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Virtual credit cards are a digital version of a plastic or metal card, often created for temporary use.

One reason for using virtual credit cards is to protect users? Did you know that more than 60 million Americans had fraudulent charges on their cards in 2024, with unauthorized purchases totaling $6.2 billion annually? A virtual card might protect you from enduring this kind of loss. Read on to learn more about what they are and how they work.

What Is a Virtual Credit Card?

A virtual credit card is a temporary credit card that doesn’t exist as the familiar physical rectangle. It can be used when making online purchases. Their intent to safeguard your actual credit card numbers from fraudsters.

In turn, it could protect your credit card from hackers.

Virtual credit cards are made for temporary use. When you use a card online, the retailer can only see and store the temporary credit card number, adding another layer of protection should a data breach occur.

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

How Do Virtual Credit Cards Work?

Not all credit card networks issue virtual credit cards. If a virtual credit card is offered, you get a virtual credit card, with a 16-digit number that is randomly generated. It will also come with a security code and expiration date. This information is tied to your account.

A major perk of a virtual credit card is that they’re intended for temporary use. These cards typically expire after a day, although some have a 12-month expiration date. A new 16-digit credit card code can be generated for each transaction.

Virtual Credit Card vs Digital Wallet

The major difference between virtual credit cards and digital wallets is that with a digital wallet, you would store the exact credit card numbers that are on your physical credit card. With a virtual credit card, you would be using a temporary number that could quickly expire to complete an online transaction.

Another major difference between the two is where they can be used. You can use a virtual credit card for any online purchase where credit cards are accepted. A digital wallet, on the other hand, can only be used at retailers where digital wallet payments are accepted, which might not be everywhere. While digital wallets are gaining greater acceptance, they are not yet used universally.

Recommended: When Are Credit Card Payments Due?

Pros and Cons of Virtual Credit Cards

Here’s an overview of the advantages and drawbacks of using virtual credit cards.

Recommended: Tips for Using a Credit Card Responsibly

Pros

Here are the major upsides of using virtual credit cards:

•   Greater protection from fraudsters: The 16-digit number of your physical credit, payment information, and personal information is safeguarded when using a virtual credit card. In the case that a hacker steals your virtual card number, that number will expire shortly. Plus, the hacker won’t have access to your personal information or identity.

•   Flexibility in use: You can change your temp card number as often as you like, at the drop of a hat, and create new card numbers for different retailers. You can even set spending limits or freeze your account without the same changes being reflected in your actual credit card account.

•   Transactions are posted to your account: While the credit card number is a temporary one, credit card charges made with your virtual card do show up on your credit card statements. In turn, you can keep better track of all purchases, whether using a virtual card with temporary numbers or your actual credit card number. This tie to your account also means you can get cash back rewards with a virtual credit card even if it’s temporary.

•   Ability to customize how long the number stays active: Depending on the credit card issuer, you might be able to customize the length of time a virtual card number stays active. Or, you can set a specific spending limit. This might come in handy if you’re using a joint credit card, or if you use a virtual credit card for recurring monthly purchases.

Cons

There are also drawbacks to virtual credit cards that are important to take into account as well. These include:

•   Generally can only be used online or over the phone: Due to their nature and intent, virtual credit cards generally can only be used online and for some over-the-phone purchases. So it won’t offer fraud protection when you use your usual credit card for brick-and-mortar purchases. However, if you link your virtual credit card to your digital wallet, you might be able to use your virtual credit card at select physical locations while the number is active.

•   Might be more challenging to use for certain purchases: If you’re using a virtual card to book a hotel reservation and the card number expires after 24 hours, it could be challenging when the hotel asks for the same credit card number at check-in time. In those cases, you might need to call your bank or consider using a permanent credit card.

•   Might be harder to get a refund: Another scenario when using a virtual credit card can be more complicated is when a refund is issued and the retailer can’t refund the amount to a virtual card after it has expired. In that case, you might have to ask the card issuer to intervene or opt for a store credit instead.

•   Requires extra legwork to get: If you want to take advantage of the added security of a virtual credit card number, you might have to make a bit more effort than just swiping your card. You’ll have to contact your issuer each time you want to get a virtual credit card number and stay on top of short usage windows.

Recommended: What is the Average Credit Card Limit?

How Is a Virtual Credit Card Number Generated?

Virtual credit card numbers are randomly generated sequences that are linked to your existing credit card account. In some cases, to access the virtual card number, you’ll need to download the virtual card issuer’s app. Other issuers may allow you to do so through their website or through the existing banking app.

Depending on the credit card issuer, you might receive a virtual card number for different merchants. Or, you might receive a randomized 16-digital credit card sequence to use for any merchant.

