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College is expensive, with the yearly cost of attendance at private schools now topping $60,000 on average. Looking at these numbers, you may wonder how you will ever possibly afford to send your kids to college.

But before you get too disheartened, it’s important to understand that a college’s published “sticker price” is often very different from what you actually have to pay (known as the net price). What’s more, just putting a small amount of money aside each month in a college fund can add up to a significant sum over time, especially if you take advantage of a tax-advantaged college savings account.

Read on to learn key things about how to save for college — from estimating how much you need to set aside to picking the right college saving fund.

Determining the Cost of College for Your Children

Tuition costs vary widely, depending on the type of school your child wants to attend, the type of degree they’ll earn (bachelor’s or associate), and even geographic location.

According to the College Board, the average annual college tuition costs for the 2024-25 school year were:

•  $11,610: public four-year in-state (a 2.7% increase from 2023-24)

•  $30,780: public four-year out-of-state (a 3.2% increase from 2023-24)

•  $43,350: private nonprofit four-year (a 3.9% increase from 2023-24)

•  $4,050: public two-year in-district (a 2.5% increase from 2023-24)

The College Board also studied the annual, inflation-adjusted change in college tuition and fees over the last decade, which showed some declines:

•  -4%: four-year public schools for in-state students

•  -9%: two-year public schools for in-district students

•  +4%: four-year private (nonprofit) schools

If your kids are young, you may wonder how much college will cost when it’s time for them to head off. Fortunately, there are many online calculators that can help you figure this out, taking factors like your child’s age, the type of school you expect your child to attend, and the expected rise in the cost of college into account.

Net Price vs Sticker Price

Every college and university, private or public, lists a sticker price, which is also known as the cost of attendance (COA). This price includes tuition, fees, room and board, books, supplies, and miscellaneous expenses.

The net price, on the other hand, is what a student would actually pay, after factoring in any financial aid provided by the college and the federal government.

Financial aid is based on your family’s income, as well as the student’s academic achievement. Aid is offered in the form of grants, scholarships, work-study, and sometimes federal student loans. Schools offer aid based on financial need, a student’s “merit,” or a combination.

When you fill out the Free Application for Federal Student Aid (FAFSA), you will receive a Student Aid Index, or SAI. (Previously, this was called the Estimated Family Contribution, or EFC.) Colleges use this number to determine the amount of financial aid they award to accepted students. Typically, colleges come up with a financial aid package to help bridge the gap between the school’s sticker price and what your family can afford to pay.

Indeed, sometimes colleges with the highest sticker price end up costing less than a college with a much lower sticker price.

Recommended: How to Start Saving for Your Child’s College Tuition

Using a Net Price Calculator

Fortunately, you can get an idea of what the net price will be for a particular college before you apply by using the government’s net price calculator. This tool can help students and their families get a better idea of the cost of college, after subtracting scholarships, grants, and other financial aid.

Keep in mind, though, that the net price calculator is going to require specific details about your income and assets, so the more transparent you are regarding your personal finances, the more precise your calculation is likely to be.

When Is a Good Time to Start Saving for Your Child’s Education?

Generally, the sooner the better. In fact, it can be wise to set up and start making small monthly contributions to a college savings fund soon after your child is born.

For some familes, however, it may not be possible to start saving that early. It’s equally important to pay attention to your other expenses and family’s needs. For example, you may want to prioritize building an emergency and paying off expensive credit card debt over saving for college. It’s also a good idea to make sure you’re on track with retirement savings. At the end of the day, students are able to get loans for an education but it’s not possible to take out loans to fund retirement.

Some Options for Saving

When thinking about how to help finance your child’s college education, consider these alternatives.

529 Plan

A 529 education savings plan is an investment account that can be used to save for the beneficiary’s qualified education expenses. The funds can be used to pay for higher education or private elementary or high schools. A 529 plan allows your savings to grow tax-free, and some states even offer a tax deduction on your contributions.

All 529 plans are set up at the state level. However, you don’t have to be a resident of a particular state to enroll in its plan.

If your child decides not to go to school, it’s possible to roll the account over into the name of another family member. If the funds aren’t used for education-related expenses, there may be taxes and penalties.

Family members and friends can also contribute to a child’s college savings plan. They may choose to make deposits to an existing 529 account or set up one themselves, naming a beneficiary of their choice.

Some 529 savings plans offer an age-based investment option to automatically adjust the risk of the investment strategy as the beneficiary gets older. This type of investment approach might be similar to how a target date fund works in your retirement plan.

Regular Savings Accounts

You can also save for your child’s college tuition using a savings account at a traditional bank, credit union, or online bank. Just keep in mind that interest rates, even for high-yield savings accounts, tend to be relatively low. Plus, savings accounts don’t offer the tax advantages you can get with some other college savings vehicles.

It may be difficult to reach education financing goals through a traditional savings account alone since the interest rate might not keep pace with the inflation of college expenses.

