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Defensive driving courses aren’t just for motorists hoping to shave points off their driving record. For some people — especially teens and seniors — taking a defensive driving class can earn them discounts on their car insurance premiums.

But what is defensive driving? In this guide, we’ll look at what these courses have to offer, who might benefit from them, and what kind of insurance discounts may be available to course participants.

What Is a Defensive Driving Course?

It isn’t the same thing as driver’s ed. In defensive driving, drivers learn strategies specifically designed to keep them safer on the road.

Experienced drivers can think of it as a refresher course or a tune-up of the skills they already have. They may even learn that some traffic laws are different from when they first got their license. New drivers, meanwhile, can pick up strategies that reinforce and improve on what they recently learned, with a focus on staying alert to potential hazards.

Drivers often take a defensive driving course (sometimes referred to as “traffic school”) to remove violation points from their driving record and keep their insurance costs from going up. Other drivers may be able to use a defensive driving course to lower their car insurance costs.

These days, anything that offsets high gas prices and car maintenance costs is welcome.

Recommended: How to Get Car Insurance

Who Is Eligible for a Defensive Driver Training Discount?

Eligibility requirements for a defensive driver training discount vary from one insurance company to the next, and from state to state. Insurers may limit discounts to older drivers (starting at age 50 or 55), but some make discounts available to drivers younger than 25.

Many people sit down for a personal insurance planning session once a year. That’s a great time to ask your insurance agent if there’s a defensive driver discount you might qualify for. Or check the list of available discounts on your insurer’s website.

An insurer may want you to take a particular driving course that it has pre-approved. If you’re looking for a discount, be sure you’re familiar with all the requirements before signing up for a class. As anyone familiar with how car insurance works can tell you, it pays to read the fine print.

Recommended: Auto Insurance Terms, Explained

Defensive Driving Insurance Discount Exclusions

Don’t count on getting a discount if you’re taking a court-ordered defensive driving course or hope to have points removed from your driving record. Taking a defensive driving class can help keep your premiums from increasing (and/or lower your fine) if you got a ticket, but you probably won’t see an additional reduction.

Your age can also exclude you from receiving a discount. Some states require insurers to offer discounts to older drivers who take a course. But if it isn’t state-mandated, a company may not offer this discount to any of its customers, regardless of age or driving experience.

How Much Can You Save with a Defensive Driving Insurance Discount?

Defensive driving discounts can vary depending on the state you’re in and the insurance company you choose. But generally, if an insurer offers a discount, it’s between 5% and 20%, and typically lasts three to five years.

How Can You Renew a Defensive Driving Insurance Discount?

Be sure to find out how long your discount will stay in effect and mark that anniversary on your calendar. You’ll have to take another defensive driving course before that time is up, or you may lose your discount and your premiums could increase.

What Happens in a Defensive Driver Training Class?

Defensive driving is generally defined as using skills that can help minimize risk and avert car accidents. The focus in a defensive driving course is your safety — and that of your passengers and the people (and critters) on the roads you travel.

State course requirements vary, but you can expect the class to last about six to 10 hours and cover topics like speeding, common distractions, anger management, reaction times, driving under the influence, crash prevention, passing and parking techniques, and your state’s traffic laws.

And yes, there will be a test. It might be a comprehensive final exam or quizzes on each separate unit, but you’ll have to pass to complete the course.

Online vs In-person Driver Training Classes

Defensive driver courses are available in-person or online, so you can choose the style that suits you best. Some states and insurance companies require you to take a specific pre-approved class to get a discount (or have points removed), so if that’s your goal, make sure you’re meeting those requirements.

Beyond that, it’s really a matter of preference. There are pros and cons to both types of classes. Taking an online course offers convenience and flexibility: You can take the class whenever it works for your schedule. And an online course may be less expensive. But with an in-person class you may be able to engage with the instructor and your classmates in a way that makes the information more meaningful — and memorable.

Recommended: How Much Does Insurance Go Up After an Accident?

Why Take a Defensive Driving Course?

There are a few good reasons why someone might take a defensive driving course:

•   Earn an insurance discount. Even with just a 10% discount every month for three years, the savings can be significant.

•   Improve driving skills. If you’re a newbie behind the wheel, you may learn some techniques and behaviors that can help keep you safe. And if you’ve been driving for decades, you might be surprised at what you’ve forgotten — or never learned.

•   Shave points from your record. Taking a class may reduce the cost of a traffic ticket or remove points from your record. And that can keep your insurance premiums from increasing. (Each insurance company has its own method for deciding how your driving record affects your rate.)

•   Because you have to. If you’re convicted of a DUI or another serious offense, your course may be court-ordered.

