Almost half of all Americans carry a balance on their credit card, month after month. If you’re among their ranks, you know that the combination of high prices and high credit card interest rates can make it challenging to pay that debt off in full.
Many cardholders have seen their interest rates creep up in recent years, in line with the Federal Reserve’s recent rate increases. That means interest payments are gobbling up a bigger share of credit card balances. And those credit card balances can be major. This kind of debt hit a staggering $1.12 trillion for the first quarter of 2024, according to data from the Federal Reserve Bank of New York.
But the situation isn’t hopeless, however. If you’re one of the cardholders who can’t pay credit card debt in full, here are five steps you can take to address it.
Step 1: Check your Credit Card Interest Rate
If you haven’t carried a credit card balance before, you may not be aware of what interest rate your credit card is charging. But it’s important to know exactly how much you’re getting charged so if you need to, you can budget for interest expense as well as your purchases.
The average credit card interest rate for all new card offers was 24.84% in mid-2024. (Depending on what type of credit card you have, your credit score, and your credit history, you may have a higher or lower interest rate than the average.)
With interest rates this high, it can be a real financial setback to carry a balance for an extended length of time, making only the minimum credit card payment. You may find that you are only paying interest and making little headway in paying off what you actually spent.
Recommended: What Is a Charge Card
Step 2: Understand How Your Grace Period Works
If you pay your credit card statement balance in full by the due date, a credit card grace period will usually take effect for the next billing cycle. That means you won’t owe interest on new purchases until the due date for the next billing cycle. If you pay that statement balance in full by the next due date, the grace period will continue into the next cycle, and on and on.
But, if you make only the minimum payment or a partial payment on the full statement balance by the credit card due date, you’ll get charged interest on the remaining balance and lose your grace period for the next billing cycle. This means you’ll owe interest on any purchase immediately. Even if you go back to paying the full balance, your grace period may not renew for several more cycles, depending on the specific terms of your credit card.
If you’re in a position where you can’t pay credit card bills and must move to partial payments, make sure you’re aware of the additional interest expense you’ll incur on the remaining credit card balance. Try your best to stop making new purchases with that card since interest will be charged on those purchases immediately.
Step 3: Look at Changing Your Due Date
If you’re feeling overwhelmed because many of your bills are due at the same time, talk to your credit card company about changing your due date. You might be able to move your credit card due date to a day of the month that works better for your budget, so the payments you owe are a bit more staggered.
While this switch might not help immediately to pay down credit card debt, it could offer some relief in the long run.
Recommended: How to Avoid Interest On a Credit Card
Step 4: Explore Ways to Pay Off Your Balance Faster
You may find that with higher interest rates and inflationary spending, you need a more efficient way to pay off your credit card debt, such as by refinancing credit card debt. Luckily, there are some options for how to pay off credit card debt, though keep in mind the best way to pay off credit card debt will depend on your financial specifics.
Balance transfer credit cards that offer a limited time low or sometimes even 0% interest rate can help — especially if you think you can pay the balance in full during the promotional low-rate period.
Another option you might consider is applying for a low-interest personal loan to pay off credit card debt in full. This could help you secure a lower interest rate, and by consolidating your credit card debt, you’d have fewer due dates to keep track of. Keep in mind, however, that there are pros and cons of personal loans to pay off credit card debt.
Recommended: Tips for Using a Credit Card Responsibly
Step 5: Consider Using a Budgeting Tool
If you’re finding it hard to make your credit card payments, that can be a signal it’s time to take a close look at your spending, perhaps with the help of one of the many online budgeting tools available.
Personal finance tools can help you understand just how much your cost of living has risen in recent months and make it easier to flag places you can cut back. Some can help to pinpoint fees you may be paying unwittingly or the automatic payments you’re making on your credit card that could get trimmed. Cutting these costs can then make it easier to pay off credit card debt.
The Takeaway
If you’re struggling with a credit card balance you can’t pay off, taking steps to pay off credit card debt faster and budget smarter can help. These can involve understanding your rate, changing your payment due date, and other moves.
Whether you’re looking to build credit, apply for a new credit card, or save money with the cards you have, it’s important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.
FAQ
What is a fast way to pay off credit card debt?
You might be able to use a balance-transfer credit card and pay down your debt during the 0% APR promotional period. Or you might consider securing a personal loan to pay off the debt. You would then pay off the personal loan, which could have a lower interest rate.
Can you change your credit card payment due date?
You may be able to change your payment due date. See if your card’s website or app allows this kind of shift, or contact customer service.
Do most Americans carry credit card debt?
According to recent data, approximately 49% of Americans carry credit card debt.
Photo credit: iStock/Sneksy
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Did you know you had more than one credit report? Each of the major credit bureaus—Equifax, TransUnion and Experian—maintains its own credit reports on consumers.
Those reports are made up of similar building blocks, including:
Personally identifying information, such as your name and address
Various credit accounts in your name, such as credit cards or car loans
Credit inquiries, which can occur when a lender checks your credit before approving you for a loan or credit card
Public records, such as bankruptcies and collection accounts
Many, but not all, of these items are known as tradelines, and they play an important role on your credit report and in calculating your credit score. Learn more about tradelines below.
What is a tradeline?
Tradelines refer to the listings of various types of accounts on your credit report. For example, say you pull your credit report and you see:
A car loan
A credit card account
A student loan account
That would mean you have three tradelines on your credit report.
Tradelines can also show up if your original debt is sent to collections. In this case, the collection agency may begin reporting the debt, and it would show up as a new tradeline from that entity.
Typically, when tradelines are listed on your credit report, they include information such as:
The name and address of the creditor or collection agency
The type of account, such as revolving credit or auto loan
Part, but never all, of the account number, so you can identify the account
The status of the account, such as whether it’s open or closed
The date the account was first opened
Payment status, including the balance on the account, any credit limit and whether you’ve paid the account on time
How do tradelines on your credit report impact your credit?
Tradelines listed on your credit report can impact your credit in a number of ways.
First, your payment history plays a critical role in determining your credit health. When the reported tradelines indicate that you pay your bills on time and have for a while, that’s good for your credit. However, if reported tradelines indicate the opposite, that can cause a negative impact on your credit.
The age of your credit also impacts your credit. Lenders like being able to see that you have been using credit for a while, so having a number of older tradelines will be beneficial for your credit.
Your credit mix, which demonstrates that you can manage revolving and installment accounts, is also important. Managing a diverse mix of credit types will be better for your credit than managing just one type of tradeline.
How much credit you have available and how much of it you’re using—known as your credit utilization rate—also affects your credit significantly. Generally, the less you use of your total available credit across your revolving tradeline accounts, the better.
Do credit bureaus have to list all tradelines?
No, there’s no legal requirement that credit bureaus must list all tradelines. The Fair Credit Reporting Act does require that the credit bureaus make efforts to ensure the information on your credit report is accurate. But this mostly focuses on the fact that they shouldn’t report inaccurate information and they must investigate if you let them know something on your report is wrong.
This doesn’t cover missing information, as the credit bureaus can only report information that creditors report to them. Courts have confirmed in lawsuit decisions that the credit reporting agencies don’t have a specific duty to include every tradeline related to each consumer.
Do creditors have to report all tradelines?
Creditors also don’t have a specific obligation to report to the credit bureaus. A lender decides whether or not it will report to any credit bureau, and it doesn’t have an obligation to report to all three credit bureaus, either. This is why your credit report can differ from bureau to bureau.
Some lenders, such as those offering credit-building products, often advertise that they report to all three credit bureaus. This is meant to be an attractive feature, as those wanting to build better credit would want their positive payment and account history reported to all the bureaus. In these cases, the lenders may have some obligation to carry through with what they promise in marketing language or in agreements when borrowers apply.
How do you get more tradelines?
If you want to bolster your credit with more diverse positive tradelines, you have a few options. The first is to apply with lenders who say they’ll report to all three bureaus. You can also get added as an authorized user to someone else’s credit card account, assuming that credit card company reports tradelines for card holders and authorized users alike. If you’re in a credit-building season, you might also want to find out about getting tradelines such as rent or utilities added to your report.
If you want to check your credit report to get an idea of your current credit health, get your free credit assessment with Lexington Law today.
If you don’t pay your credit card, it can lead to late fees, increased interest rates, being sent to collections, and damage to your credit. It could also result in legal action being taken against you.
Credit cards offer several advantages over debit cards. For example, when you use a debit card, you can only spend as much money as you have in your bank account. With a credit card, you gain access to a line of credit, increasing your purchasing power. A credit card also gives you extra fraud protection. If someone gains access to your account, your personal funds aren’t at risk.
However, if you use your credit card, you also have to make a minimum payment every month. Find out what happens if you don’t pay your credit card on time.
How Credit Cards Work
A credit card is a type of revolving debt, which means your balance and minimum monthly payment change based on your spending habits. For example, if you pay your full balance before the end of your billing cycle, you won’t have a minimum payment due the following month.