Roth IRAs

Although generally used for retirement savings, a Roth IRA can be used to pay for the cost of college. Contributions to a Roth IRA are made with after-tax dollars but earnings grow tax-free.

Generally, to withdraw the earnings from an IRA without paying a penalty (or taxes), the account holder needs to be at least 59 ½ years old. However, if you made the first contribution to your Roth IRA at least five years before, you can also withdraw the growth penalty-free for qualified education expenses, including tuition, books, and supplies.

Keep in mind that, while there may not be an early withdrawal fee, the earnings withdrawn may still be subject to income tax.

Other Options to Pay for College

Sometimes saving alone isn’t enough to cover the cost of college. In that case, there are other funding options available that could help students and their families pay for college.

Private Scholarships

Scholarships are essential free money for college because you don’t have to pay them back. Scholarships are typically merit-based and are offered through a variety of organizations and institutions, including nonprofits, corporations, and even directly from universities and colleges. In some cases, scholarships are awarded on the basis of nationality, ethnicity, or economic need. There are a number of searchable scholarship databases that compile different scholarship opportunities.

Federal Financial Aid

When you complete the FAFSA each year, you will become eligible for federal financial aid. This can include scholarships, grants, work-study, and federal student loans (which may be subsidized or unsubsidized).

Private Student Loans

If savings and financial aid aren’t enough to cover the cost of college, you can fill in gaps using private student loans. These are available through private lenders, including banks, credit unions, and online lenders.

Loan limits vary from lender to lender, but you can often get up to the total cost of attendance, which gives you more borrowing power than with the federal government. Interest rates vary depending on the lender. Generally, borrowers (or cosigners) who have strong credit qualify for the lowest rates.

Keep in mind, though, that private student loans may not offer the borrower protections — like income-based repayment and deferment or forbearance — that automatically come with federal student loans.

The Takeaway

College tuition can be a daunting expense. Setting up a dedicated account to save for college tuition can help make the process much more manageable. There are accounts, like 529 plans, that are designed specifically to pay for educational expenses.

In addition to savings, students and their families may rely on scholarships, grants, federal student loans, or private student loans to pay for tuition and other educational expenses.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

FAQ

What’s the biggest downside of a 529 plan?

One of the biggest downsides of a 529 plan is that if you use your savings for nonqualified expenses (that is, not for approved educational expenses), you will be charged an additional 10% tax on earnings.

How much to save for college?

There are many variables when it comes to saving for college, such as whether the student will go to an in-state university or a private college. It can be wise to estimate costs and then aim to save a third of that amount, using grants, scholarships, and federal and private student loans to finance the rest.

How much does college tuition cost?

For the 2024-25 school year, tuition costs averaged $11,610 for students at public four-year in-state schools; $30,780 for those who are out-of-state students at public four-year universities; and $43,350 for students at private four-year nonprofit colleges. These figures do not include room and board and other expenses.

About the author

Julia Califano

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

SoFi Loan Products
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If you’re no longer being well-served by your current savings or checking account, it may be time to make a switch. Maybe you’re moving and need a bank with closer branches or ATMs. Or, perhaps you’re annoyed by your current bank’s fees or poor customer service. A common reason for closing a bank account is finding a new account that pays a higher annual percentage yield (APY).

Whatever the reason, closing a bank account isn’t complicated. However, you’ll want to make sure you follow certain steps, in a certain order, to prevent hassles and fees. Here’s what you need to know about closing a bank account.

6 Steps to Closing a Bank Account

While closing a savings account (or checking account) is generally a simple process, it requires more than just contacting your bank. There are a series of steps you’ll want to follow to ensure a smooth transition. Here’s how to close a bank account.

Step 1: Decide Where You Want to Keep Your Money

Before you end one banking relationship, it’s a good idea to have another place lined up to stash your money. You may be able to increase your returns and reduce the cost of banking if you take time to research your options. For example, the top high-yield savings accounts currently have APYs of up to 4% or more — that’s many times higher than the average national average rate of 0.42% APY as of December 16, 2024.

If you have multiple financial goals and needs, you may want to have more than one bank account. For example, you might open different savings accounts for different objectives, such as one earmarked for an upcoming vacation or large purchase and another for your emergency fund. Just keep an eye out for any fees.

Step 2: Update Any Automated Transactions

If you have any direct deposits or automatic payments set up, you’ll need to move them to the new account. Check with your employer regarding any forms you need to fill out for direct deposit so your paycheck can be rerouted to the new account.

It’s also a good idea to comb through your statements and create a list of monthly recurring payments, such as automatic payment for loans, insurance policies, credit cards, streaming services, and the like. If you have any annual subscriptions, go through the last 12 months of transactions. A failed automated payment or negative account balance could trigger penalties.

Step 3: Move Your Money

Once your automatic payments are updated and any pending transactions have cleared, you can move your money out of your old account. However, the timing on this is critical: If an automatic payment or outstanding check goes through after you empty the account, you could end up overdrafting the account, which can trigger a hefty fee.

