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The lower your credit utilization — meaning the less of your total available credit you’re using — the higher your credit score could be. Typically, the rule of thumb is to use no more than 30% of your credit limit on your credit cards, and using only 10% or less is considered even better.

Here’s a closer look at how credit utilization affects credit score, from how much lowering your credit utilization will affect your score to how long credit utilization affects a score.

What Is Credit Utilization and Why Does It Matter?

Credit utilization is the percentage of your overall credit limit that you use on your revolving credit accounts — most commonly, credit cards. In other words, it’s how much of your available credit you’re using.

Credit utilization is one of the most important factors that scoring models look at when calculating your credit score, since it suggests the risk you could pose as a borrower. The lower your credit utilization, the more it will appear that you can handle debt or use a credit card responsibly. Thus, a lower utilization rate can contribute to a higher credit score.

To calculate your credit utilization, add up all of your credit card balances and then divide that amount by your overall credit limit across your credit cards. You would then multiply by 100 to express the ratio as a percentage. 

Here’s an example:

•   Say you have three credit cards, with an overall credit limit of $15,000. 

•   Next, imagine you’re carrying a balance of $4,000 across all of those cards. 

•   Using the previously explained equation, you divide your total balance of $4,000 by $15,000, and then multiply by 100.

•   Your credit utilization would be around 26.7%.

Factors That Affect Your Credit Score

Aside from your credit utilization, there are other factors that affect your credit score. These include:

•   Payment history: Another major factor aside from credit utilization is whether you pay your credit and debt accounts on time, meaning by the payment due date. If you consistently make on-time payments, the more creditworthy you’ll appear, and this will reflect on your score.

•   Credit history length: Credit scoring models typically take into account how long your current accounts have been open. They may even consider how long it’s been since you’ve used certain kinds of accounts. Generally, a longer credit history is a positive thing for your credit score.

•   Credit mix: Having different types of accounts may demonstrate to lenders how you handle different kinds of debt and can have a positive impact on your score if you manage your debts well.

•   New credit: Opening multiple credit accounts or having a series of hard inquiries could signal to lenders that you pose a greater risk as a borrower. As such, it may negatively impact your credit score.

How Credit Utilization Affects Your Credit Score

Your credit card utilization accounts for 30% of your FICO® credit score, which is the scoring model used by the majority of lenders.

Since lenders look at your credit score to assess your creditworthiness, having a low credit utilization is key. That’s because if you’re using most of your available credit, it suggests to lenders that you could be a greater risk. A high utilization rate could signal to lenders that you may be stretched too thin financially and need to rely too much on credit. You might therefore have a hard time paying back what you borrow.

Your credit score is also dependent on other factors, such as the number of credit cards you have. For example, if you have one credit card with a low limit, having a high credit utilization may affect your score more compared to someone with multiple credit cards, all of which have high credit limits. Same goes for someone with a lengthy credit history that’s been mostly excellent, compared to someone who has no or a limited credit history.

In other words, credit utilization is an important factor in determining your credit score, but there are other aspects as well, such as your payment history.

Tips for Managing Your Credit Utilization and Credit Score

By managing your credit utilization, you can positively impact or maintain a better credit score. The following are a few effective tactics to do so.

Keeping Your Credit Utilization Rate Under 10%

Though keeping your credit utilization under 30% can help to positively impact or maintain your credit score, the lower it is, the better.

While you may be tempted to keep it at zero, that may not be as helpful as you think. A 0% credit utilization could signal that you’re not using your credit regularly. Since lenders want to see how you currently manage accounts, it will be hard to approve you for a loan if they see you’re not using any.

Instead, consider charging smaller amounts on your credit card and trying to keep your utilization rate to under 10%, which is a benchmark for achieving a high score. That way, you should be able to afford to pay the balance and show creditors you’re using credit regularly.

In addition to keeping your overall utilization below 10%, you’ll want to make sure that your utilization on each of your credit cards is also below that percentage. In many cases, credit utilization may refer to your per-card utilization.

Your best bet would be to look at your current limit for your cards and then aim to keep each credit card balance to no more than 10% of that amount. So if you have two credit cards with limits of $3,000 and $5,000 respectively, you wouldn’t want to charge more than $300 to the first card and $500 to the second.

Recommended: What Is a Charge Card?

Asking for a Higher Credit Limit

Getting a higher credit limit can lower your credit utilization even if you maintain the same balance on your cards. It also gives you more wiggle room — if you need to carry a balance on a credit card, you won’t have to worry as much about a big increase in your credit utilization.