The number might be good for 24 hours, after which you’d need to request a new number. Some virtual credit cards allow you to choose when a credit card is set to expire. For instance, you might choose for it to expire after a day of use or after several months so you can use the same virtual card for recurring purchases.

Recommended: Tips for Using a Credit Card Responsibly

Tips for Protecting Your Identity Online

Even using a virtual credit card number doesn’t make you immune to theft. Here are some ways to protect your identity and virtual credit card online:

•   Sign up for a credit monitoring service. This will help you detect any suspicious behavior.

•   Use a virtual private network (VPN). For a more secure connection, connect to a VPN when using public wifi.

•   Create unique passwords. Passwords to online merchant accounts should not only be unique but should contain a combination of letters and numbers (but not “password123” or something else obvious).

•   Set up alerts on your virtual credit card. Setting up alerts on your credit card for online purchases can make you immediately aware of fraudulent activity.

•   Use trusted, known sites. For instance, check to see if the site is secure and has “https” instead of “http” in the URL and the lock symbol.

•   Beware of scams that pretend to be from your card’s fraud detection team. If you receive an unsolicited email or call from someone claiming to be from the security department of a credit card company and asking you to activate the protection features on your card, beware. It’s likely a scam. You don’t need it, as credit cards typically have built-in liability protection.

Virtual Credit Card Alternatives

If your credit card issuer doesn’t offer a virtual credit card or you don’t think it’s a good fit for you, here are some different kinds of cards you might consider:

•   Prepaid credit cards: If convenience when using a credit card for a purchase is top of mind, a prepaid credit card is a reloadable card that you can use for purchases. Note that while these can be an easy way to make purchases, prepaid credit cards may come stacked with fees, don’t have security protections (they’re akin to cash), and don’t help you build credit.

•   Gift cards: A gift card is also a safe way to make purchases online without fraudsters accessing your personal information or credit card number. Gift cards can be used for particular merchants or anywhere the credit card network with which the gift card is associated is accepted. They are similar to prepaid credit cards but are typically not reloadable.

The Takeaway

A virtual credit card can provide an extra layer of protection and prevent your credit card and personal information from getting into the wrong hands. However, you can typically only use virtual credit cards for online purchases and some purchases over the phone. Plus, they usually can only be used temporarily, often for one day.

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

Is a virtual credit card secure?

A virtual credit card offers added protection as you aren’t using your actual credit card number when making purchases. This helps prevent fraudsters from accessing your actual credit card number and sensitive information. Instead, you receive a temporary 16-digit code with its own expiration date and security code.

Can I get an instant approval for my virtual credit card?

Some virtual credit cards do offer instant approval. Once you receive your random credit card code, you usually can use it right away.

Can you get a virtual credit card anonymously?

No, you won’t be able to obtain a virtual credit card anonymously. You’ll need to request a virtual credit card by logging on to your existing credit card account. Once you make a request, you’ll receive your virtual credit card.

Photo credit: iStock/nesharm

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

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

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

SOCC-Q225-002

Saving money can be daunting. But what if you could make it seem less like a chore and more like a game? That’s the idea behind TikTok’s viral 100 Envelope Challenge. With this popular money-saving hack, you set aside a predetermined dollar amount in different envelopes each day for 100 days. By the end of the challenge, you’ll have saved over $5,000.

One of the appeals of the 100 Envelope Challenge is that you visually see your progress as you fill up each envelope, which can make the process of saving more tangible and fun. And like many savings challenges, this money game can help you save a sizable sum in a short period of time.

That said, the 100 Envelope Challenge may not be realistic for everyone. Here’s a closer look at how it works, its pros and cons, plus some other fun saving strategies to consider.

What Is the 100 Envelope Challenge?

The 100 Envelope Challenge, also known as the 100-Day Money Challenge, is a savings technique that involves setting aside a specific amount of money each day for 100 days. The goal is to accumulate $5,050 in just over three months.

The concept is simple: You start with 100 envelopes and number them from 1 to 100. On day 1 of the challenge, you put $1 into envelope #1. On day 2, you put $2 into envelope #2. On day 3, you put $3 in envelope #3. You continue this pattern, increasing the amount by $1 each day until you reach the 100th day, when you deposit $100.

There are also variations on the game. For example, instead of stuffing envelopes in chronological order, you can shuffle the envelopes, put them in a bucket or basket, and then randomly pick one each day. This allows you to alternate between low and high cash amounts throughout the challenge.

If your budget is tight, and saving $5,050 in 100 days isn’t feasible, you can do the 100 Envelope Challenge over 100 weeks, rather than 100 days. You’ll still get to $5,050 — it will just take longer.