Car Insurance Companies That Offer Defensive Driving Discounts

Many traditional and online insurance companies offer defensive driving discounts, but the eligibility requirements and discount amount vary by state. Here’s a look at what some insurers offer:

States that Offer Defensive Driving Discounts

Some states encourage or mandate insurance discounts for motorists who take a defensive driving course. Here’s a sampling of what’s available across the country:

California

Older drivers can qualify for reduced insurance premiums after successfully completing an approved course. California law allows insurers to determine the reduction amount. Customers with a poor driving record can be refused the discount.

Delaware

Drivers who complete a Delaware DMV-approved course are eligible to receive an insurance discount of up to 10% for three years. If they take a refresher course within 180 days of the end of that period, they may be eligible to receive a discount of up to 15% for the next three years.

Florida

Florida drivers 55 and older can qualify for a discount of up to 10% a year for three years. The state’s mandated discount applies to all insurance companies; contact your insurance agent for your discount amount and eligibility requirements.

New Jersey

New Jersey drivers who complete a defensive driving course approved by the New Jersey Motor Vehicle Commission can receive a discount that applies for up to three years. The discount does not apply to the state’s Driver Improvement Plan (DIP) or Probationary Driver Program (PDP) course.

New York

The state of New York has a mandatory three-year, 10% insurance discount for motorists who complete a defensive driving course.

Texas

Texas does not require insurers to provide a defensive driving course discount, but many insurers in the state do offer them for motorists who take a state-approved class.

Virginia

Insurance providers in Virginia must offer a discounted rate to drivers who are 55 and older who complete an approved driving course.

The Takeaway

Defensive driving courses can be a (relatively) painless way to get a discount on your auto insurance premiums of between 5% and 20%. And it could make you a better, safer driver. But before you sign up for a class, make sure it’s approved by the state and/or your insurer. Most insurance companies offer several different types of discounts to customers, so if you’re looking to lower your premiums, shop around and compare auto insurance quotes.

When you’re ready to shop for auto insurance, SoFi can help. Our online auto insurance comparison tool lets you see quotes from a network of top insurance providers within minutes, saving you time and hassle.

FAQ

Is an advanced driving course worth it?

Defensive driving courses typically cost $25-$100. If you can get an insurance discount for taking a class, you might be able to make that back in savings in less than a year. And many defensive driving course discounts are good for two or three years after taking a class. Another plus: You’ll likely come away with some improved driving skills.

Does a defensive driving course lower insurance in California?

Yes, older drivers in California can qualify for reduced insurance premiums after successfully completing a state-approved defensive driving course.

How hard is the advanced driving test?

If you pay attention in class, your defensive driving exam (or unit quizzes) shouldn’t be too difficult. But if you’re concerned, there are practice tests available online that can give you an idea of what a test might look like.

Photo credit: iStock/ljubaphoto

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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.

SOPRO-Q324-004

Even if you’ve never been a victim of credit card fraud yourself, you probably know someone who has — and you may have wondered how credit card frauds are caught. Credit card companies and merchants frequently update the security measures they use to prevent credit card fraud, and their investigators will check into issues as they occur. Law enforcement also may get involved, depending on the type of fraud and the amount.

That being said, it’s still important for you to protect yourself against credit card fraud. Read on to learn about the different types of credit card fraud you might encounter, what to do if you suspect your account has been compromised, and steps to take to safeguard your account going forward.

What Is Credit Card Fraud?

Credit card fraud is the unauthorized use of a person’s credit card information to purchase goods and services or get cash from an account. According to data the Federal Trade Commission (FTC) has collected over the past four years, credit card fraud is the most reported form of identity theft.

Luckily, federal law can limit your responsibility if you move quickly to report a lost or stolen card or dispute unauthorized charges. Still, it can be a real hassle to clear up the mess and keep inaccurate information caused by identity theft off your credit reports.

Recommended: Tips for Using a Credit Card Responsibly

What Types of Credit Card Fraud Are There?

You can become a victim of credit card fraud whether someone physically takes your card, virtually hacks into your account, or uses your information to create a new account. Here’s how fraudsters can obtain and use your account information through various credit card scams.

Card-Present Fraud

Card-present fraud is when a person uses a physical card to make an unauthorized purchase. EMV chips, PINs, and other security measures have made “card-present” fraud less of a factor than it used to be. But there are still some criminals who are willing to risk using a lost, stolen, or counterfeit card to make an in-person purchase — and they’ll likely move quickly to do so.

Even if you think you’ve simply misplaced a card, you may want to use your card’s “on/off” feature, if there’s one available, to temporarily suspend the card until you can locate it or report that it’s missing.

Card-Not-Present Fraud

Even if your cards are safely tucked away in your wallet, you may find unauthorized charges on your statement. These days, it’s far more common for a thief to work behind the scenes to get your account information and use it to commit fraud online or over the phone.

