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Did you know you can use a home loan for renovations? Renovation home loans cover the cost of purchasing and renovating a home. If you’re familiar with construction loans, renovation loans are similar. Also called “one-close” loans or renovation mortgages, renovation loans can offer buyers simplified financing for transforming a fixer-upper into an attractive, modernized home.

We’ll explain how to add renovation costs to your home loan. We’ll also cover other ways you can fund your home project, including ways to use your existing home equity to help you pay for renovations.

What Is a Renovation Home Loan?

A renovation home loan combines the cost of a home purchase and money for renovations in one mortgage. There’s only one closing and one loan when buying a new home or refinancing an existing home. The lender has oversight of the renovation funds, including the budget, vetting of the contractor, and disbursement of funds for renovation work as it is completed.

The borrower, their property, and their lender must all meet criteria set out by the remodel home loan program to qualify, which can present a challenge. Qualifying lenders in particular can be hard to find. That’s because most lenders must maintain a custodial account for the renovations over the course of an entire year, which requires extra work and resources. However, if you can find a lender that can handle the process, renovation loans can be a convenient way to improve a promising fixer-upper.

Types of Home Loans That Can Include Renovations

Most mortgages will not include renovations in the loan amount. Renovation mortgages are niche products serviced by a fraction of lenders. Buyers and properties must also meet certain requirements, which we’ll outline below.

There are several different types of home loans you can apply for that are eligible for adding renovation costs to the mortgage.

1. FHA 203K

An FHA 203(k) is a mortgage serviced by the Federal Housing Authority in which the cost of repairs is combined with the mortgage amount. It’s different from a traditional FHA loan that does not include improvement expenses, but qualifications (credit score, down payment, etc.) are very similar.

Interest rates and terms are also similar to what you see in a standard FHA loan. However, you can expect additional lender fees to cover the extra oversight needed on a renovation loan.

The amount you can borrow is equal to either the value of the property plus the cost of renovations or 110% of the projected value of the property after rehabilitation. Borrowers must use an FHA-approved lender for this type of mortgage.

Eligible properties must be one to four units. Repairs can include those that enhance the property’s appearance and function, the elimination of health and safety hazards, landscape work, roofing, accessibility improvements, energy conservation, and more. A limited 203(k) is also available for repairs costing $35,000 or less.

2. Fannie Mae HomeStyle

The Homestyle Renovation loan from Fannie Mae takes into account the value of the property after renovations are complete. The amount of allowable renovation money can equal 75% of the value of the property after renovations are complete.

In the world of home loans, the loan-to-value ratio (LTV) is the percentage of your home’s value that is borrowed. Many lenders limit your LTV to 80% to 85%.

A HomeStyle loan allows an LTV of up to 97%. This means it’s possible to put as little as 3% down. Some investment properties are also eligible for this type of loan. Renovations are eligible as long as they are permanently affixed to the property. Work must be completed within 15 months from the closing date of the loan.

3. Freddie Mac CHOICERenovation

The Freddie Mac CHOICERenovation program is virtually identical to the Fannie Mae HomeStyle program. This renovation loan is for buyers who want a loan with more flexibility than an FHA renovation loan.

Like HomeStyle, renovations that are permanently affixed to the property are eligible in one- to four-unit residences, one-unit investment properties, second homes, and manufactured homes. The maximum allowable renovation amount is 75% of the “as-completed” appraised value of the home — meaning the appraised value of the home before renovations but accounting for all planned changes. The maximum loan-to-value (LTV) ratio is 95% (97% for HomePossible or HomeOne loans).

The Freddie Mac CHOICEReno eXPress Mortgage is an extension of the CHOICERenovation mortgage. The CHOICEReno eXPress mortgage is a streamlined mortgage for smaller-scale home renovations. Renovation amounts are limited to 10% or 15% of the “as-completed” appraised value of the home. Borrowers need to work with an approved lender to apply for one of these programs.

4. USDA Purchase with Rehabilitation and Repair Loan

A USDA Purchase with Rehabilitation and Repair Loan assists moderate- to very-low-income households in rural areas with repairs and improvements to their homes. Buyers can secure 100% financing with this loan.

