Credit card networks provide the financial infrastructure for transactions, while credit card issuers are responsible for providing cards to consumers and managing their accounts. To put it another way, credit card networks facilitate transactions between merchants and credit card issuers, and credit card issuers pay for transactions on the cardholder’s behalf when they use their card.
Once you understand this difference, however, you may be confused by the fact that some credit card networks are also card issuers. To get a better understanding, keep reading for a closer look at the differences between a credit card network vs. issuer.
What Is a Credit Card Network?
Credit card networks create the digital infrastructure so merchants can facilitate transactions between themselves and the credit card issuers — meaning they’re key to how credit cards work. In order to facilitate these transactions, the credit card networks charge the merchants an interchange fee, also known as a swipe fee.
Here’s an example of how this works:
• Say someone walks into a clothing store and uses their credit card to buy a pair of pants. They swipe or tap their credit card to make the purchase.
• The store’s payment system will send the details of this transaction to the cardholder’s credit card network, which then relays the information to the credit card issuer.
• The credit card issuer decides whether or not to approve the transaction.
• The clothing store is alerted as to whether or not the transition was approved.
Essentially, credit card networks make it possible for businesses to accept credit cards as a form of payment, making them integral to what a credit card is. Credit card networks are also responsible for determining where certain credit cards are accepted, as not every merchant may accept all networks.
The Four Major Card Networks
The four major credit card networks that consumers are most likely to come across are:
• American Express
• Discover
• Mastercard
• Visa
All of these credit card networks have created their own digital infrastructure to facilitate transactions between credit card issuers and merchants. These four credit card networks are so commonly used that it’s possible to find a business almost anywhere in the U.S. that accepts one or more of the payment methods supported by these merchants.
Now, for the detail mentioned above that can cause confusion: Two of these popular payment networks — American Express and Discover — are also credit card issuers. However, their offerings as a credit card network are separate from their credit card offerings as an issuer.
Does It Matter Which Card Network You Use?
Which credit card network someone can use depends on the type of credit card they have and whether the credit card network that supports that card is available via the merchant they are purchasing from. Most merchants in the U.S. work with all of the major networks who support the most popular credit cards, so it shouldn’t matter too much which credit card network you have when shopping domestically. When traveling abroad, however, it’s important to have cash on hand in case the credit card network options are more limited.
Merchants are the ones who are more likely to be affected by the credit card networks that they use. This is due to the fact that credit card networks determine how much the merchant will pay in processing fees in order to use their system.
Credit card issuers are the financial institutions that create and manage credit cards. They’re responsible for approving applicants, determining cardholder rewards and fees, and setting credit limits and the APR on a credit card.
Essentially, credit card issuers manage the entire experience of using a credit card. Cardholders work with their credit card issuer when they need to get a new card after losing one, when they have to make their credit card minimum payment, or when they want to check their current card balance.
Credit card issuers can be banks, credit unions, fintech companies, or other types of financial institutions. Some of the biggest credit card issuers in the U.S. are:
• American Express
• Bank of America
• Barclays
• Capital One
• Chase
• Citi
• Discover
• Synchrony Bank
• U.S. Bank
• Wells Fargo
Credit Card Network vs Issuer: What Is the Difference?
Credit card issuers and credit card payment networks are easy to confuse. The main difference, as noted, is as follows:
• Credit card networks facilitate payments between merchants and credit cards.
• Credit card issuers create and manage credit cards for consumers. If you have an issue with your credit card — like in the instance you want to dispute a credit card charge or request a credit card chargeback — it’s the issuer you’d go to.
These are the main differences to be aware of when it comes to credit card networks vs. issuers, provided in chart form:
• Processes transactions between credit card companies and merchants
• Creates the digital infrastructure that facilitates these transactions
• Charges an interchange fee to merchants
• Determines which credit cards can be used at which merchants
How Credit Card Networks and Issuers Work Together
Credit card networks and issuers need each other to function. Without a credit card network, consumers wouldn’t be able to use their card to shop with any merchants, and the credit card issuer’s product would go unused. Credit card networks create the infrastructure that allows merchants to accept credit cards as payment.
However, it’s up to the credit card issuers to approve or decline the transaction. The credit card issuer is also the one responsible for getting credit cards into consumers’ hands when they’re eligible and old enough to get a credit card, thus creating a need for the credit card networks’ services.
A credit card network provides the financial infrastructure for cards and facilitates the transaction between the issuer and the merchant. The issuer is responsible for creating, offering, and managing consumers’ accounts. A couple of businesses are both credit card networks and issuers. Understanding the fine points of how credit cards operate can be an important part of your financial literacy and using credit responsibly.
Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.
FAQ
What is a credit card network?
A credit card network is the party that creates the necessary infrastructure to process transactions between a credit card issuer and a merchant. In return for processing the transaction, the merchant pays the credit card network an interchange fee, which is how the credit card networks make money.