And if you’re not a fan of cash, you can do the challenge digitally. Simply download a free “100 Envelope Challenge” printable (widely available online). You then check off the “envelopes” in order (or use an online number generator to pick a random number each day). Once you’ve selected your envelope number, you transfer that amount to your savings account. If you open a high-yield savings account, you’ll have the added advantage of earning competitive interest on your cash.

How to Do The 100 Envelope Challenge

Here’s a step-by-step guide to the original 100 Envelope Challenge.

1. Assemble Your Supplies

You’ll need 100 plain envelopes and a marker or pen to set up the challenge. If you don’t normally carry cash, you’ll also want to hit the ATM and withdraw some money to cover you for the first week. You’ll likely make multiple trips as you make your way through the challenge — and your paychecks get deposited.

Recommended: How to Avoid ATM Fees

2. Prep Your Envelopes

Label each envelope with number, starting with #1 and ending with #100. You’ll also want to find a safe place to keep your envelopes, such as a box, drawer, or safe. The idea is to keep them accessible but still secure.

3. Start Stuffing

Each day, pick out an envelope in chronological order (or, as an alternative, you can choose randomly) and place the corresponding amount of cash inside.

4. Stay Consistent

The key to any money-saving challenge is consistency, so do your best to stick to the rules as closely as you can. If you miss a few days, don’t give up — simply dust yourself off and get back on track. Or consider switching to a weekly or biweekly schedule to make the challenge more manageable.

5. Put Your Savings to Good Use

When you reach the finish line, it’s time to put your envelope cash to good use. For example, you might use your $5,050 to start your emergency fund (if you don’t already have one), pay off credit card debt, or fund something fun like a vacation. Or you might use the money to get started on a larger, long-term goal, like a home down payment, kid’s college fund, or retirement savings.

How Much Money Is Involved in the 100 Envelope Challenge?

By the end of the 100 Envelope Challenge, you will have saved a total of $5,050. You get to this amount by progressively increasing your daily (or, if you prefer, biweekly or weekly) deposit, starting with $1 and ending with $100. While the amounts may seem small at first, they add up over time, demonstrating the power of consistent saving.

Recommended: 15 Creative Ways to Save Money

Pros and Cons of the 100 Envelope Challenge

The 100 Envelope Challenge comes with both pros and cons. Here are some to consider before you decide to jump in on the trend.

Pros of the 100 Envelope Challenge

•   Easy to start: You don’t need to comb through bank statements and set up spreadsheets to start this savings plan. All you need to get going are envelopes and some cash.

•   Visual progress: The envelopes provide a visual representation of your progress. Watching them stack up can motivate you to keep going.

•   Builds discipline: The challenge encourages regular saving habits, helping to build discipline and financial responsibility.

•   Flexible: You can adjust the challenge to fit your budget, preferences, and savings goals.

Cons of the 100 Envelope Challenge

•   Cash-based: The default design relies on using cash, which may not be convenient for everyone.

•   Risk of loss: Keeping cash in envelopes can be risky, since they can potentially get lost or stolen.

•   It’s not all fun and games: Even though it’s a game, you’ll likely need to cut back on spending (and, yes, fun) to come up with the cash you need to stick with the program, especially near the end, when you’re stuffing large sums every day.

•   Not realistic for everyone: If your monthly essential expenses are already close to your monthly income, you might find it difficult to stick with a 100-day Envelope challenge.

Alternatives to the 100 Envelope Challenge

While the 100 Envelope Challenge is a popular savings method, it may not be the right approach for everyone. Here are some alternatives to consider.

•   The 30-Day Savings Challenge: Here, you start with just 30 envelopes, numbered 1 through 30. Each day, you’ll save the amount indicated on the envelope you choose. You could go in order or shuffle the envelopes and randomly select one. At the end, you’ll have saved $465.

•   The Spare Change Challenge: This involves saving the spare change from your everyday transactions. You can do it manually, by dropping your spare change into a jar each day and, once it’s filled, bringing it to the bank. Or you can do it digitally, using an app that automatically rounds up your purchases and transfers that money into savings. Either way, you’ll accumulate savings without much effort

•   No-Spend Challenge: In a no-spend challenge, you commit to not spending money on non-essential items for a set period of time, such as a week or a month. This can help you identify and eliminate unnecessary expenses, allowing you to save more money.

•   Savings Percentage Challenge: In this challenge, you commit to saving a specific percentage of your income each month, such as 10% or 20%. To make it easy, you can set up an automatic transfer from checking to savings for this amount for the same day each month (ideally right after you get paid). This can help you save consistently and build your savings over time.

