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Mar

2023

Credit Card Returned Payment Fees

It goes without saying that getting hit with a credit card fee isn’t anyone’s preferred way to spend their money. If possible, you probably want to dodge those charges so you can use that cash elsewhere, perhaps putting it towards the bill itself or buying yourself a great meal.

One common type of credit card fee is a returned payment fee. This is when you get charged with a fee because your credit card payment doesn’t go through and is returned by the bank.

Fortunately, this charge can easily be avoided. Read on to learn the ropes, including:

• What is a returned payment fee?

• What happens if a credit card payment is returned?

• Who charges a returned payment fee?

• What are tips for avoiding a returned payment fee?

What Is a Returned Payment Fee?

A returned payment fee is a one-time penalty a credit card issuer charges you when a credit card payment you make online or via phone or check gets declined by the bank.

How much is a returned payment fee? If you don’t have enough funds in your bank account to cover the bill or the credit card issuer isn’t able to process your transaction for a number of reasons, you might be charged a returned payment fee of anywhere from $25 to $40 by the credit card issuer.

How Credit Card Returned Payment Fees Work

Here’s how credit card returned payment fees work: Say you set up a $200 autopay for your next monthly credit card bill, which is due on the 21st of the month. If when that date arrives, your account only has $185 in it (perhaps you had an emergency car repair to pay for), the autopay to your credit card will not go through properly since you don’t have enough money in the linked bank account. That’s when you get charged a returned payment fee, in addition to still owing the credit card company your monthly payment.

Typically, a credit card returned payment fee will be included in your next credit card statement.

Worth noting: You may well incur other fees. Your bank might charge you a separate non-sufficient funds fee. The average non-sufficient funds fee is $34.

Generally, this could impact your credit score if a returned payment doesn’t go through before your statement due date, which results in you being late on your payment or missing it altogether.

What Happens If a Credit Card Payment Is Returned?

If your credit card payment doesn’t go through due to lack of funds in your bank account or for some other reason, the credit card issuer will charge you with a returned payment fee. In some instances, they will make a second attempt to collect your payment before assessing you for this kind of fee.

What happens if the payment goes through after you are charged a returned payment fee? The credit card issuer might still charge you and collect the fee.

How Long Does It Take for a Returned Payment to Be Refunded?

You may be able to get a returned payment fee waived. This is most likely to occur if this is the first time you have missed an on-time payment.

Another scenario: Mistakes happen, and if you believe that you are wrongly or incorrectly charged for a returned payment, you can contact your credit card issuer to discuss and/or dispute the charge.

Typically, any credit card refunds appear on your statement in three to seven business days.

Recommended: What Is Credit Card Processing?

Who Charges a Returned Payment Fee?

The credit card issuer typically charges a returned payment fee. This is a separate and different charge than a non-sufficient fee, which is charged by the financial institution where you hold your account.

Types of Returned Payment Fees

In many cases, you can get hit with a returned payment on a credit card. The credit card issuer will charge this fee if there’s not enough funds in your bank account to cover the payment or if the transaction fails to go through for some other reason.

The other main type of returned payment fee is charged by a financial institution when your check bounces or you don’t have enough money in your bank to cover a transaction on your debit card. This is also known as a non-sufficient funds fee.

Beyond those fees, you might also be assessed a returned payment fee on other kinds of accounts, such as a gym that charges a recurring fee, a streaming service, or a car leasing company.

Recommended: Guide to Choosing a Credit Card

Tips for Avoiding Credit Card Returned Payment Fees

Here, some tactics to help you avoid returned payment fees from your credit card:

• Always double-check that you have enough money in the bank to cover the payment. Some people like to keep a cash cushion in your account to help prevent overdrafts.

• It might be wise to have a separate checking account to use on discretionary spending and another one for recurring monthly bills, such as credit card payments.

• To make sure you stay in the green, consider moving money from your main checking account to a sub account whenever you make a charge on your credit card. For instance, if you spend $30 on dinner, then move $30 into the sub account. That way, when it’s time to make a credit card payment, the money will be ready.

• If you’re having trouble with autopay on a credit card payment, consider making several manual payments throughout the billing cycle. For instance, split the payment in half and make two separate, manual payments.

Other Credit Card Fees

Here are other common credit card costs and fees:

• Interest fees. If you keep a balance on your credit card, you’ll be charged interest on the outstanding balance. Your balance, plus the APR (annual percentage rate), which is the interest rate plus any tacked-on fees, can fluctuate in tandem with the prime rate, impacting how much you pay on interest on a card.

That interest (and other fees) are among the key ways that credit cards make money.

• Annual fee. Some cards might charge an annual fee, which is billed on your anniversary month. So if you opened a credit card in March, then you’ll be charged an annual fee every March as long as you keep the card open. Some issuers might waive the credit card annual fee the first year you open your card.

