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A secured credit card is one that requires a security deposit — typically several hundred dollars — that is used as collateral in case the cardholder fails to make payments. If you have a brief credit history or dinged credit, a secured credit card can be a good tool for building credit.

Why care about your credit health? Because creditworthiness can come into play when applying for loans, jobs, apartments, and other situations that require a credit check. If you can’t get a regular unsecured credit card, a secured credit card may be a good option.

What Is a Secured Credit Card?

A secured credit card is a credit card that requires a refundable security deposit, which counts as collateral until the account is closed.

The security deposit decreases the risk for the credit card issuer, and allows people with damaged or limited credit to build a history of on-time payments. If your credit score is 600 or so (fair) or perhaps lower, you may be able to get a decent secured credit card.

Most secured cards require a minimum deposit of $200 or $300, and that amount is usually equal to your credit limit. If your deposit is on the low end, you’ll want to be careful how you use the card. Credit scoring models typically penalize utilization over 30%, so if your credit limit is $300, you may want to keep your balance under $90. A higher deposit will provide breathing room. A deposit of, say, $1,000 boosts the 30% threshold to $300.

Finally, a heads-up if your credit is bad: Unsecured cards targeting people with bad credit are notorious for high fees and confusing terms. And issuers of these cards usually don’t have good cards to upgrade to.

How Does a Secured Credit Card Work?

Here’s how a secured credit card works: You put down your security deposit, and then you get the same amount to spend as a line of credit.

If you want to increase your limit, you’ll have to contribute more to your security deposit. Secured credit card issuers don’t want to be left in the dust if you decide not to pay — or cannot pay — your balance. If that were to happen, they would just take your security deposit.

This type of card may be suitable for people who’ve gone through bankruptcy or are just starting out and have a limited credit history. Typically, a secured card is a better option than a high-interest unsecured credit card that’s targeted to people with a low credit score. That’s because a high-interest card, while enticing, can take years to pay off and end up damaging your financial reputation even further. A secured credit card poses a much lower risk.

A secured credit card looks the same as a regular credit card on a credit report — so users don’t have to worry about other lenders seeing that they have this type of card. And as long as the balance is paid in full and on time every month, you should start to build your credit score.

After using the card responsibly for a certain amount of time, a secured card holder may be able to get an unsecured card. Your secured card company can switch a card to unsecured as well, allowing access to a higher line of credit without a deposit.

Recommended: What Are Purchase Interest Charges on Credit Cards?

Pros and Cons of a Secured Credit Card

Like most things in life, there are positives and negatives to this kind of card.

Pros

•   Can build credit. Secured cards can allow you to build your credit history if you have limited or damaged credit. You do that by making on-time payments every month — at least the minimum payment, but preferably the full amount to avoid interest charges.

•   Lower credit line. A lower limit means you’re less likely to go over it and risk running a high balance. This is helpful for people who are still learning how to use credit responsibly.

•   Card benefits. Secured cards may offer basic benefits like fraud protection and cash back, just like you get with an unsecured card.

•   Potential to upgrade. Some secured cards allow the holder to switch to a regular unsecured card after a period of responsible use.

Cons

•  Security deposit. All secured cards by definition require the holder to provide the issuer with a cash deposit. That deposit is refunded once you switch to an unsecured card.

•  Fewer rewards. Secured cards don’t offer all the bells and whistles that an unsecured card can. For instance, you may not earn travel points, receive any discounts on goods and services, or get access to airport lounges.

•  Interest rate. As noted above, secured cards often carry higher interest rates than regular credit cards. (Of course, the interest rate won’t matter if you’re paying your bill in full each month.)

•  Requires a hard inquiry. The issuer will need to run a hard inquiry or pull on your credit report. This usually translates to a slight drop in your credit score.

Applying for a Secured Credit Card

The application process for a secured card should be relatively quick and simple, provided you prepare what you need ahead of time.

1.   Shop Around. Secured credit cards are not all the same. Look for a card with no annual fee (they’re nonrefundable) and a minimum deposit amount that meets your needs. Some cards even offer limited rewards, like cash back. Finally, make sure your payment history will be reported to the three main credit bureaus — that is how you’ll build your credit.

