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An escrow analysis is a review of funds collected and disbursed in your escrow account throughout the year. Your escrow account is typically used to collect and then pay property taxes and/or insurance payments. The analysis is a simple addition and subtraction calculation conducted by the mortgage servicer to determine if your monthly escrow payments made in the previous year were sufficient to cover expenses.

Deposits from your monthly payment are additions to your escrow account. Subtractions from your escrow account are for charges like your tax bill or homeowners insurance premium.

After the escrow analysis is conducted, the servicer will provide the borrower with an annual escrow account statement reviewing the deposits and disbursements made over the length of the escrow year. It is normal for taxes and insurance to change and your monthly mortgage payment will be adjusted each year. The escrow analysis conducted each year ensures you’re contributing the right amount.

Here’s more information on escrow analysis, including:

•   Why you need escrow analysis

•   How escrow analysis works

•   How to read your escrow account statement that comes after an escrow analysis

Why Do I Need an Escrow Analysis

An escrow account analysis is required under consumer protection laws for the length of escrow. Regulation X of the Real Estate Settlement Procedures Act (RESPA) has mortgage servicers conduct an escrow analysis at the end of each computational year and provide consumers with an escrow account statement. The analysis shows the money coming in from your monthly mortgage payment as well as money going out to pay bills for your taxes and insurance.

The escrow account analysis is necessary to:

•   Find shortages or excess funds

•   Aim to maintain a balance high enough to pay escrow bills

•   Compute a new monthly payment each year from adjusted amounts to escrow bills

If the amount of money exceeded the disbursements, you may see a refund and a lower monthly mortgage payment over the next year. If the amount of money was less than the disbursements, you may have a negative escrow balance and need to make up the difference either in a lump sum or increased monthly payments over the next year.

This analysis also helps keep any excessive escrow monies in your pocket rather than retained with a mortgage servicer.

Recommended: How to Avoid Private Mortgage Insurance

How the Analysis Works

When you apply for a mortgage, your lender will conduct an initial escrow analysis before your mortgage servicer sets up your escrow account. This analysis will total up the costs of all the taxes and insurance premiums you will need to pay throughout the year. Then, that amount is divided by 12 to get the monthly amount that you pay into the escrow account each month.

Here’s a quick example with escrowed items:

After adding up all the yearly expenses paid through your escrow account, divide it by 12 to get your monthly escrow payment.

$4,200/12 = $350 monthly escrow payment

The amount of your escrow payment will be included with your monthly mortgage payment. Your mortgage servicer will handle the amount that needs to go to your escrow account. When the bill for your taxes or insurance comes, the mortgage lender or servicer will pay it from the escrow account for you.

Recommended: What Is an Escrow Holdback?

Every year, mortgage servicers are required to conduct an escrow analysis on your account and send you an annual escrow account statement. This statement includes how much you contributed to the escrow account each month and how much was distributed to taxing entities and insurance companies.

If, throughout the year, your tax and insurance bills totaled more than your monthly escrow deposits, you will see a negative escrow balance. If your monthly escrow deposits were significantly more than your escrowed bills, you may see a refund.

How to Read Your Escrow Analysis Statement

The primary objective of the escrow account disclosure statement is to document where your escrow account stands. It will detail specific contributions and distributions by month and let you know how your monthly escrow payment will change. It is similar to reading a mortgage statement, but there are several elements that are different.

New monthly payment

The annual escrow account disclosure will show you how your payment is going to change. You’ll see:

•   Current payment: This is how much your total monthly payment currently is. It includes both your mortgage principal and interest payment, as well your escrow payment.

•   New payment: Your statement will show your new escrow amount, which, when added to the principal and interest amount, will change your total monthly payment.

•   Shortage/surplus: If your account had a negative escrow balance in the past year due to an increased tax or insurance bill, you’ll see the amount you owe added to your monthly payment. If you have a surplus, you’ll see that here, too.

•   Difference: The statement will include a calculation of the difference between what you were paying in the past year and what you will need to pay in the upcoming year.

•   New payment effective date: You will need to change the amount you pay to your mortgage servicer by the date listed on the disclosure statement.

Escrowed items

Your escrow account disclosure statement will help explain why there was an increase or decrease in your escrow account. These include changes to insurance premiums and property taxes included in your mortgage payment. You may see a comparison summary of your escrowed items, including:

•   County tax

•   Homeowners insurance

•   Private mortgage insurance, or PMI

Your mortgage servicer will compare how much they expected to pay versus how much was actually paid for the escrowed item.

Repayment of Escrow Shortage or Surplus

If there’s a shortage in your escrow account, your mortgage servicer may provide you with the option to make up the shortage in a single payment. You may see an “escrow shortage coupon” at the bottom of the form that you can mail in with your payment.

It should include your:

•   Loan number

•   Name

•   Shortage amount

Because your mortgage servicer is allowed to collect the deficient amount throughout the year, you may not see a due date for a single payment. Keep in mind, however, that this is not the same for a new adjusted payment amount, which must be changed by the payment due date.