For very low-income borrowers, there’s a separate loan you can qualify for with a subsidized, fixed interest rate set at 1% with a 20-year term. This makes borrowing incredibly affordable.

To apply, you must have a household income that qualifies as low to moderate in your county per USDA standards. The property must be your primary residence (no investments), and rehab funds cannot be used for luxury items, such as outdoor kitchens and fireplaces, swimming pools and hot tubs, and income-producing features. Manufactured homes, condos, and homes built within the last year are not eligible.

5. VA Alteration and Repair Loan

The VA allows qualified service members to bundle repairs and alterations with the purchase of a home. As with all VA loans, 100% financing is available on these low-interest loans.

Alterations must be those “ordinarily found” in comparable homes. Renovations are also required to bring the property up to the VA’s minimum property standards.

The loan amount can include the “as completed” value of the home as determined by a VA appraiser. Leftover money from the home loan after renovations are complete is applied to the principal.

Note: SoFi does not offer the five types of home renovation loans on this list, although it does offer other types of FHA loans and VA add loans.

Home Style Quiz

Other Options for Financing Home Renovations

While a renovation home loan is a great way to finance a renovation, it’s not your only option for borrowing money for home improvements. Nor is it the most flexible. Alternative loans — such as cash-out refis, home renovation personal loans, and home equity loans -– may provide more flexibility.

Cash-out Refinance

A cash-out refinance is useful for those who already own their home. You replace your old mortgage with a new mortgage, and the equity (here, the “cash”) is refunded to you. You will have closing costs with a refinance, but you won’t have separate financing costs for the money you’re using for renovations.

Personal Loan

Personal loans are often used for a home remodel or renovation. Because the funds are not secured by your property, you’ll likely have to pay a higher interest rate. The bright side of funding this way means you won’t lose your home if you have a financial setback and need to stop paying back the loan.

This type of loan comes with a shorter repayment period, higher monthly payment, and lower loan amount. You can find these loans through banks, credit unions, and online lenders.

Home Equity Loan

A home equity loan is a secured loan that uses your home as collateral. That means the lender can foreclose on the home if you stop paying the loan, and so interest rates are typically lower. A home equity loan also comes with a longer repayment period than a personal loan.

Home Equity Line of Credit (HELOC)

A HELOC is a line of credit that lets homeowners borrow money as needed, up to a predetermined limit. As the balance is paid back, homeowners can then borrow up to the limit again through the draw period, typically 10 years. The interest rate is usually variable, and the borrower pays interest only on the amount of credit they actually use.

After the draw period ends, borrowers can continue to repay the balance, typically over 20 years, or refinance to a new loan.

Recommended: A Personal Line of Credit vs. a HELOC

Private Loan

A private loan is a loan made without a financial institution. Loans made from a family member, friend, or peer-to-peer source are considered private loans. Qualification requirements will depend on the individual or group lending the money. There are some serious drawbacks to obtaining funding from a private source, but these loans can help some borrowers in buying a home.

Government or Nonprofit Program

It is possible to finance the cost of remodeling with the help of government programs. Federal programs like the U.S. Department of Housing and Urban Development (HUD) have financing options for renovations, as do some state and local government agencies.

Recommended: What Is HUD?

The Takeaway

Homeowners have a lot of options for financing renovations, especially in an era when home equity is higher than ever before. Renovation home loans allow borrowers to purchase and renovate a property with one loan, but that’s not the only way you can remodel a fixer-upper. Some alternatives to renovation home loans include home equity loans, HELOCs, and personal loans.

SoFi now partners with Spring EQ to offer flexible HELOCs. Our HELOC options allow you to access up to 90% of your home’s value, or $500,000, at competitively lower rates. And the application process is quick and convenient.

Unlock your home’s value with a home equity line of credit brokered by SoFi.

FAQ

How do renovation mortgages work?

Home renovation loans are known for combining the cost of financing a renovation or remodel with the cost of purchasing the home into a single-closing transaction. Lenders calculate the amount to be borrowed based on the value of the home after renovations are complete.

