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Living frugally means spending less than you earn; it can involve elements of simplicity and eco-friendliness.

You already know the advice about not signing up for every streaming platform under the sun and not having a fancy coffee every day. Fortunately, living a frugal life doesn’t have to feel like you must sacrifice your favorite things. By adopting some basic money-saving moves, you can stash cash without much effort.

Read on to learn eight easy tips that will help you streamline your spending and perhaps enjoy more peace of mind.

8 Essential Frugal Living Tips

Here are eight tips on how to be more frugal and save money — without giving up all the fun and the little rewards in your life.

1. Reform Fixed Expenses

Regardless of what specific items might appear on a budget, they all come in two general varieties: fixed expenses vs. variable expenses.

Fixed expenses are, as the name suggests, those bills that are fixed and consistent each month, such as rent, insurance payments, and student loans. Variable expenses, on the other hand, are those whose amounts aren’t fixed… but that doesn’t mean all variable expenses are optional (or “discretionary”). For example, your electric bill probably varies from month to month, but you still know you’re going to have to pay it.

Let’s hone in on those fixed expenses first, though — because cutting down on regular, consistent costs can lead to regular, consistent savings. There are a variety of ways to do this, some more radical than others.

For example, moving to a less expensive neighborhood or splitting bills with a roommate might cut your rent in half; deciding to forgo a car can eliminate not only the car payment and insurance cost, but also variable expenses like parking, maintenance, and gas. These kinds of global lifestyle changes can take a lot of effort to set up at the start. However, the payoff is months or years of significant savings without too much ongoing effort.

However, there are plenty of ways to cut fixed expenses without making such seismic shifts to daily life. For instance, switching to a less expensive cell phone carrier can lower the monthly burden, as can ditching a gym membership in favor of hiking or cutting back on streaming service subscriptions. (Even those low per-month amounts can really add up when there are three or four of them!)

Recommended: Building a Line Item Budget

2. Gear Up Your Grocery Game

Groceries count as a variable expense, but they’re certainly not optional. That said, there’s an incredible margin for savings when it comes to stocking up on food each month.

So how to go about saving money on food and other grocery store items?

•   One easy way to start is to choose discount grocers and chains that are known for their low prices. Aldi, Lidl, Trader Joe’s and WinCo, for example, all have well-founded reputations for their frugal choices, particularly when compared to upscale grocery chains like Whole Foods. Shopping at a cheaper store can take some of the footwork out of saving; you may be able to spend less on the exact same grocery list. But it’s also possible to take the project even further.

•   Coupon clipping might not be the most glamorous activity, but those deals can create substantial savings, particularly for practiced couponers. These days, apps like Ibotta and Checkout 51 make it easy to score savings on the items you’re already shopping for.

•   Additionally, aiming to make cheaper meals can stretch each grocery store dollar even further. Relying on inexpensive staples like rice, which can be dressed up and filled out in many different ways, can help keep both bellies and wallets full.

3. Decide to Do It Yourself

Buying things is one thing. But maintaining them is a whole ‘nother can of worms — and it can be a downright expensive one. For instance, going in for an oil change vs. doing it yourself can be a pricey undertaking. And calling in a plumber when the sink or toilet is clogged can be expensive compared with going into DIY mode.

All of which is to say: honing some handiness skills could easily help save money over the course of a lifetime. And thanks to the fact that we live in the digital age, it’s relatively easy to become a Jack or Jill of all trades. YouTube is full of free video tutorials that can walk you through everything from fixing a dishwasher that won’t drain to rotating your own tires.

Other high-cost services to consider DIYing: mani/pedis, facials, pet grooming, landscaping, moving, and more. Basically, anytime you could spend money on hiring a professional, think seriously about whether you actually need the help.

Recommended: Pros and Cons of Online and Mobile Banking

4. Enjoy Free Entertainment

While some events are worthy splurges — like a once-in-a-lifetime concert — it’s also important to consider all the free forms of entertainment at our fingertips. For example, your local library may offer streaming movies along with books and audiobooks (or try services connected to libraries, like Kanopy and Hoopla), and many museums offer cost-free admissions on specific days of the week or month.

Even the national parks offer free admission from time to time. Free national park entrance days vary slightly from year to year, but generally include the first day of National Park Week in late April and National Public Lands Day, which falls on the in late September, along with Veterans Day and the birthday of Martin Luther King, Jr.

5. Take Frugalism With You Wherever You Go

Speaking of national parks: Travel is another big ticket item as far as discretionary expenses are concerned. Seeing the world can be enriching — and it doesn’t have to strip away all your riches, either.