• Late fees. If you’re late on making a payment, you could get charged a late fee on your credit card. This fee depends on the credit card issuer and can be anywhere from $15 to $35 for a single charge.

• Foreign transaction fee. If you use your card in another country or make a purchase from a company that’s not based in the U.S., you might be charged a foreign transaction fee. These fees are anywhere from 1% to 3% of the amount. Some travel cards and international credit cards don’t have a foreign transaction fee.

You might also opt for a conventional credit card that doesn’t charge any foreign transaction fees, which can help you save when you’re abroad.

• Balance transfer fee. If you’re moving the balance from one credit card to another, there’s likely a balance transfer fee. This is a one-time fee that is either a flat fee or a percentage of the transfer amount, which is anywhere from 3% to 5%. Balance transfers are usually a tactic to save on interest fees, so you’ll want to make sure the savings is greater than any fees.

The Takeaway

A credit card returned payment fee can feel like a nuisance at best and a financial strain at worst. Fortunately, with a bit of vigilance and planning on your part, returned payment fees — and credit card fees in general — can be avoided.

When shopping for a credit card, you’ll also want to see what the card offers in terms of perks. With the SoFi Credit Card, you’ll enjoy 2% unlimited cash back rewards, which you can use in a variety of ways to meet your personal and financial goals.

Spend smarter with the SoFi Credit Card.

FAQ

What happens when a payment is returned?

When a payment is returned and your card card issuer is unable to process a payment, they usually charge you with a returned payment fee. In some cases, they might make a second attempt to collect the money before hitting you with a fee.

Is a returned payment a late payment?

A returned payment and a late payment are two different things and, in the case of fees, two different kinds of charges. A returned payment fee is charged when there is an issue with your payment and the payee is unable to receive the funds. If you are able to make a payment to a payee but it happens after the due date, it could result in a late payment fee on your account.

What should I do about returned credit card payments?

If a credit card payment gets returned, then you should aim to make your payment as soon as possible. Or, contact your credit card issuer if they might be able to waive it, especially if it’s your first time having this problem. Also take steps to avoid this scenario in the future.

Photo credit: iStock/FreshSplash

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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Mar

2023

Guide to Canceling a Pending Transaction

If you spot a pending credit card transaction that isn’t correct or isn’t even yours, canceling it will likely be your top priority. And for good reason: It’s often wise to act quickly when dealing with this kind of financial situation rather than waiting to see how things work out. You want to take action so that the charge gets canceled before it’s posted to your credit card account.

Otherwise, it may take a few more steps to dispute the transaction or navigate the refund process with the merchant. Which could wind up changing your available credit for a period of time. Also, there could be the shadow of credit card fraud hanging over this kind of situation.

Here, you’ll learn how to spring into action if you’re in this situation, including:

• What are pending charges on a credit card?

• How can I cancel a pending transaction?

• When do I contact my credit card issuer or bank?

• Are there consequences to canceling a pending transaction?

What Are Pending Charges?

Pending charges or transactions are purchases on your credit (or debit card) that have not yet officially been posted to your account. When you use plastic to pay for something, the retailer will issue a charge which can take time to clear. Or, if there’s a pre-authorized payment (say, you’re paying a deposit at a hotel to cover any incidental charges), it may show up on a credit card as a pending transaction.

These charges may then stay pending until posted, which can take up to several days. It could take longer if the merchant needs to complete tasks such as shipping the item you’ve purchased or adding the tip amount on a meal.

While these charges are pending, they won’t accrue interest if you’re using a credit card, nor will it count as part of the outstanding balance. However, it can affect your overall available balance and how much you can spend.

Not familiar with pending charges? No worries. In many cases you may not see pending transactions since credit and debit card issuers process them fairly quickly.

Can I Cancel Pending Transactions?

In many cases, you may not be able to stop a pending transaction because they haven’t been posted yet. That’s an aspect of how credit cards function; there can be a lag time as the charge works its way through processing.

Note: Canceling a pending transaction is not offered by SoFi.

Credit card issuers tend to help their cardholders dispute a transaction once it’s posted. So if you see a pending charge that looks incorrect, you may have better luck contacting the retailer in question to resolve the matter. This might yield the best results in terms of how to cancel a pending charge on your credit card.

However, there may be some scenarios when it may make better sense to talk to your bank or credit card company instead, such as unfamiliar or unauthorized transactions. In this case, you might be dealing with fraud, and your financial institution or the card issuer should be able to offer guidance.

When to Contact the Merchant

You just read that, in general, it’s better to contact the merchant first if you want to cancel a pending transaction. But now, consider some of the reasons why you might want to get those charges struck from your account:

You Were Accidentally Charged Twice

Sometimes mistakes happen, and a merchant can process a purchase twice. It could even be a tech glitch where you pressed the “purchase” button on an online order and wound up with two orders (or more) instead of one.