Card Skimming

You’ve probably seen warnings in the news about thieves placing skimming devices on gas pumps, but credit card skimmers can be used to steal information just about anywhere there’s a card-reading device. This can include on ATMs and at stores and restaurants.

When you swipe a card, the skimmer reads the magnetic strip and stores the credit card number, expiration date, and cardholder’s name. There are also devices (cameras or false keypads) that can record a PIN number.

The captured information can then be used to make fraudulent charges online or over the phone. The hacker could also sell the collected data or use it to create counterfeit cards.

Recommended: What Is a Charge Card?

False Application Fraud

If identity thieves can get access to your personal information (through a data breach or some other method), they might be able to use it to apply for a new credit card, loan, or line of credit in your name. Or, they might blend information from several victims to create a false identity.

“Card Never Arrived” Fraud

This type of fraud can happen when someone intercepts a new or replacement card before you receive it in the mail. If a new card doesn’t come when you think it should have arrived, you may want to check with your credit card issuer to make sure it hasn’t been taken.

Phishing

Sometimes identity thieves will try to get the personal information they need using a phishing email, text, or phone call that appears like it’s from a bank or some other familiar contact or business. The message might ask you to click on a link or go to a website where you’ll be asked for your password, the CVV number on your credit card, or other details that may be used to access your accounts.

Hacking

Your personal details also could be at risk if your bank, credit card company, or some other business that stores your info is involved in a data breach. If this were to happen, a hacker could get hold of your credit card information.

Account Takeover

Once a person’s identifying information is stolen (through a data breach, phishing, or another method), a thief may contact credit card companies directly. They could impersonate the cardholder and change their PINs and passwords to take over the account.

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

How Are Credit Card Frauds Typically Caught?

Early detection is critical when it comes to catching credit card fraud and minimizing the damage thieves can do. Unfortunately, unless you notice your card is lost or stolen, or you see unusual activity on your account statement, you and your credit card company might not know someone is making unauthorized charges for days or even weeks.

How Often Do Credit Card Frauds Get Caught?

It’s difficult to say how often credit card frauds get caught. A savvy clerk might notice someone using a stolen credit card and call it in to the police. Or an investigator might be able to trace a criminal who uses a stolen credit card number online. But unless you know the person involved in committing the fraud, you may not find out if there’s actually been an arrest.

The good news for credit card fraud victims is that if you quickly report the fraudulent use of your account, you won’t be held responsible for the charges. The Fair Credit Billing Act protects credit card users from being held liable for more than $50 in the event of fraud. Even better, major card networks have their own “zero liability” policies to ensure you won’t pay for unauthorized charges made with your credit card or account information.

Recommended: Complete Guide to How Credit Cards Work

How Do Credit Card Companies Investigate Fraud?

The best way to start an investigation into fraudulent transactions on your credit card is to notify the credit card issuer, either by phone or online chat. The card issuer will likely deactivate your card and send you a replacement. It also may refund your money at this point, or it may want to wait until the case is investigated.

The issuer then has 30 days to respond to your report and begin its investigation. The investigation can take up to 90 days to be completed.

As for how credit card companies investigate fraud, the issuer’s internal investigation team will begin by gathering evidence about any disputed transactions. It may check for things like transaction timestamps, the IP address of the person who made the disputed purchase, and the purchaser’s geographic location. If the crime appears to be part of a larger pattern or organization, the card issuer might alert the FBI or other law enforcement officials.

You may be able to help the investigation if you also report the crime to local law enforcement — especially if you believe the theft was committed by someone you know, or by someone local who stole personal information from your computer or mailbox. The FTC’s identity theft website can take you through the steps of filing an identity theft report.

What Should You Do If You Suspect Credit Card Fraud?

Besides reporting credit card fraud as soon as you suspect there’s an issue, there are other steps you can take to further safeguard your finances. This applies whether you notice small unauthorized transactions or charges that go up to your credit limit.

Send a Follow-Up Letter

The FTC recommends following up immediately with a letter to the card issuer that confirms you reported unauthorized activity on your account. You should note the date and time you reported the loss, and include any relevant documents (such as your police report and/or your report to the FTC).

Send the letter to the credit card company’s address for billing inquiries (not the address where you make payments). Consider sending it by certified mail so you have a receipt.

Change Your Passwords

It’s a good idea to change your password occasionally anyway. But if you suspect you’ve been the victim of identity theft, you may want to review all of your accounts and change your passwords and PINs.

Contact the Credit Bureaus

You also should contact the three major credit bureaus to report your problem, and you may want to request a credit freeze, credit lock, and/or fraud alert. What’s the difference?

•   A credit freeze, also known as a security freeze, limits access to your credit report without your permission. This can make it harder for an identity thief to open a new credit account or loan in your name. A credit freeze is free, but you must request a separate freeze from each credit bureau. And when you want to unfreeze your file, you must do that separately as well, usually by using a PIN or password provided by each credit bureau.

