Life insurance terms can be confusing when you first come across them, so learning the language of life insurance can help when you’re thinking about or shopping for a policy.
You may know that for many people, life insurance is important to have, and perhaps you’ve started some initial research into life insurance policies.
Learning common life insurance definitions can help you make an informed decision when looking into coverage options.
Key Points
• Accidental death benefit provides extra compensation if death occurs due to an accident.
• Underwriting assesses health, lifestyle, and financial status to determine coverage.
• Permanent life insurance offers lifelong coverage and builds cash value over time.
• A beneficiary receives the death benefit upon the policyholder’s passing.
• Term life insurance provides coverage for a specific duration, usually at a lower cost.
If a life insurance policy includes an accidental death benefit, the cause of death will be examined to determine whether the insured’s death meets the policy’s definition of accidental. This is often a rider, or additional benefit for an additional fee, attached to the policy. An example of an accidental death could be one caused by a car crash, slip, or machinery.
Annuity
This is a contract in which the buyer deposits money with a life insurance company for investment on a tax-deferred basis. Annuities are designed to help protect the contract holder from the risk of outliving their income.
An annuity may include a death benefit that will pay the beneficiary a specified minimum amount.
Beneficiary
This is the person or entity designated to receive the death benefit from a life insurance policy or annuity contract.
Contestable Period
For up to two years, a life insurance company may deny payment of a claim to beneficiaries because of suicide or misrepresentation on an application — for example, if the insured was listed as a nonsmoker but smoked often and died of complications related to that.
Death Benefit
This term refers to the amount that will be paid to the beneficiary upon the death of the insured. The phrase “death benefit” is common life insurance terminology you’ll see in a life insurance policy.
Evidence of Insurability
In order for you to qualify for a particular policy at a particular price, companies have the right to ask for information about your health and lifestyle. An insurance company will use this information when deciding on approval and rate. If you are overweight, a smoker, or have a history of health problems, your policy will likely cost more than someone without those issues.
Free Examination Period
Also known as the “free look period,” this is a 10- to 30-day window during which you can cancel your new policy without penalty and get a refund of premiums.
Group Life Insurance
This provides coverage to a group of people under one contract. Group contracts are often sold to businesses that want to provide life insurance for their employees. Group life insurance can also be sold to associations to cover their members.
Insured
This is the person whose life is insured by the policy. The insured may also be the policyholder.
Permanent Life Insurance
These kinds of policies can provide lifelong coverage and the opportunity to build cash value, which accumulates tax-deferred. Whole life and universal life insurance policies fall under this umbrella term. Permanent life insurance is more expensive and complicated than term life insurance.
Policy
This is the official, legal document that includes the terms of the policy owner’s insurance. The policy will name the insured, the policy owner, the death benefit, and the beneficiary.
Policyholder
The person who owns the life insurance policy. It can be the person who is insured by the policy.
Premium
The payment the customer makes to the insurance company to pay for the policy. It may be paid annually, semiannually, quarterly, or monthly.
Term Life Insurance
This type of life insurance offers coverage for a set number of years, or “term,” of the insured’s life, commonly 20 or 30 years. If the insured individual dies during the years of coverage, a death benefit will be paid to the beneficiaries. Term life insurance costs less than permanent life insurance.
Often viewed as a mysterious process, underwriting is simply when factors are evaluated relating to the applicant’s current health, medical history, lifestyle habits, hobbies, occupation, and financial profile to determine eligibility for coverage as well as what the appropriate premiums should be.
Universal Life Insurance
With this kind of permanent life insurance, policyholders may be able to adjust their premium payments and death benefits. The cash value gains vary depending on the type of universal life insurance policy purchased.
Variable Life Insurance
With variable life, another type of permanent life insurance, the death benefit and the cash value fluctuate according to the investment performance of a separate account fund.
Earnings accumulate tax-deferred. Fees and expenses can reduce the portion of premiums that go toward the cash value.
Whole Life Insurance
Whole life is another type of permanent cash value insurance. The premiums, rate of return on cash value, and death benefit are fixed and guaranteed. The cash value component grows tax-deferred. Whole life tends to be more expensive than other types of permanent insurance.
Life insurance can be an important way to protect your loved ones’ financial future in the event of your death. While its terms can be a mouthful, they don’t have to be confusing. Understanding the definitions of life insurance can help you put a plan in place to protect your family.
SoFi has partnered with Ladder to offer competitive term life insurance policies that are quick to set up and easy to understand. Apply in just minutes and get an instant decision. As your circumstances change, you can update or cancel your policy with no fees and no hassles.
Explore your life insurance options with SoFi Protect.
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Coverage and pricing is subject to eligibility and underwriting criteria.
