle, Garfield, Pitkin
$1,209,750
$1,209.750
5.21%
Colorado
San Miguel
$994,750
$994,750
0%
Colorado
Boulder
$856,750
$862,500
.07%
Florida
Monroe
$929,200
$967,150
4.08%
Guam
All
$1,209,750
$1,209,750
5.21%
Hawaii
All
$1,209,750
$1,209,750
5.21%
Idaho
Teton
$1,209,750
$1,209,750
5.21%
Maryland
Calvert, Charles, Frederick, Montgomery, Prince George’s County
Bronx, Kings, Nassau, New York, Putnam, Queens, Richmond, Rockland, Suffolk, Westchester
$1,209,750
$1,209,750
5.21%
Pennsylvania
Pike
$1,209,750
$1,209,750
5.21%
Utah
Summit, Wasatch
$1,209,750
$1,209,750
0%
Utah
Wayne
$997,050
$997,050
0%
Virgin Islands
All
$1,209,750
$1,209,750
5.21%
Virginia
Arlington, Clarke, Culpeper, Fairfax, Fauquier, Loudoun, Madison, Prince William, Rappahannock, Spotsylvania, Stafford, Warren, Alexandria City, Fairfax City, Falls Church City, Fredericksburg City, Manassas City, Manassas Park City
$1,209,750
$1,209,750
5.21%
Washington
King, Pierce, Snohomish
$997,500
$1,037,300
6.11%
Washington D.C.
District of Columbia
$1,209,750
$1,209,750
5.21%
West Virginia
Jefferson County
$1,209,750
$1,209,750
5.21%
Wyoming
Teton
$1,209,750
$1,209,750
5.21%
Will Conforming Loan Limits Rise or Fall?
The baseline conforming loan limit is adjusted each year to reflect the change in the average home value in the United States.
The conforming loan limit has increased steadily for the past 10 years and has never declined. From 2006 to 2016, for example, the conforming loan limit remained at $417,000, despite declining home values across the country. If home values continue to rise, the conforming loan limit will also rise.
First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.
Conforming Loan Limits Over the Past 10 Years
The 5.2% increase in loan limits for 2025 is lower than the previous year’s increase of 5.5% and far lower than the 18% increase of 2022, which was the largest jump in the past 40 years. But it still represents an increase of $39,950 over the past year alone.
Conforming loan limit
Year
Amount
2025
$806,500
2024
$806,500
2023
$726,200
2022
$647,200
2021
$548,250
2020
$510,400
2019
$484,350
2018
$453,100
2017
$424,100
2016
$417,000
2015
$417,000
2014
$417,000
The Takeaway
Conforming loan limits are intended to keep costs low for homebuyers. This means competitive pricing on mortgages, no matter what the housing market looks like each year.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
SoFi Mortgages: simple, smart, and so affordable.
FAQ
Is a conforming loan a good thing?
Yes, generally speaking, staying under a conforming loan limit means you’ll most likely obtain a lower-cost mortgage.
Is a conforming loan the same as a conventional loan?
No, a conventional loan is one that is not backed by a government agency — it might come from a private lender such as a bank. A conforming loan is one in which the underlying terms and conditions adhere to the funding criteria, including loan amount limits, spelled out by Freddie Mac and Fannie Mae. Conventional loans can be conforming. Those that do not follow the conforming loan limits are considered “jumbo” loans.
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Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
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.
This content is provided for informational and educational purposes only and should not be construed as financial advice.
By Jackie Lam |
Credit, credit card |
Comments Off on No Annual Fee and No Foreign Transaction Fee Credit Cards
Depending on the credit card issuer and the card, there can be foreign transaction fees assessed when you purchase an item overseas as well as annual fees. There are also some credit cards that don’t charge any foreign transaction fees or annual fees at all.
Opting for a no annual fee and no foreign transaction fee credit card may seem like the obvious choice when selecting a card — and often it is. However, there are some scenarios in which avoiding fees won’t necessarily be a cardholder’s top priority. Learn the full story here.
Key Points
• Credit cards with no annual fees and no foreign transaction fees help avoid extra charges for online shoppers and international travelers.
• Foreign transaction fees typically range from 1% to 3% of the transaction amount but are sometimes not assessed.
• Annual fees vary widely, but some cards offer no annual fees or waivers.
• Not all cards with no annual fees also lack foreign transaction fees; check terms and conditions.
• These no fee cards may save money but could lack competitive rewards or perks.