Credit card companies usually calculate minimum payments based on your current balance plus a little extra to account for interest. If you have a balance of $3,000 during a 0% interest promotion, your minimum payment may be anywhere from $30 to $90. This assumes your credit card company charges between 1% and 3% of your balance.
Your minimum payment is the lowest amount due during a billing cycle. If you have a large balance, try to pay more than the minimum. Otherwise, interest charges will keep accumulating, making it difficult to pay your debt in full and causing your debt to become more and more expensive.
What Happens If I Don’t Pay My Credit Card on Time?
Failing to make your minimum payment on or before the due date can have some potentially serious consequences. Here’s what happens if you don’t pay a credit card on time.
1. Late Fees
Many credit card companies charge a fee for late payments. As of 2024, the average late fee is $32. In March 2024, the Consumer Financial Protection Bureau finalized a rule that would reduce the typical late fee to $8, but a federal judge has issued an injunction preventing the new rule from going into effect for now.
If you’ve never made a late payment before, you may be able to get your credit card company to remove the fee as a courtesy. Simply call the number on the back of your card and explain what happened. If you’re polite and let the agent know the late payment was a one-time mistake, they may remove it for you.
Although late fees can put a dent in your budget, late payments don’t affect your credit scores until you’re 30 days past due. This is when the consequences of a late payment can really start to hurt you.
2. Delinquency
Once you hit the 30-day mark, your account becomes delinquent. Credit card companies report delinquencies to the credit bureaus, causing your credit to decrease significantly. If you miss multiple payments, your scores will drop even more. Credit.com has a free credit score simulator to help you understand the effects of delinquency on your credit profile.
3. Charge-Off
Eventually, your credit card company stops waiting for you to make a payment. This prompts a charge-off, where a creditor closes your account and writes off your debt as a loss. If you have a charge-off on your credit report, you may find it extremely difficult to get approved for new accounts.
Your credit card company may even issue a 1099-C form for your canceled debt. Depending on your financial situation, you may have to pay income tax on the canceled amount.
4. Collections
A charge-off doesn’t make your debt magically disappear. You still owe what you borrowed, so your credit card company may send your account to collections. Once a collection account appears on your credit report, other lenders can see it. This may make it difficult to qualify for an auto loan, a mortgage, or another credit card.
Collection agencies may contact you frequently, but you have certain legal rights related to debt collection. For example, you can tell a debt collector not to call you at work. If a collection agency violates any state or federal laws, you also have the right to consult with an attorney.
5. Lawsuit
Some creditors are especially aggressive about getting paid what they’re owed. If your credit card company is one of them, you may find yourself on the receiving end of a lawsuit. When a creditor sues you, it’s important to appear in court. Otherwise, the creditor may get a default judgment against you before you even have a chance to tell the judge your side of the story. Then, you’ll have to repay the judgment, which may include interest and fees.
How to Recover From Late Credit Card Payments
Now that you know what happens if you don’t pay your credit card on time, it’s important to avoid additional negative marks on your credit record. Here are four things you can do to improve your financial situation.
Commit to On-Time Payments
Everyone makes mistakes. The important thing is you learn from your mistakes instead of repeating them. If you miss a payment, commit to on-time payments going forward. It may take some time for your credit to recover, but at least you won’t take an additional hit.
Open a Secured Credit Card
If you have several late payments on your record, you may find it difficult to open new lines of credit. Get things back on track by opening a secured credit card. With a secured card, you establish a credit line by making a small cash deposit. For example, if you deposit $500, the issuer may give you a credit line of $500.
A secured card works just like a regular credit card, so you can use it to make purchases at your favorite stores and e-commerce websites. If you don’t make payments as agreed, the credit card company can close your account and keep your deposit.
Pay Down Your Debt
Once you have a late payment on your record, it takes time to rebuild your credit profile. If a creditor won’t remove the late payment from your reports, there are other things you can do to help your credit. For example, try to make all of your future payments on time and in full. It won’t erase the negative impact of the late payment, but it can help your credit while you wait for the late payment to fall off your record.
Negotiate With Creditors
If you’ve never missed a payment before, try negotiating with your credit card company. A creditor isn’t obligated to remove negative information from your credit report, but if you ask nicely, they may be willing to cut you a break. This works best when you have a solid payment history.
The company representative may be more willing to help you if you have a good reason for missing a payment. For example, if a close family member passed away, it’s quite possible you forgot your due date because you were grieving your loss.
To learn more about managing your credit and credit cards responsibly, explore Credit.com’s credit card guide, and get your free credit report card now.
Your credit card’s grace period is the length of time that starts at the end of your billing cycle and ends when your payment is due. During this period, you may not have to pay interest on your balance — as long as you pay it off in full by your payment due date.
While a lot of credit cards have a grace period, not all of them do. Here’s a look at how grace periods on credit cards work and how you can take full advantage of them.
What Is the Grace Period on a Credit Card?
Credit cards allow you to borrow money over the course of a one-month billing cycle, during which you may not need to pay interest. The end of your credit card billing cycle is also called your statement date. That’s when your monthly credit card statement is sent to you in the mail or becomes available online. Credit card payments are due on the payment due date, about three weeks later. The time in between these dates is what’s known as the grace period.
During this time, you won’t be charged any interest on the purchases that you made during the billing cycle. However, because of how credit card payments work, you must pay off your credit card balance in full by your payment due date in order to avoid interest payments. At the very least, you must make your minimum payment, and you’ll then owe interest on whatever balance you carry into the next month.
Recommended: What is a Charge Card
How Credit Card Billing Cycles and Grace Periods Work
Grace periods on credit cards are different from the grace period for other loan products. For example, the grace period for a mortgage lasts about 15 days. If your payment is due on the first of the month, you’d have until mid-month to make your payment before it’s considered late and you’re charged potential late fees.
This is not how credit card grace periods work. The grace period for revolving credit — which is what a credit card is — comes before the payment due date. As such, credit card grace periods don’t protect you from late fees. Rather, they give you a period of time in which you can avoid interest payments.
If you miss the date when credit card payments are due, your payment is considered late. Late payments may trigger penalties, and they can have a negative effect on your credit score if they’re reported to the credit reporting bureaus.
Recommended: When Are Credit Card Payments Due
Limits on Credit Card Grace Periods
Credit card companies are not required to offer their customers a grace period. However, many of them choose to do so.
Federal law requires credit card companies to send you a bill within 21 days of the payment due date, meaning you’ll get at least three weeks’ notice of how much you owe for your previous billing cycle. However, the amount of time you’ll have for your grace period will vary by lender.
Credit card grace periods typically only apply to purchases. That means if you’ve used your credit card for a cash advance, for example, you’ll have to start paying interest on the date of the cash advance transaction.
Recommended: Tips for Using a Credit Card Responsibly
How Long Is the Typical Grace Period for a Credit Card?
Typically, grace periods last at least 21 days and up to 25 days.
You can find out how long your grace period is by checking your cardholder agreement. The length of your grace period should be listed alongside fees and your annual percentage rate (APR). You can also call your credit card company and ask them directly.
Recommended: How to Avoid Interest On a Credit Card
What Types of Transactions Are Eligible for Credit Card Grace Periods?
As mentioned above, generally only purchase transactions are eligible for the credit card grace period. Cash advances — which allow you to borrow a certain amount of money against your line of credit — typically are not eligible. They will start accruing interest the day you make the transaction.
Similarly, if you transfer a balance from one credit card to another, you’ll start to accrue interest on that balance immediately. The only exception is if you have a balance transfer credit card with a 0% introductory rate for a period of time. If you pay off the balance during that period, you won’t owe interest. However, interest will accrue on whatever remains of your balance at the end of that period.
Taking Maximum Advantage of Your Credit Card’s Grace Period
If you pay off your credit card bill in full each month, you’ll avoid paying interest. Even carrying a small balance will disrupt your grace periods. If you do, you’ll owe interest on the remaining amount, and all of the new purchases that you make in the next billing cycle will accrue interest immediately as well.
To take full advantage of your credit card’s grace period, plan your purchases accordingly to ensure you’re able to pay your bills in full and on time. For example, if you’re going to make a large purchase, you may want to do so close to the first day of your billing cycle. That way, you’ll have the full cycle (about four weeks), plus your grace period (about three weeks), to pay off your purchase without owing any interest.
Can You Lose Your Credit Card’s Grace Period?
It is possible to lose your credit card grace period if you don’t make on-time payments in full each month by the payment due date. If you lose your grace period, you’ll be charged interest on the remaining portion of your balance. In the new billing cycle, you’ll also owe interest on any new purchases on the day the transaction takes place. This can lead to you falling into a debt cycle, which isn’t easy to get out of (here’s what happens to credit card debt when you die).
Luckily, issuers usually restore grace periods once you’ve paid your outstanding balance and are back to making full on-time payments for a month or two.
Recommended: Can You Buy Crypto With a Credit Card
The Takeaway
Your credit card grace period is an important tool that can save you money on interest if you pay off your balance in full each month. If you don’t pay your balance in full each month, you could lose this privilege temporarily. As such, you’d end up owing interest on your previous remaining balance and any new purchases.