Finding ways to be a frugal traveler, such as choosing budget-friendly destinations and scoring the cheapest flights possible, can mean saving money without sacrificing this major life experience. You might even try a home swap or being a house-sitter in a foreign country to make your journey as affordable as possible.

💡 Quick Tip: If you’re creating a budget, try the 50/30/20 budget rule. Allocate 50% of your after-tax income to the “needs” of life, like living expenses and debt. Spend 30% on wants, and then save the remaining 20% towards saving for your long-term goals.

Reuse and Recycle

The idea of reusing and recycling can go in many directions. It can mean buying a reusable water bottle and filling at home and at filling stations around town vs. buying pricey bottled water and contributing to the global single-use plastic problem.

It can mean offloading your gently used items (laptop, clothing, kitchenware) and making a little bit of spending money. It can mean also buying items from your local thrift shop or picking them up for free if you have a town swap spot.

Not only is this planet-friendly, but it can help your wallet, too.

7. Split the Cost

One good way to be frugal is to share the expenses of daily life. For instance, you might get a roommate or move in with a friend to take your rent down a notch. You and a friend might shop at warehouse clubs and split the mega sizes of food and enjoy the lower costs.

8. Use Credit Sparingly

It’s no secret that credit card debt is high-interest debt, and you likely don’t want to be wasting money on major interest charges. Follow your budget, and try to pay in cash or with your debit card whenever possible. Work hard to pay off your complete credit card bill every month so you don’t have snowballing interest.

Benefits of a Frugal Lifestyle

Need more encouragement and incentive to live frugally? Consider these upsides.

Eco-Friendly

When you live frugally, you often minimize waste. You plan your meals and don’t toss as many leftovers and unused ingredients as you would otherwise. You might walk rather than take an Uber. You might reuse shopping totes vs. paying for a bag every time you go shopping.

Save Money

Living frugally is all about saving cash. You can bring down such major costs as rent, food, utilities, and transportation when living this way.

You can also learn how to rein in your discretionary spending. Instead of spending a couple of hundred dollars on an arena rock-concert ticket, perhaps there’s great live local music at a town park or a local bar.

Pay Down Debt

When you live frugally, it can give you the means to pay down debt, especially the high-interest kind. That means more money is freed up to spend as you like and/or apply towards big-picture personal and financial goals.

Live on a Small Budget

Living frugally means you have a budget that is working and helping to keep your finances on track. You likely know your spending limits well, have a handle on your debt, and a clear plan to hit your longer-term goals. You don’t have loads of expenses and credit lines to wrangle. This can enhance your peace of mind.

Is Frugal Living Sustainable Over the Long Term?

Frugal living can be sustainable over the long term. Learning how to stick to a modest budget can help you live more minimally and avoid lifestyle creep (when your expenses rise along with your salary over time). By not always upgrading to a bigger house, fancier car, or more lavish summer vacation, you can enjoy the balance and security of frugal living.

What Does Frugal Mean for Your Money?

Here’s another angle on how being frugal can impact your money:

•   Adopting frugal habits and creating a savings plan can be ways to improve your financial health. Cutting back on day-to-day living expenses can mean more money set aside for retirement as well as major life milestones, like owning a home or having a baby.

•   One of the most important first steps toward frugality is getting organized, financially speaking. Having a budget and tracking your finances are valuable moves. How often to monitor your bank accounts is a personal decision, but a couple of times a week can help you see how your money is coming in and going out.

•   Living frugally can also mean more money goes towards realizing your long-term financial goals and building wealth. Whether that means saving for a child’s college education or for retirement, by cutting back on spending now, you can help ensure a better future.

The Takeaway

Living frugally can be a way to trim your expenses, stay out of debt, and put more money towards your personal goals and long-term financial aspirations. It also can be a lifestyle that simplifies your daily habits and respects the planet. With frugality, you may find that some of your money stress decreases, too.

It’s wise to find a banking partner who can help you manage your money well if you choose to live in this cost-effective and simple style.

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

What does frugal actually mean?

Frugal means simple and inexpensive. So if you are living frugally, you are probably sticking to a budget, saving for future goals, and not indulging in too many luxuries.

What’s the best example of frugal living?

An example of frugal living could be someone who has roommates to share costs with, plans meals to minimize food expenses, grows some of their own produce, and walks or bikes when possible vs. using a car.

Why is frugal living more popular these days?

Frugal living is more popular these days for a few reasons. One is the importance of living in an eco-friendly way; others may be that with inflation still a factor and high interest rates, people are looking for ways to reduce their expenses and live more simply.

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See additional details at https://www.sofi.com/legal/banking-rate-sheet.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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When you piggyback on someone else’s credit card, you become an authorized user on their account. Usually, this is in service of establishing credit for the first time or building your credit score.