How do I know my credit card issuer?
To find out a credit card’s issuer, simply look at your credit card. There will be a string of numbers on the credit card, and the first six to eight digits represent the Bank Identification Number (BIN) or the Issuer Identification Number (IIN). The Issuer Identification Number identifies who the credit card issuer is.
Who is the largest credit card issuer?
The four largest credit card networks are American Express, Discover, Mastercard, and Visa. Most merchants in the U.S. work with all four credit card networks. When traveling abroad, it’s more common to come across Visa and Mastercard networks.
About the author
Jacqueline DeMarco
Jacqueline DeMarco is a freelance writer who specializes in financial topics. Her first job out of college was in the financial industry, and it was there she gained a passion for helping others understand tricky financial topics. Read full bio.
Photo credit: iStock/Poike
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.
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.
Budgeting can take some work to get just right. One area that often trips people up is understanding exactly how much they spend each month. Figuring that out can take some trial and error as well as fine-tuning. And even if things are humming along well for a few months, you can suddenly get hit with a surprise bill or a colossal credit card statement that jeopardizes your finances.
To help avoid that scenario and make budgeting easier, it’s important to consider some of the items that are often omitted from the expenses list when people set up budgets. This can help ensure that your hard work managing your finances stays on track.
Read on to learn about commonly overlooked expenditures and how to work them into your budget. That way, you’ll know exactly where your money is going, which can help you avoid debt.
What Are Some Expenses That Are Commonly Budgeted For?
When thinking about a basic living expenses budget, some items are so major, recurring, and important that it would be hard to overlook them. These likely include:
• Rent or mortgage payments
• Homeowners association fees
• Utilities
• WiFi
• Cell phone bill
• Car and/or student loan payments
• Groceries
• Daycare or tuition
• Gym memberships
• Medical insurance and pet insurance premiums
• Transportation
Why Is It Important to Budget for Forgotten Expenses?
It’s understandable that some expenses may slip your mind when creating a budget. The typical person probably has dozens of things they are paying for in a given month. But these sneaky forgotten expenses can wreak havoc on your budget and prevent you from reaching your financial goals.
That’s why it’s important to pay close attention to your spending so you can adjust your budget as needed. These are some of the reasons why it’s important to budget for forgotten expenses:
• Creating a successful budget requires knowing what you spend each month.
• If you forget to add an expense and run out of funds to pay for it, you may end up pulling funds out of your savings account and sacrificing future goals to cover it.
• If you really overspend due to forgotten expenses, you may have to turn to high-interest credit card debt to make ends meet.
If you are convinced of the importance of accounting for all of your expenses, then it’s time to move ahead. Let’s look at some commonly forgotten budget items to make sure they don’t fall through the cracks.
1. Home Maintenance
While it’s hard to forget about your mortgage payments, the other expenses of homeownership are easy to forget about and add up fast. From hiring a gardener to regular carpet cleanings to random handyman repairs, it makes sense to leave room in a budget for home maintenance as those charges tend to frequently pop up.
2. Vehicle Maintenance
Budgeting for a car payment is probably top of mind, since you likely don’t want to risk getting hit with late payment fees or losing your car. The same generally holds true for car insurance. But those aren’t the only car expenses worth planning for. Drivers also need to make room in their budget for such car-related expenses as tune-ups and repairs. You’ll also want to remember to include gas, insurance, parking and toll road fees; they also have a way of adding up.
3. Taxes
Income taxes may be withdrawn from your paychecks, but property taxes generally aren’t. Forgetting about these bills is a common budgeting mistake. Then, when the payment does come due, it’s a nasty surprise that can throw your budget out of whack.
4. Medical Expenses
It’s easy to forget about or overlook your medical expenses, including over-the-counter and Rx drugs, dental cleanings, regular checkups, or getting new glasses or contacts. These are all vital expenses worth planning for. Budgeting for medical expenses can help improve your financial health too by helping you avoid debt.
5. Donations/Giving
Perhaps you donate when you see a worthy cause on social media or sponsor a colleague who’s doing a charity walk. This kind of spending is easy to forget about, so make sure to put it into your budget so you don’t wind up short of funds when you want to help others.
Items that keep your home office or study space up and running need a spot in your budget too. This means accounting for things like toner, paper, stamps, shipping supplies, and software subscription fees.
7. Renewals for Licenses (Insurance, Drivers, Etc.)
Some expenses only pop up once a year, or every few years, like driver’s license or insurance renewals, but it can be helpful to split up that expense into smaller chunks and save for it month by month.
8. Seasonal Maintenance
Some home-maintenance needs are ongoing, but others come around seasonally. Similar to license renewals, it can be helpful to save up for pricey seasonal maintenance needs, like gutter cleaning and snow removal, all year round. That way, you won’t come up short when a bill hits.
