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Credit card fraud added up to $246 million last year, rising 12% from the prior year. As scammers come up with new ways to get sensitive credit card information and prey upon consumers, it can be a smart move to acquaint yourself with tactics they commonly use, from phishing scams to credit card reader scams to threats of arrest.

Read on to learn about 10 of the most popular techniques and find out what to do if you do end up getting scammed.

What Are Credit Card Scams?

A credit card scam is when an unauthorized individual uses your credit card to make fraudulent purchases or steal money from the account. While some credit card scams will take your credit card information right out from under you, others use strategies to entice you to hand over your information.

Given what a credit card is and how easy they are to use, it can be easy for a scammer to rack up debt under the cardholder’s name.

Common Scams and How to Avoid Them

Becoming familiar with the top credit card scams can increase your awareness and help you better protect your identity from fraud. Here are some of the most common credit card scams to look out for. (As you’ll see, some can involve debit cards as well.)

1. Overcharge Scams

With an overcharge scam, you’ll receive an email, call, or text stating that a retailer or merchant overcharged your card. The scammer will request your personal information to complete a refund for the overcharge. They will then use this information to gain access to your credit card.

Here’s how these scams can work:

•   Usually, the scammer identifies a product or service that you already use, so it may not seem as suspicious when they request this information. But, the fraudster may also use a standard service that many people use, such as Netflix or Spotify, so that it won’t raise red flags.

•   While it’s always good to scrutinize your incoming calls, it’s especially important to do so when you receive a call from an unidentified number, though scammers are getting more sophisticated at spoofing phone numbers and making it seem as if they are calling from legitimate businesses.

•   If you answer, the caller may tell you that you must take immediate action to get a refund, or that it’s your last chance to do so. The urgency should be an immediate sign something is amiss; that’s a common scam warning sign.

•   Also, if you do get a call from, say, Netflix saying your account is suspended, it can be wise to hang up and contact the business directly to see if there’s an issue with your account.

•   If you receive a suspicious email, compare the email to past emails from the merchant or retailer. Scammers are often good at disguising a false email address, so look carefully for differences in the sender’s address. They may add “pay” or “support” to make the address look legitimate.

•   You may also find subtle or major misspellings and incorrect grammar in the email.

The best way to avoid this potential credit card scam is to either hang up the call or exit the email. Again, if the call says it’s from your credit card issuer, you can call them directly to see if this request was legitimate or a scam. You can find your creditor’s number on the back of your credit card or credit card statement.

2. Interest Rate Scams

One of the most common credit card scams that occurs over the phone is a fraudster calling to tell you that they can reduce your credit card interest rate and potentially save you significant money on interest payments. They will typically state that their company has a relationship with your credit card company; therefore, they can negotiate reduced interest payments.

However, to entice you to act now, they’ll say the offer is only available for a limited time. Then, the scammer will request your credit card information, such as your account number and CVV number on a credit card, for the alleged service.

Legitimate debt relief companies seldomly cold call consumers to get their business. Also, they cannot charge a fee upfront until they reduce your interest rate or settle a portion of your debt. Therefore, this kind of call should set off alarm bells.

If you want to reduce your interest rate, contact your credit company directly. As the cardholder, you have a better chance of reducing your rate than a third-party company with no relationship with the creditor. If you do receive this call, simply ignore it like you would other credit card scams.

3. Gas Station Credit Card Scams

Scammers can use credit card skimmers to lift your credit card information at gas stations. They do so by attaching an external device to the credit card machine at a pump. When you swipe your card, the device can save your information instantly.

So, before you swipe your card, check to see if the credit card reader you’re using at the pump looks the same as all the other ones. If it doesn’t, that can be a tipoff. You also can tug at the reader to see if it easily detaches. Since skimmers are temporary, they’re usually only attached with double-sided tape, making them easy to remove. Don’t insert your card if you can remove the skimmer with little effort. Instead, go to another gas station to get your gas.

Make sure to inform authorities about the skimmers so they can handle it accordingly.