What Are Foreign Transaction Fees and When Are They Applied?
A foreign transaction fee is a charge that you might pay when you make a purchase on your credit card while in a foreign country. For instance, you might get charged a foreign transaction fee when buying a ticket to visit a museum or dining at a restaurant abroad. These fees might also get tacked on when you take out money from an ATM in another country.
You don’t necessarily have to be in a foreign country to get charged a foreign transaction fee though. Sometimes, a foreign transaction fee might kick in if you’re buying something from a company that’s based in a foreign country and that processes the transaction in its local currency. For instance, let’s say you buy a pair of shoes from a retailer based in France. If the purchase is processed in euros, you might be charged a foreign transaction fee.
A foreign transaction fee is typically based on a percentage of the transaction amount. For instance, if your card charged a 2% foreign transaction and you bought an item that cost $100, the foreign transaction fee would be $2.
Foreign transaction fees are a common credit card fee that will show up on your credit card statement, and they can make your travels more expensive. Say you spend $4,000 on a trip overseas, and your credit card charges a 2% foreign transaction fee. In that case, you’d pay $80 extra to cover the cost of foreign transaction fees.
How Much Are Foreign Transaction Fees?
The amount of foreign transaction fees varies depending on the credit card issuer. That being said, most foreign transaction fees are between 1% and 3% of the transaction amount. A number of cards don’t have a foreign transaction fee.
One thing to note: Foreign transaction fees are different from currency conversion fees. In some cases, you might get hit with a double whammy and be charged both. You could also face a credit card convenience fee, depending on where you use your card.
Foreign Transaction Fees by Credit Card Issuers
Here’s a look at foreign transaction fees charged by the major credit card issuers. On average, here’s how much they can run, depending on which card you’re using and the issuing bank or credit union. Just keep in mind that they may vary depending on the different types of credit cards available from an issuer.
What Are Annual Credit Card Fees and When Are They Applied?
Some cards come with an annual credit card fee. This fee is a yearly charge collected by a credit card issuer in order to use the card. Often, paying an annual credit card fee allows cardholders to tap into special perks and benefits, such as higher credit card points earnings on purchases, extended warranties and price protection, and travel or cash back perks.
The annual credit card fee will turn up on your credit card statement once a year as a single lump-sum charge. Usually you’re charged during the same billing cycle or month in which you initially signed up for the card. Once you pay the annual fee, the next time you’ll get charged is in 12 billing cycles.
You’ll cover a card’s annual fee just like you would any other purchase you put on your card. The fee will show up on your card and get folded into your statement.
How Much Are Annual Fees Typically?
The amount of an annual fee depends largely on the card, but in general, annual fees can run anywhere from $95 per year to upwards of $500. There are a number of credit cards available that don’t charge an annual fee. And some that do also offer the opportunity to get the fee waived.
Do Cards With No Annual Fees Tend to Also Have No Foreign Transaction Fees?
Whether cards that skip out on charging annual fees will also have no foreign transaction fees varies. There’s no hard-and-fast rule. In some instances, a card might have an annual fee but no foreign transaction fee. On the flip side, a credit card might have a foreign transaction fee but no annual fee. Or a card could charge both fees or neither fee.
Before opening an account, it’s important to read the fine print and comb through the terms and fees of a given credit card. This will outline the fees a card might charge as well as the rate of credit card purchase interest charges. That way, you’ll know what you’re getting into with any given card.
No Annual Fee and No Foreign Transaction Fee Credit Cards: Who They’re Great For
Here’s a closer look at when a one-two punch of a credit card with no foreign transaction fees and no annual fee might best benefit you.
Online Shoppers
If you do a lot of your shopping online, particularly through brands that aren’t U.S.-based, you might find a no annual fee and no foreign transaction fee credit card beneficial. That way, if you happen to buy something from a merchant based in a foreign country and with credit card processing done in their local currency, you can save on foreign transaction fees.
Plus, if you have a strong credit score and can snag a card that offers a better-than-average rate of cash-back rewards or points, you might not need to splurge on a card with an annual fee to gain access to added perks.
International Travelers
Foreign transaction fees can rack up quickly if you’re putting purchases on your card while traveling in other countries. For instance, if you spend $5,000 on your credit card while on a trip overseas, and your card charges 3% for foreign transaction fees, that could cost you an additional $150.
To avoid this expenditure, you might be better off looking for a card that doesn’t have foreign transaction fees. You’ll further avoid cuts to your travel budget by skipping out on paying an annual fee.
