The main difference between a soft vs. hard credit check is that each hard check can knock a few points off your credit score, whereas soft checks don’t affect your score. Both hard and soft checks pull the same financial data but for different purposes. Hard checks are typically done when you apply for a loan or credit card; soft checks are conducted for most other purposes, such as pre-screening for credit card offers.
It’s important for consumers to understand this difference because too many hard checks — also known as hard pulls and hard inquiries — can significantly lower your credit score. This in turn can hurt your chances of getting the best offers on credit cards and loans. Keep reading to learn more about credit checks and how to prevent unnecessary hard checks of your credit file.
What Is a Soft Credit Inquiry?
A soft inquiry is when a person or company accesses your credit as part of a background check. They will be able to look at:
• The number and type of all your credit accounts
• Credit card balances
• Loan balances
• Payment history for revolving credit (credit cards and home equity lines of credit)
• Payment history for installment loans (auto loans, mortgages, student loans, and personal loans)
• Accounts gone to collections
• Tax liens and other public records
Soft inquiries are not used during loan or credit card applications, and do not require the consumer’s permission or involvement. Reasons for a soft check can include:
Soft credit checks do not affect your credit score, no matter how often they take place. Some soft checks appear on your credit report, but not all — you may never find out they took place.
When they are listed, you might see language like “inquiries that do not affect your credit rating,” along with the name of the requester and the date of the inquiry. Only the consumer can see soft inquiries on their report; creditors cannot.
A hard credit inquiry typically takes place when you apply for credit, such as loans or credit cards, and give permission for the lender or creditor to pull your credit file. As with a soft credit pull, the lender will look at the financial information listed above.
Each hard pull may lower your credit score — but typically by less than five points, according to FICO® Score. All hard inquiries appear on your credit report. While they stay there for about two years, they stop affecting your credit score after 12 months.
Not all loans require a hard credit inquiry — but consider that a red flag. Some small local lenders may offer short-term, high-interest, unsecured personal loans. Borrowers must show proof of income via a recent paycheck, but no credit check is required. The risks of these “payday loans” are so great that many states have outlawed them.
Avoiding Hard Credit Inquiries
Consumers should carefully consider if they really need new credit before applying for an account that requires a hard credit check.
For example, department stores and some chains like to entice you to apply for their store credit card by offering a generous discount on your purchase as you’re checking out. In that situation, ask yourself if it’s worth a credit score hit (albeit a small one).
Another way to minimize hard inquiries is to ask which type of credit check a company intends to run. If, for example, a cable company usually requires a hard credit inquiry to open an account, you might ask if a hard pull can be avoided. Other situations where there may be some flexibility include:
• Rental applications
• Leasing a car
• New utility accounts
• Requesting a higher credit limit on an existing account
Disputing Inaccurate Hard Inquiries
A good financial rule of thumb is to review your credit reports every year to check for common credit report errors and signs of identity theft. You can access your credit reports from the three consumer credit bureaus (Equifax, Experian, and TransUnion) for free at AnnualCreditReport.com.
To check for inaccurate hard inquiries, look for a section on your credit report with any of these labels:
• Credit inquiries
• Hard inquiries
• Regular inquiries
• Requests viewed by others
You can dispute hard inquiries and remove them from your credit reports under certain circumstances: if you didn’t apply for a new credit account, you didn’t give permission for the inquiry, or the inquiry was added by mistake.
That said, under federal law, certain organizations with a “specific, legitimate purpose” can access your credit file without written permission. They include:
• Government agencies, usually in the context of licensing or benefits applications
• Collection agencies
• Insurance companies, when certain restrictions are met
• Entities that have a court order, as in child support hearings
Even so, if you didn’t give permission for a hard credit pull, it’s worth filing a dispute to request that the credit check be removed from your report.
Consumers may dispute hard inquiries online through AnnualCreditReport.com, or by writing to the individual credit reporting agencies.
Hard Credit Checks and Your Credit Scores
As mentioned, hard inquiries appear on your credit report, and each hard pull may lower your credit score by five points or less. Here we’ll go into a bit more detail.
Why Hard Inquiries Matter
Multiple hard inquiries within a short time frame can do significant damage to your credit score. It could potentially be enough to move you from the Good credit range down to the merely Fair. Someone in a Fair credit range can pay substantially more over a lifetime in interest and fees than someone with a Good score or higher.