Also, if your bank account has a minimum balance requirement, you may want to wait to transfer money out of the account until just before you officially close the account, so you don’t get hit with a monthly maintenance fee due to a low balance.

Recommended: How Much Money Do You Need to Open a Bank Account?

Step 4: Monitor Your Old Account

After you’ve funded your new bank account, you can begin using it. However, you may want to keep your old account open for a couple of months as you transition to the new account, as long as it’s not costly to do so. This allows you to catch any automatic transactions you forgot to change over.

Step 5: Download Your Transaction Records

Once your account is closed, you likely won’t have access to your transaction history and online statements. If you require any records of your banking activities under the old account (say, for tax purposes), you may want to download your documentation before you officially deactivate your account.

Step 6: Close Your Old Account

Once you’re set up and using your new savings account, you can close the old one.

The exact process for doing this will depend on your bank — some allow you to close an account online or via a phone agent, while others require you to fill out an account closure request form or submit a written request. Be sure to follow your bank’s guidance on the proper method for closing an account.

If you still have money left in your account, you should be able to request a transfer to your new account or receive a check by mail.

Because closed bank accounts can sometimes be reactivated in error and incur fees, it’s smart to get written confirmation of the account closure for your records. You’ll also want to carefully review your final bank account statement for any errors.

Recommended: How to Switch Banks in 3 Easy Steps

Common Reasons for Closing a Savings Account

Here’s a look at some reasons why you might want to close your current bank account and open a different one at the same or a different bank.

•  You’re moving and your current bank doesn’t have branches and ATMs near your new location.

•  Your bank’s hours don’t suit your lifestyle.

•  The bank has policies that don’t work for you, such as minimum balance and service fees.

•  You have multiple bank accounts and want to consolidate.

•  Another bank offers higher interest rates on savings accounts.

•  You want to change from a brick-and-mortar bank to an online bank.

•  You aren’t happy with your bank’s customer service.

•  You’re opening a joint account.

•  You’re switching from a child account to an adult account.

Why It’s Important to Close a Savings Account Properly

Once you’ve decided you no longer want or need a certain bank account, it’s a good idea to go through all of the steps involved in properly closing that account, rather than just let it sit around unused. Here’s a look at some reasons why this is important.

Dormancy Fees and Other Penalties

Some banks charge account holders a “dormancy fee” after a period of time without any deposits or withdrawals. These fees can add up over time. Also, if your old bank account charges a monthly maintenance fee when your balance goes below a certain level, you could end up triggering that fee. If you have funds left in your unused savings account, these penalties could deplete them.

Fraud

If you’re not closely monitoring your old bank account, it can be more difficult to spot suspicious activity. Even inactive accounts contain personal information that could be exploited by identity thieves. Closing a rarely or never-used account reduces the likelihood of your sensitive data falling into the wrong hands.

Lost Deposits

If you’ve signed up for direct deposit you don’t receive regularly — your yearly tax refund, for instance — you may forget you’ve done so. And if they one day make a deposit to a savings account you’re no longer using, you may not notice you received that payment.

While there are drawbacks to keeping an unused account open, you may also be wondering: Is it bad to close a savings account? The good news is, closing your account usually comes at no cost. Not only do most banks not charge a fee to close a basic savings account, but doing so will not affect your credit score.

If, however, your account has a negative balance, you will need to repay that at the time of closing the account.

Recommended: What Happens to a Direct Deposit If It Goes to a Closed Account?

Closing a Joint Account

If you’re looking to close a joint checking or savings account, you’ll want to check with your bank about the correct procedure. Some banks allow only one account holder’s authorization to close a joint account, while others require both parties to sign an account closure request or to request an account closure online.

Closing a Child’s Account

A childs’ bank account is designed for kids under age 18. Typically, both the child and a parent or guardian act as joint account holders.

In some cases, a bank will automatically convert a child’s account into a regular account when the child turns 18. In that case, the child/now adult can likely close the account on their own. If a parent or guardian is still the co-owner of the account, however, both parties will usually need to request the closure of the account.

Closing an Inactive Account

An account can become “inactive” or “dormant” if its owner does not initiate any activity for a specific period of time, often two years. If your account has been marked inactive or dormant, you’ll need to reactivate it before it can be closed by the bank. Contact your bank’s customer service to reactivate your bank account. There might also be an option to do this through your online or mobile banking.

Closing the Account of Someone Deceased

Closing the bank account of a loved one who has passed away is generally more complicated than closing your own bank account. The first step is let the bank know of the account owner’s death. To do this, you may need to supply an original or certified copy of the death certificate and, possibly, other documents. The bank can then freeze the account, and stop any standing orders or direct debits.

When you’ve notified the bank about the death, they can let you know what the next steps will be and what other documentation they need to officially close the account.