9. Items for Pets
Pets bring a lot of love into a home, but also a lot of expenses. From vet fees and pet insurance to toys, food, and doggie daycare, these expenses can be significant and deserve a place in your budget.
10. Personal Items (Hair, Nails, Etc.)
A bottle of shampoo here, a manicure there, plus regular haircuts — the myriad expenses that help us look and feel our best can add up quickly. They may only cost a few bucks a pop (hello, body wash) or only happen once in a while (that fresh set of highlights), but it’s wise to be prepared for the cost.
Get up to $300 when you bank with SoFi.
No account or overdraft fees. No minimum balance.
Up to 3.80% APY on savings balances.
Up to 2-day-early paycheck.
Up to $3M of additional FDIC insurance.
11. Lump Sum Bills
Some memberships and insurance plans may only renew once or twice a year. Many of them are lump sum bills, meaning you are expected to pay them in full, right away. Which is why it can be helpful to save money each month to make sure you have the funds to cover lump sum bills.
If you rely on ridesharing apps to get around (whether it’s once a month or several times a week), it’s important to budget for that expense. The convenience can make it feel like a free ride…but it isn’t!
13. Delivery App Fees
Another app-based expense to look out for are the delivery fees that get added when you order dinner or groceries from the comfort of your home. Also, if you tip the driver, make sure to include that as well. These fees definitely add to the price of what’s being dropped off.
14. Business Expenses (Conferences, Trips, Etc.)
You may incur expenses related to work that aren’t reimbursed by your employer. These include such purchases as buying professional clothing, renewing professional licenses, or pursuing continuing education to further your career.
15. Entertainment
From travel to movies and concerts to museum memberships, there’s no shortage of entertainment costs that need to make their way into our budgets.
Speaking of entertainment, you may be paying for one or more streaming platforms, like Netflix, HBO Max, and Hulu. And you may have other subscriptions, like meal kits, personal-care supplies, gym memberships, or even a wine- or beer-of-the-month club. These kinds of one-click sign-ups may not make it onto your budget, but they should.
17. Gifts for Others
From swanky birthday dinners to holiday gifts to wedding presents, you may spend a chunk of change every year to make others happy. It can help to save for the costs of gifts all year round. You can do this by estimating how much you expect to spend in this category for the year and then break it down into a monthly expense by adding a “presents” line to your budget. That way, when these expenses do pop up, you’ll be prepared.
18. Coffee
There’s nothing wrong with enjoying a pricey latte on the go now and then, as long as it finds a spot in your budget. These kinds of little treats can be an important part of self-care, and budgeting for them properly can be an example of financial self-care.
19. Roadside Assistance Costs
One extra that some drivers may find very worthwhile is roadside assistance service. Keep it in the budget, and stay safe.
20. Laundromat/Dry Cleaners
Whether you drop off your clothing at a laundromat once a week and have them washed and folded for you, or you DIY but occasionally drop clothing off at the dry cleaner, these are all costs that need to be considered in your monthly budget.
Why Are These Expenses Commonly Forgotten?
As you can see, the list of commonly forgotten monthly expenses is long. One key reason is that it’s relatively simple to remember to add the really big, recurring expenses — like rent or a car payment — into a monthly budget. But there are plenty of “invisible” expenses that we pay for with a simple click online (whether that means paying for a subscription service or a life insurance policy) that just don’t come to mind when setting up a budget.
There are also those very infrequent charges — say, an annual technician visit to clean your heating system — that we can overlook until they hit. It’s also easy to overlook small but relatively frequent purchases, such as laundry detergent or printer paper, that can add up over time.
Accounting for as many expenditures as possible will help you hone your budget and be as prepared as possible for the bills that come your way.
Banking With SoFi
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 3.80% APY on SoFi Checking and Savings.
FAQ
What are common monthly expenses?
Common monthly expenses include rent or mortgage payments, utilities, food, cell phone bills, and loans or credit-card payments. Many of us also purchase clothes, meals/beverages away from home, personal care products, medical insurance, and have transportation expenses, which may or may not include car payments and insurance.
What are some hidden expenses you may have?
Some commonly forgotten budget items can include medical expenses, petcare costs, charitable donations, home- and car-maintenance charges, and subscription services, whether that’s a gym membership or streaming channels.
Will my budget be messed up if I do not add these forgotten expenses?
Yes, it’s possible to mess up a budget if you don’t include all of your expenses. You may wind up with bills to pay and not enough income to cover them. To resolve this, you might have to dip into your savings or start putting things on your credit card, neither of which is ideal. The good news is, each month offers a fresh start to make your budget work better.
About the author
Jacqueline DeMarco
Jacqueline DeMarco is a freelance writer who specializes in financial topics. Her first job out of college was in the financial industry, and it was there she gained a passion for helping others understand tricky financial topics. Read full bio.
SoFi members with Eligible Direct Deposit activity can earn 3.80% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below).
Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning 3.80% APY, we encourage you to check your APY Details page the day after your Eligible Direct Deposit arrives. If your APY is not showing as 3.80%, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning 3.80% APY from the date you contact SoFi for the rest of the current 30-day Evaluation Period. You will also be eligible for 3.80% APY on future Eligible Direct Deposits, as long as SoFi Bank can validate them.
Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi members with Eligible Direct Deposit are eligible for other SoFi Plus benefits.
As an alternative to Direct Deposit, SoFi members with Qualifying Deposits can earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.
SoFi Bank shall, in its sole discretion, assess each account holder’s Eligible Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving an Eligible Direct Deposit or receipt of $5,000 in Qualifying Deposits to your account, you will begin earning 3.80% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Eligible Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Eligible Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Eligible Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Eligible Direct Deposit or Qualifying Deposits until SoFi Bank recognizes Eligible Direct Deposit activity or receives $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Eligible Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Eligible Direct Deposit.
Separately, SoFi members who enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days can also earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. For additional details, see the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.
Members without either Eligible Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, or who do not enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days, will earn 1.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
Interest rates are variable and subject to change at any time. These rates are current as of 1/24/25. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.
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.
Most people begin their banking journeys with one checking and one savings account. But, as financial lives evolve and get more complex, having more than one checking account can make sense. It may help you if, say, you have a full-time job but also have a side gig and want to keep the earnings separate.
Read on to learn more about when you can have two (or more) checking accounts at the same bank, as well as the pros and cons of having more than one checking account.
Key Points
• It is possible to have multiple checking accounts with the same bank, each with its own account number.
• Multiple accounts can help manage finances by dedicating each to specific expenses or savings goals.
• Separate accounts can prevent overdrawing, especially when automated payments are involved.
• Having multiple accounts can also facilitate easier bookkeeping for side hustles or shared expenses with others.
• Managing multiple accounts requires careful organization to avoid confusion and potential overdraft fees.
Can I Have Two Checking Accounts at the Same Bank?
You might be wondering if you can have two checking accounts with the same bank. Sometimes, this kind of arrangement can suit a person’s specific needs (more on that in a minute). The good news is, yes, it is possible to have more than one checking account. In fact, SoFi’s April 2024 Banking Survey, which looked at banking usage across 500 adults in the U.S., found that 51% of respondents had two or more checking or savings accounts.
• While each bank and credit union will have their own rules about how many checking accounts someone can have with them, generally people are allowed to have more than one checking or savings account. They will be separate entities with separate account numbers, but they will both belong to you.
• If someone chooses to open multiple checking accounts at multiple different financial institutions then they shouldn’t run into any problems. There aren’t any restrictions on how many different bank accounts someone can have.
🛈 Currently, SoFi members can have one Checking and Savings account. That means you can have an individual account or a joint account, but not both at this time.
Reasons for Opening Multiple Checking Accounts
So, what are the reasons you might want to have multiple checking accounts? Having more than one checking account can give you more control over how you manage your finances. It can allow you to dedicate specific checking accounts for certain purposes. For example:
• Separate accounts can make automated bill paying easier. Forty percent of people frequently use automatic bill paying via online banking, SoFi’s survey found. But problems can arise. For instance, say that you want to automate your mortgage payment each month. But sometimes your mortgage and credit card payments hit on the same day, leaving you at risk of overdrawing your account. Separate accounts are one way to manage this situation.
If your mortgage payment is $2,000 a month, you might want to open a second checking account and deposit exactly $2,000 a month into it. That way, when it’s time for that automatic debit to do its job, you know it’s covered. If you have another checking account for general spending and that credit-card payment, you can stress less about accidentally falling short when that mortgage payment is withdrawn.
• Perhaps you have a side hustle — maybe you sell an item you make or sometimes drive a rideshare. You might want to keep payments you receive separate in a second checking account for easier bookkeeping.
• You might also use a secondary checking account to help save for a specific, shared goal with another person. Perhaps you and your significant other are saving to rent a beach house together next summer. Or maybe you have a roommate and you both contribute to expenses equally each month. It can help to have a separate joint checking account in these situations.
Pros and Cons of Having Multiple Checking Accounts
There are both advantages and disadvantages to consider before opening multiple checking accounts. As you decide how many bank accounts to have, keep these points in mind.
Pros
• It can be easier to manage automatic deposits.
• You can set aside money for different types of purchases or goals.
• You can create a joint checking account with another person for specific needs.
• You can have more control and organization over finances.
Cons
• If not organized and managed properly, it’s easy to get confused about how much money is in each checking account and what it’s supposed to be used for.
• This confusion can lead to overdrafting, which can result in fees.
• If each checking account comes with monthly maintenance fees, those fees can add up. You might even want to find a new bank in that case. Of the 55% of people in SoFi’s survey who say they’ve switched banks, 29% did so because they wanted lower fees.