4. Prepaid Credit Card Scams

Prepaid credit cards, also known as prepaid debit cards, allow you to load money onto them and make purchases. When prepaid credit card funds are depleted, you can no longer use them (unlike credit cards, there is no credit card limit for prepaid cards). You can usually purchase prepaid credit cards at retail stores or online.

Scammers use prepaid credit cards in many different ways to take your money. For example, a scammer may call and say you won the lottery. However, to get your winnings, you must pay the taxes. They may tell you that you can do so by loading a prepaid credit card with a certain amount of funds and sending the card number to the caller. After this is done, they promise to send you your winnings — but, in this case, the scammer may take the card money and never be seen again.

If someone is requesting a prepaid credit card, that’s a red flag. It’s best not to proceed with this transaction as it may be a prepaid credit card scam.

5. Hotel Front-Desk Credit Card Scams

This scam takes place in a hotel room, where the scammer will call up stating they are a hotel employee. They will inform you that there is an issue with your credit card, and you must verify your credit card information. Usually, these calls take place early in the morning or late at night so that you will be thrown off guard.

If this happens to you, it’s best to handle the matter in person. You can hang up and then visit the front desk to ensure your credit information isn’t exposed to the wrong person.

6. Arrest Phone Call Scams

The objective of this scam is to convince you to give out your personal credit card information to pay off a debt, fine, penalty, or ticket. While arrest scams may seem unrealistic, the scammer relies on scare tactics to try to get the target to hand over their credit card information. They may target seniors with this scam.

Some points to know:

•   Usually, the scammer claims they are from a federal agency like the IRS, FBI, or other government agency that suggests there’s a connection to law enforcement.

•   Then, they threaten that if this bill, fee, or ticket goes unpaid, you will be arrested, or other legal action will be taken immediately.

•   It’s doubtful that actual law enforcement or federal agencies would request sensitive information during a phone call, especially an abrupt one.

•   Another sign that this is a scam is that the call may sound like a robot or like it’s pre-recorded.

•   The caller may also have a sense of urgency, claiming authorities are on their way to arrest you.

•   Even if you do owe outstanding fees, have a ticket, or were a part of some similar activity recently, authorities or federal agencies wouldn’t request payment information over the phone in this manner.

Don’t share any personal information with the caller. Just like with other scams, the best way to address your concerns is to hang up and call the alleged agency directly to get any information straight from the source.

Charity Scams

When nonprofit organizations ask for donations, it may pull at your heartstrings. But scammers can use this strategy to swipe your credit card information right out from under you.

Scammers who use this strategy usually call you pretending to be a part of a nonprofit or other charitable organization. They will then request donations using everyday anecdotes or narratives designed to influence their targets. It’s also common for scammers to use this tactic when a natural disaster strikes or another current event requires aid.

Although it’s common for nonprofits to solicit donations over the phone, you should still be wary when receiving one of these calls. If you want to donate to the organization, jot down information from the caller, such as their phone number and the name of the charity. Then, you can look up the phone number online to determine if it’s already identified as a scam.

If it isn’t, you can visit the IRS’s Tax Exempt Organization Search and CharityNavigator.org to research the organization to determine its legitimacy.

Overall, it’s wise to avoid donating to unsolicited callers. Instead, consider visiting an organization’s actual website to determine the best way to donate.

8. Hotspot Scams

Whether you’re connecting to a public WiFi hotspot via your phone or on your computer, scammers can try to access your credit card information when you sign on. In fact, they may prompt you to enter your credit card information to access a particular hotspot. Given how credit cards work, this is very risky. This can mean the scammer gets access to your card’s credentials.

So, when attempting to access the internet in public, be wary if you’re asked to enter your credit card information. Instead, if you’re at a restaurant or retail location, ask an employee to share the establishment’s hotspot or wifi information. Check that the connection is secure. This way, you’ll know you’re not exposing yourself to credit card fraud. But remember, it’s always wise to avoid conducting financial business on public WiFi.

9. Skimming Scams

Like gas pump skimmers, scammers can also use skimmers at ATMs to obtain credit card information.

The only way to identify a skimmer is by checking the scanning device. For example, if the card reader easily detaches, it’s likely a card skimmer. In addition, you can spot other things to identify a skimmer, such as graphics that don’t align or colors on the machine that don’t match the reader. Another clue is if the keypad seems cheap or too thick.