In addition to a grace period, the SoFi credit card offers other features to help you manage your finances. This includes 2% unlimited cash back rewards when redeemed to save, invest, or pay down eligible SoFi debt. Cardholders earn 1% cash back rewards when redeemed for a statement credit.1 Plus, you can secure a lower APR by making 12 on-time monthly payments of at least the minimum amount due.
The SoFi Credit Card offers unlimited 2% cash back on all eligible purchases. There are no spending categories or reward caps to worry about.1
Take advantage of this offer by applying for a SoFi credit card today.
FAQ
What is the grace period for credit card payments after the due date?
Credit card grace periods occur before the payment due date. Payments made after that date are considered late. After the due date, cardholders will owe interest on their balance. Further, they may lose their grace period until they can pay their balance off in full for one or two months.
What happens if you are one day late on a credit card payment?
Being one day late on a credit card payment can still trigger late fees, interest, and potentially the loss of your grace period. Late payments may also be reported to the credit reporting bureaus, which can have a negative impact on your credit score.
What is the typical grace period for a credit card?
Federal law requires that credit card companies provide your bill at least 21 days before your next payment due date. The length of the grace period can vary depending on the credit card issuer, though they typically last 21 to 25 days.
Photo credit: iStock/Moyo Studio
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .
The SoFi Credit Card is issued by SoFi Bank, N.A. pursuant to license by Mastercard® International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.
1See Rewards Details at SoFi.com/card/rewards.
1Members earn 2 rewards points for every dollar spent on purchases. No rewards points will be earned with respect to reversed transactions, returned purchases, or other similar transactions. When you elect to redeem rewards points into your SoFi Checking or Savings account, SoFi Money® account, SoFi Active Invest account, SoFi Credit Card account, or SoFi Personal, Private Student, or Student Loan Refinance, your rewards points will redeem at a rate of 1 cent per every point. For more details please visit the Rewards page. Brokerage and Active investing products offered through SoFi Securities LLC, member FINRA/SIPC. SoFi Securities LLC is an affiliate of SoFi Bank, N.A.
Recent studies reveal Americans collectively owe more than $1 trillion in credit card debt. Credit card debt can seem overwhelming, especially for those facing high interest rates. Some consumers use balance transfer cards to help them overcome this debt by reducing their interest rates—at least for a set period. Before choosing this option, it’s important to understand how these credit cards work and how to transfer a credit card balance.
This article digs deeper into the topic of balance transfer credit cards, how they work, and how to determine if this is the right option for you.
What Are Balance Transfer Cards?
Balance transfer cards are a type of credit card that includes a special offer for those wishing to transfer their current credit card balance. For example, the credit card might include a special 0% APR rate during the introductory period, which typically lasts anywhere from six to 18 months.
Let’s say you have a $4,000 balance on your current credit card. Once approved, you transfer this balance to a new balance transfer card with a 12-month APR. This allows you to work toward paying down your debt for a year without worrying about incurring more interest.
How to Transfer Credit Card Balance
Before you can transfer your credit card balance to a new card, you must first be approved for a balance transfer credit card. As with all credit cards, the lender checks your credit history and credit score when determining approval. Typically, you must have good or excellent credit to get a balance transfer credit card.
Once you’re approved for the credit card, you can transfer your balance almost immediately. There are three common ways to transfer your balance:
By phone. After receiving your card, you can contact your credit card company directly. Be sure to have all the necessary information about the card you want to transfer the balance from as well as your new account information. Customer service agents should be able to help you with the process and answer any questions you may have.
Online. Most credit card companies have an online app that allows you to handle many transactions instantly, including transferring balances. It’s likely your credit card offers these services, making it easy for you to transfer your balance as soon as you receive your new credit card.
Convenience checks. Many balance transfer credit cards provide new cardholders with convenience checks to make the transfer process as seamless as possible. If you have these checks, you can use them to pay off your current credit card and the amount will automatically transfer to your new card. Be careful—these checks can come with additional fees and may be treated as a cash advance rather than a balance transfer. Always read the terms and conditions before using these checks.
Keep in mind that you may incur a one-time balance transfer fee for making this transfer. Reading the terms and conditions of your credit card can help you better understand these fees.
Is a Balance Transfer Card Right for You?
There are several reasons obtaining a balance transfer card may be the right option for you, such as:
To pay down debt. If you’re struggling to pay off your current credit card balance due to high interest rates or you have multiple cards, transferring this outstanding debt to a balance transfer card may be the right choice. It can give you time to pay down your debt while taking advantage of the 0% APR introductory period.
To receive lower interest rates. When looking for a balance transfer credit card, be sure to shop around for one with lower standard interest rates than your current card. This ensures you receive ongoing savings as you continue to use your card.
To improve your credit. A balance transfer credit card may help you improve your credit by lowering your credit utilization rate. As you continue to make on-time payments to pay down this debt and manage your credit responsibly, your credit will likely keep improving.
Tips for Making the Most of Your Balance Transfer Card
Using balance transfer credit cards correctly helps you get the most out of them. Here are some tips for maximizing those benefits:
Look for an introductory 0% APR. If you can get 0% on your balance transfer for six to 18 months, you may be able to pay off credit card debt faster. Best of all, you’ll pay less interest. The longer the introductory offer, the better your chances of paying off the debt and avoiding high interest. When shopping for a balance transfer credit card, be sure to factor in the length of the intro period.
Don’t automatically close current accounts. Keeping an old credit card account open can improve your credit utilization, credit age, and credit mix. All these factors can have a positive impact on your credit health. Consider keeping your old accounts open, but be careful not to run the debt too high.
Avoid late or missed payments. Many balance transfer credit cards come with a stipulation that could void the 0% APR intro period. For example, if you miss a payment or make a late payment, it may be enough to void the special offer. This means you’ll end up paying interest on the remaining balance. Be sure to read the fine print when getting any new credit card.
Mistakes to Avoid When Using Balance Transfer Cards
There are some negative aspects to balance transfer cards, especially if you don’t know how to transfer a credit card balance or how these cards work. Without this understanding, these types of cards might end up costing you more in fees. Below is a look at some common mistakes you want to avoid when using balance transfer cards.
Jumping at the first offer. Don’t apply for the first balance transfer credit card you see. Instead, shop around to find a card that best fits your specific needs. Be sure to compare options, such as the length of the intro rate, balance transfer fees, regular APRs, and other relevant fees.
Not transferring your balance soon enough. Most balance transfer cards have a short window for taking advantage of low interest rates on balance transfers. This period typically ranges from one to two months.
Failing to pay more off during the intro period. If your goal for obtaining a balance transfer card is to pay down your debt, be sure to have a plan in place. Create a realistic budget that determines how much you can pay each month. Make sure you stick to this plan so you pay as much off as possible before the rates increase.
Can You Do a Balance Transfer Twice?
It’s possible to transfer your credit card balance twice. First, you must qualify for another balance transfer credit card. If you qualify, you may be able to stretch out the time you have to pay off your debt interest-free.
Keep in mind that most credit cards charge a balance transfer fee. Be sure to compare these costs before getting another car.
The Bottom Line on Balance Transfers
Balance transfer credit cards can be a good option for those facing high interest rates or who want to pay down their debt faster. The first step is to check your credit with Credit.com’s Free Credit Report Card to see what type of card you may qualify for. If you’re not quite ready for a balance transfer credit card, you can get a credit building card first. Over time, you can work toward building your credit score so you can qualify for a balance transfer card.
This post may contain affiliate links, which helps us to continue providing relevant content and we receive a small commission at no cost to you. As an Amazon Associate, I earn from qualifying purchases. Please read the full disclosure here.
Welcome to the 30 Day Money Challenge!
Today, you will learn how to make your money work for you. You don’t have to be a millionaire before knowing these things, but it’s important for everyone who wants financial stability.
Remember these keywords: saving and investing? This is where they come into play for long term success.
It’s not too late to make the right financial decisions.
But, finances are complicated and intimidating for most people so it can be hard to get started.
The 30 Day Money Challenge is here to help with that.
This 30 day financial challenge will help you create a strategy that can save, spend less, and make more by the end of this month!
Are you ready to dig into this month-long money challenge?
What is the 30 Day Money Challenge?
A money challenge is a plan for how to make your finances work better.
It can be as simple as spending less or eating out less, or something more complicated like saving up for retirement or buying a house.
During this month’s timeframe, you will dig into all areas of your finances to make sure you are on track to reach your money goals.
If you do not have financial goals, then we will make sure you do at the end of this money challenge.
I’ve seen a lot of spending challenges out there that are basically just a saving money chart telling you how much money to save each day to save $1000 or $500 in one month, but they don’t tell you how to save the money. That is where the rubber meets the road and this challenge will motivate you to improve your money habits.
Overall, you will learn more about your finances than you did previously.
Why a Money Challenge is Important
A 30 day challenge is a great way to get yourself motivated and focused on saving money and improving your money management.
The goal is not enough, you need the why behind it in order to see your savings grow.
This can be as simple as:
– Setting up a direct deposit from your paycheck to an account you control and only spending what’s in that account.
