Getting a credit card isn’t always easy, especially if you’re new to credit or have made some credit missteps.
If you can’t get approved on your own, you might be wondering if you can get someone to apply with you. After all, most loans allow you to get a cosigner.
Unfortunately, there are very few major credit cards that allow cosigners. In fact, Discover just dropped the option a year or two ago.
“There’s more administration paperwork getting multiple people to apply and agree,” says credit card expert Jason Steele. “Also, these accounts could have a higher default rate, as each account holder might assume the other is responsible.”
That doesn’t mean it’s impossible, though. Read on to learn why it’s worth looking into credit cards that allow cosigners and which issuers offer the option.
The pros and cons of getting a cosigner
The main reason why you might want to get a cosigner on a credit card is to get approved for a card you might not otherwise be eligible for.
As joint account holders, you’re equally responsible for the debt you incur on the card, but that also means that you both get the benefits of the positive credit history established with the card.
Of course, there are some drawbacks to getting a cosigner on your credit card. For starters, you can’t always remove the other person from your account after your credit has improved.
Instead, you’d have to cancel the card and open up a separate account. And as we previously mentioned, both you and your cosigner are legally liable for the debt you incur with the card.
So, if you rack up a bunch of credit card debt, it could hurt your cosigner’s credit score. What’s more, it could ruin their credit if you default on the account.
In other words, your next Thanksgiving dinner might not be pleasant if you abuse your cosigner’s trust.
Credit cards that allow cosigners
There are only a few major credit card issuers that allow cosigners, but that doesn’t mean you have only a handful of options. Your local credit unions or community banks may offer the option, as might bigger banks like the ones listed below.
If you’re intent on getting a cosigner or thinking about cosigning a credit card, check out your local options as well as the following:
Consider getting added as an authorized user instead
If you don’t like any of the credit cards that allow cosigners or can’t manage to get someone to agree to cosign for you, consider trying to get added as an authorized user instead.
You can generally be added as an authorized user on any type of credit card from any issuer. An authorized user is different than getting a cosigner in that you’ll be getting added to someone else’s existing account.
You don’t need to apply to become an authorized user, so there’s no credit check. Also, you can typically benefit from the card’s previous account history as well as future account activity.
So, in many cases, your credit could see a huge improvement immediately.
As an authorized user, you’re not liable for any of the debt you incur with the card — the primary cardholder is. So, again, it’s important to gain and maintain trust in your relationship with the person.
Getting removed as an authorized user is also much easier than getting rid of a cosigner. The primary account holder just needs to call the credit card issuer and ask that you be removed from the account.
Just keep in mind that you may lose the entirety of the card’s history from your credit report. So, avoid having this done unless your credit is in better shape.
Are credit cards that allow cosigners right for you?
Getting a cosigner on a credit card has its pros and cons, so it’s important to consider your situation and goals before choosing whether to go that route or the authorized user path.
And remember, you can have access to all of the top credit cards if you opt to become an authorized user instead.
Lastly, “You can apply for a card with lower credit requirements such as a secured card,” says Steele.
Secured credit cards aren’t ideal because of the collateral they require, but they can be a good option if you can’t convince someone to cosign or add you as an authorized user.
Thoroughly explore all three options before coming to a decision. Whichever option you choose, start working to improve your credit as soon as possible so that you can get a solid credit card on your own in the future.
Before you jump on an offer, though, it’s important to understand the difference between a secured card and a prepaid card, and which option you need right now.
To help you understand, we’ll cover the major features of each and how they can help you get your credit or finances back on track.
The difference between a secured card and a prepaid card
These cards are similar only in that you can use them to make purchases. Beyond that, they couldn’t be more different.
Here’s a breakdown of each to give you an idea of what you’re being offered.
Secured credit cards
“Obtaining a secured card requires a security deposit or collateral, generally the same amount of your credit limit,” says Katie Ross, education and development manager at American Consumer Credit Counseling.
After that, it functions similarly to a traditional credit card. You can make monthly payments to pay off the purchases you’ve made with the card throughout the month.
You’ll also undergo a credit check when you first apply for the card, which can ding your credit score. This does not mean that you’re replenishing the deposit every time you make a payment.
That cash is strictly used as collateral in case you default on your payments.
A secured credit card is a great way to build credit because it allows you to make monthly payments on a revolving credit line. In fact, you can essentially build credit for free if you pay off your balance on time and in full each month.
You can typically make payments by connecting your bank account or by sending a check or money order. If you don’t pay off your balance in full, however, the credit card issuer will charge you interest, and you can generally expect the interest rate to be higher than 20%.
A prepaid card is also sometimes referred to as a reloadable debit card. It’s not a credit card, and there’s no credit relationship with the card issuer.
You can use the card the same way you use a debit card, and can only use what you load onto the card account. In other words, it functions more like a debit card and a checking account.
Depending on the card, you can load money onto your prepaid debit card in one or more of the following ways:
Cash reload at participating retailers
Mobile check deposit
So, if you load $100 onto your account, you can spend that much before your account hits $0 and you have to load more money. You don’t have to put up a deposit to get the account, and you don’t make monthly payments like you would with a credit card.
“Debit cards do not help users build credit,” says Ross. “When you use a debit card, you are not borrowing and repaying the money. It’s just taking money out of your account. So, while a debit card can show your budgeting skills, they don’t prove that you are a responsible borrower.”
This also means there’s no credit check when you apply, and you won’t ever get charged interest, although some prepaid cards do charge a fee if you overdraw your account.