2.   Check your credit score. It’s smart to go into the application process knowing exactly what your credit score is. There are several ways to find it without having to pay a fee. Visit AnnualCreditReport.com, for example. Your bank may also provide your credit score online for free.

3.   Collect your information and paperwork. Application requirements vary depending on the card issuer. To make sure you have all the documentation you need, gather the following:

  – Proof of identity, such as a driver’s license, passport, or other photo ID.

  – Proof of address, like a recent utility bill.

  – Bank account info. If you have a checkbook, your bank info and account number appear on your checks.

  – Citizenship or residency info.

  – Recent pay stub, W2 form, tax return, or other proof of employment and income.

  – Social Security number. You don’t have to bring your card; just make sure you know your number.

4.   Complete the application. You can do this in person if your credit card issuer has a branch near you. You may also do it over the phone with a customer service rep — just be aware you’ll need a way to provide your documentation, either in person or via upload. The easiest method may be online, as long as you have access to a computer or smartphone that allows you to upload documents or images.

5.   Provide a deposit. This is usually done via online transfer from your checking or savings account.

Tips for Bettering Your Chances at Approval

If you’re nervous about getting approved, taking these extra steps can help you maximize your odds.

1.   Review your credit report. Request free reports from the three major credit agencies at AnnualCreditReport.com, as noted above, and review them carefully. If you find any errors — from outdated information to unfamiliar accounts — file a dispute to have the data corrected or removed.

2.   Pay your bills on time. Many people hit a financial rough patch at some point. The important thing is to show a recent history of on-time payments. If you can point to a year’s worth of good habits, credit card issuers will be more likely to consider you worth the risk.

3.   Maintain a steady job. Even if you don’t have a high income, job security reassures credit card companies that you have the cash flow you need to pay your bills. Your employer may be able to give you a reference letter stating how long you’ve worked for the company and your track record of reliability and good work.

4.   Become an authorized user. Got a family member or close friend with great credit? Ask them if they’ll add you as an authorized user on their credit card. Over time, their good habits will rub off on your credit history. And that may give you the boost you need to get approved for your own card.

Using a Secured Credit Card

Major credit card companies such as MasterCard, Visa, and Discover offer secured credit cards. This means you can use your card anywhere these brands are accepted.

Some secured credit cards offer benefits like cash back and free access to your credit score.

Many major credit cards also provide liability protection, so you won’t be responsible for fraudulent charges on your account. You may have to pay fees, such as a monthly maintenance fee, annual fee, balance inquiry fee, or an activation fee.

Though you may be able to get a secured credit card with a lower interest rate than an unsecured credit card, the average rate for secured cards can still be high, so be prepared for those charges.

It’s smart to do some online comparison shopping of different credit cards to see which one has the most appealing terms. However, it’s best not to apply for too many; one hard inquiry can cause a credit score to drop 5 to 10 points temporarily. If you apply for more than one or two cards, that could have a negative effect on your credit score.

When you start using your card, paying it on time is going to impact your credit score rating. If you may not remember to pay it each month, you could set up automatic payments to ensure your bills are up to date. You can also check your credit score every month to make sure it’s trending upward.

Building Credit with a Secured Credit Card

Secured cards are a great way to build credit if you have a low credit score or a limited credit history. How they do that is not so different from how a regular credit card works.

•   First, you need to pay your bills on time, each and every month. Missing one payment will undo all your good work up to this point. If you don’t trust yourself to remember every single time, there’s a simple solution. Set up automated payments through your bank so that your card is paid on the same day each month. You can choose to pay the minimum, a set amount over the minimum (say, $100), or the whole balance. What’s more, paying off the balance each month will save you money on interest.

•   Second, avoid running up a high balance. In this case, a high balance just means an amount approaching your credit limit (the same amount as your security deposit). Try to keep your credit utilization — the percentage of credit that you actually use — below 30%. If your credit limit is $500, the most you should charge per month is $150 (this assumes you have no other debt). As you rack up a history of on-time payments, you can request a higher limit, though that will require a higher deposit.

Denial of a Secured Credit Card

Even though getting a secured credit card with limited or damaged credit history is possible, an applicant may still be denied. Anyone who is denied a card should receive a letter from the credit card issuer explaining why. Perhaps they didn’t fill out the application properly and all they need to do is fix it, or their credit score wasn’t high enough.