Recommended: What Happens to a Bank Account When Someone Dies?

How Long Does It Take to Close a Bank Account?

If your bank account has a zero or positive balance and there are no pending transactions, closing a bank account is a quick process. Typically, the bank can close the account as soon as you make the request. If there are still pending transactions or unpaid fees, however, the process can take longer. You will likely need to wait for deposits or payments to fully clear and/or bring the balance into positive territory before you can close the account.

Can You Reopen a Closed Bank Account?

Generally, once a bank account is closed, it can’t be reopened. However, it may be possible to reopen a closed account if it was closed due to inactivity. Also, some banks reserve the right to reopen an account if another payment or deposit comes through.

When closing your account, it’s a good idea to ask the bank about their policy on transactions after an account is closed. If you find out that an old account was reopened due to a new transaction, you’ll want to withdraw or add funds and then close the account again. Be sure to update the person who billed or paid you with your new bank account information.

Does Closing a Bank Account Hurt Your Credit Score?

No, closing a bank account will not have any impact on your credit. Bank accounts are different from credit card accounts and aren’t part of your consumer credit reports. Banks report account closures to the consumer reporting agency ChexSystems. Opting to close a bank account, however, won’t have a negative impact on your ChexSystems report.

Finding an Account That Meets Your Needs

Even if you’ve been with the same bank forever, it’s worth taking a pulse check from time to time to ensure that your current savings and checking accounts meet your financial needs and are helping you get closer to achieving your goals.

If you find an account that offers a higher APY on your deposits and/or charges lower or no fees, it can be well worth making the switch. Closing a bank account is a simple process and there are typically no fees involved.

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

FAQ

Does it cost money to close a savings account?

Typically, no. The one exception is if you close your account soon after opening it. Some banks charge something called an “early account closure” fee (ranging from $5 to $50) if a customer closes their account within 90 to 180 days of opening it. However, many banks and credit unions don’t charge early account closure fees. Check the institution’s policy before opening an account.

Can you close a savings account at any time?

Yes, you can request to close a savings (or checking) account anytime. Just keep in mind that some banks charge what’s known as an early closure fee if an account holder closes their account within 90 to 180 days of opening it.

What happens when you close a savings account with money in it?

If you close a bank account but still have money in the account, you should receive a check from the bank for the remaining funds.

About the author

Julia Califano

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

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Taking out a personal loan can both help and hurt your credit. In the short term, applying for a new loan can have a small, negative impact on your scores, due to the hard inquiry by the lender. If managed well, however, having a personal loan can boost your credit profile over time by adding to your positive payment history and broadening your credit mix. This could make it easier to get approved for loans and credit cards with attractive rates and terms in the future.

Here’s a closer look at how personal loans affect your credit score, both positively and negatively, plus guidelines on when it makes sense to take one out.

How Is Your Credit Score Calculated?

Understanding how personal loans impact your credit starts with knowing how your credit score is calculated. The most common credit scoring model, FICO®, uses five components to calculate your score. Here’s a look at each factor and how much weight it’s given in FICO’s calculation.

•   Payment History (35%): Your record of making on-time payments to lenders is the most important component of your score. This helps creditors determine how much risk they are taking on by extending credit.

•   Amounts Owed (30%): This includes the total amount of debt you currently have and your credit utilization ratio, which measures the percentage of available credit you’re using. If you’re tapping a lot of your available credit on your credit cards, it suggests you may be overextended and, thus, at higher risk of defaulting on a loan.

•   Length of Credit History (15%): This factor takes into account the average age of your accounts, the age of your oldest account, and how long it has been since you used certain accounts. Generally, having a longer credit history can positively affect your score.

•   New Credit (10%): A small but still important part of your score is how much new credit you’ve recently taken out. Opening new accounts or having too many credit inquiries can temporarily lower your score.

•   Credit Mix (10%): Your credit mix looks at how many different types of credit you hold. Having a variety of credit types — like credit cards, retail accounts, and installment loans — can positively affect your score.

A personal loan can influence several of these factors, for better or worse, depending on how you manage it.

How Do Personal Loans Work?

A personal loan is a lump sum of money borrowed from a lender, such as a bank, credit union, or online lender. Personal loans are typically unsecured, meaning you don’t need to provide collateral (like your car or home), and can be used for various purposes like consolidating debt, covering medical bills, or funding a wedding.

When you take out a personal loan, you agree to repay it in fixed monthly installments over a predetermined period, usually ranging from two to seven years. The interest rate, determined by your creditworthiness, and any lender fees affect how much you’ll pay in total.

Recommended: Is There a Minimum Credit Score for Getting a Personal Loan?

Ways Personal Loans Can Hurt Your Credit

While personal loans can be beneficial, they also have the potential to harm your credit. Here’s how:

Requires a Hard Credit Inquiry

When you apply for a personal loan, the lender typically performs a hard credit inquiry to evaluate your creditworthiness, which can adversely impact your credit score. Hard inquiries remain on your credit report for two years. However, their negative effect on your score is minor (typically 5 points or less) and lasts only about a year.