That said, “many debit cards can be set up so that any transaction that would put your account into a negative balance will be denied,” says Ross.
Other fees you may be charged with a prepaid card include:
Monthly maintenance fees
Cash reload fees
ATM withdrawal fees
Foreign transaction fees
Money order or cashier’s check fees
Which payment method is best for you?
Now that you know the difference between secured cards and prepaid cards think about your situation to determine which card is best for you.
Here are a couple of scenarios in which one card might be better than the other.
You’re trying to rebuild your credit
Having good credit is important if you want to borrow at some point in the future. What’s more, having bad credit can hurt your chances of getting an apartment, a job, or cheap car insurance.
If your main goal is to establish a positive credit history, a secured credit card is the only option between the two that can help.
Over the course of a generation, credit cards have become America’s most popular payment method. The average American has six in her wallet. We spend trillions of dollars and take on billions of dollars of debt a year using hundreds of millions of credit cards. Credit card debt has increased almost one-hundred fold since the Federal Reserve began tracking the trend. In fact, last year credit card debt grew by over $92 billion. That’s the biggest credit card debt growth in a single year since the Great Recession and the fifth largest in over 30 years.
Some analysts view this appetite for debt as a financial bubble: a harbinger of the next recession.
Others feel there are good reasons for optimism. Sure. Credit card debt is at a record high, but so is the gross domestic product and unemployment is low. You could make the case that the growth of revolving credit debt — although not great news for the individuals carrying the debt — is indicative of a healthy economy. Delinquency rates are at close-to-historical lows, which is why lenders are not worried and are more than happy to increase the credit lines of cardholders. Naysayers could say that a growth in credit card delinquency followed the last four years credit card debt grew so quickly.
So what is the future for credit cards and what does it say about the economy as a whole. This report will take an in-depth look at the current state of the consumer credit market so you can make your own mind.
A brief history of credit cards
The concept of consumer credit is not a new one. Scholars believe that the first consumer loans were issued in 3,500 B.C. in Sumer. As Dr. Stephen Bertman explains in Handbook to Life in Ancient Mesopotamia, they even had their own “credit cards.” Except they were cylinder seals and were worn around the neck. The cylinder seals served as a personal guarantee during business deals. If a Sumerian lost his cylinder seal he would record the date and time with an official to prove that transactions made with it after the loss were no longer valid.
But credit cards didn’t come along until the 1920s when department stores and oil companies began offering metal charge plates to their customers to allow them to charge their purchases instead of paying for them upfront.
The modern credit card
In 1950, Frank McNamara took the next step toward the modern credit card when he started Diners Club. With his new company, he introduced the first credit card that was accepted by more than one merchant.
In 1958, well-known companies joined the fray, including American Express, Bank of America, and Carte Blanche. Bank of America marketed its competitor card, BankAmericard, in a publicity stunt called “The Fresno Drop,” where it mailed 60,000 activated credit cards to its Fresno, California-based customers.
The result, as you can imagine, was a flurry of fraudulent transactions and delinquencies. But the bank and its competitors learned from that mistake and continued to develop the industry.
Over the ensuing decades, the credit card industry made leaps and bounds. BankAmericard spun off of Bank of America and became Visa in the 1960s. Around that same time, a group of California-based banks started the Interbank Card Association, which later became Mastercard.
In 1986, Sears introduced the first Discover card, which became the first rewards credit card by offering cardholders a small rebate on purchases. Consumers and the competition caught on and, as we now know, the industry exploded.
Now, several credit cards offer several hundreds of dollars to consumers to entice them to apply. Most recently, the Chase Sapphire Reserve launched in late 2016 offering an impressive $1,500 worth of rewards to new cardholders as a sign-up bonus, setting a new standard.
These incentive programs, along with their general convenience, have catapulted credit cards into the most popular form of payment and credit.
Debit cards are the most popular method of payment
According to a study by TSYS, in 2016 credit cards surpassed debit cards as the most preferred method of payment (source). In 2017 debit cards regained their position as the overall most-popular payment method. Debit cards are preferred for small everyday purchases, while credit cards remain more popular for larger purchases.
Consumers with incomes higher than $75k prefer credit cards
Debit cards are the most popular form of payment for people with annual incomes under $75k. The tide switches with high-income consumers.
Credit cards are also the most popular source of credit
Based on a 2016 report that looked at the types of credit respondents applied for in the last 12 months, credit cards were the most sought-after type of credit.
The average household has six cards and $8,733 in credit card debt
Based on the Federal Reserve data and information from the Census Bureau, American households have an average of $8,733 in credit card debt. This is close to what Experian found in its 2017 State of Credit report, which shows an average balance of $8,195 for conventional credit cards and store cards combined.
Experian also found that consumers have an average of 3.1 credit cards and 2.5 retail cards in their wallet, making it easier to get into debt.
New Jersey is the state with the most credit cards per household
Alaska has the highest average credit card debt
Experian’s report also shows where consumers have the most and least credit card debt. For example, Alaska outpaces the rest of the country with consumers carrying an average balance of $8,515 on credit cards alone (retail cards not included). In contrast, Iowa residents carry $5,155 on average in credit card debt.
The APR on credit card accounts is rising
Credit card interest rates hit a new high of 14.99% in November 2017 (Source). That said, interest rates can vary wildly depending on which type of credit card you have, and it’s possible that this average doesn’t include the type of credit card that typically charges the highest interest rates: store cards. These cards often charge interest rates closer to 25%.