•   A credit lock is pretty much the same thing as a credit freeze, but it may be more convenient. Once you set it up, you can lock and unlock your credit reports using an app or secure website. Plus, you don’t have to keep track of a PIN or password to change your status.

•   A fraud alert doesn’t put an all-out block on your credit report the way a freeze or lock can, but it still can be a useful tool. It puts a notice on your credit reports that cautions creditors that you may be a fraud victim. Additionally, it encourages them to take extra steps to verify your identity before opening a new account or changing something on a current account. Fraud alerts are free, and once you place a fraud alert with one of the credit bureaus, it will send a request to the other two bureaus to set up alerts on their reports.

Watch Your Credit Card and Banking Statements

Don’t assume you’re out of the woods because you haven’t seen any unauthorized charges for a while. It may take weeks or even months before charges show up on your accounts if you’re the victim of identity theft. Checking your bank account, credit card, and other statements regularly for unusual charges (and to track your own spending) is a healthy financial habit to develop.

Track Your Credit Reports and Credit Score

It also can be helpful to track your credit reports to make sure the unauthorized charges you reported were blocked or removed, and that nothing new has turned up. Lenders, credit card issuers, and others use these reports to determine your creditworthiness, so you’ll want them to accurately reflect your finances.

You also can check your credit score to be sure it’s where it should be. Consumers can get a free credit report once a year from each of the three credit bureaus, and many financial institutions and credit card companies provide free credit scores to their customers. 

Even if you’re not a victim of identity theft, this can be a good credit card rule to follow.

Protecting Yourself From Credit Card Fraud

Unfortunately, identity theft and fraud can happen to even the most vigilant credit cardholders. To improve your chances of spotting and tracking unusual transactions, you may want to:

•   Set up transaction alerts: If your credit card issuer offers fraud notifications, it could help you react more quickly to unauthorized charges on your account. You may be able to set up alerts for specific transaction types, amounts, or locations. If an alert is triggered, you’ll be notified (usually by text, push notification, or email), so you can let the card issuer know as soon as possible if there’s a problem.

•   Track charges online or with an app: The days of waiting for your monthly credit card statement to arrive in the mail are long gone. You can check your current credit card balance and other details any time you like, by logging into your account regularly (at least once a week) or using a mobile app.

•   Sign up for credit monitoring: A credit monitoring program is another way to find out quickly (generally within 24 hours or less) if there’s been some type of unusual activity on an account. The service can notify you of major changes to your credit report, including large purchases or inquiries from lenders or credit card companies. If you didn’t make any big purchases or apply for a new credit card or loan, you can quickly take steps to inform your card issuer and the credit bureaus.

The Takeaway

Detecting and reporting credit card fraud as soon as possible is critical if you hope to limit the stress and cost of clearing it up. Even though issuers are on top of credit card fraud investigation, it’s also important to take steps to proactively protect your accounts. It’s all part of using a credit card wisely.

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 trace credit card fraud?

Yes. If you notice suspicious activity on your credit card account, you can notify your credit card issuer immediately. The card issuer will then take steps to investigate any fraudulent transactions. You also should contact the three major credit card bureaus, and you may want to make a police report.

How long does it take to investigate a credit card fraud?

The card issuer must send a letter confirming it received your fraud report within 30 days. It then has 90 days to complete its investigation.

What evidence can a card issuer use to investigate a credit card fraud?

The card issuer will use any information you provide in the course of its investigation. It also may gather further evidence by talking to the merchant who was involved, looking at transaction timestamps, or checking the IP address of the device used to make an online transaction.

What fraud protection measures do credit card issuers provide?

Credit card issuers have developed several features to stop criminals from committing fraud. Those measures range from chip technology and PIN and password protections, to real-time risk assessments that allow merchants to decide whether to approve or deny a transaction.

Photo credit: iStock/Galetos

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.

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.

SOCC-Q324-034

The lower your credit utilization — meaning the less of your total available credit you’re using — the higher your credit score could be. Typically, the rule of thumb is to use no more than 30% of your credit limit on your credit cards, and using only 10% or less is considered even better.

Here’s a closer look at how credit utilization affects credit score, from how much lowering your credit utilization will affect your score to how long credit utilization affects a score.

What Is Credit Utilization and Why Does It Matter?

Credit utilization is the percentage of your overall credit limit that you use on your revolving credit accounts — most commonly, credit cards. In other words, it’s how much of your available credit you’re using.

Credit utilization is one of the most important factors that scoring models look at when calculating your credit score, since it suggests the risk you could pose as a borrower. The lower your credit utilization, the more it will appear that you can handle debt or use a credit card responsibly. Thus, a lower utilization rate can contribute to a higher credit score.