No Annual Fee and No Foreign Transaction Fee Credit Cards: Who They’re Bad For
If you fall within one of the following groups, you might not find that it’s worthwhile to focus on finding a credit card with no annual fee and foreign transaction fee.
People Who Want the Most Rewards and Perks
For those looking for the most competitive rewards rate, lucrative travel perks, or a sizable welcome bonus, then a credit card with an annual fee might be their best bet. By taking advantage of these benefits offered by the card, you could still come out ahead even with the annual fee, as the perks can effectively offset the cost of the fee.
Just make sure to do the math ahead of time and ensure you’ll take enough advantage of the available perks before agreeing to a hefty annual fee.
If you have poor credit or a limited credit history, you might not be faced with the choice of credit card miles vs. cash back when choosing a card. Instead, your options may be pretty limited. For those in this situation, a credit card that charges an annual fee and/or foreign transaction fees may still be their best — or only — available option.
Tips for Save on Credit Card Fees When Traveling Abroad
Hoping to avoid credit card fees while you’re out of the country? Here are some pointers to keep in mind:
• Ask about fees ahead of time. If you’re not sure which of your credit cards does or does not charge foreign transaction fees, it can pay to ask ahead of time. Then, you can opt to avoid using a card with a hefty rate for foreign transaction fees while you’re traveling. Even if you can’t avoid these fees entirely due to the credit cards you have, you’ll at least avoid a surprise when you get home from your trip and be able to spend more strategically.
• Consider getting a no foreign transaction fee credit card. If you have the time ahead of your trip, can weather a dip in your credit, and are in the market for a new card, then getting a credit card with no foreign transaction fees can make sense. This is especially true if you have a number of trips abroad planned for the future.
• Exchange cash before leaving the country. Another way to dodge fees while traveling is to exchange U.S. dollars for the local currency in the country you’re visiting before you leave. This will allow you to avoid potentially costly trips to the ATM and added fees when swiping your credit card. Just make sure to take safety into consideration before taking out a huge amount of cash.
A no annual fee no foreign transaction fee credit card can save you money — especially if it comes with its own set of perks that you don’t have to pay extra for. Plus, you don’t have to keep as close an eye on your spending abroad so you can better kick back and enjoy the sights. However, these cards aren’t right for everyone. Understanding your financial goals and options can help you make the right decision for your situation.
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 does it mean when a credit card has no foreign transaction fees?
A credit card with no foreign transaction fee means that you won’t get dinged with a fee should you make a purchase in a foreign country. Depending on how much you end up spending while traveling, it could save you a significant chunk of change.
Why are no annual fees important?
A credit card with no annual fee can mean you save money and access similar services without a surcharge. Plus, you won’t have to work as hard for the annual fee to pay off. In other words, you won’t have to strategize to make the most of any special perks, nor will you need to worry about spending a certain amount to offset the cost.
Is 3% foreign transaction fee a lot?
A 3% foreign transaction fee is on the high end of average. The rate of foreign transaction fees can vary, but they typically run anywhere from 1% to 3%, with some cards not charging any foreign transaction fees.
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.
This content is provided for informational and educational purposes only and should not be construed as financial advice.
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.
Third Party Trademarks: Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.
Your credit card closing date marks the end of your billing cycle, which determines how much you’ll owe when your credit card payment comes due. Your credit card due date, on the other hand, is when you’ll need to make at least the minimum payment if you want to avoid a late fee.
By understanding the implications of both your credit card closing date and your credit card due date, you can better strategize to make purchases and also ensure you make on-time payments.
What Is a Credit Card Closing Date?
A credit card closing date determines your credit card “billing cycle,” which spans an interval of about 28 to 31 days. This day might vary each month, but according to the Consumer Financial Protection Bureau (CFPB), it can’t vary by more than four days.
The bank uses your credit card’s statement closing date to determine which purchases are calculated toward the current statement’s total balance and the minimum credit card payment that’s due. Any purchases made after your credit card closing date are applied to the next month’s billing statement.
The closing date for a credit card is also the date the bank uses to calculate your credit card’s finance charges, which are also called the interest charges. Typically, credit card issuers offer a grace period on new purchases starting on the date after the closing date until your credit card payment due date. During this time, interest charges aren’t incurred yet.
Although many credit card companies offer a grace period, it’s not a requirement, so check the terms of your credit card closely.
