When you choose a bank for your daily checking and savings needs, you can choose between a national bank, a smaller regional bank, credit unions of varying sizes, and even online banks and financial technology companies.
Since early 2023, when Signature Bank and Silicon Valley Bank both experienced failures after customers pulled out large amounts of money during bank runs, banking customers may feel more comfortable choosing a national bank.
Although the U.S. government took extraordinary measures to protect the assets of SVB and Signature Bank customers, and deposits held in the accounts were FDIC insured, many customers were still rightfully concerned about gaining access to their money in a timely manner.
After the banking crisis of 2008, the Federal government declared banks like JPMorgan Chase, Bank of America, Citibank, and Wells Fargo as “too big to fail.” But these aren’t the only national banks or credit unions available.
You might think that smaller online banks may have lower fees, while small local banks are known for friendly and responsive customer service. But the national banks on this list blend the best of all worlds: low fees, high marks for customer satisfaction, ways to avoid overdraft fees, convenient ATM networks, and a variety of banking products.
16 Best National Banks
Here are the 16 best national banks that offer exceptional services, excellent customer support, and innovative banking solutions to meet all of your financial needs.
1. SoFi – Best for Digital Banking & High Yields
SoFi became a nationally chartered online bank in 2022, after acquiring Golden Pacific Bancorp, Member FDIC. Originally known for its vast array of loan products, including private student loans, today SoFi has a combination checking and savings account, or a cash management account, with no monthly service fee.
SoFi also has no minimum balance requirements, no overdraft fee, and overdraft protection up to $50 with qualifying direct deposits each month. You can bank for free at any of 55,000+ fee free Allpoint ATMs nationwide.
As an online bank, SoFi offers higher interest rates than you may find at brick and mortar banks. Earn up to 4.20% APY on your savings account balance and 1.20% on money in your checking account. When you use your SoFi debit card at select local businesses, you can earn up to 15% cash back.
SoFi offers two tiers of accounts: SoFi and SoFi Plus. To qualify for the “freemium” SoFi Plus membership, bank customers must have qualifying direct deposits. Plus, when you sign up before December 31, 2023, you can earn a cash bonus of $250 when you set up direct deposits of $5,000 or $50 with a direct deposit as low as $1,000.
SoFi Plus members receive loan rate discounts, bonus rewards, access to special entertainment events and more, making SoFi a unique company when it comes to online banks.
2. Discover Bank – Best for Cash Back
Discover may be best known for cashback and rewards credit cards. But its online banking products are some of the best you’ll find among national banks.
With no monthly fees and no minimum balance, your Discover Cashback checking account pays 1% cashback on up to $3,000 worth of debit card purchases monthly. You’ll never pay overdraft charges, and you can withdraw cash at a network of 60,000+ fee free ATMs.
You can qualify for overdraft protection by linking your Discover Bank savings account. Discover Savings pays a high 3.90% APY with no minimum deposit required.
Other Discover Bank deposit accounts include CDs with terms from 3 months to 10 years, and a money market account that pays 3.80% APY for balances under $100,000 and 3.85% on balances $100,000 and up.
For questions or help with your account, you can reach a U.S.-based customer service representative for Discover Bank by phone, 24/7/365.
3. Chase Bank – Best for Credit Card Rewards & Referral Bonuses
As the world’s largest national bank, JPMorgan Chase Bank doesn’t need to do much to entice customers. People will choose Chase based on its name, reputation, and more than 4,700 convenient branch locations across the U.S.
However, Chase happens to have one of the best bonuses for new customers and a generous referral bonus program when existing customers refer their friends. This, coupled with a robust and easy-to-use mobile app and a variety of checking, savings and investment services, puts Chase on our list of top national banks in the U.S.
Chase is currently offering new Chase Total Checking customers a $200 bonus when they open a new account and set up direct deposit within the first 90 days.
New or upgrading Chase Private Client customers can earn a $3,000 bonus with a deposit of $500,000 or more within the first 45 days of account opening. Deposits of $150,000 to $249,999 earn $1,000 and cash deposits of $250,000 to $499,999 earn $2,000. You must keep the money in your J.P. Morgan Wealth Management or JPMorgan Chase deposit accounts for 90 days to qualify.
In addition to Chase Total Checking, the bank’s most popular checking account, and Private Client services, Chase also offers other checking and savings accounts.
Chase Secure Banking has a $4.95 monthly fee and no overdraft fees. Chase Premier Plus Checking offers a few added benefits beyond Chase Total Checking, including ATM fee rebates up to four times per statement cycle, a linked personal checking account with no monthly fees, and a 0.01% interest rate on balances.
Chase also offers bank accounts for kids, teens, and college students, as well as CDs, savings and money market accounts, mortgages, loan products, and a full array of top-rated rewards credit cards.
If you have multiple Chase accounts, it’s easy to manage them all within the mobile app.
4. Chime – Best for Building Credit
Chime is a financial technology company backed by Stride Bank, Member FDIC, and Bancorp Bank, Member FDIC. It is not a bank, itself, but offers some of the same features, including online banking, a debit card, and direct deposit up to two days earlier than some other banks.
Chime has no monthly service fee, no overdraft fee, and no minimum balance requirements. For customers who need a little boost to make it from paycheck to paycheck, Chime offers fee-free overdraft up to $200 through the SpotMe5 program and a credit builder secured Visa credit card with no annual fees, interest or minimum security deposit.
Use your Chime debit card at any of 60,000+ fee free1 ATMs in the Allpoint, MoneyPass or Visa Plus Alliance ATM networks. Out of network ATM fees may apply, otherwise.
You can qualify for Chime’s SpotMe program with a single direct deposit of $200 or more during any monthly statement period. If you process a transaction that would put you into overdraft, Chime will accept the transaction even if it puts your balance into the negative by up to $200.
The Credit Builder Secured Visa card carries the same requirements of a $200 monthly minimum direct deposit. You can build your credit and raise your credit score with responsible use of the card.
5. Citi® – Best for Large Cash Deposits
The third of the four largest national banks in the U.S. based on assets, Citi, owned by Citigroup, is best for high net worth customers or those with large cash deposits divided among Citi checking, savings, and other accounts.
Currently, you can earn a generous cash bonus of $200 to $2,000 when you open a qualifying Citi checking account and meet specific minimum opening deposit requirements. Your bonus will be determined by your account balance on the 20th day after opening the account. Funds must remain in the account for an additional 60 days after the 21st day.
Citi offers multiple checking accounts to meet various customers’ financial needs, all with monthly fees that are easy to waive if you hold the required minimum balance. The bank accounts include:
Citibank
Citi Priority, which includes travel perks and access Citi Personal Wealth Management advisors
Citigold, relationship banking and investment services
Basic Banking and ATM access
Access Account, a debit account with no paper checks
For the Basic Checking account, you’ll need to maintain a $1,500 minimum balance to waive the fees. The other accounts have larger minimum balance requirements to avoid monthly maintenance fees and take advantage of other perks, up to $200,000 for a Citigold account.
All accounts provide access to personal banking at Citi branches and access to more than 65,000 fee free ATMs across the U.S. All accounts except for Basic and Access accounts also have no fees at ATMs outside the Citi network.
Like all the larger national banks on this list, Citi has a full gamut of rewards credit cards, savings and money market accounts, and high-yield CDs.
6. CIT Bank – Best for High Interest Rates
CIT Bank, a division of First Citizens Bank, has earned awards and accolades for customer satisfaction, rated by American Banker as #1 for “delivering the most humanized experience in banking.”
You should be aware that deposits in First Citizens Bank & Trust Company, Member FDIC, are not separately insured. This only matters if you hold more than $250,000 in any single account type, such as checking or savings, in both First Citizens Bank and in CIT Bank.
CIT is the online only banking arm of First Citizens Bank, with high-yield savings accounts, CDs, money markets, and eChecking, all with no monthly fees and no overdraft fees. You won’t pay any ATM fees at CIT Bank machines, and CIT Bank reimburses up to $30 per month when you use out-of-network ATMs.
CIT offers 0.25% APY on checking when you hold more than $25,000 in your account, and 0.10% APY on balances under $25,000. The bank has high interest rates for savings, offering customers a 4.85% APY on balances of $5,000 or more with the Platinum Savings account.
CIT Bank has two other savings accounts as well:
Savings Connect, with a 4.60% APY
Savings Builder, which requires a minimum balance of $25,000 or a $100 monthly deposit to earn 1.00% APY
You’ll need a $100 minimum deposit to open a checking or savings account at CIT Bank.
7. Bank of America – Best for College Students
As the second largest of the best national banks, behind Chase, Bank of America has the full gamut of banking products, with three checking accounts plus a student account, savings, CDs, and investment products.
It’s easy to waive monthly maintenance fees on a checking account with a minimum daily balance, direct deposits, combined balances across eligible linked Bank of America accounts, or by enrolling in their Preferred Rewards programs.
We like the Advantage SafeBalance banking for kids, teens, and college students under 25 years old. They have no monthly fee and no overdraft fees. Teens ages 16+ can have sole ownership of the account.
For everyone else, the bank offers Advantage Plus and Advantage Relationship checking accounts with easy ways to waive the monthly fees with direct deposit or a minimum daily balance.
When you open a new checking account, you can qualify for a $100 bonus when you receive qualifying direct deposits of at least $1,000 within 90 days of opening the account.
Of course, Bank of America also has CDs, and a savings and money market account. Plus you can invest with Merrill. All of these deposit accounts count toward your Preferred Rewards membership.
When you have a combined average daily balance of at least $20,000 for three months, you’ll qualify for the rewards program.
8. U.S. Bank – Best for Military Members & High Balance Savings
U.S. Bank offers the Bank Smartly checking account so you can earn interest on your money. The current interest rate is just 0.01% APY on all checking balances. You’ll pay a $6.95 maintenance fee, but this is waived if you meet minimum deposit requirements or if you are a member of the U.S. military.
You can link your Bank Smartly checking account to a standard savings account or Elite Money Market to earn even more. To avoid fees on your savings account, you’ll want to keep a $300 minimum daily balance or a $1,000 average monthly collected balance. If you are already a Bank Smartly customer, you can enroll in Smart Rewards to waive savings account fees.
The Elite account is better for those with high balances. You can earn up to 4% APY on balances from $25,000 up to just under $500,000.
The appeal of U.S. Bank is in its high ratings for banking satisfaction across the board from customers. U.S. Bank earned accolades for having the best mobile app, the best digital mortgage tools, the best customer service features, and best mobile check deposit capabilities. These factors all contribute to its ranking as a best national bank.
9. Axos Bank – Best Online Bank
Axos is an online only bank with a rewards checking account that delivers up to 3.30% APY, with no fees and unlimited ATM fee rebates for out-of-network ATMs.
To earn the maximum APY, you’ll need to set up direct deposit and Axos Bank’s free Personal Finance Manager for 0.70% interest. Then, open an investment account and take out an Axos personal loan or auto loan and earn another 2.60% annual percentage yield on your checking account balance.
Axos also offers an Essential Checking account with early direct deposit and no fees, and a Cashback Checking account, which gives you 1% cash back on debit card purchases, along with no maintenance fees and unlimited domestic ATM fee reimbursements.
Voted the best online bank by many top personal finance sites, Axos Bank offers more than just high interest, no fee checking.
Axos Bank offers CDs with terms between 3 and 60 months and a savings account with 0.61% annual percentage yield, with interest compounded daily. You can also find personal loans, car loans, mortgages, and investment products.
Like other national banks, Axos Bank provides FDIC insurance up to $250,000 or $500,000 for joint account holders. But you can expand your coverage up to $150 million with Axos Bank InsureGuard+ Savings from IntraFi Network Deposits.
Axos splits up your large deposit into multiple accounts across several banks, each covered up to $250,000. If you are dealing with a substantial amount of cash and want your savings protected at a single bank, Axos may be a good choice for you.
New customers can earn a $100 welcome bonus by opening an account with just a $50 minimum opening deposit.
10. Truist Bank – Best for Relationship Banking & Innovative Savings Perks
Truist Bank is one of the top 10 largest national banks, formed as a merger between BB&T and SunTrust in 2019. Called “the biggest bank you’ve never heard of” by CNN Business, Truist holds assets of $574 billion and has been growing steadily since the merger.
Truist offers checking and savings accounts, CDs, and credit cards. Truist checking and savings customers can earn perks and benefits. This includes access to Long Game, a savings game app that lets you earn cash when depositing into your Truist savings account. It also includes bonus rewards on your Truist credit cards.