While piggybacking credit can serve as an important tool as you establish firm financial footing, there are also situations in which it can be risky. Because of this, it’s important to understand how piggyback credit works before using this strategy.

What Is Credit Card Piggybacking?

When piggybacking credit, you become an authorized user, or a secondary account holder. As a secondary cardholder, you may receive your own card and account number. You’ll be allowed to make purchases on the account, but you aren’t necessarily responsible for payment. This differs from joint accounts or for loans that are cosigned, where all parties are responsible for payment.

The primary account holder will be able to view all of the purchases and will ultimately be responsible for making all payments. You’ll likely enter into some sort of agreement with the primary account holder to pay them back for any purchases that you make. You may also agree not to use the account at all.

Piggybacking can refer to other types of debt as well, such as a piggyback mortgage loan. Here, the term is used slightly differently and usually refers to a second mortgage, a home equity loan, or a home equity line of credit (HELOC).

How Does Credit Card Piggybacking Work?

Before explaining how piggybacking works, it’s worth considering why your credit score is important. Your credit score is a three-digit number, typically between 300 and 850, that provides an indicator of your creditworthiness. Credit card companies, banks, and other lenders will look at your score to determine how risky it is to extend credit to you.

Borrowers with the highest scores are seen as the lowest risk. In other words, they are the most likely to pay their bills on time and the least likely to default on their debt. Lenders are often willing to extend the most favorable credit card terms and conditions, including interest rates, to these borrowers.

Individuals with lower scores are seen as presenting higher potential risk. Their low scores indicate that they’ve likely had trouble paying their bills on time in the past. As a result, lenders may be less willing to extend credit. If they do, it may come with higher interest rates to compensate the lender for the increased risk they’re taking on.

If you don’t have a credit history or are looking to build yours, credit card piggybacking can help. That’s because when you become an authorized user on someone else’s card, their credit history for that account has an impact on yours.

When you become an authorized user, that account pops up in your credit report. If the primary account holder has a long history of paying their bills on time or they keep their balance low, this might have a positive effect on your credit. If the account has been open for a long time, say 15 years, it will read on your credit report as a 15-year account. Since length of credit history has an effect on your credit score, this can prove helpful in building your score.

Beware, however, that the impact on your credit score doesn’t always move in the positive direction. If the primary account holder misses payments, for example, the account could have a negative effect on your credit.

Recommended: When Are Credit Card Payments Due?

Does Piggybacking Credit Actually Work?

Piggybacking on a credit card does usually work, but not all of the time. For one, not all credit card companies will report a secondary account holder to the credit reporting bureaus, which include Equifax^®, Experian^®, and TransUnion^®.

What’s more, when you become an authorized user, you’re not necessarily learning to use credit cards responsibly — especially if you’re not using the account or making purchases and having to pay them off on time.

Is Piggybacking Illegal?

Piggybacking is not illegal. In fact, under the Equal Credit Opportunity Act, Congress determined that authorized users cannot be denied on existing credit accounts. This rule applies even if the person being authorized is a stranger.

That said, there are situations in which becoming an authorized user is a deceptive practice and may entice you into some fraudulent situations. (More on this below.)

What Is Person-to-Person Piggybacking?

Person-to-person piggybacking involves becoming an authorized user on the account of a significant other, family member, or friend. For example, young adults often become an authorized user on their parent’s credit card as they seek to build credit for themselves.

Eventually, that young adult will have built enough credit to get a credit card of their own and will be financially stable enough to be able to pay it off on time. At this point, they can decide to drop from their parents’ account.

What Is For-Profit Piggybacking?

Here’s where things get tricky. If you don’t have a friend or family member who’s willing to make you an authorized user on their account, you can seek out the help of a tradeline service. A tradeline is another word for a revolving credit account or installment loan on your credit report.

The tradeline service can match you with a stranger who has good credit, and, for a fee, they’ll add you to their account. The cardholder receives a portion of that money, and you won’t receive a physical card or access to the account.

Tradeline services haven’t been without controversy. For one thing, the practice of purchasing a tradeline can be seen as a method of deceiving lenders into thinking you have better credit than you do. If perceived as fraud, this could have some legal ramifications.

Engaging a tradeline service can also be pricey. Depending on what type of credit you’re looking for, it may cost you anywhere from a few hundred to a few thousand dollars.

It’s also important to understand that you’re only authorized on the cardholder’s account for a short period of time. While your credit may be built in the short-term, when you’re dropped from the account, your credit score may fall as well.

Risks of Credit Card Piggybacking

In addition to the considerations above, there are other risks to be aware of when piggybacking, especially when doing so through a third party.

•   You have to give out your private information. This includes your name, address, and Social Security number. The service and cardholder may not have your best interests at heart, and providing them with your data may put you at risk for fraud and identity theft.

