The latest figures put the average honeymoon cost at around $4,800, Brides.com reports, adding that the average honeymoon lasts eight days.
There are plenty of ways to save on or save for a honeymoon, though.
Here’s what you need to know about the average honeymoon cost and paying for a trip you’ll never forget.
The Honeymoon Tab
The Knot, a wedding-planning platform, cited a pre-pandemic average honeymoon cost of $5,000, based on an internal study of more than 27,000 couples who married in 2019. That is atop the average cost of a wedding, which The Knot put at nearly $30,000.
The average cost of a honeymoon has increased in the past few years, reflecting couples’ desire for more experiential travel, The Knot says, with more than 60% of American couples traveling outside the continental U.S. for their honeymoon.
Of course, the honeymoon outlay could be much higher if a couple goes on a luxury getaway or takes an extended trip.
💡 Quick Tip: Need help covering the cost of a wedding, honeymoon, or new baby? A SoFi personal loan can help you fund major life events — without the high interest rates of credit cards.
Big-Ticket Honeymoon Items
The cost of a honeymoon can depend on location, amenities, and even the season couples decide to travel. Typically the cost will include:
• Plane, train, or automobile travel
• Accommodations
• Any excursions
• Food and beverages
• Taxes, tips, and fees
Essentially, it’s the same as any other big trip. The only extras may come because you want to make this trip the best it can be (and we don’t blame you).
Ways to Cut Honeymoon Expenses
There are still plenty of ways to save money on a honeymoon. As mentioned, location can play a major factor in the cost of the trip, but there is a secret a lot of travel insiders know and don’t share: Shoulder season.
Shoulder season is that awkward time between the high and low seasons of different destinations. It’s not necessarily that a place is less desirable to visit, but merely a less popular time to go.
The shoulder season in the Caribbean is the early fall (in the Northern Hemisphere, September to November), which is the midst of hurricane season, meaning fewer people tend to book during this time. Honeymooners could score great deals on flights and accommodations, and find more restaurant and excursion reservations available.
Hawaii, a perennial honeymoon destination favorite, has shoulder seasons of April through June, after all the school breaks end, and September to December, right before the holiday travel rush.
Check to see when your desired location’s shoulder season may fall, and if you wish, book in this window for the chance to save a little money.
Two other ideas:
Forage for great fares. Another way to cut back on typical honeymoon expenses is to hunt for the best flights possible if you’re traveling by air. This can be done by signing up for newsletter or alert services like Next Vacay, which sends daily emails with cheap flight deals, or similar services like Scott’s Cheap Flights and Skyscanner.
Use points or miles. One more way to lessen the financial strain of a honeymoon is to dig into credit card rewards such as points or miles. Check to see if your points can be used on flights, accommodations, or activities, and use them as you please. Don’t forget to check on any of those frequent flyer miles you’ve got hanging around either.
💡 Quick Tip: Choosing a personal loan with a fixed interest rate makes payments easy to track and gives you a target payoff date to work toward.
Paying for a Honeymoon
There are a number of ways couples can finance their honeymoon. Here are a few.
Join a honeymoon registry. The first, and perhaps most festive for a wedding, is to ask your friends and family to get involved with a honeymoon registry.
A honeymoon registry is a new twist on the wedding registry tradition. Rather than ask for gifts like china that comes out of the closet once every 10 years, couples can instead ask their guests to gift them money that they may use toward their honeymoon.
Some couples take the honeymoon registry a step further by registering at places like Honeyfund or Zola for specific honeymoon items rather than a blanket ask. This can include a specific hotel stay or merely an upgrade, scuba lessons or ski tickets, or dining at one special restaurant during the trip.
Carve out a honeymoon savings fund. Another way to finance your honeymoon is by starting your own honeymoon budget. Once you’ve decided as a couple where you’d like to travel on your first trip as the newly betrothed, you can estimate how much the trip will cost.
From there, you can start a fund where you put in a little each day, week, or a month from income or through any cutbacks you’re willing to make to your personal budgets to turn this dream trip into a reality.