Truist has four levels of relationship banking in its Truist One checking account. This means the more you deposit, the more perks you will receive, up to a 50% loyalty bonus on Truist credit cards, and a discounted annual fee for a Delta SkyMiles debit card. Benefits for relationship banking begin at $10,000 in combined average monthly balances for Truist deposit accounts.
Your Truist checking account has a $12 monthly fee, which is easy to waive with $500 or more in direct deposits each month or a $500 minimum balance across all Truist deposit accounts. Truist personal loan, mortgage or credit card customers also pay no fees on their Truist checking account.
You can also waive the monthly fee with a linked Small Business checking account or if you are a student under the age of 25. You’ll need a $25 minimum opening deposit for a Truist One checking.
Customers with lower income or just getting started establishing their finances can benefit from Truist Confidence checking and savings accounts. The account has just a $5 monthly maintenance fee, which is easily waived.
11. Capital One – Best for High Interest Rates at a Brick and Mortar Bank
Like Chase Bank, Capital One is well known for its top-rated rewards credit cards. The company is also one of the best national banks with a savings account and CDs offering interest rates higher than the national average.
Capital One Performance 360 savings has a 3.90% APY, no monthly maintenance fees, and no minimum deposit to open your account. A Capital One 360 Performance checking account, similarly, has no monthly maintenance fee, overdraft protection through your linked savings account, and early direct deposit.
You can bank with no fees at a network of 70,000+ ATMs nationwide, and can deposit cash easily at CVS retail locations. Although you must open your Capital One Performance account online, you can receive personalized service and deposit cash at any Capital One bank branches or Capital One Cafes.
12. PNC Bank – Best in East and Southwest
PNC Bank is a large, national bank with branch locations across 29 states. Most branches are in the east, south, and southwest, although you will also find branch locations in some Midwest states.
PNC Bank’s online checking account is called Spend and it links to the PNC VirtualWallet. You can add a savings account, called Reserve, or upgrade to the Performance Select product with two tiers of savings and double layer overdraft protection.
When you set up your VirtualWallet with PNC Bank and open your Spend account, you can earn a $50 bonus.
Combining your Spend account with a PNC Bank Reserve account yields even more benefits. Earn a $200 bonus when you qualify. Finally, if you open a Performance Select VirtualWallet, you could earn $400.
Each account comes with a low monthly fee that is easily waived through qualifying monthly direct deposits or by meeting minimum balance requirements.
13. Wells Fargo – Best for Checking Account Options
Wells Fargo, one of the “big four,” is the fourth largest of the best national banks in the U.S. It is known for having many convenient bank locations, with 4,700 branch locations.
The vast number of branches across the country puts it top on our list for in-person banking and customer satisfaction.
Plus, we also rated it best for various checking account choices for everyone from children to retail investors.
Like the other national banks on this list, Wells Fargo has checking, savings, and CD accounts. The bank has four checking account options for consumers at various stages of their financial lives:
Clear Access Banking, with no overdraft fee and a low $5 monthly fee, waived for teens and young adults ages 13 to 24
Everyday Checking, the most popular bank account, with optional overdraft protection
Prime Checking, offering discounted interest rates for loans and higher interest rates for linked CDs and savings accounts
Premier Checking, a relationship banking service with 24/7 support and discounts on investing services
It’s easy to waive the $10 fee on Everyday Checking with a $500 minimum daily balance or $500 in monthly direct deposits. Waive the $25 fee on your Prime checking with $20,000 in linked balances. Similarly, your Premier Checking account will be free with $250,000 in linked balances, including investments with the bank’s Advisors.
You’ll need a $25 minimum opening deposit to open your account.
14. Ally Bank – Best Online Only Bank for Savings
Ally Bank is widely recognized as one of the best national online banks. It has very few fees, including no maintenance fee, no overdraft fee, and no ACH fee (even on expedited transfers). Plus, you’ll earn interest of 0.25% in your checking account and 3.85% APY on savings, including money you have allocated into various buckets.
We rated Ally Bank as the best online only bank for savings, not just because of the high interest rate, but because it offers so many ways to manage your money and ramp up your savings efforts.
You can set up recurring transfers into your savings account for specific goals or just to build up your emergency coffers. You can choose to round up transactions made with your Ally Bank debit card, or even electronic payments and checks. When Ally Bank finds at least $5 in “round-up” savings, it will be transferred automatically to your checking account.
Finally, Ally Bank analyzes your checking account periodically to reveal extra funds that are “safe to save.” Ally Bank automatically transfers that money for you. But you can transfer it back whenever you’d like.
In addition to these savings benefits, Ally Bank lets you access your money with your debit card with no fees at any of 43,000+ Allpoint ATMs. The online bank also refunds up to $10 in fees charged by out-of-network ATMs.
You can avoid stress and overspending with the Overdraft Transfer Service, which automatically transfers money from your Ally Bank savings account into checking. If you exceed six transfers or six savings withdrawals per month, Ally Bank will reimburse those fees, too.
You can also apply for CoverDraft℠ Coverage, which will cover up to $250 in charges that would put your account in the negative. You’ll qualify 30 days after you deposit at least $100 into your checking account. If you receive qualifying direct deposits of at least $250 two months in a row, you can increase your coverage to $250.
15. TD Bank – Best for Overall Banking Satisfaction
TD Bank, deemed America’s most convenient bank for its number of branches, branch hours and excellent customer service, blends the best of brick and mortar banks with easy online banking.
Most TD Bank locations are open seven days a week, including Sundays, with extended hours beyond what most brick and mortar banks provide. Most TD Bank branches are located across the East Coast, with locations in 15 different states and Washington, D.C.
TD Bank is the 7th largest bank in the U.S. based on deposits, with 1,668 branch locations nationwide. You can also reach customer service by phone, 24/7/365, which earns TD Bank high marks for banking satisfaction.
TD Bank offers six checking accounts for customers in various life stages:
TD Essential Banking
TD Convenience Checking
TD Beyond Checking
TD Simple Checking
TD 60 Plus Checking
TD Student Checking (for ages 17 to 23)
Currently, TD Bank is offering sign-on bonuses for new customers who open a TD Beyond or TD Convenience bank account. You’ll need a qualifying direct deposit (or more than one) totaling $2,500 within the first 60 days to earn $300 with TD Beyond, and a direct deposit of just $500 within the first 60 days to earn $200 with TD Convenience.
16. Schwab Bank – Best for Investors
Schwab may be best known as an investment service, but the bank was rated highest in banking satisfaction with checking accounts from J.D. Power & Associates four years running.
If you have a Schwab investment account, or are considering opening one, Schwab could be the best choice in banking for you.
The Schwab Bank Investor checking account has no foreign transaction fees, no minimums, and unlimited ATM fee rebates. Plus, earn 0.45% annual percentage yield on checking. Schwab’s savings account offers 0.48% APY.
Schwab also offers exceptionally high interest rates for CDs, with up to 5.40% APY and terms as short as 30 days. You’ll receive FDIC protection exceeding the federal maximum because you can purchase CDs from multiple banks, all through Schwab investment.
Methodology: How We Chose the Best National Banks
We evaluated a variety of banks and credit cards, taking into consideration the:
Variety of products
Interest rates
Monthly fees
ATM fees and ATM fee reimbursement
Branch locations and number of branches
Minimum deposit requirements
Fraud protection and security
We also looked at consumer reviews, and drew on the general reputation of each bank to find the best national bank.
Finding the Best National Bank
Now that we’ve explored the specifics of the best online banks and brick and mortar banks nationwide, you probably still have questions about which one is really the best national bank.
Let’s compare the three largest in the U.S. based on number of branches, interest rates, and overall banking satisfaction.
Chase vs. Wells Fargo
For the largest nationwide bank, Chase offers excellent banking satisfaction with an A+ rating from the Better Business Bureau, 4,800 branch locations, and an easy and intuitive mobile app. If you are shopping for a bank credit card, Chase also offers some of the best rewards cards available today.
Wells Fargo rivals Chase when it comes to number of branches, with roughly 4,700 locations across the U.S. It’s somewhat easier to waive the checking account fees at Wells Fargo. Wells Fargo offers higher interest rates for savings, with a 0.15% APY compared to Chase’s 0.01%.
Both banks have lower interest rates than you might find at online banks. However, if you are looking for national banks with a solid reputation, many branches, and high marks in banking satisfaction, either Chase or Wells Fargo would be a good choice.
Wells Fargo vs. Bank of America
Bank of America and Wells Fargo are the second and third-largest banks in the U.S. based on assets. BofA only has 4,000 branches compared to Fargo’s 4,700, but BofA boasts more ATMs nationwide.
BofA stands out when you join the Preferred Rewards program because you can waive the fees on your bank account and enjoy perks, bonus rewards on BofA credit cards, and rate discounts on loans.
If you have a large balance or are looking for an investing platform through your bank, BofA may be your best choice. On the other hand, Wells Fargo offers high interest rates on savings and convenient branch locations nationwide.
Common Questions
People have many questions related to whether an online bank is better than a traditional bank or whether a local bank is better than one of the largest national banks. We break it all down here.
Which is better, an online bank or a brick-and-mortar bank?
If you are looking for the highest interest rates and generous rewards programs, you are highly likely to find them at online banks. However, there are some advantages to a brick and mortar bank, including in-person service at local branches, the availability of paper checks, and easy ways to deposit cash in person or at branch ATMs.
You should expect the best national online banks and the best brick and mortar banks to have robust mobile apps, easy-to-waive fees, and fraud protection.
Make sure whatever bank you choose is “Member FDIC,” which means your deposits are insured up to $250,000 per account holder, per account type. That means joint accounts have $500,000 worth of FDIC insurance protection.
Is my money safer in a national bank vs. a regional bank (or a national credit union vs. a regional credit union)?
All banks on this list are Member FDIC, which means they are insured to the maximum allowable limit of $250,000 per account holder, per account type. Credit unions are covered up to the same limits by the National Credit Union Administration.
Many online banks are insured up to $2 million or more. These financial institutions divide cash deposits among multiple partner banks. Each bank insures deposits up to the maximum limit allowed by the Federal Deposit Insurance Corp. Read the fine print to determine your coverage limits when you choose a bank.
Beyond that, your money should be equally safe in a national bank, a smaller bank, or a credit union of any size. Also look for features such as fraud protection, fraud alerts via text, email or in the mobile app, and enhanced website security measures. You should also be able to lock and unlock your debit card in the mobile app if you misplace it or believe it may have been stolen.
What makes big banks different from smaller banks?
By definition, big banks will have larger market capitalization, which represents the total value of a bank’s stocks. Big banks will also hold more assets. For instance, Chase, which is the world’s largest financial institution, holds $3.2 trillion in assets. The second-largest national bank, Bank of America, possesses $2.41 trillion in assets. Larger financial institutions may also have more bank branches.
In many other ways, big national banks and smaller banks are similar, especially today. Customers want specific features and are unwilling to compromise on things like fee-free ATMs, no monthly fees, early direct deposit, and an intuitive mobile app.
How much interest do the best big banks pay?
In general, some of the largest national banks do not have the highest interest rates for savings and very few offer interest earning checking accounts.
Capital One 360 and Discover are two of the best national banks that offer interest on checking. To earn a higher APY with one of the largest national banks, you might want to consider CDs.
Are national banks better than other kinds of banks?
National banks aren’t necessarily better or worse than other kinds of banks. They may have more convenient branch locations, a higher number of branches, and a greater variety of products, but they might also have higher fees. Decide what’s most important to you when you choose a bank.
If you’d prefer to trust your money with one of the largest national banks, with a large market capitalization, high value, and branches nationwide, consider opening your checking and savings accounts with one of the best national banks on this list.
Chime is a financial technology company, not a bank. Banking services and debit card provided by The Bancorp Bank N.A. or Stride Bank, N.A.; Members FDIC. Credit Builder card issued by Stride Bank, N.A.
The Chime Credit Builder Visa® Card is issued by Stride Bank, N.A., Member FDIC, pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa credit cards are accepted.
1. Out-of-network ATM withdrawal fees may apply with Chime except at MoneyPass ATMs in a 7-Eleven, or any Allpoint or Visa Plus Alliance ATM.