If you notice two identical transactions on the same day and from the same merchant, you’re most likely double charged. In this case, it’s better to contact the merchant immediately so they can cancel the extra charge and don’t ship you excessive products.

You Changed Your Mind

Whether it’s buyer’s remorse or you suddenly realize you already have the item you just bought, it’s not unusual to change your mind. The sooner you can contact the merchant, the more likely the pending transaction can get canceled. That way, you don’t have to worry about going through extra steps, like receiving the item, then returning it, and waiting for how long a credit card refund takes.

You Haven’t Gotten the Item Yet

Perhaps you purchased an item a while ago, and it still hasn’t arrived. Maybe you no longer want it or aren’t interested in waiting any longer. (Maybe you bought a gift for a friend’s birthday which is coming right up.) If the merchant hasn’t sent it by the time you contact them, you may be able to get the pending change canceled.

How to Contact the Merchant

If you find yourself in any of these situations, here are some suggested next steps:

• Have all relevant information ready when you contact the merchant, such as the total purchase amount, transaction date, and the order number. If you have a receipt, have that handy as the merchant may request to see it or ask for any information on that receipt. Don’t forget to note down what you said on the phone as a record or in case you need to escalate the situation.

• Even if the merchant grants your request, hold into any relevant documentation until you don’t see the pending transaction anymore.

• If your request is denied or ignored, you can wait until the credit card transaction is posted to request a refund or dispute it with your credit card company or bank.

When to Contact Your Credit Card Issuer or Bank

Though you generally won’t be able to dispute a pending transaction, there are several scenarios in which you may be able to do so.

You Don’t Recognize a Transaction

It’s a bad feeling when you see a pending charge that’s for an item or service you know isn’t yours. If you believe the pending transaction is due to fraud, it’s better to contact your credit card company or bank immediately to get it resolved.

The Amount of the Transaction Is Suspicious

What if you do recognize a transaction but there’s something off about the details? For instance, say you went to a flea market and swiped your card to buy yourself a necklace, but the pending charge is $100 higher than what you know the merchant said they were charging you. This might be a time to reach out to your bank or card issuer.

You Weren’t Able to Cancel a Recurring Purchase With The Merchant

If you had a recurring payment (say, a monthly gym membership) and canceled the agreement, the merchant should honor your request if you’ve followed their terms. In the unfortunate situation that you’ve done this but still see a pending transaction and the merchant is nonresponsive, it’s probably better to cancel it through your credit card company or bank. They will likely be able to show you how to stop a pending transaction.

Recommended: Guide to Choosing a Credit Card Company

How to Contact Your Credit Card Issuer or Bank

Each company may have its own method for handling requests for pending transactions. Some pointers:

• To start, you might call your bank or credit card company and let them know your situation. They can then transfer you to the relevant department or customer representative. Email and chat with a customer service representative are often other convenient methods.

• Jot down a record of whom you speak with and when.

• As with disputing a pending transaction with the merchant, you will need to provide information such as receipts, interactions you’ve tried to have with the merchant, and the transaction amount you’re disputing.

• Be prepared to create a paper trail. You may need to file a formal dispute which you will either fill out and send in or a representative can do so for you and then send you a copy. Additional steps may be taken to secure your account or to close it and open a new one if there’s been credit card fraud.

• If you have had fraudulent activity, you may want to set up fraud alerts with the big credit reporting agencies. That way, you can be on alert if anyone tries to open an account in your name.

Consequences of Canceling a Pending Transaction

Even if you successfully cancel a pending transaction, it could still take several days for it to be removed from your account. In the meantime, it could affect your overall available balance.

Those using a credit card will want to watch what their available balance is when making purchases to ensure they’re not at risk of going over their credit card limit.

If you’re waiting for a pending transaction to be canceled on your debit card, don’t count on that money being available in your bank account just yet. It can be better to err on the side of caution. For instance, should you spend money you think you have and there isn’t enough in your account, you could have your transaction denied. Or you could go into overdraft and face paying a fee.

The Takeaway

When paying with plastic, there may be times that your account shows a pending charge that you want to cancel. In some situations, it’s best to reach out directly to the merchant who charged you; in others, contacting your financial institution or the card issuer will be your best move. It’s wise to stay aware of charges on your account so you can spot anything that’s amiss and deal with it swiftly.

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

FAQ

How do I stop a pending debit transaction?

You can stop a pending debit card transaction by contacting the merchant and canceling the purchase. Or you can try contacting your bank if you don’t recognize the transaction, you suspect fraud is involved, or the merchant is unresponsive.

Can you cancel a payment while it’s pending?