Before entering your card into a reader, investigate for a skimmer. Familiar places skimmers hide are usually in high-traffic areas (a mall or a sports stadium, say) or tourist locations. Don’t use your credit card if you’re unsure whether a skimmer is present or have a feeling something may be off, potentially indicating a credit card reader scam.

10. Phishing Scams

Like the name suggests, a phishing scam involves fraudsters phishing for your personal information. Scammers contact their targets through the phone or over email, posing as an honest company. They then provide fraudulent links or instructions to help them access your personal credit card information.

For example:

•   The scammer may impersonate your credit card company (simply saying they are “calling from your bank and there’s a problem”) and state that your account details must be updated due to a compromised card.

•   They will request your card information (your credit card number, expiration date, and CVV code) over the phone or email to resolve this issue.

•   The scammer may request the answers to your security questions for protection purposes.

Don’t provide any of this information. Even if they suggest this is a sensitive matter and must be addressed immediately, it’s best to hang up, and call your credit card company right away.

Recommended: Common Reasons Why Credit Cards Get Declined

How to Protect Yourself From Credit Card Scams

To keep your credit card information safe, here are some steps you can take:

•   Select a credit card with 0% liability on unauthorized purchases. The Fair Credit Billing Act (FCBA) limits your financial responsibility for credit card fraud to up to $50. In other words, you will only have to pay $50 if you’re a victim of one of these credit card scams and request a credit card chargeback. However, some credit card companies offer 0% liability as a perk, which means you aren’t responsible for any fraud.

•   Keep tabs on your credit card activity. Regularly looking at your credit card activity and checking your credit card balance can help you spot any suspicious activity. If you do notice anything, contact your credit card company right away.

•   Request transaction alerts. Usually, credit card companies let you sign up for transaction alerts, such as for balance transfers, large purchases, and international purchases. Using alerts is a great way to monitor your card activity.

•   Ensure your information is secure. When making purchases online, over the phone, or in person, ensure your information is secure. For example, only use sites with “https” in the URL when shopping online. Also, avoid using public WiFi where your personal information may be in jeopardy.

What To Do If You’re a Victim of Credit Card Scam: Reporting Credit Card Scams

If you’re a victim of a credit card scam, follow these steps:

•   First contact your credit card company to let them know about the fraud. Per the Fair Credit Billing Act, you have 60 days after receiving your billing statement to report any fraudulent activity on your card.

•   After informing your creditor of the incident, make sure to change your password for your account.

•   You may also want to contact the three major credit bureaus: Equifax, Experian, and TransUnion. Request verification of your identity, and ask for a fraud alert to get linked to your report.

•   Additionally, if you’re a credit card scam victim, you can contact the Federal Trade Commission (FTC) to report the crime. You can report your incident online or over the phone at 1-877-382-4357 (FTC-HELP).

•   If you’ve discovered a fraudulent website, email or another internet scam, report it to the Internet Crime Complaint Center (IC3).

•   Unfortunately, not all scams originate in the US; if you believe you’re a victim of an international scam, report it through econsumer.gov.

All reports help consumer protection agencies pinpoint trends and prevent other consumers from falling victim to credit card scams.

The Takeaway

Unfortunately, it can be easy to become a victim of credit card scams. But, if you monitor your account, set fraud alerts, and keep your information confidential, you’ll have a better chance of avoiding getting duped. Pay attention to what kinds of protection your credit card issuer may offer, too.

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

Who is liable for a credit card scam?

Under the Fair Credit Billing Act (FCBA), you’re only liable for up to $50 of credit card fraud reported within 60 days. However, if your credit card has 0% fraud liability protection, you may not be liable for any fraudulent charges.

What counts as credit card fraud?

When an unauthorized person makes a charge with your credit card or steals your credit card information, this is considered credit card fraud.

How do I report credit card fraud?

Contact your credit card issuer ASAP. Then go to the Federal Trade Commission’s website to report the incident. Law enforcement agencies will then use these reports to investigate criminal activity to prevent future fraud. Once you submit a report, you can follow up with local law enforcement, if your creditors suggest it’s wise to do so.