5. Chime SpotMe is an optional, no fee service that requires a single deposit of $200 or more in qualifying direct deposits to the Chime Checking Account each at least once every 34 days. All qualifying members will be allowed to overdraw their account up to $20 on debit card purchases and cash withdrawals initially, but may be later eligible for a higher limit of up to $200 or more based on member’s Chime Account history, direct deposit frequency and amount, spending activity and other risk-based factors. Your limit will be displayed to you within the Chime mobile app. You will receive notice of any changes to your limit. Your limit may change at any time, at Chime’s discretion. Although there are no overdraft fees, there may be out-of-network or third party fees associated with ATM transactions. SpotMe won’t cover non-debit card transactions, including ACH transfers, Pay Anyone transfers, or Chime Checkbook transactions. See Terms and Conditions.
From the Kansas City Chiefs to St. Louis’s Gateway Arch, Missouri has plenty to offer both residents and visitors. As a result, there are plenty of Missouri banks. In fact, it can be tough to narrow down the options.
17 Best Banks in Missouri
From online banking apps to small community banks and large financial institutions, Missouri has a little of everything. Here are some of the best Missouri banks to kick off your search.
1. First Midwest Bank
Founded in Poplar Bluff, First Midwest Bank has branches and ATMs in Poplar Bluff, Columbia, Greenville, Piedmont, Puxico, Van Buren, and Williamsville. Currently, First Midwest is offering $.10 cash back per swipe of your First Midwest Dime-a-Time debit card.
Recently, First Midwest merged with Old National Bank to expand its service area and offerings to Indiana, Illinois, and Kentucky.
Pros:
Cash back with each debit card purchase
No monthly maintenance fees with most checking accounts
Wide variety of account options
Cons:
2. U.S. Bank
Missouri residents looking for a national bank with branches in Missouri might like U.S. Bank. You’ll find branches and ATMs in 25 different states, along with a mobile app that allows you to transfer funds, pay bills with bill pay, and split a check with Zelle.
U.S. Bank’s current special on CDs means you can earn up to 4.75% APY. Small business owners should consider U.S. Bank’s current checking bonus, which offers $500 if you open a new account and deposit $5,000. Deposit $15,000 and earn a $750 bonus.
Pros:
Robust mobile banking features
Up to $750 bonus for business checking account
Wide range of banking services
Cons:
3. Chime
Chime is a mobile banking solution with competitive interest rates on savings accounts. You’ll get fee-free1 ATM access nationwide at any MoneyPass, Allpoint, and VisaPlus Alliance ATM, as well as access to your direct deposit up to two days early2. Electronic deposit customers also qualify for up to $200 in overdraft protection through SpotMe5, although Chime charges no fees for overdrafts.
Pros:
No fees on checking account
Up to 2.00% APY3 on savings accounts
No overdraft fees
Cons:
No physical branches
No cash deposit options
4. GO2bank
GO2bank is an online banking solution with a full-featured mobile app and access to free ATM withdrawals and deposits through partners. Your account with GO2bank will include a checking account with no maintenance fees and a high-yield savings account.
If you’re interested in building credit, you can qualify for a GO2bank Secured Visa Credit Card, which reports your on-time payments to credit bureaus and requires no credit check.
Pros:
Fee-free checking account with direct deposit
Up to 4.50% APY on savings accounts
Cash deposits at 90,000+ retail locations nationwide
Cons:
No physical branches
Direct deposit necessary for free checking
5. Commerce Bank
Kansas City residents should consider Commerce Bank, a community bank with locations throughout the area. You’ll also find ATMs and branches throughout Missouri, as well as in 10 other states. You’ll find a wide variety of checking account and loan options, as well as savings accounts and CDs.
Not only will you get in-person customer service at a branch, but you can chat with a live banker at any time in the Commerce Bank CONNECT app. You’ll choose the banker and connect with the same representative every time.
Pros:
Branches and ATMs in 11 states
Free account includes full mobile banking services
Competitive rates on loans
Cons:
No fee-free ATMs outside the service area
Low interest rates on savings accounts and CDs
6. Regions Bank
With branches in Missouri, Alabama, Arkansas, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, and Texas, Regions Bank is a great option if you travel within the Midwest and Southeast.
Regions Bank offers a variety of banking services, including wealth management services and support for small business owners. With DepositSmart ATMs, you can skip the branch and deposit your funds at an ATM.
Pros:
DepositSmart ATMs let you deposit cash and checks without visiting a branch
Flexible requirements to waive checking account fees
Checking accounts for students and seniors
Cons:
Low rates on savings accounts
No branches or ATMs outside the Midwest and South
7. Axos Bank
If you don’t need a local branch, online banking might be an option. Axos Bank offers online services through its website and mobile banking app. There are multiple checking account options, including accounts with no monthly maintenance fees and rewards.
Axos offers unlimited ATM fee reimbursements, so you can use your debit card anywhere in the U.S. Currently, Axos has a $100 bonus for new checking account holders who open an account and have at least $1,500 in electronic deposits within the first 30 days.
Pros:
$100 bonus for new rewards checking account
Up to 3.30% APY on checking accounts
Unlimited reimbursements for out-of-network ATM fees
Cons:
No physical branches
Low interest rates on savings accounts
8. Central Bank
Central Bank is a regional bank with more than 130 locations in Missouri, Kansas, Illinois, and Oklahoma. You’ll find multiple checking account options, including a fee-free account with all the basic features.
You’ll enjoy free ATM transactions at any Central Bank ATM, as well as more than 37,000 ATMs nationwide. Central Bank also has robust business banking options, including loans and multiple checking options.
Pros:
Fee-free ATM withdrawals at 37,000+ MoneyPass locations nationwide
Personalized customer service at branches
Wide range of loan options available
Cons:
$50 minimum deposit to open
Branches in Missouri are mainly in the southwest and central part of the state
9. Bank of America
There are benefits to going with a national bank, including access to banking services while traveling and a broad range of features. As one of the largest national banks, Bank of America has competitive offerings, including a variety of checking account options and wealth management services.
Business customers can earn a $200 bonus for opening a new account and depositing $5,000 in the first 30 days. Individual banking customers should check out the $200 rewards bonuses on new credit cards.
Pros:
3,900 branches and 15,000 ATMs nationwide
Robust free mobile banking features
Wide range of personal and business credit cards
Cons:
Low interest rates on savings accounts
Long waits for customer service
10. Great Southern Bank
Great Southern is headquartered in Springfield, with branches in Missouri, Arkansas, Iowa, Kansas, Minnesota, and Nebraska. You’ll find multiple checking account options, with a free basic checking account.
Although Great Southern’s checking accounts require minimum deposits, there are three options with only a $25 minimum opening deposit required. That includes a second chance account designed to help those who struggle to establish an account due to their banking history.
Pros:
Fee-free ATM transactions at Allpoint ATMs nationwide
Branches across six states
Competitive rates on personal loans
Cons:
Checking accounts require a minimum deposit to open
Limited customer service hours
11. Belgrade State Bank
Belgrade State Bank is a local bank with checking and savings accounts. While there are limited ATMs and branches, Belgrade’s out-of-network ATM fee is only $1. This is in addition to the fees that will be charged by the third-party bank.
Belgrade has robust business banking options, including a fee-free checking account that includes 1,000 items per month, with a $0.25 charge per transaction after.
Pros:
Free checking with enrollment in e-statements
No minimum balance requirement for checking accounts
Competitive rates of personal loans
Cons:
Limited branch and ATM footprint
$50 minimum deposit to open
12. PNC
PNC is one of the biggest national banks with 26 branches in Missouri. Although PNC only has branches in 29 states, you’ll enjoy fee-free access to your cash at more than 60,000 ATMs nationwide, thanks to PNC’s partner network.
Pros:
Access to more than 60,000 ATMs nationwide
Branches in 29 states
Competitive mobile banking features
Cons:
Low interest rates on savings account
Accessible banking services, including support for non-English-speaking customers
13. Mid-Missouri Bank
Mid-Missouri Bank is one of the best banks for both the small business owner and the consumer. You’ll find 14 branches across Missouri, as well as ATMs within the coverage area. There are two checking accounts.
One issues an annual percentage yield on your balance, while the other offers cash back on debit card purchases. Mid-Missouri offers competitive rates on personal loans, including auto, home, and home equity lines of credit.
Pros:
14 branches across Missouri
Basic account earns cash back or APY
Up to $25 in ATM fees refunded each month
Cons:
Lower APY on savings account than competitors
Limited number of branches and ATMs
14. Bank of Missouri
Bank of Missouri is one of the best banks in Missouri for its checking account perks. You’ll have three options: a bank account that earns 3.05% APY, an account that earns cash back on debit transactions, and an account that offers iTunes, Amazon, or Google Play refunds each month.
This bank’s checking accounts come with no monthly maintenance fees and refunds on up to $25 monthly in out-of-network ATM withdrawals.
Pros:
Rewards and interest-bearing checking accounts
No monthly fee on checking and savings accounts
Competitive rates on CDs
Cons:
Low rates on savings account
Limited number of branches and ATMs
15. UMB Bank
UMB Bank is one of the longest-running Missouri banks, having been in existence for more than a century. You’ll find branches throughout Missouri, as well as in Illinois, Colorado, Kansas, Oklahoma, Nebraska, Arizona, and Texas.
UMB also offers online banking options that make it easy to transfer funds and deposit checks. One downside to UMB is its ATM footprint. You’ll pay $2 if you can’t find a UMB ATM, and those are limited to its service area.
Pros:
Robust mobile banking options
Fee-free checking account available
Competitive rates on CDs
Cons:
Minimum deposits required for all checking accounts
Low interest rates on savings account
16. Simmons Bank
If you’re looking for the best checking account among banks in Missouri, consider Simmons Bank, which offers impressive checking and savings accounts with plenty of branches throughout Missouri.
You’ll get fee-free cash withdrawals nationwide at MoneyPass ATMs, along with fee-free checking that requires no minimum balance or opening deposit.
Pros:
Fee-free checking options
Multiple checking and savings accounts
Fee-free cash access at MoneyPass ATMs nationwide
Cons:
Competitive rates on CDs
Minimum deposit on savings account
17. First State Community Bank
First State Community Bank has more than 50 branches throughout Missouri for that in-person customer service. You’ll also get free access to ATMs in the MoneyPass network for cash withdrawals while you’re traveling.
The basic account, Free eChecking, offers all the features you’ll likely need with no monthly fee as long as you sign up for electronic statements.
Pros:
Fee-free cash access at MoneyPass ATMs nationwide
Fee-free checking option when you sign up for electronic statements
Round up debit transactions to boost your savings
Cons:
Opening deposit required for checking
Limited branch locations
Frequently Asked Questions
What is the most popular bank in Missouri?
Like most states, Missouri has plenty of large corporate banks with branches in the area. Some consumers will always prefer that option due to the wealth of banking services and access to ATMs nationwide. Bank of America has a strong presence in Missouri, as does U.S. Bank.
But when it comes to popularity, locals tend to cite smaller banks. Central Bank is often mentioned as a favorite, in part due to its heavy presence throughout Missouri. Commerce Bank also often tops lists of the best banks in Missouri.
If you go with a local bank, look for one that’s covered by the Federal Deposit Insurance Corporation and pay close attention to whether you’ll have access to cash withdrawals at ATMs while traveling.
What is the best bank for small businesses in Missouri?
Those looking for business accounts typically have different criteria than those searching for personal accounts. You might be more interested in being able to invoice customers, for instance, or track spending for tax purposes.
If you’re a freelancer in Missouri, take a look at Axos for your small business banking. U.S. Bank has great money management features, so if that’s a priority, take a look at its small business banking services.
Which Missouri bank has the best customer service?
As valuable as it can be to have a bank account with no monthly maintenance fees or plenty of ATMs, sometimes it’s all about getting help when you need it. If you like in-person service, go with a small brick-and-mortar option with branches that are convenient to you. First State and Bank of Missouri are both great traditional banking options.
For some people, though, the best banks are those that offer easy-to-use remote customer service. Whether that means getting help via a chatbot or connecting with a representative by phone, narrow the options to something that works for you. Ally Bank has been recognized for its 24/7 customer support, primarily because you’ll get an estimate of how long you’ll have to wait on hold before you launch the call.
Which Missouri bank is the most reliable?
As long as you go with an FDIC-insured bank, your funds will be protected up to $250,000. Still, nobody wants to stress over a bank eventually going under. Large corporate banks like Bank of America and U.S. Bank have a long history and an impressive asset value that protects them from default.