You may be able to cancel a pending payment transaction in some cases. Contacting the merchant directly can be the best route. Many credit card companies may have you wait until the payment is posted before allowing you to dispute it.

Can I tell my bank to stop a pending transaction?

You can tell your bank to stop a pending transaction if you have a legitimate reason to do so, such as if the merchant ignores or denies your request or you suspect fraudulent activity.

Photo credit: iStock/Lemon_tm

Mar

2023

How Does a Gas Credit Card Work?

By Jamie Cattanach | Credit, credit card, Family Finances | Comments Off

Americans put a lot of money into their fuel tanks — from commuting to work to taking epic road trips — and gas credit cards are one option that can help cut the costs of getting around.

There are a few different types of gas credit cards to consider: branded gas cards that only work at specific gas stations, branded gas credit cards that you may be able to use elsewhere, and regular rewards credit cards that offer cash back or other incentives at the pump.

If you’re curious about the pros and cons of these cards, read on to learn:

• What is a gas card?

• How does a gas card work?

• How do you get a gas card?

• What’s needed for a gas card application?

What Is a Gas Credit Card?

So what is a gas card? The answer depends on whom you ask: The term can refer to a variety of different products (more on that in a moment). But at its most basic level, a gas credit card is a credit card that allows the cardholder to save money on gas, either with per-gallon discounts, cash-back rewards, or other incentives.

Given the wild fluctuations in the average price of gas, these cards can be an excellent way to lower your overall transportation costs, especially if you drive often. However, like any credit card, they do come with both risks and benefits.

Types of Gas Cards

As mentioned above, “gas credit card” and “gas card” can actually refer to several different products. Here’s a closer look.

Closed-loop gas cards

What is known as a closed-loop gas card is a card that can only be used at a specific gas station brand. They earn the cardholder discounts or rewards on money spent on that brand of fuel. They cannot be used at other gas stations or stores. This can make them convenient for those people who almost always go to the same gas station.

Of course, that limitation can also be too restrictive. Some people may want a card with more flexibility and capabilities. In addition, closed-loop gas cards can come with high interest rates, so if you don’t pay off your balance in full each month, you may actually end up spending more on gas overall.

Co-Branded Gas Station Credit Cards

Gas station credit cards vs. gas credit cards are co-branded. That means they bear the logo of both the gas station and a major credit card issuer, such as Visa or Mastercard. These cards may offer specific rewards at the pump. However, because they’re part of a major card network, they can also be used elsewhere.

These credit cards offer the benefit of being available for more general, all-purpose use. Of course, they also make it more possible to rack up debt on non-gas-related expenses, like cool shoes, the latest mobile device, or just about anything. As is true with any credit card, paying off your balance on time and in full each month is the best way to avoid paying interest on your purchases, which can quickly eclipse any rewards you might earn.

Traditional Gas Rewards Credit Cards

Finally, regular rewards credit cards may offer cash back, miles, points, or other rewards at the pump and elsewhere. Some rewards credit cards may allow borrowers to choose specific categories in which they’ll earn rewards at a higher rate, and the fuel pump might be one of those categories.

Traditional rewards credit cards offer ultimate flexibility in how and where you get rewarded for spending your money, so this could be an excellent choice for those whose budget fluctuates over time.

For instance, perhaps you spend a lot on gas over the summer because you’re taking road trips, but less so during the fall and winter. A traditional rewards credit card may allow you to choose gas stations as a category for part of the year — and another, more relevant category (like grocery stores) for the rest.

However, like all credit cards, they do come with the risk of falling into debt by carrying an ever-larger revolving balance.

How Do Gas Credit Cards Work?

Here’s how a gas card works in most situations: Although there are several different types of gas credit cards, they typically sync up with how any credit card works. You use the card at the point of sale to purchase gas and reap rewards or discounts. Usually this is done by swiping the card at the fuel terminal or, if it’s not a closed-loop card, at another point-of-sale system.

With non-closed-loop gas credit cards, you may also be able to use the card to make online purchases by typing in the relevant card information. (Always make sure the website you’re purchasing from is legitimate and secure before supplying your credit card number!)

Like any credit card, gas credit cards usually charge interest on revolving balances; that is, money you charge on the card and don’t pay off at the end of the statement period. Interest rates can be hefty — upwards of 20% APR (annual percentage rate) — which is part of what makes falling into credit card debt so possible. That’s why paying off your balance in full and on time, each and every month can be crucial.

If you can’t, you might consider consolidating your debt with a 0% balance transfer or personal loan.

Things to Consider Before Applying for a Gas Credit Card

While a gas credit card can help you save money at the pump, like any other credit card, it can also put you at financial risk, especially if you’re already struggling to make ends meet and pay down debt.

In addition, applying for a gas credit card will result in a hard inquiry on your credit report, which can lower (although usually only in the short-term) your credit score.