Photo credit: iStock/fizkes

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.

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.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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It is very unlikely that you can directly pay your mortgage lender with a credit card. However, there are a few workarounds that can help you pay your home loan with plastic. But it’s important to understand other factors involved when paying your mortgage with this kind of card, such as possible fees and other financial consequences.

Read on to learn how to pay your mortgage with a credit card and what to consider before you do so.

How to Pay Your Mortgage With a Credit Card

It’s highly unlikely that you can pay your mortgage directly with a credit card. That said, there are several ways you can use workarounds to pay your mortgage with a credit card, including using a money order, utilizing third-party services, and getting a cash advance.

Use a Third-Party Service

Some third-party services facilitate mortgage payments using your credit card and send a payment to your lender on your behalf. Companies like Plastiq allow you to use select credit cards (including American Express) to make mortgage payments through their platform.

For the privilege, you’ll most likely need to pay a convenience fee — Plastiq charges a processing fee of 2.9% — each time you make a mortgage payment using your credit card. And, depending on how that payment is delivered (say, check or bank transfer), you may also be charged an additional fixed fee that can range from 99 cents to $39. You may also have the option to make recurring payments or to make your payments manually.

Buy a Money Order

Depending on your location and the retailer, you may be able to purchase a money order with your credit card. Then, you’ll simply take the money order and deposit it at your bank and transfer the amount to your mortgage lender.

Keep in mind that many retailers may not accept credit cards as a form of payment for money orders — it’s best to check ahead of time if you plan to do so. Even if you can, money orders tend to have a limit of $1,000. That means if you want to go this route, it may take you a few transactions before your money orders total enough for your mortgage payment.

Additionally, you may incur a fee for each money order you buy. Also keep in mind that some credit card issuers treat money order purchases as cash advances, which can result in a fee and interest charges at a rate that’s usually higher than the standard purchase APR on a credit card.

Transfer a Balance to Your Bank Account

You could attempt to conduct a balance transfer, with the funds going into your bank account — some credit card issuers may allow this type of transaction. Most commonly, credit card issuers provide cardholders with balance transfer checks to facilitate these types of transactions. There may be balance transfer fees involved, and interest may accrue depending on your credit card terms.

Get a Cash Advance

As another method to pay your mortgage with a credit card, you can get a cash advance at the ATM with your credit card. You’d then deposit the cash into your bank account and use the funds to make your mortgage payments. You could also consider using the funds to purchase a cashier’s check and mail it to your lender.

Going this route most likely means you’ll have to pay a cash advance fee, and interest on cash advances will accrue on your credit card with no grace period and often at a significantly higher rate than on your everyday purchases. Credit limits may be lower for cash advances as well.

Recommended: Charge Card Advantages and Disadvantages

Do All Mortgage Lenders Accept Credit Card Payments?

No, most mortgage lenders do not accept credit card payments directly from the borrower.

If you’re curious about why this is, know that paying debt with a credit card isn’t usually a financially responsible move. Mortgage companies likely don’t want the added risk that someone is paying for their home loan with credit vs. cash. Also, it can be expensive for lenders to accept credit cards, given that processing and other fees can take a bite out of every incoming amount of money.

Factors to Consider When Paying a Mortgage With a Credit Card

Before paying your mortgage with a credit card, consider the following.

Fees vs Rewards

Similar to those considering paying taxes with a credit card, many people tend to pay their mortgage with a credit card because they want to earn rewards. Since third-party services will charge you fees — or you’ll pay the fees charged directly by your credit card issuer for balance transfers — you’ll want to make sure the value of the rewards outweighs what you’re paying in fees.

Sure, the fees may seem small, but they can quickly add up over time. Also, in many cases, rewards cards may only count certain transactions as eligible for rewards. Many issuers don’t consider balance transfers as qualifying transactions, for example.

The Cost of Interest

If you don’t pay off your balance each month, interest will start to accrue on your credit card — and credit card interest rates are typically much higher than your mortgage interest rate, even if you have a good APR for a credit card.