Can you include renovation costs in a mortgage?

A home loan can include renovations, but you must work with your lender to be approved for specific renovation loan programs.

Can you add renovation costs to your mortgage?

You cannot add renovation costs to an existing mortgage, but you can refinance your mortgage with a cash-out refinance that provides you with funds you can use however you wish. You can also take out a home equity loan or open a home equity line of credit (HELOC) which would provide you with renovation money and would, technically, be a second mortgage.

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Photo credit: iStock/Hispanolistic

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 Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

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.

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.
^¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
^†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.
^²SoFi Bank, N.A. NMLS #696891 (Member FDIC), offers loans directly or we may assist you in obtaining a loan from SpringEQ, a state licensed lender, NMLS #1464945.
All loan terms, fees, and rates may vary based upon your individual financial and personal circumstances and state.
You should consider and discuss with your loan officer whether a Cash Out Refinance, Home Equity Loan or a Home Equity Line of Credit is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit not originated by SoFi Bank. Terms and conditions will apply. Before you apply, please note that not all products are offered in all states, and all loans are subject to eligibility restrictions and limitations, including requirements related to loan applicant’s credit, income, property, and a minimum loan amount. Lowest rates are reserved for the most creditworthy borrowers. Products, rates, benefits, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria. Information current as of 06/27/24.
In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee.

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When you’re looking for funds to pay for your college education, you’re likely to go after federal funds and all of their benefits first — and, if that isn’t enough, then you’ll seek private loan funding. One option for private funding is a signature student loan.

Keep reading to learn more on what a signature student loan is, how it can be used, pros and cons of signature student loans, and more.

What Are Student Signature Loans?

Student signature loans, also known as “sig student loans,” are private loans that typically don’t require collateral, relying instead on the borrower’s creditworthiness or that of a cosigner. These loans can cover tuition, housing, and other educational costs, offering flexible repayment options.

Understanding the terms and conditions is crucial before choosing a signature student loan.

What Type of Loan Is a Signature Student Loan?

There are two main types of student loans: federal and private student loans. Federal loans require the filling out of a FAFSA to see if a student qualifies for any type of aid from the federal government. They come with certain benefits and protections not offered by private lenders. Private loans, on the other hand, are given by banks, credit unions, and online lenders to help students pay for college. They should be used after all federal aid options have been considered.

A student signature loan is a form of private funding, one where collateral is not needed, making it an unsecured private loan for college expenses.

Recommended: How to Complete the FAFSA Step by Step

Common Uses of a Signature Student Loan

Common uses of a signature student loan include for tuition/attendance, books, and housing. Here’s more about each.

Tuition/Attendance

The average cost of tuition and fees for the 2024-25 school year at a public in-state university was $11,610. Those at private universities paid an average of $43,350 for the same school year. A student may decide to use a sig student loan to cover costs of tuition/attendance that aren’t covered by grants, scholarships, and federal student loans.

Books

The average college student spends $1,212 annually to pay for their books and supplies during college. One single hardback textbook can now cost as much as $400, although the average is between $100 and $150. Students may need to resort to loans to cover the cost of books each semester.

Housing

Although some students continue to live at home during college, many pay for room and board. At a public, four year institution, the average cost for room and board is $12,639 a year. At a private, nonprofit institution, the average cost is $14,406 annually.

Should You Get a Signature Student Loan?

Deciding whether to get a signature student loan will depend on your unique circumstances. As general guidance, students who don’t receive enough funding through grants, scholarships, and federal student loans often look to private funding to make up the difference. Private student loans, sometimes called signature student loans, can help bridge funding gaps, but they may come with higher interest rates than federal loans.

Pros and Cons of Signature Student Loans

Signature student loans come with both advantages and drawbacks. Understanding the pros and cons can help borrowers make informed choices about their education financing.