If the reason has to do with the applicant’s credit report, they can get free access to their report through AnnualCreditReport.com and see their entire credit history. For example, the credit report may reveal that the credit utilization ratio or the amount of debt compared with the amount of credit a person has is too high. An applicant could start paying down debt more aggressively in order to bring down the credit utilization ratio and have a better chance of being approved for a secured credit card.

Another factor that may cause a denial is if an applicant doesn’t make enough income or can’t prove income. The credit score just may be too low as well.

The Takeaway

A secured credit card is one that requires a security deposit that is used as collateral in case the cardholder fails to make payments. Secured cards have more relaxed application requirements than unsecured cards, making them popular with people who have limited or damaged credit histories. Most secured cards report to the major credit bureaus, allowing holders to build up a positive credit history over time.

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

FAQ

Do secured credit cards build credit?

Many secured credit cards can help you build credit. Before you apply, check that the card issuer reports to the three main credit bureaus. Then, make sure you make on-time payments each and every month.

How does a secured credit card differ from an unsecured credit card?

A secured credit card requires a cash deposit that is equal to your credit limit, while an unsecured one doesn’t ask for this. This serves as collateral in case you are unable to pay your bill. The deposit is refunded if you close the card or switch to a regular unsecured card. Secured cards typically have low credit limits, higher interest rates, and few perks or rewards.

How do I close a secured credit card?

To close your card, call the number on the back or log in into your account online. Or you may choose to cut up the card without officially closing it, so that your credit history doesn’t take a hit due to a reduced credit history.

How can I change a secured credit card to an unsecured card?

If you have a record of on-time payments with your secured card issuer, ask them if they offer an unsecured upgrade. Some card issuers want to see a year or so of good credit habits before switching you to an unsecured card.

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

This content is provided for informational and educational purposes only and should not be construed as financial advice.

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.

Third Party Trademarks: Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

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Many of us rely on a job for our income. If that includes you, and if you find yourself unable to continue performing your job duties because of a physical ailment, disability insurance can be a godsend. It replaces a portion of the income you lose when you can’t work.

Disability insurance comes in two distinct flavors: own-occupation (also called own-occ) and any-occupation (or any-occ) disability insurance policies. Although they may sound similar, there are some key differences in how much coverage each type of policy offers.

What Is Disability Insurance?

Let’s start with a review of what disability insurance is and how it works.

Disability insurance is an insurance product that protects workers against income loss due to a disability. In other words, if a disability or illness keeps you from being able to do your job, disability insurance can provide you with a source of income. But typically, the payments don’t replace the full amount of your lost wages.

Disability insurance usually has an expiration date. Short-term disability insurance pays a portion of your lost wages — typically between 50% to 70% — for three to six months. Long-term disability insurance can pay around 60% to 80% of your lost wages for two years or until your retirement, based on your specific policy. (The duration may be reflected in the premium amount.)

There’s also public disability insurance through the Social Security program: Social Security Disability Insurance (SSDI), which is free and can pay for as long as you are disabled or until you reach retirement age. Those payments are calculated based on your average indexed monthly earnings, which means they might be higher than the 60% to 80% range offered by private insurers. However, SSDI can be difficult to qualify for and the process can be lengthy. Even if you are approved, you must wait five months after approval to receive your first payment.

Recommended: Short Term vs. Long Term Disability Insurance

Own-Occupation vs. Any-Occupation Disability Insurance

When purchasing private disability insurance, you may have the option to choose either an own-occupation policy or any-occupation policy. (Note that your employer may only offer only any-occupation policy, so be sure you read your paperwork carefully to understand what you’re getting.)

Own-occupation is a more robust disability insurance product. It protects you in the event you become disabled and can’t work at your job. Typically, it’s more expensive than any-occupation disability insurance.

Any-occupation disability insurance protects you in the event you become disabled and can’t work at any job you’re reasonably qualified for.

Let’s dive deeper into the differences between these two products.

Own-Occupation Disability Insurance

Own-occupation disability insurance insures you against any disability that keeps you from performing your regular job. In many cases, you’re still eligible to receive benefits even if you find another job.

There may be language in the contract stating that you have to have been working at the moment you became disabled in order to be covered. But there are also policies that cover people who become disabled outside work if their disabilities prevent them from performing their job duties.

