Subsidized vs. Unsubsidized Loans

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.

The federal direct loan program offers subsidized and unsubsidized loans to college students. A federal direct subsidized loan is a loan where the government pays the interest while the student is in school. A federal direct unsubsidized loan is one in which the student is responsible for paying all interest, receiving no additional federal aid.

What Is the Difference Between Subsidized and Unsubsidized Student Loans?

The main differences between federal direct subsidized and unsubsidized loans are the qualification criteria, the maximum limits and how the loan interest works.

A chart displaying the differences between subsidized and unsubsidized student loans.

Loan Qualifications

Subsidized: To qualify for a subsidized loan, you must be an undergraduate student who can demonstrate financial need based on the information you submit through the Free Application for Federal Student Aid (“FAFSA”).

Unsubsidized: Unsubsidized loans are available to both undergraduate and graduate students, and there is no requirement to demonstrate financial need.

Maximum Loan Limits

Subsidized: Your school will determine exactly how much you can borrow each year, but there are federal limits. These limits are based on what year of school you are in and whether you file as a dependent or an independent. Subsidized loan limits tend to be lower than unsubsidized limits. The aggregate limit for an independent student with subsidized loans is $23,000.

Unsubsidized: Unsubsidized loan limits tend to be higher than subsidized loan limits. The aggregate limit for an independent student with unsubsidized loans is $34,500.

How Interest Accrues

Subsidized: The U.S. Department of Education pays the interest for subsidized loans as long as the student is enrolled in school at least half-time. They will also pay the interest during your grace period—defined as the first six months after leaving school—and any period of deferment. This means that the amount of the loan will not grow once the student graduates, since the government has been paying the interest.

Unsubsidized: Whether you’re an undergraduate or a graduate student, you’re responsible for paying all of the interest during the entire life of your unsubsidized loan.

What Are the Similarities Between Subsidized and Unsubsidized Student Loans?

When it comes to interest rates, fees and the “maximum eligibility period”—the amount of time you’re able to take out loans—subsidized and unsubsidized loans are virtually the same.


On top of interest, you can expect to pay a small fee for both types of loans. This is approximately 1.06 percent of your total loan amount, and it is deducted from each loan disbursement. 

Both subsidized and unsubsidized student loans have a fee of 1.06% of the total loan amount.

Undergraduate Interest Rates

The interest rates for both subsidized and unsubsidized loans for undergraduate students are the same. Currently, the rate is at 2.75 percent for loans first disbursed from July 1st, 2020, to June 31st, 2021. The one exception is for direct unsubsidized loans for graduate students, which have an interest rate of 4.30 percent. 

Maximum Eligibility Period

For both loan types, the time in which you’re eligible for your loans is equal to 150 percent of the time of your program. For undergraduates pursuing a four-year bachelor’s degree, this means they will be eligible for their loans for six years. Those pursuing a two-year associate’s degree will be eligible for three years. This ensures that students can still receive loans even if they’re unable or choose not to graduate within the program’s time frame. 

How to Apply for Subsidized and Unsubsidized Loans

Once you’re ready to apply for a federal direct loan, fill out the FAFSA. Your school will send you a detailed report of what student aid you’re eligible for. Any grants or scholarships are free money, so make sure to accept them. They’ll also decide which loans you’re eligible for, the amount you can borrow each year and what loan type you can get—subsidized or unsubsidized. 

No matter what type of student loan you go for, it’s important to understand how they affect your credit so that you can set yourself up for financial success after graduation. With responsible, on-time payments, you’ll be well on your way to healthy credit for life.

Reviewed by Cynthia Thaxton, Lexington Law Firm Attorney. Written by Lexington Law.

Cynthia Thaxton has been with Lexington Law Firm since 2014. She attended The College of William and Mary in Williamsburg, Virginia where she graduated summa cum laude with a degree in International Relations and a minor in Arabic. Cynthia then attended law school at George Mason University School of Law, where she served as Senior Articles Editor of the George Mason Law Review and graduated cum laude. Cynthia is licensed to practice law in Utah and North Carolina.

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.


4 Side Hustles You Can Do While Working Full Time

From selling unwanted items online to launching a blog, there are side hustles you can start today.

A side hustle may just sound like extra work. Like coming home from your 9-to-5 job only to work another one (goodbye, free time). But a side hustle that generates income beyond your primary job doesn’t have to be a drain on your energy or time.

It’s easier than ever to find ways to make money on the side of your day job. As the side hustlers below show, it can be as easy as digging out forgotten treasures from the back of your closet.

Whether you’re looking to leverage a side gig to more quickly build wealth, or you’ve set out to increase your emergency fund or save for a specific financial goal, consider these four side hustles you can start today:

1. Sell unwanted items online

If you’re considering ways to make money side hustling, look no further than your own home. Chances are you have items lying around that you don’t actually use—books, toys, kitchen gadgets, exercise equipment, tech accessories, you name it—that sounded like a good idea at one point but are now just collecting dust. Selling unwanted items online is one of the easiest side hustles you can do while working full time.

Selling things you no longer want or need is a great side hustle you can start today.