Additionally, if you go the cash advance route, these transactions may have higher credit card interest rates, and there’s no interest-free grace period.

Effect on Your Credit Score

If your credit card balance starts to get too overwhelming and you miss making the credit card minimum payment, it could negatively impact your score.

Even if you make on-time payments, having a high balance could affect your credit utilization, which is the ratio between your balance and your available credit. The higher your credit utilization, the more it could negatively impact your score.

Challenges You May Face When Paying a Mortgage With a Credit Card

One challenge with using a credit card for mortgage payments is the time it takes to do so. Any of the above mentioned methods will take you some time and effort to complete successfully. That’s because it’s unlikely your lender will accept a direct credit card payment and you will instead have to use a workaround.

There are also the fees to consider — determining whether paying the extra charges and potentially a higher interest rate is worth it takes some careful calculations.

Should You Pay Your Mortgage With a Credit Card?

Making mortgage payments with a credit card may be a good idea if you’re looking for a way to earn more rewards or get some financial breathing room. However, given the downsides, such as high fees and the impact it may have on your credit, you may be better off pursuing other options first. Also keep in mind that using a credit card to pay your mortgage may trigger a higher cash-advance interest rate than your typical interest rate since you can’t pay directly.

Alternatives to Using a Credit Card for Your Mortgage

Here are several options you can choose from instead of paying your mortgage with a credit card:

•   Consider mortgage forbearance: If you’re struggling with your payments and experiencing a significant hardship, you can contact your lender to see if mortgage forbearance is possible. This could allow you to temporarily stop paying or have your monthly payments reduced until you can get back on your feet.

•   Seek help with a housing counselor: You can find a reputable housing counselor that’s approved by the U.S. Department of Housing and Urban Development (HUD) by contacting the Homeowners HOPE Hotline or using the housing counselor tool on the Consumer Financial Protection Bureau’s website. They could suggest options to help you manage your mortgage payments. You may have to pay a small fee for the service, but it could be more affordable than using a credit card to pay your mortgage.

The Takeaway

While you probably can’t pay your mortgage directly with a credit card, there are workarounds that are possible, as long as you understand what you’re getting into and are strategic about how to do so. Before you move forward with paying your mortgage with your credit card, make sure you weigh the fees involved vs. the rewards you could earn as well as any interest you could accrue and potential impacts to your credit. Understanding the pros and cons of this scenario is an important step in using your credit card 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

Can you use a credit card to pay a mortgage?

You probably can’t pay your mortgage directly using a credit card, but you can do so through indirect methods. Some of these include going through a third-party service, making a balance transfer, purchasing a money order using your credit card, or getting a cash advance. Each of these methods will come with its own set of fees and/or higher interest rates.

Can paying a mortgage with a credit card impact credit score?

If you end up with a high balance on your credit card as a result of your mortgage payment, it could negatively impact your score if you have a high credit utilization. Or, if you end up missing or being late on a payment (perhaps you’re struggling to make the monthly payments), then your score could also be impacted.

Are there fees for paying a mortgage with a credit card?

There are fees depending on how you use your credit card to pay for your mortgage. For instance, you may incur balance transfer, cash advance, or third-party fees.

Photo credit: iStock/vgajic

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.

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.

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In general, it is possible to buy a gift card with a credit card. There are some instances where you might not be able to, though; namely at some specific stores that may limit or ban the purchase of gift cards with a credit card due to fraud concerns. However, you can usually go ahead and swipe or tap to get one of these cards, which can be a convenient and useful present.

Read on to learn more about when you can buy a gift card with a credit card and how it works.

What Are Gift Cards?

A gift card looks and functions similarly to a credit card, but instead it is a prepaid debit card. You can purchase one and load it with a certain amount of funds or many come preloaded in different denominations. These can be a convenient way to give a gift to anyone from your nephew to your dog walker.

Some gift cards can be used at just a specific retailer, like an Amazon or Target gift card. Others can be used at a variety of retailers, such as a Visa gift card that’s designed to be spent almost anywhere.

You can buy gift cards in store or online. Gift cards are activated at purchase so they can be used right away without any further steps necessary. Just like there are credit card expiration dates, gift cards can expire if they’re not used within a certain timeframe.