But there are plenty of reliable local banks in Missouri as well. First State has been in business for 150 years, and Central Bank was founded in 1902. Both are unlikely to go anywhere and if they did, it would be to merge with another bank or join a parent company.
The best banks are the ones that fill your needs while also keeping fees at a minimum. It’s important to compare at least a few options to make sure you’re getting the best deal for your Missouri banking needs.
1. Out-of-network ATM withdrawal fees may apply with Chime except at MoneyPass ATMs in a 7-Eleven, or any Allpoint or Visa Plus Alliance ATM.
2. Early access to direct deposit funds depends on the timing of the submission of the payment file from the payer. Chime generally make these funds available on the day the payment file is received, which may be up to 2 days earlier than the scheduled payment date.
3. The Annual Percentage Yield (“APY”) for the Chime Savings Account is variable and may change at any time. The disclosed APY is accurate as of May, 22, 2023. No minimum balance required. Must have $0.01 in savings to earn interest.
5. Chime SpotMe is an optional, no fee service that requires a single deposit of $200 or more in qualifying direct deposits to the Chime Checking Account each at least once every 34 days. All qualifying members will be allowed to overdraw their account up to $20 on debit card purchases and cash withdrawals initially, but may be later eligible for a higher limit of up to $200 or more based on member’s Chime Account history, direct deposit frequency and amount, spending activity and other risk-based factors. Your limit will be displayed to you within the Chime mobile app. You will receive notice of any changes to your limit. Your limit may change at any time, at Chime’s discretion. Although there are no overdraft fees, there may be out-of-network or third party fees associated with ATM transactions. SpotMe won’t cover non-debit card transactions, including ACH transfers, Pay Anyone transfers, or Chime Checkbook transactions. See Terms and Conditions.
Credit card pre-approval makes signing up for your first credit card a lot easier.
The credit card marketplace is crowded, and every issuer is advertising to get your attention. But they may not tell you (or only tell you in the fine print) which cards you’re actually likely to get approved for, or which will score you the best interest rates.
A little research into good credit cards can help you cut through the noise, and the pre-approval process helps you narrow down which cards are the best fit for your (cloth or virtual) wallet. It’s a low-risk opportunity to pick the credit card with the features you want — and to make sure you qualify.
What’s Ahead:
What is pre-approval?
Credit card companies are always on the lookout for new customers. One way they find potential cardholders is by pre-screening credit reports from the major credit bureaus.
They identify consumers whose credit scores and reports are in the ballpark of what the company looks for — like no bankruptcies, no delinquencies for several months, and a score below the company’s minimum cutoff.
Then they’ll send a pre-approval card offer to these consumers.
It’s important to remember that pre-approval doesn’t mean you’re automatically qualified for the card. But it does mean you’ve made the “first cut” by fitting the credit card issuer’s most basic requirements.
What’s the difference between pre-qualification and pre-approval?
Some issuers use the term “pre-qualified” instead of “pre-approved.” Though these terms are sometimes used interchangeably, they describe different types of offers based on who initiates the process.
Pre-qualification for a card means the customer (you) makes the first request.
If you’re interested in a specific card, you can go to the company’s website and fill out some basic info. The company responds by showing you the cards and offers you might qualify for if you made a formal application. At that point, you’re “pre-qualified” and can decide whether or not to apply.
Or a lender may invite you to find out if you pre-qualify for their card (through an advertisement, for instance). This isn’t pre-approval, since the lender hasn’t screened your credit yet to see if you’ve made the first cut.
Pre-qualification may be the route to take if you’re brand new to credit — without a credit score, you’re probably not getting on pre-approval mailing lists.
Pre-approval means the credit card company reaches out to you first because you meet their basic requirements. Once they’ve scanned consumers’ credit scores, they let certain consumers know they’ve been “pre-approved.”
Lenders often tap into their existing customer base to find people to pre-approve, as well. If your current bank is rolling out a new credit card, for example, they might send you a pre-approval offer.
Which is better, pre-approval or pre-qualification?
Neither of these processes is better than the other, or more likely to get you final approval. They’re just different ways to review your credit card options.
For both pre-approval and pre-qualification, you’ll go through a soft credit check — a check that doesn’t impact your credit score. This means both processes are relatively risk-free.
The hard credit check, the one that knocks a few points off your score, doesn’t happen until you fill out the longer application for the card.
Read more: Soft pull vs. hard pull – how each affects your credit
How do I get pre-approved for a credit card?
Respond to an offer from a credit card company
If you have time to pick a card and don’t have a lender you prefer, you can wait for the credit card company to come to you.
Companies do still send offers by snail mail, though not as much as they once did. So it’s worth taking a look at any mail offers before dropping them in the recycling bin.
Pre-screened offers are different from the general mailings that companies send to everyone on their marketing list. Look for the words “pre-approved,” “pre-qualified,” or “pre-screened.” The offer may include an invitation code you’ll need to apply for the card online.
One advantage to applying for a pre-approval offer is that they’ll sometimes give you an introductory deal associated with the offer, like a sign-up bonus or a few extra months of 0% interest.
These deals aren’t always advertised to the general public, so they’re a nice pre-approval perk.
Request pre-qualification on a credit card company’s website
Inquiring about a pre-qualification offer may be the best way to get credit card pre-approval if:
You’re new to credit and opening your first credit card.
You’re rebuilding a low credit score.
You want to go through a certain bank or apply for a specific card, and you haven’t received an offer.
You want to check out a wider range of card options.
Most major card issuers that offer pre-qualification have an online link to a simple form. Usually, you won’t enter more than your:
Name.
Address.
Date of birth.
Social security number.
Why is it important to get pre-approved or pre-qualify?
If you’re shopping around and considering lots of different cards, pre-qualification is a risk-free way to compare initial offers before you fill out any applications.
The pre-approval stage allows you to:
Rule out any cards or issuers that you don’t qualify for, so you don’t waste time applying.
Figure out the interest rate range you’re likely to get.
Compare potential sign-on bonuses, loyalty rewards, and other credit card features.
Double-check the card company’s requirements for cardholders, which are more detailed than their pre-approval requirements.
When you take the next step of a formal application, you’re officially applying for new credit. This means the company is required to run a hard credit check. They’ll ask your permission first.
Hard credit checks do show up on your credit score, usually knocking it down only 10 or 20 points. That’s not a huge deal if it happens once in a while.
But if you apply for credit pretty frequently — more than two or three times in six months — your credit score takes a bigger drop.
With pre-approval, you can make sure you’re only committing to the hard credit check if you’re likely to be approved for new credit.
Picking the right credit card to apply for
As a savvy MoneyUnder30 reader, you probably know this already, but I’ll remind you just in case: pre-approval or pre-qualification doesn’t mean the card is the best fit for your needs and lifestyle.
First, spend some time figuring out what you want in a credit card. I suggest asking yourself questions like:
Are you likely to use it for big expenses like travel, or everyday costs like groceries?
Do you want a card where the rewards category matches up with the way you spend?
Is your main goal to start building credit?
Once you know what’s important to you, you can use the pre-approval process to find cards that are a good match.
This is especially helpful if your credit card pre-approval offer suggests multiple cards from the same company. These cards will all have slightly different terms, so take the time to do your research about their differences.
Read more: Best credit cards for young adults & first-timers
How do you apply for a credit card after you’re pre-approved?
The pre-approval or pre-qualification process doesn’t require much info.
You’ll usually enter your name, birth date, address, and your social security number (either the last four digits or the whole number) to confirm your identity.
The official application is a lot more thorough. At a minimum, be prepared with:
Income information. You may or may not need to submit proof of income, depending on the issuer. But you’ll at least have to estimate how much you earn every year.
Housing payment information. This should include how much you’re paying in rent or mortgage a month.
Employment status.
Income details for a co-signer, if someone is co-signing for the card with you.
Read more: How to apply for a credit card (and approval requirements)
What credit score do you need?
It depends. There’s no minimum score that applies to all issuers, so if you have any credit at all, it may be possible to pre-qualify for a card. Of course, the better your credit is, the more offers will be available.
If you don’t have a credit history, it’s a little trickier. Some card issuers consider alternative credit data, like income and work history, to determine financial responsibility.
Read more: What credit score do you need to get approved for a credit card?
After you get approved
If you make the final cut and get approved, not just pre-approved, it’s time to double-check your card terms.
Credit card companies are required to provide the same terms listed in the initial pre-approval offer if they accept you. This means you should get the same interest rate, fee, or bonus that was stated in the offer. Many pre-approvals show a range of interest rates, so they’re required to give you a rate somewhere within that range.
Read more: The best credit cards – MU30’s top picks
Are you guaranteed approval when pre-approved for a credit card?
Not necessarily. A pre-approval or pre-qualification is an invitation to apply, not a guarantee of acceptance. It means there’s a strong chance you’ll meet the standards for cardholders, but the lender needs to know more before actually extending you credit.
Can you get denied after pre-approval?
Remember, pre-approval is just the first step in the process. You can get denied after submitting a formal application, even if you were pre-qualified or were pre-approved.
According to a 2019 report, only around 40% of credit card applicants made the final cut and got approved for a card.
When you officially apply, you’re giving credit card issuers a lot more information about your financial status than you did in the pre-screening stages. This means they’ll judge you a little more strictly.
Here are some of the most common reasons pre-approved candidates get their applications declined:
Your monthly or annual income doesn’t meet the issuer’s minimum cutoff.
Your reported payments are too high relative to your income.
Your credit data has changed significantly since the pre-approval offer.
You’ve taken on debt or missed several payments since the pre-approval offer.
Your income has dropped since the pre-approval offer.
The lender should send you a letter telling you why they made the decision, so it won’t be a mystery.
What if I can’t get pre-approved for a credit card?
If you don’t get any card pre-approvals or pre-qualifications, don’t sweat it. Credit lenders may be looking for cardholders who fit a particular financial profile, and that doesn’t reflect on your general creditworthiness. You still have a number of options.
Try pre-qualifying with another credit card company. Their terms may be more generous or suited to what you need.
Apply anyway. This is a risk because the issuer will run a hard credit check. But if you have stable employment, good income stats, or a co-signer with strong credit, these factors may make up for a less-than-perfect credit score.
Work on improving your credit. Make rent, bill, and loan payments on time. If you’re brand new to credit, you can take out a credit builder loan (as long as you’re able to pay it back on schedule!). Or ask a trusted family member or partner if you can be an authorized user on their account.
Read more: How to build credit the right way
Apply for a secured credit card
For credit newbies, secured credit cards are a nice bridge into the world of credit, and a lot of major card issuers offer them.
You’ll “secure” the card with a deposit — this amount can vary, but think around $200 — which gives you access to a credit line up to that amount. Then you spend just as you would on any other card.
After several months of responsible use, you’ll usually be eligible to transition to an unsecured credit card from the same company.
Read more: Best secured credit cards
Credit card companies that offer pre-approval
Most of the bigger credit card names have pre-approval or pre-qualification forms that are easy and quick to fill out online.
Keep in mind you may not be able to seek pre-approval for every card in the lender’s collection, but they’ll offer a decent range of cards to choose from.
Summary
Whether you’re getting your first credit card or adding one to your collection, it’s worth going through the pre-approval process first. You’ll save time, preserve your credit, and hopefully end up with a great card that will help you achieve financial stability.
It’s tough out there for first-time homebuyers. They’re facing multiple challenges, including rising mortgage rates, high home prices and limited inventory. However, that doesn’t seem to scare off young Americans — in fact, 71.5% of Gen Zers plan to buy their first home in the next one to six years, according to a Rocket Mortgage survey from earlier this year.
At the same time, not every Gen Zer knows what mortgage lenders are looking at when evaluating a home loan application. On average, 33.9% of Gen-Z were wrong about the factors lenders consider when deciding whether to approve a mortgage, according to the survey.
What most mortgage lenders look at when considering your application
CNBC Select explains what factors influence mortgage approval and what young people can do to increase their chances of qualifying for a home loan.
Credit score
Most Gen Zers know that their credit score can impact their ability to secure a mortgage (73.2%). And while they’ve had less time to establish a credit history, Gen Zers have an average FICO score of 679 according to the latest data from Experian. That’s lower than that of older generations but still considered good.
The minimum credit score to qualify for a conventional mortgage is 620. Government-backed mortgages have more relaxed credit requirements. The minimum credit score for an FHA loan is 580 with a down payment of 3.5% or as low as 500 if you can put at least 10% down. USDA and VA loans don’t have set credit requirements, but lenders that offer them might.