“You can really sell anything on Craigslist and Kijiji. If it’s still in decent shape, there’s a buyer out there for items you’re no longer using,” says Tom Drake, founder of MapleMoney and no stranger to selling items online in his spare time.

Drake and his wife declutter their home and sell unwanted items online as often as they can. A recent focus was video games: Drake says he sold about $2,000 worth of video games that were sitting in his garage for over a decade. Based on his calculations, he expects to sell about $10,000 worth of unwanted items in 2018.

If you’re thinking about posting items online as a way to make money on the side, Drake says it’s easy to start. Listing items doesn’t take long, though he suggests taking a decent photo and writing a detailed description to make the item easier to find in search results and more likely to sell in a timely fashion.

PriceCharting, which documents prices for every video game ever made, to check value.

Outside of video games, Drake says you can find clothing at thrift stores, then list it for 30 to 50 percent off retail price to make a sale. For collectible items like coins, you can Google the item and add the term “price guide” to the search query. This type of information could come in handy as you build out your pricing structure. Don’t forget to explore e-commerce sites to gauge market rates for items.

3. Start an online store

Briana Ford is a search engine marketing campaign manager for a marketing company based in Dallas. Her way to make money side hustling is through three stores she runs on Shopify, an online e-commerce platform. She generates about $1,000 to $3,000 in total revenue each month.

Her stores Ciao Toots and Karma Outfitters sell phone covers and graphic tees, respectively. Her most popular store, PinLivingColor, sells ’90s memorabilia. She creates the designs through Printful, a printing service through Shopify, and uploads the photos to her store. When someone buys, say, a cell phone case, Printful prints the design on a case and sends it off to the customer. She took a weekend each to start her stores.

“We live in a day and age where you can literally have an idea in the morning and have your business launched in the evening. There is an audience and a customer for almost anything,” she says.

She also helps fellow African Americans start their own stores as a consultant via Startup Noire.

4. Launch a blog

Eric Rosenberg, founder of Personal Profitability, has tried side hustles from web coding to organizing flash mobs. He found a winning side hustle you can do while working full time with his blog.

Blogging is a great way to make money on the side.

“Personal Profitability led to freelance opportunities and eventually a full-time job. But it all started with weekends and evenings,” Rosenberg says.

He has tracked his online earnings publicly since 2012, when the blog earned him about $700 a month. In 2017 he had a six-figure business. Most of his income comes from writing services and website support, with some affiliate income, Rosenberg says.

Blogging is one of the side hustles you can start today, and it doesn’t necessarily cost much to get up and running. However, as the online income reports on Rosenberg’s blog show, it does require patience to make it really pay off.

Ways to make money side hustling: The possibilities are endless

These are just a few of the possibilities available to you as you explore ways to make money on the side of your primary career. As you compare the various side hustles you can start today, consider activities, skills or experiences that you’re passionate about. Enjoying and finding value in your side hustle may make the extra income and increased earning potential even more rewarding.


Why the Racial Homeownership Gap Exists and How to Combat It

Homeownership is more than a mortgage. For a child, it also shapes their access to education, affects health, establishes a sense of community, enhances the chance of going to college, and promotes a happier family life. For adults, homeownership is one of the strongest tools American households use to build their wealth. Today, the average American homeowner has amassed $119,000 worth of equity in their home and that equity is increasing at a rate of about 4.8% a year. 

Read: Is a Home Equity Line of Credit the Right Choice?

As a wealth-builder, homeownership plays a more critical role for minorities than whites. During the last quarter-century, homeownership equity accounted for nearly half of all Black and Latino wealth, compared to about a quarter for white families’ wealth.

More than three-quarters of white households, 77.3%, own their own homes, and less than half, 44% of Black households own their own homes. The Black-white homeownership gap is 29.70 percentage points, 6.2 points greater than it was 52 years ago when the Fair Housing Act was signed.

black family touring a house to buy racial homeownership gap discriminationblack family touring a house to buy racial homeownership gap discrimination

Why Racial Homeownership Gaps Exist?

Outside factors such as affordable housing, gentrification, decreases in federal funding and programs for minorities, and discrimination in mortgage lending all directly affect the homeownership gaps amongst white, Black, and other minority households. Recent research by the Urban Institute found three correlating causes for the racial homeownership gap:

Black households are more likely to buy homes later in life than white households. The result is a lower level of equity when owners reach retirement age. Eighty-seven percent of white homeowners bought their first homes before age 35, compared with only 53% of Black homeowners. Not only are Black households less likely to buy their homes young, 18% of them never own a home before turning 60.

Black homeowners are less likely to sustain their homeownership. Among a sample of households that purchased their first home after age 44, 34% of Black homeowner households switched to rental housing, while only 9% of white households did so. Black families who sustained their homeownership carried more than $23,500 higher housing wealth into their 60s than Black households who moved from owning to renting during their lives.

racial homeownership gap discrimination graphicracial homeownership gap discrimination graphic

Black homebuyers purchase less expensive first homes while using more debt. The average first home purchased by Black homebuyers is valued at $127,000, compared with $139,000 for white homebuyers, yet Black homebuyers, on average, have higher mortgage debt ($90,000) than white homebuyers ($75,000). Higher mortgage debt not only lowers current and future wealth, but could make it harder to financially maintain homeownership long term.