When it comes to asking for a credit limit increase, issuers tend to look more favorably to those who have maintained good credit history, whose income went up, and even those who have less debt. If you do make a request, some credit card companies may conduct a hard credit inquiry, which could temporarily (and slightly) lower your credit score.

Making Payments Twice in a Month

By paying your credit card twice a month, your balance will remain lower. It will also increase the chances of your credit card issuer reporting that lower amount to the credit bureaus. You may hear this method referred to as the 15/3 credit card payment method.

This could mean that your calculated credit utilization is lower, which could help build your credit score. Plus, it will help you avoid racking up excessive credit card debt, which can have a negative impact on your score.

Recommended: How to Avoid Interest on a Credit Card

Keeping Your Credit Cards Active

It may be tempting to close a credit card that you don’t use anymore. However, if you do so — or if you don’t use a credit card for a while and the card is closed automatically — your credit utilization will automatically go up. This is true even if your balance is still the same, as your overall credit limit is now lower. In addition, your credit history could be shortened, which may lower your credit score.

Instead, consider keeping that card open, even if you make a small purchase on it every few months.

The Takeaway

Credit cards are useful tools, helping you make purchases, earn rewards, and possibly build your credit. In order to reap these benefits, make sure to use your credit cards responsibly — including by keeping your credit utilization low. Given how significantly credit utilization affects credit score, it may be worth exploring ways to manage your current utilization in order to lower it.

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

FAQ

What is a good credit utilization ratio?

A good credit utilization ratio is 30% or lower. Ideally, you should aim to maintain a credit utilization ratio of around 10% to show lenders you’re responsible with credit.

How long does credit utilization affect credit score?

Your credit utilization is a key contributing factor to your credit score. However, a high utilization rate won’t affect your credit score forever. As long as you take the steps to lower it, you can see positive effects within a short amount of time; say, a couple of update cycles after you bring it down.

How much will lowering my credit utilization affect my credit score?

Lowering your credit utilization can have a significant impact on your credit score. That’s because credit utilization makes up around 30% of your credit score calculation with most scoring models.

Photo credit: iStock/Ridofranz

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 .

SOCC-Q324-022

Pulling a metal credit card out of your wallet was once considered a status symbol. Today, however, more card issuers have added credit card metal options to their card offerings for customers who prefer a sleek — and heavier — alternative to plastic.

But beyond being metal instead of plastic, you may wonder what is a metal credit card exactly and are they better? Here, learn the similarities and differences between plastic and metal credit cards, as well as how to get a metal credit card if you’re looking to add some heft to your wallet.

What Is a Metal Credit Card?

A metal credit card functions much in the same way as its plastic cousin. You can swipe a metal card at a point-of-sale terminal, or if the card is chip- or RFID-enabled, you can insert or tap it for payment.

Additionally, cardholders who have a metal credit card but prefer to use their digital wallets, can use their digital metal card the same way as other credit cards in their digital wallet. To use a credit card in this manner, simply tap your device toward the card reader to activate the transaction.

A key distinction with metal credit cards, however, is the material that the physical card is made of. They’re typically composed of some type of hard, durable metal.

Recommended: When Are Credit Card Payments Due?

A Brief History of Metal Credit Cards

The credit card issuer to spark buzz with its metal credit card was American Express. In 1999, it launched the Centurion Card — colloquially called the Black Card — which was the first metal card of the time.

The innovative, invite-only card was offered to the highest spenders of AmEx’s Platinum Card. Its exclusivity, coveted benefits, and unique credit card metal material set an impressive bar for the luxury credit card market moving forward.

Recommended: Does Applying For a Credit Card Hurt Your Credit Score?

What Are Metal Credit Cards Made Of?

The transition from traditional, lightweight plastic to various metals is why some credit cards are heavy. Specific materials that are used for metal credit cards vary across card issuers, with many companies keeping information about their credit card metal materials under lock and key.

As an example, the metal used for the Apple Card is titanium, while some cards use stainless steel, metal alloys, 24 karat gold, palladium and other metals, as well as hybrid cards that have a metal exterior with a plastic core.

Why Metal Credit Cards Are Popular

Since AmEx launched its metal Centurion Card, metal cards have oozed a sense of luxury and prestige. This premium metal card phenomenon went mainstream when Chase announced its metal Sapphire Reserve credit card in 2016.