How Many Points Will a Hard Inquiry Cost You?
As noted above, each hard pull can lower your credit score by less than five points. One or two hard inquiries per year may not matter, especially if you’re not planning on applying for a loan.
If you’re rate shopping for a particular type of loan, such as a mortgage or auto loan, keep in mind that multiple hard credit checks within a specific period (often several weeks) for the same purpose are usually counted as one inquiry by credit scoring companies. However, this is not the case with hard pulls for credit card applications.
How Long Do Inquiries Stay On Your Credit?
Hard inquiries stay on your credit report for two years. While they’re on your credit report, they are visible to anyone who checks your credit. But their impact on your credit score typically lasts less than 12 months.
Soft inquiries may remain on your credit report for one or two years, but only you can see them.
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The Takeaway
Soft credit inquiries do not affect a credit score, while hard credit inquiries may cost you a few points. In both cases, individuals or businesses pull information from your credit reports. Checking your own credit report counts as a soft pull, as do most other situations where the consumer hasn’t given written permission. Hard pulls are typically done only when you’re applying for a loan or new credit account.
Many lenders allow you to “prequalify” for a loan without running a hard credit check. This allows you to shop rates without risking any impact to your credit.
Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.
SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
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 .
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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A mortgage lien may sound scary, but any homeowner with a mortgage has one. It’s simply the legal claim that your mortgage issuer has on your home until you have paid off your mortgage.
Then there are involuntary liens, which can be frightful. Think tax liens, mechanic’s liens, creditor liens, and child support liens.
What Is a Mortgage Lien?
Mortgage liens are part of the agreement people make when they obtain a mortgage loan. Not all homebuyers can purchase a property in cash, so lenders give buyers cash upfront and let them pay off the loan in installments, with the mortgage secured by the property, or collateral.
If a buyer stops paying the mortgage, the lender can take the property. If making monthly mortgage payments becomes a challenge, homeowners would be smart to contact their loan servicer or lender immediately and look into mortgage forbearance.
Generally, there are two lien types: voluntary and involuntary.
Voluntary
Homebuyers agree to a voluntary, or consensual, lien when they sign a mortgage. If a homeowner defaults on the mortgage, the lender has the right to seize the property.
Voluntary liens aren’t considered a negative mark on a person’s finances. It’s only when a borrower stops making payments that the lien could be an issue.
Involuntary
On the other side of the coin is the involuntary, or nonconsensual, lien. This lien is placed on the property without the homeowner’s consent.
An involuntary lien could occur if homeowners are behind on taxes or homeowners association payments. They can lose their property if they don’t pay back the debt.
Property Liens to Avoid
Homeowners will want to avoid an involuntary lien, which may come from a state or local agency, the federal government, or even a contractor.
Any of the following liens can prohibit a homeowner from selling or refinancing property.
Judgment Liens
A judgment lien is an involuntary lien on both real and personal property and future assets that results from a court ruling involving child support, an auto accident, or a creditor.
If you’re in this unfortunate position, you’ll need to pay up, negotiate a partial payoff, or get the lien removed before you can sell the property.
A tax lien is an involuntary lien filed for failure to pay property taxes or federal income taxes. Liens for unpaid real estate taxes usually attach only to the property on which the taxes were owed.
An IRS lien, though, attaches to all of your assets (real property, securities, and vehicles) and to assets acquired during the duration of the lien. If the taxpayer doesn’t pay off or resolve the lien, the government may seize the property and sell it to settle the balance.
HOA Liens
If a property owner in a homeowners association community is delinquent on dues or fees, the HOA can impose an HOA lien on the property. The lien may cover debts owed and late fees or interest.
In many cases, the HOA will report the lien to the county. With a lien attached to the property title, selling the home may not be possible. In some cases, the HOA can foreclose on a property if the lien has not been resolved, sell the home, and use the proceeds to satisfy the debt.
Mechanic’s Liens
If a homeowner refuses to pay a contractor for work or materials, the contractor can enforce a lien. Mechanic’s liens apply to everything from mechanics and builders to suppliers and subcontractors.
When a mechanic or other specialist files a lien on a property, it shows up on the title, making it hard to sell the property without resolving it.