How to Combat the Racial Homeownership Gap and Identify Discrimination in Homebuying

In order to lessen the racial homeownership gaps we see today, programs and guidance need to be created and readily available to minority communities. For example, the National Association of Real Estate Brokers created the Two Million New Black Homeowners Program with the intent of helping minimize the gap and protect against homeownership discrimination. And, the NAACP provides a Fair Lending Program to help Black homebuyers receive fair distribution of credit.

stylish Black man sitting in armchair and looking at camerastylish Black man sitting in armchair and looking at camera

Another way to combat the racial homeownership gap is to provide guidance to minorities looking to purchase the home and help them recognize the signs of potential discrimination in their homebuying journey. ConsumerAction, a website that helps consumers make informed decisions, created a downloadable document highlighting the different ways you can identify these discriminatory practices. In short, these are some things you can look for:

  • A developer or agent refuses to sell to someone based on their race. This also includes if the developer or agent doesn’t return your phone calls or ignores offers you put in on the home.
  • Lying about sale terms to place minority buyers out of the market. To protect yourself, always work with an agent you trust who can understand the terms and what the seller is ideally looking for before putting in an offer on the home.
  • An agent who steers clients to or from certain neighborhoods because of race. If you’re a white homebuyer and an agent tells you minorities live in the neighborhood as a way to deter you, then the proper reporting should be made to the Fair Housing Equal Opportunity office.
  • An agent failing to inform and show buyers all available listings in their desired area and price range. As a buyer, it’s your right to be able to view all the available properties that fall under your desired specifications. If an agent refuses to do so, discriminatory practices may be at play.
Portrait Of Couple Looking Over Back Yard FencePortrait Of Couple Looking Over Back Yard Fence

Discrimination can also come from mortgage lending and coverage practices, not just agents, landlords and developers. If you’ve found a home you love and you want to make an offer, or you’re in the process of getting pre-approved, then be sure you’re lender or insurance agent isn’t following the below practices:

  • Denial of a loan or insurance due to location of the home. Lenders and agents are not allowed to deny approval due to the location or neighborhood of your home.
  • Creating different terms and conditions on a loan because of race. Changes in the fees, points, and rates could all be identified as a change in the terms of a loan.
  • Receiving an artificially low appraisal on your property. If you’re a minority looking to sell your home, then make sure you’re not given an artificially low appraisal, get second opinions and compare the appraisal to your home’s current value.

Education is how buyers, sellers and renters can protect themselves from racial discrimination in the housing industry. For a full list of rights and obligations from the Fair Housing Act, you can visit the Fair Housing Equal Opportunity website. If you’ve experienced discriminatory practices during your buying, selling or renting journey, then you can file an official complaint online as well

Looking to Buy a Home?

If you’re looking to buy a home– or sell your current home in order to buy– then you can visit’s How To section which includes free, step-by-step guides on the entire buying, selling, or renting process.

Steve Cook is the editor of the Down Payment Report and provides public relations consulting services to leading companies and non-profits in residential real estate and housing finance. He has been vice president of public affairs for the National Association of Realtors, senior vice president of Edelman Worldwide and press secretary to two members of Congress.


5 Reasons Why You Should Still Buy an Investment Property

If owning an investment property was on your bucket list prior to COVID-19, don’t scratch it off the list just yet. In fact, buying an investment property is still a good idea. From wealth building to tax incentives, investment properties can still offer a lot of perks. In particular, there are five reasons why you should still buy an investment property.

Read: Investing in a College Town Rental: Is Now a Good Time?

Charleston, South Carolina, USA homes along The Battery.Charleston, South Carolina, USA homes along The Battery.

Low Mortgage Rates Continue

Taking advantage of historically low mortgage rates is a major incentive to buyers— and investors. While investment loans do typically have increased rates over owner-occupied homes, the investment rates are still relatively low. One of the important aspects in successful real estate investing is to minimize holding costs and keeping the monthly payment as low as possible to insure cash flow.  With overall reduced interest, investors can see more cash flow and less overhead in their investment.

Read: Should You Use a Home Equity Line to Buy an Investment Property?

House-Hacking Has Grown In Popularity

Not all investment properties have to be entirely rented out to tenants. Instead, the house-hacking model offers the best of both worlds: real estate investing with the benefits of owner-occupant. As thousands of Americans are furloughed or unemployed, many are looking to reduce their living expenses— including cheaper rent. Owner-occupants are benefitting from this change by renting out spare bedrooms, guest houses, or even occupying a multi-family property and renting out the additional units. If house-hacking is a desirable option for you, there are a few things to consider:

  • Know what rent you can reasonably expect from the spare bedroom/guest house/additional unit
  • Make sure you can afford the property without renting out any portion
  • Consult a CPA for any tax incentives or consequences from house-hacking

Young couple buying new investment rental propertyYoung couple buying new investment rental property

Vacation Rental Demand Has Increased

As most of us have been quarantined at home for months on end, the desire to break out of our four walls has grown. However, people are looking for safer alternatives than hopping on a plane to a tropical destination. Instead, many are opting for road trips and vacation homes to enjoy a change of scenery while still social distancing. Purchasing an investment property in a high-demand vacation area has long proven to be a good investment, and that still rings true today. In fact, data shows vacation areas are recovering faster than urban areas as far as vacation rental demand. As the demand surges, investments like Airbnb can still offer a lot of benefits. Airbnb investing is also a model that can be combined with the house-hacking model.