Ladder Insurance Services, LLC (CA license # OK22568; AR license # 3000140372) distributes term life insurance products issued by multiple insurers- for further details see ladderlife.com. All insurance products are governed by the terms set forth in the applicable insurance policy. Each insurer has financial responsibility for its own products.
Ladder, SoFi and SoFi Agency are separate, independent entities and are not responsible for the financial condition, business, or legal obligations of the other, SoFi Technologies, Inc. (SoFi) and SoFi Insurance Agency, LLC (SoFi Agency) do not issue, underwrite insurance or pay claims under LadderlifeTM policies. SoFi is compensated by Ladder for each issued term life policy.
Ladder offers coverage to people who are between the ages of 20 and 60 as of their nearest birthday. Your current age plus the term length cannot exceed 70 years.
All services from Ladder Insurance Services, LLC are their own. Once you reach Ladder, SoFi is not involved and has no control over the products or services involved. The Ladder service is limited to documents and does not provide legal advice. Individual circumstances are unique and using documents provided is not a substitute for obtaining legal advice.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
If you have a savings goal that’s coming up in the not-too-distant future — such as a large purchase, vacation, or wedding — you may want to consider some good short-term savings options.
There isn’t a hard and fast definition of short-term savings, but it’s typically considered to be money you want to use within the next few months or years.
While there are a number of options for short-term savings, one of the best places to start stashing cash for a short-term goal can be a savings account. They can offer safety (so you shouldn’t lose any money), liquidity (allowing you to access money when needed), and growth (meaning they are interest-bearing).
But some of these accounts offer more liquidity and higher interest than others. With a little reading and research, you can start socking your cash away in the right place — and start moving closer to those short-term savings goals.
Key Points
• Short-term savings are for goals you plan to accomplish in the next few months or years.
• Online savings accounts generally offer higher APYs than regular savings accounts, as well as lower (or no) fees.
• CDs lock in interest rates for fixed periods and may offer competitive rates.
• Money market accounts combine savings and checking features but often have higher minimum balances.
• Cash management accounts provide flexibility, allowing users to spend, save, and potentially invest from a single account.
Should You Invest Short-Term Savings?
Depending on your short-term savings goals, a savings account may be a wise move. One significant downside to any cash savings account is that they tend to have relatively low-interest rates.
You might however wonder: Should I invest this money in stocks or a mutual fund in order to meet my short-term goals more quickly?
Generally speaking, for short-term money, your goal is not necessarily to maximize returns. It is to control the risk — to keep it safe — so that the money is available when it’s needed.
While everyone’s risk tolerance is different, the downside to investing in the market is that you might lose money in the short term. Investment returns start to “smooth out,” or return their average yield, over longer periods. Shorter periods tend to be volatile and unpredictable — especially in the stock market.
To invest in the short-term would require complete flexibility — if the market were to fall steeply, it would likely be best to wait it out and avoid realizing losses. Suddenly, you’re on the market’s timeline, not your own.
Because of this, these investments may be inappropriate for an emergency fund, which needs to be accessible at all times. The same goes for those financial goals with a hard deadline (such as wanting to use this money as a down payment in two years).
That said, there’s a trade-off. Many of the options for short-term savings may not keep up with increasing prices, or inflation, and its impact on the cost of living. “For money you’ll use in three to seven years, you may be prepared to take slightly more risk than a savings account,” says Brian Walsh, CFP® and Head of Advice & Planning at SoFi. You might choose to use a brokerage account where you can invest that money in stocks, bonds, cash, or other asset classes. Just be sure to keep your comfort with risk in mind.”
If you’d prefer to avoid risk with your short-term savings, here are options to consider.
Option 1: Online Savings Account
Online savings accounts, also sometimes referred to as high-yield savings accounts, are an increasingly popular option for short-term savings. As their name implies, these accounts are offered by banks or financial institutions that only operate online. Here’s the scoop:
• That means no brick-and-mortar locations and no chatting up a banker face-to-face. The upside: When you compare accounts offered by traditional banks vs. online banks, the latter typically have lower overhead costs and pass that savings onto their customers in the form of a higher annual percentage yield (APY).
• A potentially higher rate of interest isn’t the only reason to use online-only savings accounts. The websites and mobile apps for online accounts essentially serve as storefronts, so online financial institutions often devote lots of resources to make sure they’re optimized and easy to navigate.
• Additionally, many online-only institutions don’t have monthly account fees, which can be a real burden for those at the start of their savings journey. (For example, some traditional banks might charge a fee when you balance drops below the minimum.)
• Banking online doesn’t mean you have to forgo the conveniences of your neighborhood bank. You can typically still do all of the important banking duties, such as depositing checks (via mobile deposit, or snapping a picture of the check on your phone), moving money back and forth between accounts, and speaking with a customer service rep.