How to Get a Gas Credit Card

In terms of how to get a gas card, it’s similar to applying for a credit card of any kind. There will be information you need to share about yourself and your finances on a gas card application.

You can apply for gas credit cards at the gas station offering one or online. The application process will require basic demographic information, like your name and address, as well as financial information such as your employment situation and annual income. Once you’re approved for the card, you’ll receive it in the mail and can start using it for gas purchases — and, if it’s a major network credit card, purchases elsewhere, too.

Putting Money on a Gas Card

In addition to gas credit cards, there are also reloadable prepaid gas cards which are not credit cards. They’re more like debit cards in that you can use them only to access a finite amount of preloaded money on the card.
These types of cards can be a useful tool for managing gas spending and controlling your budget. You can load them with money at the gas station or online.

How to Pay With a Gas Card

How to pay for gas with a card works just as it would with any other card. You use it at the point-of-sale system (or present it to the person at the pump, if you’re in Oregon or New Jersey).

If you’re using a refillable gas card, you’ll need to load money on it ahead of time. If you’re using a credit card, you’ll get a monthly statement listing everything you’ve spent over the billing period and will have the opportunity to pay it off in full, which is a wise move vs. paying the minimum amount.

Is a Gas Credit Card Right for You?

If you find yourself spending a lot of money at the fuel pump, a gas credit card could help you pinch some pennies and get where you’re going for less. But like other credit cards, the risk of going into debt — or at least paying more than you need to after interest — is real. A prepaid gas card could be a good middle-ground option to help you stick to your transportation budget and manage your gas money budget more easily.

The Takeaway

There are multiple different types of gas credit cards, but they all generally have the same benefit: making the cost of gas more affordable by providing discounts or rewards at the pump. Whether you opt for a gas credit card or a reloadable gas card, this kind of product can make budgeting simpler, as long as used wisely.

Finding a credit card that can reward you for good financial decisions is a total game-changer, and that can be what the SoFi Credit Card does. With it, you’ll earn unlimited 2% cash back rewards, including those that can help you pay down debt.

The SoFi Credit Card: Put it to work in your wallet.

FAQ

What is the difference between a gas card and a credit card?

People may use the term “gas card” to refer to prepaid gas cards or gas credit cards specifically designed to offer the cardholder rewards at the pump. A regular credit card doesn’t necessarily offer any specific fuel savings, but a gas credit card can.

Does a gas card affect your credit?

If you apply for any credit card, the issuer will run a hard inquiry on your credit history, which may have a short-term negative effect on your credit score. In addition, late payments and high balances can drive your score down, as well, but paying off your debt in full and on time can help create a healthy credit history.

Can you buy other things with a gas card?

Can you get cash back from a gas card?

Some gas credit cards offer cash back rewards. You can also find unlimited cash back rewards credit cards that aren’t specifically designed for gas savings but can still help you earn back a percentage of every dollar you spend.

Photo credit: iStock/Eleganza

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.

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

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.

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Mar

2023

How Does a Joint Credit Card Impact Your Credit?

By Jackie Lam | Credit, credit card, Family Finances | Comments Off

Opening a joint credit card with someone you trust — meaning a spouse, partner, trusted friend, or family member — can seem like a good idea. You’re both 100% financially responsible for paying off the balance on the card. Plus, you both share privileges of making changes to the account, earning rewards, and using the card much the way you would as a primary cardholder of a solo account.

But before you jump in and sign up for a joint credit card, you’ll want to understand how having such a card can affect your credit, both good and bad. Plus, it’s wise to understand the ground rules for managing such an account successfully.

Here, you’ll learn:

• What are joint credit cards?

• How do joint accounts work for a credit card?

• How can a joint credit card impact your credit?

• What are the pros and cons of a joint credit card?

• What are alternatives to a joint credit card?

Mulling over this intel can help you make the decision of whether or not a joint credit card is right for you.

What Are Joint Credit Cards?

Just as the name suggests, a joint credit card is one that permits two users to share a single credit line. In turn, as primary cardholders, each individual is able to make purchases on the card, as well as update and manage account information. Plus, they’re each 100% responsible for paying off the card balance.

When applying for such a card, both individuals’ credit scores and credit histories are reviewed. So if you both have strong credit scores, it could boost your odds of getting approved for a credit card with higher credit limits and favorable rates, terms, and perks.

But what might happen when one of you has a lower credit score? In that case, it could potentially hurt the odds of your getting approved for a credit card. Or it might lead to your being offered less favorable rates, terms, and lower credit limits. However, it could benefit the person with the lower score, as they’re piggybacking off the co-applicant’s higher credit score.

How Do Joint Accounts Work for Credit Cards?