Recommended: 52 Week Savings Challenge (2024 Edition)

The Takeaway

The 100 Envelope Challenge is a simple yet effective way to save money and build financial discipline. By following the steps and sticking with the program, you can reach your savings goal and have a tangible reminder of your progress along the way.

If socking away $5,050 in a little over three months feels too challenging, however, you might want to try one of the many other ways to gamify saving. The best approach to boosting the balance in your savings account is the one you’ll stick with.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible 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.

FAQ

Can I save $5,000 in 3 months with 100 envelopes?

Yes, it’s possible to save around $5,000 in three months with the 100 Envelope Challenge. The challenge is designed to be completed over 100 days, which is a little over three months.

How it works: You gather 100 envelopes and number them from 1 to 100. Each day you fill up one envelope with the amount of cash to match the number on the envelope.You can fill up the envelopes in order or pick them at random. After you’ve filled up all the envelopes, you’ll have a total of $5,050 saved.

How long does it take to complete the 100 envelope challenge?

The 100 Envelope Challenge is designed to be completed over 100 days. Each day, you deposit a specific amount of money into an envelope, starting with $1 on day #1, and increasing by $1 each day until you reach $100 on day #100. By then, you’ll have saved $5,050.

You can also choose to do the 100 Envelope Challenge over 100 weeks, filling each envelope according to the week number. In this version, you’ll save $5,050 in a little less than two years.

What are other money saving challenges besides the 100 envelope challenge?

There are several other money-saving challenges that you can try besides the 100 Envelope Challenge. Some popular alternatives include:

•   30-day Savings Challenge Here, you start with 30 envelopes, numbered 1 through 30. Each day, you put cash into an envelope, basing the amount on the number written on the envelope you choose. At the end, you’ll have saved $465.

•   No-Spend Challenge With this approach, you commit to not spending any money on non-essentials for a set time period, say a week or a month. This can boost your bank account and highlight how much you spend on unnecessary purchases.

•   Savings Percentage Challenge In this challenge, you commit to saving a specific percentage of your income each month, such as 10% or 20%. If you set up an automatic transfer, you can build your savings without even thinking about it.

About the author

Julia Califano

Julia Califano is an award-winning journalist who covers banking, small business, personal loans, student loans, and other money issues for SoFi. She has over 20 years of experience writing about personal finance and lifestyle topics. Read full bio.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

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 every 31 calendar days.

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 the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, 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 the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit 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, Wise, 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 Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

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.

SOBK-Q224-1885031-V1

It’s the most wonderful time of the year. It’s also the time when Americans tend to go on a shopping spree. The average person spends more than $900 on holiday gifts, according to the latest research. And that’s before factoring in entertainment, food, or travel costs, or the higher inflation rate, which means your dollars don’t go as far as they used to.

Fortunately, it is possible to have a festive season without blowing your budget and starting the New Year in debt. Try the holiday budgeting tips below to help you celebrate the holidays affordably.

20 Holiday Savings Ideas

It is possible to enjoy the holidays on a budget. In fact, you may have even more to celebrate since you won’t be starting the New Year in debt. As you start making your lists for holiday gifts and activities to do, consider these clever ways to avoid overspending and still have fun this season.

1. Create a Holiday Budget

Before you start your holiday shopping, make a budget for gifts, decorations, and experiences. This will allow you to prioritize your spending in advance and identify where you can make cuts.

As a bonus, following a budget can be one way to help achieve financial security, so this could be a good practice to continue after the holidays as well.

💡 Quick Tip: Are you paying pointless bank fees? Open a checking account with no account fees and avoid monthly charges (and likely earn a higher rate, too).

2. Use the Envelope Method

By making purchases with cash instead of credit during the holidays, you could end up spending more thoughtfully. Try the cash envelope system to help stick to your holidays on a budget. To do it, designate a few different envelopes for spending categories like holiday meals, decorations, and experiences, and then put cash for each into the envelopes. When you run out of money, it means you can’t spend any in that category (or you’ll have to dip into the budget for another category).

3. Host a Potluck

Hosting a gathering at your place and asking your friends and family members to bring food to the holiday meal is a good way to cut costs on your grocery bill. It’s also less stressful for you. Just make sure that you ask people ahead of time what they plan to bring so that you have enough different kinds of dishes and options for everyone.

4. Visit a Museum for Free to See the Holiday Decorations

Another holiday budgeting tip: Check out your local museum when there’s no admission fee (many cultural institutions offer a monthly or weekly date) as a fun thing to do for free. The holiday decorations will likely be up, and there may even be an exhibition of holiday ornaments or trees. It can get your seasonal spirit soaring at no cost.