Read: Questions to Ask Yourself Before Buying a Home in a Hurricane-prone Area

Unique Point In History

Unlike the last several years, we are in a unique point in history regarding housing. Cambron Elsey, Realtor with The Boulevard Company in Charleston, South Carolina describes this unique housing need, “We have three generations looking to buy or rent: Generation Z, Millennials, and Baby Boomers. Because of this, we have a housing shortage.” With such a demand for affordable housing—whether you’re investing to sell or investing to rent, there is a steady flow of demand from three generations! In fact, both millennials and baby boomers are looking for a “hands free lifestyle” that is found through rentals, according to CNBC. Over the next five years, over 40,000 housing units must be delivered to the market per year just to meet the demand of baby boomers; however, new supply growth hasn’t met the demand. This is a prime, often overlooked, area prime for real estate investing. One of the keys to success in real estate investing is to identify a major demand and meet that demand— meeting the “hands free” demand is one of many opportunities currently available to investors.

Row houses in Spring Garden, Philadelphia, PennsylvaniaRow houses in Spring Garden, Philadelphia, Pennsylvania

Wealth Building

One of the long-term proven methods to wealth building is through real estate investing. By investing early in real estate, people can enjoy passive income, tax benefits, and appreciation in value. Real estate investing can offer cash flow now but also a payday later. According to Forbes, “Appreciation, or the rising of home prices over time, is how the majority of wealth is built in real estate.” While the real estate market may fluctuate, similar to the stock market, a long-term hold mentality shows that it consistently offers a return on the investment that many utilize for retirement.

While 2020 is proving to be a unique year on all fronts, it doesn’t mean it’s a bad time to begin (or grow!) your real estate investing career. Ask any successful real estate investor, and they’ll tell you: you make your money on the buy. Buy right, even in the midst of a pandemic, and real estate investing can be a smart choice!

Jennifer is an accidental house flipper turned Realtor and real estate investor. She is the voice behind the blog, Bachelorette Pad Flip. Over five years, Jennifer paid off $70,000 in student loan debt through real estate investing. She’s passionate about the power of real estate. She’s also passionate about southern cooking, good architecture, and thrift store treasure hunting. She calls Northwest Arkansas home with her cat Smokey, but she has a deep love affair with South Florida.


Can You Get a Mortgage After Bankruptcy?

Around the age of four years old, most of us begin attending school. We’ll remain there until the age of 18, when we may choose to continue our studies in college. Given we spend roughly 10 months of each year in an institute of learning, you’d think there’d be ample opportunity to teach kids about personal finances, budgeting, loans, investing and savings. But while these are topics most people say they’d love to learn more about, they are rarely touched on in school.

As we continue to learn about life, this lack of financial literacy can come back to haunt us. We learn our parents cannot pay our way forever. Here is where we enter the world of car loans, personal lines of credit, and credit cards, relationships, travelling, and consumer goods. We use credit cards to spend money we really don’t have. We use them again, and again and again, and so on.

Debt begins to pile up; the job just isn’t paying enough, the minimum payments cannot be made, items go to the collectors, the phone stops working, and now you are in serious trouble. So what do you do?

For some, a consumer proposal or bankruptcy are the only options. But what is the difference between these methods – and how will they impact your chances of buying a home later on?

The Difference Between a Consumer Proposal and Bankruptcy

A consumer proposal pays off a portion of the total debts through a trustee. There are agreed-upon payments over a set payoff timeline, and the creditors stop calling. You can breathe now – but your personal credit bureau history is in shambles until the debt is finally discharged.

A bankruptcy is a Federal court legal proceeding involving a person or business, with the condition of financial failure: not having the money required to pay debts.

The term bankruptcy is from the Italian phrase banca rotta, meaning ‘broken bank’, which stems from the custom of breaking a moneychanger’s bench to signify his insolvency.

What’s noteworthy is that student debt is very unlikely to be part of bankruptcy; similar to a consumer proposal, you agree to make payments through a trustee for a particular time and your personal credit is negatively affected until the time the bankruptcy is discharged.

Is it Possible to get a Mortgage after Bankruptcy?

The answer is yes – but you’ll face additional restrictions. Depending on your credit agency, a bankruptcy will remain on your credit report between six and seven years. Once a bankruptcy or consumer proposal is discharged, many lenders require an additional two years’of time with two active trade lines such as credit card, loans, line of credit, another credit card, etc.; plus no late payments and liabilities that are in good standing.

Related Read: Tougher Mortgage Rules are Coming… Very Soon

Doing so can regain the A-credit status needed to access the best mortgage rates, and make a minimum of 5% down payment;
If a late payment has been made, but the borrower has two active trade lines, they can make a 10% minimum down payment with higher rates;
If the borrower has only one trade line, had made late payment(s), has a low credit score, etc., they’ll need to pay at least a 35% down payment, and will only be able to access high mortgage rates, short terms, additional fees, possible ‘private’ financing with even higher rates and additional fees.