However, consumers should be wary of the fine print. There are two types of 0% APR promotions:
Pure 0% APR: With this promotion, you’ll get a period of no interest, after which the interest rate increases. If you have a remaining balance, interest is assessed on the amount that remains from the original purchase or balance transfer. This type is more common with major credit cards that offer balance transfer promotions.
Deferred interest: Store cards that offer 0% APR financing often offer this kind of promotion. While there’s a period of no interest, there’s also a set interest rate the card charges if you don’t pay off the purchase in time. The difference is that you’ll be on the hook for interest based on the original purchase amount, not the amount that’s leftover.
The credit card market is bigger than ever
The credit card market is one of the largest consumer financial markets in the United States and it continues to grow a higher rate than the overall economy. Credit card debt is now at pre-recession levels but purchasing volume with credit cards has skyrocketed past previous highs and is showing no signs of slowing down.
Consumers seem to be getting smarter about how they use their credit cards
Credit card purchase volume is increasing dramatically but credit card debt remains stable.
This would indicate that more people are being smart about how they use their credit cards. In other words, more credit card users are paying with credit cards for the rewards and protections, but repaying their balances before incurring interest. However, that doesn’t mean credit card debt is low.
Revolving credit card debt hits an all-time high… but so does GDP
According to the Federal Reserve, Americans have a record amount of credit card debt. In December 2017, that number hit $1.028 trillion. That’s a 5.8% increase from the previous year.
Some experts consider the new record a warning of things to come, considering the number hit $1.02 trillion in June 2008 as the financial crisis was taking hold. As America tightened its belt, total outstanding debt reached as low as $832.5 billion in April 2011 but has continued a steady rise since then.
However, today’s credit card debt total is about 5% of the nation’s gross domestic product (GDP). In 2008, that number was 6.5%, thus imposing a greater threat to the economy.
Credit card debt is not good for individual consumers long-term financial health. However, you need to look a bit deeper into these statistics to see how concerning it is for the economy as a whole. Total debt in absolute numbers typically grows with the economy, inflation, and population growth. Credit scores are currently very high, and a lower percentage of credit card users carry a balance than they did before the last recession, so the situation is not as concerning as the last time we were at this level of credit card debt.
Delinquency and charge-off rates are at record lows
As mentioned in the introduction, delinquency rates are low. Unusually so. In the final quarter of 2017, only 2.48% of credit card accounts were past due 30 days or more.This is fueling lenders appetite to further increase the credit line of cardholders. On the other hand, although delinquency rates are low they are increasing from the all-time low in 2015, which is concerning when you consider the growth in credit card debt.
Credit card banks are becoming less profitable
Credit card banks have seen a drop in their noninterest income — i.e. fees — and are now required to set aside more provisions for loan losses. This has caused a drop in profitability for major credit card issuers.
Consolidating credit card debt is the top reason borrowers qualify for a loan
SuperMoney generates tens of thousands of personal loan applications per month. The most popular loan reason among borrowers who get a pre-approved loan offer is debt consolidation. Credit card debt consolidation specifically makes up the large majority of debt consolidation loan applications.
Let’s provide some context to these household averages by breaking down credit card debt and usage into more meaningful categories.
Families are now more likely to carry a balance on their credit cards but the amounts are smaller
The percentage of families who were carrying a balance on their credit cards came down significantly during and after the financial crisis. This is likely due to high rates of default, a reduction in the supply of credit, and a general sense of caution towards credit products that occurred in this period. However, in recent years we’ve seen that trend start to shoot back up.
The story here is nuanced. The percentage of families that carry credit card debt grew from a minimum of 38% in 2013 to 44% in 2016, but the median value of credit card debt dropped. It seems that more families are carrying a balance on their cards but for smaller amounts.
Couples with children are the most likely to carry a balance but couples without children are the biggest borrowers
Not surprisingly, couples with children are the most likely to carry a balance on their credit cards. However, they have they have the same median value credit card debt as couples without children.
College graduates have the largest credit card debts
Household heads with some college education are the most likely to carry a balance but those with a college degree owe nearly twice as much in credit card debt. A similar pattern appears when you look at the occupation of the family head.
Consumers working technical, sales or service jobs are more likely to carry a balance but managers and professionals owe $1.5k more
When looking at the data broken down by occupation, when the family head is in a managerial profession they are less likely to carry a credit card balance. But the balances they carry tend to be almost twice as high someone in a technical, sales, or service occupation.
Wealthier consumers are less likely to carry a balance but when they do the amounts are much larger
Income seems to be driving force behind this pattern, as the following graphs continue to show. Middle-class consumers are more likely to carry a balance than the 90+ percentile earners (53% vs. 20%) but the credit card debt balance is also $1.3k less, on average.
Self-employed workers are the biggest borrowers but they’re less likely to carry a balance than employees
Access to credit is another important factor. Lower-income consumers, especially the unemployed, are less likely to get approved and when they do the credit lines are typically low. Which explains why low income and unemployed consumers are the less likely to carry a balance. The issue of access to credit is also illustrated by the data on self-employed versus employees. All things being equal, self-employed workers are less likely to qualify for a credit card. Employees are more likely to have a balance on their credit card (50% vs. 46%) but their average debt amounts are lower.