As mentioned, both people will need to apply for a credit card. This means that the credit card issuer will review your respective credit scores and profiles. You both are equally responsible for paying off the balance on the card, and you each also have full rights to manage and make changes to the account. Plus, you can each make credit card charges, swiping or tapping at will.

A common misconception is that if you share a joint credit card account, your credit histories and scores will be merged. Not at all: Credit scores will always be looked at on an individual basis. In other words, the credit card payments on joint accounts will be reported to the credit bureaus, and this will be reflected on each user’s credit history.

How to Manage a Joint Credit Card Account

How you manage a joint credit card account is largely up to you and the co-owner on the account. While you both have full privileges to the account and can make changes, do you want to touch base before making any changes? Do you want to establish a monthly spending limit? It can be wise to agree to how you will use the account and what guardrails you may want in place before applying.

As for payments, you have decisions to make about who pays the bill. For instance:

• You might decide it’s best to have one co-owner make payments and have the other person pay them back.

• You could alternate making payments. That is, one account holder pays the January bill; the other takes care of February, and so forth.

• Another payment guideline could be that you tally who bought what during each billing cycle and have each person be responsible for their fair share.

Impact of a Joint Credit Card on Your Credit Score

You are likely to be wondering, do joint accounts affect your credit score and can these credit cards help establish or maintain good credit? They can. Here are a few scenarios to consider:

• As all credit card payments on a joint account are reported to the credit bureaus, if you stay on top of payments, a joint account can help establish your credit. They can also help build your credit history.

• On the flip side, if you fall behind on payments or the account goes to collections, that can negatively impact your credit score. Debt gone to collections will stay on your respective credit reports for seven years.

• Another way joint credit cards can impact your credit is credit utilization. If you run up a high balance and are using close to your credit limit, then it could depress your score. But if you keep a low credit usage ratio, then it could help establish or build credit from scratch.

• Opening any credit card can affect your credit card history, which is another factor that plays into your credit score as tracked by the three credit bureaus.

Open too many credit cards in a short time period, and that may not be a positive thing; it looks as if you are trying to quickly access a lot of credit. But if you open a joint account and stay in good standing, it can lengthen each of your credit histories, which can be good.

Joint Credit Card vs Authorized User vs Cosigner

You might’ve heard the terms “authorized user” and “cosigner” tossed around when considering credit cards. While they both imply a level of joint usage on a credit card, they actually mean very different things.

• An authorized user is a person you add to your account. They can use the card to make purchases. However, you remain the account holder and are fully responsible for paying off the card. And as the account holder, you are the only person authorized to manage and make changes to the account.

Your credit card payments are also reported on the authorized user’s credit file. So if you stay on-time with your debt payoff, this could establish or maintain your authorized user’s credit score.

• A cosigner is someone who agrees to share financial responsibility on a credit card account. If you have a low credit score or are building credit from scratch, a lender will take into consideration the cosigner’s credit. A cosigner’s strong credit could help you get approved for a credit card you might otherwise not be granted.

Furthermore, should you fall behind on payments, the cosigner is financially responsible for your paying off the balance.

Benefits of Joint Credit Card Accounts

Here’s a look at some of the advantages of having a joint credit card account:

• Can help you land better credit card offers. If you both have strong credit scores, then it could potentially improve the chances of getting credit cards with higher credit limits and better terms and rates.

Should one of you have a lower credit score, it might help that person get approved for a better credit card.

• Shared financial responsibility. If both co-owners of the credit card account are responsible and do their share to pay off the balance, it could help you stay on top of payments.

• Streamlines bills. Instead of having two separate credit cards, putting both people’s transactions on a single account could simplify payments. You have one fewer bill to manage.

• Can help build credit history. If one applicant is starting from scratch in terms of building a credit history, a joint account can help them establish themselves if payments are made on time and the credit utilization is kept low.

Disadvantages of Joint Credit Card Accounts

Now, consider the potential downsides of a joint account:

• Shared financial responsibility. This is one of those “could be a pro, could be a con” factors. Why’s that? Well, if one person is doing most of the spending, you’re both on the hook for making payments. This could potentially get complicated if one person isn’t pulling their weight, financially speaking.

• Potential personal complications. Should your relationship change or you end up fighting over transactions and other financial matters, a joint credit card could wind up being a difficult thing. Also, having a shared account could lead to each of you scrutinizing one another’s spending habits, for better or for worse.

• Confusion over who pays for what and when. Even if you set up some basic guidelines, you might find yourself in a quandary as to who pays for what. A joint credit card could become a source of stress or arguing in this way if you can’t develop a good, fair system for paying.

Factors to Consider Before You Open a Joint Account

Before making a decision on whether to open a joint credit card account, you’ll need to decide on how doing so can benefit both parties. It can be wise to work through the following points:

• Can a joint credit card help boost the odds of getting a credit card with better rates, terms, and more attractive perks? How can it help build both people’s credit histories?