•   It’s not looked on favorably by lenders. Lenders look to your credit score to learn how well you’re able to manage your debts. If they learn that you’ve used a tradeline service, they may lose trust in you and be less likely to extend credit to you.

•   There’s the potential for fraud. Be on the lookout for shady tradeline companies with fraudulent practices. Beware any company that tells you that you can hide bad credit or a bankruptcy using a credit privacy number. The number they provide might actually be someone else’s Social Security number, which would put you at the heart of an identity theft scam.

•   It could hurt your credit. You might also be duped into buying an account that’s gone into default, which could hurt your credit.

•   There’s the potential for address merging, which is fraudulent. Sketchy companies may also try to use a process called address merging. This involves claiming that the authorized user lives at the same address as the account holder. This is fraudulent and indicates that you are not working with a reliable company.

•   You may not give yourself the chance to build healthy financial habits. The best way to build your credit score is to not take on more debt than you can afford and to make payments on time. If you don’t have experience with doing that, you may not learn healthy financial behaviors.

•   It could get you in over your head down the road. Building your credit to a point that doesn’t reflect your actual credit activities can land you in hot water if you qualify for a loan only to realize later you can’t actually afford it. You don’t want to end up in a place where you’re wondering if you can pay a credit card with a credit card.

Is Credit Card Piggybacking Right for You?

Credit card piggybacking may be right for you if you’re building credit for the first time and need a way to get your foot in the door.

If you do decide to try piggybacking credit, it may be best to piggyback on the credit of someone close to you. Only turn to tradeline services if there are no other options available, and make sure to carefully vet any options and consider the costs involved.

Alternatives to Credit Card Piggybacking

Piggybacking isn’t the only way to build your credit.

There are many different types of credit cards. Secured cards, for instance, require you to make a security deposit to receive a line of credit, which makes them easier for people with no credit history to qualify for. The credit limit on the card is typically equal to the security deposit amount.

You can also look for tools that allow you to get credit for paying off bills and utilities on time. For example, Experian, one of the major credit reporting bureaus, offers Experian Boost as a free service.

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

Tips for Managing Your Credit History

As you build your credit history, there are important steps that you can take to help ensure your credit score is as high as possible:

•   First and foremost, always pay all or your bills on time.

•   Next, you’ll want to have a diverse mix of credit, such as credit cards, student loans, auto loans, or a mortgage.

•   Keep your credit utilization below 30%. For revolving credit, credit utilization measures how much of your credit limit you are currently using. You can calculate it by dividing your credit card balance by your loan limit.

•   Work to keep hard inquiries at a minimum. When you apply for credit, you trigger what is known as a “hard inquiry.” These can temporarily lower your credit score, especially if there are many in a short period of time.

You’ll also want to be diligent about monitoring your credit report. You can request a free credit report from each of the three credit reporting bureaus once a year. That means, you could be checking your credit report every four months. Look for mistakes on the report and alert the reporting bureaus immediately if you spot anything that’s amiss.

Learning to read your credit report can also clue you into areas of your credit that need your attention and may be dragging down your score.

The Takeaway

Piggybacking credit — becoming an authorized user on another person’s credit account — can be an important tool for building credit. Yet, you only get a benefit with credit card piggybacking if the person’s account is in good standing. If they miss a payment, it could have a negative impact. And if you use a third-party tradeline service, you could be putting your personal information at risk.

Weigh these factors carefully before choosing to build credit using this strategy, and be sure to consider other options.

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

FAQ

Is piggybacking credit illegal?

Piggybacking credit is not illegal. In fact, Congress has said, under the Equal Credit Opportunity Act, that no authorized users can be denied on existing credit accounts, even if that credit account belongs to a stranger.

How much can piggybacking positively impact your credit score?

According to one recent study, piggybacking can build a credit score by, on average, 22 points.

Does piggybacking credit still work in 2024?

Piggybacking can still work in 2024, though credit reporting bureaus and credit scoring companies may frown on it.

Photo credit: iStock/Morsa Images

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

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

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 revolving letter of credit is a financial instrument often used in international trade to facilitate transactions between buyers and sellers. It is a type of letter of credit that allows the buyer to make multiple drawdowns (or “draws”) within a specified period, typically a year, up to a certain limit.

If you’re in the business of importing and exporting, or any type of buying and selling, a revolving letter of credit can allow for smoother transactions. Once in place, it allows both buyers and sellers to be more confident in their business arrangements. It also helps to ensure that goods arrive — and all payments are made — on time.

Here, we’ll look at the specifics of revolving letters of credit. We’ll dive into:

•   What is a revolving letter of credit

•   How a revolving letter of credit works

•   The different types of revolving letters of credit

•   Limitations of revolving letters of credit

•   The pros and cons of a revolving letter of credit

What Is a Revolving Letter of Credit?

