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You probably are well aware that you can swipe or tap your credit card almost anywhere you shop, and you likely also know that many retailers offer their own store credit cards. These store credit cards can give additional perks and benefits specific to their store.

Store credit cards come in two different forms — open-loop and closed-loop. An open-loop store credit card will typically have the logo of a payment network on it (such as Visa or Mastercard), and it can be used anywhere those networks are accepted.

A closed-loop store credit card, on the other hand, can generally only be used at the store that issued it. While there may be added benefits and rewards with a closed-loop store credit card, that may be offset by the limited places where you can use it. Still, it can make sense to have a store credit card, especially if you frequently shop at a particular retailer.

Here’s a closer look at how store cards compare to major credit cards, what their pros and cons are, and how store cards can impact credit.

What Is a Store Card?

A store credit card or retail credit card is a card issued by a store or retailer. There are two main types of store cards — open-loop and closed-loop store credit cards.

•  An open-loop store credit card is likely a Visa or Mastercard that simply is co-branded with the retailer’s name and logo, but good to use anywhere those networks are accepted.

•  A closed-loop store card, also called a private label credit card, can only be used at the retailer that issues the card.

How Store Cards Works

Open-loop store credit cards are typically Mastercard or Visa credit cards, and they can be used anywhere those payment networks are accepted. While it may be marketed or branded with the retailer’s logo and name, an open-loop store card works the same way any other credit card works.

On the other hand, a closed-loop store card is only accepted at the store that issued the card. If you try to use a closed-loop store credit card at any other place, it will be declined.

With either kind of card, you’ll get a statement each month with the charges you’ve made. You’ll be charged interest on any outstanding balance, just like with a general-purpose credit card.

Recommended: Charge Card vs. Credit Card

Pros and Cons of Store Cards

One pro of store credit cards is that they often give perks and rewards that are specific to that particular store. If you frequently shop at a particular retailer, it can be lucrative to get their store credit card. You may also be able to get a signup bonus for applying and being approved for the card.

On the other hand, a store credit card can be limiting, especially if it is a closed-loop credit card that you can’t use anywhere else. Many store credit cards also come with higher-than-average interest rates, so it can be wise to pay off your balance in full each month so you can avoid paying any extra.

Store Card vs Credit Card Compared

While there are some important differences between store cards and general-purpose credit cards, they also share some similarities.

Similarities

•  You get a monthly statement with a list of all of your purchases.

•  You’ll be charged interest on any outstanding balance.

•  Payment history and balance information typically reported to the major credit bureaus.

•  Open-loop store credit cards and general-purpose credit cards can both be used anywhere the payment network (Visa, Mastercard) is accepted.

Differences

There are also some key differences between store cards and credit cards that you’ll want to be aware of:

•  A closed-loop store card can only be used by the issuing retailer.

•  You may pay a higher interest rate for a store card.

•  The rewards you get will likely only be usable at the retailer.

Here is how these features stack up in chart form:

Recommended: How Many Credit Cards Should You Have?

Is It Easier to Get Store Cards?

How easy it will be to get any kind of credit card depends on the specific card and your own financial situation. However, it is generally believed that on average it is easier to get a store credit card than it is to get many other major credit cards.

In fact, at some stores, you may even be able to get approved in the middle of your transaction as you check out.

Can Store Cards Impact Credit?

Yes, store cards can impact your credit, either positively or negatively, depending on how you use them. That’s true of all credit cards and is part of how they work.

Just like any credit card, your store card information is also reported to the major credit bureaus (Equifax, Experian, and TransUnion). That means that if you use your store card responsibly, you can help build your credit, while if you fall behind on payments and/or carry a balance, it might have a negative impact on your credit.

Which Is Right for You: Store Card or Credit Card?

Deciding whether a store card or regular credit card is right for you will depend on your own specific shopping habits and overall financial situation. If you frequently shop at a particular store or retailer, you may be able to take advantage of rewards, discounts, or other benefits that come with the store’s credit card.