Recommended: 23 Tips on Saving Money Daily

5. Take a Tour of Your Town’s Christmas Lights

There may be an area near you that’s known for looking spectacular at the holidays. Or perhaps you just drive around until you find some fun Grinch inflatables. Whatever the case, hop in the car with a friend or your family and tour the local lights and decor for a festive, free night out.

6. Hold a Cookie Swap

Instead of doing a Secret Santa gift exchange with presents, get together some friends, colleagues, or neighbors and do a cookie swap instead. It’s simple and fun: Everyone bakes a different kind of treat and then shares them, so that each guest goes home with an assortment of sweets. Just make sure each person is making a different kind of cookie so you don’t end up with duplicates.

7. Go Ice-Skating

Local ice rinks typically offer an affordable and fun way to get some exercise, along with helping to put you in the holiday spirit. It can be a great after-work outing with friends or colleagues or a family activity. You can all celebrate (and warm up) with hot chocolate afterward.

8. Head to the Dollar Store

Here’s one secret to not paying full price: Go where the discounts are. The dollar store is full of inexpensive holiday decorations as well as goodies you can put into gift bags or stuff into stockings. You can find low-cost ornaments, lights, balloons, and more to make your home more festive for the season.

9. Give the Gift of Holiday Playlists

A custom playlist is a thoughtful gift for friends and family, and it’s another way of budgeting for the holidays. And now that most music is available online, making a playlist is easier than ever. Just create a playlist on Spotify or another platform, name it, and then share the link. The recipients will appreciate the tunes!

10. Check Out Your Town’s Calendar

Your town likely hosts lots of events you can participate in during the holidays. Search for Christmas tree lightings, concerts, parades, and outdoor movie nights, which are usually free or low cost.

11. Volunteer at a Soup Kitchen

What better way to celebrate the holidays than to give back? Look for local opportunities to volunteer at a soup kitchen or local animal shelter, for instance. Your community will benefit from your kindness, and you’ll feel great for volunteering.

12. Donate Toys to Families in Need

Another way you can give back — and get the entire family involved — is to donate toys your kids no longer use to children and families in need. Search for local toy drives happening in your community to find the best place to donate them to.

13. Get Friends Together to Regift

Here’s another alternative to a Secret Santa get-together: Host a regifting party with you pals. Everyone brings a gift they received but didn’t like or use, and then swaps them. After all, one person’s trash is another’s treasure.

14. Host a Game Night

Have some board games in your closet? Invite over friends and neighbors, and host a game night. Buy some snacks like popcorn, chips, and pretzels, and serve some beverages like soda, water, beer, or wine to stay on budget.

15. Use Your Credit Card Points

If you have credit card points racked up, the holiday season can be a good time to use these rewards to purchase gifts as well as book hotels and flights at a discount.

16. Make Your Own Decorations

If you log onto Pinterest, you’ll find a number of DIY holiday decorations you can make yourself for a fraction of the price of store-bought. For instance, you could create a wreath out of cranberries or string up popcorn on your Christmas tree.

If you have a natural area nearby where pinecones are abundant and yours for the taking, consider a winter walk to gather some. You’ll get some fresh air and exercise, plus these and any pine boughs on the ground can make a festive seasonal display at home.

17. Get Creative with Gift Wrap

Rather than buying expensive wrapping paper and ribbons, find some low- or no-cost ways to make your gifts look great. For example, you could use craft paper that you decorate with a few colorful flourishes with a marker. Yarn or twine can work well in place of ribbon and save you money.

18. Make Some of Your Gifts

You can construct some great gifts at home without having to spend much on materials — and at the same time, get the satisfaction of practicing a more sustainable way to shop. For example, you could make a family cookbook with treasured recipes and stories about the person they came from. If you sew or knit, you could whip up items like scarves or tote bags, and if you’re a whiz in the kitchen, you could make jams and jellies, and more.

19. Save Your Shopping for the Biggest Sale Days

Black Friday and Cyber Monday are great times to save on certain items. The key is knowing in advance what price actually constitutes a deal. Many stores advertise their upcoming sales around this time of year, so you should have plenty of time to research and comparison-shop.

20. Avoid Last-Minute Purchases

If you put off shopping until the last minute, you’re much more likely to blow your budget. Schedule time to shop before the holiday season is in full swing to help you avoid the impulsive overspending trap.

The Takeaway

The holidays don’t have to be expensive for you and your family to enjoy them. Focus on spending time with loved ones, investing in your community, and exploring your DIY side to get the most out of the season while spending the least.

It can also be helpful to start saving up money ahead of time. You could designate a certain bank account for the holidays, for instance, and contribute a little bit to it each week.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible 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.