In the past, the Federal Reserve limited savings account withdrawals to six per month, but this rule has been lifted. Even so, some banks have continued to put limits on the number of withdrawals you can make from a savings account. Before you sign up, you’ll want to understand the rules for accessing your money.
Also, while online banking is now considered mainstream, it’s always smart to do a little background research before you open an online account. You may want to check, for instance, to make sure an institution has Federal Deposit Insurance Corp (FDIC) coverage, a government-guaranteed program that protects your money up to certain limits.
Option 2: Certificate of Deposit
A certificate of deposit (CD) is a savings account that holds a fixed amount of money for a designated period of time, such as six months or three years. In exchange for the deposit, the bank pays a fixed rate of interest.
Generally, CDs with longer maturities offer higher interest rates. However, this isn’t always the case. For example, banks may offer high interest rates on short-term CDs when they expect the Federal Reserve to cut rates in the future. As a result, it pays to shop around and compare CD rates and terms.
You may also want to keep in mind that the interest rate on a CD is locked in at the point of purchase, as opposed to the interest rate in a savings account (both traditional and online-only), which may fluctuate. If you’re interested in locking in a certain rate, you may want to consider a CD. (Although be aware that you would be locking yourself into a lower rate if rates rise.)
While savings accounts are designed to provide regular access to your money, CDs are not. Because CDs have a fixed time frame, there may be a penalty to access the money before the period is over. And in exchange for the lock-up period, CDs generally offer higher rates than traditional savings accounts.
CDs can be a good option for people who don’t need to touch their short-term savings for a certain period of time. And they are typically FDIC-insured.
These accounts, offered by banks and credit unions, can allow you to write checks (though you may be limited on how often) and may also have a debit card. (Savings accounts, whether online or at a traditional bank, typically do not offer checks or a debit card.)
Returns on these accounts often beat those on traditional savings accounts. Depending on what’s happening in the economy overall, an MMA may be in line with that of an online-only bank account.
However, MMAs sometimes require higher minimum balances than other types of savings accounts. So, this might be a better option for those with more money to save.
MMAs are considered a safe choice since, like other types of savings accounts, they are typically covered by FDIC if held by a bank, and National Credit Union Administration (NCUA) if held by a credit union. (Although, it’s always a good idea to double-check insurance coverage to be sure.)
Keep in mind that MMAs differ from money market mutual funds, which are not FDIC- or NCUA-insured.
Option 4: Cash Management Account
A cash management account (CMA) is a cash account offered by a financial institution other than a bank or credit union. These accounts are designed to merge the services and features of checking, savings, and investment accounts, all into one offering.
While CMAs are typically offered by financial service providers that are not themselves technically classified as banks, they are still usually covered by FDIC deposit insurance like regular bank deposits — often through a partner bank.
Generally, CMAs function similarly to a traditional checking account, yet pay interest that is often higher than regular savings accounts.
Some brokerage firms require a large minimum deposit to open a CMA, or may charge monthly fees for anyone under that minimum. Before opening a CMA, it’s a good idea to ask about monthly fees and minimum balance requirements.
Also, since CMA providers typically “sweep” your uninvested cash into interest-paying deposit accounts held at partner banks, you’ll want to make sure those sweep accounts are FDIC-insured.
The Takeaway
Short-term savings is money that you likely will need in the not too-distant future, such as within a few months or years.
There are a number of options for short-term savings, but some good bets include online savings accounts, CDs, money market accounts, and cash management accounts. These accounts tend to be low-risk and generally offer a higher return than a traditional savings or checking account.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 3.80% APY on SoFi Checking and Savings.
SoFi members with Eligible Direct Deposit activity can earn 3.80% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below).
Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning 3.80% APY, we encourage you to check your APY Details page the day after your Eligible Direct Deposit arrives. If your APY is not showing as 3.80%, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning 3.80% APY from the date you contact SoFi for the rest of the current 30-day Evaluation Period. You will also be eligible for 3.80% APY on future Eligible Direct Deposits, as long as SoFi Bank can validate them.
Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi members with Eligible Direct Deposit are eligible for other SoFi Plus benefits.
As an alternative to Direct Deposit, SoFi members with Qualifying Deposits can earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.
SoFi Bank shall, in its sole discretion, assess each account holder’s Eligible Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving an Eligible Direct Deposit or receipt of $5,000 in Qualifying Deposits to your account, you will begin earning 3.80% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Eligible Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Eligible Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Eligible Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Eligible Direct Deposit or Qualifying Deposits until SoFi Bank recognizes Eligible Direct Deposit activity or receives $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Eligible Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Eligible Direct Deposit.
Separately, SoFi members who enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days can also earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. For additional details, see the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.