Pros of Signature Student Loans

Pros of signature student loans include the following:

•   Extra source of funds

•   Variety of repayment terms

•   Flexibility of usage

Extra Source of Funds

Student signature loans can provide a source of funding for college after grants, scholarships, and federal options have been exhausted. Grants and scholarships typically do not have to be repaid. Federal loans and signature student loans do need to be repaid, but payments won’t start until six months after the student graduates or drops below half-time enrollment.

Variety of Repayment Terms

With a private student loan, funds are obtained from a private lender. Some offer better rates and terms than others, with some of them deferring payments while the student is attending college classes. Compare rates and terms to choose which route is best for you.

Flexibility of Usage

In general, a private loan can offer flexibility with how the funds are used. For example, this funding can be used as one of the undergraduate student loan options or one of the graduate student loan options: for tuition, books and supplies, and/or housing expenses.

Cons of Signature Student Loans

Unlike a federal student loan, private lenders of student signature loans don’t rely upon information found in the FAFSA. Instead, a student interested in receiving private funding would fill out an application with the lender and must qualify for the loan.

Qualifying for a Sig Student Loan

Loan terms can vary by lending institution. This includes the interest rates offered, borrowing limits allowed, and the length of the loan. Some require payments while the student is in school, while others will defer payments until the student is out of school. Choose parameters that fit your needs, with the understanding that you’ll need to qualify for the loan program.

Credit Score

Private lenders may require you to have a certain credit score to obtain the loan or to get the best rates and terms. The three main credit bureaus that issue scores are Equifax, Experian, and TransUnion. A private lender will likely have a certain credit bureau that they use to get an applicant’s credit scores, and yours will need to fit within their lending guidelines to get loan approval.

Income

The lender will also want to see proof of a steady income, one that’s sufficient to pay back the loan. If you don’t have enough on your own, adding a cosigner could help you qualify. This can help reassure the private lender that the loan will be appropriately paid back.

Other Ways to Pay for College

Ways to pay for college include:

•   Financial aid

•   Federal loans for students

•   Federal PLUS Loans for parents

•   Work-study jobs

•   Part-time jobs

•   Private student loans

Financial Aid

Student financial aid can be a combination of grants and scholarships, federal student loans, private student loans, and federal work-study programs.

Federal Loans for Students

Federal Direct Loans, also known as Stafford Loans, can be either subsidized or unsubsidized. With subsidized loans, the government covers the interest while the student is in school; with the latter, the interest accrues while the student is in school. In either case, finding out what you qualify for in federal funding can be a logical first step.

Federal PLUS Loans for Parents

Parents can take out a Parent PLUS Loan for an undergraduate with fixed interest rates and flexible repayment methods. These loans do require a credit check and can also be taken out by graduate/professional students. The maximum amount that can be borrowed is the full cost of tuition minus other financial assistance the student receives.

Work-Study Jobs

There is a federal work-study program that allows students with financial need to earn income to pay their education-related expenses. Ideally, the work will be connected to community service and/or the student’s academic study courses. This program is managed by the colleges themselves, so check with yours to see if they participate and if you qualify.

Part-time Jobs

If you don’t qualify for work study, you can still seek part-time employment in the general location of your university. You could work at a restaurant or coffee shop, babysit, or walk dogs. This allows the student to earn income, hopefully on a schedule that is flexible enough to work around college commitments.

Private Student Loans

Private student loans can be a source of funding for college expenses when grants, scholarships, and federal funding options have been exhausted. Keep in mind, though, that private student loans do not offer the same protections and benefits as federal student loans. Private lenders can have different loan programs, so compare carefully before making a decision.

The Takeaway

A signature student loan is a type of unsecured (no collateral) private funding to help with educational expenses. Signature student loans rely on the borrower’s or cosigner’s creditworthiness for approval. In addition to signature student loans, students can rely on grants, scholarships, cash savings, and federal student loans to pay for college.

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.

FAQ

Is a signature student loan a good idea?

A signature student loan can be a good idea if you need funding beyond federal aid and have strong credit or a cosigner. However, they often come with higher interest rates and stricter repayment terms, so carefully compare options and consider your ability to repay before committing.

Is it easy to get a signature student loan?