However, general-purpose credit cards may offer better or more flexible rewards, in addition to having more flexibility in where you can use them.

The Takeaway

Store credit cards come in two different varieties — open-loop and closed-loop cards. An open-loop store card is one that may be branded or marketed as a store credit card, but can be used anywhere the card’s payment network (e.g. Visa or Mastercard) is accepted. A closed-loop store card can only be used at the store or retailer that issues it. While there can be good reasons to get a store credit card, you might be better off with a more flexible credit card that gives cash back or other flexible rewards.

If you’re in the market for a general-purpose credit card that gives outstanding cash-back rewards, you should consider the SoFi Credit Card. With the SoFi Credit Card, you can earn cash back with every eligible purchase, which you can then use for travel or to invest, save, or pay down eligible SoFi debt. You can also add an authorized user to your SoFi credit card as a possible way to earn additional rewards.

FAQ

Which is better: a credit card or store card?

There isn’t a single right answer as to whether a credit card or a store card is better. Instead, it will depend on your own specific situation. If you are a frequent shopper at a particular store or retailer, it may make sense to open its store credit card and get those rewards. However, if you’re not especially loyal to certain stores, you might prefer to get a general-purpose credit card and earn rewards that way.

Does a store card count as a credit card?

A store credit card can be considered a credit card since you can carry a balance and get charged interest. But keep in mind that only open-loop store credit cards can be used more widely like other major credit cards.

What are the disadvantages of a store card?

While it can make sense to apply for a store card, depending on your financial situation and shopping habits, store cards may come with some disadvantages. Many store credit cards have interest rates that are higher than average, so it can be best to pay off your balance in full each month to avoid those steep charges. Additionally, closed-loop store cards can only be used at the retailer that issues them, which makes them less flexible.

Photo credit: iStock/RgStudio

¹See Rewards Details at SoFi.com/card/rewards.

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 .

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Adding your spouse to a credit card could indirectly affect your credit, for better or for worse.

First, though, consider that many married people choose to combine their finances — using a joint bank account and treating all income as shared. Others keep some or all of their money separate.

But regardless of whether or not you choose to combine your finances, both partners will still have their own separate credit scores. Credit cards in the name of one spouse will not directly affect the credit of the other spouse.

If you add your spouse as an authorized user to a credit card in your name, it won’t affect your credit directly. However, how your spouse chooses to use their card can possibly impact your credit. If they don’t use the card responsibly and it impacts your ability to pay the monthly bill, your credit may suffer as a result.

Take a closer look at how adding your spouse to a credit card can affect credit.

Can Adding Your Spouse as a Co-borrower Affect Your Credit Score?

Adding your spouse as a co-borrower will not have an impact on your credit score directly. Simply having a spouse (or anyone) as a co-borrower or authorized user won’t affect your credit score. However, how your spouse uses the card may impact your credit. If they use the credit card responsibly then it may help your credit.

But if they spend more than you can afford to pay, your credit may be negatively affected.

Can Cosigning Affect Your Credit Score?

Cosigning on a loan, credit card, or other debt account can impact your credit score. Applying for a new credit account, even as a cosigner, will show up on your credit report. Having a new account on your credit may have a small impact just for opening the account.

Additionally, how you and your spouse use the new account will also affect your credit score, as your balance and payment history will be reported to both of your credit reports. For instance, a new account could raise your total credit limit, but if you don’t carry a balance, then your credit utilization would look smaller, which can be a positive.

If however, you use that credit you are granted and your credit utilization percentage goes up or you make late payments, then it could have a negative effect. For these reasons, the answer to “If I add my spouse to my credit card, will it help their credit?” is “Maybe.”

Recommended: Joint Accounts vs. Separate Accounts in Marriage

7 Ways You Can Help Your Spouse Build Credit

If you have good credit but your spouse does not, here are a few ways that you might consider helping them build credit:

1. Authorized User

If you already have good credit but your spouse does not, one thing that you can do is add them as an authorized user on a credit card. Having them on an account that you already have in good standing can help them to build their credit. Just make sure that they use their card responsibly or it can negatively impact both of your credit scores.