To calculate your credit utilization, add up all of your credit card balances and then divide that amount by your overall credit limit across your credit cards. You would then multiply by 100 to express the ratio as a percentage. 

Here’s an example:

•   Say you have three credit cards, with an overall credit limit of $15,000. 

•   Next, imagine you’re carrying a balance of $4,000 across all of those cards. 

•   Using the previously explained equation, you divide your total balance of $4,000 by $15,000, and then multiply by 100.

•   Your credit utilization would be around 26.7%.

Factors That Affect Your Credit Score

Aside from your credit utilization, there are other factors that affect your credit score. These include:

•   Payment history: Another major factor aside from credit utilization is whether you pay your credit and debt accounts on time, meaning by the payment due date. If you consistently make on-time payments, the more creditworthy you’ll appear, and this will reflect on your score.

•   Credit history length: Credit scoring models typically take into account how long your current accounts have been open. They may even consider how long it’s been since you’ve used certain kinds of accounts. Generally, a longer credit history is a positive thing for your credit score.

•   Credit mix: Having different types of accounts may demonstrate to lenders how you handle different kinds of debt and can have a positive impact on your score if you manage your debts well.

•   New credit: Opening multiple credit accounts or having a series of hard inquiries could signal to lenders that you pose a greater risk as a borrower. As such, it may negatively impact your credit score.

How Credit Utilization Affects Your Credit Score

Your credit card utilization accounts for 30% of your FICO® credit score, which is the scoring model used by the majority of lenders.

Since lenders look at your credit score to assess your creditworthiness, having a low credit utilization is key. That’s because if you’re using most of your available credit, it suggests to lenders that you could be a greater risk. A high utilization rate could signal to lenders that you may be stretched too thin financially and need to rely too much on credit. You might therefore have a hard time paying back what you borrow.

Your credit score is also dependent on other factors, such as the number of credit cards you have. For example, if you have one credit card with a low limit, having a high credit utilization may affect your score more compared to someone with multiple credit cards, all of which have high credit limits. Same goes for someone with a lengthy credit history that’s been mostly excellent, compared to someone who has no or a limited credit history.

In other words, credit utilization is an important factor in determining your credit score, but there are other aspects as well, such as your payment history.

Tips for Managing Your Credit Utilization and Credit Score

By managing your credit utilization, you can positively impact or maintain a better credit score. The following are a few effective tactics to do so.

Keeping Your Credit Utilization Rate Under 10%

Though keeping your credit utilization under 30% can help to positively impact or maintain your credit score, the lower it is, the better.

While you may be tempted to keep it at zero, that may not be as helpful as you think. A 0% credit utilization could signal that you’re not using your credit regularly. Since lenders want to see how you currently manage accounts, it will be hard to approve you for a loan if they see you’re not using any.

Instead, consider charging smaller amounts on your credit card and trying to keep your utilization rate to under 10%, which is a benchmark for achieving a high score. That way, you should be able to afford to pay the balance and show creditors you’re using credit regularly.

In addition to keeping your overall utilization below 10%, you’ll want to make sure that your utilization on each of your credit cards is also below that percentage. In many cases, credit utilization may refer to your per-card utilization.

Your best bet would be to look at your current limit for your cards and then aim to keep each credit card balance to no more than 10% of that amount. So if you have two credit cards with limits of $3,000 and $5,000 respectively, you wouldn’t want to charge more than $300 to the first card and $500 to the second.

Recommended: What Is a Charge Card?

Asking for a Higher Credit Limit

Getting a higher credit limit can lower your credit utilization even if you maintain the same balance on your cards. It also gives you more wiggle room — if you need to carry a balance on a credit card, you won’t have to worry as much about a big increase in your credit utilization.

When it comes to asking for a credit limit increase, issuers tend to look more favorably to those who have maintained good credit history, whose income went up, and even those who have less debt. If you do make a request, some credit card companies may conduct a hard credit inquiry, which could temporarily (and slightly) lower your credit score.

Making Payments Twice in a Month

By paying your credit card twice a month, your balance will remain lower. It will also increase the chances of your credit card issuer reporting that lower amount to the credit bureaus. You may hear this method referred to as the 15/3 credit card payment method.

This could mean that your calculated credit utilization is lower, which could help build your credit score. Plus, it will help you avoid racking up excessive credit card debt, which can have a negative impact on your score.

Recommended: How to Avoid Interest on a Credit Card

Keeping Your Credit Cards Active

It may be tempting to close a credit card that you don’t use anymore. However, if you do so — or if you don’t use a credit card for a while and the card is closed automatically — your credit utilization will automatically go up. This is true even if your balance is still the same, as your overall credit limit is now lower. In addition, your credit history could be shortened, which may lower your credit score.

Instead, consider keeping that card open, even if you make a small purchase on it every few months.