If there is a surplus, which is defined as $50 or more, you’ll likely receive a check in the mail.

Escrow Account Projections and Activity History

It’s common to see a table of payments and disbursements by month on an escrow analysis. You’ll see how much you paid each month and when escrowed items were paid. You’ll also see a running account balance, which is important in ensuring there’s enough money to pay for escrowed items throughout the year.

The Takeaway

Escrow analysis occurs at the end of each computational year to ensure there’s enough in your escrow account to cover the costs of insurance and taxes. Excess amounts can be refunded to you, while deficient amounts (or shortfalls) can be added to your monthly payment in the next year.

When thinking about mortgages, whether a new loan or a refinance, SoFi may be able to help you with your homeownership goals. With flexible mortgage loan options, competitive interest rates, and personalized attention from loan professionals, you’ll have the information you need to make important financial decisions, quickly and conveniently.

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

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A hotel credit card is a type of credit card that’s co-branded with a major hotel group. They work just like any other credit card, and you can use them to make purchases anywhere that a particular credit card network is accepted. The main difference is that when you use the card for purchases, you earn points, which allow you to save money on hotels. You can redeem those points for free hotel stays and additional perks with that hotel group.

Deciding which hotel credit card is right for you entails more than just finding a hotel you like. To know if a hotel credit card is worth it, you’ll want to know what to look for in a hotel credit card and the pros and cons involved, as well as how redemption rates can vary.

What Are Hotel Credit Cards?

As mentioned, a hotel credit card is a type of card that’s offered through a partnership between a credit card issuer, such as a bank or credit card network, and a major hotel. Hotel credit cards are considered open-loop cards, which means you can use the card to make purchases anywhere that type of card is accepted. This is in contrast to a private label credit card, which you can only use at a particular store.

Hotel credit cards feature a rewards program, which allows you to earn points for purchases made with the card. You can use the points you earn toward stays at hotels, allowing you to save money on hotels. These cards may also come with automatic elite status, which might include free wifi, extended checkout, and complimentary breakfast.

Keep in mind that hotel credit cards are different from a hotel loyalty program, which incentivizes guests to stay at hotels. In return for their stays, guests can earn rewards like free nights and complimentary meals. Hotel credit cards allow you to earn rewards more quickly by making purchases on your card.

How Do Hotel Credit Cards Work?

Hotel credit cards operate how credit cards work usually. You’re given a credit limit and can use your card to make purchases to that limit. You can pay your balance in full each month, or you can opt to pay it back over time, though this will lead to interest charges accruing.

The main draw of hotel credit cards is that there’s a rewards program and various extra perks offered. You rack up credit card points for using your card, and then can redeem them for free hotel rooms. Think of it like the hotel version of an airline credit card, which allows you to earn credit card miles for flights.

Each hotel credit card has a different rewards program and awards points at different rates. The amount you earn hinges on the hotel’s rewards policy as well as your card’s tier. That’s because the same card can have different tiers, with higher tiers enabling you to earn rewards faster.

What to Look for in a Hotel Credit Card

With so many hotel credit cards to choose from, here’s what you’ll want to pay close attention to when researching and comparing your options:

•   Hotel brand: As hotel credit cards only allow you to redeem credit card points for that particular hotel or group of hotels, which major hotel group the card is co-branded with is important. Where are their hotels located, and how many hotels are there? Can you redeem points for any of their hotels? Are there blackout dates?

•   Rewards program: You’ll want to look at the earning rate for the rewards program. Also investigate where there other perks, such as automatic upgrades, complimentary wifi and breakfast, and extended checkout. Some hotel credit cards even feature an anniversary bonus.

•   Sign-up bonus: Some cards feature an attractive sign-up bonus. For instance, you might earn a free night’s stay for simply signing up, or points if you spend a certain amount within the first few months after opening your account.

•   Additional perks: Beyond the basics, a hotel credit card might offer extras like credit card travel insurance and airport lounge access.

•   Credit card tier: As mentioned, a single hotel credit card might have several tiers to choose from. The higher the tier, the quicker you can earn points, and the more opportunities to earn points. Plus, higher tiers usually come with more perks. However, higher-tier credit cards also can be harder to qualify for. You might need a stronger credit score, higher income, and lower debt-to-income ratio than you would to qualify for a lower-tier card. Plus, a higher annual fee might apply.

•   Annual percentage rate (APR): If you plan on carrying a balance on your card, it’s particularly important to understand the APR of the card. Further, look at the terms and fees. What will you be charged for a late payment? Are there foreign transaction fees? Some credit cards, such as SoFi’s credit card, charge no foreign transaction fees.

•   Fees: If the hotel credit card comes with an annual fee, will you use it enough to offset the fee? Take the time to crunch the numbers before committing.

