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The cost of attending college in the U.S. can be quite expensive. In addition to tuition and fees, students may need to cover the cost of room and board, and other expenses like books and lab fees.

To help students going to college manage their budgets, it’s important that they carefully weigh their options when it comes to public and private schools. In-state tuition at public colleges can be far cheaper than out-of-state tuition or the price of attending private nonprofit schools.

College Tuition in the United States

The United States has some of the highest tuition costs, and prices have risen over time. Some of the factors that drive increasing prices are increased demand from students and increased availability of financial aid.

Colleges have also added amenities to their campuses to help attract higher-paying students. The cost of these amenities can account for as much as $3,000 per student per year. Schools are also spending more on administration.

Average College Tuition

The cost of colleges varies depending on whether students choose to attend public or private institutions. Public schools generally have different costs for in-state versus out-of-state tuition.

The average tuition in 2024 at a public, four-year school for in-state students is $9,750 per year. Students attending a public four-year program from out-of-state could expect to pay $28,386, according to Education Data Initiative.

Students who wished to attend a private nonprofit four-year college paid an average of $38,421.

In addition to tuition and fees, students have to cover other costs, such as the price of room and board, transportation, and other expenses. These additional expenses will vary depending on whether you’re living on or off-campus, but they can add more than $10,000 to the price of attending school. The average cost of attendance for students attending a public four-year in-state program is $27,146 for the 2023–2024 school year. Out-of-state students had an average of $45,708. And students attending a private nonprofit four-year program had an average annual cost of attendance of $55,840.

Recommended: What is the Average Cost of College Tuition?

States With the Cheapest College Tuition

College tuition prices vary widely by state at public four-years institutions. Generally speaking, public colleges in the South and the West are the cheapest to attend. Colleges in the Northeast are the most expensive. Vermont has the most expensive in-state tuition and fees, topping out at $17,180. New Hampshire is a close second at $17,170. To learn more, take a look at the annual study published by the College Board that tracks trends in college pricing and financial aid.

Here’s a look at the states with the cheapest in-state tuition and fees at four-year flagship university programs over the 2023–2024 school year.

Wyoming

University of Wyoming
In-state tuition and fees: $6,700
Out-of-state tuition and fees: $22,480

Florida

University of Florida
In-state tuition and fees: $6,380
Out-of-state tuition and fees: $28,660

Montana

University of Montana
In-state tuition and fees: $8,150
Out-of-state tuition and fees: $31,620

Idaho

University of Idaho
In-state tuition and fees: $8,820
Out-of-state tuition and fees: $28,050

North Carolina

University of NC-Chapel Hill
In-state tuition and fees: $9,000
Out-of-state tuition and fees: $39,340

Nevada

University of Nevada: Reno
In-state tuition and fees: $9,010
Out-of-state tuition and fees: $25,970

Mississippi

University of Mississippi
In-state tuition and fees: $9,410
Out-of-state tuition and fees: $26,980

South Dakota

University of South Dakota
In-state tuition and fees: $9,430
Out-of-state tuition and fees: $12,940

West Virginia

West Virginia University
In-state tuition and fees: $9,650
Out-of-state tuition and fees: $27,360

Arkansas

University of Arkansas
In-state tuition and fees: $9,750
Out-of-state tuition and fees: $28,770

Paying for College

Because the price of college tuition, fees, and room and board can be so high, many students have to take out student loans, apply for grants and scholarships, or apply for student aid in order to make college affordable. Students may take out federal loans or private loans to help them pay for school. They will have to repay these loans through a series of monthly payments with interest.

Federal student loans are offered by the U.S. Department of Education under the William D. Ford Federal Direct Loan Program. This program offers four types of federal loans:

•  Direct Subsidized Loans are available to undergrads who demonstrate financial need. Interest on these loans is covered by the Department of Education while the students are enrolled in school at least half-time.

•  Direct Unsubsidized Loans are available to undergrads, graduate students, and professional students and are not made based on need.

•  Direct PLUS Loans are for graduate and undergraduate students and parents of dependent undergrads. Eligibility is not based on financial need.

•  Direct Consolidation Loans allow students to combine federal loans into a single loan.

To apply for federal student loans and other forms of federal aid, students are required to fill out the FAFSA®, or Free Application for Federal Student Aid, each year.