Before You Try to Borrow Again

It’s important to assess the reasons for claiming a consumer proposal or bankruptcy in the first place. If it was for reasons such as overspending, a marital split, business breakdown, illness, death in the family, etc., be prepared to take some time to get your life back in order. Try to save some extra cash, and to adjust your spending habits to avoid credit trouble in the future.


How New Construction Homes Are Helping Ease the Housing Shortage

Across all 50 states, in every county—there is one universal real estate truth right now: there is an extreme housing inventory shortage. In fact, according to Lawrence Yun, Chief Economist for the National Association of Realtors says “Realtors across the country are saying there are not enough homes for sale compared to the number of buyers in the marketplace.” Due to low interest rates and continued demand, the market has become a brutal place for first time homebuyers, but buyers across all price points are experiencing the same thing—there aren’t enough homes to choose from.

Read: How the App Makes Homebuying Simply Smarter

And this news may sound discouraging, especially for homebuyers; however, there is one sector of real estate rising to the top to ease the chaos: new construction. Mr. Yun credits new construction with being the saving factor for the shortage: “New construction for both single-family and multi-family units ramped up sizably in July. Such growth is needed to steadily relieve the housing shortage.”

Gray Bungalow House Under Blue and White Cloudy Sky new construction spec home housing shortageGray Bungalow House Under Blue and White Cloudy Sky new construction spec home housing shortage

How New Construction Homes Are Helping Ease the Housing Shortage

What Is A Spec Home?

There is a specific type of new construction that is meeting the needs of the masses: spec home construction. Unlike custom construction, a spec home is designed for any buyer—not a specific buyer. The finishes are chosen to appeal to most buyers, the builder owns the property and carries the construction loan, and they’re typically built several at a time in subdivisions or neighborhoods. The appeal of spec homes to buyers is that they receive a brand-new home that is turn-key and move-in ready, and most come with extended builder’s warranties, as well as manufacturer warranties.

Read: From Living in Older Homes to Buying a New Build: The Homebuying Journey with Love and Renovations

Why Is Spec Construction Helping The Shortage?

The demand by buyers for houses necessitates several homes hitting the market for them to choose from. Existing construction homes become available one at a time, and frequently as homeowners buy another home that is on the market. It’s essentially negates the available homes at that point. With spec construction, several homes become available at once, This is beneficial because it frees up numerous houses to be purchases by buyers, and for buyers that are selling a home to buy new construction, it also frees up that existing construction home.

Why Are Spec Homes Appealing To Buyers?

As the shortage continues, homeowners are capitalizing by listing their homes over market value and, frequently, receive multiple offers. This type of seller’s market is never beneficial to buyers. Buyers are looking for a method that provides less chaos than bidding wars, and new construction can offer that. While still in the construction process, buyers can pay deposits to secure their new construction home. This often allows them to pick their lot, pick their finishes, while also receiving a brand-new home.

Read: The New Must-Haves of Homebuying: What Buyers are Looking for

Man in Blue Crew Neck T-shirt Holding Woman in White Long Sleeve Shirt moving houseMan in Blue Crew Neck T-shirt Holding Woman in White Long Sleeve Shirt moving house

What To Consider When Purchasing A New Spec Home

One of the important things to remember as a home buyer: Just because it’s new, doesn’t mean it’s problem-free. Not all builders have the same quality, same warranty, or same reputation. While it’s tempting to see a new construction home and jump to make an offer, not every new home is worth it. If you’re tired of the bidding war insanity and considering the spec home route, there are a few things to consider and questions to ask:

  • Does the builder offer a warranty? If so, request to see a copy of it prior to making an offer.
  • Don’t buy sight unseen! Buyers should request to tour a model home or existing home previously built by the builder to see their quality before making an offer.
  • Does the builder upcharge? Many builders have builder-grade packages for finishes, but if buyers choose different finishes, it can come with an additional cost. It’s important to know before choosing upgrades if there is an additional price and how much.
  • Get a home inspection. Many buyers naively assume that a new construction home does not need an inspection by a licensed home inspector; however, no home is perfect. It’s critical for any mistakes to be caught prior to purchasing the home.
  • Use a real estate agent as a buyer. While many builders employ their listing agents that work exclusively for them, it’s important to remember those agents work for the benefit of the builder. Using a buyer’s agent Realtor is typically a free resource for professional representation in the transaction, and each home buyer should have someone advocating solely for their benefit! You can begin your search for a Buyer’s Agent on

Jennifer is an accidental house flipper turned Realtor and real estate investor. She is the voice behind the blog, Bachelorette Pad Flip. Over five years, Jennifer paid off $70,000 in student loan debt through real estate investing. She’s passionate about the power of real estate. She’s also passionate about southern cooking, good architecture, and thrift store treasure hunting. She calls Northwest Arkansas home with her cat Smokey, but she has a deep love affair with South Florida.


How Many Credit Cards Is Too Many?

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.

There’s no right or wrong answer to the question of how many credit cards to have. More importantly, you should aim to understand what affects your credit score, and how the number of cards you have plays into your ability to responsibly manage your credit. 

How Many Credit Cards Should I Have?

