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A wire transfer is a way of moving money electronically between from one individual to another person or a business. For example, if you’re buying a house and you need to make the down payment, you could do a wire transfer to deliver the funds quickly. Or maybe you need to send money to relatives overseas. Wire transfers can be done within the U.S. and internationally.

Read on to learn more about bank wire transfers, how to wire money, the cost involved, and the pros and cons of transferring money this way.

What Is a Wire Transfer?

A wire transfer is an electronic transfer of funds between bank accounts. Wire transfers can be done by banks or by money transfer services like Western Union and MoneyGram.

Wire transfers allow a certain amount of money to be sent electronically from your bank account at a traditional or online bank to a recipient’s bank account, or vice versa.

Domestic vs International Wire Transfers

Wire transfers are a way to manage money, and they can be domestic or international.

Domestic wire transfers involve transferring money to someone within the same country. You may be able to do the wire transfer through your online portal on your bank’s website, using your bank’s mobile app, or by calling the bank. You’ll need the recipient’s banking information, including their account and routing numbers, and their contact information. Domestic wire transfers are typically processed the same day.

The process is similar for an international wire transfer in which you send money to someone in another country, but banks may have stricter rules for these transfers. For example, you might need to visit a branch in person and/or provide more detailed information about the transaction. International wire transfers may take two or three days or more to clear.

How Wire Transfers Work

You can wire money through a bank or wire transfer service. Either way, here are some details to know:

•   You’ll typically need to provide banking information like the recipient’s routing and account numbers in order to process wire transfers.

•   The money could be sent within hours if it’s a domestic wire transfer or a few days if it’s an international transaction.

•   When someone is sending money, the funds must be in their account before the bank will initiate the transaction. The money will be removed immediately after the wire transfer.

•   When someone is receiving money through a wire transfer, the bank will treat the payment like cleared money. As soon as the recipient’s account is credited, they can withdraw or spend the money.

How Long Does it Take to Wire Money?

A wire transfer can be set up in minutes at a bank or wire transfer service. Then, once it’s sent, wire transfers are typically processed the same day when they are domestic.

International wire transfers can take at least two to three days, depending on the receiving country’s banking processes.

How to Wire Money in 5 Steps

Wiring funds typically involves the following steps:

1. Make Sure You Have the Funds

If you are the sender, make sure that the money is in your bank account. Wire transfers can’t be sent if the money isn’t there.

2. Pick a Wire Transfer Service

The sender can typically transfer the money online or go to providers in person and use cash or a bank account, depending on the service.

3. Fill Out the Forms/Create an Account

When sending money through a bank, senders will need to fill out forms and include their bank account information, their bank’s contact information, and the recipient’s bank account information, including the account number and contact information for the bank. They may also need to provide a government-issued ID if they do a wire transfer in person.

When sending through a wire transfer service, they may have to log in online or go to the service in person and draw funds from a linked bank account or take cash, choose the recipient’s country, delivery method, and account information, and fill out any other information that’s required. Again, they may need to provide a government-issued ID.

Senders have to be careful that the bank account numbers they provide are accurate so that the money gets to the recipient.

4. Include Fees

Banks and wire transfer services should be able to tell users what the fees are going to be upfront. Your bank will typically deduct the fee from your bank account.

5. Ask for a Receipt

The last step in how to wire money is to get your receipt. This ensures that senders have a record of the transaction.

Pros of Wiring Money

Reasons that people might want to wire money include the following.

They Need to Move a Big Amount

Wire transfers are common for moving large sums, such as money in a savings account that’s needed for real estate transactions and sending money to and from family members.

The Money Is There

With checks and debit cards, payment can bounce or an account can go into overdraft. With a wire transfer, that’s not possible, since the money must be there in order to be sent. A wire transfer request will be declined if someone has limited funds.

It’s Safer Than Checks

While checks are typically safe, mailing them is not necessarily. Individuals might open mail that isn’t theirs and take checks out and try to cash them. Wire transfers may offer a more secure alternative to writing checks.

Money Can Be Sent Internationally

Say a person goes to work in another country but wants to send money to family members back home every month. With a wire transfer, that’s easily done.

Cons of Wiring Money

Wire transfers do have some possible drawbacks, such as:

Cost

For a domestic wire transfer, the cost is typically about $25 to $30 for an outgoing bank transfer within the U.S, and $0 to $15 for a domestic incoming payment. International transfers typically cost around $50 for an international outgoing payment and $0 to $25 for an international incoming wire transfer.

No Do-Overs

Wire transfers are typically irreversible, so both sender and recipient should be sure that all of the required information is correct.

Potential Scams

Scammers might ask unsuspecting people to wire them money for goods or services and then never follow through with the items, among other possible scams involving wire transfers. So it’s best to avoid wire transfers unless the sender and receiver know each other.

Unlike with a credit card, where someone might be able to dispute the charge, the money sent by a wire transfer may be gone forever once it’s sent.

Here, for a quick comparison, are the pros and cons of wire transfers:

Pros of Wire Transfers	Cons of Wire Transfers
Can move large sums domestically and internationally	There are typically fees involved.
Reliable — the money can only be sent if the sender has it	No do-overs
May be safer than checks	Potential for scams

Alternatives to Wiring Money

If you need to move money but don’t want to use a wire transfer, here are some other options.