Highly skilled surgeons, for example, frequently get own-occupation insurance, since their jobs require such finely tuned motor skills. For instance, if Grey’s Anatomy heart surgeon extraordinaire Dr. Preston Burke, who suffered from hand tremors after surviving a gunshot injury, had had own-occupation insurance coverage, he could have chosen to move into a different role in the hospital and still received benefits for losing his ability to perform his original job. He could also have chosen not to work at all and still have received benefits.

Any-Occupation Disability Insurance

Any-occupation disability insurance works a bit differently. This type of policy insures you against any disability that keeps you from performing any job you’re reasonably qualified for.

“Reasonably qualified” is determined by the insurance company and is based on factors like your age, education, and experience level. If you’re still considered “capable” of working with the disability — even if it’s at a lower-paying job — you would likely not receive any disability benefits at all.

This means that any-occupation insurance is a much less flexible and reliable form of disability insurance coverage. However, it’s often the only option available through an employer. Be sure to read your benefits package carefully, since you might want to purchase additional coverage to ensure that you’ll receive benefits if you do find yourself unable to do your work.

Let’s go back to the Dr. Burke example to see how the difference between these two insurance coverage options plays out. Because Dr. Burke was still a talented doctor who could perform other medical services and assessments, any-occupation disability insurance wouldn’t have covered him at all after he sustained his gunshot wound. Although he was unable to perform delicate heart surgeries, he could have taken another job in the hospital or even a job outside the medical field entirely. Thus, his any-occupation disability insurance wouldn’t have kicked in unless he sustained a more incapacitating injury that rendered him unable to work at all.

Recommended: Everything You Need To Know About Getting a Loan While on Disability

The Takeaway

Disability insurance helps you replace part of your lost income if you become unable to perform your job duties due to an illness or injury. But when you’re covered depends in large part on whether you have own-occupation or all-occupation insurance.

Own-occupation disability insurance coverage kicks in if your disability prevents you from performing the specific occupation you hold. Any-occupation disability insurance coverage kicks in only if you can’t perform any job you’re reasonably qualified for.
That’s why it’s key to know what kind of policy you have and whether you have the right coverage in place. Disability coverage can offer one level of protection; life insurance can provide another.

When the unexpected happens, it’s good to know you have a plan to protect your loved ones and your finances. SoFi has teamed up with some of the best insurance companies in the industry to provide members with fast, easy, and reliable insurance.

Find affordable auto, life, homeowners, and renters insurance with SoFi Protect.

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Auto Insurance: Must have a valid driver’s license. Not available in all states.
Home and Renters Insurance: Insurance not available in all states.
Experian is a registered trademark of Experian.
SoFi Insurance Agency, LLC. (“”SoFi””) is compensated by Experian for each customer who purchases a policy through the SoFi-Experian partnership.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.


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’re not a seasoned credit card user, you might have questions about credit card payments and their impact on your credit.

Used smartly, a credit card can be a great financial tool, but the key is not charging more than you can afford to pay back and making payments on time each month. Here, you’ll learn more about how to manage your credit card payments well which can help optimize your finances.

The Benefits of Using a Credit Card

A credit card is convenient if you don’t have cash on hand to make a purchase. As long as you know you can pay back what you charge, either in full or over a few months, a credit card can be a useful tool.

There may also be situations like renting a car or booking a hotel room when you are typically required to have a credit card to avoid a deposit. The hotel or rental company will place a hold on your card so that in the event of damage or other expenses you need to cover, the company knows you can pay them. With a debit card, you may have that same hold of several hundred dollars tying up your funds for several days.

Another benefit of credit cards is the ability to earn rewards. Many cards give you points for purchases that you can redeem for travel, cash back, or other perks, and if you pay your balance before accruing interest, it can be like the card is paying you to use it.

Potential Downsides of Using a Credit Card

On the other hand, credit cards can cause issues if you don’t exercise good behavior in terms of your credit card payments. Each month, you are charged interest on your purchases. The interest is calculated by dividing your card’s annual percentage rate by 365 to get the daily rate, and then multiplying your current balance by the daily rate.

That may only amount to a few extra dollars a month, but if you don’t pay your balance in full for several months, that amount can snowball, and what you initially charged can easily cost you a lot more.