Lien Priority
Lien priority refers to the order in which liens are addressed in the case of multiple lien types. Generally, lien priority follows chronological order, meaning the first lienholder has priority.
Lien priority primarily comes into play when a property is foreclosed or sold for cash. The priority dictates which parties get paid first from the home’s sale.
Say a homeowner has a mortgage lien on a property, and then a tax lien is filed. If the owner defaults on their home loan and the property goes into foreclosure, the mortgagee has priority as it was first to file.
Lien priority also explains why lenders may deny homeowners a refinance or home equity line of credit if they have multiple liens to their name. If the homeowner were to default on everything, a lender might be further down the repayment food chain, making the loan riskier.
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How to Find Liens
Homeowners or interested homebuyers can find out if a property has a lien on it by using an online search. Liens are a public record, so interested parties can research any address.
For a DIY approach:
• Search by address on the local county’s assessor or clerk’s site.
• Use an online tool like PropertyShark.
Title companies can also search for a lien on a property for a fee.
If sellers have a lien on a property they’re selling, they’ll need to bring cash to the closing to cover the difference. If the seller doesn’t have enough money, the homebuyer is asked to cover the cost, or they can walk away from the deal.
How Can Liens Affect Your Mortgage?
An involuntary lien can affect homeowners’ ability to buy a new home, sell theirs, or refinance a mortgage. Lenders may deem the homeowner too big a risk for a refinance if they have multiple liens already.
Or, when homeowners go to sell their home, they’ll need to be able to satisfy the voluntary mortgage lien or liens at closing with the proceeds from the sale. If they sell the house for less than they purchased it for or have other liens that take priority, it may be hard to find a buyer willing to pay the difference.
Liens can also lead to foreclosure, which can impede a person’s chances of getting a mortgage for at least three to seven years.
How to Remove a Lien on a Property
There are several ways to remove a lien from a property, including:
• Pay off the debt. The most straightforward approach is to pay an involuntary lien, or pay off your mortgage, which removes the voluntary lien.
• Ask for the lien to be removed. In some cases, borrowers pay off their debt and still have a lien on their property. In that case, they should reach out to the creditor to formally be released from the lien and ask for a release-of-lien form for documentation.
• Run out the statute of limitations. This approach varies by state, but in some cases, homeowners can wait up to a decade and the statute of limitations on the lien will expire. However, this doesn’t excuse the homeowner from their debt. It simply removes the lien from the home, making it easier to sell and settle the debt.
• Negotiate the terms of the lien. If borrowers are willing to negotiate with their creditors, they may be able to lift the lien without paying the debt in full.
• Go to court. If a homeowner thinks a lien was incorrectly placed on their property, they can file a court motion to have it removed.
Before taking any approach, you might consider reaching out to a legal professional or financial advisor to plan the next steps.
Liens can be voluntary and involuntary. Many homeowners don’t realize that the terms of their mortgage include a voluntary lien, and as long as you make your mortgage payments this is nothing to be concerned about. It’s involuntary liens that homeowners would be smart to avoid.
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FAQ
What type of lien is a mortgage?
A mortgage lien is a voluntary lien because a homeowner agrees to its terms before signing the loan.
Will having a lien prevent me from getting a new loan?
Some liens can keep people from getting new loans. Lenders are unlikely to loan applicants money if they have multiple liens.
Is it bad to have a lien on my property?
A mortgage lien is voluntary and not considered bad for a borrower. But an involuntary lien prohibits owners from having full rights to their property, which can affect their ability to sell the home.
How can I avoid involuntary liens?
Homeowners can avoid involuntary liens by staying up to date on payments, including property taxes, federal income taxes, HOA fees, and contractor bills.
Can an involuntary lien be removed?
Yes, an involuntary lien can be removed in several ways, including paying off the debt, filing bankruptcy, negotiating the debt owed, and challenging the lien in court.
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*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
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.
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.
This article is not intended to be legal advice. Please consult an attorney for advice.
Labels like prime and subprime help denote loans that are designed for people with different credit scores. Prime loans are built for borrowers with good credit, while subprime loans are designed for those with less-than-perfect credit. While subprime loans can help this group finance big purchases like a home or a car, they also come with potentially significant downsides.
Here are key things to know about prime and subprime loans to help you make better borrowing decisions.