Recommended: FAFSA Guide

Private student loans may be available through private lenders, such as banks and online lenders. These institutions set their own terms, interest rates, and loan amounts. When determining individual rates and terms, lenders will generally evaluate the applicants credit history, among other factors. Private student loans are typically considered a last resort when it comes to financing college because they aren’t required to offer the same borrower benefits or protections (like income-driven repayment options) as federal student loans.

There are also various sources of financial aid that can help students pay for school. It can come from federal, state, school, and private sources.

•  Grants, such as federal Pell Grants, are a form of financial aid that doesn’t need to be paid back, unlike student loans.

•  Scholarships are funds offered to students often based on academic performance, an area of study, or special talents. Scholarships also do not generally need to be repaid.

•  Work-study programs allow students to earn money while they are in school. Students may qualify for the federal work-study program based on financial need.

•  Many schools offer financial aid or scholarships.

The Takeaway

College can be a huge expense, but there are also a lot of benefits of a college education. As you’re choosing schools, it’s important to evaluate all of your options and think seriously about choosing one that’s in your budget as well as finding manageable ways to pay for it. That may mean attending the public school in the state you live in. And if you live in one of the states with the cheapest in-state tuition, you may pay less than $10,000 a year to go to school.

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.

FAQ

How much does college cost on average in the U.S.?

The estimated cost of attendance for one year of college is $27,146 for in-state students at public four-year schools, $45,708 per year for out-of-state students at public four-year colleges, and $55,840 for students at private nonprofit schools.

What state has the cheapest tuition?

States with the cheapest tuition include Florida, Wyoming, and Montana.

Photo credit: iStock/Bet_Noire

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

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.

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.

SOIS-Q224-1917029-V1

A rewards credit card allows cardholders to earn incentives for purchases they make. While the potential benefits of these cards are apparent, maximizing these benefits requires determining which rewards credit card is best for you. That’s because different cards offer different types of rewards and have varying criteria for how to earn them.

Read on to learn more about how these cards work and how to choose a rewards credit card that suits your spending habits.

What Is a Rewards Credit Card?

A rewards credit card offers cardholders bonuses based on their spending. Bonuses can come in many forms, including airline miles, cash back, or points.

The benefits of a rewards credit card will vary based on the card type. For instance, one cash back credit card may offer a flat percentage back on all purchases, while another may offer higher rates in certain categories, such as gas or groceries, and a lower rate across other areas. Meanwhile, another rewards credit card could offer cardholders one or two points for every dollar they spend using the card, which they could then redeem for airline tickets or hotel stays.

Recommended: What Is the Average Credit Card Limit

How Rewards Credit Cards Work

Rewards credit cards operate similarly to how credit cards work traditionally, with the bonus of rewards earned based on spending. These cards offer access to a revolving line of credit that cardholders can use to make payments. Cardholders can use the card to make purchases as long as they stay under their credit limit.

When the cardholder makes a payment by their credit card due date, their revolving credit is restored for the amount of their payment.

Where rewards credit cards differ from other types of credit cards is that a portion of each purchase will go toward the card’s designated bonus, whether that’s cash back rewards or points to use for a hotel stay. Card issuers pay out rewards on a specific term, such as by billing period, on a monthly cycle, or based on spending. Once the rewards hit the user’s account, they can redeem them.

There are a number of ways that cardholders can redeem the credit card rewards they earn. This could include as a statement credit, for merchandise or gift cards, for stays at hotels and resorts, toward airline tickets, as a direct deposit to a bank account, or in the form of a check mailed to the cardholder.

Types of Credit Card Rewards Programs

Rewards credit cards break down into six broad categories based on the earning and redemption processes.

Cash Back

With cash back rewards cards, users get a percentage of “cash back” on every purchase made with their card. Cash back rewards rates are typically around 1% to 2% of every purchase, but some cards may offer higher returns based on the spending category.

Cardholders can redeem cash back rewards in several ways, including as:

•   A credit against the card’s balance

•   Gift cards from select retailers

•   Donations to charity

•   A check sent by mail or direct deposit

Travel Rewards

Credit card issuers also offer general travel cards, where cardholders can earn points or miles through their spending that they can then put toward all manner of travel expenses. This could include everything from car rentals to hotels to flights, effectively allowing the cardholder to use credit card rewards to travel for less.