Is three cards too many? Should I apply for another card? What should I do if I have too many credit cards? How many cards do people with good credit have? If you’re asking these questions, you’re not alone.

According to FICO as reported by CNBC, cardholders with “exceptional” credit scores—above 800—have an average of three open credit cards. Ultimately, the perfect amount of credit cards for you comes down to what you’re comfortable with and what you can realistically manage. 

Cardholders with exceptional credit scores (above 800) have an average of three open cards.

Here, we’ll discuss some instances when you may want to consider adding another card—and when to hold off. Remember to consult your financial advisor if you’re ever unsure of the best move. 

When to Consider Adding a Card

If you have zero cards or one card: Having a variety of credit accounts is important. This means incorporating a mix of things like credit cards, auto loans, mortgages, and student loans. If you don’t yet have a credit card, consider applying for one to diversify your mix.

If you only have one, it may be beneficial to add another to show lenders that you’re capable of managing multiple accounts and paying them on time.

If you have no trouble managing accounts: Some people have a hard time keeping track of multiple credit cards. If you’re able to stay organized and keep track of relevant account information, having multiple credit cards will be a less risky move. As long as you’re paying all your accounts on time, you shouldn’t have a problem with three or more credit cards. 

If you’re not earning rewards or benefits: Maybe you’re still using the first credit card you ever applied for years ago. If it doesn’t have a cash back or other rewards program, you may be missing out on free money. Additionally, if your credit score has improved in recent years, you may be able to apply for a card with a lower interest rate. 

When to Hold Off on Adding a Card

If you have debt: According to a 2019 survey from CNBC, approximately 55 percent of cardholders have debt. Instead of adding another card—increasing the temptation to rack up a hefty balance—consider shifting your priorities to paying off debt. A smaller debt load has psychological benefits and increases your chances of getting approved for a line of credit in the future.

If you’re struggling to keep track of your cards: If you’re finding it hard to remember payment due dates or keep track of balances, it’s probably a sign you’ve reached your credit card capacity. Staying organized is the key to success with multiple credit cards. 

If you’re about to apply for a loan or mortgage: If you’re planning on applying for a large or important line of credit, hold off on taking any action that could affect your credit score. Lenders like to see that you have a steady credit history, and applying for a new card may cause a temporary dip in your score.

Does Having Too Many Credit Cards Hurt Your Credit?

No, the number of credit cards you have doesn’t directly impact your credit score. Whether you have seven cards or one, two basic principles of good credit management remain important: monitoring credit utilization rate and limiting hard inquiries. These factors do have the potential to substantially impact your credit score.

Pay Attention to Credit Utilization Rate

One of the main benefits of having multiple credit cards is that your combined total credit limit will increase. This is very useful when you’re aiming to stay below the recommended 30 percent credit utilization rate, or the percentage of your total credit limit currently in use.

For example, having only one card with a $3,000 limit doesn’t give you much leeway in terms of how much you can charge. If you were to charge the full $3,000, you would max out your card and likely lower your credit score. However, if you were to add two more cards with the same limit, your total credit availability would now be $9,000.

This would allow you to charge up to a total of $3,000 while still staying at or below the recommended 30 percent credit utilization rate. 

No matter how many credit cards you have, aim to use less than 30% of your total available credit.

Like all things, it’s best to find a balance. Adding multiple cards too quickly in order to boost your total credit limit may trigger hard inquiries. 

Limit Your Number of Hard Inquiries

A “hard inquiry” is a notation on your credit report caused by an official request by a lender to view your credit report. Hard inquiries typically occur when you apply for a credit card, loan or mortgage. They have the potential to lower your credit score, especially if you incur too many in a short amount of time.

A single inquiry may only lower your score by a few points. However, if you have very few credit accounts or a short credit history, the effects may be more substantial.

If you’re looking to apply for multiple credit cards, space them out over a period of six months or longer. Only apply for cards you know you’ll be approved for—or better yet, get preapproved. This means that a credit card issuer may approve you for a card based on income requirements and won’t have to pull a hard inquiry.

In addition to monitoring credit utilization and limiting hard inquiries, remember to keep other credit management best practices in mind:

  • Pay at least the minimum balance—on time and every time—for all of your credit cards.
  • Keep a good mix of credit accounts—cards, auto loans, a mortgage, and student loans, are a few examples.
  • Build a long history of good credit management by keeping accounts open.

Is It Better to Cancel Unused Credit Cards or Keep Them?

If you have a pile of credit cards that have gone unused, it may be tempting to cancel the accounts. However, this is typically more detrimental than it is beneficial. To build a long history of good credit management, aim to keep your credit accounts open. 

Use your cards every once in a while—even if it’s just for small purchases—to avoid them being canceled. Since credit card issuers aren’t all required to notify consumers of a card cancelation, an unexpected cancelation may result in a credit score dip.

When to Consider Canceling a Credit Card

If the card is newer: If you absolutely need to cancel a credit card, it’s better to close a newer one than an older one. Since length of credit history accounts for 15 percent of your credit score, you’ll want to keep old cards with a long payment history. With newer cards, you haven’t built up that history, so canceling may not be as detrimental to your score.