Prime Loan vs Subprime Loan
When you’re shopping for a loan, lenders will consider your credit history to help them determine how much default risk they’d be taking on were they to loan you money.
Your credit score is a three-digit representation of your credit history that lenders use to understand your creditworthiness. While there are different credit scoring models, the FICO® score is one of the most commonly used. Lenders and other institutions may have different rules for which credit scores determine prime vs subprime loans.
For example, Experian, one of the three major credit reporting bureaus, defines a prime loan as requiring a FICO score of 670 to 739. With a score of 740 or above, you’re in super prime territory. Borrowers with a FICO score of 580 to 669 will likely only qualify for subprime loans.
Here are some key differences between the two that borrowers should be aware of.
Interest Rates
Borrowers with lower credit scores are seen as a greater lending risk. To offset some of that risk, lenders may charge higher interest rates on subprime loans than on prime loans.
What’s more, many subprime loans have adjustable interest rates, which may be locked in for a short period of time after which they may readjust on a regular basis, such as every month, quarter, or year. If interest rates are on the rise, this can mean your subprime loan becomes increasingly more expensive.
Down Payments
Again, because subprime borrowers may be at a higher risk of default, lenders may protect themselves by requiring a higher down payment. That way, the borrower has more skin in the game, and their bank doesn’t need to lend as much money.
Loan Amounts
Subprime borrowers may not be able to borrow as much as their prime counterparts.
Higher Fees
Fees, such as late-payment penalties or origination fees, may be higher for subprime borrowers.
💡 Quick Tip: Before choosing a personal loan, ask about the lender’s fees: origination, prepayment, late fees, etc. One question can save you many dollars.
Repayment Periods
Subprime loans typically carry longer terms than prime loans. That means they take longer to pay back. While a longer term can mean a smaller monthly payment, it also means that you may end up paying more in interest over the life of the loan.
Prime Loan vs Subprime Loan: What Type of Loans Are They?
Prime and subprime options are available for a variety of loan types. For example, different types of personal loans come as prime personal loans or subprime personal loans. When you’re comparing personal loan interest rates, you’ll see that prime loans offer lower rates than subprime. Common uses for personal loans include consolidating debt, paying off medical bills, and home repairs.
You can also apply for prime and subprime mortgages and auto loans. What is considered a prime or subprime score varies depending on the type of loan and the lender.
By checking your credit score, you can get a pretty good idea of whether you’ll qualify for a prime or subprime loan. That said, as mentioned above, the categories will vary by lender.
The process for applying for a prime or subprime loan is similar.
Get Prepared
Lenders may ask for all sorts of documentation when you apply for a loan, such as recent paystubs, employer contact information, and bank statements. Gather this information ahead of time, so you can move swiftly when researching and applying for loans.
Research Lenders
Banks, credit unions, and online lenders all offer prime and subprime loans. You may want to start with the bank you already have a relationship with, but it’s important to explore other options too. You may even want to approach lenders who specialize in subprime loans.
To shop around for the best possible rate, you may be able to prequalify with several different lenders. This only requires a soft credit inquiry, which won’t impact your credit. That way you can see which lender can offer you the best terms and interest rates. Applying for credit will trigger a hard inquiry on your credit report, which will temporarily lower your credit score.
Consider a Cosigner
If you’re having trouble getting a subprime loan, you may consider a cosigner with better credit, such as a close family member. They will be on the hook for paying off your loan if you miss any payments, so be sure you are both aware of the risk.
Subprime Loan Alternatives
There are alternatives to subprime loans that also carry a fair amount of risk. Some, like credit cards, are legitimate options when used responsibly. Others, like payday loans, should be avoided whenever possible.
Credit Cards
Credit cards allow you to borrow relatively small amounts of money on a revolving basis. If you pay off your credit card bill each month, you will owe no interest. However, if you carry a balance from month to month, you will owe interest, which can compound and send you deeper into debt.
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Predatory Loans
Payday loans are a type of predatory loan that usually must be paid off when you receive your next paycheck. These lenders often charge high fees and extremely high interest rates — as high as 400%, or more. If you cannot pay off the loan within the designated period, you may be allowed to roll it over. However, you will be charged a fee again, potentially trapping you in a cycle of debt.