The Takeaway

Credit cards are useful tools, helping you make purchases, earn rewards, and possibly build your credit. In order to reap these benefits, make sure to use your credit cards responsibly — including by keeping your credit utilization low. Given how significantly credit utilization affects credit score, it may be worth exploring ways to manage your current utilization in order to lower it.

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 good credit utilization ratio?

A good credit utilization ratio is 30% or lower. Ideally, you should aim to maintain a credit utilization ratio of around 10% to show lenders you’re responsible with credit.

How long does credit utilization affect credit score?

Your credit utilization is a key contributing factor to your credit score. However, a high utilization rate won’t affect your credit score forever. As long as you take the steps to lower it, you can see positive effects within a short amount of time; say, a couple of update cycles after you bring it down.

How much will lowering my credit utilization affect my credit score?

Lowering your credit utilization can have a significant impact on your credit score. That’s because credit utilization makes up around 30% of your credit score calculation with most scoring models.

Photo credit: iStock/Ridofranz

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

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

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Pulling a metal credit card out of your wallet was once considered a status symbol. Today, however, more card issuers have added credit card metal options to their card offerings for customers who prefer a sleek — and heavier — alternative to plastic.

But beyond being metal instead of plastic, you may wonder what is a metal credit card exactly and are they better? Here, learn the similarities and differences between plastic and metal credit cards, as well as how to get a metal credit card if you’re looking to add some heft to your wallet.

What Is a Metal Credit Card?

A metal credit card functions much in the same way as its plastic cousin. You can swipe a metal card at a point-of-sale terminal, or if the card is chip- or RFID-enabled, you can insert or tap it for payment.

Additionally, cardholders who have a metal credit card but prefer to use their digital wallets, can use their digital metal card the same way as other credit cards in their digital wallet. To use a credit card in this manner, simply tap your device toward the card reader to activate the transaction.

A key distinction with metal credit cards, however, is the material that the physical card is made of. They’re typically composed of some type of hard, durable metal.

Recommended: When Are Credit Card Payments Due?

A Brief History of Metal Credit Cards

The credit card issuer to spark buzz with its metal credit card was American Express. In 1999, it launched the Centurion Card — colloquially called the Black Card — which was the first metal card of the time.

The innovative, invite-only card was offered to the highest spenders of AmEx’s Platinum Card. Its exclusivity, coveted benefits, and unique credit card metal material set an impressive bar for the luxury credit card market moving forward.

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

What Are Metal Credit Cards Made Of?

The transition from traditional, lightweight plastic to various metals is why some credit cards are heavy. Specific materials that are used for metal credit cards vary across card issuers, with many companies keeping information about their credit card metal materials under lock and key.

As an example, the metal used for the Apple Card is titanium, while some cards use stainless steel, metal alloys, 24 karat gold, palladium and other metals, as well as hybrid cards that have a metal exterior with a plastic core.

Why Metal Credit Cards Are Popular

Since AmEx launched its metal Centurion Card, metal cards have oozed a sense of luxury and prestige. This premium metal card phenomenon went mainstream when Chase announced its metal Sapphire Reserve credit card in 2016.

The heavier material of metal credit cards has a noticeable in-hand feel that some cardholders prefer. Metal credit cards are also generally associated with elite status. For some, the perk of carrying a card that feels and looks special can be attractive.

Differences Between Metal and Plastic Credit Cards

Although metal credit cards have grown in popularity in the market, traditional credit cards made out of plastic are still commonly available. Below are the main differences to know between a metal versus plastic card:

Similarities Between Metal and Plastic Credit Cards

As mentioned earlier, how a credit card works doesn’t vary whether it’s metal or plastic. You can add both metal and plastic cards into a digital wallet for convenience and use them in the same way to make purchases.

Further, both options offer the same bank-level security features you’ve come to expect from a credit card since encryption isn’t dependent on the material of the card. Rather, it’s contained within other features of the card, like the magnetic strip or chip-and-PIN technology.

Finally, despite the noticeable added weight of a metal credit card, their dimensions are roughly the same as those of a plastic credit card. Both a metal and plastic credit card fit into a standard wallet’s card slot, although metal cards might be slightly thicker.

How to Get a Metal Credit Card

Various card companies offer credit card products that issue a metal card, if you qualify. A good credit card rule of thumb to find the right card — whether metal or otherwise — is to compare various features, such as annual fees, rewards programs, sign-up bonus incentives and minimum required spend, and other card benefits.

Here are some examples of where to get a metal credit card and its specific card product name(s):

•   Amazon: Amazon Prime Visa Card

•   American Express: Gold Card, Platinum Card, Centurion Card

•   Apple: Apple Card

•   Capital One: Savor, Venture X

•   Chase: Sapphire Preferred, Sapphire Reserve

•   Citi: Citi / AAdvantage Executive World Elite MasterCard

•   HSBC: Elite Credit Card

•   JP Morgan: Reserve Credit Card

•   MasterCard: Gold Card, Titanium Card, Black Card

•   U.S. Bank: Altitude Reserve Visa Infinite Card

You may also find other credit cards, such as travel rewards cards, that offer metal versions.