Decide to camp out in Uncle Jeremy’s backyard. And grill hot dogs for days. It will be unforgettable. Just sayin’.
Take out a personal loan. A personal wedding or honeymoon loan can be used for just about anything you want. Yes, that means it can be used to cover any and all costs of a honeymoon.
The Takeaway
The average honeymoon costs around $4,800. But clearly, that number can vary greatly depending on when and where honeymooners travel, for how long, and the level of luxury. With more couples lusting for experiential travel, the average tab has grown.
Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.
SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.
Photo credit: iStock/DragonImages
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.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
A wedding day is a milestone for many people. It’s a day that’s dreamed about and planned for. It can also be expensive. If you’re wondering if you should finance your wedding, here is some guidance when it comes to making that decision.
The Average Cost of a Wedding
SoFi’s most recent survey found that the median cost of a wedding is $10,000. Of course, prices can be higher or lower than that median: A destination wedding or one held in a big city with 300-plus guests will likely be a much bigger expense than having 50 of your nearest and dearest gather in your grandmother’s beautiful backyard flower garden.
Now in 2023, the average cost of a wedding is rising once again, with the average cost sitting at $29,000. In larger cities, many spend $35,000 or more.
Here’s what you need to consider when it comes to financing your wedding.
💡 Quick Tip: Need help covering the cost of a wedding, honeymoon, or new baby? A SoFi personal loan can help you fund major life events — without the high interest rates of credit cards.
To Borrow or Not To Borrow
There are many variables that can affect the cost of a wedding, including the time of year you say I do, the day of the week, the number of guests, the reception venue, and a host of other things. Not to mention, there are sometimes unexpected wedding expenses that are sometimes forgotten in planning, like the cost of beauty and hair treatments and the marriage license, for example.
Temptation can also get the better of you. If you plan on using a wedding loan to pay for your wedding, it’s possible that you will qualify for an amount that’s more than you need. Will you have the discipline not to upgrade your plans and spend more than you can realistically afford? It can be easy to get caught up in the fantasy and have regrets later.
The Pros of Financing a Wedding
• You get your day with all the bells and whistles that you’ve dreamed of. You have the wiggle room to have more guests, a highly sought-after DJ or band, and food that will still be talked about on your anniversary. Mission accomplished in having a special day that will last a lifetime of memories.
• You might be able to borrow enough money to have a relaxing honeymoon, too, which might be nice after the stress of wedding planning.
• You won’t deplete your savings to pay for your wedding. Starting your life together without an emergency savings account can be stressful.
The Cons of Financing a Wedding
• When the wedding is long over, that monthly loan payment is still owed. Depending on the amount and term of the loan, that can be a big commitment.
• Interest rates for personal loans vary based on the borrower’s credit rating and other factors. If you don’t qualify for favorable interest rates, you could end up paying a decent amount in interest over the life of the loan.
• Taking out a loan also increases your debt-to-income (DTI) ratio. If you are planning on near-future large purchases that will require another loan, like a mortgage, having a high DTI ratio might make it more difficult to qualify for future loans, or might affect the rates you qualify for.
Making the Decision
Borrowing money to pay for wedding expenses is a major decision. Being informed of all the details will help you make the best decision for your financial situation.
A wedding loan is a personal loan and is most often unsecured, which means you don’t need to put up collateral to secure the loan. You will, however, need to meet other qualifying factors, such as a certain credit score or employment history, to name a few.
Ideally, you want the lowest interest rate you can get. Fixed-rate loans carry the same interest rate throughout the term of the loan, but a variable interest rate loan can fluctuate throughout the term based on changes in the underlying index rate.
There also may be fees to be aware of, such as origination fees, closing fees, prepayment penalties, and others. It’s helpful to know what all the fees are for and if they are negotiable.
Knowing your total costs and understanding the total interest you will pay over the life of the loan will help you with your decision about whether or not to borrow. Either a lower interest rate or a shorter term may save money in the long run. A personal loan calculator or amortization table can help with this analysis.