2. Secured Credit Card

If you don’t want to or can’t add them as an authorized user to one of your accounts, another option might be to have them apply for a secured credit card. With a secured credit card, you put down an initial deposit that serves as your credit line. As you make payments to your account, your available credit increases.

Depending on the card, you may be able to change from a secured card to a traditional or unsecured card after building your credit history.

3. Joint Credit Account

Like a joint bank account, a joint credit account is one where two people are both listed as owners of the account and are jointly responsible for usage. With a joint credit account, usage, balance and payment history will show up on both borrowers’ credit reports.

However, it’s worth noting that many major credit card issuers no longer allow joint credit card accounts. If you find one that does, then this could be an option to help build credit.

Recommended: How to Build Credit Over Time

4. Apply for a Small Loan

Another option to help build credit may be to apply for a small loan together. Getting a personal loan in both of your names may help build credit. One of the things many lenders look for in a credit report is a reliable history of on-time and regular payments. Taking out a small personal loan (and then regularly making payments) can help build credit history.

5. Review Credit Reports Together

Another tip for establishing credit is to regularly review both of your credit reports together. Your credit report contains a history of the different loan, credit card and other debt accounts that you have had. Going through your credit report regularly is a great habit to have as you can make sure that there are no errors, inconsistencies or incorrect information on your report. If there is, you can take steps to correct it, either with the account directly or the credit bureau.

You are entitled to one free credit report per year from each of the big three credit-reporting agencies (Equifax, Experian, and TransUnion). You can access your reports at AnnualCreditReport.com .

6. Discuss Money Management

Another great financial habit to have is to regularly discuss money management. You’ll want to work together on making sound financial decisions, setting financial goals, or deciding on big-ticket purchases. When both partners are involved in the household finances, it makes it easier to stay on the same financial page.

7. Establish and Stick to a Budget

One of the best habits that you can have to improve your finances is to establish and stick to a budget. A budget is a tool that helps you not spend money on things that are not important to you, so that you still have money to spend on the things that are important to you.

At its simplest, a budget can just be a listing of the expected income and expenses for a month. Sticking to a budget can just mean making sure that your income exceeds your expenses. There are a variety of methods you might try out and see how they work for you, such as the envelope system and the 50/30/20 budget rule, among others.

The Takeaway

Even if you combine finances in your marriage or partnership, each individual will still have their own credit report and credit score. Adding your spouse to a credit card account will not directly impact your credit score. However, the manner in which they use the card can have an affect on your credit.

Work together to set up sound financial habits so that both of you use your credit responsibly. Having a good credit score is one of the biggest financial assets that you will have in life.

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

Will adding my spouse to my credit card build our credit?

It’s important to note that even if you combine your other finances, both you and your spouse will continue to have separate credit reports and credit scores. If you have good credit but your spouse does not, you could add them as an authorized user to one of your credit card accounts. Just make sure that they use the card responsibly, or it can have a negative impact on both of your scores.

Does my spouse affect my credit score?

Regardless of whether or not you combine finances in marriage, your credit scores remain individual accounts. Your spouse will not affect your credit score, unless you have joint accounts where both of you are listed as borrowers on the account. Another way your spouse can affect your credit score is if their spending or financial habits cause you to miss payments or increase balances on your own accounts.

Will lenders look at both spouses’ credit scores?

Whether or not lenders look at both spouses’ credit scores will depend on what type of loan you’re applying for. If you apply for an individual credit card, the lender will generally only look at your credit report. However, if you apply for a joint loan (such as a home mortgage), then lenders will look at both credit reports. If one spouse has poor credit, it may not make sense to apply in both spouses’ names.

What happens if I have a good credit score, but my spouse doesn’t?

One spouse’s credit score does not directly affect the credit score of the other spouse, unless they are joint borrowers. If you have a good credit score but your spouse does not, that may mean that you will want to apply for loans or mortgages in only your name.