Typically, general travel cards offer points or miles on any purchase, often at a rate of 1 or 2 miles or points per dollar spent. However, general travel rewards cards may offer 2x or 3x points on specific spending categories, such as dining out or travel.

With general travel cards, users can typically redeem points through the issuer’s booking platform or transfer the value to a partner. Unlike co-branded cards that may restrict where cardholders can redeem their points, general travel cards usually allow redemption at a variety of airlines or hotels.

Points

Credit cards that offer rewards points can provide access to a variety of rewards, including options for cash back or travel redemption. Generally, a base rate of 1 point per dollar spent is offered.

However, the value of points can vary depending on the card issuer and how the cardholder redeems their points. Reward point cards could be redeemed for gift cards, travel, donations, or cash, depending on the issuer.

Gas

Gas cards help users save money on filling up the tank. Typically, these cards only offer rewards or redemptions for purchasing gas at a gas station. A cardholder could redeem their rewards as a statement credit or a discount at the pump.

Hotel or Airline

Hotel and airline-branded credit cards reward users when they spend with a particular company. For instance, booking nights at the same hotel brand could earn a cardholder points, bumping up their status, or give them access to room upgrades or a free night’s stay.

Similarly, airline credit cards reward users for traveling on their airline. They also can include opportunities for status upgrades, and being a loyal airline traveler could lead to receiving perks like lounge access in the airport or free bag check.

Retail

Retail credit cards is a broad designation that encompasses any credit card reward tied to a specific retailer or store. Rewards vary based on the card issuer and the store. However, they could include point-of-sale discounts with every purchase or the chance to earn points to use toward discounts and gift cards at the store.

Factors to Consider When Comparing Rewards Credit Cards

There’s a wide range of reward programs to take advantage of, and the policies of these programs vary from credit card issuer to issuer. This is why it’s important to take the time to compare rewards credit cards. Before applying for any rewards card, it’s worth looking at each of the following factors.

Annual Fees

Some rewards credit cards include an annual fee. This fee could be as low as $50, while other cards’ annual fees may soar into the thousands of dollars a year for super premium cards.

It’s important to consider whether the rewards you earn from the card will offset the cost of a credit card’s annual fee. Depending on how often someone uses the card, and how frequently they redeem rewards, they could determine that the fee is worth it.

Additionally, it’s worth looking into whether the card offers a lucrative opening bonus offer that essentially cancels out the annual fee, at least for the first year.

Interest Rates

Interest rate, or annual percentage rate (APR), is the amount of interest a person will pay on the money they borrow from the credit card issuer. If the credit card holder carries a balance month to month, they may owe interest charges on their outstanding balance.

Currently, the average APR is around 22%, though APRs on rewards cards tend to be on the higher end. A high APR on a credit card could translate to steep interest charges if the cardholder carries a balance. As such, keep an eye on the interest rate when comparing cards.

Tiered vs Fixed Rewards

Tiered vs. fixed refers to the way the card structures its rewards, which is another important consideration to keep in mind.

With tiered rewards, a credit card offers different points or values based on the category of purchase. For example, a travel card may offer more points for a travel-related purchase as opposed to groceries.

Fixed rewards, on the other hand, offer the same rate for every purchase. An example of this is a cash back rewards card that gives cardholders 2% cash back on every purchase, no matter the spending category.

The type of rewards structure that’s right for you will depend on your spending habits. If you know you spend mostly in one category, you could find that a tiered rewards card that prioritizes that category is the right fit. But if your spending doesn’t align with the highest rewards categories, fixed rewards may pay off more.

Cashback Rewards Caps

When researching cash back rewards cards, keep an eye on the fine print around rewards caps. Some cards may cap redemption after a certain amount of spending.

For example, it may offer 3% cash back on purchases up to a certain dollar value, then only offer 1% once the cardholder hits that amount.

If you’re between two cards, the one with the higher cap — or better yet, no cap at all — could help you determine which one will win out.

Guide to Choosing the Best Rewards Credit Card for You

While no two cardholders are the same, many can approach the search for the perfect card by considering the same factors. These include:

Analyzing Your Spending Habits

Where or what a person spends the most on will directly impact which rewards card is the best fit for them.

Here’s an example of how that would play out in the decision between credit card miles or cash back rewards. If someone prioritizes travel and lives near an airport that’s a central hub for one particular airline, they may choose to get an airline credit card that rewards their travel spending with airline miles for future flights.