Besides approval chances, a homebuyer’s credit affects the interest rate on the loan. A small difference in interest rates can add hundreds of dollars to a monthly mortgage payment.
It’s best to work on building credit before applying for a mortgage. Free credit monitoring services such as CreditWise® from Capital One and Experian free credit monitoring can be helpful in tracking progress and finding opportunities to improve.
CreditWise® from Capital One
Information about CreditWise has been collected independently by Select and has not been reviewed or provided by Capital One prior to publication.
Cost
Credit bureaus monitored
TransUnion and Experian
Credit scoring model used
VantageScore
Dark web scan
Identity insurance
Terms apply.
Experian Dark Web Scan + Credit Monitoring
On Experian’s secure site
Cost
Credit bureaus monitored
Credit scoring model used
Dark web scan
Yes, one-time only
Identity insurance
Terms apply.
Note that the scores credit monitoring services offer differ slightly from the scores mortgage lenders use when making their decisions. That said, they should be pretty close and provide a good idea of your overall credit health.
Debt-to-income ratio (DTI)
Almost one-third of Gen-Z didn’t name the debt-to-income ratio (DTI) as one of the factors affecting mortgage approval (32.8%). In reality, lenders evaluate this closely when determining whether to approve a mortgage and what the terms of the loan will be.
DTI is the amount of debt relative to income. To qualify for a conventional mortgage, you don’t want a DTI any higher than 43%. For USDA and VA loans, the DTI limit is typically 41%, while the FHA might allow you to go up to 50%. Remember, these are guidelines — it’s up to individual lenders to determine the cutoff for what’s an acceptable number.
Calculating your DTI
To calculate your DTI, divide your total monthly bills, such as rent and any debt payments, by your gross monthly income (how much you make before taxes).
For example, let’s say your monthly bills total $2,500 and your gross monthly earnings are $5,000.
$2,500 / $5,000 = 0.5
Multiply the result by 100 to get the percentage. In this case, your DTI would be 50%.
Down payment
When a homebuyer makes a sizeable down payment, the lender may consider them a less risky borrower. Having more money to put down increases the chance of mortgage approval and can lower the monthly mortgage payment.
According to the survey, 10.1% of Gen-Z plan to put down 20% of their home price. If they do, they’ll start off with a good amount of equity in their home and won’t have to worry about private mortgage insurance (PMI). PMI is a monthly fee rolled into the mortgage payment, designed to protect the lender if the borrower can’t pay their home loan.
That said, it’s possible to secure a mortgage without a 20% down payment. In fact, FHA loans require as little as 3.5% down with a credit score of at least 580. Qualified first-time homebuyers can also put 3% down with conventional mortgages, such as HomeReady and Home Possible. USDA and VA loans have no down payment requirement at all.
Saving up for a down payment can take some time — often, several years. Putting the funds in a high-yield savings account can help them grow a little faster. Some of CNBC Select’s favorite accounts include LendingClub High-Yield Savings and the Western Alliance Bank Savings Account for their high APYs and ease of use.
LendingClub High-Yield Savings
LendingClub Bank, N.A., Member FDIC
Annual Percentage Yield (APY)
Minimum balance
No minimum balance requirement after $100.00 to open the account
Monthly fee
Maximum transactions
Excessive transactions fee
Overdraft fees
Offer checking account?
Offer ATM card?
Western Alliance Bank Savings Account
Western Alliance Bank is a Member FDIC.
Annual Percentage Yield (APY)
Minimum balance
$1 minimum deposit
Monthly fee
Maximum transactions
Up to 6 transactions each month
Excessive transactions fee
The bank may charge fees for non-sufficient funds
Overdraft fee
The bank may charge fees for overdrafts
Offer checking account?
Offer ATM card?
Terms apply.
Employment
Current employment, as well as work history, are also factors in mortgage lending decisions. It’s not uncommon for a lender to require two years of consistent employment history. Note that it doesn’t necessarily mean working for the same company. More likely, the lender will be looking to see whether the borrower has been employed in the same line of work or career field and if there are any lengthy gaps without a job.
Showing this kind of consistency can be tricky for Gen Zers who have only just started building their careers. However, as long as the homebuyer can prove they have a stable income and are a responsible borrower, the lack of two years of work history might be something a lender can live with.
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How Gen-Z can prepare for a mortgage application
While mortgage lenders generally examine the same things when evaluating an application, they might not always agree on what’s an acceptable risk. Individual lenders also may offer different types of home loans, work with different down payment assistance programs or even have their own unique offers for first-time homebuyers.
For that reason, it’s wise to speak to several lenders before choosing one. Plus, this will also allow for interest rate shopping, which is essential to securing the best possible mortgage terms.
CNBC Select picked PNC Bank as one of the best lenders for first-time homebuyers, thanks to the variety of home loan options they can offer. Rocket Mortgage can be a good choice for borrowers with lower credit scores, and Ally Bank Mortgage can help new homebuyers save on lender fees.
PNC Bank
Annual Percentage Rate (APR)
Apply online for personalized rates; fixed-rate and adjustable-rate mortgages included
Types of loans
Conventional loans, FHA loans, VA loans, USDA loans, jumbo loans, HELOCs, Community Loan and Medical Professional Loan
Terms
10 – 30 years
Credit needed
Minimum down payment
0% if moving forward with a USDA loan
Terms apply.
Ally Bank Mortgage
Annual Percentage Rate (APR)
Apply online for personalized rates; fixed-rate and adjustable-rate mortgages included
Types of loans
Conventional loans, HomeReady loan and Jumbo loans
Terms
15 – 30 years
Credit needed
Minimum down payment
3% if moving forward with a HomeReady loan
Terms apply.
Bottom line
Gen-Z are entering a challenging housing market, but many feel up for the task and plan to buy a home in the next few years. Homeownership can be an excellent way to build wealth, but before springing into action, it’s a good idea to educate yourself on what impacts mortgage lending decisions and get your financial ducks in order based on what you’ve learned.
Catch up on CNBC Select’s in-depth coverage of credit cards, banking and money, and follow us on TikTok, Facebook, Instagram and Twitter to stay up to date
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
While you might be intimidated, it doesn’t have to be hard!
I learned how to build credit at 18 by opening a credit card offer that came in the mail. My first credit card had a small limit around $300.
I never maxed it out, and there were really no benefits. But, it didn’t have a monthly fee, and it helped me learn how to build credit fast.
My credit score is now over 800 and considered excellent.
I don’t rely on my credit score and credit history, but I know that it impacts my life in many different areas — from insurance, to loans, to my cell phone bill.
Whether you want to believe it or not, your credit score can play a major role in your family’s life.
While you shouldn’t go crazy and completely obsess over learning how to improve your credit score, it is important to learn what you can about your credit score and the impact it may have on your life.
Your credit score can influence the interest rate you receive on a loan or your home mortgage, finding a rental home, attaining certain jobs, your insurance rates, and more.
Because of this, I think that a credit score can be used to a person’s advantage.
Even though your credit score can impact your life in a big way, that doesn’t mean it’s hard to build your credit history and credit score. Yes, it can be easy to wreck your score, but it’s easy to learn how to build your credit score back up.
Check your credit score with Credit Sesame for free!
How to build credit.
What is a credit score?
Before we begin, I want to talk more about what a credit score is. If you want to learn how to build a credit score from scratch, then starting here is the key to understanding what you’re working with.
A credit score is a three digit number that shows others your creditworthiness, and is often used as an indicator to show how risky you are.
There are three main credit bureaus, which is why you may occasionally see different numbers. The main three (Equifax, TransUnion, and Experian) calculate scores depending on the information they have about you, so your history and score may be slightly different at each of them.
Related: How Do Credit Cards Work?
What is a good credit score?
Lenders and people who are checking your credit score usually have varying opinions about what a good credit score is.
In general, though, a good credit score is usually 720+. The higher your number, the better your credit score.
Is 600 a good credit score?
A 600 credit score is below average. But, do not fret. There are ways to increase your credit score.
Is it easy to hurt your credit history?
Learning how to build credit and improving your credit score usually take more work and time than it does to damage your credit score.
You may be hurting your credit score if:
You have a high utilization rate. Keeping your balances below 20% of what you can borrow is important. For example, if your credit card limit is $1,000, try not to have a balance over $200. Lenders like to see a low utilization rate, as it shows that you are not maxing out your debt.
You cancel credit cards that may be helping your credit history.
You pay your bills late or not at all.
You never check your credit report and have errors listed.
Can my credit score influence my home buying process?
Yes, for sure!
This is a big reason why learning how to build credit is so important. Your credit score can impact:
Whether or not you are approved for a home loan.
Your interest rate.
How large of a home loan you are given.
The size of the down payment you are required to put down.
Read more at How Your Credit Score Impacts Your Home Buying Process.
Why is improving your credit score important? What else can it affect?
There are many instances in which your credit score and/or credit report may be looked at, and sometimes it has nothing to do with a loan. This is why it is important to work on building your credit score, because you never know when you may need it.
Plus, it’s something you can personally control, so why not learn how to build credit and start working on improving it?
Home and car insurance – If you have homeowners or car insurance, your rate may be calculated on a factor you didn’t know about – your credit score. If your credit score isn’t good, then you may actually be paying more because companies consider you to be riskier.
Employer – This may be shocking to hear, but there are some employers out there that will check your credit report (with your permission). Industries that often check your credit report include those dealing with financial services, chemicals, and defense. I recently read a statistic that around 30% of companies will check a potential new hire’s credit report before making a hiring decision.
Renting a home – If you have decided you don’t want to own a home, you may still need your credit history checked. In fact, your landlord will most likely check your credit history. They will want to know if you pay your bills on time or if you have ever skipped a payment entirely. This will say a lot about you as a renter, whether you want to believe it or not. If your credit history is not up to their standards, you may be denied the rental altogether, you may be asked to pay multiple months rent upfront, or you may be asked to find a co-signer just in case you fail to pay your rent.
Credit cards – If you don’t care about credit, then you probably will not care about this one. However, if you want a credit card, especially one with a good rewards system in place, then you will want to work on improving your credit score. The credit cards with the best reward offers are usually only available to those with good or excellent credit scores.
Loans (home, car, etc.) – If you apply for a loan, your credit score and credit history will definitely be checked. Before you are approved for a loan of any sort, the lending institution is going to thoroughly check your financial history so they don’t end up losing money on your loan.
The interest rate you receive – A good credit score usually means you will qualify for lower interest rates, while a bad credit score means higher interest rates. I have talked to someone with a 24% interest rate on a car loan, all because they had a very low credit score. A higher interest rate means paying hundreds or thousands of dollars extra in interest, and this is why it’s so important to learn how to build credit
What makes up your credit score?
There are five categories that make up your credit score. Your payment history and amounts owed equate to 65% of your credit history, but don’t forget the others factors!
If you want to work on building your credit score, here are the following factors that go into your score:
35% Payment History. Your payment history has the biggest impact on your credit score. This includes if you pay your bills on time, if you have missed a payment, if any of your bills have been sent to collections, and so on.
30% Amounts Owed. This is the next largest category when it comes to your credit score. This includes your balances, your utilization rate, and more.
15% Length of Credit History. The age of your accounts come into play here. This is why it’s usually a good idea to keep a credit card that you’ve had for a long time. I still have the credit card I opened when I was 18. It has no other rewards than improving my average account age. However, only keep cards open if you know you won’t go into debt.
10% New Credit. This category includes things such as how many hard credit inquiries you have and how long it’s been since you last opened a new credit account. It is important to remember that checking your own credit score does NOT impact this category as long as you receive your credit report from a company that is authorized to give you your credit report.
10% Credit Mix. This includes the type of accounts you have, such as whether or not you have credit cards, a mortgage, car loan, and so on.
Check your credit score with Credit Sesame for free!
Here’s how to build credit from scratch:
After reading all of the above, I’m sure you’re wondering how you can build your credit score fast, especially if you have a low credit score or no credit at all.
Increasing your score and learning how to establish credit is not extremely difficult. Once you realize what impacts your credit score, you can make relatively easy changes that will begin to improve it.
Below are my general tips for building your credit score.
Get a credit card.
Okay, okay, some of you may be cringing at this tip. Credit cards are not for everyone, BUT if you know that you can be smart about it, opening a credit card is a way to build your credit history. It can one day lead to you being able to use your credit score and credit history to your advantage.