• Another important consideration is the payment arrangement. Who is responsible for making the payments? Or will you set it on autopay and link it to one person’s account? Who will be responsible for going through each billing statement and figuring out which transaction belongs to which user?

• If you’re sharing a joint account with someone, it might be a good idea to have a savings account that serves as a cash cushion. You could each contribute a small amount every week, so it’s there in case money gets tight and you need help covering a credit card bill.

Do You Trust the Joint Account Holder?

As a joint credit card can impact your credit and financial situation, you likely need to truly trust the other party involved. If you’re relying on the other person to make payments on your behalf, can you count on them to do so? Also, it’s important that both parties are in a financially sound place where they can cover their share of the bill.

You also want to feel reassured that the co-account holder isn’t the type to splurge and put an extravagant purchase on the card. For instance, if you usually put, say, $250 a month on your credit card, you will likely want to know how much the other person usually rings up, as well as if they ever go buying sprees.

Are There Other Options to Consider?

Understanding exactly how a joint credit card works, what your respective responsibilities are, and how it impacts your finances and credit is important.

If a joint credit card doesn’t seem like the right fit, you can look into alternatives. These include keeping separate credit cards and possibly, if one person is building their credit from scratch, using a secured credit card.

Or the individual with a stronger credit history could add the other as an authorized user on their credit card account, as described above.

Tips for Removing for Partner From Your Accounts

Unlike an authorized user, where you can simply remove someone from your account, you usually can’t remove one co-owner on a joint credit card. Typically, you need to close the account entirely.

Either person has the power to close the account. However, both parties will be responsible for making payments until the balance goes to zero. So, you’ll likely want to have a discussion before doing so. When would be a good time to close the account, and how will you go about handling paying off the remaining balance? Communication is key to making sure that closing the account doesn’t become a difficult situation.

The Takeaway

Opening any credit card comes with an array of financial considerations to think over. And if you’re considering a joint credit card, it’s important to know how it can impact your credit, financial situation, and be aware of any potential quagmires. Typically, both applicants’ credit histories will be reviewed when seeking one of these cards, and each party, if given this kind of access to credit, will have full use of the account and full responsibility for the balance. If handled well, this can help establish and maintain your credit.

FAQ

How do shared finances affect my credit rating?

Sharing your bank accounts and budgets doesn’t inherently impact your credit rating. But when you open a joint credit card account, it can impact your credit histories, credit history length, and credit usage. With both parties responsible for the balance, it’s wise to think carefully about this kind of account. Another option is to be an authorized user on someone’s account who makes on-time payments and keeps their credit usage low.

Do both users on a joint credit card have the same credit score?

While both users on a joint credit card can be affected by the payment history and credit usage on the joint account, credit histories are always on an individual basis.

In other words, there’s no such thing as a shared credit account, and many factors go into someone’s credit score. So having a joint credit card doesn’t merge your scores or mean you’ll have the exact same score.

Is it advisable to open a joint account with my friend?

While you can open a joint credit card account with a friend, whether it’s a good idea depends on your financial habits and the level of trust between you two. Can they be trusted not to overspend and to do their part in paying off any credit card balance? A lot of discussion will need to take place before making this decision.

Photo credit: iStock/Jelena Danilovic

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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Mar

2023

Guide to Hotel Credit Card Holds

By Dan Miller | Credit, credit card, Money & Life | Comments Off

When you check into a hotel, the hotel is very likely to ask you to put a credit card on file. This is true even if you are using points for a free night or if you have already prepaid for your stay. When you give the hotel your credit card, they will usually place a small hold on your credit card. This is typically a relatively small amount, but it can range from $20 to $200 above the price of your room.

Hotels use these credit card holds because the exact amount of your final bill is not known at the moment of check in. You may charge items to your room, grab some drinks from the minibar, extend your stay, or even cause damage to the property. Once you checkout and your final bill is settled, the hotel credit card hold will usually drop off of your credit card account.

This can be a practice that merits a closer look. Read on to learn more about these credit card holds, including:

• What is a hotel credit card hold?

• How do hotel credit card holds work?

• How much do hotels hold on your credit card?

• How long does a hotel hold your deposit by credit card?

• What is a credit card hold vs. a debit card hold?

What Is a Hotel Credit Card Hold?

A hotel credit card hold is a type of credit card hold that happens when you stay as a guest at a property. When you check in to a hotel, they typically will ask for a credit card to put on file. The hotel will then put a hold on your card to account for any incidentals or other charges during your stay, such as room service or perhaps Wi-Fi fees (yes, some places still charge for that).

You are not responsible for paying the amount of the hold until and unless it becomes an actual posted charge. It may, however, decrease your total available credit in terms of your credit card limit.