Members without either Eligible Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, or who do not enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days, will earn 1.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
Interest rates are variable and subject to change at any time. These rates are current as of 1/24/25. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Checking & Savings Fee Sheet for details at sofi.com/legal/banking-fees/. Third Party Trademarks: Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.
Asking for a higher credit limit can be as simple as calling the credit card company or completing an online form. In some cases, a credit card company may grant one automatically based on an account history.
To give this subject a bit of context: Most credit cards come with credit limits that determine how much you can spend at any given time. Requesting a credit line increase is something you might consider if you’d like to have more purchasing power, you want to schedule a balance transfer, or you need a cash advance.
Knowing how to increase a credit limit the right way can minimize credit score impacts. Read on to learn more about this important topic.
Key Points
• Credit limits affect credit utilization, a key factor in credit scores.
• Requesting a higher limit may give you more spending power but also cause a temporary drop in credit scores due to a hard inquiry.
• Maintaining low balances with a higher limit can build credit scores.
• Methods to increase limits include online requests, updating income, and contacting issuers.
• Opening a new card boosts available credit but can also impact scores with a hard inquiry.
Why Credit Limits Matter for Credit Scoring
Credit scores are a measure of your ability to manage debt responsibly. FICO® Scores, which are used by 90% of top lenders, are calculated using these five factors:
• Payment history (35% of your score)
• Credit utilization (30% of your score)
• Length of credit history (15% of your score)
• Credit mix (10% of your score)
• New credit inquiries (10%)
As a reference point, the current average credit limit in the U.S. is around $13,000.
Credit limits are important because they can affect the credit utilization part of your credit score. Credit utilization refers to the percentage of your available credit you’re using. For example, if you have a credit card with a $5,000 limit and a $1,000 balance, your credit utilization is 20%.
Using a lot of your available credit can be detrimental to your credit scores, while keeping balances low can positively impact your scores.
Generally, it’s recommended that you keep the ratio at 30% or less (below 10% can be ideal) for the most favorable credit score impact. A higher ratio could suggest to lenders that you may be struggling to manage spending and debt.
Does Requesting a Credit Increase Hurt Your Score?
Whether a credit line increase hurts your credit score, or affects it all, depends on how the credit card company reviews your financial information. Specifically, it hinges on whether the credit card company performs a soft or hard inquiry into your credit history.
Remember, credit inquiries account for 10% of your FICO credit score. An inquiry simply means that you have authorized a creditor or biller to review your credit reports and scores. (Inquiries for credit remain on your credit report for two years, though they only affect FICO credit score calculations for 12 months or less.)
When requesting an increase in credit limit that involves a hard pull, you may lose a few credit score points. While the impact isn’t as significant as a late payment or a maxed-out credit card, it’s still worth noting.
If you were to ask for a credit line increase from several cards at once, multiple hard inquiries could cost you more points.
A soft inquiry, on the other hand, has no credit score impact. Checking your own credit score, prescreened credit offers, and credit screenings that are required as part of an employer’s hiring process are examples of soft pulls.
Can a Credit Line Increase Positively Impact a Credit Score?
While you may lose a few points initially if your credit card company performs a hard inquiry, asking to increase your limit could help build your credit score over time.
It all goes back to credit utilization. If raising your credit limit on one or more credit cards improves your credit utilization, then you may see a positive effect on your credit score.
Say you have a card with a $10,000 limit and a $5,000 balance. That puts your credit utilization at 50%. But if you can increase the credit limit to $15,000, you instantly shrink your credit utilization to 33%.
The key to making this strategy work is not adding to your debt balance. Going back to the previous example, say that you have to unexpectedly replace your HVAC system to the tune of $5,000. You decide to take advantage of your new higher credit limit to make the purchase.
Now your balance is $10,000. While you still have a $5,000 available credit cushion, you’ve increased your credit utilization to 66%. That could result in a credit score drop until you’re able to pay some of the balance down. So, while asking for a credit line increase can give you more purchasing power, that can work against you if you use it.
Four Ways to Increase a Credit Limit
There are several ways to get a credit line increase, depending on what your credit card company offers. There are different types of credit cards, and card issuers don’t always follow the same policies with regard to credit limit increases.
Before asking to increase your credit limit, get familiar with the various ways your credit card company allows you to do it. Then consider how much of a credit limit increase you’d like to ask for.
Keep in mind that whether the credit card company grants your request can depend on things like:
• How long you’ve been a customer
• Your account history, including payment and purchase history
• Your income
• Credit scores, if a hard pull is required
With that in mind, here are four ways to get a higher credit limit:
Request a Credit Line Increase Online
Your credit card company may make it easy to ask for a higher credit limit online. Log in to your account, navigate to the Request Credit Limit Increase section, and fill out the relevant details. You may need to update your income information.