Getting a signature student loan depends on your creditworthiness or having a creditworthy cosigner. It can be easier for those with strong credit and steady income, but students with limited credit history may face challenges. Loan approval criteria vary by lender, so researching options is essential.

When do you have to start paying a sig student loan back?

Repayment for a signature student loan typically begins after graduation or dropping below half-time enrollment, following a grace period of about six months. Some lenders may require immediate payments or offer flexible repayment plans. Always review loan terms carefully to understand when repayment begins.

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Photo credit: iStock/FatCamera

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., Puerto Rico, U.S. Virgin Islands, or American Samoa, 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 4/22/2025 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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.

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.

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

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

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

What Are Hotel Credit Cards?

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

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

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

How Do Hotel Credit Cards Work?

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

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

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

What to Look for in a Hotel Credit Card

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

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

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

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

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

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

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

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

Advantages of Hotel Credit Cards

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

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

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

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

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

Recommended: What Is an International Credit Card?

Disadvantages of Hotel Credit Cards

Here are some downsides of hotel credit cards to consider:

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

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

Recommended: What Is an International Credit Card?

Who Should Open a Hotel Credit Card?

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

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

Recommended: Credit Card Miles vs. Cash Back

How Redemptions and Earning Rates Vary on Hotel Credit Cards

The “earn and burn” rates for this category of rewards credit cards can vary greatly. Some offer two to five times or even higher the usual number of points when booking a stay at the hotel brand affiliated with the card. Plus, higher-tiered cards typically make it easier for you to earn points more quickly, perhaps with sign-up bonuses.

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

How to Find a Hotel Credit Card

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

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

The Takeaway

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

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.

While SoFi does not currently offer hotel credit cards, we may have other credit cards to suit your needs.

FAQ

Does my marital status matter in a hotel credit card?

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

How much is charged by hotels on your credit card?

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

Is your credit card charged when you check out?

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

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Photo credit: iStock/Prostock-Studio

**Terms, and conditions apply: This SoFi member benefit is provided by Expedia, not by SoFi or its affiliates. SoFi may be compensated by the benefit provider. Offers are subject to change and may have restrictions, please review the benefit provider's terms: Travel Services Terms & Conditions.
The SoFi Travel Portal is operated by Expedia. To learn more about Expedia, click https://www.expediagroup.com/home/default.aspx.

When you use your SoFi Credit Card to make a purchase on the SoFi Travel Portal, you will earn a number of SoFi Member Rewards points equal to 3% of the total amount you spend on the SoFi Travel Portal. Members can save up to 10% or more on eligible bookings.

Eligibility: You must be a SoFi registered user.
You must agree to SoFi’s privacy consent agreement.
You must book the travel on SoFi’s Travel Portal reached directly through a link on the SoFi website or mobile application. Travel booked directly on Expedia's website or app, or any other site operated or powered by Expedia is not eligible.
You must pay using your SoFi Credit Card.

SoFi Member Rewards: All terms applicable to the use of SoFi Member Rewards apply. To learn more please see: https://www.sofi.com/rewards/ and Terms applicable to Member Rewards.

Additional Terms: Changes to your bookings will affect the Rewards balance for the purchase. Any canceled bookings or fraud will cause Rewards to be rescinded. Rewards can be delayed by up to 7 business days after a transaction posts on Members’ SoFi Credit Card ledger. SoFi reserves the right to withhold Rewards points for suspected fraud, misuse, or suspicious activities.
©2024 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender. NMLS #696891 (Member FDIC), (www.nmlsconsumeraccess.org).

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

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 Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

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A retail credit card is a type of credit card that is a partnership between a bank or major credit card issuer and a retailer. Also known as a store credit card, retail credit cards usually come with discounts, rewards, and other perks that are specific to that retailer.

You might have received an offer for a retail credit card when you’re at the checkout at a brick-and-mortar store. Or you may have gotten an offer in the mail or while shopping online. When it comes to determining whether store credit cards are worth it, you’ll want to weigh their pros and cons.

What Is a Store Credit Card?