💡 Quick Tip: Choosing a personal loan with a fixed interest rate makes payments easy to track and gives you a target payoff date to work toward.
Other Options for Financing a Wedding
If you’re having second thoughts about borrowing to pay for your wedding, you might need to come up with alternatives. With wedding planning, there’s always a Plan B.
• Postpone the wedding. You might be able to avoid borrowing altogether by postponing the wedding to give yourself time to save the money to pay for it. Cutting unnecessary expenses might free up some money in your budget. Or earning extra money by taking on a side hustle might be a good way to add to your savings.
• Use a credit card. Using a credit card to pay for wedding expenses might be another option. While a personal loan might offer a lower rate than a credit card, you might find credit card offers with low introductory rates — perhaps even 0% — for a limited time. If you’re confident that you can pay the card off in full before the introductory rate ends, this could be an attractive option.
• Ask your parents to contribute. Asking parents for money might not be the most appealing option, but it might be a worthwhile consideration. Even though the average age of newlywed couples is rising, which might mean more couples are established financially before they marry, it’s still traditional for the parents of the couple to contribute to the cost of the wedding and it’s common for the couple to have help paying for the wedding.
The Takeaway
Your wedding is a special day, but it’s just one day — then comes the rest of your lives together. Using borrowed money to finance your wedding is a big decision and should not be taken lightly. Taking on debt will affect your budget immediately and your borrowing options in the future.
Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.
SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.
Photo credit: iStock/PeopleImages
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.
If you need more living space, but don’t have the property (or the budget) to put an addition on your home, it may be time to take a closer look at your garage. Whether it’s attached or free-standing, a garage conversion can be a relatively quick and affordable way to expand your current home.
The cost and amount of work involved in turning your garage into usable living space will depend on its size, current condition, the purpose of the remodel, and where you live. Read on for a closer look at what’s involved in a garage conversion, including design ideas and estimated costs.
Do Garage Conversions Add Value?
You may define value in myriad ways, but one of the most important considerations in converting a garage is what value it might add to your life. If you have a big family, you might want more space — perhaps a quiet, child-free zone where you can enjoy some quiet time. Or, you may want to convert a garage into a playroom where your children can keep their toys, decluttering your main house.
If you frequently have house guests, building a garage apartment or in-law suite can function as extra living space for friends and family to use when they’re in town.
A garage conversion can also add monetary value to your home, since you’re adding to the total livable square footage of your home. You can generally expect to get about 80% of what you spend on a garage conversion back when you sell your home (known as your return on investment, or ROI). To get an idea of the ROI of a garage renovation in your area, you may want to use a free online home improvement ROI estimator.
Adding Living Space to a Converted Garage
How you use a converted garage space depends on whether it’s attached to your house or a freestanding structure. If the garage is attached, you could create a room that becomes part of your home. This might be a recreation room, a workout room, a family room, a home theater, an extra bedroom, or a multipurpose room.
If your attached garage is connected to your kitchen, you might consider expanding your kitchen into a home chef’s paradise or creating an open-concept dining and entertaining area.
A detached garage could also become an apartment for your child as a young adult. Or, you might turn it into an art studio or a home office. The options are virtually endless. So a good first step is to figure out how a converted garage might provide the most value for your family.
Need help funding your garage conversion?
Check out home improvement loans with SoFi.
Converting a Garage to an Apartment
If you’ve decided to convert your garage into an apartment, whether to create an in-law suite or a private space for your older child, you’ll want to consult your local planning board to find out what permits, if any, are needed. Often, if you’re building a new structure or making modifications to existing structures, a permit will be required. In fact, it’s important to double-check whether a permit is needed even for light remodeling.
Before you begin converting your garage, you might want to map out where everything is going to go and what you’ll do with the items that are currently in the space. To streamline that process, you could divide the items into one of three categories:
• Keep
• Donate
• Throw Away
Once you’ve donated and thrown away items, it’s time to determine where you want to store the remaining items. Do you have a basement or attic where you can pack away everything you’ve stuffed into the garage over the years? How can you make those areas more storage-friendly?