While your first credit card will probably have a low limit and a high interest rate, it can help you learn how to build credit.
If you are looking for options, I recommend reading Best Rewards Credit Cards | What You Need To Know.
And, I recommend reading Top 5 Credit Card Mistakes And How To Avoid Them before you get a credit card.
Now, there are other ways to learn how to build credit without a credit card. Continue reading below.
Pay your bills on time.
According to FICO, 35% of your credit score is determined by your payment history. One or two late payments most likely won’t prevent you from having a good credit score. However, continuing to miss payments most likely will.
No matter what the bill is, you should always pay it on time. Paying a bill late may lead to interest charges, late fees, and a drop in your credit score.
Yes, companies can report late payments to credit agencies. If you do happen to accidentally pay a bill late, do not panic, though. If you are quick enough, you can call the company and ask for some leniency so they won’t report it.
I once underpaid my monthly mortgage payment by $10. I must have clicked the wrong number because I’m still not even sure how that happened. Luckily, I caught it quickly enough and my mortgage company realized that it must have been a mistake. They waived any late fees and also did not report it to anyone.
Other related tip on how to build your credit score from scratch: Pay your credit card bill before your balance is reported. Even if you pay your credit cards in full each month, your balances are still probably being reported. Some people avoid this by paying their credit card bills twice a month to keep their utilization rate low.
Regularly check your credit report.
It’s important to check your credit report regularly because it may include errors that negatively affect your credit score. The sooner you fix those errors, the sooner you can improve your score.
My favorite site for checking my credit score is Credit Sesame. Credit Sesame makes it extremely easy to check your score and both me and my husband have active accounts.
You can also receive one annual free credit report from the three main credit bureaus mentioned above. Yes, this means that you get one from EACH, so three each year. I recommend spacing them out so you can get one every four months. You can read more about this here.
Keep your balances and utilization rate low.
If you have a credit card, then you have a credit limit. However, just because you are given this limit doesn’t mean you should try to reach it.
I recommend spending less than 20% of your available credit.
In fact, you should always try to be below 30% of your credit limit if you want to have a good credit score. So, if your credit limit is $1,000, you do not want to spend more than $300. Any more than that will impact your credit score.
It’s also important to note that even if you are paying your balance in full each month that going over 30% of your credit limit can still negatively impact you. This is because your balance is reported on a monthly basis to the credit bureaus. In this case, it is best to pay off your balance or at least some of it before your next credit card statement goes live. Paying off all or a portion of your balance before the rest of it is due will keep your utilization rate low.
If your credit limit is low, then you may even want to request an increase. Of course, only do this if you trust yourself not to spend more. The key here is to not it all!
Be mindful of your credit history.
Keeping credit cards open can lengthen your credit history, and this can improve your credit score. However, only do this if it makes sense for you. If you think you will go into debt or if the annual feels aren’t worth it, then you may want to think about closing your cards instead.
According to FICO, 15% of your credit score is from the length of your credit history. The longer your credit history then the higher your score may be.
If you want to learn how to build credit when you have none and you have old credit cards that carry no annual fees, you may want to think twice before you cancel them. Yes, closing them can help you simplify your life, but an old credit card may be lengthening your credit history and, therefore, improving your credit score.
Like I said, I still have the credit card I opened when I turned 18. The credit card stinks and pretty much offers no benefits. However, it’s the card I’ve had the longest. To keep it active, I just buy one thing a year (such as gum)!
Side note: There are many reasons why you may want to cancel your credit cards, though. If having credit cards leads to credit card debt (not being able to pay your balance in full every month), then it may be the best idea to cancel them.
Get your rent reported.
Did you know that paying your rent can help you improve your credit score?
If you have little to no credit or are struggling with poor or bad credit, by using ExtraCredit, you can report your rent and utilities to TransUnion® & Equifax®, so you can get payment history for bills you are already paying! Rent reporting can help you add more credit history and help you work your way to a strong credit profile.
You can learn more at What Is ExtraCredit? Here Are 4 Reasons You Need to Read This ExtraCredit Review.
How do I start building credit?
As a recap of the above, you can learn how to build your credit score by:
Getting a credit card (but be smart!)
Paying your bills on time
Regularly checking your credit report
Keeping your balances and utilization rate low
Being mindful of your credit history
Getting your rent reported
How can I build my credit if I have no credit?
As a personal finance blogger, I sometimes hear people say that you shouldn’t worry about your credit score because credit cards are horrible. However, I don’t completely agree with that.
Credit cards are dangerous for some people, but that’s not the case for everyone.
Learning how to start building credit and improving your score can end up saving you lots of money. It can lead to lower interest rates, lower down payments, and lead to more opportunities.
Having a good credit score doesn’t mean you use credit cards all of the time either, it means you’ve followed the tips in this article and have shown lenders, employers, and others that they can trust you.
Check your credit score with Credit Sesame for free!
Do you know what your credit score is? Do you think learning how to build credit is important?
Getting your first credit card can be an exciting milestone. You start to picture all the responsible things you’ll do with it, like putting your bills on autopay, getting extended warranties on vital electronics like laptops and cellphones, and collecting and cashing in all those sweet, sweet rewards points.
But sometimes, your credit history doesn’t meet the requirements for approval. Fortunately, there are options available to help you secure a credit card and start building your credit.
Two common approaches are having a co-signer or becoming an authorized user on someone else’s account. However, these credit relationships are more complex than they appear at first glance. It’s essential to explore the differences between co-signers and authorized users before you even ask someone.
Co-Signer vs. Authorized User: What’s the Difference?
Co-signing involves you having your own credit card, whereas an authorized user is something you become. Both could give you access to a credit card and improve your credit history, but both roles also have credit implications and unique responsibilities.
What Is a Co-Signer?
A co-signer essentially lends their creditworthiness to support your credit application.
If you don’t meet the issuer’s requirements, such as having insufficient income or a problematic credit history, you can find someone who has good enough credit to act as a co-signer. And even if you do qualify, having a co-signer with better credit might get you more favorable terms, such as a lower interest rate.
The credit card company checks both your credit before deciding to issue you a credit card. And by co-signing, they become just as legally obligated for the debt as you are.
So expect your co-signer to want to stay informed about the account’s activity and take measures to ensure timely payments. They have a personal stake in your financial responsibility. That’s why co-signers are typically trusted family members or close friends.
Co-signing a credit card can have a significant credit score impact, both on you and your co-signer. The account activity, including payment history and credit utilization, shows up on both parties’ credit reports.
Any late or skipped payments, high balances, or defaults can negatively affect the credit scores of both individuals. That’s because co-signed debt appears on the co-signer’s credit report just like any other financial obligation, potentially impacting their ability to take on new credit or loans of their own.
And if you don’t pay up, the co-signer has to pay the entire debt, including any accrued fees or interest. If they don’t, you could both face lawsuits, wage garnishments, and severe credit score damage.
On the plus side, responsible credit management on your part can benefit both parties and help improve both your credit profiles.
Unfortunately, it can sometimes be difficult for them to get removed as a co-signer. Check the card agreement for a co-signer release option. Even if there is one, for them to get released, you must have a good payment history so the lender feels confident relieving them of co-signer responsibilities.
And if things go south, it can strain your relationship and have long-term financial consequences if you aren’t careful.
If you’re not 100% sure you can use the credit card responsibly, it’s probably best to seek out other options. It’s not worth destroying a relationship over.
What Is an Authorized User?
An authorized user is someone the primary borrower adds to their credit card.
An authorized user shares no legal responsibility for the debt, meaning they don’t necessarily make payments. They just have permission to make purchases on the account. But if you’re just trying to build your credit history, it can help to have someone add you to a card that reports on authorized users’ credit too (which is most of them).
When the primary account holder adds you to their account, you receive a card with your own name on it. The primary account holder retains control over the account and can monitor your spending activity. So it’s crucial to discuss upfront whether there are any guidelines they’d like you to follow.
For example, they may ask you to limit purchase totals to a certain amount, use the card only at certain locations or for specific reasons, or only use it if you can pay them back. They can swiftly cancel your card if you violate any of the rules.
It’s most common to become an authorized user on the cards of family members or trusted individuals. They may be willing to grant access to the account for various reasons, such as building credit, convenience, or sharing expenses.
Being an authorized user can have both positive and negative impacts on your credit. The account’s history, including payment behavior and credit utilization, is typically reported on your credit report as well. If both you and the primary account holder demonstrate responsible credit management, such as making timely payments and maintaining low balances, it can have a positive influence on your credit score.
But if the primary account holder has a history of late payments, high balances, or defaults, it can negatively affect your credit profile. You can also negatively impact their credit rating by charging too much or failing to pay them as agreed so they can afford the monthly payment.
As an authorized user, you don’t have the same level of control or decision-making power as the primary account holder. That means they can cancel the account, revoke your access, or make unexpectedly bad decisions that negatively affect your credit.
You’re not legally responsible for the debt incurred on the account, but you are ethically responsible if you agreed to pay. And there’s nothing to stop them from suing you if you don’t hold up your end of the agreement.
Additionally, pretty much everyone else involved is going to act like the account holder is doing you a favor — probably because they are. So you’re unable to access certain account features or make changes to the account.
It’s essential to establish clear communication with the primary account holder to understand any restrictions or guidelines associated with your authorized user status. And if your primary goal is improving your credit score, it’s critical that you become an authorized user with someone who has good or excellent credit on a card that reports on the authorized user’s credit.
Key Differences Between Co-Signers & Authorized Users
Co-signers and authorized users are pretty much opposite in terms of their rights and responsibilities. The only thing they have in common is how it affects their credit score.
Co-Signer
Authorized User
Definition
Personally guarantees repayment
Granted permission to use someone else’s credit card
Role
Repays debt if you don’t
Authorized to make purchases
Credit Check
Yes
No
Credit Impact
Activity affects credit reports of both parties
Activity may or may not impact the credit report of authorized user
Financial Risk
Obligated to repay the debt if the borrower defaults
No legal obligation for the debt
Control
Has access to account information and decision-making
Account control remains with the primary cardholder
Relationship
Typically trusted family members or close friends
Often family members or individuals with shared needs
Easy to Remove
Only once you meet co-signer release threshold
Yes
Should You Use a Co-Signer or Become an Authorized User?
You may find a credit card co-signer is the best option if you have credit or income issues. But you should only do it if you have no other option for getting credit. And consider whether you can just wait a bit and improve your income or credit score enough to qualify alone.
And you need someone willing to take on the risk as your co-signer. They should know you well enough to trust that you’ll pay your card on time, and you should also feel confident you can. The co-signer also needs to have good enough credit to qualify.
Using a co-signer can cause awkward situations and disagreements, so if you want to maintain a good relationship, think twice. After all, the person puts their finances and credit on the line for you. Running up charges or missing a payment can easily cause issues.
When deciding whether to add an authorized user, consider whether you trust the person to spend responsibly and pay you back as agreed. Even when they use the card, you’re the one stuck with the debt. So, you can easily end up with financial strains and a dinged credit score.
While you might intend to help a loved one build their credit as an authorized user, don’t disregard how it could affect your relationship. Arguments can happen if the person runs up your balance or doesn’t pay you back. This makes a usage agreement with the person crucial.
If you have any doubts about letting the person access your credit card, it’s safer to just not agree to make them an authorized user. Instead, you could help them create a budget and find other ways to build a credit history. That way, they can eventually get credit on their own.
How to Add a Co-Signer or Authorized User to Your Account
If you want to add a co-signer to a credit card application, first ensure your prospective creditor allows it. Unfortunately, most major banks no longer allow the practice. However, you may have better luck going through a smaller bank or credit union.
Depending on the creditor, you may have options to apply online, by phone, by mail, or even in person. In all cases, you must supply personal and financial information for yourself and the co-signer. Exactly how that works depends on how you apply.
Online: You both digitally sign and submit the application.
Phone: The creditor may need to speak with the co-signer in addition to the borrower.
Mail: You must both fill out and sign the application, then mail it to the listed address.
In Person: You must both fill out and sign the application, then you must both go to a branch in person.
The creditor runs both your credit files. Then depending on how you applied, you may find out instantly whether you’re approved or have to wait for an email or even a letter.
If you want to add an authorized user, you’ll have better luck since most card companies allow it. You can either do it when you fill out your application or after you’ve opened the account. Either way, the process is straightforward, and you can do it online, by phone, by mail or in person
When applying, there’s a step to add authorized users. If it’s an existing account, you can log into your online portal, contact customer service, or if it’s at your bank, just walk in.