Photo credit: iStock/Eva-Katalin

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

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

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

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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Have you ever noticed that all the credit cards in your wallet are exactly the same size?

That’s because every credit card issued in the U.S. — and around the world — must be 3.375 inches wide by 2.125 inches high, according to requirements established decades ago by the International Organization for Standardization (ISO).

Credit card issuers can get a little creative with their logo and some other design features, but there are rules regarding credit card size, including how high, wide, and thick they can be. (And, by the way, those same rules apply to debit cards and government-issued IDs.)

Read on to learn why, when it comes to credit cards, size matters.

Why Are All Credit Cards the Same Size?

It makes sense that all credit cards should be a uniform size so they can fit conveniently in the slots of any type of wallet. But that’s just a happy byproduct of card standardization.

The dimensions were put in place so that payment-processing technology can accept any credit card, no matter where the card came from or where it’s used. This means the same cards you use to make purchases or withdraw cash in the U.S. can go with you when you take a vacation trip to Paris, France, or any of the ISO’s member nations.

All financial transaction cards must follow the ISO’s ID-1 format. It specifies the dimensions of a credit card in inches must be 3.375 wide by 2.125 high, with a thickness of 0.0299 inches, and the corners must be rounded. The sequence of the digits in your credit card number and other card features also must follow standards set by the ISO.

When Did the Size of a Credit Card Become Standardized?

Although credit cards have gone through several major changes over the past 60 or so years—especially when it comes to developing new ways to pay and protect against identity theft—they’ve actually looked pretty much the same since the late 1950s.

There were different versions of credit “cards” before that — made from clay tablets in ancient times, dog tag-style metal plates in the 1930s, and even paper and cardboard in the ‘40s and ‘50s. But when American Express and Bank of America began issuing cards in 1958, and other banks followed suit in the next few years after that, credit cards quickly evolved to the size and shape they are today. Even that magnetic “swipe” stripe on the back has been around for decades: It was invented in the 1960s by an IBM engineer and became the standard worldwide by the early ’70s.

Recommended: What Is a Contactless Credit Card and How Does It Work?

What Are Credit Cards Made Of?

American Express is credited with creating the first plastic credit card, in 1959, and that’s still what most cards are made of. A card is typically created using a plastic resin known as polyvinyl chloride acetate (PVCA) that makes it bendable, durable, and water resistant.

Some credit card companies also issue metal credit cards, which are sturdier than plastic cards and usually heavier, too. (We’re only talking about a few grams here, however, so not nearly enough weight to put extra stress on a pants pocket or purse strap.)

What Is the Weight of a Credit Card?

While most plastic credit cards weigh about 5 grams, metal credit cards—which may be made from stainless steel, aluminum, titanium, or a mix of metals—may weigh in at anywhere from 10 to 18 grams.

These heavier cards are sometimes considered more prestigious, as many premium cards are made of metal. And feeling that distinctive heft in your hand can make a metal card stand out from plastic cards. But metal cards aren’t as rare as they used to be. And the way a credit card works is basically the same no matter what material it’s made from.

If you’re thinking about applying for a credit card, you may want to start by finding the card that’s the best fit for you based on its financial benefits rather than its appearance or physical weight. It can be helpful to compare the type of rewards a card offers, if it has low or no fees, the interest rate and credit limit you can qualify for, as well as other perks.

Recommended: What is the Average Credit Card Limit and How Can You Increase It?

Are There Other Design Features that Can Vary?

Although all credit cards are the same size and share other important features, if you lay out your credit cards side by side in front of you, you’ll also likely spot a few differences.

Your credit card number may be on the front of some cards and on the back of others, for example, and those numbers might be flat or slightly raised (embossed). There may or may not be a space for your signature. And the security hologram and code verification value (CVV) — features that are there to protect you from fraudsters — also may vary a bit from card to card.

The magnetic stripe and chip used for making payments are located in the same spot on every card, though. Again, this is designed to make processing transactions as universal and convenient as possible. Mastercard plans to slowly get rid of the swipe stripe on its cards, however, starting in 2024.