If you still want to use a portion of your garage for storage after conversion, you might think about how to partition off that section so that the rest of the garage looks attractive and not cluttered. If you don’t want to use your garage for storage after the conversion, you might consider building an outdoor shed (provided your HOA or neighborhood association allows it) where you can items you don’t need on a regular basis.ws it, in which to store your remaining belongings, or a remote storage unit for things that you’ll rarely need.
Garage Floors and Doors
Deciding what to do with garage floors and doors is a crucial part of a garage conversion. If you have a traditional garage, the flooring might be a concrete slab with no insulation. In addition, the garage floor may fall several feet below the floors in your home, sloping toward a floor drain or the garage door, in which case you’ll need to have the floor leveled.
Then there’s the garage door to consider. If you remove it, you’ll likely have a large, gaping space. You might want to install a wall with french doors to let in the light or create a new wall that contains a large bay window. What you do might depend on whether or not you want the spot where the garage door existed to be an entryway.
Garage Roofing, Ventilation, and Insulation
Before beginning a garage conversion, you’ll want to check that the garage roof is watertight. If it’s not, some roofing upgrades could be necessary. If the plan is to install a kitchen or bathroom in your converted garage, you may also need to address ventilation issues. To create a comfortable space, you’ll also need to ensure there is proper insulation in the walls, roof, flooring, and anywhere else it’s needed.
Garage Windows and Walls
In order to create walls, you may need to install stud framing and drywall. In addition, you may need to put insulation and moisture-proofing, as well as wiring, in the walls. Also consider whether you want to add closets to your converted garage. If so, now is the time to lay those out.
One way to make a garage quickly feel like home is through access to natural daylight, which can be achieved by installing large windows strategically throughout the space or punching holes in the ceilings to install skylights. Consider using window styles that match those on your home to give it a cohesive look, especially with attached garages.
Garage Heating, Plumbing, and Wiring
If you have an attached garage, consider whether your current HVAC system can heat and cool your converted space. You may want to think about supplementing what you currently have, whether through a floor heating system, electric baseboards, wood stoves for the winter season, or an air-conditioning unit to cool off the space in the hot, sticky months of summer.
With plumbing, consider how to run pipes to supply water to the garage, as well as how to effectively drain the water back into the sewer system. If you need to add plumbing to the new space, this could be one of your bigger expenses.
What It Costs to Convert a Garage
How much it will cost to convert a garage into a living space will depend on what you will use the space for, the size of the garage, and the materials you choose. You could spend anywhere from $1,500 to $60,000 on a garage conversion.
To convert a garage into a bedroom, for example, you may need to spend around $15,000. If your plan is to make it a master bedroom with an attached bath, however, it could run closer to $25,000.
Converting a garage into an office tends to be one of the more budget-friendly options, since you don’t need plumbing and closets. You can expect to spend somewhere around $5,000. Turning your garage into a kitchen, on the other hand, will likely cost quite a bit more. You could spend anywhere from $6,000 to $50,000, depending on plumbing, appliances, and finishes.
The Takeaway
Converting a garage can be a great way to expand your livable space, while also adding value to your home. The design possibilities are virtually endless — you might turn your garage into an in-law suite, rec room for kids, gourmet kitchen, artist’s studio, home office, hobby room, home gym, or workshop. Whatever direction you take your garage conversion, you’ll want to consider budget (getting estimates from at least three contractors) and whether you’ll be able to pay up front for the project or may need to consider financing.
One type of loan that can work well for a garage conversion is a home improvement loan. This is an unsecured personal loan used to finance home upgrades and renovations. You receive a lump sum up front which you can use to pay for your garage conversion; you then repay the loan over a set term, often five to seven years, with regular monthly payments. Interest rates are typically fixed.
If you’re ready to remodel your garage and want to explore your financing options, SoFi could help. SoFi’s personal loans offer competitive, fixed rates and a variety of terms. Checking your rate won’t affect your credit score, and it takes just one minute.
See if a home improvement loan from SoFi is right for you.
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.
Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
Curb appeal should always be front of mind when you plan to sell your home and want to attract buyers or boost your resale value. But it can also help make your home a more appealing place to live.
If you’re thinking about upgrading your home’s exterior, consider these smart home remodel projects
Ideas for Exterior Home Remodel Projects
No matter how beautifully you decorate the inside of your home, the outside offers up the first impression to visitors, and these exterior home remodel ideas can be great investments for you as a homeowner, whether or not you’re planning to sell your house right now.
From adding texture to the exterior of your home to swapping out old windows for more contemporary ones to fixing up your front door, a home exterior makeover can be a smart way to make a lasting impact in a short amount of time.
Replace Your Front Door With an Inviting Style
Psychologists say that it takes just seven seconds to make a first impression. This means your front door is one of the first parts of your house that a guest or potential buyer will see and will help set the tone for how they feel about the home in general. Thus, the front door should be one of the first places you focus your energy when tackling exterior renovations of your property.
For an open, light-filled look, consider doors with glass panels. Want more privacy? Use mirrored glass in the side panels, which allows you to see outside but people walking by can’t see in. Frosted glass also offers privacy while diffusing natural light.
The overall cost of installing an exterior door depends on complexity, materials, and where you live; it could run you as little as $150 or as much as $20,000. But on average, installing an exterior door will cost between $495 to $1,771. The labor alone of having someone install it for you could cost around $1,094, so if you’re handy with tools, this could be where you save money.
Even if you choose not to replace the door itself, a fresh coat of paint, updated knob and hinge hardware, and a new doorbell to match can go far in improving the curb appeal of your home’s exterior.
Mixing Textures on Your Home’s Exterior
Mixing textures is one way to alter the exterior of your home for a positive effect. Alternating visual patterns between wood, metal, concrete, and stucco requires some experimentation, but the results can be dramatic.
For a contemporary look, consider mixing multiple textures, which could range from different widths of siding or choosing different types of siding like combining cedar shingles and shiplap in the same color. You can also mix and match levels of gloss, or shapes and lengths of bricks and stone.
For a baseline cost, installed vinyl siding can range in price from $6,370 and $17,615, with the average cost being $11,676. Your costs will depend on the thickness of the siding, how much added style you want as you mix and match textures, the size of your house, how standard the shape of your house is or isn’t, and any added details like moldings, trim, soffits, corners, or vents. If there’s old siding that needs to be removed first, you’ll also want to factor in the additional cost of labor (or consider doing it yourself).
Upgrading the Windows
Changing the style of your windows will not only give your home’s exterior a brand-new look, but potentially be more energy-efficient than your current windows. This could end up helping you save money on electric bills, which may be attractive to buyers down the line.
Material selection will dictate the overall cost of new windows. Vinyl, for example, is on the lower end of the price scale, whereas solid wood windows will cost much more.
The cost of new windows also is dependent on the size of each unit, as there are hundreds of common window sizes available. On average, a single window unit runs $150 to $800 with installation costing an additional $60 to $300 per unit. The complexity of the windows also affects pricing, and if you plan to add shutters or new blinds, factor in those costs, too.
How Much Could Your Home Exterior Makeover Boost Value?
At a minimum, your home exterior makeover can make your house more appealing to the eye, but it also can help give potential buyers assurance that you have maintained the home’s upkeep.
Projects like fixing up the front door are a great place to start, and while you’re replacing your door, you could consider adding a portico or awning as a design element or to protect visitors from the weather. Also make sure your doorbell is attractive, dovetails with the house’s overall style, and — most importantly — works.
Similar comparative data shows that an upscale window replacement using vinyl can increase a home’s value by an average of 68.5% of its cost. Upscale window replacement using wood boosts a home’s value by an average of 61.2% of its cost. And siding replacement, on average, boosts home value by 94.7% of the cost.
Funding Your Exterior Home Remodel
Once you have created a plan for exterior improvements, priced out materials, and mapped out a budget, the next item on your agenda should be figuring out the best way to pay for your improvements. If you’ve got the money in savings, then that isn’t an issue. Or, if you plan to use your credit cards but can pay them off in full when the bills arrive, again, you’re squared away.