The creditor won’t run a credit check, but they do need some information about the user. Common information requested includes the authorized user’s full name, birth date, Social Security number, address, and relationship to you. The user should receive their card upon approval.
Final Word
Becoming or adding a co-signer or authorized user is not a decision you should take lightly. Both parties must feel comfortable with the responsibility and trust they’ll act in each other’s best interest. Otherwise, you risk a messy situation in which both parties’ finances and relationships are at risk.
Communication and financial planning is key. If you use a co-signer, budget for your monthly payment and don’t carry a high balance that can harm you both. And if you add an authorized user, set limits with them and don’t hesitate to revoke their access if needed.
If your finances or relationships are too big a risk, other options exist for those who struggle to qualify for regular credit cards. Backed by a security deposit, a secured credit card involves a much easier approval process and can help with building credit for easier borrowing experiences later.
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Heather Barnett has been an editor and writer for over 20 years, with over a decade committed to the financial services industry. She joined the Money Crashers team in 2020, covering banking and credit content for banking- and credit-weary readers. In her off time, she enjoys baking, binge-watching crime dramas, and doting on her beloved pets.
Save more, spend smarter, and make your money go further
Last week I was in Athens, GA guest lecturing at the University of Georgia . I’m up there once a semester speaking with senior students who are about to graduate and go out into the “real” world. And while my agenda is to talk about credit reports, credit scores, and how the whole financial services system works, it usually ends up becoming a fairly lengthy Q&A session about how best to establish and build your credit. Here’s the deal…you have one chance to establish credit, that’s it. You can either do it the right way or the wrong way, but you can never have a mulligan. For those of you who’ve already built credit and managed it poorly (for whatever reason), you’re not going to have to build your credit; you’re going to have to re-build it. Here are some of the more common methods for each, and their pros and cons:
Opening A Secured Credit Card
A secured credit card is a legitimate credit card issued by a legitimate bank. You make a deposit at the bank and they will issue you a credit card with a credit limit equal to your deposit. Since you’ve essentially fully secured any purchases you’ll make with a cash deposit, banks are more willing to issue these cards to either new credit users or those who are trying to rebuild their credit. Additionally, you can open a secured card for as little as a $250 deposit, so it’s a nice option for people who have limited cash flow. Secured cards aren’t a good long-term option,however; the fees associated with these cards and the interest rates aren’t very good. But, you have to remember that you’re opening the card for a purpose and that purpose is to get something good on your credit reports. After a few years of paying the bills on time you may be able to convince the card issuer to convert the account to an unsecured credit card and refund your deposit. And because this is a credit building strategy, you’ll want to make sure you choose a card issuer who reports their secured card accounts to the credit reporting agencies. Otherwise, you’re just wasting your time.
Being Added as an Authorized User
An authorized user is someone who has been authorized to use a credit card issued to another person. Most of the time, parents will add their children to one of their existing credit cards, which allows them to have a card in their name but doesn’t convey any sort of liability for payment of the balance. The good news is that the account history is reported to the authorized user’s credit reports and can almost instantly establish them a solid credit history. This is my favorite option, as it really has no downside. I call the authorized user strategy “having a credit card with training wheels.” As long as the account is managed properly, then it’s a positive addition to your credit reports. And, this is a great option for consumers who have limited (or zero) cash flow or are already working hard to get out of debt. If the account is mismanaged by your parent (or spouse, as this is also common among spouses) then all you have to do is ask that your name be removed from the account and it will also be removed from your credit reports. In fact Experian, one of the major credit reporting agencies, will automatically remove the account history from the authorized user’s credit report if it becomes derogatory, “because an authorized user has no responsibility for repayment of the debt”, according to Rod Griffin, Experian’s Director of Public Education. “We will also remove the account at the request of the authorized user.” The good news for authorized users is that the FICO scoring system gives you full benefits for a properly managed authorized user account on your credit report, as long as you have a legitimate relationship with the primary cardholder. A few years ago, credit repair companies were trying to take advantage of the authorized user strategy to boost the credit scores of consumers who had bad credit. FICO figured out a way to filter out the consumers trying to game the system, so they won’t get the same benefit as a legitimate parent/child or husband/wife relationship.
Co-signing For a Loan
Co-signing for a loan is when you sign the promissory note (the promise to pay back the loan) and accept equal liability for payments on someone else’s loan. The newly opened loan will likely end up on your credit reports and will help you to establish or re-build your credit. Co-signed loans are normally auto loans, personal loans, or mortgages. That’s where the good news ends. I don’t like this option for three reasons:
1) It’s unnecessary. You don’t establish credit any faster by obligating yourself to a huge loan than you do by opening a $250 secured credit card. Choose the path of least resistance!
2) You can’t change your mind. There is no such thing as “co-signing for credit only” although some consumers have tried to challenge this in court, unsuccessfully. When you co-sign you’re just as liable for payments as anyone else on the loan. If the payments start being missed, it’s your problem. You have to be prepared to make all the payments if you choose this option.
3) Missed payments will go on your credit reports. If the payments on the loan are missed then anyone who has signed for the loan (yes, including you) will have a record of those missed payments reported on their credit reports. And, if the loan goes into default any aggressive collection actions, including litigation, it will be targeted at you. I’m not a fan of co-signing for a loan EVER, unless you need two incomes to qualify for a mortgage.
John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a contributor for the National Foundation for Credit Counseling. He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. The opinions expressed in his articles are his and not of Mint.com or Intuit. Follow John on Twitter.
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Politics and a pandemic have shoved stodgy student loans into the spotlight. Since 2020, borrowers have encountered an onslaught of changes to the federal student loan landscape, including more than three years of paused payments, an upcoming repayment plan overhaul and potential debt cancellation.
Backtracked announcements and timeline changes have made it difficult for borrowers to keep up with where things stand. Here’s what you need to know and how to prepare for what comes next.
Announced in August 2022, President Joe Biden’s one-time proposal would erase up to $20,000 in federal student loans for more than 40 million eligible borrowers — but an ensuing legal showdown has put the plan in the hands of the Supreme Court.
In December 2022, the high court said it would evaluate two major lawsuits blocking the loan cancellation plan, and it held student debt cancellation oral arguments in February. The public hearing was the last visible step before a ruling comes out.
The justices are crafting their opinions behind closed doors, so for now, we wait. Legal experts expect a final decision by late June or early July. It will determine whether Biden’s plan can roll out as intended and end the payment pause.
What you can do about it: “Prepare for what you have in front of you today,” says Scott Buchanan, executive director of the Student Loan Servicing Alliance. “Don’t make financial decisions premised on what may or may not happen in the courts, because you’re guessing just as much as anyone else.”
One way to prepare is to “pretend” to pay your student loans now by moving your estimated student loan payment from a checking account into a savings account each month, advises Lindsay Bryan-Podvin, a Michigan-based certified financial therapist and partner of the financial wellness app Upwise. When payments turn back on, you’ll already have some money set aside to cover your first few bills. And if cancellation survives the Supreme Court, you could have a bit of extra money set aside for something else.
“We can’t really predict the weather, but we can dress appropriately for it,” Bryan-Podvin says.“We can’t decide … whether or not they’re going to actually let people have the $10,000 to $20,000 in forgiveness, but we do have control over what we do.”
Payments resume late summer 2023 — for now
Timing of the Supreme Court’s decision is set to affect when exactly student loan payments will resume after more than three years of an interest-free federal payment pause, known as forbearance.
Under current guidance, borrowers will need to start repaying their federal student loans 60 days after June 30 or 60 days after the Supreme Court releases its ruling — whichever comes first.
Forbearance started in March 2020, as the pandemic began sweeping the U.S. The government has insisted the current forbearance timeline won’t change again, but note that the expiration date has moved nine times so far.
What you can do about it: Borrowers may be frustrated by the uncertainty, but they should still prepare as if bills will resume later this summer. Reach out to your student loan servicer if you’re not sure what to expect.
“Even if the government decides to make some change or delay something for a month or two, that homework is not wasted,” Buchanan says. “Whenever that day comes, you know what plan you’re going to go into, you know how much that monthly payment is going to be, you know where to send the check.”
Don’t wait for official word of forbearance ending to start that homework, especially when it comes to contacting your servicer. If you do, you could encounter long hold times and delayed responses. “We know we’re going to have a bottleneck of people,” Buchanan adds.
Other loan forgiveness pathways expanded
The U.S. Department of Education has proposed a few recent changes to income-driven repayment, or IDR, plans, which cap monthly federal student loan bills at a set percentage of your income and erase remaining student debt after borrowers make payments for a set number of years.
IDR account adjustment, or waiver
In April 2022, the Education Department announced an IDR and Public Service Loan Forgiveness, or PSLF, one-time account adjustment — also called the IDR waiver — that will move millions of borrowers closer to the student loan forgiveness finish line.
About 40,000 borrowers with older loans were to see balances wiped clean starting this spring, the Department of Education estimated, and more than 3.6 million borrowers are expected to receive at least three years of additional credit toward forgiveness under an IDR plan or PSLF when their accounts are updated in 2024. If you’ve been in repayment for at least 20 or 25 years (including forbearance time), you’ll be free of student debt after the adjustment. If you qualify for PSLF, you’ll be debt-free if 10 years have passed.
What you can do about it: The recount is largely automatic — but if you have commercially held Federal Family Education Loan (FFEL) Program, Perkins or Health Education Assistance Loan (HEAL) Program loans, you must apply to consolidate them at StudentAid.gov by the end of 2023 to get the full benefits. Get started soon because the consolidation process can take time.
Even if you weren’t enrolled in an IDR plan before the pandemic payment pause, you’ll still see the adjustment applied to your account. But if you have a balance remaining after the adjustment, you will need to sign up for an IDR plan once payments resume to keep building credit toward loan forgiveness. Borrowers can call their servicers and submit paperwork today so they’ll be all set to go into an IDR plan as soon as forbearance ends, Buchanan says.
A new IDR plan
A major revision to an IDR plan called REPAYE would halve monthly payments for many borrowers with undergraduate loans and help some reach loan forgiveness more quickly. Students who originally borrowed less than $12,000 would see their remaining balances wiped away after 10 years of payments, instead of the 20 or 25 years under existing IDR plans.
The Education Department unveiled new details about the plan in January, but it’s not yet available to borrowers. Nor is it set in stone. The department aims to finalize and start rolling out the plan by the end of 2023.
What you can do about it: Once the revised IDR is finalized, you can call your servicer to ask about signing up for it. Don’t count on it being available by the time federal student loan payments resume.
Student loan servicer switches
The company that manages your student loans could change in the next couple of years. In April, the Education Department signed contracts with five federal student loan servicers. The new contracts are slated to go live sometime in 2024, but legacy contracts will last through December 2024 to smooth the servicer transition. Effects may be limited: Only one new servicer is entering the arena, and one — OSLA — is leaving.
Eventually, the overhaul will also include the launch of a central servicer portal at StudentAid.gov. The portal is intended to lead to more customer service accountability and prevent borrowers from having to navigate servicer-specific websites.
What you can do about it: Make sure your contact information is up to date with your current servicer, and download a copy of your payment history. You don’t need to do anything else at this point. “From an everyday experience perspective, I don’t know that it’s going to be a whole lot different than it is today,” Buchanan says of the new contract landscape.
If the Department of Education transfers your loans to another servicer, your current servicer and your new one will notify you by mail, email or phone. From that point on, you’ll make monthly payments with the new servicer, and you may need to set up any auto-pay or biweekly payments again. Most servicers deliver the same options, but customer service may differ among them.
Other key student loan changes underway
“Fresh Start” program for delinquent or defaulted loans. People with past-due federal student loans now have a second chance to get them back into good standing, thanks to the government’s temporary “Fresh Start” program. It includes a bevy of benefits, like restored access to IDR plans. Eligible borrowers will need to sign up for Fresh Start within one year of forbearance ending to enjoy its full relief. You can sign up on myeddebt.ed.gov or by calling the Education Department at 800-621-3115.
Bankruptcy guidance. The departments of Education and Justice jointly released updated bankruptcy guidance in November 2022, meant to standardize the requirements for borrowers to discharge their federal student loans in bankruptcy. Local bankruptcy judges will still make final calls case by case. Contact a bankruptcy attorney to see whether this is a good option for you.