– Spending less on impulse buys.
– Cutting back on luxury items to save money.
– Living more in cash and less in credit card debt.
You can also take knowledge in knowing the number of our readers who have taken the challenge to improve their money management skills.
3 Steps to Start the Money Challenge
The 30 Day Money Challenge is a simple process that starts with 3 steps.
Your reward for participating in the challenge is pretty appealing, but the process can be hard for some.
So, know these steps before you start the challenge.
1. Pick a Time
While there is no good time to start, you need to find a time when you have the highest probability of success.
Starting the money challenge during the holidays will leave you defeated. Maybe starting as a New Year’s Resolution. Or during a quieter time throughout the year.
You need to find the “right” time because you will have to dedicate at least 10-30 minutes per day. However, the longer you put it off, the less likely you are to start.
2. Be Prepared
More than likely, you will be ripping off the band-aid on some old money failures and defeats. This is common.
You have to be mentally prepared to overcome these negative feelings towards money in order to find that breakthrough moment.
3. Accountability
Find someone to keep you accountable during the challenge.
There will be points when you want to accept defeat and run back to your old money ways. It’s great to create a support system for managing money wisely.
If those old money habits didn’t serve you well before, then how will they serve you moving forward.
You need to keep your eye on the prize!
Thirty Days of Money Challenges
A 30-day money challenge is a popular type of personal finance experiment in which participants take a pledge to review their finances and overcome any obstacles that are preventing them from long term financial stability.
The goal is to teach people how quickly they can change the trajectory of their personal finances before they snowball into a serious money problem.
Day 1 – Get Organized
If you don’t have an understanding of how many accounts you have, credit cards you have open, or debt payments that are due, then you must get your personal finances organized.
Start here to learn how to organize personal finances.
Day 2 – Understand your Income
If you do not know how much do I make a year, then you must figure that out first.
It is impossible to manage money if you do not know how much money is coming in.
Also, consider all types of income sources – earned, passive or investment.
Day 3 – Understand your Expenses
Understand where your paycheck is going. When you understand how much of your money is going to things like rent, utilities, and mortgage, you can make better decisions about spending.
This is not the time for “this-is-where-I-hope-my-spending-goes;” this is the true reality of how you spend money.
Day 4 – Pay Yourself First
This is a must for long-term success. Every time you get paid, you need to pay yourself first. Put a percentage of your paycheck into savings each month before anything else is spent on non-essential items.
We suggest starting with at least 5% of your income. Even better, you want to start with 20% of your income.
You must cut your fun spending until you can save money first.
When saving becomes an automatic habit, start investing through high yield accounts like IRAs and 401(K)s.
Day 5 – Automate your Emergency Savings
Set up a transfer to put $50 into your Emergency Fund every time you get paid.
Learn how much you need in your emergency fund. Remember, the goal is never to use your emergency fund, but you always want one – just in case!
Day 6 – Create Money Goals
Figure out what your financial goals are and how much they will cost over time, then come up with a strategy to achieve them.
You need to make a plan to reach your money goals.
If you skip this step, you may be lucky and still reach your goals. But, you can find better prosperity but writing out those money goals and maybe even using a vision board.
Learn how to create smart financial goals.
Day 7 – Budget Time
Crazy! I know. Most people would think that creating a budget would need to be first. But, it isn’t. You need to figure out days 1-6 first before you dig into budgeting.
Begin tracking your expenses on paper or online as soon as possible. Here are the best budgeting apps available.
The goal with the budget is to focus on saving first, then your expenses. you must spend less than you make.
Day 8 – Make More Money
Come up with ways to generate more income. Period. You need to make your money work for you.
You need to learn how to make your income work for you by creating streams of income outside of your primary work or “earned” income.
Theoretically, if multiple streams of revenue exist at your full-time job, you can work fewer hours than necessary.
Ways to Make Money:
Day 9 – Enough with Debt
Debt will hold you back. Period.
You need to recognize that paying off your debt is the best thing you can do for your finances. However, during this 30 day financial challenge, it is not the time to focus on paying off debt.
Calculate the total amount of debt (except mortgage).
Put down getting out of debt as one of your money goals and the timeframe to make it happen.
For now, don’t take on more debt, and make sure you’re paying the minimum on your credit card balance.
Day 10 – Understand Investing
Investing is a way of giving your money the opportunity to work for you. In other words, you are using what you have now in order to make more out of what you have in the future.
This is the first step to earning investment income that will fund your lifestyle.
Typically, most people associate investing in the stock market. Many people invest with their 401ks or IRAs. However, you can invest your personal income as well.
What if you could earn a return on that opportunity cost? For example, what if you invested the $10 in your wallet and it grew to be $20?
Learn how to start investing.
Trade and Travel 2.0
Learn to trade stocks with confidence.
Whether you want to:
Retire in peace without financial anxiety
Pay your bills without taking on a side hustle
Quit your 9-5 and do what you love
Or just make more than your current income….
Making $1,000 every.single.day is NOT a pie-in-the-sky goal.
It’s been done over and over again, and the 30,000 students that Teri has helped to be financially independent and fulfill their financial dreams are my witnesses…
Day 11 – Control Excess Spending
Every time you spend money, it is an opportunity cost to your future self. You are trading away your future self’s money to buy something today.
Is that what you want?
More than likely, no.
Learn how to drastically cut expenses.
Day 12 – Autopay your Bills
Consider setting up an autopay feature for your bills. It can help you avoid late fees and will have a steadier flow of money coming in.
This will help you to make sure you have the cash flow available to meet your expenses.
Day 13 – Avoid Fees
One of the best ways to save money is by avoiding fees.
If you have a credit card, consider switching to one with no annual fee or an introductory offer that expires after one year.
Check your bank and credit card statements for any fees you may not be aware of.
If there is a fee, call the company and negotiate to have it removed or reduced.
Day 14 – Automate Retirement Contributions
You should automatically make a certain percentage of your salary go to a 401k or other savings account, and the other percentage goes to your checking account for spending money.
This is something your human resources department can help you set up.
Day 15 – Increase your Retirement Contributions
Now, that you have automated your retirement contribution, you want to increase you much your contribution each year until you are maxed out by IRS limits.
Start to increase your retirement contributions by 1%.
Set a five-year goal to fully max your retirement contributions!
Halfway Point!!
You’re halfway through the 30 day money challenge!
Keep up the good work and keep reaching for your goals.
You’ve made it this far, so just imagine what you’ll be able to do in another month of working hard towards saving more money.
Day 16 – Communication
Don’t think money has to be a taboo topic. In fact, you need to be comfortable talking about money.
The key is to be on the same page with key family members about where money should go. This is something that we struggled with our marriage and had to overcome. Thankfully, we did and we made way more progress than previously.
Day 17: Invest in yourself
I know you’re probably tired of hearing about investing in yourself, but it’s important. Investing means putting money into something that will make more money back. You might not think this applies to you, but it really can! You might not have a big budget for investing in stocks or mutual funds right now, so let’s talk about something you do spend money on every day: you.
You only learn by growing.
Day 18 – Start Reading About Personal FInance
This isn’t something that you do once or twice. Make it a goal to read books on money or personal finances each month.
Importantly, make sure you are reading books, regardless of what aspect they look at money. It is never too late to pick up new tricks or ideas.
Plus learning from others’ money stories is powerful.
Day 19 – Free Fun
Participating in only free activities for 30 days, and refusing to spend a single penny, we created a guide to make that happen for you.
101+ Things to Do with No Money
After writing that post, we discovered this is one of the best money saving ideas out there. This guide not only teaches you how to save money but also teaches about where you want to spend money and the importance of living a purposeful life.
Day 20 – Review Insurance
You need to make sure you are properly covered with insurance as well as not paying too much money for your policies.
There are all of the types of insurance you need to review:
This is something you should do once a year.
Day 21 – Waste Less Food
You need to learn to save money by wasting less food.
This doesn’t mean you have to make homemade meals every night of the week! The goal is not to throw food away – that is hard earned cash going right down the trash.
Ways to Save Money on Groceries:
Day 22 – Buy Second Hand
Consider second-hand stores and consignment sales as options for buying used items. Thrift stores are also great to save money on clothes and other household items.
The same is true for buying cars, baby equipment, kids clothes, etc. Plus you protect our world.
Day 23 – Save Money
So, this day is all about saving money and I think that it’s the most important one of them all because if you’re not saving your money, then what are you doing with it? You’re throwing it away.
So today, I want to talk about two different types of saving money – physical and mental. The first one is all about physically saving your money. This is the easiest one because it doesn’t require any effort on your part to do so, but it’s also very important as well.
The second type of saving money is mental saving. This is all about saving your money because you know that something better will come along soon and it gives you hope for the future!
So, I think these two types of savings are both really important.
Day 24 – Give Back
This is the time to give back to others, donate money to charities, and put small contributions into charity.
By hoarding money, you are not learning the principles of helping others just like you have been helped along the way.
Day 25 – Renegoite Interest Rates
Right now, we are not starting to pay off debt. We are looking for ways to save on higher interest payments.