The heavier material of metal credit cards has a noticeable in-hand feel that some cardholders prefer. Metal credit cards are also generally associated with elite status. For some, the perk of carrying a card that feels and looks special can be attractive.

Differences Between Metal and Plastic Credit Cards

Although metal credit cards have grown in popularity in the market, traditional credit cards made out of plastic are still commonly available. Below are the main differences to know between a metal versus plastic card:

Similarities Between Metal and Plastic Credit Cards

As mentioned earlier, how a credit card works doesn’t vary whether it’s metal or plastic. You can add both metal and plastic cards into a digital wallet for convenience and use them in the same way to make purchases.

Further, both options offer the same bank-level security features you’ve come to expect from a credit card since encryption isn’t dependent on the material of the card. Rather, it’s contained within other features of the card, like the magnetic strip or chip-and-PIN technology.

Finally, despite the noticeable added weight of a metal credit card, their dimensions are roughly the same as those of a plastic credit card. Both a metal and plastic credit card fit into a standard wallet’s card slot, although metal cards might be slightly thicker.

How to Get a Metal Credit Card

Various card companies offer credit card products that issue a metal card, if you qualify. A good credit card rule of thumb to find the right card — whether metal or otherwise — is to compare various features, such as annual fees, rewards programs, sign-up bonus incentives and minimum required spend, and other card benefits.

Here are some examples of where to get a metal credit card and its specific card product name(s):

•   Amazon: Amazon Prime Visa Card

•   American Express: Gold Card, Platinum Card, Centurion Card

•   Apple: Apple Card

•   Capital One: Savor, Venture X

•   Chase: Sapphire Preferred, Sapphire Reserve

•   Citi: Citi / AAdvantage Executive World Elite MasterCard

•   HSBC: Elite Credit Card

•   JP Morgan: Reserve Credit Card

•   MasterCard: Gold Card, Titanium Card, Black Card

•   U.S. Bank: Altitude Reserve Visa Infinite Card

You may also find other credit cards, such as travel rewards cards, that offer metal versions.

Factors to Consider Before Getting a Metal Credit Card

Flashing a metal credit card might feel like an ego boost, but the bells and whistles of a premium metal card will also cost you. And, at the end of the day, a credit card’s material doesn’t affect what a credit card is and how it serves you.

Generally, credit card companies offer a metal credit card for its premium card products that charge steep annual fees. For example, for the privilege of using a swanky metal card, you might have to pay an annual fee of $95, with some cards charging up to a $550 annual fee or even higher.

If that’s within your budget, take a closer look at the benefits and incentives that the metal card offers, compared to non-metal cards. Whichever card you get next should serve your needs, whether that’s preference for high bonus reward categories in your top monthly spending categories or unique travel benefits and protections.

Also, consider that getting rid of your metal card takes a bit more effort than a standard plastic card. Whether you close your account or you’re issued a replacement for an expired card, you’ll usually have to mail your old metal card to the issuer for disposal. They’ll issue you a dedicated envelope to do so, but it’s an extra step that doesn’t exist with a plastic card.

Recommended: What is a Charge Card?

Pros and Cons of Metal Credit Cards

As you can see, there are both upsides and downsides to metal credit cards. Here are the pros and cons to take into consideration before you get a metal credit card:

How to Destroy a Metal Credit Card

If your existing metal credit card has passed its credit card expiration date, you won’t be able to destroy it using a standard pair of scissors, nor can you put it in a shredder that could typically handle your plastic cards.

To effectively destroy a metal credit card, you must either:

1.    Return it to your card issuer by mail. Your issuer will provide you with a prepaid mailing envelope.

2.    Drop it off at a local branch. If your issuer has a brick-and-mortar location, it might be able to dispose of it or mail it to the correct department.

Since the card is made of metal, it requires industrial-grade tools to dispose of securely. Additionally, shredding it yourself might result in injury. Consider relinquishing the metal card to your issuer for safe disposal.

The Takeaway

Metal credit cards might add panache to your credit card rotation, but their aesthetic appeal shouldn’t be the only reason to seek one out. A plastic card that has a generous rewards program might be more valuable in the long run than a metal credit card that has limited perks. Always consider your own credit card habits, the types of purchases you make, and the benefits that are most valuable to you when shopping for a new credit card.

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

Can anyone get a metal credit card?

Everyday consumers who meet a card issuer’s lending criteria can be eligible for a metal credit card. Unlike decades prior when metal credit cards were accessible to a select few by invitation only, today more card issuers offer their own metal credit card. That said, there are a number that are still invitation-only for high net worth individuals.