Breaking up consolidated spousal loans. In October 2022, Congress passed the Joint Consolidation Loan Separation Act, which will allow borrowers who previously consolidated their student loans with a spouse — through a program that ran from 1993 until 2006 — to separate them and access debt relief programs, like Public Service Loan Forgiveness. However, lawmakers have not yet said when they’ll roll out the program for eligible borrowers to apply for the loan separation.
Save more, spend smarter, and make your money go further
A credit card for your kid? Before you completely write the idea off, consider that there are legitimate reasons to consider giving your kid plastic. Getting your child a credit card for kids can help make your little one a savvy spender. By empowering them with the skill of financial literacy from an early age, they could be set up for a much more stable future, which could benefit both them and you.
But wait, can kids even get credit cards? They can with your help. That’s why it’s important for you to be knowledgeable about the options for credit cards for kids and how you can guide them to develop good habits and responsible credit management.
If you’re still hesitant about the idea of kids’ credit cards (we can’t blame you), we recommend reading this post to learn more about why you might reconsider and how to go about getting one. You can also use the links below to navigate to the section you need:
Benefits of Kids Having Credit Cards
While it might seem like credit cards for kids are a major risk, the benefits often far outweigh them. That’s because with careful supervision, you can help set your child up for a better financial future. Let’s review some of the main benefits of giving your child a credit card.
Help Them Build Credit
Many young adults find themselves unable to qualify for their own credit cards because they have no credit history. However, you can prevent this from becoming an issue for your child if you help them build their credit early on—that’s where kids’ credit cards come in.
Establishing a credit line for them when they’re younger increases length of credit history, which makes up 15% of credit score. With a better credit score, they are more likely to:
Pay less for car insurance premiums
Be approved for an apartment or house rentals
Have an easier time qualifying for student loans or a car loan
Get lower interest rates
Avoid security deposits on cell phones or utilities
Teach Them Good Habits
For many people, getting a credit card can open a door to a lot of temptation, as it gives them access to more money. However, if your child has become accustomed early to good habits when it comes to credit card usage, they may be less likely to fall victim to the potential pitfalls of owning a credit card.
Teaching your child best practices for paying off credit cards, maintaining their balance, and monitoring their credit score are invaluable skills.
Help Them Avoid Overspending
The average American household has $8,398 in credit card debt, according to Debt.org. And with the average credit card interest rate at over 16%, borrowing money doesn’t come cheap. Many credit card holders fall into a pattern of overspending with what they may consider “free money”—sometimes it can feel like that when you don’t have to pay for it right away. Whether it’s retail therapy shopping spree, a spontaneous luxury vacation, or putting a big purchase on the card, many people have every intention of paying it back with their next paycheck, but too often that’s not the case.
While giving your child a credit card is scary, letting them dive into credit unsupervised is even scarier. Teaching kids about money and helping them understand the consequences of overspending on their credit cards can help them avoid the all-too-common fate of ending up in a never ending pit of credit card debt.
Emergency Preparedness
While it might seem hard to imagine what kind of financial emergency your kid could run into, there are actually a variety of situations when having a credit card could help your kid. You never know what kinds of scenarios could arise when they’re on vacation with their friends’ family, on a school trip, or even on their way home from school.
While it’s fairly unlikely that emergency situations will arise, you both will be better off if your child has a back-up plan to get themselves out of a sticky situation. As long as you are both on the same page about what constitutes an emergency, having access to credit card funds could provide both of you peace of mind. Just make sure you lay some ground rules when teaching your child about appropriate credit card usage.
Show Your Child You Trust Them
One of the most overlooked benefits of getting your child a credit card is showing them that you trust them with this responsibility. Your trust in them can help them build confidence in their decision-making capabilities and empower them to be financially responsible, both of which will benefit them well into the future.
How to Get Credit Cards for Kids
You may be wondering, how can a minor get a credit card? They’ll need your help, but it’s fairly straightforward. Here is what you need to do:
Research whether your credit card provider allows you to add your child as an authorized user on your credit card. Some of your options may include:
Adding them as an authorized user: It’s still your account and your responsibility to pay the balance, but as an authorized user your kid can make charges on your card. Be specific about what items you are allowing them to charge and remove them if they prove they cannot handle the responsibility.
Giving them a secured credit card: Put $500 in a bank account to secure the credit limit, then if the bill doesn’t get paid, the bank uses the deposit to cover it. Make sure the issuer reports the payments to the three major bureaus, Experian, TransUnion, and Equifax.
Co-signing on your kid’s credit card: At 21, your grown child may be eligible for a credit card as long as you sign off on it (or if they can show a stable source of income). Co-signing on a credit card can help them secure a better interest rate. But think twice before you put your own credit history on the line, because you are legally both on the hook to pay it off.
If they do have kids’ credit cards, complete your lender or bank’s process for adding them as an authorized user. If they do not, then you will need to look at other banks or credit card companies that do.
Set up the parameters for the card—spending limits, tracking alerts, blocked purchases, etc.
Your child will then be issued their credit card, which will need to be activated.
Keep in mind that not all companies offer credit cards for minors under 18 or allowed for authorized users, in fact most have age requirements, so you may need to research your options to find a credit card issuer that works for you.
Best Credit Cards for Children
Here are credit and debit cards for kids that can be a good starting point for teaching your child about financial management:
Gas card: Credit cards for gas stations are a way to give your child an opportunity to learn about and building credit, without the temptation of spending on unnecessary things. Gas cards make great starter credit cards for students who need to drive to high school and college.
Prepaid debit or credit cards:This type of card won’t build credit, but the upside is that a child as young as 13 can typically get one. Keep in mind that there may be maintenance fees on these types of cards.
Card with a low limit: A low limit credit card can help prevent spending from getting out of control; these cards usually have limits of about $250-$500.
Emergency credit card: Stipulating that the card is only to be used for emergencies is one way to teach your child about credit, without giving them free range. A useful emergency credit card should have a higher balance, but be carefully monitored to prevent abuse of their privileges.
If your child isn’t quite ready for a credit card, set them up with a debit card before graduating to credit. Tie it to their bank account and set up notifications so you can see where your child is charging. If they can’t handle debit, forget about credit for now. The downside is that a debit card does not establish credit history.
How to Help Your Child Manage Their Credit
Set a limit: With tight boundaries that you set, failure may come, but in small doses. Aside from staying out of debt, more and more employers are checking applicants’ credit history, meaning solid credit lessons early on could improve chances of employment down the road.
Review the monthly statement with them:Explain how the card works and when the bill arrives, explain it again. Due date? Check. Payment options check? Check. Interest rate? Check. Grab a calculator and show them what an interest rate is—in real dollars. Talk about what happens if you don’t pay off the balance in full and make a rule to always do so.
Explain fine print: There many aspects of credit management that are easy to overlook. Make sure to point out the repayment terms, annual fees, late penalties. etc.
Monitor credit: If they have their own credit card, you may want to regularly check their credit score (along with their statement) to ensure there are no issues such as unauthorized spending or errors that need to be disputed.
Comparing credit to cash is one of the most important aspects of teaching kids about managing their credit—emphasizing that it is not free money and needs to be repaid responsibly. USA.gov is also a valuable resource for teaching your child ins and outs of credit cards.
Kids’ Credit Card Pitfalls
Before signing your child up for kids’ credit card, it’s important to consider the risks:
Accumulation of debt: One of the scariest things about allowing your child to have a credit card is that they risk accumulating debt. While it can be dangerous if it gets out of control, the key is supervision, and learning to pay off the full balance on time each month.
Risk of scams and theft: With access to a credit card, your child may be pressured or manipulated into spending or allowing others to spend the funds available. There’s also the risk that the card could get lost or stolen; children are known to forget or lose things frequently. This is where emphasizing caution and responsibility will be essential. You should also read up on child identity theft at Consumer.ftc.gov.
More impulsive tendencies: Children tend to be more impulsive in nature because they haven’t learned as many of the hard lessons about consequences as adults. And depending on their age, their decision-making skills may not have fully developed.
Credit card addiction: Those with addictive personalities, especially when it pertains to shopping, may be more inclined to abuse the convenience of credit cards and form a credit card addiction.
Your credit habits could affect their history: No matter how responsible we try to be, sometimes we make financial missteps or fall on hard times. How your credit history can affect your childs’ is important to keep in mind if they’re an authorized user on your card.
Keeping in mind these kids’ credit card pitfalls, and how to circumvent them, will help you set your child up for success.
Sign Them up for Their First Kids’ Credit Card
Taking the plunge into getting your kids a credit card can be a scary and stressful process, but it doesn’t have to be. By taking it one step at a time, educating your child about credit cards, and closely monitoring their usage, you can make this a positive experience. Once you have a game plan for how you’ll help your child use the credit card, take the initiative and sign them up as soon as they’re eligible.
Save more, spend smarter, and make your money go further
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Getting Your Kid A Credit Card? This Is What You Need To Know
If you’re trying to perfect your credit score, it’s important to first understand what makes up your credit report and credit score. Your credit score is determined by an advanced algorithm which was developed by FICO and pulls the data from your credit report to determine your score. When calculating your credit score, the following information is going to affect your credit score in the corresponding percentages:
35 percent: History of on-time or late payments of credit.
30 percent: Available credit on your open credit cards
15 percent: The age of your lines of credit (old = good)
10 percent: How often you apply for new credit.
10 percent: Variable factors, such as the types of open credit lines you have
Many of this may be common sense or information that you’ve already learned over time, resulting in a good credit score but possibly not a perfect score. If you have a bad credit score, it could take a lot of time and work to increase your score and you may first want to consider repairing your credit. If your credit score is already above 700 but you’re trying to shoot for that perfect score of 850 to ensure the best deals and interest rates, here are 5 ways to perfect your credit score:
5 Ways to Get a Higher Credit Score
1. Maintaining Debt-To-Limit Ratio
To increase your credit score, it’s recommended that you keep your debt-to-credit ratio below 30% and, if possible, as low as 10%. The debt-to-limit ratio is the difference between how much you owe on a credit card versus how much your credit limit is. For example, if one of your credit cards has a credit limit of $5,000, then you should always keep the balance below $1,500 but preferably around $500. As you can see above, 30% of your credit score is determined by the available credit on your open credit cards, so keeping the debt-to-limit ratio will increase your available credit and also show that you’re responsible with your credit.
2. Keep Your Credit Cards Active
Make sure that you use your cards at least once a year to keep them shown as “active” credit and make sure that you never cancel your credit cards. 15% of your credit score is determined by the age of your lines of credit, so you should always keep your credit cards active to lengthen the age of your line of credit. Many people tend to cancel cards that they no longer use – many times because the rates aren’t very good or because they have another card with better benefits – but even if you don’t use the cards very often (just once a year is fine), you should keep them active. Typically, someone with a credit score over 800 has credit lines with at least 10 years of positive activity.
3. Always Pay Bills On Time
Probably the most well-known factor of a credit score and the factor that has the biggest impact on your credit score (35% of your score) is your history of paying your credit payments on-time. If you have a history of always making your credit card, mortgage, and car payments on time, you will greatly improve your credit score. This can also have an adverse effect as well, should you ever make a late payment. Unfortunately, it only takes one late payment to severely reduce your credit score so it’s crucial that you make sure to always make credit payments on time.
4. Dispute Errors On Your Credit Report
If you don’t already, make sure that you request a copy of your credit report once every year and review it for errors. It is actually quite common for credit reports to contain errors which can be disputed and potentially allow you to have negative items removed from your credit report. If, for instance, your credit report shows a late payment on a credit card but contained errors in the record, you can dispute the negative item and request to have it removed from your report. Having a negative item, like a late payment, removed from your report can improve your credit score significantly. While disputing errors on your credit report can be tedious and take a lot of time, it is usually worth it. Another option would be to contact a credit repair agency to help you dispute any negative items on your credit report.
5. Reduce The Number of Credit Inquiries
While this may only affect 10% of your credit score, keeping the number of credit inquiries down can still help to build that perfect credit score but is often ignored. You should never have more than one credit inquiry per year but many people do not realize how often this is done and often times have their credit checked more than once per year. If you’re applying for a car loan, checking your credit score online, or applying for a new credit card, these type of actions will almost always result in a credit inquiry and should be avoided if you’ve already had a credit inquiry earlier in the year. Make sure you do your research on what will result in a credit inquiry so that you don’t accidentally have more than one a year without realizing it.