Note that prequalifying for a personal loan, which involves a soft inquiry, won’t have any impact on your score. This can give you an estimate of the interest rate and loan amount you can expect in a loan offer.

Can Increase Overall Debt

Taking out a personal loan can increase your overall debt, which can negatively affect the “amounts owed” component of your credit score. This may cause you to see a slight drop in your score. However, if you’re consolidating credit card debt, you will reduce that debt by paying it down with the personal loan, and your amounts owed won’t be impacted.

Can Negatively Impact Payment History If You Miss a Payment

Since payment history is the largest factor in credit scoring, missing just one payment on your personal loan can result in a substantial drop in your score. While being just a few days late may not affect your credit, lenders can report payments that are more than 30 days overdue to the credit bureaus. Late payments remain on your credit reports for seven years.

Setting up autopay or reminders can help ensure you make your payments on time and avoid this credit score setback.

Can Shorten Your Credit History

Taking on a new loan can shorten the average age of your credit accounts, which could have a small negative impact on your score. Generally, a longer credit history is considered better than a shorter one.

How Personal Loans Can Help Your Credit

Despite the risks, personal loans can also positively influence your credit when managed wisely. Here’s how:

Can Add to Your Credit Mix

Your credit mix accounts for 10% of your score. Adding a personal loan to your portfolio — especially if you primarily have revolving credit, like credit cards — can enhance your credit profile by showing that you can manage different types of credit responsibly.

Can Improve Your On-Time Payment History

Consistently making on-time payments on your personal loan demonstrates financial responsibility, which can strengthen your payment history — the most significant component of your score. It may take a few months for the benefits to show up but over time, this can positively impact your credit.

May Help Lower Your Credit Utilization Ratio

If you take out a personal loan to pay off high-interest credit card debt (also known as a credit card consolidation loan), you can lower your credit utilization ratio, which is the percentage of your available credit you’re using. A lower ratio — ideally under 30% — is generally beneficial for your credit. However, this strategy only works if you keep your credit card spending low after paying off your balances with the loan.

When to Consider Taking Out a Personal Loan

Even though applying for a personal loan may result in a small, temporary drop in your credit score, there are times when taking on this type of debt can be a smart financial move. Here are some scenarios where you might consider getting a personal loan.

•  You want to consolidate high-interest debt: Personal loans typically have lower interest rates than credit cards, making them an attractive choice for paying off expensive credit card debt. An online personal loan calculator can help you determine how much you could potentially save. If you’re juggling several credit cards, a debt consolidation loan can also simplify repayment.

•  You’re facing unexpected expenses: Medical bills, home and car repairs, or other emergencies can sometimes justify taking out a loan. Using a personal loan may be more cost effective than putting these expenses on your credit card.

•  You have good or excellent credit: The best personal loan interest rates are generally reserved for borrowers who have strong credit. While there are personal loans for bad credit, they typically come with higher interest rates and other less-than-ideal terms.

•  You earn a steady paycheck: Getting a personal loan generally only makes sense if you have a regular income and earn enough to comfortably cover the monthly payments for the term you select.

The Takeaway

Personal loans can have a positive or negative impact on your credit depending on how you manage them. Initially, applying for a personal loan can slightly downgrade your score. This is due to the hard inquiry, as well as the loan’s impact on the average age of your accounts and (potentially) your overall debt load. However, if you repay the loan responsibly, having a personal loan can ultimately help your credit by adding positive payment history, diversifying your credit mix, and — if you use it pay off credit card debt — reducing your credit utilization rate.

Before taking out a personal loan, you’ll want to assess your financial situation, shop around for the best rates and terms, and make sure the monthly payments work with your budget.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

FAQ

Is a personal loan bad for your credit?

A personal loan isn’t inherently bad for your credit, but its impact depends on how you manage it. Initially, applying for a loan may lower your score slightly due to the hard credit inquiry. In addition, taking on more debt can increase your amounts owed, which might affect your score. However, consistently making on-time payments can boost your payment history, a major factor in credit scores. And if you use a personal loan to consolidate credit card debt, you’ll lower your credit utilization ratio (how much of your credit limit you are using), which can positively impact your credit.

Will a personal loan affect my credit card application?

It can. If you applied for the loan recently, the hard credit inquiry may have slightly lowered your credit scores. Having a personal loan can also lower the average age of your accounts and, potentially, increase your debt load, which can negatively impact your credit. Over time, however, having a personal loan can improve your credit profile by adding to your positive payment history and, if you use it to consolidate credit card debt, lowering your credit utilization, making it easier to get approved for a credit card.

Will a personal loan affect my car loan application?