If the card has a lower limit: Whenever you cancel a credit card, your total available credit will decrease, which in turn will also decrease your utilization rate. This is the main factor that lowers people’s credit scores after canceling a card.

Canceling a card with a low total credit limit will put you at the least amount of risk for going over the 30 percent utilization rate. And if you do cancel, make sure your utilization rate on your other cards is low.

If the card has high fees: Cards with annual fees or extremely high interest rates may be making it more difficult for you to make regular on-time payments on all of your cards or pay off other debts. Even though canceling a card may result in a temporary dip in your credit score, it’s best to consider your overall financial health and debt load.

Always consider what’s best for your unique situation—and if you’re ever unsure, consult your financial advisor.  Improving your credit score, especially when you have multiple cards, can seem like a daunting task. If you don’t know where to start, Lexington Law can help. Explore our credit repair services to see if they’re right for you.

Reviewed by Cynthia Thaxton, Lexington Law Firm Attorney. Written by Lexington Law.

Cynthia Thaxton has been with Lexington Law Firm since 2014. She attended The College of William and Mary in Williamsburg, Virginia where she graduated summa cum laude with a degree in International Relations and a minor in Arabic. Cynthia then attended law school at George Mason University School of Law, where she served as Senior Articles Editor of the George Mason Law Review and graduated cum laude. Cynthia is licensed to practice law in Utah and North Carolina.

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.


How To Start A Business With No Money

Starting a business is a dream for many people.

Whether it’s the freedom to pursue something you love, the flexibility to be the boss, or the challenge of growing something from scratch that motivates you, many of us have a strong desire to start and own a business.

Although the thought of being a business owner is appealing, there are a few significant hurdles that routinely prevent people from pursuing these dreams. Most businesses require capital to get started. That means you’ll need to have a lot of money to invest in a building, inventory, equipment, or employees. Getting the money is a challenge and borrowing the startup capital comes with the risk of failing and not being able to repay the debt.

As a result, most people simply never pursue their entrepreneurial dreams. However, it’s possible to start a business with no money and avoid taking on debt.

start a business with no money

Quick Navigation


  • Write articles for blogs, websites, or printed publications
  • 3. Invest Once You Start Making Money

    As soon as you start making money, it’s ideal if you’re able to reinvest at least a portion of that money back into the business. You could use that money for:

    • Advertising
    • Software and tools that make your work faster, easier, or more effective
    • Outsourcing work to free up more time
    • Training

    You don’t need to spend money just for the sake of spending money, but you should be willing to reinvest money into your business when it makes sense. Investing in your business may produce a huge return by allowing you to make much more money in the future.

    how to begin a business with no money

    Businesses That Can Be Started With No Money

    Now, let’s take a look at some of the best opportunities for service-related business that could be started with just a small investment, or even no investment at all.

    Virtual Assistant

    One of the best business opportunities out there today is to work as a virtual assistant (VA). As a VA, you could offer a wide variety of services, but the best option is to focus on the things that you already have experience with. Maybe you’ve worked in administrative roles in the past and you’re good at things like managing a calendar, setting appointments, making travel arrangements, or responding to emails.

    Maybe you have experience with blogging and social media and you could moderate forums or Facebook groups, respond to blog comments and messages on social platforms, write or edit blog posts, or create social media posts for your clients.

    In the current environment, many businesses are more interested in outsourcing work to freelancers as opposed to hiring full-time employees. There is strong demand for quality virtual assistants, and that demand is likely to continue to increase.

    While there are a lot of companies that offer jobs for virtual assistants, these jobs typically do not offer the best income potential. If you want to maximize your income as a VA, starting your own freelance business is the better option.

    If you’re interested in learning how to start your own VA business, Fully Booked VA by Gina Horkey is a great resource.

    Freelance Writer

    With millions of websites and blogs publishing new content on a daily basis, there is a need for writers who can create that content. While the biggest companies may use full-time staff writers, most publications rely heavily on freelancers.

    One of the most attractive perks of working as a freelance writer is the fact that many of your clients will be ongoing. You may have weekly or monthly assignments for new articles from each client. That means that once you have enough clients, you won’t need to dedicate time or effort towards finding work. Instead, you’ll be able to devote all of your time to the work that actually brings in the money.

    There is work available in many different industries, so you can probably use your existing skills and experience to find work. You may even be able to turn one of your hobbies into a business by landing some writing gigs that cover the topics you enjoy most.

    Check out the great 30 Days Or Less To Freelance Writing Success, included in the VA Foundations Skills Course from Gina Horkey.

    Graphic Designer

    If you have some design skills, you could put them to good use by working for clients. You could offer a wide range of services like:

    • Logo design
    • Brochure design (or other marketing materials)
    • Social media graphics
    • Label or product packaging design
    • And much more

    If you’re a designer, you probably already have the software that you’d need. If not, there are free alternatives to popular options like Adobe Photoshop and Illustrator.

    Web Designer

    Another way to put design skills to good use is to focus on websites. Obviously, every business and organization should have a website these days, so there are plenty of potential clients out there.

    Website builders like WordPress and Squarespace have definitely had an impact on the industry as it’s easier than ever for non-designers to create their own website. However, these tools have a learning curve and many business owners don’t have the time to create their own website.