If your credit card issuer offers this option, it’s possible to be approved for a credit line increase almost instantly. But a decision may be delayed if the credit card company wants to take time to review your account or credit history.
Update Your Income Information
Credit card companies may periodically ask you to update your income information when you log in. You may be tempted to skip over this step, but it’s worth taking a moment to do, as the credit card company may use the information to grant an automatic credit limit increase.
Again, whether you’re eligible for an automatic credit line increase can depend on the type of your card and your account history, income, and overall financial situation.
Call and Ask
If your credit card company doesn’t allow for automatic increases or credit limit increase requests online, you can always call and ask for a higher limit. You may need to tell them your income, specify how much of a credit limit increase you’d like, and provide a reason for the request.
Calling the credit card company may also be worthwhile if you’ve been denied for a credit limit increase online. You can ask the card provider to reconsider your request, but be prepared to make a strong case (e.g., significantly higher income, on-time payment history) for why it should do so.
Open a New Credit Card Account
If you’ve tried other avenues for requesting an increase in credit limit and been unsuccessful, you could always consider opening a brand-new credit card account. The upside is that you can expand your available credit if you’re approved, which could improve your credit utilization ratio.
The downside of opening a new credit card is that applying can ding your score, since it typically involves a hard inquiry. But if you’re able to keep your credit utilization low, that could help make up the difference in lost points relatively quickly.
The Takeaway
If you have good credit, requesting a higher credit limit may be easy. The key is knowing how to make the most of a credit limit increase to improve your credit score. Keeping your balances as low is a step in the right direction. Paying your balance in full each month is even better, since this can help you avoid paying interest on credit cards. Finally, spacing out credit line increase requests and opening new accounts sparingly can help maintain your credit scores.
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 can I get a higher credit limit?
You may get a higher credit limit simply by asking your card issuer to raise it. To qualify, keep your financial information up to date, make on-time debt payments, and keep an eye on your credit reports for any incorrect or fraudulent information.
Is a $30,000 credit limit good?
If you define good as above average, yes, it’s a very good limit. The average limit is currently around $13,000. However, if you spend a lot and your credit utilization rises, that can negatively impact your credit score and financial health.
How can I increase my credit limit?
You can increase your credit limit by contacting your card issuer and requesting an increase. You’ll likely need to show responsible credit usage to qualify and perhaps a higher income than in the past. Or you might apply for a new card.
About the author
Rebecca Lake
Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. 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.
This content is provided for informational and educational purposes only and should not be construed as financial advice.
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 .
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.
Third Party Trademarks: Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.
With a cash-back credit card, you receive a refund of a portion of your purchases as cash applied to your account. This is usually a small percentage of what you charge. This can be a money-wise bonus for using a given card. In fact, recent research shows that 68% of Americans have this kind of card in their wallet.
If you’re thinking about adding a credit card to your wallet or want to maximize your savings with the one you have, read on. Here is what you should know about cash-back rewards, including how cash-back rewards work, and whether this type of rewards card makes sense for you.
Key Points
• Cash-back credit cards refund a small percentage of purchases as cash.
• Rewards often range from 1% to 2%.
• Some cards offer higher rewards in specific categories.
• Rewards can be redeemed as balance reduction, charitable donation, or direct deposit.
• It’s important to pay off the cash-back credit card’s balance monthly to avoid interest.
What Are “Cash-Back Rewards”?
Cash-back credit cards are offered by many credit card companies to qualified consumers. Consumers can use these credit cards to make purchases, and a certain percentage of that purchase is returned to the customer as a cash incentive. In other words, cash-back rewards can be an easy way to make the most of everyday expenses.
Typically, cash-back rewards range between 1% and 2%; however, a few cards offer more.
There are different types of credit cards, and rewards cards can vary. Some rewards cards offer a set number of points per purchase that can be redeemed later for cash or for goods like airline tickets, discounts at coffee shops, or gift cards.
How Does Cash Back Work?
Cash-back rewards are easy to use. All that consumers have to do is spend as they normally do, and in return, the credit card company calculates the percentage to return to the cardholder based on what they spent on eligible purchases.
For example: A card pays a flat rate of 2% cash-back on all purchases. If the cardholder spends $1,000 in a statement period, the card issuer will then give the cardholder $20 in cash-back rewards. Some more details to consider:
• Some cards will raise the percentage refunded for certain categories for a limited time. For instance, during one quarter of the year, you might get a higher percentage back on gas purchases, and then for the next period, a higher percentage back on travel expenses. (More on that below.)
• The card issuer pays out the percentage at the end of a given term, which could mean paying it out at the end of a statement period or billing cycle, or even once you hit a predetermined amount, like $20.