Recommended: Guide to Choosing a Credit Card

The Takeaway

Although there have been significant advancements over the years in how credit cards can be used, how payments are processed, and the technology that helps shield consumers from theft, the standard credit card size and shape hasn’t changed in decades. And thanks to the international standards that dictate credit card dimensions, all your cards should fit in any card reader used worldwide — and in the slots in your wallet.

This means you can focus on other factors when choosing which credit card or cards you want to own, including the card’s interest rate, the types of rewards offered, and other benefits and protections.

Looking for a new credit card? Consider a rewards card that makes your money work for you. With the SoFi Credit Card, you earn cash-back rewards on all eligible purchases. You can then use those rewards for travel or to invest, save, or pay down eligible SoFi debt. (It’s also a pretty good-looking card… if you’re into that sort of thing.)

FAQ

What size is a credit card in centimeters?

The International Organization for Standardization (ISO) specifies that credit cards, debit cards, and gift cards must be 8.56 cm by 5.398 cm (which is 85.6 mm by 53.98 mm, or 3.375 inches by 2.125 inches). The ISO standard for credit card thickness is .076 cm (that’s .76 mm, or about .03 inches).

What is the print size on a credit card?

Print size, font, and color may vary from one credit card to the next. Some credit card issuers even allow their customers to personalize a card with their own custom or semi-custom design.

How can visually impaired consumers tell a credit card from a debit card?

Credit card issuers are increasingly moving away from using raised letters and numbers as part of their card designs. Mastercard, for instance, plans to introduce the Touch Card, which uses a distinctive notch on the side (rounded for debit, squared for credit, triangular for prepaid) to aid those who may struggle to identify the card they’re using.

Photo credit: iStock/Sitthiphong

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.

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

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If you paid money on your student loans in the last tax year, you might qualify for the student loan tax deduction, which allows borrowers to deduct up to $2,500 in interest they paid out of their taxable income.

Here are some important things you should know about the student loan interest deduction and whether you qualify.

How the Student Loan Tax Deduction Works

With the student loan tax deduction, you claim the interest you paid on your student loans throughout the tax year when it’s time to do your taxes.

The interest applies to qualified student loans that were used for tuition and fees; room and board; coursework-related fees, books, supplies, and equipment; and other necessary expenses like transportation.

So how much student loan interest can you deduct? If you qualify for the full deduction, you can deduct student loan interest up to $2,500, as long as you actually paid that much in interest. (You don’t need to itemize in order to get the deduction.)

Not only do required interest payments count, but if you made any additional interest payments toward your student loans in the past tax year, those count too.

How to Qualify for the Student Loan Tax Deduction

To be eligible to deduct student loan interest, individuals must meet the following requirements:

•   You paid interest on a qualified student loan (a loan for you, your spouse, or a dependent) during the tax year.

•   Your modified adjusted gross income (gross income for the year minus certain deductions) is less than a specified amount that is set annually.

•   Your filing status isn’t married filing separately.

•   Neither you nor your spouse can be claimed as a dependent on someone else’s return.

The loans in question can be federal or private student loans.

Recommended: Private Student Loans Guide

What Are the Income Requirements for Student Loan Tax Deduction?

Your modified adjusted gross income (MAGI) is calculated on your federal tax return before any student loan interest deduction is made. The eligible ranges are recalculated annually.

For tax year 2022 (filing in 2023), the student loan interest deduction was worth as much as $2,500 for a single filer, head of household, or qualifying widow/widower with a MAGI of under $70,000.

For those who exceeded a MAGI of $70,000, the deduction began to phase out, meaning the most they could deduct was less than $2,500. Once their MAGI reached $85,000 or more, they were no longer able to claim the deduction.

For married couples filing jointly, the phaseout began after a MAGI of $145,000, and eligibility ended at $175,000.

Confused by all these requirements? If so, consider going to a tax professional to help with your return to make sure you can take advantage of the deduction.