However, if someone travels very little, they may benefit more from earning cash back on their everyday spending rather than airline miles.

To figure out where you spend the most, look at your credit card and bank statements from the last quarter. Whichever spending category comes up the most may be the best fit for a rewards card. On the other hand, if there are no clear patterns, a standard cash back card may be the right fit.

Checking Your Credit Score

Checking their credit score may give credit card applicants a healthy dose of reality. Most rewards credit cards require a good or excellent credit score, which means a score of 670 or above. Those with a credit score lower than 670 may not be able to qualify for a rewards credit card.

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

Pros and Cons of Rewards Credit Cards

Credit card rewards may sound too good to be true, and in some ways, they are. Here are some rewards credit card benefits and drawbacks:

Making the Most of Your Rewards Card

Ready to reward regular spending? Keep these final tips in mind to make the most of your rewards credit card:

•   Spend within your means. It may feel tempting to overspend when every purchase means more points, but overspending can lead to debt, interest charges, and even a negative impact on credit score.

•   Aim to snag the bonus. Most rewards credit cards offer an introductory bonus when the cardholder hits a certain spending threshold within a specified period. Plan purchases strategically to hit this bonus.

•   Plan card opening around large purchases. Planning a wedding, buying a house, or making a large purchase? It may be the perfect time to open a new card, as a few large charges could mean hitting the bonus.

•   Use rewards wisely. Rewards are only really redeemed when they’re spent. Take time to read up on the fine print around redemption, as there’s often a strategy associated with getting the best value out of card rewards. That may mean redeeming them for a gift card of the highest conversion rate or booking travel through the card issuer’s platform to make miles stretch further.

The Takeaway

Rewards credit card benefits can make them very enticing for many credit card holders. However, consider a card with benefits that “pay” for themselves, meaning the benefits fit within the cardholder’s lifestyle and suit their existing spending habits. A card with a high annual fee and rarely used benefits likely isn’t worth someone’s time or money.

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 are the benefits of having a rewards credit card?

The main rewards credit card benefit is earning rewards — whether points, miles, or cash back — from everyday spending. Rewards credit cards can also offer additional perks, such as free credit monitoring, travel insurance, and purchase protection.

Are credit card rewards taxable?

In most cases, credit card rewards are not taxable, as they’re considered rebates or discounts. However, if a credit card reward is given without the user doing any spending to earn it, then those rewards may be considered taxable income.

What credit score do I need to get a rewards credit card?

Most rewards credit cards require a good or excellent credit score in order to qualify. This is typically 670 or higher.

What can I do with credit card rewards?

You can redeem credit card rewards for cash, statement credits, hotel and airline bookings, store discounts, or gift cards. Ultimately, what you’re able to do with your credit card rewards will depend on the type of card you have.

Photo credit: iStock/Hiraman

SOCC-Q224-1911069-V1

Student loans — federal or private — begin accruing interest when they’re disbursed, and the borrower is responsible for paying the interest on all but subsidized federal student loans during grace periods or deferment.

There are a few exceptions, though, including periods of deferment for certain subsidized loans. And if you have federal student loans that were subject to the payment pause that began in 2020, it’s important to know when those loans begin accruing interest again in 2023.

Interest Accrual Basics and Exceptions

As a general rule, interest begins accruing on a student loan as soon as it’s disbursed. While the repayment of the loan is usually subject to a grace period (detailed later in this article), the interest continues to accrue even while the payments are paused.

The one exception is when certain loans are on deferment. Interest on the following types of loans usually does not accrue when a loan is on deferment:

•   Direct Subsidized Loans

•   Perkins Loans

•   The subsidized portion of Direct Consolidation Loans

•   The subsidized portion of Federal Family Education Loan Consolidation Loans

The other major exception is the federal student loan forbearance that the government implemented in March 2020. Not only did this pause federal student loan payments, it also set federal student loan interest rates at 0%, thereby pausing all interest accrual. The 2023 debt ceiling bill officially ended the payment pause, requiring interest accrual to resume on Sept. 1 and payments to resume on Oct. 1, 2023.

Some private student loan issuers offer deferment or forbearance for specific reasons. Any unpaid interest will likely accrue and be added to the principal after the payment pause, though.