Are metal credit cards safe?

Yes, metal credit cards are safe to use. They have the same security features as their plastic credit card counterparts. The main difference is that the credit card metal material is more durable.

Can I request a metal credit card?

No, generally, a metal credit card is not a feature you can choose, although a few issuers may allow you to choose between plastic or metal. Instead, metal credit cards are more often offered for specific credit card products that you can apply for.

Why are some metal credit cards heavy?

Credit card metal materials vary depending on the card. Some card companies use materials like stainless steel, aluminum, titanium, or a blended mix of metals to create the card. Different metals have different weights, some of which may feel heavier.

Are metal credit cards generally better?

No, metal credit cards aren’t better than plastic cards in terms of how the card functions or its features. Metal credit cards do have an edge when it comes to durability, however.

Photo credit: iStock/VioletaStoimenova

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

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

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Applying for credit cards isn’t something you should take lightly because it can lower your credit score with each application you submit. Reviewing a credit card application typically involves a hard credit inquiry, which usually lowers a score by perhaps five points or so. If you were to fill out several credit card applications at one time, that could have a significant impact on your score.

Still, while applying for a credit card can hurt your credit, there are a number of potential pluses to credit cards, from allowing you to build your credit history to earning rewards. Here’s how to navigate the effects of applying for credit on your credit score, as well as some alternatives to consider if you don’t think your score can currently weather it.

Hard vs Soft Credit Inquiries

To understand how applying for a credit card can hurt your score, it’s first important to know the difference between hard and soft credit inquiries.

A hard inquiry, also known as a hard pull or hard credit check, generally occurs when a lender is determining whether to loan you the funds you’ve applied for. This might happen if you’ve applied for a mortgage or a new credit card, for example.

On the other hand, a soft inquiry, or soft credit pull, tends to happen when someone runs a credit check to gather information without the express purpose of lending you money. For instance, a credit card issuer may do a soft pull in order to make a preapproval offer, or a potential employer might perform a soft inquiry as part of the application process. A soft credit inquiry also may happen when you check your credit report.

Perhaps the most important difference between a hard pull vs. a soft pull is how it impacts your credit scores. While hard credit inquiries show up on your credit report and affect your score, soft inquiries do not. Further, while soft pulls can be done without your consent, creditors need your approval to do a hard inquiry.

How Applying for Credit Cards Can Hurt Your Score

While your credit score won’t take a huge hit when you apply for a credit card, it will get dinged. Why? When you apply for a credit card, the card issuer will perform a hard inquiry to determine whether you’re a good candidate to lend money to.

Hard inquiries can lower your credit score because a new application can represent more risk for the card issuer. According to FICO®, a hard credit inquiry will generally affect the score on your credit report by five points or less. Those with few accounts or a thin credit history can experience a greater impact on their score. Additionally, multiple inquiries within a short period of time can exacerbate the negative effect on your credit score.

Hard pulls stay on your credit report for two years, though their impact on your credit scores typically vanishes after a year. It’s important to note that your score will see an impact whether or not you’re approved, as the hard inquiry is conducted either way.

Should You Apply for Multiple Credit Cards at Once?

Simply put, probably not. Applying for multiple credit cards at one time is likely to have a negative impact on your credit score. While it might make sense to apply for more than one job at a time, that’s not the way to go with credit cards. Instead, you should approach applying for credit cards strategically.

By applying for several cards over a short period, you might send the signal that you’re desperately seeking funds and headed for — or already in — trouble. You’ll appear risky to lenders and that will likely be reflected by a dip in your credit score.

Of course, this doesn’t mean you can’t have multiple credit cards. You’ll just want to take your time and space out your acquisitions. If you get rejected for a card, pause to figure out why, and then take steps to address the suspected weak spots. Once you’ve had time to build your credit, consider trying again.

How Often Can I Apply for a Credit Card Without Hurting My Credit?

Per Experian, one of the three major credit bureaus, it’s wise to wait at least six months in between credit card applications. If you apply for a number of credit cards within a few months, you could see more than the usual ding to your score that new credit inquiries typically cause. While the effects may be brief, Experian states that you could see a “potentially significant drop” in your score.

While six months is the minimum waiting period suggested, how often it’s appropriate to apply for new credit cards also depends on your financial specifics. For instance, if your application was denied due to your credit score and you still haven’t built it, then it may not make sense to apply again, even if six months have passed. Similarly, you might not choose to apply for a new card if you know you have another big lending application coming up, such as for a mortgage.