Other Tax Deductions for Students

In addition to the student loan interest rate deductions, there are other tax breaks that may be available to you if you’re a student, or you’re saving for or paying for certain education expenses for yourself, a spouse, or a dependent. Here’s a look:

529 Plans

A 529 college savings plan is a tax advantaged plan that allows you to save for qualified education expenses — like tuition, lab fees, and text books — for yourself or your children. You can contribute up to $15,000 per year without triggering gift taxes, and other family members can contribute to the fund, as well.

Savings can be invested and grow tax free inside the account. And while the federal government doesn’t offer any tax deductions, some states will provide tax benefits like deductions from state income tax. Withdrawals must be used to cover qualified expenses, otherwise you will face income taxes and a 10% penalty.

American Opportunity Tax Credit

The American Opportunity Tax Credit (AOTC) helps offset $2,500 in qualified education expenses per student per year for the first four years of higher education. Unlike a tax deduction, tax credits reduce your tax bill on a dollar-for-dollar basis. And if the credit brings your taxes to zero, 40% of whatever remains of the credit amount can be refunded to you, up to $1,000.

To be eligible for the AOTC you must be getting a degree or another form of recognized education credential. And at the beginning of the tax year, you must be enrolled in school at least half time for one academic period, and you cannot have finished your first four years of higher education at the beginning of the tax year.

Lifetime Learning Credit

The Lifetime Learning Credit (LLC) helps pick up where the AOTC leaves off. While the AOTC only lasts for four years, the LLC helps offset the expense of graduate school and other continuing educational opportunities. The credit can help pay for undergraduate and graduate programs, as well as professional degree courses that help you improve your job skills. The credit is worth $2,000 per tax return, and there is no limit to the number of years you can claim it. Unlike the AOTC, it is not a refundable tax credit.

To be eligible, you, a dependent or someone else must pay qualified education expenses for higher education or pay for the expenses of an eligible student and an eligible educational institution. The eligible student must be yourself, your spouse or a dependent that you have listed on your tax return.

Recommended: Can You Deduct Your Child’s Tuition from Taxes?

Look for Form 1098-E

Unfortunately, you can’t deduct the entirety of your student loan payments from your taxes. As mentioned, you can only deduct your interest. How to get the student loan interest deduction? Your loan provider reports information on interest paid on Form 1098-E, which is a tax form financial institutions generally send to borrowers when the tax year ends.

The only reason you wouldn’t receive one from your lender is if you paid less than $600 in interest on their loan. But these forms don’t always report things like the interest you paid on certain origination fees or capitalized interest, which may also qualify for the student loan deduction.

How to Calculate the Student Loan Tax Deduction

To calculate the full value of the interest deduction, start with the amount of interest the form says you paid, and then add any interest you paid on qualified origination fees and capitalized interest. Just make sure these amounts don’t add up to more than the total you paid on your student loan principal.

Clear as mud, right? Hey, no one said the IRS makes things easy! Here are some examples of how to deduct these amounts.

Deducting the origination fee: As of Sept. 1, 2004, this fee — usually a one-time fee that lenders charge for creating a new loan — is included on your 1098-E. For loans issued before that date, you can use any reasonable method to allocate the loan origination fees over the term of the loan. One way to do this is to figure out how much the fees will cost you monthly over the life of the loan.

Example: If the origination fee you were charged on your loan was $1,000 and the term length was 10 years, or 120 months, that would mean your origination fee would be $8.33 per month, or $100 per year.

Deducting capitalized interest: If your Form 1098-E says your loan has capitalized interest, you can also claim that after you’ve claimed an origination fee deduction. Capitalized interest accrues and then is added to the loan principal if you don’t pay it. For example, Unsubsidized federal student loan accrue interest while the student is in school and during the loan’s grace period. It’s common for that interest to be capitalized (added to principal) at the end of the grace period.