• Cash-back cards might come in handy for everything from large purchases to everyday needs. Think of it this way — rather than purchasing things with cash, which doesn’t provide any added benefits, a cash-back card could return money right into a consumer’s pocket.
However, in order for that money to really pay off, the cardholder will likely want to pay off the credit card balance every month in full so they’re not accruing interest and fees, and negating that cash-back reward.
One thing to remember is that cash-back cards are different from other rewards cards. There are rewards cards that offer specific travel rewards, cards that partner with gas stations to earn free gallons, and many more.
Four Ways to Redeem Cash-Back Rewards
Depending on the cash-back card, there may be a number of different ways you can redeem cash back rewards. Here are some commonly offered options.
1. Credit card balance reduction: This allows you to have your cash rewards applied to your balance and use them to pay off a portion of your monthly bill.
2. Gift cards: Some card issuers allow you to redeem your cash-back rewards in the form of gift cards to your favorite retailers or restaurants. To sweeten this deal, some issuers partner with other companies, such as online retailers or airlines, to provide bonus payouts when cash-back rewards are redeemed with a gift card.
3. Charitable giving: Several card providers allow users to use their cash back for good, sending their rewards directly to the charity of their choice. All that users need to do is select the charity, and the card does the rest.
4. Paper check or direct deposit: You can often redeem your cash back as just that — cash. In this case, you ask your card issuer to transfer the money directly to your bank account or send a paper check.
The Different Types of Cash-Back Cards
While cash-back cards all work in a similar way, there are some differences between these cards to keep in mind.
• Some are flat-rate cards, which means that cardholders receive the same exact cash-back percentage on every eligible purchase, be it groceries or plane tickets. This option is easy as users never have to think about the way they use their cards.
• Another option is a bonus category cash-back card. These cards offer higher cash-back percentages on certain purchase categories. For example, you might get more cash back on gas and groceries (say 2% or 3%) than you do on other items (say 1%). If you opt for this type of card, it can be a good idea to make sure the higher variable percentage is for items you purchase often.
Note: Just be careful that these promotions don’t encourage you to spend more than you planned just to get that cash-back bonus. That could drive up your credit utilization ratio and ding your credit score.
• Some cards rotate these bonus purchase categories every quarter, and you need to activate your rotating bonus categories in order to earn rewards. Others allow you to choose your bonus category.
Any of these cards may offer additional features, such as:
• Special promotions One way to earn even more cash back may be via a special promotion run through the credit card. For example, a credit card may typically offer 1% cash-back. However, for one billing cycle, it could partner with a large retailer for 5% cash back for all eligible purchases.
• Sign-up bonuses Cash-back rewards cards might also come with sign-up bonuses to attract new customers. This might be a certain lump sum of cash back (say $100) if you spend a certain amount in the first three months. Or, you might be able to earn double or triple cash back for a set period of time.
Potential Drawbacks of Cash-Back Rewards
Cash-back credit cards can come with a few potential downsides that users may also want to be aware of. As with signing up for any new credit card, it’s a wise idea to read the fine print.
For instance, you may want to be sure to read through the contract carefully to understand exactly how the rewards work, what to expect along the way, and also suss out any hidden credit card fees such as late payment fees, balance transfer fees, foreign transaction fees, and more.
It can also be a good idea to find out if the card has a high annual fee, which may negate any earned rewards, and what the APR (annual percentage rate) is, in case you get into a bind and need to carry over a balance month to month. However, it’s key to keep in mind that carrying a balance nearly always outweighs any rewards.
It’s also important to note that many credit cards (cash-back or otherwise) can retain the right to change their bonus structure at any time. That means it could change the percentage of cash users receive in return for purchases for a lower (or higher) amount. So, users might want to be happy with the card and its rates and policies, not just the cash-back rewards, as that could change at any moment.
When looking at the fine print, consumers might also want to identify if the card comes with a cap on possible rewards. Many cards limit just how much money a user is allowed to claim, so make sure to know that number and be comfortable with the limit.
And, again, like all cards, it’s key to pay off a cash-back rewards card in a timely fashion. This way, users won’t be paying interest on purchases with a card that was meant to bring them a little money in return.
Cash-back is a credit card rewards benefit that refunds the cardholder a small percentage of some or all purchases made with the card. Every time you make an eligible purchase with your cash-back credit card, your card issuer will pay you back a percentage of that transaction. Your cash-back reward won’t necessarily pay out immediately. Like your statement balance, your rewards will accrue each month and show up on your monthly statement.
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 cash-back cards work?
With cash-back rewards, you receive a small percentage of a purchase price back as a refund on your credit card account. Some credit card issuers may offer higher percentages in certain categories for a limited time.