One of the disadvantages of having multiple checking accounts is that they can be hard to manage if the account holder (or multiple account holders) don’t have a plan. Here are some tips:
• It’s wise to have a clear system for allocating money into each checking account, withdrawing money, and avoiding overdraft fees.
• Monitoring these checking accounts weekly can be a good idea to make sure everything is working as intended. In SoFi’s survey, 32% of people say they check their account balance a few times a week, and 38% check it at least once a day.
• You may also want to schedule automatic transfers in and out, to make sure recurring payments (like rent or a mortgage) are happening when funds are available.
Everyone has options for how they choose to organize their finances, and maintaining multiple checking accounts works well for some people. Multiple checking accounts may help you manage your financial life, but it’s necessary to have a plan in place to avoid overdrafting or paying too many account maintenance fees. With a little forethought and smart scheduling, you can enjoy the rewards of having multiple checking accounts without running into any issues.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 3.80% APY on SoFi Checking and Savings.
🛈 Currently, SoFi members can have one Checking and Savings account. That means you can have an individual account or a joint account, but not both at this time.
FAQ
Is it bad to have two checking accounts?
If managed correctly, it’s not necessarily a bad thing to have two checking accounts. For some people, it may be a helpful financial tool. However, people with multiple accounts may risk incurring more bank fees and have to stay organized.
How many bank accounts can a person have?
There is no rule in place limiting how many different bank accounts a consumer can open at banks or credit unions. Consumers can open as many bank accounts as they want.
Can I combine two bank accounts?
Yes, you have the option to combine two bank accounts. If they are at the same bank, ask customer service to help. If they are at different banks, you can research which financial institution offers the best benefits and lowest fees before choosing where to combine accounts. Linking bank accounts is also an option.
About the author
Jacqueline DeMarco
Jacqueline DeMarco is a freelance writer who specializes in financial topics. Her first job out of college was in the financial industry, and it was there she gained a passion for helping others understand tricky financial topics. Read full bio.
SoFi members with Eligible Direct Deposit activity can earn 3.80% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below).
Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning 3.80% APY, we encourage you to check your APY Details page the day after your Eligible Direct Deposit arrives. If your APY is not showing as 3.80%, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning 3.80% APY from the date you contact SoFi for the rest of the current 30-day Evaluation Period. You will also be eligible for 3.80% APY on future Eligible Direct Deposits, as long as SoFi Bank can validate them.
Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi members with Eligible Direct Deposit are eligible for other SoFi Plus benefits.
As an alternative to Direct Deposit, SoFi members with Qualifying Deposits can earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.
SoFi Bank shall, in its sole discretion, assess each account holder’s Eligible Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving an Eligible Direct Deposit or receipt of $5,000 in Qualifying Deposits to your account, you will begin earning 3.80% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Eligible Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Eligible Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Eligible Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Eligible Direct Deposit or Qualifying Deposits until SoFi Bank recognizes Eligible Direct Deposit activity or receives $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Eligible Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Eligible Direct Deposit.
Separately, SoFi members who enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days can also earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. For additional details, see the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.
Members without either Eligible Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, or who do not enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days, will earn 1.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
Interest rates are variable and subject to change at any time. These rates are current as of 1/24/25. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
If you’re wondering if it’s okay to use checks with an old address, the answer is yes — most of the time.
Having a checkbook with your old address isn’t so unusual these days. Checks can come in handy sometimes, but many of us don’t need to use them too often in this era of online electronic payments. Because of this, it’s easy to see how the address on checks might become outdated.
Key Points
• Using checks with an old address is generally acceptable as long as the routing and account numbers remain accurate for processing payments.
• Informing recipients about an outdated address on a check is advisable to ensure smooth communication regarding payments or receipts.
• New checks should be ordered if there are changes to the bank account number or routing number due to bank mergers or account closures.
• Checks do not expire as long as the bank account is open and the check details are accurate, but closed accounts render checks unusable.
• Alternative payment methods like money orders, cashier’s checks, or P2P transfer apps can be considered if using checks is not preferred.
Can You Use a Personal Check With an Old Address?
It is possible to use a personal check with an old address on it as long as it still has the correct routing and account numbers on it. If those numbers properly identify which bank and account the money should come from in order to pay a check, you’re good to go. However, it’s a good idea to let the bank know about a change of address to ensure they send statements and other important information about the account to the correct location.
In addition, it can be helpful to let the check recipient know that the address on the check is old just in case they need to send a receipt or any other correspondence regarding the payment via mail.
It’s a different story if you get a new bank account number or the bank changed routing numbers — this can happen, for instance, when one bank merges with another. In this situation, it is necessary to order new checks with the correct information on them.
It’s important to make sure a check’s routing numbers and account number are accurate. If someone knowingly writes a check for an account that has already been closed, this is considered writing a bad check, which is a form of fraud. Because of this, it’s a good idea to confirm check details, including your address, are current and accurate whenever you move or switch banks or set up a new checking account.