Homeowners have larger credit card debt amounts and are more likely to carry a balance
Your credit score is a key predictor of access to credit. This is well illustrated by the differences between renters and homeowners. Renters are more likely to be younger consumers with lower incomes (source) and lower credit scores. They are also more likely to carry a balance (46% vs. 40%) and for larger amounts ($3k vs $1.3k).
Hispanics and African Americans are more likely to carry a balance on their credit cards but White cardholders are the biggest borrowers
Sadly, race is still a predictor of income and credit score disparities (source). This is also reflected in credit card usage and debt data. Hispanics and African Americans are more likely to have a balance on their credit card than White non-Hispanic consumers but the average credit card debt of White consumers with a balance is much higher ($2.7k vs. $1.7k and $1.4k).
Country folk and city slickers share their love for credit card debt and are equally likely to carry a balance
Credit card usage and debt do not vary much between urban and rural consumers, but it wasn’t always like that.
Millennials wisely trail behind their seniors in credit card debt
Generation X has the most credit card debt, according to the Experian report, followed by baby boomers and the silent generation. As irresponsible as Millennials are sometimes described, they come in fourth followed by generation Z, which doesn’t yet have good access to credit.
Millennials tend to prefer debit over credit, according to several polls taken over the past few years. For example, Chime Bank found that of 70% of Millennials would rather use a debit card for their purchases.
Part of this can be attributed to the world that Millennials grew up in. In 2008, when the financial crisis hit, consumer debt hit a staggering 127% of disposable income. So, while it’s easy to blame the big banks for causing the Great Recession, Millennials know that their parents also had a hand in the crisis.
Another reason for this is the student loan crisis that seems to continue to get worse. According to the Pew Research Center, the median student debt burden for bachelor’s degree holders is $25,000. And postgraduate degree holders are on the hook for $45,000.
With such a high student loan balance at graduation, it’s no wonder Millennials are afraid to add to it.
The majority of Americans have great credit
Credit limits are determined by your credit score but there is some wriggle room
If you’re applying for a new credit card, there’s no guarantee what your credit limit will be. Unlike with other loan types, credit card companies don’t share this information upfront. But according to the American Bankers Association (ABA), you might be able to estimate how much you qualify for based on your credit score.
Based on data gathered from the credit card industry, the ABA found the following average credit limits on new accounts based on VantageScore ranges:
Super prime (781 to 850 credit score): $10,396
Prime (661 to 780 credit score): $5,692
Subprime (500 to 600 credit score): $2,566
Keep in mind that some lenders are willing to give higher credit lines than others. If you don’t get the credit limit you need, consider calling and requesting a credit line increase. Some issuers, like Capital One, even offer automatic credit limit increases on their cards targeted to people with bad or average credit.
There’s a new set of credit card priorities. Forget balance transfer options. Show me the rewards.
The rewards offered by credit cards are increasingly important to users. Balance transfer options and card brand, on the other hand, are becoming less important to consumers.
While some personal finance experts, including money guru Dave Ramsey, consider credit cards to be a one-way ticket to debt town, data shows that the majority of credit card holders don’t carry a balance.
According to the ABA’s Credit Card Market Monitor, just 43.7% of credit card holders are considered “revolvers,” meaning they carry a balance from month to month. The Federal Reserve found similar data in a 2016 report when it reported that 46% of adults with a credit card reported that they were carrying a balance.
In contrast, the ABA states that 29.1% of credit card holders are “transactors,” meaning they pay off their balances in full each month, and 27.2% are “dormants” who didn’t use their credit cards at all in the previous quarter.
Prepaid debit cards compete with credit cards, particularly among Millennials
Because Millennials continue to shy away from credit cards, prepaid debit cards have emerged as an alternative payment method. In 2006, prepaid cards accounted for 3.3 billion transactions. In 2015, that number was 10.6 billion.
Some prepaid debit cards have even started to offer credit card-like perks, to entice consumers to make the switch. For example, the American Express Serve Cash Back offers 1% cash back on every purchase you make. Others have started to offer benefits like purchase and price protection, perks that previously were reserved only for credit card holders.
Debit and prepaid cards are a simple way to avoid debt, which explains their popularity among those who grew up during the Great Recession and credit crisis. However, if you can keep your impulse spending in check and you’re responsible with your finances, consider credit cards, if only as a way to build their credit and qualify for a future home or auto loans.
What does this all mean for the future of credit cards and credit card debt?
It’s impossible to know for sure how the credit card industry will change in the future. There are, however, some indicators worth considering.
In the short term, credit card usage and debt will continue to grow
Credit cards are the most popular source of credit and payment method. We are currently in a golden age for credit card users with prime credit scores. Credit card issuers want to maximize on low delinquent rates and the growth of credit card purchasing volume and are aggressively courting power users with generous signup bonuses, rewards, and perks.
Growth may become unsustainable if interest rates and credit card debt continue to rise
Interest rates are rising which could put pressure on consumers who carry a balance. The credit card debt growth and the recent uptick in delinquency rates may be partially due to this.
Credit card usage may plateau as Millennials grow older
Millennials are not as enamored with credit cards as previous generations. If this attitude continues, credit cards may lose ground to debit cards and mobile payment options as Millennials gain a more dominant position in the market.
For now, credit cards remain the best option for consumers with prime credit scores who are good at managing their finances and can resist the urge to overspend. It’s hard to compete with a payment method that offers generous rewards and large signup bonus for simply buying the stuff you regularly purchase.
Click here to learn about the best deals currently available in the credit card market and compare offers side-by-side.