    Many freelancers have responded by offering services to set up and customize a WordPress-powered website for a client who doesn’t want to tackle the project on their own.

    Web Developer

    While web designers focus on the visual aspect, developers handle the coding and technical aspects. If you have coding experience, working as a freelance web developer could be a great fit.

    In addition to a strong demand for the services, developers also benefit from excellent earning potential.

    Social Media Marketer

    Social media platforms like Facebook, Instagram, Twitter, and Pinterest can present outstanding opportunities for businesses. Unfortunately, most businesses are sitting on the sidelines and missing out on these opportunities.

    That’s where you come in.

    As a social media marketer, you could assist business owners by managing their social presence for them. This might involve posting regularly on select platforms, responding to questions or comments that arrive via social media, creating images and graphics to post, and even management of ad campaigns.

    In particular, managing Facebook ads is an excellent business opportunity with a lot of potential. Most businesses could benefit from Facebook ads, but they don’t have the experience or expertise to do it on their own.

    The Facebook Side Hustle Course teaches everything you need to know to start your own business running ads for clients. It’s a great option for a side hustle or a full-time business.


    There are a lot of hobbyist photographers out there, so I know that some people reading this article would love to be able to make money with their photography.

    If you have an interest in photography, you probably already have all of the gear you would need to get started with a simple photography business Really, you don’t need more than a camera, lens, and photo editing software to get started. Of course, you can invest in more gear as your business grows.

    There are several different types of photography that you could offer, including:

    • Engagement
    • Wedding
    • Maternity
    • Newborn
    • Family
    • Senior
    • Sports
    • Events
    • Business/Corporate
    • Real Estate

    Consultant Or Coach

    Here is an extremely flexible option that could allow you to take advantage of your existing skills or expertise. Consultants and coaches can work in just about any industry. Think about your strongest skills and your past work experience. Is there a way to incorporate that into a consulting or coaching business?

    One of the main benefits of working as a consultant or coach is the income potential, since rates for these services tend to be high.


    If you’ve done any bookkeeping work at a previous job, you could start your own bookkeeping business. You don’t need to be a CPA or have accounting experience to work as a bookkeeper, and you can still earn a really nice hourly rate with this service.


    If you have strong grammar skills and keen attention to detail, working as a freelance proofreader could be a great fit for you. As a proofreader, you can work from anywhere with an internet connection. With the amount of content being published today, there is plenty of demand for quality proofreaders.

    Proofread Anywhere is the leading course for anyone who is interested in learning how to make money as a proofreader.

    Flea Market Flipping

    If you enjoy shopping at yard sales and flea markets to find the best deals, perhaps you should turn it into a business. It’s possible to do really well as a flipper. Rob and Melissa from Flea Market Flipper run a six-figure flipping business and they offer a free workshop that shows how you can start your own reselling business.

    Getting started as a flipper could involve a small investment to purchase the initial products that you’ll be reselling. However, if you need to get started with no investment, you can find some items from around your house to sell. You’ll be able to start making money right away with no investment, and you can reinvest that money to purchase additional items.

    Trash Cleanup

    This is one of my favorite opportunities because it’s completely overlooked by most people, anyone can do it, and the income potential is outstanding.

    Brian Winch started a side hustle in the 1980s cleaning up trash in business parking lots and at shopping centers. In a very short time, he replaced the income from his full-time job. For more than 30 years, Brian has been earning a six-figure income cleaning trash.

    If you’re interested in starting your own business, be sure to check out Cleanlots, where Brian teaches the exact methods he uses. He refers to it as “America’s simplest business” because it requires very few tools and is so simple to do.

    Lawn Care

    A lawn care business will cost some money to start if you don’t already have the equipment. But if you do already have a mower, you could get started by simply canvassing your neighborhood and offering your service.

    Aside from mowing, you could also offer trimming, leaf cleanup, power washing, and other related services.


    Painting is a relatively simple service to offer. Many people prefer to hire a painter because they don’t have the time or they simply don’t want to do their own painting. You could be painting interior walls, or exterior projects like fences and shutters.

    The equipment needed is minimal, an you can build the cost of things like paint, rollers, and brushes into your estimates.


    If you’re good with your hands and you enjoy fixing things, working as a handyman could be the right fit for you. There’s always work available and you can get started by talking to your friends and family or simply posting an ad on Craigslist.

    Dog Walking and Pet Sitting

    A good opportunity for pet lovers is to work as a dog walker and/or pet sitter. There is a strong need for these services and you can make a pretty good income doing it.

    To get started, you can create a free profile on Rover and make it possible for clients in your local area to find you.


    Put your knowledge to good use by helping others. You could offer tutoring services in the subjects that you know best. Tutoring is something that can be done online or locally in-person.

    Starting A Business With No Money Is More Possible Than Ever

    Don’t let a lack of capital stop you from pursuing your dreams of starting your own business.

    A service-related business is a great option to start a business with no money upfront, and here we’ve covered a number of realistic possibilities.

    Consider your own interests and experience to determine what might be the best fit for yourself. Take action and you could begin making money almost immediately.

    Start a business with no money

    How To Start A Business With No Money