Types of Gift Cards

There are two main types of gift cards that consumers will come across:

•   Retail or store-specific gift cards

•   Generic gift cards.

This is how these two types of gift cards work.

Retail or Store Specific Gift Cards

Retail or store-specific gift cards can only be used at select (if not just one) retailer. So, for instance, if you buy a gift card for a particular restaurant or cafe chain, the funds are only spendable at that restaurant, not anywhere else. This type of gift card is also known as a closed-loop gift card.

Generic Gift Cards

Generic, or open-loop, gift cards can be used at a variety of retailers as long as they accept credit card payments from that specific payment card network. This type of gift card is offered by most major credit card networks, such as American Express, Visa, and MasterCard.

These cards are often reloadable, though there may be a fee to do so. Open-loop gift cards also often charge an activation fee when the card is purchased.

Recommended: When Are Credit Card Payments Due

Can You Buy Gift Cards With a Credit Card?

Generally, it’s possible to buy a gift card with a credit card. Of course, whether you can do so will depend on whether the retailer allows credit card purchases and accepts payment from the consumer’s specific credit card network.

Some retailers may not allow you to buy a gift card with a credit card or they may place limits on purchases. This is because of fraud concerns, as the purchase of gift cards with stolen or counterfeit credit cards is common. These limitations generally apply to store-specific gift cards.

Recommended: What Is a Credit Card Chargeback

Things to Watch Out for When Buying Gift Cards With a Credit Card

Plenty of people buy gift cards with a credit card, especially when buying gift cards online. Even though it’s possible to buy a gift card with a credit card, there are some things worth looking out for when making this kind of purchase.

Can You Get Rewards for Purchasing Gift Cards With a Credit Card?

While some credit card issuers make it possible to earn rewards like cash back and miles when purchasing a gift card, other issuers don’t reward these purchases at all. For example, the Blue Cash Preferred® Card from American Express does not consider gift cards an eligible purchase for rewards. This may be something to keep in mind when applying for a credit card if you plan to purchase gift cards often.

To find out if you’ll earn rewards for buying a gift card with a credit card, check your credit card issuer’s terms for more details on how your credit card works.

Does Making a Gift Card Purchase Count as a Cash Advance?

Buying a gift card with a credit card can potentially cost consumers more than they realize. This is because some credit card issuers may view buying a gift card as taking a cash advance, particularly for open-loop cards.

Why is that a bad thing?

•   Credit card issuers charge interest and fees on cash advances, which is when a credit card allows the cardholder to borrow a set amount of cash as an advance.

•   Plus, interest starts accruing immediately on cash advances, with no grace period offered. Usually, interest only begins accruing if you make only the credit card minimum payment rather than paying off your balance in full.

•   Also note that the APR of a cash advance also can be higher than the purchase APR on a credit card and can add up quickly.

How to Avoid Cash Advances When Buying Gift Cards With Your Credit Card

Most people don’t realize that a gift card purchase with a credit card can count as a cash advance. Before buying a gift card with a credit card, it’s a good idea to double check what a credit card issuer’s policies are surrounding gift card purchases. You may be charged a higher interest rate, which can contribute to credit card debt.

If the card issuer does count the purchase of gift cards as a cash advance, then it can be wise to buy a gift card with cash or another card whenever possible. And if you do end up needing to buy a gift card with that credit card when you’re in a bind, know this: Your credit card’s cash advance limit may be different than your average credit card limit.

The Takeaway

It is often possible to buy gift cards with a credit card, and you may even earn rewards for doing so. However, it’s a good idea to learn the details before you buy as you might be charged as if you are accessing a cash advance. That can mean a higher APR assessed, and you may have a different limit, too. These are important points to know to make sure you are using your credit card 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

Do credit card providers issue rewards for gift card purchases?

It’s possible with some credit cards to earn rewards points when purchasing a gift card. However, many credit card issuers don’t consider gift card purchases eligible for earning rewards (they deem them cash equivalents and ineligible). Double check the cardholder agreement for a specific card for details.

How can you avoid gift card scams?