Get up to $300 when you bank with SoFi.
No account or overdraft fees. No minimum balance.
Up to 3.80% APY on savings balances.
Up to 2-day-early paycheck.
Up to $3M of additional FDIC insurance.
Can You Use a Business Check With an Old Address
It is possible to use a business check vs. a personal check that has an old address on it as long as the account number and routing number are accurate. The main difference between business checks and personal checks is that business checks are drawn on personal accounts and business checks are drawn on business accounts.
Can You Use a Personal Check With a Wrong Address?
It’s fair to wonder, is it really okay if my checks have the wrong address? Whether it’s a typo on the check or you moved, this situation definitely happens.
While writing a personal check with the wrong address on it isn’t ideal, it is possible to use one. As mentioned earlier, as long as the routing number and account number for your checking account are accurate, the check can be cashed properly. However, as noted previously, you may want to inform the check recipient of your current correct address in case they need it. And, of course, if you open a new bank account, you’ll want to make sure that your address on the checks you order is correct.
Can You Use a Business Check With a Wrong Address?
Even if the address on a business check isn’t just outdated but wrong, it is still possible to write a business check with the wrong address on it as long as the routing number and account number listed on the check remain accurate.
Most businesses will want to order new checks with the correct address on them to avoid confusion about where their business is located and where correspondence should be directed. But they don’t need to worry if they have old checks left to use up. Those checks should still be fine to use.
Do Unwritten Checks Expire?
As long as an individual keeps their account open and the correct account number and routing number remain on a check, the check won’t expire. There is an important exception, however. If someone closes a bank account, this means the checks associated with the account become unusable.
Another situation to be aware of is that bank routing numbers can change, especially when banks merge. So it’s a good idea to confirm from time to time that a check’s information is up to date.
When Are Checks With an Old Address Unusable?
Checks with an old address on them only become unusable if the routing number or account number listed on the check are inaccurate. This causes problems because these numbers are used to verify that the check is good and identify the account the money needs to be withdrawn from in order to process the check.
Ordering New and Correct Checks
If an individual needs new checks for any reason — such as a desire to update their address — these are the steps they’ll generally take to order new ones.
• Log on to their online bank account. It’s usually possible to order checks online or via a mobile account dashboard.
• Request a counter check. If someone is really in a rush and can’t wait for new checks to come in the mail, they can go to a local bank branch and purchase counter checks. These are temporary checks that will have your account information on them, and they typically cost $1 or $2 per check, though fees may vary.
• Review terms and fees. All banks charge different fees to buy checks or a checkbook, so double check how much doing so will cost.
Changing Your Address on Checks
If you need to change the address listed on the checks in your personal checkbook, order more checks via one of the methods previously mentioned. This can be done online or via your mobile banking app. You may also be able to order checks in person at your bank.
Do You Need to Write Your Address on a Check?
Checks typically have an address already printed on them. Therefore it is not necessary for the check writer to write it on the check themselves. However, some people may prefer that only their name appears on their checks. Maybe they know they’ll be moving soon, or perhaps they simply prefer this for privacy and security reasons.
If you do need to write your address on a check that doesn’t have your address — perhaps because the recipient such as a merchant is requesting it — it’s generally best to:
• Use blue or black pen
• Print your new address under your name at the upper lefthand corner of the check
• See if the business or merchant wants your phone number as well; this is a fairly common request so they can reach you if necessary.
Do Checks Need an Address?
Checks do not need to have an address printed on them. However, if you choose to omit an address (say, because you know you’ll likely be moving soon), some businesses may hesitate to accept the check. They might ask for a form of ID or a phone number in case they need to contact you.
Alternatives to Personal Checks
If an individual doesn’t want to write a check for whatever reason, these are some alternative payment options.
Money Orders
It’s possible to buy a money order from the post office and other locations, including some big box stores and grocery stores. Money orders are a very quick form of payment, and can cost about $2 in fees.
Cashier’s Checks
A cashier’s check, which usually costs a small fee, can be bought at the bank and is a check that is guaranteed by the bank. It will usually require a visit to the bank to get one, though.
P2P Money Transfer Apps
P2P money transfer apps — like Venmo — that allow users to instantly transfer cash electronically to an individual as long as they have enough money in their bank account can be a convenient option. These are often free to use but they can involve a small fee (a percentage of the transaction) in certain situations, such as if you’re sending money via credit card. (Sometimes e-checks, or electronic checks, are a payment option for utilities and other accounts. While not a P2P app, they do allow for a seamless transfer of funds.)
The Takeaway
As long as the routing and account numbers on the check are accurate, it’s possible to use a check with an old, incorrect address on it. That said, it’s a good idea to order new checks with the correct address on them to help lessen any confusion the wrong address might cause with check recipients. Having all your details correct can help make banking as simple as possible.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 3.80% APY on SoFi Checking and Savings.