FAQ

How much does the average person spend during the holidays?

The average person spends more than $900 on gifts alone, according to the latest research. That doesn’t include decorations, holiday entertainment, or travel.

Is it possible to celebrate the holidays on a tight budget?

Yes! There are many ways to celebrate the holidays without spending much money. For instance, you can make gifts and decorations yourself. Rather than buying and cooking an elaborate holiday dinner, you could host a potluck and ask each guest to bring a dish. And you can take advantage of no-cost seasonal activities like free nights at a local museum, holiday parades, and outdoor movie nights in your town.

About the author

Kylie Ora Lobell

Kylie Ora Lobell is a personal finance writer who covers topics such as credit cards, loans, investing, and budgeting. She has worked for major brands such as Mastercard and Visa, and her work has been featured by MoneyGeek, Slickdeals, TaxAct, and LegalZoom. Read full bio.

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.

3.30% APY
SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

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 every 31 calendar days.

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 the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, 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 the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit 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, Wise, 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 Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.

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Credit cards are handy financial tools, thanks to the credit card issuers who offer, provide, and manage them. A credit card issuer is a type of financial institution that supplies credit cards to consumers.

Read on to learn more about how these businesses operate.

What Is a Credit Card Issuer?

Credit card issuers are financial institutions responsible for making credit cards, managing the application and approval process for credit cards, and keeping credit card accounts running smoothly. If you needed to check your credit card balance, pay your bill, or request a replacement credit card, you’d turn to your credit card issuer.

Recommended: Guide to Credit Card Purchase Protection

How Credit Card Issuers Work

The financial institutions that offer credit cards can be lending institutions, banks, credit unions, or fintech companies. The cardholder borrows money from the credit card issuer each time they make a purchase, and when they pay their credit card bill, they’re paying the credit card issuer back for some or all of the credit they have used. This makes credit card issuers integral to what a credit card is.

A credit card issuer is the one to determine an applicant’s credit card interest rate and limit, the type of cardholder benefits offered, and the fee structure for the credit card. Generally, credit card issuers aren’t the ones to process merchant transactions, but they do decide whether to approve or decline a charge.

When questions about their credit card arise, account holders can call the number on the back of their credit card to connect with their credit card issuer’s customer support line.

Why Are Credit Card Issuers Important?

Understanding why credit card issuers are so important can help consumers to better manage their relationship with their credit card issuer and choose the right credit card for their needs once they’re old enough to get a credit card.

The issuer is responsible for determining a credit card’s terms and features. All credit card issuers have different policies, customer support approaches, and types of rewards offerings. Before choosing a credit card, it’s helpful to carefully research not just how a credit card works but how the credit card issuer runs its operations, in terms of fees and rates you will be subject to.

Recommended: How Do Credit Cards Work?

Common Credit Card Issuer Fees

What the fees look like for a specific credit card will vary by credit card issuer, but the following credit card issuer fees are fairly common to come across.

Annual Fees

An annual fee is a charge that’s paid once a year for having the credit card. These fees can often range from $95 to $500 or more per year. Not all cards charge this fee, but those that do tend to come with more valuable perks and rewards.

Before signing up for a credit card with an annual fee, it’s important to crunch the numbers to see if the rewards that come with using the credit card (like cash back or travel points) will outweigh the cost of the fee. Even if you get a good APR for a credit card, a high annual fee could make the offer less sweet.

Late Payment Fees

Late payment fees apply when someone is past due on paying their bill. Usually, these fees go up each time a payment is missed. The late fee won’t ever cost more than the minimum payment due on the payment the cardholder missed, but these fees can still add up. The current average fee is $32, but it may soon be lowered to $8, pending legislation.

Balance Transfer Fees

When someone transfers their credit card balance from one card to another (usually to a balance transfer card with a lower interest rate), they can potentially owe a balance transfer fee. This fee can be either a percentage of the transferred amount or a fixed fee.

While consolidating debt through a balance transfer can make it easier to pay off credit card debt, make sure to take into consideration any fees involved.

Foreign Transaction Fees

Making purchases when traveling abroad can lead to paying a foreign transaction fee, which is usually around 1% to 3% of the purchase.

However, there are plenty of credit cards — especially travel rewards credit cards — that don’t charge foreign transaction fees. If someone travels internationally often, they could save a lot by choosing a credit card with no foreign transaction fees, which is worth considering when applying for a credit card.

Credit Card Issuer vs Credit Card Payment Networks

It’s easy to confuse credit card issuers and credit card payment networks. While a credit card issuer creates and manages credit cards, a credit card payment network is the one that processes transactions between credit card companies and merchants.