The Takeaway
Subprime loans can be a relatively expensive way to take on debt, especially compared to their prime counterparts. If you can, you may want to wait to improve your credit profile before taking on a subprime loan. You can do this by always paying your bills on time and by paying down debt. That said, in some cases, taking on a subprime loan is unavoidable — you may need a new car now to get you to work, for example — so shop around for the best rates you can get.
Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.
SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.
FAQ
Why are subprime loans bad?
Subprime loans are not necessarily bad. However, these loans typically charge higher interest rates and fees than their prime counterparts. Borrowers may also be asked to put down a higher down payment, and they may be able to borrow less.
What is the difference between subprime and nonprime?
Nonprime borrowers have credit scores that are higher than subprime but lower than prime.
What type of loan is a subprime loan?
A variety of loan types may include a subprime category, including mortgages, auto loans, and personal loans. All loans in the subprime category likely have higher interest rates and fees.
Photo credit: iStock/Nikola Stojadinovic
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
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 .
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.
We’re a nation of coffee lovers, with java consumption at a two-decade high, according to the National Coffee Association’s 2024 research. Whether you like a cup of basic black coffee or an iced latte with all the bells, whistles, and whipped cream, coffee may feel like an affordable treat.
However, that little indulgence and energy booster is getting more expensive. In fact, between inflation and the higher cost of coffee beans, java prices have increased nationwide. Specifically, in April 2024, the price was 26.5% higher than it was in April 2010, according to U.S. Bureau of Labor Statistics data. This means you’re most likely paying more for your coffee at home and in neighborhood and national chain coffee shops.
While you might not consider spending an extra 25 or 50 cents a cup a big deal, these expenses can add up and mess with your budget. Fortunately, there are lots of ways you can still enjoy your daily cup of joe without going broke. Read on for 17 practical ways you can save money on coffee.
How Much Does the Average Person Spend on Coffee?
It’s estimated that women shell out $2,327 on coffee each year, while men spend $1,934, according to the Perfect Brew. Statistics show Millennials are the biggest spenders with the average 25 to 34 year-old dishing out $2,008 a year on their coffee habit, followed by 35 to 44 year-olds, who spend $1,410 on coffee each year.
The average price of a cup of coffee-shop joe costs nearly $5 according to the latest data. If you’re buying your coffee five days a week, that’s $25 a week and $100 a month. It might not sound like a lot, but do the math and you’ll find even if you’re only ordering one cup, you’re shelling out $1,200 a year just on to-go coffee. By making a few small changes to your routine, you could potentially save yourself hundreds of dollars and then use that money to open a savings account and sock the funds away for future goals, like a vacation or even a down payment on a house.
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17 Great Ways to Save Money on Coffee
Think you might be spending a small fortune on coffee? It may be time to take stock of how much of your money is going towards those pots of Italian roast at home and pumpkin spice lattes when out and about. By incorporating some small changes, you can end up with extra money that can go into savings.
Here are 17 great ideas on how you can lower the cost of buying coffee every day.
1. Grind Your Own Beans
Even though bags of pre-ground coffee and whole beans may cost the same, grinding beans can be more economical in the long run. Why? Whole beans stay fresher longer compared to pre-ground coffee, which is often made with lower quality beans, additives, and fillers, tending to go stale faster. Coffee that’s lost its aroma and flavor may go unused or tossed, resulting in pouring money down the drain along with your brew.
2. Improve Your Brew Method
One reason why you might skip making coffee at home is because it doesn’t taste like it does at the coffee shop. If this is the case, it’s time to up your brewing game. Start by using the right grind size for your coffee method, such as a coarse grind for a French press or a medium-coarse grind for automatic drip. Also try figuring out your preferred coffee strength for the ratio of coffee to water, and understand the best water temperature for your chosen brewing method.
3. Invest in a Quality Coffee Maker
Here’s another smart idea for how to save money on coffee: Get a coffee maker you’re excited about. It will likely inspire you to drink more coffee at home. Purchasing a coffee maker may feel like a bit of a splurge, but in the long run, you’re likely to be spending money wisely. Making coffee at home will offset the cost of daily trips to the coffee shop.
4. Get an Inexpensive Milk Frother
Instead of paying extra for a latte or a cappuccino from your local barista, make your own at home with a milk frother. Milk frothers work by aerating the milk and creating the foam to add to your hot or cold coffee drinks. There are different types of frothers, from handheld to electric, which vary considerably in price, but you can find one on Amazon for as low as $4. Little savings like this can help you live below your means.