FAQ
Does it matter if the address on my check is wrong?
It is possible to use a check with a wrong address on it. The key is to make sure both the routing number and account number are still accurate on the check before using it.
Can you cash a check with an incorrect address?
Yes, you can cash a check with the incorrect address on it as long as the routing and account numbers on the check are accurate.
Do checks need an address?
Checks commonly have an address on them, but it’s not a requirement. If you are using a check without an address, the business or service you are playing may require some additional ID or info.
About the author
Jacqueline DeMarco
Jacqueline DeMarco is a freelance writer who specializes in financial topics. Her first job out of college was in the financial industry, and it was there she gained a passion for helping others understand tricky financial topics. Read full bio.
Photo credit: iStock/MicroStockHub
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
3.80% APY
SoFi members with Eligible Direct Deposit activity can earn 3.80% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below).
Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning 3.80% APY, we encourage you to check your APY Details page the day after your Eligible Direct Deposit arrives. If your APY is not showing as 3.80%, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning 3.80% APY from the date you contact SoFi for the rest of the current 30-day Evaluation Period. You will also be eligible for 3.80% APY on future Eligible Direct Deposits, as long as SoFi Bank can validate them.
Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi members with Eligible Direct Deposit are eligible for other SoFi Plus benefits.
As an alternative to Direct Deposit, SoFi members with Qualifying Deposits can earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.
SoFi Bank shall, in its sole discretion, assess each account holder’s Eligible Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving an Eligible Direct Deposit or receipt of $5,000 in Qualifying Deposits to your account, you will begin earning 3.80% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Eligible Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Eligible Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Eligible Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Eligible Direct Deposit or Qualifying Deposits until SoFi Bank recognizes Eligible Direct Deposit activity or receives $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Eligible Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Eligible Direct Deposit.
Separately, SoFi members who enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days can also earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. For additional details, see the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.
Members without either Eligible Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, or who do not enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days, will earn 1.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
Interest rates are variable and subject to change at any time. These rates are current as of 1/24/25. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.
While you have to be at least 18 years old to get your own credit card, you can become an authorized user on someone else’s credit card as a 16-year-old. This allows you to have a copy of a credit card with your name on it — though the adult will still be the account holder and be responsible for paying the bills.
Keep reading to learn more about how to get a credit card at 16, which will involve becoming an authorized user.
How Old Do You Have to Be to Get a Credit Card?
Generally, you must be 18 years old to get a credit card on your own. Even after turning 18, you usually must prove that you have independent income or get an older cosigner before the age of 21 in order to get a credit card, due to regulations that govern how credit cards work.
While getting a cosigner (usually a parent) can be doable, many teens may struggle to find a credit card issuer that is willing to accept a cosigner. More often than not, if a teen wants to gain access to a credit card, their best path forward is to become an authorized user on someone else’s credit card.
What Is an Authorized User?
An authorized user is someone who is added to a credit card account by the primary account holder. Becoming an authorized user on someone else’s credit card can make it possible for a 16-year old to have a credit card, as virtually all major credit card issuers accept authorized users who are 16.
If an adult — such as a parent — wants to, they can add a teenager as an authorized user to their credit card. The account holder can then request that the authorized user receive a copy of the credit card with their name on it. This credit card will share the same number as the card of the main account holder.
The teen can then make purchases with the credit card anywhere that accepts credit card payments, but they won’t be legally responsible for paying the bills. Because of this, it’s important that everyone works together to communicate and is aware of what’s being spent and who will pay it off. If the parent is going to put a big purchase on their credit card — such as paying taxes with a credit card — an authorized user’s added spending can drive up the credit utilization ratio.
Becoming an authorized user on a credit card can impact a teen’s credit score and build their credit history. That’s because when a teenager becomes an authorized user on a credit card, the credit card issuer will begin to report the account activity to the three major credit bureaus (TransUnion, Equifax, and Experian).
The primary account holder must contact their card issuer to add you. Then, here’s how being an authorized user can benefit you:
• When the primary account holder makes on time payments and keeps their balance low in comparison to their credit card limit, the teen’s score should benefit. On the other hand, if the account holder is late on their payments, the teen’s credit score could suffer.
• It’s important for both the account holder and authorized user to know how much they can afford to spend and how much they can manage to pay off each month. Ideally, you’ll be able to pay more than the credit card minimum payment to minimize the interest that accrues.
• It’s also wise to double-check that the credit card issuer is reporting the behavior of the authorized user to the three main credit bureaus. Some credit card issuers, like Wells Fargo, accept authorized users who are under the age of 18 but don’t report their behavior to the credit bureaus until they come of legal age — which won’t help the teen build their credit history or credit score.