On the other hand, if you have a strong credit profile, your score may not take as much of a hit if you decide to apply for another card sooner to try to cash in on generous rewards or a hefty welcome bonus offer. Those who don’t yet have a credit history and are beginning to build a credit profile may also find it’s worthwhile to wait less time between applications.

Recommended: What Is the Average Credit Card Limit?

Can Applying for Credit Cards Help Your Score?

There are two sides to a coin and so it goes with applying for credit cards — there can be some upside when you apply for a new card.

This is partly because opening a new account effectively increases your credit limit. In turn, this can lower your credit utilization ratio, which is your outstanding balances compared to your overall credit limit. Credit utilization accounts for 30% of your credit score and is second in importance only to your payment history.

Another potential plus to opening a new card is that if you make on-time payments on your new card, your positive payment history can build your score over time. However, if you’re a credit card newbie and still working on establishing credit, you may not see the uptick in your score as quickly. This is because FICO requires you to have at least one account that’s been open for six months and one account that’s been reported to the credit bureau within the last six months to qualify for a credit score.

If you don’t already have a handful of credit card accounts, a new card also can positively impact your score because it’s adding another revolving account to your lineup. While your mix of account types only comprises 10% of your credit score, credit scoring models do look at and reflect this.

Recommended: When Are Credit Card Payments Due?

Does Applying for a Credit Card and Not Getting Approved Hurt Your Credit?

Your credit will be affected whether or not you’re approved for a credit card. That’s because when you submit a credit card application, a hard credit inquiry is conducted to determine if you’re eligible. The effects of that hard pull will apply regardless of the results.

However, your credit won’t face any consequences for the fact you were denied a credit card. That information won’t be reflected in your credit score, nor will it show up on your credit report.

Recommended: Tips for Using a Credit Card Responsibly

Things to Consider Before Applying for a Credit Card

Before you rush to apply for credit, make sure you’re ready. Here’s what to consider doing prior to applying.

•   Check your credit report: The first step is to get a copy of your credit report. To get your free report each year, go to AnnualCreditReport.com . As you review your credit report, look for any errors. If there are any, take steps to fix them before you approach a credit card issuer. Also check to see if you’ve had any other recent hard inquiries.

•   Consider any other upcoming credit applications: Be mindful about what’s on your horizon before moving forward with applying for a new credit card. For example, if you think that you will be applying for a mortgage or car loan soon, you may not want to apply for a card and rack up multiple inquiries at once. It may make sense to get your mortgage or car loan first and wait for a little while to go after the credit card.

•   Don’t plan to ditch your old cards: Just because you hope to get a new card, don’t start canceling the other cards in your wallet. Remember, length of credit history makes up 15% of your credit score. By canceling old cards, you’d also reduce your total available credit, which could drive up your credit utilization ratio if you have hefty balances on other cards.

•   Think about why you want to apply for a credit card: Lastly, have a little talk with yourself. A credit card rule of thumb is just because you can get a credit card doesn’t mean you need one. If you already have a credit card, what’s driving you to apply? How are you managing your existing credit card? If you’re not 100% sure you’ll be able to pay off the balance in full each month, think twice about getting it. When balances linger from month to month, it becomes costly due to interest racking up.

Recommended: How to Avoid Interest On a Credit Card

Alternatives to Credit Cards

If you’re worried about the effects that applying for a credit card may have on your credit score, know that you have other options. Instead of getting a credit card, you may also consider the following alternatives for financing:

•   Debit card: If you’re simply looking for another way to easily make purchases and avoid carrying around a wallet full of cash, consider a debit card. While a debit card does not allow you to build your credit score, applying for one does not require a hard pull and is often as easy as opening a bank account. Do note that debit cards tend to have less robust security protections on purchases compared to credit cards though.

•   Loan from a family member or friend: If you’re wary of weathering a hard credit inquiry right now, consider approaching a close family member or friend about borrowing the funds you need. Make sure to clearly agree to the terms of the loan agreement, including when you’ll pay back the money. Also realize the potential implications for your personal relationship if you don’t make good on paying this person back.

•   Salary advance: Another option may be to ask your employer if you can borrow funds from a future paycheck. This can allow you to borrow money in a pinch without needing to go through the formal credit application process. Employers typically won’t charge fees or interest, though you may have to pay an administration fee or interest if your employer relies on a third party for the service.