Another thing to be aware of is the fact that credit card companies charge fees in addition to interest. Some charge an annual fee (usually for cards with rewards programs).

Cash advances come with a fee and a higher interest rate than for purchases.

There are also late credit card payment fees to watch out for. Not only will you be charged a fee if you don’t pay the minimum due by the payment due date, but it may appear on your credit report as a negative mark. This may hurt your credit scores and your ability to take out other financing later.

How Credit Cards Impact Your Credit Scores

While a late payment can negatively affect your credit scores, credit card payments made on time can actually help your credit scores.

Each time you make a payment on time, it is reported to credit bureaus like Experian®, Equifax®, and TransUnion®. Over time, on-time payments may factor into the algorithms the credit bureaus use to determine your credit scores, and may build your number a few points.

Each bureau has its own formula for how scores are determined, and not every credit card company reports to each bureau, so there’s no easy way to know how your payments directly affect your score. But in general, paying on time is behavior that will benefit you over time.

Understanding Credit Utilization

Another factor that goes into your credit scores is credit utilization. This is a calculation of how much credit you have available to access compared with how much you are actually using.

Let’s say you have three credit cards and a total available credit of $15,000. You have a balance of $2,000 across all of them. By dividing the balance by the total credit available, you get 0.133, or 13% credit utilization.

When applying for new credit cards or loans, lenders will look at your credit utilization. If it’s too high — most look for a rate of under 30% or under 10% ideally — you may not be approved for the card or loan. That’s why it’s important to stay on top of how much of your total credit you’re using and pay down your debt so you don’t have a high credit utilization rate.

Recommended: Breaking Down the Different Types of Credit Cards

How to Build Your Credit With a Credit Card

Once you understand how credit card payments work, you may use credit cards to build your credit.

1. Pay Your Bill on Time Each Month

You’ve learned the importance of making your credit card payments on time. For some people, it can be helpful to put the credit card due date on a calendar (leaving a few days for the payment to get to the company and be processed) to ensure they don’t have late payments.

Many people find autopay, used wisely, a great tool.

If you’ve just received your first credit card, find out how to make credit card payments long before your first one is due, as you might need to set up your bank account information to send an electronic payment, and you want to allow time for that process to be finalized before the due date.

2. Pay More Than the Minimum

If you only charge what you can afford, you should be able to pay off your balance each month, but there may come a time when you have an emergency that requires a larger charge you can’t pay off all at once.

In that case, you may be tempted to pay the minimum amount due, but realize that in doing so, you will pay more in the long run, as those interest charges will snowball. Even if you pay just $5 a month more than the minimum due, you can cut down on interest and pay off your balance faster.

This will also reduce your credit utilization rate and may build your credit score.

3. Review Your Credit Report Regularly

Working on your credit involves more than just making credit card payments on time. Access your credit report from Equifax, Experian, and TransUnion (it’s typically free to do so) and review it for accuracy. Make sure the payments you’ve made are reported as on-time, and look at your list of trade accounts to make sure there are no errors.

For example, maybe you closed a credit card six months ago, but it still appears on your credit report. This is a discrepancy that you can report to the bureau (each bureau’s website has information on how to report a discrepancy). Check again after you report it (allowing for time to process your request) to ensure it has been removed.

Regularly reviewing your credit report will also alert you to any fraudulent activity that might occur. It’s rare, but identity theft does happen, and you’ll want to know if someone is using your identity to open credit cards or take out loans.

4. Only Charge What You Can Afford

Credit cards can be tempting. Without discipline, you might feel like taking a shopping spree, ignoring the financial consequences.

As mentioned in terms of using a credit card responsibly, only charge what you can afford to pay back in a reasonable time frame. A credit card isn’t meant to be free money, and overspending with one can cost you much more than you initially spent.

The Takeaway

Using credit cards responsibly and making credit card payments on time (and in full, when you can) can set you on the path to financial success. The key is to be aware of your spending and your credit utilization so you can help build your credit scores over time.

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

FAQ

How do credit card monthly payments work?

Credit card monthly payments involve paying at least the minimum amount due to avoid late fees and keep your account in good standing. Paying off the full statement balance avoids interest charges.

Do you pay your credit card in full every month?

Credit cards don’t need to be paid in full every month, but doing so prevents interest charges and debt from accumulating. Even so, carrying a balance with interest can be an effective way to finance major purchases, like a kitchen renovation or a significant car repair.