The Basics of Student Loan Interest

A student who takes out a student loan (or a parent who takes out a parent-student loan in their own name) signs a promissory note outlining all the terms of the loan, which include the loan amount, interest rate, disbursement date, and payment schedule.

Federal student loans issued after July 1, 2006, have a fixed rate. The repayment default is the standard 10-year plan, but there are options, such as income-based repayment or a Direct Consolidation Loan, that can draw out repayment to double that or more. The Saving on a Valuable Education (SAVE) Plan is one of the federal student loan repayment options to consider.

The SAVE Plan is the most affordable repayment plan for federal student loans, according to the U.S. Department of Education. Borrowers who are single and make less than $32,800 a year won’t have to make any payments under this federal income-driven repayment plan. (If you are a family of four and make less than $67,500 annually, you also won’t have to make payments.)

Private student loans are not eligible for federal income-driven repayment plans. Interest rates on private student loans may be fixed or variable, and are based on your — or your cosigner’s — financial history. The repayment term can be anywhere from five to 20 years.

When does interest start on student loans? Federal and private student loans typically begin accruing interest when they’re disbursed. With federal student loans and most private student loans, payments are deferred until after you graduate. Interest will have accrued, and in almost all cases you’re responsible for paying it.

Interest and Grace Periods by Loan

Capitalized interest on student loans can significantly increase how much a borrower owes. This is when a lender adds unpaid interest to your principal loan balance and then charges interest on your larger balance.

The Department of Education implemented new regulations in July 2023 eliminating all instances of interest capitalization that are not specified in the Higher Education Act of 1965 (HEA). That means federal student loan interest capitalization no longer occurs when a borrower first enters repayment status following the grace period.

A federal student loan borrower who exits a period of deferment on an unsubsidized loan or who overcomes a partial financial hardship on the Income-Based Repayment Plan may face capitalized interest charges. Federal student loan interest capitalization can also occur upon loan consolidation. These are the few instances where federal law requires interest capitalization.

Fixed interest rates on newly disbursed federal student loans are determined by formulas specified in the HEA. These are the rates and loan fees (deducted from each disbursement) for the 2024–25 school year:

•   6.53% for Direct Subsidized or Unsubsidized loans for undergraduates

•   8.08% for Direct Unsubsidized loans for graduate and professional students

•   9.08% for Direct PLUS loans for graduate students, professional students, and parents

Recommended: Types of Federal Student Loans

Unsubsidized Student Loans

Federal Direct Unsubsidized Loans are available to undergraduate and graduate students with no regard to financial need.

Loan fee: 1.057%.

Grace period: While you’re in school at least half-time and for six months after graduation.

Subsidized Student Loans

Federal Direct Subsidized Loans are available to undergraduates with financial needs.

Loan fee: 1.057%.

Grace period: While you’re in school at least half-time and for six months after you leave school. The government pays the interest during those grace periods and during any deferment.

Direct PLUS Loans

Taken Out by a Parent

A Parent PLUS Loan acquired to help a dependent undergraduate is unsubsidized.

Loan fee: 4.228%.

Some private lenders refinance Parent PLUS loans at what could be a lower rate.

Grace period: First payment is due within 60 days of final disbursement, but a parent can apply to defer payments while their child is in school at least half-time and for six months after.

Taken Out by a Graduate Student or Professional Student

Grad PLUS Loans are available to students through schools participating in the Direct Loan Program.

Loan fee: 4.228%.

Grace period: Automatic deferment while in school and for six months after graduating or dropping below half-time enrollment.

Private Student Loans

Some banks, credit unions, state agencies, and online lenders offer private student loans.

Rate and fee: Rates can be fixed or variable, and rates and fees vary by lender

Grace period: Student loan interest accrual begins when a private student loan is disbursed, but payments may be deferred while a borrower is in school.

How Is Interest on Student Loans Calculated?

Student loans typically generate interest every day. Your annual percentage rate (APR) is divided by 365 days to determine a daily interest rate, and you are then charged interest each day on the total amount you owe.

That interest is added to your total balance, and you’re then charged interest on the new balance — paying interest on interest until the loans are paid off.

If you don’t know what your monthly payments will be, a student loan payment calculator can help. This one estimates how much you’ll be paying each month so you can better prepare for your upcoming bills.
The amount you pay each month will be the same, but the money first goes toward paying off interest and any fees you’ve been charged (like late fees); the remainder goes to pay down the principal of the loan.