Recommended: Credit Card Miles vs. Cashback

Advantages of Hotel Credit Cards

When weighing whether hotel credit cards are worth it, consider some of these potential advantages:

•   Faster rewards earning: Compared to a hotel’s loyalty program, you’ll earn points faster with a hotel credit card. Plus, with a hotel credit card, there are usually more opportunities to earn rewards, as you rack points whenever you purchase something with your card. You might also earn additional points for booking at the hotel using your card.

•   Additional perks: As mentioned, a hotel credit card might come with added benefits, such as free internet, extended checkout, complimentary breakfast, and room upgrades.

•   Travel-related benefits: You might be able to take advantage of trip protection, credits that you can use to pay for room service or spa treatments, and credit toward Global Entry or TSA PreCheck.

•   Automatic upgrade to elite status: If a card offers an automatic upgrade to their hotel program’s elite status, you might be privy to room upgrades, credits toward room service, or concierge services.

Recommended: What Is an International Credit Card?

Disadvantages of Hotel Credit Cards

Here are some downsides of hotel credit cards to consider:

•   Limited uses: Because hotel credit cards are co-branded with a specific hotel brand, you can only use the rewards and perks when you stay at that particular hotel. Plus, there might be blackout dates, meaning you can’t use your benefits on those particular days, which are usually during times of high demand.

•   Possible annual fee: A card might come with an annual fee. The higher the tier, the higher the annual fee, if one applies. However, there’s a chance you could dodge this by focusing your search on no annual fee credit cards.

Who Should Open a Hotel Credit Card?

Wondering if a hotel credit card is worth it? If you’re someone who travels frequently and enjoys staying at major hotels as opposed to an Airbnb, then a hotel credit card could be a good idea. You’ll want to make sure you use the card enough to rack up points accordingly, and understand all the perks so you can make the most of them.

If the card comes with an annual fee, determine first whether the cash value of your points is enough to justify the cost. This could influence whether opening a hotel credit card makes sense.

How Redemptions and Earning Rates Vary on Hotel Credit Cards

The “earn and burn” rates for this category of rewards credit cards can vary greatly. Some offer 0.5 cents a dollar, while others over 5 cents a dollar and upwards. Plus, higher-tiered cards typically make it easier for you to earn points more quickly.

As no two hotel credit cards are alike, before deciding on a hotel credit card, look carefully at how you can earn points and how many points you can earn for certain types of purchases. By looking into how you can redeem your rewards and if there are any restrictions, you can also figure out how to make the most of your card.

How to Find a Hotel Credit Card

You might receive a hotel credit card offer via mail or in your email inbox. But your options aren’t limited to offers you’re preapproved for. Rather, the easiest way to find a hotel credit card is by way of an internet search. You can start by searching for your favorite hotel brands to see if they have a co-branded credit card available.

From there, you’ll want to narrow it down to a few options and compare how those hotel credit cards stack up against one another.

The Takeaway

Hotel credit cards are a category of rewards credit cards that allow you to earn hotel points through your spending on the card. You can then use those points toward hotel stays and other perks at the hotel chain affiliated with the card. When shopping around, you’ll find that there are a slew of options for hotel credit cards. It’s important to review details like the card’s rewards programs and other perks, as well as the APR and fees involved.

In some cases, after weighing the advantages and drawbacks of hotel credit cards, you might decide a hotel credit card isn’t worth it for you. Instead, a more general rewards credit card could be a better fit. The SoFi Credit Card, for instance, allows you to earn cash-back rewards on all eligible purchases that you can then use to save, invest, or pay down eligible SoFi debt.

FAQ

Does my marital status matter in a hotel credit card?

By law, credit card companies cannot consider your marital status when determining whether to offer you a credit card. By extension, whether you’re married or not doesn’t affect your odds of getting approved for a hotel credit card, nor should it impact your terms, rates, or benefits.

How much is charged by hotels on your credit card?

A hotel might charge your credit card when you book a room, check in, or at checkout. When your card is charged might depend on how you made your reservation and the hotel’s policies. If in doubt, read up on the hotel or booking platform’s policies.

Is your credit card charged when you check out?

If you’re booking for a prepaid stay, your credit card will be charged at the time you make your reservation. If it’s a standard booking, then the hotel will charge your credit card at checkout. Any incidentals — think room service, massage treatments, and meals at the hotel — will be charged at checkout.

Photo credit: iStock/Prostock-Studio

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.


Members earn 2 rewards points for every dollar spent on purchases. No rewards points will be earned with respect to reversed transactions, returned purchases, or other similar transactions. When you elect to redeem rewards points toward active SoFi accounts, including but not limited to, your SoFi Checking or Savings account, SoFi Money® account, SoFi Active Invest account, SoFi Credit Card account, or SoFi Personal, Private Student, Student Loan Refinance, or toward SoFi Travel purchases, your rewards points will redeem at a rate of 1 cent per every point. For more details, please visit the Rewards page. Brokerage and Active investing products offered through SoFi Securities LLC, Member FINRA/SIPC. SoFi Securities LLC is an affiliate of SoFi Bank, N.A.

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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