Here are the key differences between credit card issuers and credit card payment networks:

Differences Between Credit Card Issuers and Co-branded Partners

A co-branded partner is a merchant that works with a credit card issuer to create a co-branded credit card with their name on it. This is a common arrangement with store, airline, and hotel credit cards.

Here’s a breakdown of how credit card issuers and co-branded partners differ:

Finding the Credit Card Issuer Number

If someone looks closely at their credit card, they’ll be able to learn a lot about their credit card issuer, including what their credit card issuer number is and how to contact their issuer.

Credit Card Issuer Phone Number

It’s always possible to learn how to contact a credit card issuer by going to their website, but cardholders also can find their card issuer’s phone number on the back of their credit card or on their monthly statements.

Credit Card Issuer Identification Number

To find a credit card issuer number, all a cardholder has to do is look at the string of numbers on a credit card. The first six to eight digits on the card represent the Bank Identification Number (BIN), or the Issuer Identification Number (IIN). This number is what identifies the credit card issuer. The following digits on the card are what identify the cardholder.

Examples of Some Major Credit Card Issuers

There are many different credit card issuers, but these are some of the biggest ones in the U.S.:

•   American Express

•   Bank of America

•   Capital One

•   Chase

•   Citi

•   Discover

•   U.S. Bank

•   Wells Fargo

The Takeaway

When you’re choosing a credit card, looking at the credit card issuer matters. This is the financial institution that creates and manages credit cards, determines a card’s fees, interest rate, and rewards offerings, and also approves (or denies) credit card applicants. Knowing that you have a well regarded issuer with fair policies is an important step in securing a credit card that suits 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

How do I know my credit card issuer?

If someone is unsure of who their credit card issuer is, they can look at the credit card number on their card. The first six to eight digits on a credit card — called either the Bank Identification Number (BIN) or the Issuer Identification Number (IIN) — identify the card issuer.

What is the difference between a credit card issuer and a credit card network?

Credit card networks, unlike credit card issuers, are the party that processes the credit card transaction directly with merchants. Credit card networks have digital infrastructure that allow them to facilitate transactions between merchants and card issuers in exchange for an interchange fee.

What do credit card issuers do?

Credit card issuers create, distribute, and manage credit cards. They decide what the interest rates and fees of a credit card are, who is approved for one and how much they can spend, and how the card’s rewards structure works.

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.

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Bank guarantees are often used in real estate contracts and infrastructure projects, while letters of credit are primarily used in global transactions. But a bank guarantee and a letter of credit are quite similar.

With both instruments, the issuing bank accepts a customer’s liability if the customer defaults on the money it owes, and they both, effectively, are a show of good faith from a lending institution that ensures the bank will step up if a debtor can’t cover a debt.

What Is a Bank Guarantee?

Bank guarantees represent a more significant contractual obligation for banks than letters of credit do. With a guarantee, the seller’s claim goes first to the buyer, and if the buyer defaults, then the claim goes to the bank.

Bank guarantees serve a key purpose for businesses. The bank, through their due diligence of the applicant, provides credibility to them as a viable business partner in a particular business dealing. In essence, the bank puts its seal of approval on the applicant’s creditworthiness, co-signing on behalf of the applicant as it relates to the specific contract the two external parties are undertaking.

A bank guarantee is an assurance from a bank regarding a contract between a buyer and a seller. Essentially, the bank guarantee acts as a risk management tool. A bank guarantee provides support and assurance to the beneficiary of the payment, as the bank guarantee means that the bank is assuming liability for completion of the contract.

This means that if the buyer defaults on their debt or obligation, the bank makes sure the beneficiary receives their payment.

Any business may benefit from a bank guarantee, but especially small businesses that would be more affected if a payment from a business partner or customer falls through.

Bank guarantees only apply to a certain monetary amount and last for a set period of time. There will be a contract in place that dictates in which scenarios and at what point in time the guarantee is applicable.

Before taking on a bank guarantee, the bank does research on the applicant to make sure they are credible and will act as a reliable business partner. In a way, a bank guarantee serves as a seal of approval as the bank has good reason (they’re on the hook for the money) to only accept creditworthy applicants.

Types of Bank Guarantees

There are a few different types of bank agreements, here’s a closer look at the main ones.

Financial Bank Guarantee

With a financial bank guarantee the bank guarantees that the buyer repays all debts they owe to the seller and if they fail to pay those various types of debts, the bank has to assume responsibility for the money owed. The buyer will need to pay a small initial fee when the guarantee is issued.