As you pay down your loan, because the principal is decreasing, the amount of interest you’re accruing decreases. And so, over the life of your loan, less of your monthly payment will go toward interest and more will go toward the principal. This is known as amortization

💡 Quick Tip: Ready to refinance your student loan? With SoFi’s no-fee loans, you could save thousands.

How You Could Save on Interest

Because interest can add up so quickly, it’s important to pay attention to the interest rates you’re paying on your student loans.

Student loan refinancing — taking out a brand-new loan that pays off your current loans — can lower the amount of interest your loans accrue if you qualify for a lower interest rate or a shorter term. To see how refinancing might save you money, take a look at this student loan refinance calculator.

Even a small difference in interest rates could help you save a substantial amount of money paid in total interest over the life of the loan, depending on the term you select.

It’s important to know, though, that refinancing federal student loans will make them ineligible for federal benefits like income-driven repayment plans and Public Service Loan Forgiveness.

💡 Quick Tip: If you have student loans with variable rates, you may want to consider refinancing to lock in a fixed rate before rates rise. But if you’re willing to take a risk to potentially save on interest — and will be able to pay off your student loans quickly — you might consider a variable rate.

The Takeaway

When does student loan interest start accruing? The minute the loan is disbursed, and you’re usually responsible for paying it. It’s important for borrowers to understand and pay attention to capitalized interest.

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.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

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.

SOIS-Q224-1915219-V1

A joint credit card account is a way for you and a spouse, partner, family member, or trusted friend to co-own a line of credit. A joint credit card is in both of your names, meaning both parties are equally responsible for the debt that the card accrues.

Joint credit cards can make sharing finances with a domestic partner easier, but if you’re not on the same page about using the card and paying off debt, it could mean trouble for your credit score and your relationship. Here, learn the full story on joint credit cards and their pros and cons.

What Is a Joint Credit Card Account?

A joint credit card allows two people to fully share in the responsibility of spending with a credit card and paying it off. Each cardholder receives a physical card to use, and each also has full access to credit card statements and payments.

Otherwise, a joint credit card operates just like a traditional credit card — with a credit limit and interest rate on borrowed funds. If you carry over a balance month to month, that balance will accrue interest, and both joint account owners are equally on the hook for paying it back, even if one person is doing most of the spending.

Because a joint credit card is in both owners’ names, it impacts both users’ credit scores. Making regular monthly payments in full and maintaining a low credit utilization could build both cardholders’ scores. On the other hand, late payments and accumulated debt might bring credit scores down.

Recommended: When Are Credit Card Payments Due?

Ways You Can Share a Credit Card

Joint credit card accounts are just one type of shared credit card. Before deciding to apply for a joint credit card, consider whether adding someone as an authorized user on a credit card might be a better option for your situation.

Authorized User

Instead of applying for a credit card with a co-owner, you can make someone an authorized user on an existing credit card. Unlike with a joint account credit card, only one person serves as the cardholder and bears the full responsibility of the card.

The authorized user, on the other hand, can get their own physical card and use it as they see fit. However, the authorized user cannot make larger changes to the card, like requesting an increase in credit limit.

Some, though not all, credit card issuers report authorized users’ activity to the three major credit bureaus. Assuming the main cardholder uses the card responsibly (meaning they make on-time payments and keep credit utilization low), this can reflect well on the authorized user and potentially improve their credit score.

Adding an authorized user can be a good solution for spouses or domestic partners with shared expenses. If one partner has a strong credit score but the other is struggling, the struggling partner might benefit from becoming an authorized user on the other’s card. Additionally, parents who want their children to learn about using a credit card or find comfort knowing their teenage kids have a spending option in emergencies might also benefit from a card with an authorized user.

A caveat: If the main credit cardholder mismanages their credit card and the card issuer reports authorized users to the credit bureaus, this could potentially lower the authorized user’s score rather than helping to build it.

Joint Cardholder

As previously mentioned, joint cardholders share equal responsibility for how the card is used and paid off. Just as there are pros and cons of joint bank accounts, this arrangement can have benefits and drawbacks. A joint credit card enables spouses and domestic partners to approach their finances on equal footing, but a poorly managed card can have major negative impacts on the other.