5. Drink Your Coffee Black
It might take time to get used to it, but by drinking black coffee, you’ll be saving money on buying milk or creamer in the supermarket and at the cafe. Some national coffee chains charge as much as 80 cents extra or more if you order coffee with certain types of dairy-free milk, such as almond, oat, soy, or coconut. What’s more, when you keep it simple and black, you can really appreciate the coffee’s true aroma and flavor.
6. Switch to a Cheaper Alternative
If you’ve been toying with giving up coffee for a less expensive fix, consider switching to tea, which can cost up to three times less than coffee you make at home. Caffeinated teas such as black, matcha, and Oolong can provide plenty of flavor while still providing you the buzz you need.
The cheapest choice? Decrease the amount of coffee you drink everyday or quit entirely.
7. Refrigerate or Freeze Leftover Coffee
Made too much coffee? No problem. Refrigerate it later and drink it iced, or add it to a smoothie with other ingredients such as peanut butter, banana, vanilla extract, and the milk of your choice. Leftover coffee can also be used to make coffee popsicles or fill an ice tray for cubes you can add to iced coffee.
8. Make Your Own Creamer
Those French vanilla and other flavored creamers can liven up your cup of joe, but they don’t come cheap. Cut your grocery bill by saying no to those costly supermarket creamers. Do a search for homemade creamer recipes on the internet, and you’ll find many different variations. Making your own creamer can be as easy as combining 1 can of sweetened condensed milk, 1-¾ cup skim milk, and 2 teaspoons of vanilla extract.
9. Add Your Own Flavorings Instead of Paying Extra
Before you head out to a coffee bar for one of those flavored treats, try spicing up your coffee at home by sprinkling in cinnamon, powdered cocoa, cayenne pepper, or vanilla extract. Fancy syrups used by coffee shops are easy to create yourself and you can find a variety of recipes online. A couple of teaspoons of maple syrup can sweeten up your java too.
The difference between buying a small and a large size coffee can be as much as 80 cents or more. Opting for a smaller cup over the largest size over the course of a week could save you about $5. That’s $20 a month and a yearly savings of $240.
11. Pay with Cash Instead of Credit
When paying for coffee, it’s easy to whip out a credit card. However, using your card each time and not keeping track can be an eye-opener when your bill comes due. If you’re carrying a balance and have an interest rate of, say, 19%, you’re paying almost 20% more by using your plastic for that cup of joe. Instead, switch to cash only for coffee to become more aware of how much you’re really spending — and to avoid getting into a position of having to pay off outstanding debt.
12. Ask for Gift Cards
For special occasions like birthdays or holidays, put a coffee gift card on your wishlist. A $15 or $20 gift card from a loved one can give you a week or two reprieve from spending your own money at coffee shops.
13. Pay with an EBT Card
The USDA’s Supplemental Nutrition Assistance Program (SNAP), formerly known as food stamps, provides financial assistance towards groceries for individuals in need. SNAP recipients receive an Electronics Benefit Transfer (EBT) card to buy food items and non-alcoholic beverages at most major supermarkets as well as Amazon, Instacart, and more. This means you can use your benefits in participating retailers to buy such brands as Califia Farms, Starbucks, or Dunkin’ brand packaged coffee, K-cups or cold bottled drinks. Although Starbucks doesn’t accept SNAP at their stand-alone stores, some of its licensed kiosks found inside certain grocery sellers such as Target, Fred Meyer, and Safeway, accept EBT.
The catch? You can only purchase SNAP-eligible items that have a nutritional label. Hot foods and beverages are excluded so barista-prepared coffee isn’t covered. You can check to see what stores in your area take EBT cards with the USDA Snap locator .
14. Check out Coffee ‘Happy Hours’
Look for coffee shop happy hours where you can get your favorite beverages at lower prices. Starbucks, Peet’s, and Ziggi’s Coffee are some national chains that often offer happy hour deals, and your local coffee shop may have them as well.
15. Avoid Hanging Out in Coffee Shops
With more people working remotely, coffee shops have become a popular place to get out of the house and get one’s job done. But, as the hours pass, you’re likely to order more coffee. Just like the price of eating out vs. eating at home can be more expensive, camping out for a longer period of time also means you may feel obligated to purchase food, plus contribute to the tip jar.