Performance-Based Bank Guarantee

When it comes to a performance-based guarantee, the beneficiary has the right to seek reparations from the bank if contractual obligations aren’t met due to non-performance. If the counterparty doesn’t deliver on promised services, then the beneficiary will have the choice to claim resulting losses caused by the lack of performance.

Foreign Bank Guarantee

Foreign bank guarantees can apply to unique scenarios such as international export situations. In this case, there may be a fourth party involved — a correspondent bank operating where the beneficiary resides.

What Is a Letter of Credit?

A letter of credit (sometimes referred to as a credit letter) is a document provided by a financial institution such as a bank or credit union that guarantees a payment will be made during a business transaction. The bank acts as an impartial third party throughout the transaction.

When the bank issues a letter of credit, they are assuring that the purchaser will in fact pay for any goods or services on time and in full. If the buyer doesn’t make their payment on time and in full, the bank that issued the letter of credit will guarantee that they will make the payment instead. The bank will cover any remaining overdue balance as long as it doesn’t surpass the full purchase amount.

Letters of credit are commonly used in international trade (but can be used domestically as well) where, understandably, companies require more certainty when making deals across borders. A letter of credit can provide security and confidence to importers and exporters since they know the issuing bank guarantees the payment.

Applicants for letters of credit need to work with a lender in order to secure this backing. The applicant will need to provide a purchase contract, and a copy of the purchase order or export contract (among other documents) during the application process. Applicants will pay a fee to obtain the letter of credit and it usually equates to a percentage of the amount the letter of credit backs.

Types of Letters of Credit

There are multiple types of letters of credit, with some being more common than others, and some applying to unique situations. Here’s a look at the main types.

Commercial Letter of Credit

This type of letter of credit applies to commercial transactions and is commonly used for international trade deals. In this case the bank makes a direct payment to the beneficiary.

Standby Letter of Credit

A standby letter of credit acts as a secondary payment method. The bank will pay the beneficiary if they are able to prove they didn’t receive the promised product or service from the seller.

Revolving Letter of Credit

A revolving letter of credit can help secure multiple transactions when two parties anticipate doing multiple deals.

Traveler’s Letter of Credit

With a traveler’s letter of credit, the issuing bank guarantees to honor letters of credit signed at certain foreign banks.

Confirmed Letter of Credit

This type of letter of credit specifies that the seller’s bank will be the party to ensure that the seller receives payment if the buyer and their issuing bank default on the agreement.

Special Considerations

Bank guarantees and letters of credit differ slightly, but both serve the same purpose: to give confidence and protection during transactions.

Because the financial institutions that back these guarantees confirm that the buyer is creditworthy in the case of a bank guarantee or a letter of credit, the seller can be confident that the transaction should go through as planned if they have one of these agreements in place. If it does not, they know they’ll still receive payment from the institution that backed the agreement.

Key Differences between a Bank Guarantee and Letter of Credit

These are the most important differences to know about a bank guarantee vs. a letter of credit.

Liability

With some letters of credit the bank pays the seller directly so they take on the primary liability.

With a bank guarantee they only pay if the buyer fails to do so, so they take on a secondary liability.

Risk

The bank takes on more risk with a letter of credit as they take on the primary liability, but that means the seller and customer take on more risk with a bank guarantee.

Number of Parties Involved

At least three parties are involved in letters of credit and bank guarantee transactions. To start there is the buyer, seller, and a bank or other type of financial institution. With a letter of credit, a lender also gets involved. Sometimes two banks (more common in foreign transactions) are involved in a letter of credit or bank guarantee.

Payment

With a bank guarantee, the bank only makes payment if the buyer fails to do so. With a letter of credit this is also usually the case, but the bank can be more involved in the transaction, so disputes tend to be resolved faster.

The Takeaway

When considering a letter of credit versus bank guarantee, both can help two parties involved in a transaction feel more confident that the seller will be paid and the buyer will receive the goods or services promised — or they will be reimbursed by the bank that issued the agreement. Each type of agreement may be especially helpful when conducting business across borders.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible 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.

FAQ

How is a letter of credit different from a bank guarantee?

When it comes to a bank guarantee vs. a letter of credit, both letters of credit and bank guarantees function very similarly. The main difference is that with a letter of credit the bank takes on more risk than they do with a bank guarantee.

What is a bank guarantee and how does it work?

A bank guarantee is an assurance from a bank that a contract between a buyer and a seller will be executed or they will reimburse the wronged party accordingly.

What is the primary difference between a standby letter of credit and a bank guarantee?

The main difference between a letter of credit and a bank guarantee is risk level. With a bank guarantee the bank takes on less risk than they do with a letter of credit.

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.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

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 every 31 calendar days.

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 the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, 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 the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit 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, Wise, 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 Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

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