Make calls to renegotiate your interest rates on your debt. If the credit card company says no, then look at a zero interest transfer.
Just no more debt.
Day 26 – Avoid Scarity Mindset
You have to believe in yourself that you are capable of achieving great things and that includes success money.
However, we get caught in this trap of hoarding materialistic items in order to make up for the dollars in our bank account or money that was wasted in buying them.
If you don’t believe how poverty mentality overwhelms your life, then read this story of reclaiming your home with decluttering.
Day 27 – Cut Out What you Don’t Need
If you are not using something, sell it or give it away to someone who can use it more than you do!
You’ll save money and make room in your budget for the things that matter.
We learned a lot when we started to own less stuff.
Day 28 – Prepare for a No Spend Challenge
If you have not been able to keep your spending in check, this is an excellent opportunity for you to try out a no spend challenge once this challenge finishes.
A no spend challenge will help you to review your budget and see what areas of spending need more attention in order to increase savings or pay down debt.
Also, it will help you focus on what area are important to spend money.
Day 29 – Reward Yourself
This is the biggest lesson I learned when paying off debt and trying to increase our savings percentage. I became unable to spend money. I would feel guilty about spending money.
That is not the type of life you want. You must be comfortable spending money (especially if you are a thrifty person).
Pick rewards to match your smart financial goals. Keep motivated with those rewards.
Day 30 – Stay on Track
Proper money management does not end just because the end of the 30 day challenge is over. This is a lifelong skill to master and perfect.
Keep focused by not going over budget limits and being honest about where you really stand financially today as opposed to where you want it to be in the future.
You can stay on track if you have a deep desire to continue.
30 Day Money Saving Challenge
This one is just about saving money. Period.
Each day, you save money to reach your goal.
For many people, the 30 day money saving challenge will make sure you are on track with your goals and objectives.
At the minimum, you should be able to save $500 in 30 days. But, you need to decide what you want to save in a month.
The challenge is open to everyone, so this might be the perfect opportunity for you!
What is the 30 Day Money saving Challenge?
The 30 day money saving challenge is saving a set amount of money during the month.
Keep in mind, not everyone will be able to save this much in 30 days and that’s perfectly okay.
You need to make it work with your budget.
Another option for the 30 Day Money Challenge is committing to give up one or more expenses for the whole month. For instance, pick ten things that cost you money and give them up for 30 days.
How to get started with the 30 day savings challenge
The 30 day savings challenge is a simple but effective way to get started saving money.
You can choose any of these methods:
Take the amount you want to save and divide by 30. That is how much to save daily.
Determine the amount to save and take that immediately when you are paid.
It is easy to go in order or skip around depending on what amount you want to save each day.
Keep change hidden in jars and watch it add up over time, then put the money away every day and see where they rank at the end of the month.
Give up a certain expense and save that money.
Try a modified version of the 100 day challenge.
You can find plenty of money saving challenge printable or PDF in our resource library.
Want more easy money saving challenges?
Are you in for this 30 Day Money Reset Challenge?
This is only a 30 day money challenge because it’s a short period of time to gain a win. That is what you need to keep up the motivation as well as have a strong kickstart to your finances.
In order to build wealth through their finances, these are 30 smart moves that require no time on some days.
Don’t lose momentum. If you miss a day, then jump back into the challenge the next day.
The key to success for 2021 is to take control of your finances.
Photo Credit:
www.rakuten.com
The Shopping Trick to Save Hundreds of Dollars
Personally, I love to shop online from the convenience of my own home and have packages delivered to my house. Plus you can get paid to shop online!! The process is super simple.
Just head here to get an Rakuten/Ebates account, click on the retailer you are shopping online, and then complete your checkout process as normal.
Already a Rakuten / Ebtaes member? Make sure you have the Extension Buttonfor automatic savings!
Photo Credit:
www.asktrim.com
Perfect for the person who hates to hassle with canceling subscriptions and checking spending. Trim is a virtual personal assistant that constantly works to save users money.
Trim adds value in such ways as canceling old subscriptions, setting spending alerts, checking how much users spent on ride-sharing apps the previous month, and automatically fighting fees.
Photo Credit:
ibotta.com
Ibotta can be used for grocery stores, drugstores or online shopping. Once you accrue $20 in your account, you can transfer it to PayPal or venmo or buy gift cards to selected retailers.
Just for signing up, they will give you a bonus when you use use this link. Ibotta rocks at bonus categories and offers. This is where your cash back can really add up fast.
Photo Credit:
checkout51.com
Checkout 51 can be used for grocery stores or drugstores. Their offers are valid each week from Thursday-Wednesday. With new offers released each Thursday.
One of my favorite offers is the “Pick your own offer” – it is a selection of 5 fruits of veggies to redeem for extra cents cash back. Once your account balance is over $20, they will mail you a check.
Know someone else that needs this, too? Then, please share!!
Did the post resonate with you?
More importantly, did I answer the questions you have about this topic? Let me know in the comments if I can help in some other way!
Your comments are not just welcomed; they’re an integral part of our community. Let’s continue the conversation and explore how these ideas align with your journey towards Money Bliss.
Renting a car with a credit card is easier than renting a car without a credit card, but both methods are possible at many major car rental agencies. Car rental companies typically put customers through more hoops to rent a car without a credit card.
In this guide, we’ll cover how to rent a car without a credit card — but also explore the potential perks of paying for a rental car with a credit card, when possible.
Is It Possible to Rent a Car Without a Credit Card?
So do you need a credit card to rent a car? Technically, no, you do not have to have a credit card to rent a car. It’s possible to rent a car with a debit card at some major rental agencies. Some agencies even accept prepaid gift cards, cash, or money orders as a form of payment at the end of the rental.
Each rental agency has its own stipulations about paying by debit card. Some franchises may not follow corporate policy, so it’s always a good idea to call the specific rental agency location to ask about payment options before arriving at your destination.
Common requirements for customers paying for a rental without a credit card include:
• Security deposit: Many agencies will put a hold on your debit card for the cost of the rental, plus an additional amount. You will not be able to use the money being held for the duration of your trip, which can make funding your vacation more challenging.
• Credit check: If you are paying with a debit card (or cash), some rental car agencies may perform a credit check. This could result in a hard inquiry on your credit report, which might temporarily lower your score.
• Identification: Renting a car without a credit card might mean that the rental agency needs to see multiple valid forms of ID.
• Age: While 25 is often the magic number to rent a car, it is possible to rent a car as a younger driver. Many agencies charge “young driver fees” to do so. However, if you are renting a car with a debit card, agencies may not allow drivers under the age of 25.
• Proof of return travel: If renting from an airport with a debit card, many agencies want to see a ticketed return travel itinerary as an extra assurance that you will return with the car.
• Logos: Some rental car agencies require debit or prepaid cards to carry the logo of a major credit card company, like Mastercard, Visa, or Discover.
The following rental car agencies allow you to rent a car without a credit card at participating franchises if you meet their specific requirements (though note this is not an exhaustive list):
• Alamo
• Avis
• Budget
• Dollar
• Enterprise
• Hertz
• National
• Sixt
• Thrifty
• Turo
Recommended: Buying a Car with a Credit Card
Why Rental Car Agencies Typically Require a Credit Card to Rent a Car
Why do you need a credit card to rent a car at some agencies, and why do others impose a number of requirements for debit card payments? Here are the reasons rental car agencies require a credit card or other information.
Proof of Reliability
Having a credit card inherently demonstrates to a rental car agency that a creditor trusts you enough to borrow their money. Because rental car agencies can ascertain your creditworthiness from a credit card in your name, they don’t need to run a credit check before loaning you a $25,000 piece of machinery.
Ability to Collect Repair Fees
If you return the car damaged, the rental car agency will need to pay for these repairs. Car insurance (whether through your own policy, credit card travel insurance, or the agency’s policy) may cover most of the charges, but you still might owe a deductible. Without proper insurance, there is a risk that the repair costs will exceed your security deposit.
Though you can rent a car without a credit card, if you pay with a debit card, the rental agency runs the risk of your checking account not having enough funds to cover the cost. There is a better chance the agency can charge your credit card without hitting your credit limit.
Ability to Collect Tickets and Fees
Similarly, if you go through any electronic toll booths or receive a ticket without being pulled over (e.g., through a traffic camera), the rental car agency can charge your credit card to pay the outstanding balance. Again, they face less risk of maxing out a credit card than overdrawing a checking account, which is why some agencies prefer customers renting a car with a credit card.
Benefits of Using a Credit Card for a Car Rental
Here are just a few potential perks of swiping your credit card for a car rental:
• It’s easier. As discussed above, renting a car without a credit card can complicate the process.
• You might have insurance. Some travel credit cards offer car insurance when you use them to pay for a rental car. Research your card’s policy carefully to understand what coverage it provides and how to use it. For example, many credit cards with travel insurance require that you decline the rental agency’s insurance; some only offer secondary insurance, meaning you need to file claims through your own auto insurance first.
• You might get discounts. Some credit cards offer special discounts at select car rental agencies. Check your card’s policy to understand where and how to get discounted rates.