The Takeaway

Applying for a credit card may be a simple process in terms of filling out the forms, but that doesn’t mean it’s something to take lightly. It can have very real effects on your credit score due to the fact that a formal application requires a hard credit inquiry. Thus, applying for a credit card is always something you should consider carefully and do responsibly.

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 much does my credit score go down when I apply for a new card?

Typically, when you apply for a new credit card, your score will only go down temporarily by five points or even less. This will, however, depend on other factors related to your credit status.

How bad does a credit application hurt your credit?

In most cases, a hard credit inquiry as part of a credit card application will temporarily decrease your credit score by five points or less.

How often can I apply for a credit card without hurting my credit?

Typically, hard inquiries stay on your credit report for two years, but only impact your FICO score for one year. You might therefore want to space out applying for a credit card and do so only once every six months or so.

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 .

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

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 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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Paying interest can be a fact of life for many credit cardholders. In most cases, carrying a balance month to month on a credit card will trigger interest charges, which is essentially the cost of borrowing money from a credit card company. Compared to other types of debt, such as mortgages and car loans, credit cards tend to have higher rates of interest, which can make them an expensive way to borrow money.

One thing that people who use credit cards to their advantage have in common? They know how to avoid paying interest on credit cards. You can learn how, too. Here are some ways you might avoid interest on credit cards.

What’s an APR?

To understand how to avoid paying interest on credit cards, it helps to start by learning about credit card APR, or annual percentage rate. Basically, the APR is the rate of interest you’ll pay if you carry a credit card balance. Unlike the APR for other loan products, the APR for a credit card does not include any fees you may owe for using the card — it’s simply your interest rate.

Your APR on a credit card will depend on your creditworthiness as well as the current prime rate. Generally, borrowers with better credit will have better credit card APRs, meaning they may fall below the average credit card interest rate.

Recommended: Does Applying For a Credit Card Hurt Your Credit Score?

When Is Interest Charged?

Credit card interest is charged if you don’t pay off your balance in full each month. If cardholders pay their entire statement balance by their due date, interest charges are typically waived.

When you carry a balance, interest accrues on a daily basis. Your daily interest charge is determined by dividing your APR by 365, the number of days in the year. Then, at the end of each day, the interest is calculated based on your average daily balance. Because this continues throughout the billing cycle, the interest you’re charged yesterday then becomes part of the balance on which interest is charged today.

Your lender will then tally up all of your daily interest charges at the end of the month and put that amount onto your card as a finance charge.

Recommended: When Are Credit Card Payments Due?

How to Avoid Interest on a Credit Card

There are several strategies you can use to help avoid credit card interest.

Pay Off Your Balance in Full

If you’re wondering how to avoid credit card interest, one of the easiest methods is simply paying off your credit card balance in full each month. So long as you don’t carry a balance from month to month, you should never face purchase interest charges on credit cards.

To make paying off your full balance easier to do, you might consider making multiple payments throughout the month. That way, you don’t have to fork over one lump sum on your statement due date. One technique to consider is what’s known as the 15/3 credit card payment method.

Or, you could plan to check in on your balance regularly to ensure you’re going to be able to pay it off in full. The other benefit of paying off your full balance each month is that it can help you to build credit over time.

Take Advantage of Your Grace Period

Paying off a credit card in full each month creates an additional opportunity to avoid interest on a credit card. To help avoid paying interest, you can take advantage of your card’s grace period, the stretch of time between the end of your billing cycle and when a payment is due. During this time, no interest is charged on new purchases.

Here’s a hypothetical example:

•   A cardholder’s billing cycle for the month ends on January 15.

•   Say the cardholder pays their credit card bill on February 10. On February 10, they are only required to pay the “statement amount,” which includes only the purchases made from December 15 to January 15.

•   However, the grace period applies to any purchases that are made after January 15, but that won’t technically require payment until March 10. 

•   In this way, a purchase could remain interest-free for longer than just one billing cycle.

Credit card issuers aren’t required to offer a grace period, but plenty do. However, many require the balance to be paid off in full during the previous one or two billing cycles to qualify. If you lose your grace period because you haven’t paid your balance in full, you’ll be charged interest on any unpaid portion of the balance. In addition, you’ll lose your grace period, and all new purchases will accrue interest beginning from the date the purchase is made.