As mentioned, a store credit card is the same as a retail credit card. A store card is a credit card from a retailer, franchise, or group of stores. It might come with a sign-up offer, such as a one-time discount on your purchase. Other perks include a credit card points rewards program, special promotions, offers, and discounts on your purchases. Some might offer 0% financing on big-ticket purchases.

Store credit cards are not to be confused with retailer loyalty cards. Loyalty cards are a way to gain access to deals and promotions, and to earn points to swap for a discount on future purchases. However, they do not allow you to buy with credit, which is essentially borrowing money.

Recommended: Understanding Purchase Interest Charges on Credit Cards

How Do Store Credit Cards Differ From Other Credit Cards?

There are two main types of store credit cards: private label store cards and cobranded store cards. Private label credit cards differ more from other credit cards, as they are closed-loop cards, meaning you can only use the card at a specific retailer or group of retailers.

Closed-loop cards are more common than cobranded store cards. Cobranded credit cards are open-loop cards that partner with a major credit card network — think Visa, Mastercard, American Express, or Discover. As such, you can use this type of store card at the featured store or group of stores, as well as anywhere that particular credit card issuer is accepted.

Unlike private label cards, open-loop cards also may give you a chance to rack up points or scoop up rewards beyond spending in that specific store. Private label cards generally reserve rewards earnings for that particular store.

Benefits and Drawbacks of Store Credit Cards

There are both pros and cons to retail credit cards. Advantages include:

•   Easier to obtain: Retail credit cards are usually easier to qualify for than other types of credit cards. They typically require just a fair credit score. And because they report to the major credit bureaus each month, they still can help you build your credit when you’re starting out.

•   Often no annual fee: Many store credit cards don’t have an annual fee, which can save you money. This can be especially motivating if you don’t anticipate using the card that often.

•   Instant discounts: When you first sign up for a retail credit card, you might get a one-time discount on your first purchase.

•   Discounts, promos, and offers: As a store cardholder, you might be privy to exclusive ongoing discounts or special promotions and offers. The types of discounts and offers vary widely depending on the retailer and time of year. For instance, a retailer might offer a flat 5% discount on every purchase. Cardholders also might have access to special coupons and offers.

•   Rewards and cash back programs: Similar to other types of credit cards, you can earn points to use for store purchases or cash back.

•   Other perks: If you’re a cardholder for a particular retailer, you might receive other benefits, such as free or expedited shipping, financing on certain types of products, or more time to return items.

Here are some potential downsides of a store credit card:

•   High interest rates: Whereas the average credit card annual percentage rate (APR) was 21.47% in late 2024, interest rates for store credit cards average exceeded 30% for the same period. If you carry a credit card balance, it could take you longer to pay off your debt. Plus, you’ll owe more in interest.

•   Inflexibility in use: If you have a private label store card, or a closed-loop card, then you can only use the card to make purchases at that particular store or group of stores. Unless you shop frequently at that particular retailer, it might prove difficult to use often enough to make sense.

•   Lower credit limits: Store credit cards usually have lower credit limits than other types of credit cards. In turn, it could be harder to keep your credit usage down. A high credit usage, or credit utilization ratio, could hurt your credit score.

•   Deferred interest: A retail card might offer 0% financing for a period of time. Here’s the potential catch: If you don’t pay off your purchase before the promotional period ends, you might be on the hook for all of the interest owed from the purchase date onward.

To recap, here are the major pros and cons to keep in mind when considering if you should get a store credit card:

Store Credit Card Pros and Cons
Pros	Cons
Easier to qualify for	Higher interest rates
Often no annual fee	Low credit limits
Rewards and cash back programs	Deferred interest
Other perks	Inflexibility in use

Recommended: Difference Between Credit Card Issuer and Credit Card Network

Are Store and Retail Credit Cards Worth It?

A store credit card could be beneficial if you are building credit from scratch or are new to credit. As they typically are easier to qualify for and often don’t have an annual fee, you can use it at your leisure to build credit.

It can also be worth it if you are a loyal devotee and shop frequently at a particular retailer. That way, you’ll make the most of ongoing discounts, exclusive sales, promotions, offers, and additional perks.