Only buy gift cards from trusted retailers to help protect against gift cards scams. Avoid purchasing gift cards from online auction sites that offer discounts, as the gift cards they sell may be stolen or fake. It’s also a good idea to check for protective stickers on a gift card before buying it and to confirm that the gift card’s pin number isn’t showing. If you do spot an issue, get a different gift card.

Can you put money on a gift card with a credit card?

Yes, it is possible to add money to a gift card by using a credit card. It’s up to consumers to choose how much they want to add to a gift card. Retailers can offer gift cards that come in pre-set amounts like $50 or $100, or they may allow customers to add a custom amount to their gift card.

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.

Photo credit: iStock/Tingting Ji
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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.

When traveling and using a credit card internationally, it’s more common to come across Visa and Mastercard networks.

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.

Recommended: Charge Cards Advantages and Disadvantages

What Are Credit Card Issuers?

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:

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.

Recommended: When Are Credit Card Payments Due

The Takeaway

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.

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.

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In a nutshell, a credit card balance is the amount of money you owe to a credit card company from month to month. This is an important number to keep track of because if you don’t pay off your balance by the end of the billing cycle, you’ll owe interest. And, as you may know, credit cards usually have a high interest rate, which can lead to credit card debt.

That said, when you go to manage your credit card bill, you might get tripped up on the difference between your statement balance and your current balance. Read on to learn more about what each type of credit card balance is, how you can check yours, and whether carrying a balance affects your credit score.

What Is a Credit Card Balance?

A credit card balance is the amount of money you owe to your credit card company, as well as interest and any fees.

When you look at your credit card bill, you may see two balances posted: your current balance and your statement balance.

•   Your statement balance is the amount of money you owe from the previous billing cycle.

•   Your current balance, on the other hand, is how much you owe at this moment in time. This amount could be higher or lower than your statement balance, depending on whether you’ve paid your credit card bill, charged more items to your credit card, or requested a credit card chargeback.

But when your billing cycle closes with a balance, what does that mean? It depends on your card issuer. Many card issuers have a grace period between when the credit card billing cycle closes and when payment is due. That means, if you pay your statement balance in full when payment is due, you will not accrue interest on any of the charges billed from the previous cycle.

Recommended: Pros and Cons of a Charge Card

How Is a Credit Card Balance Calculated?

What does your credit card balance mean? It’s more than just whatever you’ve purchased during the previous month. A credit balance also consists of:

•   Any accrued interest

•   Late payment fees

•   Foreign transaction fees

•   Annual fees

•   Cash advances

•   Transfer fees

•   Any statement credits

•   Any payments made to the account

If you carry a balance, you’ll have to pay interest on the balance owed. The only exception is if you have a card with a 0% annual percentage rate, or APR, which is the interest rate charged when you carry a balance on your card. (This 0% might be a promotional or introductory rate, for example.)

But generally, your card will have a grace period, during which interest will not accrue on the balance.

Differences Between My Credit Card Balance and Statement Balance

The meaning of your credit card balance can vary depending on whether you’re discussing your statement balance or current balance.

•   Your statement balance is how much you owe at the end of the billing cycle.

•   Your current balance is a continuous tally of any credit card activity.

Here are some points to know about this:

•   You will have a due date by which you’ll need to pay your statement balance.

•   When your statement balance is paid, there may be activity on your balance as you continue to use your credit card throughout the month.

•   The charges made after your statement balance is available will show up on your next statement balance.

•   These charges, as well as any remaining amount from your statement balance, constitute your current balance.

Here’s the information on this topic in chart form:

Your Credit Card Balance and How It Affects Your Credit Score

Some people believe that carrying a balance may benefit their credit score, but that’s not true. Credit card companies do like to see credit card usage, but paying your balance in full is what can help your credit score.

One of the largest determinants of your credit score is your credit utilization ratio. This is the amount of money you’ve borrowed across credit cards compared to the amount of credit you have available. If you had a card with a credit card limit of $10,000 and you charged $3,000 on the card, for instance, your credit utilization ratio would be 30%.