16. Budget for Your Coffee
Sometimes you just have to reward yourself with a fancy coffee. This is doable as long as you work it into your weekly budget. That gives your spending some structure and gives you permission to buy that treat guilt-free. As you hone your money-saving skills by sticking to your budget, a PSL can be a great way to celebrate a job well done.
One way to create a flexible budget is to try following the 50-30-20 rule, which teaches you to allocate your take-home income into three categories: needs (50%), wants (30%), and savings (20%). That weekly peppermint mocha can be factored in as a non-essential want.
17. Use a Reusable Cup
In an effort to reduce single-cup waste, some national chains such as Starbucks, Tim Hortons and Peet’s, give customers 10 cents off of each cup of coffee if you bring a reusable cup. Drinking out of an insulated cup not only means you’re helping the environment, but your coffee tends to stay hotter longer too.
Banking With SoFi
Want to find room in your budget for a little more java? Opening the right bank account could help you save and potentially even grow your money. That way you can order a special coffee from time to time and really savor it.
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 4.00% APY on SoFi Checking and Savings.
FAQ
Is it cheaper to make or buy coffee?
Making coffee at home turns out to be much more affordable than buying coffee at a shop. Depending on the type of coffee maker and coffee you use, you can spend pennies per cup. Using a drip coffee maker can cost about 29 cents a cup compared to $3 or more at a cafe.
How much money do you save if you make your own coffee?
At about 29 cents a cup, making coffee at home can cost as little as $105.85 a year if you drink it every day. On the flip side, getting a $4 coffee at a popular cafe every day can be as much as $1,460 a year. Based on those figures, drinking coffee at home can save you a little more than $1,354 annually. In the bigger picture, over the course of 10 years, you’d save more than $13,540. And that’s without interest.
Is coffee worth the money?
For people who can’t live without their daily coffee, this is a no brainer. Spending money on coffee you love is worthwhile, as long as it fits within your budget. You shouldn’t have to sacrifice your daily pick-me-up. The key is deciding if regular visits to the coffee shop are worth the money, or if you can still enjoy a quality cup of coffee with a less costly alternative.
4.00% APY
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.
Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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Private label credit cards are a particular kind of credit card that’s typically only good at one specific store. Some stores or other merchants offer private label credit cards to give better terms to certain customers than they might otherwise be able to offer. Many merchants also provide these cards as an incentive for customers to spend more, since they can potentially defer payment and/or earn loyalty rewards.
These perks are among the reasons why private label credit cards are popular. But before you start thinking about how to get a private label credit card, it’s important to consider their pros and cons.
What Is a Private Label Credit Card?
Also called a store credit card or a closed loop credit card, a private label credit card is a credit card that can only be used at one particular store or merchant.
Generally, a merchant’s private label credit card is partnered with and issued by a third-party financial institution, such as a bank. These institutions act as private label credit card issuers, and they’re responsible for funding the credit line and collecting all payments.
If you understand how credit cards work, you’ll know they usually can be used anywhere the processor (often Visa or Mastercard) is accepted. In contrast, private label cards are intended for use only at the store or merchant where they are issued.
In other respects, private label cards work in much the same way as traditional credit cards. These cards offer a revolving line of credit that cardholders can borrow against, up to their predetermined credit limit. It’s necessary to make at least a minimum credit card payment to avoid a late payment fee. Balances that carry over from month to month will accrue interest.
In most cases, the easiest way to get a private label credit card is to apply at the store that’s issuing or sponsoring the private label credit card. Many stores offer incentives for applying for their private label card while you’re shopping in the store. You also may be able to sign up for a private label card on the store’s website.
But even if you can get one, should you get a private label credit card? Choosing a credit card depends on your specific financial situation. However, if you have sufficient income and strong credit, you may be able to get a traditional credit card that may offer rewards and more flexibility than a private label card that’s only good at one store may provide.
Because banks or other financial services companies serve as the credit card issuers for most private label credit cards, you’ll likely be familiar with the setup process if you’ve ever had any other credit card.
Once you’ve applied for and been approved for a private label credit card — assuming you met the credit card requirements — you’ll typically go through the process of setting up your card. You’ll want to make sure to log in to your online account, review your statements, and set up payments.