How are credit card payments worked out?

Credit card minimum payments are usually calculated as a percentage of your statement balance. Some lenders may charge a percentage of your balance, while others factor in interest and other fees. You can check the fine print or contact your card issuer for details.

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

This content is provided for informational and educational purposes only and should not be construed as financial advice.

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.

Third Party Trademarks: Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

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Attending college is a big milestone that both parents and students look forward to for many months.

While this is a highly anticipated event, college move-in day can also be a very stressful and emotional day for both students and parents. Attending a college that is out of state can be another nerve-wracking factor.

Moving can be challenging, especially if it’s hot or you have to climb up several sets of stairs. Fortunately, there are several things you can do ahead of time over the summer that can help ensure the day goes as smoothly as possible.

Preparing for the Big Day

Getting organized beforehand is one surefire way to prepare for the big move as a college freshman. Here are a few ideas to help you and your child get ready for move-in day.

Getting Familiar with Dorm Room Rules

Being prepared and learning what the college dorms allow students to bring can relieve some potential headaches. Colleges typically post a list of items that students can bring and ones that are prohibited in the residence halls.

Sticking to the basics is a good start since your child can buy more items from a local store or have it shipped to them at a later date.

Recommended: College Essentials: What to Bring to College

Coordinating with Your Roommate

Recommend that your child contact their roommate over the summer and discuss their interests and what items each of them are bringing. This can be one way to help avoid bringing duplicates, especially for larger items like TVs or bean bags.

Another idea is to coordinate the time you are going to move in so you can assist each other during the process. This can also be helpful if the parents are interested in meeting each other.

Packing with Purpose

Packing for college can be a frustrating task, but one way to expedite the chore is to have your child label all the containers and boxes so you know what’s already packed and can easily find things once you arrive. If you have items that are more fragile, consider putting them into heavy plastic containers so they are less likely to be damaged during the move.

Also consider making a list of must-have items, to limit the chance that something important is forgotten. For example, bedding, computer, school supplies, a first aid kit, and basic tool kit — which can be extremely useful on move-in day.

If your child is attending a college that is out of state or in a different climate, you may have to build out a more weather-appropriate wardrobe. For instance, if your child is moving to a college in the Midwest from Florida, you might buy and pack weatherproof boots, jackets, scarves, gloves, and other clothing suited for colder temperatures.

If they are attending college in a warmer climate, consider packing more t-shirts and shorts and leave some of the sweatshirts and wool sweaters at home.

Recommended: College Planning Guide for Parents

Planning Travel Arrangements

Once you’ve organized and packed all of your child’s belongings, it’s time to decide how you’ll get everything to campus. This will likely depend on factors like how far away the school is.

Consider renting an SUV or a moving van if the university is within driving distance and you own a smaller vehicle. If you plan on driving, pack the car strategically, so items you’ll need first (like cleaning supplies), are easily accessible when you arrive.

If you’re planning to fly to the college, another strategy may be to mail some of the belongings to the residence hall ahead of time, if it is permitted.


💡 Quick Tip: Parents and sponsors with strong credit and income may find much lower rates on no-fee private parent student loans than federal parent PLUS loans. Federal PLUS loans also come with an origination fee.

What to Expect on Move-In Day

While going to college is really exciting for your child and your family, consider limiting the number of people you bring with you on moving day. You know the saying “too many cooks in the kitchen,” well the same philosophy can apply to a move.

Having too many people could actually slow down or complicate the process. Plus, it’s likely that many students and their parents will all be in the residence halls at the same time. Dorm rooms can be pretty small and having more people in the space could create more chaos and tension.

Instead, consider planning a visit when there is more flexibility. Many colleges have a family weekend in the fall. This could provide an opportunity for a longer, more relaxing and fun visit, especially if grandparents, aunts, and uncles also want to tag along.

Since many students move in during late summer, it can help to be prepared for heat (and humidity, depending on the local climate). It’s likely going to be hot, especially if the residential dorm does not have central air conditioning and only window units or getting to a top floor requires traipsing up and down several flights of stairs.

Consider bringing a fan to help circulate some air while you get everything settled.

Doing all that heavy lifting is no easy task. Wear comfortable clothing and shoes for the move and bring another outfit to change into later as you tour the campus or grab dinner with your child.