Another critical date to remember when it comes to your credit card account is your credit card due date. Payments received by the bank by 5 p.m. on the credit card payment deadline are considered on-time; after this period, your credit card payment is considered past due. (Keep in mind that the time zone in which your bank is located may vary from yours. You might want to check that when trying to pay right before the deadline.)
Your credit card due date is the same for each billing statement. For example, if this month’s credit card bill is due on June 15, your next billing statement will be due on July 15. This due date applies regardless of whether you’re making a full payment for your statement balance or the minimum amount due.
Although you should always aim to make your credit card payment on time, card issuers generally don’t report late payments to credit bureaus until 30 to 60 days after your credit card due date. Late fees might be applied to your credit card account if you don’t make a payment by the credit card payment due date, however, given how credit cards work.
Differences Between a Credit Card Closing Date vs Due Date
Here’s a look at some of the key distinctions between credit card payment due date vs. closing date to keep in mind:
Credit Card Closing Date
Credit Card Due Date
Last date of billing cycle
Last date to submit an on-time payment
Date before grace period begins
Date before the next billing cycle begins
Date might change slightly
Same date every statement period
Affects your credit utilization ratio
Can impact your credit score
How Your Credit Card Closing Date Affects Your Credit Score
On your credit card statement closing date, your card issuer typically reports your account activity, including your card’s outstanding balance, to the three credit bureaus — Experian®, Equifax®, and TransUnion®. This information impacts your credit utilization ratio, which is the ratio of credit in use compared to the amount of credit you can access.
As an example, say your closing date is May 20, and you made a $2,000 purchase on your credit card on May 15. That purchase will be reported and can increase your credit utilization ratio. A high credit utilization ratio can adversely affect your credit score.
If the purchase isn’t urgent, perhaps you might wait until May 21 to put the charge on your credit card. In this scenario, your $2,000 credit card purchase wouldn’t be reported to the credit bureaus until the end of your next billing cycle. And if you pay it off before then, it might not affect your credit utilization ratio.
Determining Your Next Credit Card Statement Closing Date
Knowing how to decipher your credit card bill each month can help you to uncover your statement closing date. Typically, you’ll find your billing cycle dates at the top of your credit card bill. This might be called your “opening/closing dates,” and it typically will be displayed as a date range.
When reading your credit card statement, you can find these dates and then count the number of days between the dates. Then, count forward from the credit card closing date to determine your next credit card statement closing date.
Guide to Changing Your Credit Card Due Date
You might find that changing your credit card due date can help you better manage your credit card payments. This might come up if you get paid on a certain date each month and want your due date to fall closer to payday.
Generally, card issuers are willing to work with you on a due date that will help you make regular, on-time payments. However, credit issuers have different restrictions, so talk to your credit card issuer to see whether it’s flexible.
To change your credit card due date, you can either:
1. Call the phone number at the back of your credit card to speak to a customer service associate who can help.
2. Log in to your credit card’s online account and make the change (if available) yourself.
Be aware that it can take one to two billing cycles to see the change on your account.
What You Should Know About Determining Your Time to Pay
Your credit card closing date and payment due date can help you strategically decide when it’s time to pay your credit card bill. For example, if you need to keep your credit utilization low to improve your credit to secure a mortgage loan approval, then paying your credit card bill before your closing date can help.
However, if you simply want to avoid interest charges and late fees on your purchases, making a payment by your credit card due date is sufficient. Still, make sure to stay mindful of the potential to fall into credit card debt, which can be hard to shake (here’s what happens to credit card debt when you die).
The Takeaway
Your payment due date vs. closing date are two very important dates that relate to your credit card account. The closing date indicates the end of the monthly billing cycle, and the payment due date tells you when at least the minimum payment must be paid to avoid a late fee. Being aware of both dates can help you make purchases strategically and ensure you make payments on time.
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
Should I pay off my credit card before the closing date?
Paying off your credit card as early as possible is always ideal. Doing so can help you maintain a low credit utilization ratio, which is beneficial to your credit score.
Can I make more than one payment per statement period on my credit card?
Yes, you’re allowed to make more than one payment per statement period to pay off your statement balance. In fact, doing so can help you potentially avoid incurring interest charges and rolling a balance into your next billing cycle.
Can I use my credit card between the due date and the closing date?
Yes, you can use your credit card between the due date and the credit card statement closing date. Purchases made after your credit card due date are simply included in the next billing statement.
Is the credit card closing date the same every month?