Using your credit cards when you can’t pay them off relatively quickly, however, can be problematic as credit card debt can be tricky to pay off. That’s because most credit card companies charge compound interest, which means you’re paying interest on the accrued interest, with the interest continually calculated and added to your balance. To make matters worse, the interest may typically be compounded daily.
Even if you make minimum payments, the interest just keeps compounding. In fact, it keeps doing so until the balance is paid off completely. If you miss a payment, the situation gets worse, with late fees and penalties often added on.
If you decide that it won’t make sense to use a credit card to pay for your remodeling, then consider comparing and contrasting home equity lines of credit versus home improvement loans, which is a kind of lump-sum personal loan. Under certain circumstances, a home equity line of credit (HELOC) may make sense; for example, if you have significant equity in your home, plan to borrow a large amount of money and/or want the potential tax benefits.
Exterior home remodel projects can be a way to increase your house’s curb appeal, while also adding value. They also are often the quickest way to turn a real estate investment into long-term value. Exterior home projects can be as simple as adding a fresh coat of paint to your existing front door or as complex as replacing all the windows in your house to be both contemporary and more energy efficient. At the very least, tackling these smart exterior home remodel ideas should help you down the line when you decide to sell your house.
Of course, the more involved a project is, the more expensive it can be. If you need help financing an exterior home remodeling project, you have options, including using cash, using a credit card and paying off the balance quickly, or taking out a personal loan.
If you’re ready to roll up your sleeves and get some home repairs or renovations done, see what a SoFi personal loan can offer. With a SoFi Home Improvement Loan, you can borrow between $5,000 to $100,000 as an unsecured personal loan, meaning you don’t use your home as collateral and no appraisal is required. Our rates are competitive, and the whole process is easy and speedy.
Turn your home into your dream house with a SoFi Home Improvement Loan.
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.
A “secured” credit card is one that requires a security deposit — typically several hundred dollars — that is used as collateral in case the cardholder fails to make payments. If you have a brief credit history or dinged credit, a secured credit card can be a good tool for building credit.
Why care about your credit health? Because creditworthiness can come into play when applying for loans, jobs, apartments, and other situations that require a credit check. If you can’t get a regular “unsecured” credit card, a secured credit card may be a good option.
What Is a Secured Credit Card?
A secured credit card is a credit card that requires a refundable security deposit, which counts as collateral until the account is closed.
The security deposit decreases the risk for the credit card issuer, and allows people with damaged or limited credit to build a history of on-time payments. If your credit score is 600 or so (fair), you may be able to get a decent secured credit card.
Most secured cards require a minimum deposit of $200 or $300, and that amount is usually equal to your credit limit. If your deposit is on the low end, you’ll want to be careful how you use the card. Credit scoring models typically penalize utilization over 30%, so if your credit limit is $300, you may want to keep your balance under $90. A higher deposit will provide breathing room. A deposit of, say, $1,000 boosts the 30% threshold to $300.
Finally, a heads-up if your credit is bad: Unsecured cards targeting people with bad credit are notorious for high fees and confusing terms. And issuers of these cards usually don’t have good cards to upgrade to.
How Does a Secured Credit Card Work?
Here’s how a secured credit card works: You put down your security deposit, and then you get the same amount to spend as a line of credit.
If you want to increase your limit, you’ll have to contribute more to your security deposit. Secured credit card issuers don’t want to be left in the dust if you decide not to pay — or cannot pay — your balance. If that were to happen, they would just take your security deposit.
This type of card may be suitable for people who’ve gone through bankruptcy or are just starting out and have a limited credit history. Typically, a secured card is a better option than a high-interest unsecured credit card that’s targeted to people with a low credit score. That’s because a high-interest card, while enticing, can take years to pay off and end up damaging your financial reputation even further. A secured credit card poses a much lower risk.
A secured credit card looks the same as a regular credit card on a credit report — so users don’t have to worry about other lenders seeing that they have this type of card. And as long as the balance is paid in full and on time every month, your credit score should start to mend.