Bringing water and snacks is generally a good idea too, especially if you are moving furniture and other heavier items. Putting the drinks in a cooler will help keep them cold, especially if the room does not have a refrigerator. Make sure you have enough for the roommate and their parents.

Determine whether the residence hall has a dolly or other items that you can borrow because they can help make the move easier. Signing up for those items early can help ensure that you can use them the day you move in. Otherwise, you can buy one from a local hardware store or split the costs with a roommate or another friend who is living in the same residence hall.

Students who have other friends who are also moving in during the same day might want to consider connecting beforehand so they can help each other move, especially bulky or heavier pieces of furniture.

During the unpacking process, your child might find that they brought too many personal belongings or packed things they either don’t actually need or don’t have room for.

For instance, if the roommate also brought a television and there is no room for two, you could pack yours up and take it home.

While you may be concerned about whether your child has enough necessities like sheets, toothpaste, and food, there are likely several stores on or near the campus.

If your student lives near a grocery or drugstore, they can buy other items later on or they can have the items delivered to them. Many retailers offer free shipping and stores at college campuses often have special offers suited for students.

Move-in day can be emotional, for everyone involved. As hard as it is to say goodbye, try not to hang around too long — let your child adjust to their new surroundings, hang out with their new roommate, make new friends in their residence hall, and get ready for their first day as a freshman.


💡 Quick Tip: Parents and sponsors with strong credit and income may find much lower rates on no-fee private parent student loans than federal parent PLUS loans. Federal PLUS loans also come with an origination fee.

Considering SoFi Private Student Loans

As you gear up for move-in day, you may have other concerns, including how you’re going to cover the cost of your child’s education. Financing your child’s education is a large responsibility and can be complicated. While there are some ways to prepare for college, like filling out the FAFSA to apply for federal aid, some families do not receive enough to pay for tuition and room and board entirely.

After exhausting federal aid options, you might want to explore the option of private student loans. You can be the cosigner of your child’s application for a private student loan. You also have the option of taking out a private parent student loan. Just keep in mind that private student loans don’t offer the same protections, like government-sponsored forgiveness programs, that come with federal student loans.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.

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SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 04/24/2024 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org).

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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The cost of going to college can vary dramatically depending on where you go. The average cost of tuition and fees for the 2023-2024 school year is $42,162 at private colleges, $23,630 for out-of-state students at public universities, and $10,662 for in-state residents at public schools, according to U.S. News. Based on those numbers, the average tuition and fees to attend an in-state public college are nearly 75% less than the average sticker price charged at a private institution.

But should you choose a college based on price? Maybe. While there are a number of things you’ll want to consider when choosing a college, including its location, reputation, and even the vibe on campus, price is often near the top of the list for many families. Here’s a look at how to compare schools by cost, plus tips for making a school that seems economically out of reach more affordable.

Understanding Net Price vs Sticker Price

Choosing a college based on price begins with knowing what the actual price is. But this isn’t as simple as it sounds. That’s because there is a difference between the sticker price published by the college and the actual price you will pay if you are admitted to that school. Indeed, colleges with the highest sticker prices sometimes end up costing far less than a college with an affordable sticker price.

The sticker price is a school’s published cost of attendance (COA), including tuition, fees, room and board. It can vary anywhere from $3,000 to $75,000-plus. But don’t let those upper ranges frighten you off — few students end up paying the full sticker price.

Net price, on the other hand, is what you will actually pay. It is sticker price (COA) minus any financial aid provided by the college and the federal government.

Financial aid is based on financial need, a student’s merit (achievements), or a combination. Aid is offered in the form of grants, scholarships, work-study, and sometimes federal student loans.

Before you apply to a school, it’s a good idea to use the net price calculator available on the school’s website. This can give you a better indication of the actual cost of attending that college.


💡 Quick Tip: You can fund your education with a low-rate, no-fee private student loan that covers all school-certified costs.

3 Reasons to Choose a College Based on Price

While price likely isn’t the only factor you’ll want to weigh when choosing a school, here are some reasons why you may want to make it a key consideration.