Not always. Your credit card closing date might be the same date each month, but billing cycles can vary up to four days from the typical closing date.
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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.
How old an authorized user has to be really depends on the credit card issuer. Some set the minimum age for an authorized user on a credit card at 13, while others require that an authorized user is 15 or even 16. Many issuers don’t specify a minimum age requirement at all.
In other words, it’s largely up to the adult’s discretion whether a minor seems old enough to become an authorized user. While it can serve as an educational tool and help build their credit, it also can lead to racking up debt and impacting both parties’ credit. You’ll want to make sure you know what you’re getting into in order to determine if it’s the right arrangement for you.
Key Points
• The minimum age for an authorized user on a credit card varies by issuer, typically ranging from 13 to 16, with some issuers having no minimum age requirement.
• Adding a minor as an authorized user can help them build credit early, but it also carries risks like increased debt and potential negative impacts on both parties’ credit scores.
• Educating minors on credit card basics, setting spending limits, and monitoring their usage is important to ensure responsible behavior.
• Some credit cards may charge a fee for adding authorized users, especially premium cards, so it’s crucial to check with the issuer.
• Removing a minor as an authorized user is straightforward, usually requiring a call to the credit card company to request the change.
That being said, the minimum age for an authorized user on a credit card ultimately depends on the credit card company, as each issuer has its own age requirements. Some set the minimum age to 13 years old, while others may make authorized users wait to get a credit card at 16 or 15 (SoFi requires an authorized user to be age 15 or older). Some credit card issuers don’t specify a minimum age for authorized users on credit cards.
Factors to Consider Before Adding a Minor as an Authorized User
Depending on the particular type of credit card and issuer, you might have to pay an additional annual fee to add an authorized user. For example, the Chase Sapphire Reserve card currently charges a $75 fee to add an authorized user.
Check with your card card issuer to see if you might get hit with a fee for adding authorized users to your account.
If They’re Old Enough to Handle the Responsibility
Even if you can add an authorized user as young as 13 to your card, doing so might not be in your best interest — or theirs. For instance, a child in their early teens might not have a basic grasp of managing finances, or they might not be mature enough to handle the financial responsibility and abide by basic credit card rules.
If you’re adding your minor as an authorized user to help them establish credit, a few years is enough time for them to be on their way. Plus, should you slip on your credit, it could also impact your child’s credit.
Most credit cards don’t issue unique card numbers to each authorized user. That means if you have multiple authorized users on an account, you won’t be able to easily figure out who made which purchases. Before you go ahead with adding an authorized user, make sure you have a system worked out so you’re not stuck covering their spending (unless you want to).
Whether You’ll Give Access to the Card
While you can give an authorized user their own card, you don’t have to, especially if you’re worried about how they’ll spend with it. If you’re strictly adding a child to your card to help them build credit, there’s no need to hand them a card. They don’t need to have access to your credit card number, either.
Steps to Add a Minor as an Authorized User
First and foremost, you’ll want to carefully weigh the pros and cons of adding someone under the age of 18 as an authorized user. If you have decided that you want to proceed, you’ll need to do the following.
1. Educate the Child About Credit Card Basics
Before adding a minor as an authorized user and giving them the privilege to spend on your card, sit them down and walk them through how credit cards work. For instance, you’ll want to explain what a credit limit is, how interest rates work, what one’s financial responsibility is when putting purchases on a card, and why it’s beneficial to build credit.
Next, you’ll need to contact the credit card company to let them know you’d like to add an authorized user to your card. You can do so by calling the number on the back of the card or by logging onto your account online.
You usually need to provide the following information about the individual you’re adding as an authorized user:
• Name
• Date of birth
• Social Security number
• Address (for them to receive the card)
• Additionally, you may be able to set spending limits or restrictions for the authorized user at this point in the process.
3. Check Your Account
To make sure the authorized user was correctly added, log on to your account on the issuer’s website or through the app. Double-check to make sure the minor’s name and details are all correct. You might also receive an email notification informing you of this change.
The Cost of Adding an Authorized User
Many credit card issuers do not charge a fee to add an authorized user to an account. However, premium credit cards or cards that already charge annual fees, may charge an annual fee for adding authorized users. This fee may apply per authorized user, or you may pay a flat cost for up to a certain number of users.
Beyond this potential fee, there are other costs you could incur by adding an authorized user. For instance, additional purchases made by the authorized user could cause you to rack up a balance. Plus, their activity can impact your credit utilization, which could hurt your credit score.