If you’re applying for a new credit card, you typically won’t be able to start using it immediately upon approval. And depending on your application and the issuer, you may not even get approved right away.
But if you’re planning to make a big purchase or you want to score a big sign-up bonus for an upcoming vacation, you’ll want to know how long you can expect to wait before you get your card and if there’s anything you can do to speed up the process.
Let’s take a look.
How long does it usually take to get approved for a credit card?
“Issuers who have automated the process can provide you an answer to your application almost instantaneously,” says Aaron Aggerwal, assistant vice president of credit card products at Navy Federal Credit Union.
For smaller banks and credit unions, however, Aggerwal notes that the process can take anywhere between five and 10 days at most. Keep in mind that there’s no guarantee that you’ll get a “yes” or “no” immediately.
“If your application has flags, such as fraud incidents or if your credit score needs a closer look,” says Aggerwal, “it could go to pending and will likely need to be reviewed manually.”
If this happens, it could take anywhere between 10 and 30 days to find out what’s going on. One way around this is to call the credit card issuer directly through their application status line.
In many cases, you can speak with a credit analyst who can either give you a decision over the phone or let you know what the issuer needs to complete your application.
How long does it take to get a credit card?
“Once you’ve been approved, it could take anywhere from seven to ten business days to receive your new credit card,” says Aggerwal. “If you have an urgent need, some issuers offer the option for express delivery.”
To help you get a better idea of what to expect, we’ve put together a list of the seven top credit card issuers and how long you’ll have to wait to before getting your new credit card from them.
We also checked for replacement card shipping times in case you lose yours or it gets stolen.
Platinum and Delta-branded cards receive rush delivery (two to three business days) for new cards. But all other American Express cards take at least seven to 10 business days for delivery.
For some cards, American Express offers to give you a temporary account number when you get approved if you apply online. This makes it possible for you to use the card for online purchases immediately. American Express will expedite replacement cards if you ask.
Bank of America doesn’t expedite new cards, so you’ll have to wait for seven to 10 business days to get your card in the mail. You can, however, request rush delivery on replacement cards and get your card in just a few days.
You can get overnight delivery, but the issuer will charge you a fee for the convenience of up to $30. If you don’t opt for overnight delivery, expect to wait as long as two to three weeks to get your card.
Barclaycard will expedite a replacement card if it finds fraud on your account. Otherwise, you’ll have to pay the overnight delivery fee to get it sooner than seven to 10 business days.
Capital One doesn’t expedite new cards. Instead, you’ll get your card within seven to 10 business days. It does offer rush delivery on replacement cards, but you have to pay a $16 fee to get it. Otherwise, you’ll have to wait four to six business days.
The issuer will expedite your new card if you ask, unless extra verification is required. They’re not clear on what this means, though, so you might not have much control over it. If you can’t get your card expedited, you’ll receive it within seven to 10 business days. Chase will expedite replacement cards upon request.
Citi doesn’t offer rush delivery, but its regular shipping method is slightly faster than most of the major issuers. You’ll get new cards in five to seven business days. The issuer may expedite a replacement card if you ask.
Discover breaks with other major credit card issuers by sending all its new cards via priority mail, so you’ll get it in three to five days. The issuer also always expedites replacement cards, and you can expect to get yours within 24 to 48 hours.
Keep in mind that these are all guidelines and there may be situations where you can get an exception. So, if you’re in a bind, it never hurts to call the issuer directly and ask. Feel free to explain your situation to solidify your case, and consider asking to speak with a supervisor if you need to. As is the case any time you call customer service, you’re more likely to get a positive result when you’re polite and respectful.
Which is the fastest credit card issuer?
Discover is the fastest major credit card issuer. It sends all cards in three to five days. Replacement credit cards arrive in one or two days.
Give yourself enough time
If you have a large purchase coming up and want to finance it with a 0% APR promotion, or you’re planning a vacation and want to earn a sign-up bonus to help you pay for it, start making a plan in advance.
Take a look at your timeline and consider how long it might take for you to get approved and get the card in the mail.
And if you need your card faster, consider getting one from a lender that offers faster shipping times so you’re not waiting by the mailbox for too long. Also, remember that “business days” always excludes holidays and weekends.
To help you get started on the right foot, here are answers to the top 10 credit card questions you’re too embarrassed to ask.
1. What is a credit card CVV?
One way that credit card issuers protect your card’s security is through the CVV code.
“These three- and four-digit codes provide extra security when authenticating transactions when the credit card isn’t present, such as phone or internet purchases,” says Jason Steele, a credit card expert and journalist.
There are actually two different CVV codes:
CVV1: This code is embedded into the card’s magnetic stripe.
CVV2: This code is printed on the card, and you’ll typically get asked for it when paying for something over the phone or online.
Since the CVV2 code is printed on the card, an identity thief can’t make those kinds of purchases if they just steal the information from your magnetic strip.
American Express cards also have a 4-digit security code on the front of the card.
2. How does my credit card know which rewards to give me?
If you have a rewards credit card that offers bonus categories, you may be wondering how the credit card issuer knows when you’ve made bonus purchases.
This is done through merchant category codes (MCCs). Each merchant has an MCC based on their primary business when their code is established.
MCCs are then grouped into different categories, such as groceries, travel, or gas. So, when you use your credit at a Kroger, HEB, or Trader Joes, your card issuer knows that you made a purchase at a grocery store. It then posts your rewards accordingly.
3. How many credit cards should you have?
There’s no right answer to this question. Rather, it’s based on your ability to manage your credit.