Is cash back just free money?
While cash back may feel like free money, it’s actually just a small discount on your purchases. That’s a nice perk, but you are still spending money on credit that needs to be repaid.
Is cash back from a credit card a good thing?
Cash back is a nice perk to enjoy as a credit card holder, but keep in mind that cards offering this reward may charge higher interest rates than those that don’t offer this feature.
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.
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 .
Regularly paying your bills on time can help you avoid doling out money on interest and fees. It can also help build your credit score, which might help you snag the best interest rates when qualifying for loans or getting a credit card.
Fortunately, organizing your bills isn’t hard. You might use an old-school accordion folder and a calculator to manage the process. Or you might decide to handle the whole process digitally.
Here are some smart ideas for how to organize those bills.
Key Points
• Setting up a dedicated space (at a desk or in the cloud) for bill management and storage can streamline the process.
• Creating a master list of all monthly bills helps track payments.
• Adjusting due dates can ease financial pressure.
• Using reminders or specific days for bill payments can be effective.
• Keeping records of all payments, whether digital or physical, can be crucial for financial management.
1. Setting Up a Bill-Paying Station
Do you have a convenient spot where you can open, organize, and pay your bills? If you get paper bills, consider setting up a dedicated desk or area or (if space is tight) a roll-away cart. The goal is simply to keep everything in one place, instead of scattered around in your car, bag, or on the kitchen counter.
It’s a good idea to stock your station with all the items you’ll need to get the job done. Depending on how you pay your bills, this might include: envelopes, stamps, pens, your checkbook, a calendar, a filing system for sorting paper bills as they arrive, and storing those you’ve paid.
Or, if you pay your bills digitally, you could set up a separate virtual bill paying space. You might, for instance, set up an email account just for bills. This will ensure that you don’t overlook an electronic bill in the midst of the other emails you receive. You might also use your current email and create a folder, with subfolders, for anything related to your finances. That way, you’ll know exactly where to look if you need to check on a bill or other financial correspondence.
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2. Making a Master List of Monthly Bills
Creating a list of every single bill you pay can be another way to help ensure that nothing falls through the cracks. It can also help you see where your money goes and how much money you have left after paying bills (if any).
You can do this with pen and paper, or create a printed out or online spreadsheet that includes a column for each month (allowing you to simply check off each bill as it gets paid). Check your bank account and credit card statements for bills you pay less frequently (annual subscriptions, quarterly membership fees, tax bills, etc.), and anything that’s on autopay.
For each bill, consider including: the vendor/service provider/lender, the account number, contact information, the bill’s due date, the date you think you should send/make the payment so it’s always on time.
For loan/credit card bills, you may want to also include the balance owed, and the minimum monthly payment.
You can use this list to make decisions about which bills you might want to set up by automating your finances and which you’ll pay manually.
And once it’s done, you can keep a copy on your bulletin board and/or in your files to use as a checklist.
Looking for other ideas on how to organize bills? There are two basic automatic bill payment options.
• One is setting up automatic debit payments with a merchant or service, which involves giving them your checking account or debit card number and authorizing them to withdraw money on a recurring basis to pay a bill.
• Another way is to authorize your bank or credit union’s bill pay service to send recurring payments to a company.
Either way you set it up, there are both pros and cons to using automatic payments, or autopay.
Here are the pros:
• Autopay can help simplify your finances, since you don’t have to write out checks or log on to various websites to pay online every month.
• It also ensures that it happens. The money is whisked out of your account before you have a chance to think about it or forget to think about it. Automating this process can help you save on interest and fees.
Here are the cons, because that out-of-sight-out-of-mind factor has a downside.
• Autopay can make it easier to forget that you’re still paying for a subscription service you don’t use anymore, for example, or you might not notice when a bill’s amount is incorrect.
• If you don’t have enough money in your account when an autopay bill goes through, you could end up overdrafting your account, which can lead to overdraft or NSF fees.
If you generally have plenty of money in your account and you regularly check your bank and credit card statements to make sure the charges are accurate, autopay might be a good fit.
But if your account balance fluctuates, or you’re likely to forget about small or infrequent charges if they’re paid automatically, you may want to use a different payment method (or at least for certain bills).
One other point: If many of your bills hit on the same day of the month, you might talk to some of your payees about whether you can change your bill due date. That could help you spread out payments over the month is a way that eases your financial pressure.
4. Putting a Bill Paying System in Place
Once you’ve decided which (if any) bills you’ll manage with automatic payments, you can move on to choosing a strategy for paying all your other bills, as well as keeping track of autopayments.
You can go as full-on techie as you like, or handle it with classic pencil and paper. The key is simply having a system.