Factors to Consider Before Getting a Metal Credit Card

Flashing a metal credit card might feel like an ego boost, but the bells and whistles of a premium metal card will also cost you. And, at the end of the day, a credit card’s material doesn’t affect what a credit card is and how it serves you.

Generally, credit card companies offer a metal credit card for its premium card products that charge steep annual fees. For example, for the privilege of using a swanky metal card, you might have to pay an annual fee of $95, with some cards charging up to a $550 annual fee or even higher.

If that’s within your budget, take a closer look at the benefits and incentives that the metal card offers, compared to non-metal cards. Whichever card you get next should serve your needs, whether that’s preference for high bonus reward categories in your top monthly spending categories or unique travel benefits and protections.

Also, consider that getting rid of your metal card takes a bit more effort than a standard plastic card. Whether you close your account or you’re issued a replacement for an expired card, you’ll usually have to mail your old metal card to the issuer for disposal. They’ll issue you a dedicated envelope to do so, but it’s an extra step that doesn’t exist with a plastic card.

Recommended: What is a Charge Card?

Pros and Cons of Metal Credit Cards

As you can see, there are both upsides and downsides to metal credit cards. Here are the pros and cons to take into consideration before you get a metal credit card:

How to Destroy a Metal Credit Card

If your existing metal credit card has passed its credit card expiration date, you won’t be able to destroy it using a standard pair of scissors, nor can you put it in a shredder that could typically handle your plastic cards.

To effectively destroy a metal credit card, you must either:

1.    Return it to your card issuer by mail. Your issuer will provide you with a prepaid mailing envelope.

2.    Drop it off at a local branch. If your issuer has a brick-and-mortar location, it might be able to dispose of it or mail it to the correct department.

Since the card is made of metal, it requires industrial-grade tools to dispose of securely. Additionally, shredding it yourself might result in injury. Consider relinquishing the metal card to your issuer for safe disposal.

The Takeaway

Metal credit cards might add panache to your credit card rotation, but their aesthetic appeal shouldn’t be the only reason to seek one out. A plastic card that has a generous rewards program might be more valuable in the long run than a metal credit card that has limited perks. Always consider your own credit card habits, the types of purchases you make, and the benefits that are most valuable to you when shopping for a new credit card.

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

FAQ

Can anyone get a metal credit card?

Everyday consumers who meet a card issuer’s lending criteria can be eligible for a metal credit card. Unlike decades prior when metal credit cards were accessible to a select few by invitation only, today more card issuers offer their own metal credit card. That said, there are a number that are still invitation-only for high net worth individuals.

Are metal credit cards safe?

Yes, metal credit cards are safe to use. They have the same security features as their plastic credit card counterparts. The main difference is that the credit card metal material is more durable.

Can I request a metal credit card?

No, generally, a metal credit card is not a feature you can choose, although a few issuers may allow you to choose between plastic or metal. Instead, metal credit cards are more often offered for specific credit card products that you can apply for.

Why are some metal credit cards heavy?

Credit card metal materials vary depending on the card. Some card companies use materials like stainless steel, aluminum, titanium, or a blended mix of metals to create the card. Different metals have different weights, some of which may feel heavier.

Are metal credit cards generally better?

No, metal credit cards aren’t better than plastic cards in terms of how the card functions or its features. Metal credit cards do have an edge when it comes to durability, however.

Photo credit: iStock/VioletaStoimenova

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.

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When it comes to conducting transactions with your bank account, one of the most popular types is using ACH transfers, but they can come with limits, albeit fairly high ones. ACH payments are electronic bank transfers that quickly and conveniently process regular payments such as mortgages, utilities, loans, and tax payments. They can also be used for one-time payments as well.

Nacha, the organization that oversees the ACH network, raised the limit for same-day incoming and outcoming consumer and business transfer to $1 million in March 2022. That, however, does not necessarily mean that limit applies to your particular financial institution. Knowing the full story on ACH transfer limits can help to make sure all your transactions go through smoothly and avoid any potential hiccups.

How ACH Transfers Work

First, a little more about ACH, which stands for Automated Clearing House. ACH transfers are an electronic transfer system that allows individuals or businesses to transfer money from one financial institution. This network is one of the main ways to send and receive money. Did you sign up for autopay on your utilities bill? ACH transfers will make it happen. Do you receive your paycheck by direct deposit? That’s also an ACH transfer.