Pros and Cons of Adding a Minor as an Authorized User
Here’s an overview of the advantages and downsides of adding a minor as an authorized user to your credit card:
thumb_up
Pros:
• Can help build credit
• May allow you to earn more rewards
• Serves as an educational tool
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Cons:
• May cause you to rack up debt
• Can’t easily track who’s making purchases
• Can impact credit of both primary cardholder and authorized user
Pros
Adding an authorized user can have the following benefits:
• Can help build credit: A major upside of adding a minor as an authorized user is that it can help them establish credit at a young age. They’ll have a more firm financial footing as a result.
• May allow you to earn more rewards: Another person making purchases on your card means there’s greater potential to earn more rewards. You can gain rewards more quickly than if you would if you were the sole user.
• Serves as an educational tool: You may find that adding a minor as an authorized user to your card can help them learn credit basics and how to manage credit card debt, especially if you coach them through the process.
Beware of the potential downsides of having an authorized as well:
• May cause you to rack up debt: It can be easy to rack up debt and overspend on the credit card with an authorized user. This is especially possible if you’re giving a child access to your card who is still wrapping their head around financial basics.
• Can’t easily track who is making the purchases: Because purchases aren’t tracked by the authorized user, it might be tough to figure out which person was responsible for which transaction with your card. This is particularly tricky when you have, say, a joint account user and several authorized users.
• Can impact credit of both primary cardholder and authorized user: If having additional users on your card equates to carrying a higher balance, that can up your credit utilization ratio. As credit usage makes up 30% of your credit score, you’ll want to keep that ratio under 30%, preferably closer to 10%. Beyond potentially hurting your credit, also know that any irresponsible credit behavior on your card can hurt your authorized user’s credit. For instance, if you are late on a credit card payment, both your credit and the credit of the minor you added to your card can suffer.
If those possible downsides are making you nervous, here are a few things you can do to ensure your minor uses their privileges responsibly:
• Set limits. Talk to your child and give them an amount they can spend on the card each billing cycle. Also, determine if they’ll be responsible for helping you pay off their share. Or perhaps you might consider an alternative arrangement, such as doing chores around the house to cover purchases they made on their credit card. Hash this out beforehand.
• Treat the card as a teaching tool. Sit down with your child and go over basics of a credit card, such as how interest fees work, how to read a billing statement, and what can happen if you’re late or miss a payment. You’ll also want to teach them how repayment works.
• Set alerts. To keep an eye on your child’s spending, consider setting alerts on your credit card. You can set it up so you get notifications for transactions over a certain amount, or any transactions made online, in person, or over the phone.
Removing a minor as an authorized user from a credit card is a relatively simple and painless process. To do so, you call the number on the back of the card and let them know the name of the person you’d like taken off. If you have several authorized users on a card, be sure to specify which card user you’re removing.
It’s not a bad idea to leave a paper trail and send a letter to the credit card company reiterating that you’ve requested the change over the phone.
The Takeaway
The minimum age for an authorized user on a credit card varies depending on the credit card issuer. Some require an authorized user to be 13, while others set the age limit at 15 or 16 or even have no formal limit at all. Before adding a minor as an authorized user on a credit card, you’ll want to carefully weigh the pros and cons before doing so. If you decide to add a child as a user, set some ground rules and teach them credit and financial basics beforehand.
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
Do some issuers allow authorized users with no minimum age?
Usually the minimum age requirement to add an authorized user to a credit card is at least 13. However, there are several credit card issuers that don’t note a specific minimum age.
How many authorized users can I add to my account?
It depends on the credit card issuer. Some allow, say, between four and seven, while others have no limit as to how many authorized users you can add to a credit card. The number of authorized users might also depend on what type of card it is, such as a rewards or travel credit card.
Is an authorized user relationship or a joint account holder better?
It depends on what kind of privileges you want the additional card user to have and the reason you’d like to add them. If you want to help build someone’s credit and not have them responsible for making payments, then an authorized user could be the better route. If you’d like the user to be equally responsible for making payments and have access to make changes on the account, a joint account holder might make sense.
Photo credit: iStock/Manuel Tauber-Romieri
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Financial stability can mean different things to different people, and there’s no single way to measure whether someone is financially secure. There are, however, certain money behaviors that can indicate when you’re on the right track. These can include following a budget, growing your savings account, and living within your means vs. accruing high-interest debt.