Utilizing the grace period to its full extent is one way to avoid paying interest on a purchase for longer than just one month (or whatever the billing cycle happens to be). Before going this route, just make sure your card has a grace period, and second, that you qualify. If you have questions, never hesitate to call your credit card issuer to ask how and when you’re billed.

Recommended: Tips for Using a Credit Card Responsibly

Use a Balance Transfer Offer or 0% Interest Credit Card

A balance transfer credit card, or a credit card that temporarily offers a 0% APR (or a very low rate), could be an enticing option for those who want to make major headway toward paying down a credit card balance. Keep in mind, however, that good credit (meaning a score of 670+) is typically needed to qualify for these offers.

If this is an approach you’re interested in, calculate how much you’d need to pay off each month in order to eradicate your balance. For example, if you have $6,000 you want to pay off during a 12-month 0% offer, you’d need to pay $500 each month. You’ll want to make sure you can realistically pay off the full balance before the promotion ends and the standard higher APR kicks in.

Also note that many balance transfers carry a balance transfer fee, which is usually around 3% to 5%of the amount transferred. Using our example from above, a $6,000 balance transfer with a 3% balance transfer fee would cost $180. Generally, this amount is added to the card’s total outstanding balance. Before pulling the trigger and transferring a balance, analyze how much you’d save in interest compared to the cost of the balance transfer fee.

There are a couple other potential pitfalls to balance transfers to keep in mind as well. For one, a balance transfer won’t get to the bottom of why you’ve racked up credit card debt in the first place. Some might find it too tempting to keep spending, and if more spending were to occur on top of the balance transfer, it could lead to unwanted interest charges. This could make it even harder to escape high-interest credit card debt.

Avoid Overspending

This may sound obvious, but it’s worth mentioning: To put yourself in a position where you can pay off your credit card balances every month, make sure your monthly spending doesn’t exceed your income.

This is easier said than done sometimes, but once you start racking up credit card interest, it can become even harder to pay off your full balance. You might consider making a budget and then vowing to stick to it to ensure you stay on track with your spending each month.

Plan Out Major Purchases

On a similar note to budgeting, another method for how to avoid paying interest on credit cards is by planning ahead for big purchases. If you know you have a pricey purchase coming up that you may need to spread out in smaller payments across a period of time, be strategic about how you’ll do it.

This could mean simply saving up ahead of time until you have enough stashed up to promptly pay off your balance. Or, you might time opening a credit card with a 0% promotional APR with completing your major purchase.

Tips for Reducing Interest

Sometimes you can’t avoid interest entirely. Even in those instances, you shouldn’t give up entirely and give into interest. Here are some tips for reducing the amount of interest you pay.

Taking Out a Personal Loan

Though not an interest-free option, there are other ways to potentially lower how much you’re paying in interest on your credit card debt. One such option is taking out a debt consolidation loan that has a lower rate of interest.

A debt consolidation loan allows you to roll your debts into one monthly payment that’s a set amount and stretched over a predetermined amount of time. This can make budgeting easier. Plus, if you manage to secure a lower interest rate, you might be able to pay off your debt faster, thanks to saving money on interest.

Making Multiple Payments Each Month

Another tactic to reduce the amount of interest you pay is to make payments on your credit card balance throughout the month, instead of waiting until the due date, as mentioned above. This helps because credit card interest is calculated on a daily basis, based on your average daily account balance. If you lower your balance with more frequent payments throughout the month, your average daily balance will be lower, thus reducing the amount of interest you’re charged.

Trying the Debt Avalanche Method

If you find yourself staring down a mountain of debt, you might consider trying a popular debt payoff strategy: the debt avalanche. With this approach, you focus on paying off your debt with the highest interest rate first. Over the long run, this can save you on interest.

The debt avalanche method instructs that you apply any extra funds to your highest-interest debt, while maintaining minimum monthly payments on your other debts. Then, once that debt is paid off, you’ll move your focus to paying down your debt with the second-highest interest rate.

The Takeaway

There are several ways to not pay interest on a credit card. These range from paying your balance off in full each month to taking advantage of a 0% APR offer. And even if you can’t avoid interest entirely, there are ways to reduce the amount of interest you pay on a balance you’ve accrued.

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

FAQ

What is the best strategy to avoid paying interest on your credit card?

There are several different ways you can avoid paying interest on your credit card, but among the most common are paying your credit card bill in full every month, consolidating debt with a balance transfer card, and being strategic about major purchases.

When should I pay my credit card to avoid interest?