Other types of transactions include direct ACH debits, electronic funds transfers (EFTs), electronic checks (eChecks), and direct payments. Aside from banks, third-party apps, such as PayPal, which allow you to pay friends without cash, also use the ACH network.

In most cases, ACH payments, which are only for U.S. transactions, are usually faster than other types of transactions — if there’s enough money in the account, an ACH incoming transfer is usually cleared within one to several days. A few instances where it could take longer is during holidays or if the network suspects the transaction is potentially fraudulent. Debits are typically processed on a next-day basis. (If you need a super-fast transfer, look into how ACH vs. wire transfers stack up.)

There are often daily ACH limits as well as ACH period limits — as in, there may be daily or monthly limits, depending on your financial institution.

💡 Quick Tip: Make money easy. Open a bank account online so you can manage bills, deposits, transfers — all from one convenient app.

Incoming ACH Transfer Limits

According to the National Automated Clearing House Association (Nacha), which manages ACH payments, ACH limits can be as high as $1,000,000 per day, up from $100,000 previously.

However, ACH transfer limits for your checking account or savings account may be considerably lower. For clients of Chase bank, for example, the same-day limit is $25,000 for standard accounts and $100,000 for premium or private client accounts.

This means it can be crucial to check with your bank about their policies. By knowing your limits, you can troubleshoot before you wind up in a “Where’s my money?” situation.

Outgoing ACH Transfer Limits

Depending on your financial institution, your outgoing ACH transfer limit may be much lower than what NACHA imposes. Understanding the ACH outgoing transfer limit is important because you want to ensure your transactions go smoothly.

If you have multiple transactions set up regularly to send money, you’ll want them all to go through and not run the risk of payments being held up and late fees accruing.

ACH Transfer Limits at Top US Banks

The following ACH transfer limits and its associated fees are from the six biggest traditional banks, plus SoFi.

As you can see above, a few of the banks have varying daily and monthly ACH transfer limits. Some of these depend on the type of account you have and your relationship with the bank. For instance, those who have more premium accounts (such as ones that require higher balance minimum requirements) may have higher ACH transfer limits, though it’s not always the case.

Also, business accounts may have different and/or higher limits than personal bank accounts. ACH transfers can be conducted with both brick-and-mortar and secure online bank accounts.

ACH Transfer Penalties

While ACH transfers are a convenient way to conduct bank transactions, there are some limitations you need to be aware of.

Cutoff Times

ACH transfers can be conducted on a same-day or somewhat slower basis. For same-day, transfers must usually be submitted by 4:45 pm ET. Some banks may set earlier deadlines, such as 12:30 ET.

In general, though, ACH transfers can take a bit longer than same-day, and it’s worth taking into account the day of the week. If you submit a transfer at 5:03 pm on a Friday, it may not get moving until the following Monday, which could count as a late payment.

So, if you’re making a transfer from your checking or savings account and want it to arrive as soon as possible, it’s best to initiate the transfer earlier in the day. And keep these timing issues in mind if you are tracking an ACH payment, whether incoming or outgoing.

Insufficient Funds Penalty Fee

Many financial institutions won’t charge you for an ACH transfer, but they may charge you a fee if you don’t have enough money in your account. This penalty is typically called the insufficient funds fee, and the amount varies from bank to bank.

No International Transfers

In most cases, ACH transfers aren’t available to send money to another account internationally. If you want to send money overseas from your bank, you’ll have to do so via a wire transfer. You’ll likely be charged a fee for the service, often between $35 and $50.

Recommended: Understanding ACH Fees

The Takeaway

ACH transfers are an important part of modern banking, whisking funds from account to account. This process enables direct deposit, automatic bill-pay, P2P platforms, and more. However, these transactions may come with dollar and timing limits, as well as fees. Each financial institution will have different rules and guidelines as to how you can conduct ACH transfers. Reading the fine print on your account agreement or checking in with customer support can save you time, money, and headaches.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

Which bank has the highest ACH transfer limit?

As of press time, SoFi, Chase, Capital One, and Citi have the highest ACH transfer limits. However, these higher limits may only be available for those who have certain types of bank accounts or have been a long-time customer with these financial institutions.

Are ACH transfers reported to the IRS?

The IRS doesn’t count ACH transfers as cash, so they are not reported.

What is the maximum amount you can transfer from bank to bank?

The maximum amount you’ll be able to transfer between banks will depend on various factors, such as how much you have in your account, ACH transfer limits for your financial institution, and how much the receiving bank is allowed to receive. Nacha recently raised the maximum possible to $1,000,000, but again, that will not be available to every banking customer.

Which bank is good for ACH?

All financial institutions should be able to initiate and receive ACH transactions. The differences involve limits, processing time, and possible fees. It’s worth checking at specific banks to understand their guidelines if you plan on using ACH transfers.

Photo credit: iStock/AleksandarNakic

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SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. 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 (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

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

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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