“I think that it’s important to have at least two or three credit cards to build your credit history and take advantage of the benefits offered by different cards,” says Steele.
“However, you should never have more than you can responsibly manage. Those who can’t pay their bills on-time and control their debt should use other forms of payment.”
Yes, that means that, for some people, having no credit cards at all is the best choice.
4. Do I need to carry a balance to build credit?
The answer to this question is a resounding no. Your payment history, which is the most important factor in your FICO and VantageScore credit scores, is based on whether or not you make your monthly payments on time.
The credit bureaus don’t register how much you paid and whether it was a full or partial payment. As a result, the only one who benefits from you carrying a balance each month is the credit card issuer.
Do yourself a favor and pay your balance on time and in full each month.
5. How does a secured credit card work?
“A secured card works much like any other credit card, except you must submit a refundable security deposit before your account can be opened,” says Steele. “But after your account is open, your card will work just like any other credit card.”
Most credit cards allow you to convert some of your available credit to cash through an ATM or at a bank teller counter. For the most part, however, this is a bad idea.
“Most cash advances incur a higher interest rate and have no grace period, so you can’t avoid interest by paying your statement balance in full,” says Steele. “Also, you can be charged a cash advance fee, which may be $10 or 5%, whichever is higher.”
8. How do I avoid overspending with my credit card?
Popular personal finance gurus like Dave Ramsey recommend avoiding credit cards at all costs. But for most people, credit cards aren’t the problem; lack of spending discipline is.
If you want to avoid overspending with your credit card, it’s important to create and maintain a monthly budget. Set spending goals and keep track of your spending so you don’t exceed them.
As you do this, you’ll have a much better chance of avoiding credit card debt now and in the future.
9. Can you use a credit card to buy a money order?
“You can only purchase a money order with cash, and sometimes with a debit or prepaid card,” says Steele.
In some situations, you may be able to buy a Visa or Mastercard gift card with your credit card, then use that gift card to buy a money order. But doing so is against your credit card agreement, so it’s not advisable.
10. What’s with the chip on my credit card?
The magnetic strip on the back of your credit card contains static information about your credit card. As a result, it’s vulnerable to fraudsters.
The chip on the front of your card, which is called an EMV chip, helps secure your card information. Its data is dynamic in that, every time you use the card, it gives a unique token to process the payment.
If an identity thief stole that token information, it would no longer work because it’s for one use only. Of course, it’s not foolproof, but it can help protect you from becoming a victim of fraud.
The more you know about your credit card, the better. That’s why we’ve created an easier and quicker way to find the right information so that you can be confident you’re making the right decision.
If you’re considering getting a new credit card, take a look at SuperMoney’s credit card review page to see which cards are best for your needs. You’ll be able to read reviews and quickly compare rates side-by-side.
The more time you spend understanding each available option, the easier it will be to get the most out of your card.
Can you buy a car with a credit card? Yes, but you have to know how to do it right or it could cost you. This guide will explain how to buy a vehicle with a credit card without getting burned.
If you’re like me, you’ll do anything to rack up credit card rewards. Whether it’s cash back or travel, there’s nothing like getting money from your credit card company for your everyday spending.
So, if you’ve ever bought a car, you may have wondered, “Can you use a credit card to buy a car?” The short answer is: sort of. But just because you can doesn’t always mean you should.
To illustrate, here are a couple of stories of doing it right and then doing it wrong.
How to earn credit card rewards with your car down payment
When my wife and I bought our new family car in 2016, we had a few thousand dollars saved up for a down payment. But when we talked with the salesperson about making that payment, I had to ask: Can we buy this car with a credit card?
It turns out, the dealership allowed credit card payments up to $3,000, which is exactly how much we’d saved for our down payment. So, I put the down payment on the card, earned $60 in rewards, then paid off the card the next day with the cash we had saved.
And that’s the thing: Car dealerships typically don’t allow you to pay for the whole car with a credit card. The main reason is that the dealership is on the hook for the merchant fee, which eats into their profits. For example, if you buy a $20,000 car and the merchant fee is 2%, the dealer loses $400 in profits on the transaction.
But some dealerships may be willing to accept a credit card for a portion of your payment, so be sure to ask what you can do, and only use your credit card for an amount that you can afford to pay off immediately.
How not to earn credit card rewards with your car down payment
Tyler Philbrook, a 27-year-old personal finance blogger from Clearwater, Florida, had the same experience, but with a slight twist.
“My experience with using a credit card was also my first experience financing a car,” he says. The dealership he used accepted his credit card for a $1,000 down payment, and he had enough cash to pay it off.
“I had originally planned on just paying the card off with the cash,” says Philbrook, “but young foolishness led me to instead use the cash for other things.”
What’s worse, Philbrook ended up making just the minimum payment on his card and kept using it until it was maxed out. With a 23% interest rate, he paid far more than he ever earned in interest from his purchases, especially the car down payment.
“To pay that off took me about a year,” says Philbrook. “If I could go back, I would either pay the credit card off the same second I ran it at the dealership, or just use the cash in the first place. If I were to give advice, it would be to do that– either pay it off the same day or use the cash in the first place.”
I can buy a lot more tires when I have time to pay them off interest-free. It means I can have more tires in stock and get the customers in and out faster.”
For most people, these benefits aren’t very appealing, especially if you can qualify for a traditional rewards credit card. But for Jack Wyatt, who owns an auto repair shop in Pennsylvania, the card gives his business time to float his tire purchases.