In general, the lower your credit utilization ratio, the more helpful it is in building your score. It’s recommended to keep your credit utilization below 30%, though 10% is ideal. By paying off as much of your credit card balance as you can in a statement period, you’ll lower the amount of money you owe, thus decreasing your credit utilization ratio. This can be part of using a credit card responsibly.

How to Check Your Credit Card Balance

There are many ways to check your credit card balance. You can do so online, over the phone, through an app, or simply keep an eye out for monthly statements, which may be mailed to you or securely delivered through email.

Online

An easy way to check your credit card account balance is to go online to your card issuer’s website, where you can set up your online account. You can then log onto this account to check your balance, pay any bills, and otherwise perform any account maintenance.

As with any sensitive information, make sure you keep your user information secure.

Recommended: When Are Credit Card Payments Due

Over the Phone

Your credit card company likely has a number that you can call to learn your balance, often from an automated voice that reads it off to you. It can also be helpful to know the number to your credit card company in case you want to dispute a credit card charge you don’t recognize or have questions about fees or anything else that appears on your statement, or have lost your card.

Through an App

Most credit card companies have an app in which you can check your credit card balance. The app also may offer additional features, such as a breakdown of spending and your most recent credit score.

Through Regular User Notifications

Depending on how you’ve set up your account, you may receive user notifications and statement balance updates through text message, email, or the mail, or a combination of all three.

Should You Carry a Credit Card Balance?

In general, carrying a credit card balance has the potential to hurt your finances and your credit score.

Sometimes, however, carrying a credit card balance can happen. Perhaps you had a big dental bill or had to buy a new refrigerator. Or maybe you used your card to pay for plane tickets for next summer’s vacation.

Here are some ways to potentially minimize the negative effects of carrying a balance if you end up in a situation where you need to do so:

•   Look for a card with low APR. The lower the APR, the less interest you’ll pay on purchases. A good APR is one that’s below the current average, though what’s considered competitive can also vary depending on the type of the card and the individual’s credit score and history.

•   Pay more than the minimum balance due. Even if you can’t pay the full balance, paying as much as you can above the credit card minimum payment will help keep your credit utilization ratio low. It will also minimize the amount of interest you’ll pay over time.

•   Make a budget. Look through your expenses and find ways to pay down the card over a set amount of time. (There are a variety of budgeting methods available; try a couple and see what works best for you.) Some cards may offer the option to pay off certain purchases in installments, at a different interest rate than the overall card.

•   Treat your credit card as you would cash. If you don’t have the money right now, don’t whip out your card. Using a debit card instead can help you stay within the bounds of your available funds.

The Takeaway

A credit card can be a powerful tool — but carrying a balance can make it harder to achieve financial goals. Keeping track of your current balance and making a plan to pay off your statement balance in full each month can be helpful. Doing so can allow you to make the most of your credit card and minimize credit card debt, which can be important money moves.

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 does a negative balance mean on a credit card?

A negative balance means the card company owes you money. This might occur due to a statement credit, a return, or you overpaying your bill. A negative balance won’t affect your credit score. When you make a charge on your credit card, the negative balance will be used to cover the payment.

Is it good to carry a balance on a credit card?

No. While it is good to use a credit card regularly and pay it off on time as a means of building your credit history, carrying a balance won’t help your credit score. In fact, if you rack up too much of a balance that it increases your credit utilization ratio, it could hurt your credit score.

What happens if you cancel a credit card with a balance?

If you cancel a credit card with a balance, you’ll still be responsible for payments, interest, and card fees. There may be downsides to canceling the card, too. That’s because part of your credit score rests on how long you’ve had open accounts.

Can I transfer my credit card balance to another card?

Yes. This is called a balance transfer. In a balance transfer, you’ll put your current balance on a new credit card. This can save you money on interest if you’re moving your balance to a lower-interest card. However, be aware that there are balance transfer fees involved. Also, a balance transfer may affect your credit utilization ratio.

Can I make partial monthly payments instead of settling the entire balance?

You can. Paying more than the minimum each month can minimize the effect of interest and lower your credit utilization ratio. To avoid interest entirely, however, you’ll want to pay off your statement balance in full each month.

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.

Photo credit: iStock/Roman Novitskii
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