Credit Card Options for 16-Year-Olds
If becoming an authorized user isn’t a good fit, 16-year-olds have other options. Teens may find that a debit card or prepaid card can give them the convenience of using a card without actually having a credit card or borrowing any money.
• Because debit cards are connected to bank accounts, a teen can use a debit card to make payments without physical cash on hand. However, they can’t spend more than they have in their bank account.
• They also won’t have to worry about any potential impacts to their credit score when using a debit card.
Another option: prepaid cards, which can be purchased at grocery stores, gas stations, and pharmacies. These can be loaded with a set amount of money. The user can then spend as much as the prepaid card is worth.
Neither a debit card nor a prepaid card will help teens build their credit score, nor do they offer the protections a credit card does, like requesting a credit card chargeback if there’s an incorrect charge. However, these options can get teens used to the concept of not overspending when shopping with a card instead of cash.
Are There Advantages to Getting a Credit Card at 16?
There are some unique advantages that come with getting a credit card at the age of 16 by becoming an authorized user. In addition to the teen gaining a firm grasp on what a credit card is, these are the main benefits worth keeping in mind.
Building Credit Score
As we briefly mentioned earlier, using a credit card responsibly can help teens build their credit history and credit score. Building credit when you’re young can make it easier to qualify for better credit products as well as rates and terms down the road.
Learning Good Financial Habits Early
Another headstart that teens can get by using a credit card at age 16 is learning good financial habits. Using a credit card can help teenagers learn how to budget, pay bills on time, and spend less than they earn. They can also begin to learn about annual percentage rate, or APR, and understand why it’s so important to find a good APR for a credit card.
Access to Emergency Funds
As teenagers gain more and more independence, their parents won’t always be with them when they’re out and about. If an emergency were to arise, like running out of gas, a credit card can give a teen the ability to spend more than just the cash they have on hand.
Rewards for Card Holders
The fun part about credit cards is that it’s possible to earn rewards when you use them. Because the teen will be an authorized user on a credit card, the account holder will be the one to redeem any credit card rewards. Still, this serves as a good opportunity to teach a teenager the benefits of using credit responsibly when it comes time for them to apply for a credit card of their own.
If they want, the primary account holder can even share some of their cash back or other perks with the authorized user.
Convenience for Both Parents and Children
Parents may find that their teen having a credit card saves them a lot of fuss. Do they need money for a yearbook or to buy prom tickets? No worries, they can use their credit card as long as they have permission or know their spending limits. With their own credit card (and the help of a responsible adult when it comes time to pay the bill), teens can use a credit card to manage their college applications, pay for SAT prep classes, or pick up school supplies.
Common Pitfalls for 16-Year-Olds With a Credit Card
Of course, credit cards aren’t all fun and games. Here are some pitfalls that 16-year-olds should look out for when using a credit card.
Overspending
The biggest mistake any of us can make when it comes to credit cards is overspending and not being able to afford our bill. It’s important that parents or legal guardians have serious conversations with their teens about how credit works and what the consequences of overspending can be. This can include credit card interest, fees, and a bruised credit score.
Possibility of Credit Card Fraud
Credit cards come with fraud risks that teens who are used to paying in cash may not know what to look out for, such as credit card skimmers. While credit cards can be more secure than debit cards, it’s important to teach teens about how to use credit cards safely so their card isn’t lost or stolen and they don’t fall prey to identity theft.
The Takeaway
It is possible to get a credit card at 16 by becoming an authorized user on an adult’s credit card account. To get your own credit card, you’ll need to wait until you’re at least 18, and even then, you’ll need to prove you have independent income or get a cosigner. When it is time to get a credit card of your own, you’ll want to make sure you’re ready to manage it responsibly and that you take the time to select a credit card that fits your needs.
Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.
FAQ
What is the minimum age to get a credit card?
You must be 18 years old to get your own credit card. Even then, you must prove that you have a steady source of income or else you’ll need to get a cosigner who is over the age of 21.
Can a 16 year old get a credit card with a cosigner?
No, you must be at least 18 years old to get a credit card — even if you have a cosigner. Those under the age of 18 can become an authorized user on an adult’s credit card account, but they can’t get a credit card of their own.
Can you use a credit card to build a good credit score?
When used responsibly, a credit card can help build a credit score. If a teen becomes an authorized user on a parent’s credit card, for instance, and that parent makes on-time payments and keeps their credit utilization low, they can build their credit score as well as the teen’s.
What payment card can you get at 16?
Before the age of 18, teens can get a debit card or a prepaid card on their own. Neither type of payment card will help build their credit score, but they are easier to obtain than a credit card. A teen can also become an authorized user and get a credit card of their own if approved by the main account holder, though this will not be their own credit card account.
About the author
Jacqueline DeMarco
Jacqueline DeMarco is a freelance writer who specializes in financial topics. Her first job out of college was in the financial industry, and it was there she gained a passion for helping others understand tricky financial topics. Read full bio.
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.
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.