“I can buy a lot more tires when I have time to pay them off interest-free,” says Wyatt. “It means I can have more tires in stock and get the customers in and out faster.”
Things to watch out for
The biggest benefit of this card is the special financing offer, especially if you regularly spend a lot on tires. The trick, however, is that the offer is a deferred interest promotion rather than a true 0% APR offer.
This means that, if you don’t pay off the purchase in full before your promotional period ends, you’ll end up paying interest from the date of the original purchase rather than on the amount that remains.
If you make a mistake or something unexpected happens and you can’t pay off the balance, the added interest could hurt your wallet.
Also, Goodyear touts on its website that you can use your card to get cash at an ATM. But if you read the fine print, you’ll notice that there’s a cash advance fee of 5% or $10, whichever is greater.
What’s more, there’s no grace period on cash advances like there is with regular purchases. This means that interest will begin accruing immediately.
In other words, a cash advance isn’t a great idea regardless of which credit card you use.
Is the Goodyear credit card right for you?
The Goodyear credit card can be easy to get if your credit isn’t stellar. “My credit was in bad shape when I got the Goodyear card,” says Wyatt. “I don’t think anyone else would’ve given me a second look, so I was happy to get approved.”
Not only can you get cash back or travel with these cards, but also extra benefits like purchase protection, extended warranties, rental car insurance, and more.
If you’re like Jack Wyatt, however, and spend a lot of money on tires, the card’s promotional financing might just be worth the card’s drawbacks. Just make sure you pay off your purchases before the promotional period ends. Otherwise, you’ll end up with a big interest charge.
If you’re trying to think of different ways you can rack up credit card rewards, you may have wondered how to pay your mortgage with a credit card. After all, that’s probably your biggest monthly expense, and you’re going to have it for years to come.
While it’s possible to pay your mortgage with a credit card, it can get a little complicated and expensive, and it’s not always advisable.
Read on to learn what options you have and how to know if it’s worth it.
How to pay your mortgage with a credit card
“It’s not common for lenders to allow you to make your mortgage payment with a credit card,” says Patti Geroulis, a credit card rewards expert at The Travel Sisters. “Most do not offer that option.”
There are, however, ways to get around that fact, including third-party services and what Geroulis calls “manufactured spending.”
“There’s at least one third-party service that allows you to pay your mortgage with a credit card,” says Geroulis. “And that’s Plastiq.”
Plastiq is a service that allows you pay your mortgage and other bills with a credit card. The caveat is that there’s a flat fee of 2.5% for each transaction.
What’s more, the service only accepts Mastercard and Discover for mortgage payments, so you’re out of luck if you have a Visa or American Express card.
Depending on the card you have, though, it could be worth it. For example, the Discover it® Miles card offers 1.5 miles per dollar spent but doubles your miles for the first year.
So, you’re essentially getting 3% back and paying 2.5%, giving you a profit of 0.5%. That’s not a lot — $7.50 for a $1,500 mortgage payment — so it may not be worth the effort. But a profit is a profit.
But if your credit card earns less than 2.5%, you’d be paying more than you’d get back in rewards, so it’s never worth it to use Plastiq in this case unless you’re working on meeting the minimum spending requirement for a sign-up bonus.
“Another pitfall is the length of time that it takes for the lender to receive your payment,” says Geroulis. “Depending on the payee, sometimes Plastiq sends payments electronically and sometimes by check which takes longer.
If paying your mortgage with Plastiq, you need to schedule your payment early enough that the bank receives it by the due date.”
Manufactured spending is essentially the process of turning credit card spending into cash, which you can turn around and use to pay off the credit card. The most popular way to do this is to use your credit card to buy a Visa or Mastercard gift card.
Here’s how that works:
Buy a Visa or Mastercard gift card with your credit card, usually with a fee around $5 or $6 per card.
Use that card as a debit card to buy a money order at a retailer or the post office, usually with a fee of $1 or less.
Deposit the money order in the bank or take it to the bank to pay your mortgage.
Pay off the credit card before the due date to avoid interest.
The problem with this method is that it can be tricky. For example, some retailers don’t allow you to buy money orders with a gift card, and some may limit how much you can buy.
Also, while this process isn’t illegal, it can raise red flags at the bank if you do it frequently. For example, one credit card rewards expert was detained by the police for high-volume manufactured spending.
It’s also important to note that doing this is against the terms of your credit card agreement. Your credit card company could technically close down your account if it senses what you’re doing.
So, only do this if you feel comfortable understanding the pitfalls.
Other monthly payments
Your mortgage isn’t the only monthly payment you may want to pay with a credit card. Here are a few others you might be wondering about.
Can I use a credit card to pay my student loans?
There are no student loan servicers that we know of that take credit cards for your monthly payment. You can use Geroulis’ idea about buying gift cards and converting them to money orders.
But that strategy typically isn’t as beneficial with small amounts, so it might not be worth it for your student loan payment.
Can you pay your utility bill with a credit card?
Most utility companies allow you to use a credit card to make your monthly payment. But some, especially smaller companies, may charge you a fee.
If this is the case, the fee is normally more than you’d earn in rewards from making the payment. So, it’s likely not worth it. But check with each of your utility companies to see if you can make fee-free credit card payments.
Can you use a credit card to pay your rent?
It depends on your landlord and which service they use to take payments. Some may take credit cards for a fee, and you may even be able to drive down that fee percentage by paying more than one month at a time.