It can. When assessing your eligibility for a car loan, lenders typically consider your credit score, debt-to-income ratio, and overall financial profile. The hard credit inquiry for the personal loan might lower your credit score temporarily. In addition, the added debt from the loan could increase your debt-to-income ratio, making you appear higher risk to a lender. On the other hand, responsible repayment of the personal loan shows financial discipline, which can improve your credit profile over time. Ultimately, this could make it easier to get a car loan with attractive rates and terms.

About the author

Julia Califano

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

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.

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If you’re like the roughly 48% of credit card holders, you probably carry at least some debt from month to month. Indeed, the average credit card balance in the U.S. is currently $6,580 as of 2025.

Unfortunately, many consumers are uninformed and unprepared for the responsibility of paying with plastic. Credit card issuers don’t require you to take a class before they hand you that first card — or the next one, or the next. But the consequences of getting in over your head can be troublesome.

Here are some do’s and don’ts to keep in mind so you can manage your credit card usage and debt responsibly.

Just Because You Can Get Another Credit Card Doesn’t Mean You Should

Once you prove your creditworthiness, you’ll likely receive other credit card offers in the mail. Retail stores you shop in often ask if you’d like to apply for their card, offering things like special discounts, partnerships, and card-holder shopping days to draw you in.

But unless the rewards are high and the annual percentage rate (APR) is low, you may want to pass, especially if you’re in a store and won’t have time to focus on the terms and fees in the agreement.

Remember: When you apply for a credit card, it can create a credit inquiry on your report because of the hard pull on your credit report. Unless your credit inquiry qualifies as rate shopping, too many inquiries in a short time period could have a negative impact on your credit score.

A Credit Card Can Be Convenient — If You Keep Your Balance in Check

The clock starts ticking whenever you make a purchase using your credit card. Many credit card companies will give you a period of interest-free grace, but if you don’t pay off the balance within the grace period, you’ll start racking up interest.

Of course, using cash instead of credit for purchases is an option, especially for purchases made in person.

It’s also wise to keep an eye on your balance. Financial experts say that you should only utilize up to 30% of your credit limit. It’s better still to only use 10% of that limit.

Thinking Twice Before Just Paying The Minimum

It’s easy to get into the mindset that you’re on track for the month because you paid the minimum payment due on your credit card statement. But that amount is typically based on a small percentage of your balance, typically between 1% and 3%, or a fixed dollar amount.

Unless you have a 0% credit card rate, letting your balance carry over can rack up additional interest.

Checking Your Statements Every Month

A thorough monthly review of credit card statements makes it possible to find billing mistakes and be sure your purchases and returns are accurately reflected.

It’s worth reviewing your statement for any subscription services you might be making automatic payments or renewals for. You could be paying for a service or app you don’t want anymore.

Reviewing your charges can also help you determine if you’ve been the victim of identity fraud. The faster you move to report any problems , the better off you typically are. The Fair Credit Billing Act (FCBA) instructs consumers to report unauthorized charges within 60 days after the statement was mailed. So making it a habit to check your statements as they come in — or reviewing them online at least once a month — can help you be aware of any issues and report them quickly.

If you’ve made late payments or missed a payment, your interest rate may have gone up — and you could be paying a much higher rate than you thought. Keeping track of this information will give you a more complete picture of the amount you owe.

Credit card statements also include information about how long it will take to pay off the bill if you send only the minimum payment each month, as well as how much you’ll pay in interest. Think of this information like nutrition facts on food packaging — it could be an encouragement to be financially healthier.

Reporting Misplaced, Lost, or Stolen Cards

Under the FCBA , a consumer’s liability for unauthorized use of their credit card is limited to $50. However, the FCBA also says if you report the loss before your credit card is used to make unauthorized purchases, you aren’t responsible for any charges you didn’t authorize.

If your credit card account number is stolen, but not the card, the FCBA also says you won’t be liable for unauthorized use. Credit card companies are generally quick to provide customers with new account numbers, passwords, and cards.

Using a Credit Card to Get Cash

Another piece of information available on a credit card statement is the APR charged for cash advances. Most likely, the interest rate charged for cash advances is several points higher than the rate charged for purchases.

If a credit card is used at an ATM, there may also be an additional fee charged by the machine’s owner.

So unless it’s an unavoidable emergency, it’s probably much better for your wallet to stick to your debit card or go old-school and cash a check.

Using a Credit Card for Purchases Just to Get the Rewards Points

Cash back and other credit card rewards make some cards more appealing than others. But that probably shouldn’t be an excuse to use a credit card if you’re not in a solid financial position. The trade-off probably isn’t worth it if you carry a balance.

Balance Transfer Cards Can Be Appealing, But…

Again, if you have solid credit, you may be getting offers for 0% balance transfer cards. And they may potentially save you a significant amount of money, if you can realistically pay off that balance in the designated period.

If not, the interest rate will increase after the introductory 0% interest period ends. And moving the remaining amount to yet another balance transfer card could ding your credit record, as every time you apply for a credit card a hard inquiry is pulled.