• You could earn rewards. As mentioned above, you might qualify for cash back rewards when you opt to cover your rental car with a credit card payment. Other cards may pay out rewards as miles or points. Travel credit cards might even offer extra points for travel-related expenses, like rental cars.
Typical Rental Car Credit Card Interest Charges
When you rent a car, the agency typically puts a hold on your credit card for a set amount, often the value of the rental car agreement; this is commonly called a security deposit. During the rental period, these funds will count toward your credit limit.
When you return the car, the agency will charge you the amount of the rental, plus any fees incurred during the rental (damages, extra days, late drop-off, etc.). If the initial hold was more than the final cost of the rental, the agency will put that amount back on your card.
Because you pay interest on money borrowed with a credit card, it’s possible you might incur interest on the held security deposit. However, paying off a credit card in full every month is a smart strategy for avoiding interest charges given how credit cards work.
Recommended: When Are Credit Card Payments Due?
The Takeaway
Renting a car with a credit card makes the process much easier and can have benefits for the renter as well. However, it is possible to rent a car without a credit card. Just be prepared to take additional steps to get behind the wheel.
Whether you’re looking to build credit, apply for a new credit card, or save money with the cards you have, it’s important to understand the options so you can use your credit card responsibly.
SoFi Travel has teamed up with Expedia to bring even more to your one-stop finance app, helping you book reservations — for flights, hotels, car rentals, and more — all in one place. SoFi Members also have exclusive access to premium savings, with 10% or more off on select hotels. Plus, earn unlimited 3%** cash back rewards when you book with your SoFi Unlimited 2% Credit Card through SoFi Travel.
Wherever you’re going, get there with SoFi Travel.
FAQ
Do I need a credit card for rental car insurance?
You do not need a credit card to purchase rental car insurance. While using a credit card makes it easier to secure a rental, most agencies allow you to pay upon your return with a credit card, debit card, or even cash, a gift card, or a money order. That includes the cost of insurance provided by the rental agency.
However, many car insurance providers cover rental cars in their policies, especially in the United States. Check with your agent to see if you’re covered. Additionally, some credit cards offer rental car insurance when you use them to pay for the rental. Your credit card benefits administrator can explain how, if, and when coverage applies.
Is it easier to rent a car with a credit card or debit card?
Renting a car with a credit card is easier than renting a car with a debit card. Many agencies will let you rent with a debit card; they just have additional requirements for you to meet before renting.
What form of payments are accepted for renting a car?
While rental agencies generally prefer credit cards for payment, some agencies allow you to book and rent a car with a debit card. Upon return, you may be able to pay for the car with a prepaid gift card, cash, or money order.
Can I use someone else’s credit card to rent a car?
If you use someone else’s credit card to rent a car, that person must be present to pick up the rental and be the main driver. If you intend to drive the rental, you will likely have to pay a fee for an additional driver, as you can’t be listed as the primary driver when using someone else’s credit card.
Photo credit: iStock/skynesher
**Terms, and conditions apply: The SoFi Travel Portal is operated by Expedia. To learn more about Expedia, click https://www.expediagroup.com/home/default.aspx.
When you use your SoFi Credit Card to make a purchase on the SoFi Travel Portal, you will earn a number of SoFi Member Rewards points equal to 3% of the total amount you spend on the SoFi Travel Portal. Members can save up to 10% or more on eligible bookings.
Eligibility:
You must be a SoFi registered user. You must agree to SoFi’s privacy consent agreement. You must book the travel on SoFi’s Travel Portal reached directly through a link on the SoFi website or mobile application. Travel booked directly on Expedia’s website or app, or any other site operated or powered by Expedia is not eligible. You must pay using your SoFi Credit Card.
SoFi Member Rewards: All terms applicable to the use of SoFi Member Rewards apply. To learn more please see: https://www.sofi.com/rewards/ and Terms applicable to Member Rewards.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
With flight disruptions, natural disasters, and other issues, travel insurance has become a popular option for travelers. While you can purchase travel insurance through third-party providers (and get specific insurance when booking flights, hotels, and rental cars), you may already have credit card travel insurance at your disposal.
So, should you choose a credit card specifically because it offers travel insurance? Below, we’ll take a closer look at what credit card travel insurance is, how it works, what it covers, and why you might want a credit card with travel insurance ahead of your next adventure.
What Is Travel Insurance?
Travel insurance protects consumers against financial losses when traveling domestically or internationally. It can cover everything from lost luggage to new hotel arrangements because of canceled flights to medical emergencies while on vacation.
Travel insurance can also protect you before your trip. If something changes, like a family emergency, that will keep you from traveling as planned, travel insurance might get you a refund for your expenses.
You can find travel insurance through insurance companies, travel agents, and insurance comparison sites. Your car insurance policy may insure you even in a rental car, and certain hotel booking sites may allow you to make refundable accommodations for a fee. But did you know that your credit card may also already cover portions of your trip?
How Does Credit Card Travel Insurance Work?
Credit card travel insurance is a set of coverages offered by select credit cards to protect you when traveling on qualified trips. How credit card travel insurance works varies by card, however. It’s important to read the fine print of your credit card to understand what may and may not be covered.
The main thing to remember is that you typically need to use the credit card when booking your major travel expenses (airfare, lodging, and transportation) for those costs to be covered should something happen.
Recommended: Tips for Using a Credit Card Responsibly
Types of Travel Covered by Travel Insurance
Each travel credit card will have its own inclusions and exclusions for travel insurance. But generally, credit cards with travel insurance may offer trip protection and coverage for unexpected medical expenses.
Trip Protection
Trip protection covers a wide range of potential insurances your credit card might offer when traveling:
• Trip cancellation and interruption insurance: If you prepaid for a trip and have to cancel it, or are on a trip and need to end it early, your credit card may cover this. Read your credit card’s policy closely to understand how your credit card works and what qualifies as a covered trip cancellation or trip interruption. Unexpected injuries or illness, inclement weather, terrorist action, a change in military orders, and jury duty are examples of reasons a trip may be canceled or end early — and be covered by credit card travel insurance.
• Trip delay insurance: If your flight, bus, cruise, or other transportation (called a common carrier) is delayed or canceled and you miss activities or lodgings that you’ve already paid for, your credit card may cover this. In addition, such policies might cover your expenses as you scramble to find new lodging, meals, and transportation.
• Rental car insurance: Check with your car insurance provider before booking a rental to understand if your coverage extends to rentals. If it does not (or if you do not want to make a claim with your car insurance provider), your credit card might also serve as an insurance option in the event of an accident. Read the fine print carefully; many credit cards require that you decline the insurance from the rental company for the credit card travel insurance to apply. Some credit cards only offer secondary car insurance, meaning they require you to file a claim through your personal car insurance first.
• Delayed or lost baggage insurance: If an airline loses or damages your baggage, you can make a claim for the (depreciated) contents of the bag. Some credit cards may even cover delayed baggage since it can put a dent in your plans. Just check your policy: You may have to put in a claim with the airline before your travel credit card will step in.
Medical Coverage
Travel insurance through credit cards may cover medical expenses as well, including:
• Medical insurance: If your health insurance doesn’t cover medical costs incurred abroad, travel medical insurance might cover qualified expenses. In most cases, Medicare does not cover health costs incurred outside of the U.S., so travel insurance can be helpful for seniors relying on a government health plan.
• Accident insurance: While we don’t want to assume the worst can happen, this insurance sometimes offered through credit cards offers a payout if you are killed or seriously injured (such as dismemberment or loss of sight, hearing, or speech). This applies while traveling on a common carrier or on a covered trip paid for with the card. In this way, accident insurance can operate like life insurance while traveling.
• Emergency evacuation: If you fall ill or are injured while traveling and need to be evacuated, including through emergency airlift, this coverage will pay for associated expenses. This also may cover emergency evacuations due to extreme weather or political unrest.
Recommended: Preparing Financially for Travel
Benefits of Credit Card Travel Insurance
Credit cards offering travel insurance have multiple benefits. Not all credit cards offer travel insurance, however, so it’s a good idea for consumers to weigh these benefits against benefits of other credit cards to determine which card is right for them.
Among the benefits of credit card insurance are:
• Financial security: Travel can be a big expense. When unplanned events cut trips short or leave you stranded, travel insurance can protect the money you have spent.
• Emergency coverage: Whether you encounter dangerous weather, a terrorist incident, or a medical emergency during travel, having travel insurance can make it easier to deal with crises while on vacation.
• A sense of comfort: Ultimately, insurance policies can ease consumers’ worries when traveling. Knowing that there is a Plan B when your best-laid travel plans go awry can be comforting, especially when facing an emergency in an unfamiliar place.
Recommended: Tips for Finding Travel Deals
Picking a Credit Card for Travel Insurance
When looking for a new credit card, you can search specifically for cards that offer travel insurance among different credit card rewards. Note that many of these can have annual fees, so they might only be a good choice if you’re a frequent traveler.
Before applying for a credit card, check your credit score to ensure you can qualify.