Knowing how to recognize the signs of being financially stable can help you fine-tune your money plan.
Key Points
• Financial stability can be defined differently for each person, but there are some common indicators of being financially secure.
• Signs of financial stability include following a budget, living below your means, saving money consistently, prioritizing debt repayment, and paying bills on time.
• Financially stable individuals typically have clearly defined financial goals, regularly invest, have the right insurance coverage, make decisions based on their own needs vs. FOMO, and stress less about their finances.
• Achieving financial stability can take time and effort. In addition to making smart money decisions, you may find advice from a financial professional helpful as well.
What Is Financial Stability?
If you search online for a definition of financial stability, the results are usually geared toward organizations or governments, not individual people. For example, the Federal Reserve defines financial stability as “building a financial system that can function in good times and bad, and can absorb all the good and bad things that happen in the U.S. economy at any moment.”
That’s an institutional way to define financial stability, but it’s possible to adapt that to fit personal finance. For instance, creating a budget and adding money to an emergency fund can help you manage money wisely during the good times. It can also allow you to be prepared for the unexpected, such as a job layoff or an emergency expense.
The best way to define financial stability is in a way that has meaning for you. For instance, you might create a personal financial mission statement that outlines your ideal money vision for yourself. For some people, that vision might involve having six months’ worth of expenses in an emergency fund. For another, it might involve putting enough money in their savings account to take a two-week vacation or meeting goals for funding their retirement.
Why Does Financial Stability Matter?
Being financially stable is important because it can influence your overall financial health. When you feel financially secure, it may be easier to pay bills without stress. Or you might have developed the discipline to save money and be excited about it, versus spending everything that you make.
In a nutshell, being financially stable can help you to:
• Have the money that you need to cover day-to-day expenses while working toward financial goals
• Avoid costly debt
• Manage your money without it feeling like a chore or a cause for anxiety
Chances are, you might be doing some of the things on this list already. And if you’re not, then these moves could help you to overcome your personal financial challenges.
1. Following a Budget
A budget is the foundation for your financial plan. When you make a budget, you’re dictating where your money goes instead of simply spending without a plan. If you don’t have a budget yet, then making one should be a top priority.
There are a number of budgeting methods you can use, including:
Experimenting with different budget systems can help you find one that works for you.
2. Living Below Your Means
Here’s one of the secrets to how to have financial freedom: Live below your means. This simply means spending less than you earn. Making a budget is central to living below your means because without one, you may not have a clue how much you’re spending each month.
Tracking expenses can be a great way to determine if you’re living below your means. You can write each expense down in a notebook, use a spreadsheet, or link your bank account to a budgeting app. It’s a good idea to track expenses for at least one month to get a realistic idea of what you spend, which can help you to better define your budget.
3. Saving Money Is a Consistent Habit
You may have heard the expression “pay yourself first,” and it’s a wise move. This simply means that before you spend any money on payday, you first deposit some of your earnings into savings. Paying yourself first is a sign of financial stability as it suggests that you have money reserved for emergencies and are also saving for longer-term financial goals.
Setting up direct deposit into savings or scheduling automatic transfers from your checking account each payday are easy ways to automatic savings. When the money is directed to savings automatically, there’s no opportunity for you to spend it.
4. Paying Down Debt Is a Priority
Debt can be a roadblock to reaching your financial goals and too much debt could make you financially unstable. Making an effort to pay down debt (or avoid it altogether) is a sign that you’re committed to living within your means instead of spending money unnecessarily.
If you have debt, consider the best ways to pay it off. For example, the debt snowball method involves paying off debts from smallest balance to highest. The debt avalanche, on the other hand, advocates paying off debts from highest APR to lowest in order to maximize interest savings.
When choosing a debt repayment method, consider how much of your budget you can commit to it. If you’re only able to pay the minimums to your debts, you may need to review your expenses to see where you can cut back or look into debt consolidation.
5. Bills Get Paid On Time
Paying bills late can trigger nasty late fees. What’s more, late payments can lower your credit scores.
A good credit score is a sign of financial stability because it means that you’re responsible with how you use credit. On-time payments can work in your favor while late payments can hurt your score.
If you’ve fallen behind, getting caught up on late payments as soon as possible can help you turn things around. From there, you can commit to paying on time each month. Scheduling automatic payments or setting up payment reminders is an easy way to keep track of due dates.