Negotiating Rates and Fees

Even the most attentive person might sometimes miss a credit card due date. This oversight, however, means a late fee and interest may be added to the account balance. If this happens more than once, you might incur a higher late fee than the first one and the account’s interest rate might increase.

It may be possible, however, to negotiate credit card interest rates and fees. If you’ve only had one late payment, it’s worth a call to customer service asking for the late fee to be waived. If there have been multiple late payments and you’re faced with an increased interest rate, it might take up to six months of on-time payments before a credit card issuer is willing to consider lowering the interest rate.

Recommended: How To Lower Credit Card Debt Without Ruining Your Credit

Knowing How Much Credit Is Being Utilized

The amount of debt owed is the second largest factor that makes up a person’s credit score. It accounts for 30% of the total score, and revolving credit accounts like credit cards are important in the calculation of a credit score. Someone who is using a high percentage of their credit card limit might be seen as potentially risky by lenders. But someone who uses a lower percentage of their credit card limit may be considered to be in a favorable financial position.

Credit card companies sometimes raise the credit limit of financially responsible customers. By keeping your account balance low, it can improve the credit utilization rate used to calculate your credit score.

Managing Credit Card Debt

Credit card debt can feel overwhelming quickly. If you’ve racked up more debt than you can comfortably pay off, you might consider using a personal loan to consolidate that debt.

If your financial history is solid, getting approved for a personal loan interest rate that’s lower than your credit card rates could make your outstanding debt easier to deal with. Using a debt consolidation loan to consolidate multiple credit cards would also mean just one bill to pay each month instead of keeping track of multiple payments and due dates. A consolidation loan with a respected lender can be part of a smart overall money management plan.

Recommended: Typical Personal Loan Requirements

The Takeaway

Almost half of all Americans carry credit card debt, with the average amount being around $6,580 as of 2025. Knowing how to use a credit card responsibly, such as why paying more than the minimum due is wise, can help you avoid credit card debt. If you do find yourself with more credit card debt than you can manage, you can investigate ways to pay it off, such as taking out a personal loan.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

FAQ

What is the 2 3 4 rule for credit cards?

According to the 2 3 4 rule, credit card applicants are limited to two new cards in 30 days, three new cards in 12 months, and four new cards in 24 months.

What is the golden rule for credit cards?

The golden rule for credit cards is to pay the full balance on time every month. This is a way to stay out of credit card debt and positively impact your credit score.

What habit lowers your credit score?

Several habits can negatively impact your credit score. Paying your bill late (or skipping payments), carrying too much debt (more than 30%) vs. your credit limit, applying for too much credit in a given period of time, having a limited credit history, and not having a robust credit mix are all considerations that can lower your score.

About the author

Julia Califano

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

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.

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When babies start crawling, they can get into all sorts of trouble. Aside from creating messes, they can hurt themselves. That’s why it’s important to babyproof a home before a child begins to explore.

The process of babyproofing can take time, effort, as well as a financial investment. But the payoff is huge — you’ll be able to relax, knowing that your little one will be able to crawl — and eventually walk — around your home without getting hurt.

If tackling your entire home all at once seems daunting, don’t stress. What follows is a simple, step-by-step babyproofing checklist that will help you turn your home into a safe haven for your little one.

Put Up Gates

If you don’t have doors throughout your home, you’ll want to install baby gates.

Baby gates that can be screwed into a banister, wall, or door frame are the most secure. But pressure-mounted gates can be a good alternative if you live in a rental and don’t want to put holes in any walls.

Some gates allow parents to step through, while others swing open. When looking for baby gates, it’s a good idea to seek out the ones that are the top-rated for safety and the most convenient for your home. For instance, you might get frustrated if you have to constantly step over a gate, so a swinging gate could be a better fit.


💡 Quick Tip: Home improvement loans typically offer lower interest rates than credit cards. Consider a loan to fund your next renovation.

Buy a Hexagon Play Yard

When you can’t constantly watch your baby, you can put your little one in a hexagon “play yard” with toys and comfort items.

The panels can also be used to block off certain rooms or areas of a room.

However, keep in mind that as your child grows and develops, they may be able to move the play yard or climb over the panels.

Cover the Outlets

Another part of a babyproofing checklist is covering all the outlets in your home.

The easiest option is to push heavy furniture in front of outlets so your baby can’t get to them. But if that’s not possible, you can buy plug-in plastic covers, outlet shields, or sliding plate covers.

Remember to also get power strip covers and electrical cord covers so your baby can’t play with those either.

Babyproof the Doors

Babyproofing doors is important so that babies can’t get into certain rooms or get their fingers jammed in doors.

To babyproof doors, you can install door knob covers, which are rounded, plastic covers that are too hard for babies to squeeze in order to turn the knobs.

You can also use a door strap, which will keep babies out of a room but allow small pets in.