If travel insurance is not your top priority for choosing a credit card, you can consider other incentives, like credit card bonuses for new customers or cash back rewards.
Recommended: What Is a Charge Card?
Filing a Travel Insurance Claim
If you experience an unexpected event, like a delayed flight, during your trip, calling your credit card company to ensure your emergency expenses will be covered can be a smart idea. This might keep you incurring credit card payments for meals or lodging that won’t actually be covered.
Look at the back of your credit card to find the phone number for a benefits administrator. They can help you as you begin your claim process.
As explained previously, certain credit cards may require you to file a claim with another entity before they get involved. For example, a credit card offering secondary auto insurance requires that you file with your personal car insurance company first. Likewise, if an airline loses your luggage, a credit card’s travel insurance policy may stipulate that you file first with the airline.
When you know you will be filing a claim, saving your receipts (and taking photos of them as you go) can be a smart way to stay organized. Filing as soon as you’re home (or even while still traveling) may expedite the process. In fact, some credit card insurance policies might have deadlines for filing claims.
The Takeaway
Some credit cards include travel insurance among their perks. Insurance coverage can vary, but it might cover delayed flights, trip cancellations, emergency medical expenses, and lost luggage. Travel cards with such coverage often have annual fees, so it’s a good idea for consumers to weigh multiple options when selecting a credit card and insurance policies.
Whether you’re looking to build credit, apply for a new credit card, or save money with the cards you have, it’s important to understand the options that are best for you.
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Wherever you’re going, get there with SoFi Travel.
FAQ
How do I know if my trip is covered?
Not every credit card offers travel insurance. Always read the fine print of your credit card before making travel insurance decisions ahead of and during your trip. If the legal jargon is confusing, you can typically contact a benefits administrator for clarification. Look at the back of your credit card to find the number.
What does travel insurance cover?
Every credit card travel insurance policy is different. Common coverages include trip cancellation or interruption, accident and medical, lost luggage, and even rental car insurance. Research your card’s policy ahead of your next vacation.
Will the expenses not charged to my card be covered?
Some credit cards with travel insurance require that you use those cards on travel expenses for the insurance to apply. Others may automatically apply certain types of coverage, like medical coverage, regardless of what card you used to book your trip. Reach out to your card’s benefits administrator before travel if you need help interpreting the travel insurance policy.
Photo credit: iStock/Atstock Productions
**Terms, and conditions apply: The SoFi Travel Portal is operated by Expedia. To learn more about Expedia, click https://www.expediagroup.com/home/default.aspx.
When you use your SoFi Credit Card to make a purchase on the SoFi Travel Portal, you will earn a number of SoFi Member Rewards points equal to 3% of the total amount you spend on the SoFi Travel Portal. Members can save up to 10% or more on eligible bookings.
Eligibility:
You must be a SoFi registered user. You must agree to SoFi’s privacy consent agreement. You must book the travel on SoFi’s Travel Portal reached directly through a link on the SoFi website or mobile application. Travel booked directly on Expedia’s website or app, or any other site operated or powered by Expedia is not eligible. You must pay using your SoFi Credit Card.
SoFi Member Rewards: All terms applicable to the use of SoFi Member Rewards apply. To learn more please see: https://www.sofi.com/rewards/ and Terms applicable to Member Rewards.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
You can, but we don’t recommend it. In most cases, it’s not advisable to buy a car with a credit card due to limitations on credit card transaction amounts, high-interest rates on credit card balances, and potential merchant fees. However, some dealerships may allow you to use a credit card for a portion of the payment or for a down payment, but weigh the costs and consider alternative financing options before you do.
Are you shopping for a new or used car? If so, there’s a good chance you’ll need to finance this purchase. There are several financing options available, such as an auto loan or personal loan—but what about your credit card? Can you buy a car with a credit card?
The simple answer is yes, you probably could find a car dealership willing to accept a credit card payment. The real question you may want to ask yourself is, “Should I make such a large purchase with a credit card?”
Let’s take a closer look at the advantages and disadvantages of purchasing a car with a credit card so you can decide if it’s the right option for you.
Can You Buy a Car With a Credit Card?
Buying a new car with a credit card is possible, but it’s not going to be easy.
First, not all car dealerships accept credit card payments. This is likely due to the high processing fees credit card payments incur. These fees can range between 1.5% and 3.5%. For example, if you purchase a car for $20,000, these processing fees can range from $300 to $700.
Even if you do find a dealership willing to take a credit card payment, you may be responsible for paying these processing fees. The dealership may also limit the amount you can pay with your credit card. For instance, you may be able to use your credit card for a down payment but not to pay for the full value of the car.
Secondly, not all credit card companies allow cardholders to make a large purchase like this. It’s important to contact your credit card company first to better understand its policies.
Finally, even if the car dealership and credit card company permit this type of purchase, you have to have enough available credit. If you go over your credit limit, you could incur additional fees and higher interest rates—or the credit card company may decide to deny the transaction altogether.
Things to Consider
Before you grab your credit card and head to the car dealership, there are a few things you should know about making this type of purchase.
Limited Options
As mentioned above, not all car dealers and credit card companies allow this type of purchase. This could significantly decrease your options when you go looking for a car. You’ll be limited to finding a car at one of these dealerships.
Negative Impact on Your Credit Score
Adding a large purchase, such as a car, to your credit card balance can drastically increase your credit utilization. Because your credit utilization rate accounts for up to 30% of your overall FICO® credit score, any large purchase could cause your credit health to take a hit.
In fact, most experts agree that you should try to keep your credit utilization rate at or below 30%. It’s unlikely that adding a large purchase, such as a car, will keep your credit utilization low enough to meet this recommendation.
Your lower credit could impact your ability to get other credit cards, take out a personal loan, or even secure an apartment. This is why it’s important to understand the risks involved before buying a car with a credit card.
Lack of Available Credit
One of the main reasons people get a credit card is to have additional funds available in case of an emergency. Using a majority of these funds to purchase a car means you’ll have less available if you do face an emergency. Be sure to carefully consider this factor and the lasting effects it may have before making a large purchase.
Higher Interest Rates
Before you make any financing decisions, you should always compare interest rates. While your specific rates will vary based on your income and credit score, you’ll likely pay higher interest rates when making a credit card purchase than you would with an auto loan.
For instance, the average APR for credit cards is 27.89%, while average car loan rates range from 7.19% to 11.93%. Even if you have bad credit, you’re likely to find better interest rates through a car loan versus a credit card.
Even if your credit card comes with a 0% APR introductory rate, you still need to be careful. If you can’t pay the entire balance within the initial time frame, higher interest rates will be applied to your balance.
Ability to Make Payments
No matter what lending option you choose when purchasing a new car, it’s crucial to make sure you can afford the monthly payments. Before you even start shopping for a car, set a realistic budget to determine how much you can afford. Be sure to take the interest rate and any other additional fees and costs into account, such as insurance, registration, and processing fees.
Advantages of Buying a Car With a Credit Card
There is a potential advantage of buying a car with a credit card to consider. If you have a rewards card, making such a large purchase could help you earn cash back or travel points quickly. This could be very beneficial, especially if your rewards card has a welcome bonus that requires you to spend a certain amount in a short period of time.
The idea of earning big rewards with just one purchase may sound great, but you have to consider other factors. For instance, does your credit card charge an annual fee? Unless your rewards exceed the annual fee, it may not be worth it. You also need to factor in the higher interest rates.
Alternative Lending Options
Before using your credit card to purchase a new car, be sure to explore your other options, including:
Getting an auto loan. You’ll likely find better interest rates with an auto loan through a bank or credit union. Additionally, you’ll probably get a higher credit limit with a car loan than by relying on your available credit card balance.
Getting a cosigner. If you’re having trouble securing an auto loan due to your credit or lack of credit, you can consider using a cosigner. If your cosigner has good credit, it may help you get a car. There are some risks involved for the cosigner, so consider this option carefully.
Using your savings. If you have an emergency fund set up or available savings, it may be worthwhile to use this money to purchase a new car. Then, you can keep your credit card to use for any emergencies that may arise while you’re rebuilding your savings.
Doing a trade-in. If you don’t have money in your savings account to use as a down payment, trading in your current car may provide the funds you need. The more money you can put down on a new car, the better chance you have of being approved for a car loan and keeping monthly payments within your budget.
Before you use your credit card to buy a car, find out what your credit score is. This can help you determine what lending options are available to you. If your score is too low to secure an auto loan with reasonable interest rates, you can take steps to repair and rebuild your credit.
Use Credit.com’s Free Credit Score to find out your credit score and get started today.
The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.
Learning how to build credit as a student is important so you’re ready for life after graduation. Focus on building healthy credit habits—paying bills on time, keeping your credit utilization low and avoiding common credit mistakes.
While the government considers you an adult at 18, many people consider graduating college and starting their first job as the first real marker of adulthood. However, adulthood comes with responsibilities, many of which require a credit score—putting utilities in your name, renting your first apartment, putting car insurance in your name and even buying a car.
Read on to learn about some of the ways you can build credit as a student so you can graduate college with a degree and healthy credit.