When you hear the phrase “revolving credit,” it may sound familiar from personal finance tools you’ve used, such as credit cards and home equity lines of credits. These revolving credit accounts have a credit limit, which represents the maximum amount that you can spend. You can draw on the account up to the limit. Then, as you pay back the amount you owe, the amount of credit will rise back to its original value.

Like the revolving credit you use in your personal finances, revolving letters of credit help streamline financial transactions. However, they work in a different way.

Revolving letters of credit offer convenience and added flexibility for buyers and sellers engaged in ongoing trade relationships, as they eliminate the need to establish a new letter of credit for each transaction. More specifically, they are used to facilitate the regular shipments of goods or the delivery of services between buyers and sellers. You often see them in international trade, in which the buyer and seller are operating in two different places and/or regulatory environments.


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

How Does a Revolving Letter of Credit Work?

Here’s a step-by-step look at how revolving letters of credit work work in the business world.

•   Opening the letter of credit: The buyer and seller agree to use a revolving letter of credit for their transactions. The buyer applies for the letter of credit from their bank (called the issuing bank) and specifies the terms and conditions, including the amount and validity period.

•   Issuance: The issuing bank issues the letter of credit, which serves as a guarantee to the seller that they will receive payment for the goods or services as long as they comply with the terms and conditions of the letter of credit.

•   Shipment and presentation of documents: The seller ships the goods or provides the services to the buyer and prepares the necessary documents as specified in the letter of credit, such as invoices and packing lists.

•   Drawdown: Upon shipment, the seller presents the required documents to the issuing bank through their own bank (called the advising bank) to request payment. The issuing bank examines the documents and, if they comply with the terms of the letter of credit, makes payment to the seller.

•   Revolving feature: After the first drawdown, the letter of credit does not expire. The buyer can continue to make additional drawdowns up to the specified limit and within the validity period of the letter of credit without the need for the issuing bank to issue a new letter of credit.

•   Payment and settlement: The buyer is required to repay the issuing bank for the amount of each drawdown, typically on a predetermined schedule. The buyer can also choose to pay the entire outstanding balance at once.

•   Renewal: Once the specified period or limit is reached, the letter of credit can be renewed by the buyer and the issuing bank if both parties agree.

Recommended: How to Build Credit Over Time

Types of Revolving Letters of Credit

Revolving letters of credit can generally be subdivided into two main categories, one based on value and the other based on time.

Time-Based Revolving Letter of Credit

Some revolving letters of credit are based on time. This means a specific payment amount can be drawn down over a set time period. For example, an importer could have a revolving letter of credit worth $120,000 drawn to cover a six-month period. During that time, payments of $20,000 could be made to an exporter each month. At the end of the six-month period, the revolving letter of credit expires.

Cumulative Revolving Letter of Credit

The time-based resolving letter of credit can be subdivided again into two different subcategories: cumulative and non-cumulative revolving letters of credit. If the revolving letter of credit is cumulative, then previously unused limits can be shifted ahead and used in subsequent time periods. In the example above, if the exporter doesn’t ship any goods in the second month, then it could ship $40,000 worth of goods in month three.

This type of set-up provides the seller with a certain amount of flexibility. However, it can be riskier for the buyer who isn’t receiving goods regularly.

Recommended: How Many Lines of Credit Should I Have?

Non-Cumulative Revolving Letter of Credit

The other type of time-based revolving letter of credit is non-cumulative. This means that previous unused amounts of credit cannot be rolled over into a subsequent month. So, if the exporter in the example above doesn’t ship any goods in the second month, only $20,000 worth of goods can be shipped in each of the subsequent months.

This set-up is less risky for the buyer, because it locks the seller into shipping goods within a narrower time period and under more specific conditions. If the seller doesn’t supply the promised goods within a certain period, they cannot carry that over into a subsequent period.

Value-Based Revolving Letter of Credit

The other main type of revolving letter of credit is the value-based revolving letter of credit. It’s much like its time-based counterpart. The biggest difference is payment from the buyer is only released when they receive goods worth a certain value.

Say, for example, a revolving letter of credit is issued for $120,000 over six months for goods worth $20,000 each month. The exporter can only ship and receive payment for goods worth $20,000 each month. If, for example, they are only able to produce $15,000 worth of goods in one month, they cannot ship the goods to the seller, and the seller won’t provide payment. In this case, the value is very specific, and it really matters.

Recommended: Personal Loan vs Personal Line of Credit

Advantages of Revolving Letters of Credit

So why issue a letter of revolving credit? Here’s a look at some of the benefits they offer:

•   It can save time and money.