6. Financial Goals Are Clearly Defined
Setting financial goals can help you to make the most of your money. Financial goals can be short-term, like saving $10,000 for an emergency fund. Or they might be long-term, like saving $1 million for retirement.
Someone who’s financially stable understands the value and importance of setting goals and how to set them effectively. For example, they may follow the SMART rule for goal setting and create money goals which means they are:
• Specific
• Measurable
• Actionable or achievable
• Realistic
• Time-bound
If you’re not setting financial goals yet, consider what you want to do with your money or what kind of lifestyle you’d like to have. If you created a personal financial mission statement that can be a good guide to deciding what kind of goals to set.
7. Regular Investing Is Part of Your Financial Routine
Investing money and saving it are two different things. When you invest money, you’re putting it into the stock market. Investing can help you grow your money faster and build a higher net worth thanks to the power of compounding interest.
There are different ways to invest. If you have a 401(k) or similar retirement plan at work, for example, you may defer 10%, 15%, or more of your income into it each year. At a minimum, it’s a good idea to contribute at least enough to get the full company match (which is akin to free money) if one is offered.
You might also open an Individual Retirement Account and a taxable investment account. With an IRA, you can save for retirement on a tax-advantaged basis. A taxable investment account, on the other hand, is useful for trading stocks, mutual funds, exchange-traded funds (ETFs), and other securities without restrictions on how much you can invest.
Having the right coverage in place can help to minimize financial losses in a worst-case scenario. If your home or apartment is damaged because of a fire, for instance, then your insurance policy could help you to rebuild or replace your belongings.
Life insurance is also important to have, especially if you have a family. Life insurance can pay out a death benefit to your loved ones if something should happen to you. That means they’re not in danger of becoming financially unstable after you’re gone.
9. FOMO Doesn’t Drive Decision-Making
FOMO, or fear of missing out, can be a threat to financial stability. It’s the modern-day equivalent of keeping up with the Joneses: What it means is that you make financial decisions out of peer pressure or societal pressure. Trying to mimic the lifestyle of social media influencers, for example, can wreck your finances if you’re going into debt with FOMO spending on things that you can’t afford.
Someone who’s financially stable, on the other hand, is relatively immune to FOMO. They don’t buy things on impulse (or at least not often). And they don’t make financial decisions without considering the short- and long-term impacts.
10. There’s No Worrying About Money
Worries about money can keep you up at night if you’re fretting over the bills or debt. Financially stable people don’t have stress over money because they know that they’re in control of their situation. They approach money with a calm, confident attitude.
So how do you reach that zen state with your finances? Again, it can all come down to making smart money decisions like sticking to a budget, saving, and avoiding debt. The more proactive you are about making your money work for you (and finding the right banking partner and financial advisors, if you like), the faster money worries may fade away.
If You’re Struggling to Become Financially Stable
If you recognize that your financial situation isn’t as stable as you’d like it to be, it’s important to consider how you can improve it. Working your way through this list of action items is a good starting point but what if you’re overwhelmed by debt or struggle to make a budget?
In that case, you may benefit from talking to a nonprofit credit counselor or a financial advisor. A credit counselor can help you come up with a plan for budgeting, paying down debt, and getting into a savings routine. And once you begin to gain some stability, you can think about things like investing or insurance.
In addition, you can consult these government sources for more insight:
Achieving financial stability can take time, but it’s typically possible if you’re using the right approach to managing money. Taking small steps, such as setting one or two money goals or changing bank accounts, can add up to a big difference in your situation over time.
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.
Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.00% APY on SoFi Checking and Savings.
FAQ
How much money is considered financially stable?
The amount of money needed to be considered financially stable is subjective and depends on a person’s individual situation. But generally, having a net worth of $1 million or more can indicate that someone is financially stable or secure and has a good grasp of money management.
What are the signs of a financially stable person?
The most common signs of a financially stable person include having little to no debt (or at least avoiding high-interest debt), being able to make and stick to a budget, having a healthy amount of money in savings, and having a good credit score. Financially stable people tend to see their net worth increase year over year. What’s more, money generally isn’t a source of stress or worry.
At what point are you financially stable?
Someone could be considered financially stable when money is no longer a cause for anxiety or frustration. A financially stable person isn’t necessarily measured by how much money they have. Instead, their stability is based on their overall financial situation and their approach to managing money. They are likely to have savings for emergencies, as well as short- and long-term goals.
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SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.
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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.
This content is provided for informational and educational purposes only and should not be construed as financial advice.
Third Party Trademarks: Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.
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