Wondering why are private label credit cards popular? Here are some of the upsides of these types of credit cards:
• Easier to qualify for: Private label credit cards are often thought of as being easier to get approved for than general purpose credit cards. So if you don’t have an excellent credit history, you may consider a private label credit card as a way to help build your credit.
• Earn rewards and other benefits: Another benefit of private label credit cards is that stores often use them to build loyalty with their best customers. This might include offering rewards, loyalty points, or even nixing the credit card annual fee some cards have.
Drawbacks of Private Label Credit Cards
Even if the pros of private label credit cards may seem enticing, it’s also important to account for the downsides. These include:
• Lack of flexibility in use: The biggest drawback of a private label credit card is that it typically can only be used at one specific store or merchant. The lack of flexibility means that it is difficult for a private label credit card to be your only or main credit card.
• Potentially higher APRs: Another potential drawback is that many private label cards have annual percentage rates, or APRs. Make sure you read the terms and conditions before signing up for a private label credit card to ensure you know the consequences of carrying a balance. Otherwise, you could end paying exorbitant interest — which is how credit card companies make money.
As you can see, slightly different credit card rules apply to private label credit cards. Here are the major differences to keep in mind when comparing a private label card to a general purpose credit card:
Private Label Credit Cards
General Purpose Credit Cards
Can usually only be used at one store or merchant
Can generally be used anywhere the issuer (e.g. Visa, Mastercard, etc.) is accepted
Only offers store-specific rewards or perks
May offer cash back or travel rewards on every purchase
Generally are easier to get approved for than traditional credit cards
Often more difficult to get approved for than private label cards
Private Label vs Co-Branded Credit Cards
Some merchants offer a co-branded credit card that offers specific perks for their particular store but is issued by a major credit card processor (i.e., Visa or Mastercard). This means that you can also use the co-branded credit card at other merchants. As one example, Old Navy and Barclays offer the Navyist Rewards Mastercard, which offers Old Navy perks but can also be used anywhere that Mastercard is accepted.
Here’s a breakdown of the key differences to keep in mind to distinguish between private label credit cards and co-branded credit cards:
Private Label Credit Cards
Co-Branded Credit Cards
Can usually only be used at one store or merchant
Can be used anywhere the issuer (e.g. Visa, Mastercard) is accepted
Only offers store-specific rewards or perks
Also offers store-specific rewards or perks but can also offer rewards on purchases at other merchants
Generally are easier to be approved for than traditional credit cards
Often more difficult to be approved for than private label cards
Alternatives to Private Label Credit Cards
Two alternatives to private label credit cards are general purpose credit cards and co-branded credit cards. Here’s what you need to know about each of those other options as you’re deciding which type of card is right for you:
• General purpose credit cards are what you probably think of when you think of a credit card. These cards can be used anywhere that processing network, such as Visa or Mastercard, is accepted.
• Co-branded credit cards are cards that share branding between a bank or credit card issuer and another merchant or company. Examples include airline or hotel credit cards or the credit cards of some retail stores. With a co-branded credit card, you can also use the card anywhere the processing network is accepted, and you’ll often earn brand-specific perks on every purchase.
A private label credit card is a type of credit card that can typically only be used at one particular store or merchant. Many merchants use private label cards as a way to incentivize and reward their most loyal shoppers. It can also motivate shoppers to spend more, since they have the convenience of a credit card and can defer payments to a later date.
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 private label credit card?
The easiest way to get a private label credit card is to apply on the website or in the store of the merchant that offers the card. If you meet the credit card requirements, you will be approved for the card. Then you can start using it while shopping at this particular merchant.
How do private label credit cards make money?
Private label credit cards make money in much the same way that any other credit card companies make money. They make money from the fees associated with the card (late fees, possible annual fees, etc.) and interest paid by cardholders who carry a balance. Additionally, they may rake in money from “swipe fees” paid by the merchant each time the card is used.
Who do you make payments to when using a private label credit card?
While a private label credit card often has the logo of a particular merchant or store, the day-to-day processing is handled by a bank or other financial services company. You’ll make your payments directly to the processing company, usually not to the store itself. One of the credit card rules for successfully managing your credit is to pay your bill in full, each and every month, so make sure you understand who and when you need to pay.
Photo credit: iStock/gazanfer
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.