•   Because it is revolving, the letter of credit does not need to be reissued for each transaction during a set period.

•   It helps facilitate regular trade between a buyer and a seller.

•   It can help build trust between buyers and sellers.

•   It can incentivize sellers to manufacture a consistent level of goods, especially for non-cumulative and value-based letters.

•   It can provide flexibility in terms of the types of agreements buyers and sellers can enter into.

Disadvantages of a Revolving Letter of Credit

Despite the advantages listed above, there are some limitations and drawbacks to consider:

•   Letters of credit tend to be limited to one supplier only.

•   They don’t apply to one-time transactions.

•   Changes, such as changes to tax law, customs rules, or product design may require amendments to the agreement.

•   Bank fees may make revolving letters of credit costly, especially for applicants.

The Takeaway

If you run an importing business and you’re buying goods from overseas — especially from an exporter that represents a new business relationship — a revolving letter of credit can make things easier. It can remove some of the risk of the transactions as you build trust with this new supplier. Of course, if you’re an exporter, the same applies.

That said, it’s important to consider the limitations of using a letter of credit, in particular the cost, and weigh that against the benefits. Before agreeing to a revolving letter of credit, it’s important to explore how this financial instrument fits into your company’s overall needs and goals.

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

When should a revolving letter of credit be used?

Generally, a revolving letter of credit should be used when there is an ongoing business relationship between a buyer and a seller, and the buyer needs to make multiple transactions over a period of time. It can be particularly useful for businesses that have regular import or export requirements and want to streamline the payment process.

Who issues the revolving letter of credit?

The revolving letter of credit is issued by the buyer’s bank.

What is an irrevocable revolving letter of credit?

An irrevocable revolving letter of credit is a type of revolving letter of credit that cannot be changed unless all parties involved agree to the modifications of the contract. This provides a high level of assurance to the seller that they will receive payment as long as they meet the terms and conditions of the letter of credit.

Photo credit: iStock/Morsa Images

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

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

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

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

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/.
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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You can get a personal loan from many banks, online lenders, and credit unions. A type of unsecured loan, personal loans can be used to pay for just about any large expense.

You might use it to pay off credit card debt, an unexpected medical bill, or the cost of home renovations. Some people use these loans to fund a wedding or big vacation. Given the many ways these versatile loans can be spent, it’s no surprise that personal loans are a popular choice. Currently, 23.5 million Americans have unsecured personal loans, totaling about $245 billion.

If you’re thinking of getting a personal loan, read on to learn more about where you can get one and the pros and cons of each option.

Where Can You Get a Personal Loan?

In terms of where to get a personal loan, these loans are generally available through three main markets: banks, credit unions, and online lenders. (There are other types of personal loans available through physical storefronts and online, such as payday loans and pawnshop loans, but it’s wise to avoid these options. You’ll learn why in a minute.)

Banks

National and regional banks often offer personal loans, which you can typically apply for online or in person. A bank may be the first choice for consumers who are already account holders at that institution, especially since the loan amount can usually be deposited quickly and directly into their checking account.

Credit Unions

Credit unions are another popular option for where to source a personal loan — though generally, these loans are only available to those who are already credit union members.

Each credit union has its own eligibility requirements to open an account or otherwise do business with it, which may be based on where you live or what industry you work in. However, if you do have access to a credit union, you may find lower interest rates and more favorable terms there than at other financial institutions.

Recommended: Is It Hard to Get a Personal Loan?

Online Lenders

Online lenders have proliferated over the years. These days, a personal loan can be easy to find from one of these sources with just a few clicks.

Online lenders may offer instant or near-instant loan decisions. They also don’t require you to be a member of or an account-holder at any specific financial institution. That said, it may take longer to receive your check or transfer than it would if you were borrowing from a bank or credit union where you already hold an account.

Of course, you will want to carefully review the personal loan interest rates and fees you are offered.


💡 Quick Tip: Some personal loan lenders can release your funds as quickly as the same day your loan is approved.

Where Can You Get a Personal Loan With Bad Credit?

You can get a personal loan with bad credit from a few lenders, such as online ones and payday lenders, but it’s important to proceed with caution.

First, a little important background intel:

•   A personal loan with no collateral, also known as an unsecured personal loan, can be tough to qualify for if your credit history is less than perfect.

•   Since there’s no collateral, like a house or a car, for the lender to take if you fail to repay the loan, unsecured personal loans often come with steeper qualification requirements than other types of loans.

•   They may also have higher interest rates, especially for those whose credit could use some improvement. There are some lenders out there who specifically market their products to folks with lower credit scores — but beware. Sometimes these loans come with predatorily high interest rates and other drawbacks.