Example: If you made $6,000 in student loan payments, of which $1,000 went to interest and $5,000 to principal, you can claim the $100 you paid toward your origination fee and the full $1,000 in capitalized interest. But if you only paid off $750 of your principal, you can claim $650 of the $1,000 of capitalized interest, because you’ll have to claim the $100 in origination fees first and you can’t exceed the amount you paid toward your principal.

Tips for Lowering Your Student Loan Payments

Tax credits and deductions are one way to help pay for the cost of school. Finding ways to lower your student loan payments is another cost-saving measure and can be good to know about when it comes to the basics of student loans. Here are a few ideas:

•   Put money toward student loans by making additional payments to pay down your principal. Doing this may help reduce the amount of interest you will owe less interest over the life of the loan, but beware of any prepayment penalties.

•   Make interest only payments while you’re still in school. This may prevent thousands of dollars from being added to your loan principal.

•   See whether your loan provider offers discounts if you set up automatic payment. Federal Direct Loan holders may be eligible for a 0.25% discount when they sign up for automatic payments.

•   Consider refinancing student loans, replacing your student loan with a new loan that ideally has a lower interest rate or more favorable terms.

While there are advantages of refinancing student loans, such as possibly lowering your monthly payments, there are disadvantages as well. One major caveat: If you refinance federal loans, they are no longer eligible for federal benefits or protections. Also, you may pay more interest over the life of the loan if you refinance with an extended term. Refinancing is not right for everyone.

The Takeaway

Who doesn’t love a tax deduction? Qualified filers can take a student loan interest deduction of up to $2,500 atop the standard deduction. Most private and federal student loans are fair game.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. And lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

SoFi Student Loan Refinance
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.

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Student loans are meant to be used to pay for your education and related expenses so that you can earn a college degree. Even if you have access to additional student loan money, it doesn’t mean you should use it on nonessential living expenses.

By learning the answer to, “What can you use a student loan for?” you will make better use of your money and ensure you’re in a more stable financial situation post-graduation.

5 Things You Can Use Your Student Loans to Pay For

Here are five things you can spend your student loan funds on.

1. Tuition and Fees

The first thing your student loans are intended to cover is your college tuition and fees. The average college tuition and fees for a private institution is $37,641 per year, while the average for a public, out-of-state school is $27,279 per year, and a public, in-state school is $9,377 per year.

2. Books and Supplies

Beyond tuition and fees, student loans can be used to purchase textbooks and supplies, such as a laptop, notebooks and pens, and a backpack. You may be able to save money by purchasing used textbooks online or by renting textbooks instead of purchasing them.

3. Housing Costs

Your student loans can be used to pay for your housing costs, whether you live in a dormitory or off-campus. If you live off-campus, you can put your loans toward paying for related expenses, such as your utility bill. Compare the costs of on-campus vs. off-campus housing, and consider getting a roommate to help cover the costs of living off-campus.

4. Transportation

If you have a car on campus or you need to take public transportation to get to school, work, or your internships, you can use your student loans to pay for those costs. If you have a car, you may want to consider leaving it at home when you go away to school. Gas, maintenance, and a parking pass could end up costing much more than using public transportation and your school’s shuttle, which should be free.

5. Food

What else can you use student loans for? Food would qualify as a valid expense, whether you’re cooking meals at home or you’ve signed up for a meal plan. This doesn’t mean you should eat out at fancy restaurants all the time just because the money is there. Instead, you could save by cooking at home, splitting food costs with a roommate, and asking if local establishments have discounts for college students.

Recommended: 23 Tips on Saving Money Daily

5 Things Your Student Loans Should Not Cover

Now that you know what student loans can be used for, you’re likely wondering what they should not be used for. While your lender is not tracking your expenses, it’s not wise to use student loans for non-school related expenses. You will eventually have to pay this money back, with interest.

Here are five expenses that should not be covered with funds from your student loans.

1. Entertainment

Going to the movies, concerts, and bowling are all part of the college experience, but you should not use your student loans to pay for your entertainment. Your campus likely offers plenty of free and low-cost entertainment, such as sports games and movie nights, to pursue instead. You can also consider getting a job on campus to help pay for entertainment and fun.