Some options to think about:
Paying Bills Right Away
There’s no reason you have to wait for a specific day of the week or month to pay your bills. With this method, you would just open and pay bills as they arrive in the mail or online.
Setting up Reminders
Another option is to set up reminders for when you need to pay each bill, whether in your digital calendar or a paper one, if you use it. In addition, some companies and service providers allow you to sign up for bill reminder emails or texts.
Paying Bills on a Specific Day
If you don’t want to (or can’t always) sit down immediately to write a check or get online to pay, you could make it a weekly, biweekly or monthly routine.
With this method, you would file any bills that arrive in a “to pay” folder or inbox. You might also consider opening them and organizing them by the due date.
If the due dates are all over the place or difficult to manage, you may be able to get the dates adjusted simply by calling or emailing the company or service provider. It’s also a good idea to go through autopay notices to make sure you agree with the amounts charged.
Choosing the Best Way to Pay Manually
Many service providers and lenders offer customers several different methods for paying their bills.
Besides autopay, you might be able to use an app, a website, an automated phone system, deliver a payment in person, or send it in the mail.
No matter which option you choose, try to remember to always keep some sort of record of the payment in your files.
5. Keeping Good Records
In addition to checking off each paid bill on your master list, you may also want to create a system for managing your records after you’ve made your payments.
One option is to file paper copies of all your bills, noting on each how much you paid, when you paid, and how you paid (including any confirmation numbers for online or phone payments or check numbers for payments you mailed). If any of these bills are needed for tax purposes, you may want to make a copy and file it with your yearly tax documents.
Another option is to scan each bill and file them digitally on your computer’s hard drive or in the cloud, using a folder for the year that has subfolders for each month.
You may also want to create a real or digital file with all your credit and debit card receipts until you have a chance to reconcile them with your statements. (It’s a good idea to hold onto any receipt, bill, or statement until you’re absolutely sure you won’t need it for taxes or some other purpose, such as an insurance claim.)
6. Designating a Family Bookkeeper
Here’s another way to go about organizing your bills. If one spouse or partner has a knack for organization and bookkeeping and the other is less inclined, you might want to have the “numbers” person take the lead on the household’s bill-paying duties. (Have you ever missed a payment because you each thought the other would take care of it?)
Another option is to sit down together to work through the bills. Or, you might decide to alternate from month to month. You could make it a “money date” and do it over coffee at home.
No matter which approach you choose, consider setting up a regular time to sit down together and review the household budget, see how you stand, and make sure you both have access to account information, including passwords.
You also may want to consider setting up a separate account for paying household bills.
7. Using Budgeting Tools/Apps
Technology can step in and help you manage your bills, too. There are an array of ways to track your spending and paying. Your financial institution may offer digital tools for this, or you can download apps for this purpose, whether free or paid options.
You might want to experiment with a few and see which suits you best, depending on, say, whether pumping up your savings account or avoiding late payments is your key goal with organizing your finances.
8. Using the Cash Envelope Method
There are a variety of budget techniques you might use. One popular one is the envelope method, which involves setting key budget categories, writing the name of each on an envelope, and putting the designated amount of cash for the month ahead into it.
Then you pay the bills from the appropriate envelope as needed. Once the money from an envelope is gone, it’s gone. You either have to forego spending in that category or else borrow from another envelope.
For those who prefer not to use cash, this program can be adapted to involve debit card payments or checks.
Setting up a simple bill organization system can save you time, stress, as well as money, and can also make it easy to access records you need come tax time. Smart ways to organize your bills include creating a master list of all your monthly bills, deciding when autopay makes sense (and when it might not), and creating a virtual or actual filing system to track and streamline the bill paying process.
You might have to try a few different methods to figure out what works best for your situation. Another move that might help you get your finances organized is finding the right banking partner.
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FAQ
What bills are most important to pay?
While all bills are important to pay, basic living expenses (the things that keep you up and running, such as rent, utilities, and healthcare) and debt (student loan payments, for instance) can be priorities.
How do I organize my monthly expenses?
There are many ways to organize your monthly expenses, depending on your personal preferences and financial style. You might use an app or pencil and paper; you could try the envelope budgeting method or set up autopay. Many people try a couple of techniques before they land on one that suits them best.
How do you simplify bill payments?
Many people find that either using an app or automating their bills makes payment simpler. Your bank might offer a good app, or you can download one. And automating bill payments is something that vendors may set up for you or you can set up with your financial institution.
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SoFi Bank shall, in its sole discretion, assess each account holder’s Eligible Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving an Eligible Direct Deposit or receipt of $5,000 in Qualifying Deposits to your account, you will begin earning 3.80% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Eligible Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
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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.
This content is provided for informational and educational purposes only and should not be construed as financial advice.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
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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