How Hotel Credit Card Holds Work

Hotel stays are one of a few types of expenses where you may not know the exact final amount of the charge initially. When you go to the supermarket and buy a week’s worth of groceries, you will be immediately charged for the cost of that food — no credit card hold required. But when you check into a hotel, the management will put a hold on your card to account for any extra charges or damages that could occur in the future.

What Can You Be Charged For?

Most hotels will put a hold on your credit card to account for any extra or additional charges that might come from your stay. Here are a few things you might be charged for:

• The cost of your room (if not prepaid)

• Additional nights if you extend your stay

• Room service

• Other items charged to your room (such as minibar snacks or an on-demand movie)

• Damages to the property

How Long Does a Hotel Hold Your Credit Card?

Generally a credit card hold is processed by the card network itself (e.g. Visa or Mastercard) and not by the merchant. So the hotel itself likely does not have any control over how long the hotel credit card hold amount stays on your account. Generally, most hotel credit card holds will drop off within one to a few days after you check out.

If you’re still seeing the hold on your account after that, reach out to your credit card issuer to see if you can get it removed.

What Are the Benefits of a Hotel Credit Card Hold

A hotel credit card hold doesn’t offer very many benefits to the consumer — it’s more just an artifact of how credit cards work. A hotel credit card hold may provide some semblance of protection for the hotel itself in the case of getting payment for additional charges or damages.

But from the consumer side of things, a hotel hold on your credit card is just something to be aware of and account for, since it will generally lower your amount of available credit.

Other Methods of Reservation

You have a variety of different methods of payment that you might use to pay for your hotel stay. You might use your credit card points, cash, a debit card or prepay for your stay.

But it’s important to know this: No matter how you reserve and pay for your hotel room, the hotel is likely going to ask you for a credit card to put on file and put a hold on your card when you check in. It’s quite typical throughout the industry.

Booking a Hotel Using a Credit Card Hold

One of the most popular ways to book a hotel is with a credit card. Using a credit card to book and pay for your hotel allows you to not have to give a cash deposit or another form of payment when you check in and check out.

If you pay for your hotel room with a debit card, credit card rewards, or cash, you’ll likely also have to show a credit card when you check in. The hotel will generally put a small temporary hold on your credit card account at that time.

Best Practices for Managing Credit Card Holds

It’s unlikely that you have any control over a hotel putting a temporary hold on your credit card. That said, it’s still important to understand what that means and how you can manage it.

Most hotel holds on credit cards are relatively small amounts, even as little as $20. However, if you have a credit card with a lower overall credit ceiling or if you are close to maxing out your credit, this practice may end up limiting your total available credit. You’ll want to be aware of that to minimize the chances of your credit card being declined.

How Do Hotel Credit Card Holds Help Hotels?

Hotel credit card holds help hotels by making sure that they have access to your card in case there are additional charges or damages by guests. In many cases, there are no additional charges. You can make a credit card payment for the total amount of your bill and settle your account.

But if there are any additional charges, a credit card hold helps the hotel to know that your card has at least a certain amount available to pay.

Credit Card Hold vs Debit Card Hold

Holds can be issued on both credit cards as well as debit cards. In both cases, a hold is temporary and for a specific amount. Once the charge is finalized, the hold will usually be automatically removed.

One important difference to note: Because a debit card is tied directly to your bank account, you may be charged additional fees if the hold triggers an overdraft on your account.

In either scenario, it can be wise to understand your total available balance and how any temporary holds affect it.

Recommended: Credit Cards vs. Debit Cards

The Takeaway

It is common practice in the hotel industry to request a credit card at check-in and place a temporary hotel credit card hold on the card. This temporary hold is generally around $20 to $200 higher than the outstanding balance on your hotel room. This hold helps to protect the hotel if you have any additional charges or damages to the room. The temporary hold will usually be cleared within a few days of checking out.

FAQ

What happens to your card limit when you use it to hold a room?

The amount of credit that you have available to use on your credit card account is reduced by any pending credit card charges like hotel room holds. Your available balance will be at this lowered level until the charge is finalized, which may take a few days after you check out. Make sure that you understand your available balance to limit the chances that your card is declined.

How long does a hotel hold your deposit?

Generally, most hotels will put a temporary hold on your credit card when you check in. This hold usually lasts for a few days after you check out, when it will usually disappear. If you see a hotel credit card hold on your statement longer than that, contact your credit card issuer to see if they can remove the hold.

How much do hotels hold on credit cards?

The amount that hotels hold on credit cards will vary by hotel. Usually the hold will be anywhere from $20 to $200, plus any outstanding balance owed on the room. This helps to protect the hotel over any extra charges or damages that might occur. If you’re not sure how much the hold will be for, you can ask the desk clerk when you check in for the policy at that specific hotel.

Photo credit: iStock/ferrantraite