2. Vacations

College is draining, and you deserve a vacation from the stress every once in a while. However, if you can’t afford to go on spring break or another type of trip out of your own pocket, then you should put it off at this time. It’s never a good idea to use your student loans to cover these expenses.

3. Gym Membership

You may have belonged to a gym at home before you went to college and you still want to keep up your membership there. You can, as long as you don’t use your student loans to cover it. Many colleges and universities have a gym or fitness center on campus that is available to students and included in the cost of tuition.

4. A New Car

Even if you need a new car, student loans cannot be used to buy a new set of wheels. Consider taking public transportation instead or buying a modest used car when you save up enough money.

5. Extra Food Costs

While you and your roommates may love pizza, it’s not a good idea to use your student loan money to cover that cost. You also shouldn’t take your family out to eat or dine out too much with that borrowed money. Stick to eating at home or in the dining hall, and only going out to eat every once in a while with your own money.

Student Loan Spending Rules

Your student loan refund — what’s left after your scholarships, grants, and loans are applied toward tuition, campus housing, fees, and other direct charges — isn’t money that’s meant to be spent willy-nilly. It’s meant for education-related expenses. If you don’t need the refund, it’s best to send it back to the loan servicer.

The amount of financial aid a student receives is based largely on each academic institution’s calculated “cost of attendance,” which may include factors like your financial need and your Student Aid Index, or SAI (formerly called the Expected Family Contribution, or EFC). Your cost of attendance minus your SAI generally helps determine how much need-based aid you’re eligible for. Eligibility for non-need-based financial aid is determined by subtracting all of the aid you’ve already received from your cost of attendance.

Recommended: What Is the Student Aid Index (SAI)?

Additionally, when you took out a student loan, you probably signed a promissory note that outlined what you’re supposed to be spending your loan money on. Those restrictions may vary depending on what kind of loan you received — federal or private, subsidized or unsubsidized. If the restrictions weren’t clear, it’s not a bad idea to ask your lender, “What can I use my student loan for?”

Alternatives to Using Student Loans

If you can’t pay for college on your own or you don’t have the luxury of someone paying for it for you, oftentimes you’ll have no choice but to rely on student loans to get you through. There’s nothing wrong with that; that’s what they’re there for! However, you may not need to cover all of your tuition and living expenses with loans. Here are some alternative ideas to help fund your college education:

Work Part-time While in School

While working and attending college is not easy, it’s possible. Roughly 40% of full-time undergraduate students maintain a job while in school, with 10% of those students working full-time hours in addition to a full class load. Working is a great way to reduce your student loan debt and pay for additional living expenses.

Recommended: Am I Eligible for Work-Study?

Apply for Scholarships

There are thousands of scholarships available for many different types of students, it’s just a matter of finding them. Putting in the time to find a scholarship, apply, and get awarded can save you thousands in tuition over the course of your college experience.

Attend a Community College

The best way to cut down on the cost of college and reduce your student loan debt is to choose a less expensive route, such as a community college or in-state institution. The average cost of community college is $5,155 per year for in-state students. Consider taking your prerequisites at your community college and then transferring to your in-state public university.

Refinancing Student Loans

If you’re interested in adjusting loan terms or securing a new interest rate, you could consider refinancing your student loans. Refinancing can allow qualifying borrowers to secure a lower interest rate or more preferable terms, which could potentially save them money over the long run. Refinancing federal loans eliminates them from all federal borrower benefits and protections, including deferment options and the ability to pursue Public Service Loan Forgiveness, so it’s not the right choice for all borrowers.

The Takeaway

Student loans are intended to be used to pay for qualifying educational expenses such as tuition and fees, room and board, supplies, transportation, and food. Expenses like entertainment, vacations, cars, and fancy dinners cannot generally be paid for using student loans.

If you already have student loans and are looking to lower your monthly payment, refinancing may be one way to do it – by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. And lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

SoFi Student Loan Refinance
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.

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