Sharing a joint credit card requires implicit trust between the co-owners. Partners who disagree about managing finances might not find a joint credit card a good option.

Differences Between Authorized Users and Joint Accounts

Here’s a closer look at the differences between authorized users and joint accounts.

Privileges

Joint cardholders share the same level of privileges on a credit card. Authorized users, however, cannot increase the credit limit or add additional authorized users. On top of that, primary cardholders can sometimes impose spending limits on authorized users.

Number of Users

Two co-owners share a joint credit card account. With an authorized credit card, there is a single primary cardholder and one or more authorized users. The max number of permissible authorized users varies by card issuer. Some may let you add up to five.

Responsibility

Both co-owners share equal responsibility for a joint credit card account. Authorized users are not responsible for payments, but how the credit card is managed can impact the authorized user’s credit score.

Impact on Credit Score

Both joint credit cards and cards with authorized users can impact credit scores of everyone attached to the card. Authorized users just have less control over how the card is managed, so they must put their faith in the hands of the primary cardholder.

Recommended: How to Avoid Interest On a Credit Card

Pros of a Joint Credit Card Account

What are the benefits of a joint credit card? Here are some potential perks of this setup:

•   Equal control: Spouses and domestic partners who want equal control of their finances can benefit from a joint credit card, which affords them equal access to spending, statements, and payments.

•   Convenience of one shared card: If you share finances with a partner, having one credit card with one payment date might be easier than juggling multiple cards and due dates.

•   Potential to boost credit score or get a better rate: If one co-owner lacks a credit history or has a lower credit score, being a co-owner on a well-managed joint credit card could build their score. The person with the lower score might even qualify for a card with a better rate by applying with a joint cardholder.

Cons of a Joint Credit Card Account

There are some drawbacks to joint credit cards, however:

•   Shared repercussions for mismanagement: If one co-owner maxes out the card or misses a payment they said they would make, both cardholders share the burden, which can include late fees, a credit score impact, or growing interest. And if your partner decides not to do anything about the growing credit card debt, you could be on your own in paying off their shopping spree.

•   Difficulty of removing someone: Removing someone from a joint credit card can be challenging. Your only option for getting out of a bad situation might be paying off and closing the card.

•   Possibility of damage to the relationship: If you and a partner do not share the same financial philosophy, entangling your debts might do more harm than good. Couples who already fight about making financial decisions may find that sharing a joint credit card is detrimental to their relationship.

Applying for a Joint Credit Card

Does a joint account sound right for your situation? Here’s how to apply for a joint credit card:

1.    Find a credit card issuer with a joint credit card option: Not every credit card issuer offers joint cards. Understand that your options will be more limited than if you applied for a credit card by yourself. Just as you would if you were choosing a joint bank account, take the time to compare a few options and find a joint credit card you’re both happy with.

2.    Understand the qualification requirements: Read the fine print to make sure you and your co-owner can qualify. It’s not just your own credit score and credit history you have to consider; credit card issuers will be reviewing both applicants to determine if you can get a joint credit card.

3.    Fill out the application: Have all of the necessary information for both applicants handy. It’s a good idea to apply together at a computer, if possible.

4.    Set the ground rules: Make sure both of you are on the same page about how you will use the card and who is responsible for making on-time payments. If you’re not sure where to start, check out these basic credit card rules, which can promote healthy card usage.

The Takeaway

Joint credit cards give both co-owners equal responsibility for credit card usage and payments. Using a joint credit card can be a good way to combine finances and help boost a partner’s credit score. However, applicants might benefit from going the authorized user route instead. Understanding the risks of both options is important before completing a joint credit card application or making someone an authorized user on an existing card.

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

FAQ

Do joint credit cards affect both credit scores?

Joint credit cards affect both users’ credit scores equally. A well-managed card that is paid off in full each month might build both users’ scores. On the other hand, regularly late payments and a high credit utilization could bring both scores down.

Can I add someone to my credit card as a joint account holder?

Not every credit card issuer offers joint account credit cards. However, most allow you to add authorized users to existing credit cards. Contact your credit card issuer to learn more.

What requirements are needed to get a joint credit card account?

Requirements for getting a joint credit card account will vary by credit card issuer. Credit card companies typically consider factors like age, credit score, and income to determine whether you can get a joint credit card.

Photo credit: iStock/gorodenkoff

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

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

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