You should pay your credit card as soon as you get it to avoid interest. There can be interest charged on the previous month’s balance between when the bill is issued and the due date. By making a prompt payment, you could avoid paying that.

How can I get my credit card company to waive interest?

You can call your credit card company’s customer service and request that interest be waived. You will likely have to explain the situation that led to this request. You might get a one-time waiver on some or all interest charges, depending on the situation and the issuer’s policies.

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There are many reasons you might consider signing up for a new credit card. Many people look at their credit card as simply a financial tool to help them meet their goals. For others, a particular credit card can be a status symbol. Meanwhile, others view the credit card they use as an extension of their personality. For these individuals, many credit card issuers allow you to personalize the design and appearance of your credit card.

Generally, if you want to get a customized credit card, you can do so when you sign up. However, if you already have your card and are wondering how to get a custom credit card, you may still be able to ask your issuer for a new card design.

What Is Credit Card Personalization?

Credit card personalization is the ability to design and personalize the appearance of your credit card. Many issuers allow you to customize the appearance of your credit card in different ways, such as by selecting a unique background, uploading a photo to serve as your card’s backdrop, or adding the logo of your favorite sports team. 

That way, when you’re using a credit card, it can become a conversation starter rather than simply a way to pay for purchases.

Keep in mind that the way your credit card looks won’t in any way impact what a credit card is and how it functions — customization is simply for appearance’s sake.

Banks That Allow Personalized Credit Card

The list of banks that allow personalized credit cards can change as different issuers update their policies. Here are a few banks that are known to allow personalized cards:

•   Discover: Discover allows you to customize any card to “show your true colors.” You simply need to log into your online account to select a new design for yourself or any authorized users on your account.

•   American Express: Sometimes American Express offers different options for some of their credit cards. For instance, the Art x Platinum collection features artwork from Kehinde Wiley and Julie Mehretu.

•   Wells Fargo: Wells Fargo allows you to use one of your own photos or a photo from their library to serve as the face of your credit card.

•   Chase Bank: The Chase Disney Visa and Chase Disney debit feature favorite motifs on your card.

Because policies change, your best course of action is to contact your issuer directly, either through your online account or the phone number listed on the back of your card.

Different Ways to Customize Your Credit Card

There are several different ways you might be able to customize your credit card. This includes:

•   Selecting from a limited number of design options offered by the issuer

•   Getting a credit card featuring your favorite professional sports team

•   Taking advantage of limited time designs

•   Uploading a personal photo to use as the face of your credit card

While some issuers will allow these options, keep in mind that how credit cards work and their specifics will vary by issuer. As such, some issuers do not allow for any credit card customization.

Guide to Getting a Customized Credit Card

There are particular credit card requirements and steps that you should follow when trying to get a customized credit card.

Recommended: Does Applying For a Credit Card Hurt Your Credit Score?

Verify Your Account

Sometimes, you can choose your credit card customization as part of the initial application process, such as if you’re getting a credit card for the first time. In other cases, you’ll need to log in and verify your account in order to get a personalized credit card.

Choose a Design

Once you’ve been verified and are either in the credit card application process or account screen, you will choose your design. Some credit card issuers present you with a list of images or designs to choose from, while others allow you to upload a completely custom design.

Confirm Your Design

Once you’ve chosen your design, you will have to confirm your design to make sure that it’s what you want and that everything looks good. Your new customized credit card will then arrive at your house through the mail.

From there, the regular credit card rules — like the importance of making on-time payments — will apply, though you can feel like you’re swiping in style.

Recommended: When Are Credit Card Payments Due

The Takeaway

If you want to use your credit card as a way to express yourself, some credit card issuers allow you to customize the design of your card. You might be able to choose between a set of options, while others will allow you to upload an image of your choosing to serve as the face of your credit card.

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 long does it take to get a customized credit card?

You shouldn’t have too much of a delay for getting a customized credit card as compared to any other credit card. The one scenario where there can be a delay is if you’re using your own uploaded image. In most cases, issuers will have someone personally review each uploaded image to make sure it meets their standards.

Can an authorized user get a custom card?

While an authorized user can sometimes get a custom card, it will usually have to be managed through the primary cardholder. Policies differ by card issuer, so check with the primary cardholder and/or issuer to see what might work for you.

Can you change your credit card design?

In many cases, you can change your credit card design. You can find out if this is possible — and if it is, start the process of getting a personalized credit card — by contacting your credit card issuer.

Photo credit: iStock/MStudioImages

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

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

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