After using the card responsibly for a certain amount of time, a secured-card holder may be able to get an unsecured card. Your secured-card company can switch a card to unsecured as well, allowing access to a higher line of credit without a deposit.
Pros and Cons of a Secured Credit Card
Like most things in life, there are positives and negatives to this kind of card.
Pros
• Rebuild credit. Secured cards allow you to rebuild your credit history if you have limited or damaged credit. You do that by making on-time payments every month — at least the minimum payment, but preferably the full amount to avoid interest charges.
• Lower credit line. A lower limit means you’re less likely to go over it and risk running a high balance. This is helpful for people who are still learning how to use credit responsibly.
• Card benefits. Secured cards may offer basic benefits like fraud protection and cash back, just like you get with an unsecured card.
• Potential to upgrade. Some secured cards allow the holder to switch to a regular unsecured card after a period of responsible use.
Cons
• Security deposit. All secured cards by definition require the holder to provide the issuer with a cash deposit. That deposit is refunded once you switch to an unsecured card.
• Fewer rewards. Secured cards don’t offer all the bells and whistles that an unsecured card can. For instance, you may not earn travel points, receive any discounts on goods and services, or get access to airport lounges.
• Interest rate. As noted above, secured cards often carry higher interest rates than regular credit cards. (Of course, the interest rate won’t matter if you’re paying your bill in full each month.)
• Requires a hard inquiry. The issuer will need to run a hard inquiry or pull on your credit report. This usually translates to a slight drop in your credit score.
Applying for a Secured Credit Card
The application process for a secured card should be relatively quick and simple, provided you prepare what you need ahead of time.
1. Shop Around. Secured credit cards are not all the same. Look for a card with no annual fee (they’re nonrefundable) and a minimum deposit amount that meets your needs. Some cards even offer limited rewards, like cash back. Finally, make sure your payment history will be reported to the three main credit bureaus — that is how you’ll rebuild your credit.
2. Check your credit score. It’s smart to go into the application process knowing exactly what your credit score is. There are several ways to find it without having to pay a fee. The credit bureau Experian provides consumers with their FICO Score at no charge. Your bank may also provide your credit score online for free.
3. Collect your information and paperwork. Application requirements vary depending on the card issuer. To make sure you have all the documentation you need, gather the following:
– Proof of identity, such as a driver’s license, passport, or other photo ID.
– Proof of address, like a recent utility bill.
– Bank account info. If you have a checkbook, your bank info and account number appear on your checks.
– Social Security number. You don’t have to bring your card; just make sure you know your number.
4. Complete the application. You can do this in person if your credit card issuer has a branch near you. You may also do it over the phone with a customer service rep — just be aware you’ll need a way to provide your documentation, either in person or via upload. The easiest method is online, as long as you have access to a computer or smartphone that allows you to upload documents or images.
5. Provide a deposit. This is usually done via online transfer from your checking or savings account.
Tips for Bettering Your Chances at Approval
If you’re nervous about getting approved, taking these extra steps can help you maximize your odds.
1. Review your credit report. Request free reports from the three major credit agencies at AnnualCreditReport.com, and review them carefully. If you find any errors — from outdated information to unfamiliar accounts — file a dispute to have the data corrected or removed.
2. Pay your bills on time. Many people hit a financial rough patch at some point. The important thing is to show a recent history of on-time payments. If you can point to a year’s worth of good habits, credit card issuers will be more likely to consider you worth the risk.
3. Maintain a steady job. Even if you don’t have a high income, job security reassures credit card companies that you have the cash flow you need to pay your bills. Your employer may be able to give you a reference letter stating how long you’ve worked for the company and your track record of reliability and good work.
4. Become an authorized user. Got a family member or close friend with great credit? Ask them if they’ll add you as an “authorized user” on their credit card. Over time, their good habits will rub off on your credit history. And that may give you the boost you need to get approved for your own card.