You Can Avoid High Debt

The average student borrows over $30,000 to pursue a bachelor’s degree, according to the Education Data Initiative. Students who used their federal loans to attend public institutions owe an average of $27,884, while the average student who attended a private, nonprofit institution owes $40,607. Attending a lower-cost school can mean borrowing less, and graduating with a smaller student loan balance.

You’ll Help Your Parents Out

If your parents plan to help you with college costs, choosing a less expensive school can help them avoid having to tap their savings, home equity, or retirement to cover your education expenses. While there are many different types of student loans you can tap, there is no such thing as a retirement loan.

Along with using income and savings for college costs, parents might also need to take on private loans or federal PLUS loans to pay for your college education, which come with higher interest rates than federal student loans. Generally, it’s cheaper for you to borrow money for college than your parents. Plus, you’ll have more time to repay the debt.

You’ll Improve the Return on Your Investment

Return on investment (ROI) is a term borrowed from investing that tells you the average earnings you can expect when you compare the return to how much you invested. To consider ROI for a college degree, you need to look at how much you can expect to earn with your degree versus how much the degree costs. You likely won’t earn enough to offset the degree within one year, so you generally want to consider the potential return over 10 years.

The lower your college costs, the better the chance you’ll get a strong return on your investment. That means earning enough after graduating to justify the expense of attending school.

To figure out which schools have the best chance of setting you up for success, you might look at the U.S. Department of Education’s College Scorecard . It has key details including average net price, graduation rates, and typical salaries students earn after attending a college or university.

How to Lower the Cost of College

What you will have to pay to attend a particular college may differ from that school’s published cost of attendance. Here are some ways to significantly shrink the sticker price.

Fill out the FAFSA

Submitting the Free Application for Federal Student Aid (FAFSA) is a critical step when it comes to reducing the price of college. This form is a gateway to several forms of financial aid, including grants, scholarships, work-study, and federal student loans. Many colleges also use the FAFSA when awarding institutional (merit-based) aid, and some states use the form for certain state-based aid. So it’s worth filling out even if you don’t think you will qualify for aid.

Seek Out Local Scholarships

Submitting the FAFSA puts you in the running for many grants and scholarships. But there are other, smaller, sources of “free money” out there that can further chip away at the cost of college. You may be able to take advantage of local scholarships, which are typically offered by local organizations, nonprofits, or places of worship. You can do a national search for private scholarships using an online search engine. To find local scholarships, however, you may want to ask your high school guidance counselor what is available in your area. Some companies also give out scholarships to dependents of their employees.

Earn College Credits in High School

Taking Advanced Placement (AP) courses in high school and doing well on AP exams can help you save on college tuition. Some schools will award course credits based on AP scores, while others allow students with qualifying scores to place into higher-level courses, which could allow you to graduate a semester early.

Pay Less for a Four-Year Degree

You may be able to save on the cost of a four-year degree by starting at a community college for two years, then transferring to a pricier, four-year school for your remaining two years. However, you’ll need to make sure that the college you want to transfer to — and graduate from — will accept the credits from the community college. Some community colleges actually have reciprocity agreements with nearby four-year schools.

Pursue Federal Loans First

If you need to borrow money to pay for college, you generally want to tap all sources of financial aid, including federal student loans, before looking at private student loans. Then, if you still have gaps in funding, you might consider using private student loans ot fill them.

Available through banks, credit unions, and online lenders, private student loans typically come with higher interest rates than federal student loans and don’t offer the same borrower protections (like income-driven repayment plans and forgiveness programs). However, they come with higher borrowing limits. Typically, you can borrow up to the total cost of attendance, minus any financial aid received, every year, giving you more borrowing flexibility than you can get with federal government.


💡 Quick Tip: Federal student loans carry an origination or processing fee (1.057% for Direct Subsidized and Unsubsidized loans first disbursed from Oct. 1, 2020, through Oct. 1, 2024). The fee is subtracted from your loan amount, which is why the amount disbursed is less than the amount you borrowed. That said, some private student loan lenders don’t charge an origination fee.

The Takeaway

There may be many colleges where you’d be happy and thrive academically, so it’s important to narrow the possibilities into a manageable list. To do this, you’ll want to consider size, location, available majors, makeup of the student body, and, of course, price. Going to a more affordable college can mean taking on less debt, giving your parents a break, and improving your return on investment.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.

---

About the author

---

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 04/24/2024 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org).

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.


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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