Online Private Lenders

The convenience and ubiquity of the online personal loan market is a mixed blessing. Sure, it’s easy to find a loan when you need one, but it’s also easy to fall into a bad deal.

Some online lenders specialize in offering loans for poor or no credit, but be sure to read all the fine print before you hit “submit” on your application. The loans may come with soaring interest rates, high origination fees, or hidden costs. Do your homework and vet the business you are borrowing from to make sure it’s legitimate. You may want to check with the Better Business Bureau to search for any complaints on file and for reliable, verified reviews.

Payday Lenders

Payday loans have been around for a long time, but that doesn’t mean they’re a good option.

Designed to be repaid quickly (i.e., at the borrower’s next payday), these short-term cash loans may be for small amounts, but often come with astronomical interest rates. According to the Consumer Financial Protection Bureau, it’s not uncommon for these quick-turnaround loans to have APRs as high as 400%!

In almost every instance, when comparing payday loans vs. personal loans, payday loans are worth avoiding. Other forms of unsecured loans will likely come with lower interest rates and more favorable repayment terms. Fortunately, it is possible to find loans from reliable lenders — even with imperfect credit.

Banks and Credit Unions

You can get a personal loan with bad credit from a few lenders, such as online ones and payday lenders, but it’s important to proceed with caution.

First, a little important background intel:

•   A personal loan with no collateral, also known as an unsecured personal loan, can be tough to qualify for if your credit history is less than perfect.

•   Since there’s no collateral like a house or a car, for the lender to take if you fail to repay the loan, unsecured personal loans often come with steeper qualification requirements than other types of loans.

•   They may also have higher interest rates, especially for those whose credit could use some improvement. There are some lenders out there who specifically market their products to folks with lower credit scores—but beware. Sometimes these loans come with predatorily high interest rates and other drawbacks.

Another place where you can go to get a personal loan of this sort is a bank or credit union. Each financial institution sets their own qualification requirements for their unsecured personal loans, so it’s worth shopping around to find the best fit for your financial needs. Additionally, they may have other products that could work for you, like secured credit cards or share-secured loans.


💡 Quick Tip: Just as there are no free lunches, there are no guaranteed loans. So beware lenders who advertise them. If they are legitimate, they need to know your creditworthiness before offering you a loan.

What Are Some Pros and Cons of Different Types of Lenders?

Now that you’ve learned about the main options for personal loan shopping, you can figure out which kind of lender is right for you. Each alternative comes with its own pros and cons. Here are some things to consider while you’re browsing.

Personal Loans From Banks

Personal Loans From Credit Unions

Personal Loans From Online Lenders

Choosing a Personal Loan Lender

No matter where you choose to apply for a personal loan, the best way to determine whether it’s the right loan for you is to look at the fine print. The lender matters less than the loan, and knowing what you’re agreeing to ahead of time is key to avoiding an unpleasant financial surprise.

Here are the most important factors to look for when shopping around for a personal loan:

•   Fees, such as origination fees, early repayment penalties, and late fees, can increase the total amount you’ll spend on your loan in no time. Ideally, you’ll want to look for a lender that charges few fees — or none at all.

•   Interest rates can vary widely with unsecured personal loans, from as low as 4% to as high as 30% or more. While your specific options will vary based on your credit history and other financial information, it’s good to shop around for the lowest possible interest rate.

•   Loan amount caps may be relatively small (e.g., $1,000) or very large ($100,000 or more). Whatever your financial need, you want to ensure your lender will offer enough for you to cover whatever expense you’re paying for.

Recommended: Personal Loan Calculator

The Takeaway

There are many personal loan lenders to choose from, including banks, credit unions, and online lenders. Whether you need money to pay for an unexpected expense, such as a car repair, or you’re planning the ultimate 40th birthday party, it’s wise to shop around and compare interest rates, fees, and speed of funding.

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

Where is the best place to get a personal loan?

In terms of where to get a personal loan, there isn’t one “best” place. When comparing banks, credit unions, and online lenders, look at interest rates, fees, customer reviews, and how quickly the loan would fund to determine the option that suits you best.

Where is the best place to get a small personal loan?

Where to go to get a personal loan depends on a variety of factors. Would you be more comfortable working with a large lender or a small, community-based lender for your small loan? Do you already have an account at a financial institution that also makes personal loans? It might also depend on how much you want to borrow because different lenders have different borrowing ranges.

Where is the easiest place to get a personal loan?

If you’re looking for where you can go for a personal loan, it might be best to start at a financial institution where you already have an account. In that case, your financial information will be on record, making the process faster and easier. Although online lenders may promise super-fast funding, be sure to research options carefully and make sure the business is legitimate and interest rates are affordable.