Using a Secured Credit Card
Major credit card companies such as MasterCard, Visa, and Discover offer secured credit cards. This means you can use your card anywhere these brands are accepted.
Some secured credit cards offer benefits like cash back and free access to your credit score.
Many major credit cards also provide liability protection, so you won’t be responsible for fraudulent charges on your account. You may have to pay fees, such as a monthly maintenance fee, annual fee, balance inquiry fee, or an activation fee.
Though you may be able to get a secured credit card with a lower interest rate than an unsecured credit card, the average rate for secured cards is still higher, at 22.48%, than the average regular credit card interest rate of 20.09%.
It’s smart to do some online comparison shopping of different credit cards to see which one has the most appealing terms. However, it’s best not to apply for too many; one hard inquiry can cause a credit score to drop 5 to 10 points. If you apply for more than one or two cards, that could have a negative effect on your credit score.
When you start using your card, paying it on time is going to impact your credit score rating. If you may not remember to pay it each month, you could set up automatic payments to ensure your bills are up to date. You can also check your credit score every month to make sure it’s trending upward.
Building Credit with a Secured Credit Card
Secured cards are a great way to build credit if you have a low credit score or a limited credit history. How they do that is not so different from how a regular credit card works.
First, you need to pay your bills on time, each and every month. Missing one payment will undo all your good work up to this point. If you don’t trust yourself to remember every single time, there’s a simple solution. Set up automated payments through your bank so that your card is paid on the same day each month. You can choose to pay the minimum, a set amount over the minimum (say, $100), or the whole balance. Hot tip: Paying off the balance each month will save you money on interest.
Second, avoid running up a high balance. In this case, a high balance just means an amount approaching your credit limit (the same amount as your security deposit). Try to keep your credit utilization — the percentage of credit that you actually use — below 30%. If your credit limit is $500, the most you should charge per month is $150 (this assumes you have no other debt). As you rack up a history of on-time payments, you can request a higher limit, though that will require a higher deposit.
Denial of a Secured Credit Card
Even though getting a secured credit card with limited or damaged credit history is possible, an applicant may still be denied. Anyone who is denied a card should receive a letter from the credit card issuer explaining why. Perhaps they didn’t fill out the application properly and all they need to do is fix it, or their credit score wasn’t high enough.
If the reason has to do with the applicant’s credit report, they can get free access to their report through AnnualCreditReport.com and see their entire credit history. For example, the credit report may reveal that the credit utilization ratio, or the amount of debt compared with the amount of credit a person has, is too high. An applicant could start paying down debt more aggressively in order to bring down the credit utilization ratio and have a better chance of being approved for a secured credit card.
Another factor that may cause a denial is if an applicant doesn’t make enough income or can’t prove income. The credit score just may be too low as well.
The Takeaway
A “secured” credit card is one that requires a security deposit that is used as collateral in case the cardholder fails to make payments. Secured cards have more relaxed application requirements than unsecured cards, making them popular with people who have limited or damaged credit histories. Some secured cards offer the same conveniences as regular credit cards — from cash back to rental car coverage — without the risk of running up a huge bill. Most secured cards report to the major credit bureaus, allowing holders to build up a positive credit history over time.
Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.
FAQ
Do secured credit cards build credit?
Many secured credit cards can help you build credit. Before you apply, check that the card issuer reports to the three main credit bureaus. Then, make sure you make on-time payments each and every month.
How does a secured credit card differ from an unsecured credit card?
A secured credit card requires a cash deposit that is equal to your credit limit. This serves as collateral in case you are unable to pay your bill. The deposit is refunded if you close the card or switch to a regular unsecured card. Secured cards typically have low credit limits, higher interest rates, and few perks or rewards.
How do I close a secured credit card?
To close your card, call the number on the back or log in into your account online. Or you may choose to cut up the card without officially closing it, so that your credit history doesn’t take a hit.
How can I change a secured credit card to an unsecured card?
If you have a record of on-time payments with your secured card issuer, ask them if they offer an unsecured upgrade. Some card issuers want to see a year or so of good credit habits before switching you to an unsecured card.
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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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.