Recommended: Common Financial Mistakes First-Time Parents Make

Put Away Heavy Objects

If young children pick up a heavy object, they could drop it and break it or, worse, hurt themselves.

A major part of a babyproof checklist is putting away heavy objects that could injure your child. These objects could go in a closet or another room. It doesn’t matter where they go, as long as they are out of baby’s reach.

Install Latches on Drawers

One key part of babyproofing a home is to make sure that children can’t get into drawers and cabinets where dangerous objects like knives are stored.

Parents have a few options for babyproofing cabinets and drawers. You can use slide locks for double door cabinets, which tie adjacent knobs together. Or, you might opt for magnetic locks, which go in drawers and cabinets and require a key to unlock them.

Other options include: adhesive strap locks (which use heavy-duty, removable adhesive) and spring-action locks (which unlock when parents open a drawer and hold down on the lock at the same time).

Recommended: 20 Small-Kitchen Remodel Ideas & Designs

Remove Choking Hazards

If you have more than one child, there could be little toys around the house or other objects that are choking hazards for your baby.

You can store these objects in a safe spot and instruct your older kids to do the same. For instance, an older child could have a special trunk where they put all their toys when the baby is around.

Keep Chemicals Locked Up

Before having a baby, you may have kept household cleaners and bug spray underneath the sink.

Now, when babyproofing, you’ll need to put a lock on the cabinet where these chemicals are stored and/or install a gate to keep your baby far away from them.

A number of household substances must, by law, have child-resistant packaging. Still, one look around the average home shows potential dangers, including perhaps colorful single-load laundry detergent pods and dishwashing liquid.

Recommended: How Much Does it Cost to Raise a Child to 18?

Use Corner Guards

Installing corner guards is an essential babyproofing step. Corner guards, which may prevent a bad bruise or eye injury, can be used on sharp corners of wooden desks, glass tables, and metal fireplace hearths.

Some corner guards are made of high-density foam; others from silicone rubber. They come in different colors and may include double-stick tape for easy installation.

Babyproof Window Blinds

Cords attached to window coverings are a strangling hazard for babies. Ideally, you’ll want to switch any corded window treatments for cordless options. If that’s not possible, your next best option is to shorten the cords, attach plastic covers to the ends, and secure them to the wall with a tie-down device, or cleat. Cord cleats should be installed at least 5 feet above a floor, where a baby can’t reach.

Recommended: The Top Home Improvements to Increase Your Home’s Value

Secure Furniture to the Wall

Babies start to become very curious when they roam around the house. They may push furniture and try to move it. Every year children are injured in tip-overs of TVs, tables, dressers, and bookcases, some fatally. This is why all furniture they have access to should be secured to walls.

It’s important to secure furniture not only in the living and dining room but also in the nursery. Pay special attention to the baby’s bookshelf and dresser.

Secure Rugs

Once babies start to crawl and even walk, they could slip and fall on rugs. A good way to avoid mishaps is to make rugs immovable by placing nonskid rug pads underneath them.

Double-sided carpet tape can also be used to keep down any slight upturns on the edges and corners of the rugs.

Block or Babyproof Stairs

Babies tend to love stairs, but of course stairs can be dangerous. You can block stairs off with a baby gate and/or add carpeting, nonskid step pads, or a carpet runner to make stairs less slippery.

Paying for Babyproofing

Any way you slice it, raising kids is expensive, and that includes babyproofing your home.

The total cost of baby-proofing a home will depend on its size and specific baby-proofing needs. On average, babyproofing a home can cost between $500 and $2500, with most parents paying around $1,500 to make their homes safe and secure for their child.

Costs typically include essential items for each room like baby gates, outlet plugs, furniture anchors, electrical protection covers and materials, and locks for drawers and doors. Your outlay can run much higher than the average babyproofing cost if you install all new child-safe window treatments or make some structural changes to your home to make it safer for your little one.

If you aren’t able to pay for babyproofing out of pocket, you might consider using a low- or no-interest credit card or taking out a personal loan for home improvement.


💡 Quick Tip: Before choosing a personal loan, ask about the lender’s fees: origination, prepayment, late fees, etc. SoFi personal loans come with no-fee options, and no surprises.

The Takeaway

A babyproof checklist is a must before babies start crawling, cruising, or otherwise getting around. Some key babyproofing steps include: using gates on stairs, locking or latching cupboards and drawers, containing dangerous items, placing outlet covers on all electrical outlets, and securing and mounting large unstable furniture to the walls.

Unfortunately, babyproofing typically isn’t a one-and-done home project. It’s a good idea to frequently reassess safety as your child ages and develops new skills (such as pulling up and walking) or you make any changes to your home.

Some babyproofing steps are free, while others can be costly. If you don’t have the cash on hand to cover safety-related home improvements, you might consider using a credit card with a 0% introductory interest rate or getting a low-interest personal loan.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

About the author

Kylie Ora Lobell

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

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