Photo credit: iStock/solidcolours

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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Car sales professionals make an average of $103,042 a year, according to Salary.com. While that’s more than what the average American worker earns annually, the job often requires long hours and your income may depend on how many cars you sell.

Let’s dive into what car salesmen do and how much they can make.

What Are Car Salesmen?

Car salespeople help customers shop for cars. Typical duties include answering questions about the cars on the lot, arranging test drives, and explaining financing options, warranties, and specifications.

Being able to build relationships with customers and close deals can help you succeed as a car salesman. Since car salespeople work directly with customers, the job may not be the best fit for introverts.


💡 Quick Tip: Online tools make tracking your spending a breeze: You can easily set up budgets, then get instant updates on your progress, spot upcoming bills, analyze your spending habits, and more.

How Much Do Starting Car Salesmen Make a Year?

The average salary for entry-level car sales positions in the United States is $38,680 per year, according to ZipRecruiter data. The pay for entry-level jobs in car sales will likely differ based on the dealership’s size, location, and car brand.

While some employers pay a base wage, others offer commission-based pay. Base wages tend to provide a more consistent monthly income, usually between $2,000 and $4,000. With commission-based compensation, you may earn a portion of each sale, typically between 20% and 30%.

What Is the Average Salary for a Car Salesman?

If you’re looking to enter the field, you may wonder, how much does a car salesman make a year?

As mentioned above, the average annual salary for a car salesman is a competitive $103,042, per Salary.com, though pay can range between $88,987 and $119,501. High-achieving salespeople may make more than six figures, particularly if they are employed by luxury car dealerships or in regions with wealthy buyer demographics.

Commission-based arrangements are also a major factor in determining overall income.

Recommended: What Trade Makes the Most Money?

What Is the Average Car Salesman Salary by State for 2024?

A car salesman may not be the highest-paying job in most states, but it can provide a good living. This is especially true if you happen to work in a state like California, New Jersey, or Alaska, where the position tends to pay more. Let’s see how salaries in 2024 vary by state.

Source: Salary.com

Car Salesman Job Considerations for Pay and Benefits

Flexible schedules and possible commissions and bonuses are some attractive parts of being a car salesman. Plus, dealerships might provide extra incentives, such bonuses for hitting or exceeding sales goals, corporate cars, and expense reimbursements. Retirement plans, health insurance, and employee car discounts may also be included in the benefits package.

Recommended: Work-From-Home Jobs for Retirees

Pros and Cons of a Car Salesman Salary

As with any profession, there are advantages and disadvantages of working as a car salesman.

Pros:

•   Performance-driven earnings. Commission-based pay can boost your income, especially during strong sales periods.

•   Flexibility. Compared to standard 9–5 jobs, the position may offer flexibility in terms of work hours.

•   Career advancement. A successful car sales career can lead to managerial roles and a path for professional advancement within the dealership.

•   Diverse work environment. Helping customers find a car that fits their needs and budget can be professionally satisfying.

•   Incentives and perks. Dealerships often provide extra bonuses and perks, such car discounts for staff members or opportunities for career advancement.

Cons:

•   Income volatility. If you earn a commission, your earnings could decrease during slow times.

•   Pressure to perform. Reaching sales goals is essential, and the stress of closing deals might lower your level of job satisfaction.

•   Long hours. In order to accommodate consumers, you’ll likely need to work weekends and evenings.

•   Customer relations. Resolving complaints and interacting with a variety of client personalities can be difficult.


💡 Quick Tip: Income, expenses, and life circumstances can change. Consider reviewing your budget a few times a year and making any adjustments if needed.

The Takeaway

How much does a car salesman make? These professionals have the potential to earn $100,000 or more a year, especially if they can earn a commission based on their sales. They also have the chance to advance their careers and gain a variety of work experiences. That said, the job often requires long hours, income may not be steady, and there’s often a pressure to hit sales goals.

Whatever type of job you pursue, you’ll want to make sure your earnings can cover your everyday living expenses. Establishing a budget — and using online tools to help monitor spending — can help you make progress toward your financial goals.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

With SoFi, you can keep tabs on how your money comes and goes.

FAQ

Can you make $100k a year as a car salesman?

Yes, it is possible to make $100,000 or more as a car salesman. Your salary may depend on your location, base pay, the car brand being sold and how many cars you sell each month.

Do people like being a car salesman?

Some people love being a car salesman, but the job is not a good fit for everyone. Those who enjoy making sales and building customer relationships may enjoy a career as a car salesman.

Is it hard to get hired as a car salesman?

The difficulty of getting hired as a car salesman depends on factors such as the dealership, car brand, location, and your experience. If you’re a people person, willing to put in time, and eager to make sales, you can likely find a position at a dealership.

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

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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