When to Consider Getting a Store Credit Card

As mentioned, if you’re building credit from scratch and don’t want to worry about annual fees, a store credit card could be a good choice for you. It could also be a solid option if you shop at that retailer enough to make use of the card’s perks.

A store credit card can also be a good idea if you don’t need a card with a high credit limit. Ideally, you’ll be able to pay off the balance in full each month.

When Not to Consider a Store Credit Card

If you don’t anticipate using a card very often or prefer a card that you can use more widely, then it might be best to forgo opening a store credit card.

A store credit card also is probably not the best choice for you if you tend to carry a balance. That’s because the higher-than-average interest rates can gobble up any savings you’ve earned on rewards and discounts.

Alternatives to a Store Credit Card

Not sure a store credit card is worth it for you? Here are some of the different types of credit cards to look into:

•   Cash back credit card: A cash-back card is a type of rewards credit card that offers rewards in the form of cash back, which can offset your spending on the card. For instance, with a card that offers 1% cash back, you’d get $1 back for every $100 you spend. The SoFi credit card is an example of a cash-back card, offering unlimited cash-back rewards on all eligible purchases.

•   Airline credit card: Airline credit cards are a kind of travel credit card cobranded with major credit card networks. Similar to a store or retail credit card, you’ll receive perks with a specific airline company if you make purchases on the card. Airline credit cards typically are open-loop cards, which means you can use the card anywhere that type of card is accepted.

•   Hotel credit card: Hotel credit cards are offered through partnerships between a hotel and a credit card network. With a hotel credit card, you get points toward that particular hotel’s rewards program. The card might also come with other benefits.

Recommended: Instant-Use Credit Cards

The Takeaway

A store credit card could be a good idea if you are building credit from scratch or if there’s a card offered by a retailer you love and shop at often (you could access valuable perks). Otherwise, it might make more sense to look at other options with greater flexibility in use and lower interest rates.

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

Are store credit cards good for credit?

Store credit cards can help you build credit from scratch. They tend to be easier to qualify for than other types of credit cards. And if you practice good credit card habits, such as keeping a low credit usage and paying on-time, they can positively impact your score.

Will a store credit card build my credit limit?

Adding another credit card, no matter the type of credit card, can help build your credit limit. When you open a credit card, you receive a credit limit on top of those of your existing cards. For instance, let’s say you open a store credit card with a $2,000 limit, and your credit is capped at $10,000 among your other cards. By opening a store card, your credit limit will have increased to $12,000.

Should I cancel an unused store credit card?

You might consider closing an unused store credit card, but doing so could negatively impact your credit. That’s because it will lower your credit limit, which in turn increases your credit usage. Plus, it can impact your length of credit, which also plays into your score.

Will closing a store credit card hurt my credit?

Closing a store credit card could negatively impact your credit in two ways. First, it can lower your credit utilization ratio because your overall credit limit will decrease. Second, it could shorten the length of your credit history, which also impacts your credit score.

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Photo credit: iStock/Prostock-Studio

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 Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

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

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

What Is a Hotel Credit Card Hold?

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

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

How Hotel Credit Card Holds Work

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

What Can You Be Charged For?

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

•   The cost of your room (if not prepaid)

•   Additional nights if you extend your stay

•   Room service

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

•   Damages to the property

Recommended: Breaking Down the Different Types of Credit Cards

How Long Does a Hotel Hold Your Credit Card?

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

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

What Are the Benefits of a Hotel Credit Card Hold?

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

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

Other Methods of Reservation

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

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

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

Booking a Hotel Using a Credit Card Hold

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

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

Best Practices for Managing Credit Card Holds

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

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

How Do Hotel Credit Card Holds Help Hotels?

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

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

Credit Card Hold vs Debit Card Hold

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

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

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

Recommended: Understanding Purchase Interest Charges on Credit Cards

The Takeaway

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

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

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

How long does a hotel hold your deposit?

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

How much do hotels hold on credit cards?

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

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Photo credit: iStock/ferrantraite

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 Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

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