Become an authorized user on a credit card
For many students, the first step to building credit is using a credit card to build credit. Unfortunately, it can be challenging to get a credit card if you don’t have any credit.
Often, a person’s first credit card isn’t actually theirs. Instead, they become an authorized user on someone else’s credit card. An authorized user is someone who is added to another person’s credit card account with full spending privileges. Responsibility for paying the credit card bill will still belong to the primary cardholder, who is usually a parent, close friend or relative.
The advantages to being an authorized user don’t end with being able to use the card like it’s your own. You also piggyback credit because the credit card’s account and payment histories are added to your credit report. This extends the length of your credit history, builds your payment history and increases the amount of credit available to you, which should all help improve your credit.
If you want to ask someone to make you an authorized user on their account, make sure they have a good credit history. You don’t want to be added as an authorized user to a primary cardholder who doesn’t pay their bills on time, since that would hurt your credit more than help it.
Open a student credit card
If you can’t become an authorized user on someone’s credit card, you can open a student credit card instead. A student credit card is a type of credit card specifically geared for students looking to build credit.
Often, the only difference between a traditional credit card and a student credit card is that they have a lower credit limit. Some also offer rewards for students, such as incentives for good grades and other cashback and rewards offers.
Open a secured credit card
Another type of credit card to consider as a student is a secured credit card. With this type of credit card, you make a deposit to cover your credit limit, which minimizes the risk to the issuer. As a result, credit card issuers are more likely to offer credit to someone with no or low credit.
As you use the credit card and pay your bill on time, you’ll build credit and eventually graduate to an unsecured credit card.
Develop healthy credit habits
College is full of great experiences, but the costs can add up quickly, and being financially responsible can be challenging. Throw in access to credit for the first time, and it’s easy to see why many students struggle with credit initially.
While students may want to take advantage of that new credit limit, it’s important to use your credit card wisely. Only use it for emergencies or small, regular expenses that you have the cash to pay for. These actions seem small, but they will establish the skills you need to keep your credit high throughout your life.
From the moment you have your new credit card, do the following:
Keep your balance low. This keeps your credit utilization rate low, which is one of the factors impacting your credit health. Experts recommend only using 30 percent or less of your credit limit. An easy way to stick to this is to use your credit card for small, regular purchases each month. For example, put all your subscription services on your credit card or only use it for gas. This habit will also prevent you from overspending or spending money you don’t have on nonnecessities.
Pay your balance each month. While you are only required to pay off the minimum balance each month, you’ll owe interest on the unpaid balance. The interest is applied to your balance, which can hurt your credit utilization rate, not to mention cost you more over time. Get in the habit now of paying off your entire balance every month.
Avoid opening too many accounts. Don’t open too many credit cards at once. New credit can damage your credit score, and having too many credit cards can make it harder to monitor your spending.
Take out a credit builder loan
Your credit mix, or the types of credit you have, play a role in your credit score. So, just having a credit card may not be enough to build credit quickly—you need other types of debt. Instead of taking out a loan for a car you don’t need, consider a credit builder loan.
The sole purpose of a credit builder loan is to build credit, so you won’t get money to put toward something else. Instead, the bank will put the money you’re borrowing into a savings account. You’ll make regular payments to repay the loan, and once you’ve satisfied the loan terms, the money in the savings account is yours.
Get a cosigner
When you’re starting to build credit, it may be difficult to get lenders to let you borrow money on your own. You can add a cosigner, someone with a better credit history than you who agrees to take responsibility for the loan if you miss payments. The cosigner minimizes the risk to the lender, making them more likely to lend to you.
As long as you make your monthly payments on time, you can build your credit history and payment history with a cosigner.
Get credit for rent and utility payments
Usually, only credit cards and installment loans such as a student loan or car loan affect your credit. Monthly bills like rent, utilities, and cell phones won’t appear on your credit report unless they’re delinquent.
A few programs and services enable you to add some of your monthly bills to your credit report to track on-time payments and build your credit. For example, ExtraCredit® is a program that reports utility and cell phone bills to credit bureaus, and rent reporting services will add your rent payment history to your credit report.
Only add these bills to your credit report if you pay them on time. Adding them to your credit report and then missing payments will hurt your credit more than help it. Be aware that some of these programs and services may charge a fee.
Think carefully about your student loans
Student loans seem to be a fact of modern life, with over 43.5 million Americans carrying $1.7 trillion in student loan debt. While the exact amount varies, the average student graduate has more than $37,000 in student loan debt.
Using your loan as income might be necessary, but if you can help it, only take out enough to cover your education expenses. Look into work-study or student aid options as alternatives to an oversized loan.
Monitor your accounts carefully
Keep an eye on your accounts to protect yourself from identity theft. By monitoring your account using the credit card app, you can shut down the card as soon as you see fraudulent activity, preventing the problem from escalating.
If you are the victim of identity fraud, you can remove fraud from your credit account.
Check your credit report annually
Experts recommend that you check your credit report and score annually or more often to ensure they’re accurate. AnnualCreditReport.com will give you one free credit report from each of the three credit bureaus at least once every 12 months (currently, you can see your credit reports once a week!).
You can sign up for credit monitoring services if you want to review your credit report more often than once a year. Keep in mind that building credit takes time, and even though you may be able to check your credit score every 14 days with some services, it will still take time to see results.
Avoid these common credit mistakes
Being a student means learning, and so does building credit. You’ll want to keep the five factors that impact your credit in mind when making decisions. Those five factors are:
Payment history: 35 percent
Amounts owed: 30 percent
Length of credit history: 15 percent
Credit mix: 10 percent
New credit: 10 percent
While mistakes are part of the learning process, you’ll want to avoid these common credit mistakes to avoid long-term consequences to your credit.
Mistake #1: Waiting too long to start building credit
Credit factor: Payment history
Most experts agree that the best time to start building credit is at age 18. The length of your credit history determines 15 percent of your FICO credit score. If you start building credit at 18, you’ll have around four years of credit history by the time you graduate and need to start putting bills and loans in your name.
Mistake #2: Using your credit card for nonessentials
Credit factor: Amounts owed
When you don’t see the physical money you’re spending, it can be easy to lose track of your spending and spend more money than you have. Avoid this by limiting credit card purchases to essential items only. Use it to pay for groceries and gas, not expensive vacations.
Mistake #3: Maxing out your credit cards
Credit factor: Amounts owed
Maxing out your credit cards hurts your credit utilization rate. The less money you carry from month to month, the better it is for your credit.
If you have a low credit limit, you can avoid maxing out your card by paying more often than the monthly payment due date. For example, if you buy gas and groceries over the weekend, check your balance on your credit card app a few days later and pay it off.
Mistake #4: Missing payments
Credit factor: Payment history
If you aren’t used to them, remembering to pay monthly payments at first might be rough. But you want to avoid late payments at all costs because they can hurt your credit for up to seven years.
Avoid missing payments by setting up automatic payments or calendar reminders on your phone. If you missed the payment because it didn’t line up with your paycheck and you didn’t have the money, you may be able to change your payment date with the credit card company.
Mistake #5: Closing accounts too soon
Credit factor: Length of credit history
If you open a student or secured credit card and graduate with a traditional credit card, it might be tempting to close those other accounts. But if you don’t have any additional credit beyond those initial credit cards, closing them can actually hurt your credit health by minimizing the length of your credit history.
Instead of closing them and opening new credit cards, see if your credit card issuer can convert the student or secured credit card account to a traditional one. That way, you can keep the account active and preserve the length of your credit history.
If you can’t convert the account, hold onto it and make a small purchase every month to keep it active. After you’ve had the new credit card for a while, you can cancel your initial credit cards.
Mistake #6: Taking out too much credit
Credit factor: Amounts owed
Just because someone offers you credit doesn’t mean you should take it. Sometimes lenders offer more money than you need because they make money off your interest payments. When considering credit offers, look carefully at monthly payments and consider your budget. Only take out credit for the amount you need and can reasonably afford to pay back each month.
For example, when you apply for an auto loan for your first car after college, the lender might preapprove you for $20,000. Run the numbers and ensure that’s a monthly payment you can afford. You’ll probably find that you can only comfortably afford to borrow a lower amount.
FAQ
Here are some answers to common questions about how you can build credit as a student.
How long does it take for a student to build credit?
Typically, it takes about six months to a year to build up some credit. Your exact timeline may vary based on your specific situation and how responsible you are with credit-building techniques like a student credit card.
How can a college student build credit with no income?
Usually, you’ll need income to qualify for credit, but there are a few ways around it. You can use a cosigner for a loan or ask someone to add you as an authorized user to their credit card. As an authorized user, you won’t have to make any payments with your credit card to get the card put on your credit report.
Trust Lexington Law Firm to fight for your credit
Building credit is tough—it’s hard to build from scratch but frustratingly easy to damage. Don’t let a lack of credit or a few credit mistakes destroy your confidence. The credit repair team at Lexington Law Firm could help you challenge inaccuracies affecting your credit. Learn more about our services to see how we can help.
Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.