You can also use a third-party company like Plastiq to make your payments, but those fees are a flat percentage and more than you’d get in rewards.
If you’re lucky, your landlord will use a property management company that allows you to make credit card payments for free. But this is a rare occurrence.
The bottom line
“Overall, using a credit card to earn points for paying your mortgage is only worth it if the rewards earned outweigh the fee,” says Geroulis. So, it’s important to take a moment to do the math before jumping on an opportunity.
For example, if you’re working on a $500 sign-up bonus with your travel credit card, paying 2.5% on a $1,500 mortgage payment ($37.50) isn’t a big deal. But if you’re not working on a sign-up bonus and your rewards rate is 2%, you’re paying $37.50 to get $30 back, which doesn’t work in your favor.
If you’re interested in trying it out, check out some of the top credit cards to see if you can score enough rewards to make it worth the cost.
Number of identity fraud victims in 2017 (source: Javelin Strategy)
One way hackers can access your credit card information is through credit card dumps, which is the fraudulent copy of information from the magnetic strip of a credit card.
If you want to protect yourself from credit card dumps, it’s important to understand how they work and steps you can do to limit your exposure.
What are credit card dumps?
As mentioned previously, credit card dumps happen when an identity thief steals information from your credit card’s magnetic strip.
This information includes your credit card number and expiration date, and fraudsters can use the data to create a fake credit card that they can use just like you use yours.
Credit card companies have been trying to combat this type of fraud through the EMV chip. This chip creates a unique token every time you use your card, so if hackers steal the token, it’s already been used.
But as you’ve probably experienced at the grocery store or another retailer, if the card reader isn’t reading your chip properly or your card doesn’t have a chip, you can still swipe like you used to.
And many retailers, especially small businesses, haven’t even transitioned their card readers to accept an EMV chip.
How hackers get your card information
According to Robert Siciliano, an identity theft expert at Hotspot Shield, there are a few different ways identity thieves can create credit card dumps, including:
Placing a fake credit card reader over a legitimate one to skim the data from your card. This frequently happens at gas stations and ATMs.
Infecting a point-of-sale card reader with malware that copies the data from each credit card that gets swiped.
Hacking a retailer’s network to access card information they have stored.
Taking it through an unsecured internet connection.
In most cases, there’s no way for you to know that your card information has been stolen until the criminal has used it or the retailer informs you of a security breach.
Preventing card fraud is almost impossible”
It’s important to stay vigilant so that you’re ready to take action as soon as you notice something off.
5 ways to protect yourself from credit card dumps
“Preventing card fraud is almost impossible,” says Siciliano. But there are some things you can do to limit your losses.
1) Check for skimming devices
Anytime you use an ATM or pump gas, take a look at the card reader.
In many cases, there should be a tamper-proof seal the owner placed on there to show that no one has placed a fake reader over the legitimate one. If you notice that the seal looks like it’s been removed at any point, use a different ATM or gas pump.
Also, if the material on the card reader looks different from the surrounding material, or it looks off in any other way, it’s better to be safe than sorry. Use a different one and report it to the bank or gas station.
2) Shop securely online
Whenever you shop online, it’s important to make sure that the website you’re using it secured.
It’s always important to look for HTTPS in the address bar when placing an order, which would mean the website itself is secured”
“It’s always important to look for HTTPS in the address bar when placing an order, which would mean the website itself is secured,” says Siciliano. “Only do business with those in person or online that you know, like, and trust.”
So, if you get an offer from a website you’ve never heard of, do some research first. Check for the HTTPS in the address bar first, then do a quick internet search to make sure it’s not a scam.
3) Check your accounts often
As we mentioned previously, you may not know that someone has stolen your information until they’ve used it. Credit card companies do their best to spot fraud when it happens, so you may get a notification from yours.
But they don’t always catch fraudulent purchases when they happen, so it’s crucial that you check your online accounts often to catch the fraud before it gets worse.
An easy way to do this is to sign up for an online money management tool like Mint or Personal Capital. These platforms can import transactions from all of your accounts into one place, so you don’t have to log in to each account separately.
When you do spot fraud, don’t hesitate to take action.
“Often the best course of action is to call the toll-free number on the back of your card and get in touch with the fraud department,” says Siciliano. “They will immediately check into potential fraud and, in some cases, mail you another card overnight.”
4) Make sure your card has fraud protection
All credit cards these days offer fraud protection, but some are better than others at detecting fraud and getting your money back to you.
JPMorgan Chase & Co., which does business as Chase Bank, is one of the oldest financial institutions in the United States. Chase operates in more than 60 countries and has $2.6 trillion in assets. One of Chase’s signature products is the company’s line of credit cards, including a wide range of both personal and business credit card options.
You can choose from several credit card types such as cash back, rewards, travel, and dining. Many Chase cards feature a signup bonus and 0% introductory rate for 15 months.
According to credit card travel journalist Jason Steele, “Chase offers some of the leading credit cards on the market. They’re especially strong in the area of travel rewards. They have co-branded cards with airlines and hotels.”
The best Chase card for you will depend on your lifestyle and spending habits. To help narrow down your choice, here are the top five Chase credit cards.
The Chase Freedom Unlimited gets the unlimited designation from the fact that you get 1.5% cash back on every purchase. There are no categories to remember. This makes this card one of the best Chase rewards cards.
$150 bonus when you spend $500 on purchases in your first 3 months
$25 bonus when you add your first authorized user and make a purchase within the same 3-month period
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