Peer-to-Peer Services

P2P payments (peer-to-peer payments) through an app such as PayPal or Venmo usually can be made from a linked bank account or directly from the P2P account for free.

Some P2P providers charge around 1.5% to 3.5% to process payments drawn from a credit or debit card.

Bank Account Money Transfer

You may also set up electronic transfers with your bank. Funds can often be sent to any other bank account, not just those held at the same financial institution. The following are two different types of bank account transfers.

Automated Clearing House (ACH) Transfers

The Automated Clearing House is a national electronic network that links financial institutions in the U.S. With an ACH payment or transfer, an individual or a business can move money from one bank account to another.

For example, ACH transfers are often used for bill payment. Individuals provide their bank account information to businesses like their mortgage lender or utility companies, and those companies can then withdraw funds through autopay or one-time payments.

The ACH network is also often used by employers to direct deposit paychecks into employees’ bank accounts. This may show up on your bank account as an ACH credit, meaning the money has been paid to you.

Blockchain-Based Bank Transfers

A blockchain bank transfer is a way to send digital assets like cryptocurrencies over a blockchain network. (A blockchain network uses a decentralized network of computers to perform the transaction. ) The sender converts the money they want to send into digital assets in order to do the transfer. The recipient usually receives it within minutes.

However, the blockchain transfer process can be complex and typically involves a learning curve for those who have never done it.

Here’s a quick overview of how three major methods of transferring funds — wire transfer, P2P transfer, and bank account transfer — compare:

Wire Transfer	P2P Services	Bank Account Transfer
Often involve a fee	May involve a fee, depending on the provider and funding source	Often free
May take at least two to three days internationally	May take up to 5 days internationally	May take up to 5 days internationally

The Takeaway

Wire transfers can be an efficient electronic way to move funds between people or businesses. Depending on the specific details, such as whether the transaction is domestic or international, the timing and fees may vary. A good first step may be to check with your banking partner to learn what they offer.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Better banking is here with SoFi, named the #1 Bank in the U.S. for the fourth year in a row by Forbes (2026).* Enjoy up to 3.10% APY on SoFi Checking and Savings.

FAQ

What information is required to wire money to someone?

To wire money, you will need to use your bank or a wire service and have the sum available in your bank account that you’re planning to transfer. Then, you’ll need to fill out the proper forms, provide the recipient’s bank account information, and pay any fees owed for the transfer.

How much do bank wire transfers cost?

The amount it costs to wire money depends on the financial institution, whether the money is moving into your account or into someone else’s account, and whether the funds are being sent domestically or internationally. Fees typically range from about $0 to $50 per transaction.

How do you do a wire transfer?

To wire money, you can go through your bank or use a wire transfer service. Make sure you have the funds available that you’re planning to transfer. Then, you’ll fill out paperwork with the recipient’s banking information, including their bank account and routing numbers, and pay a fee for the transfer, if required. Finally, it’s a good idea to get a receipt so that you have a record of the transfer.

Are wire transfers reversible if I make a mistake?

Wire transfers are generally irreversible once they’re sent. Carefully review the recipient’s information, including their bank account and routing numbers, to make sure they are correct before you sign off on a wire transfer.

Do wire transfers get reported to the IRS?

Wire transfers of sums over a certain amount are reported to the IRS. Any transfer over $10,000 must be reported to the IRS by banks and other financial institutions under the Bank Secrecy Act. The reason for this is to help prevent money laundering and other illegal activity.

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This content is for educational and informational purposes only. The products, services, or features discussed may not currently be available via the SoFi platform. Any references to third-party products, services, or companies do not constitute an endorsement, recommendation, or solicitation by SoFi. Readers should independently evaluate their options and consider their individual financial needs and circumstances before making any decisions. ©2026 SoFi Technologies, Inc. All rights reserved.
SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2026 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
This article is not intended to be legal advice. Please consult an attorney for advice.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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An ATM (automated teller machine) can be a convenient way to deposit or withdraw money from your bank account, check your account balance, and conduct other aspects of your banking business.

But how do you use an ATM? Knowing how an ATM works may help you get the most out of your banking transactions. Read on to learn how to use an ATM.

What Is an ATM?

An ATM is a computerized machine that performs some of the same functions as a human teller at a bank, such as dispensing cash.

ATMs provide certain banking services quickly and conveniently. You can access them at banks, but it’s also usually possible to find ATMs at grocery stores, in shopping centers, in major hotel lobbies, and in airports. They also may be at convenience stores, restaurants, and other places where cash could be needed.

You can typically withdraw cash from ATMs and check your bank account balance. You may also be able to deposit cash at an ATM or possibly checks, although deposits have more restrictions than withdrawals.

How Does an ATM Work?

An ATM machine gives bank customers easy access to their banking resources, often around the clock. An individual typically inserts their debit card into a reader that scans their banking information, and then they can conduct transactions. (At some locations, contactless transactions may be possible; see more on this below.)

Here are some of the main functions an ATM can usually perform:

•   Withdraw cash.

•   Make deposits. However, to do so, the device typically needs to be within the same network as the customer’s bank. Often, it’s not possible to make a deposit at an out-of-network ATM or, if it is, you may be charged a fee.

•   Check your account balance, which may help you avoid overdrafting when making a withdrawal or using a debit card. The balance may appear on the ATM screen or on the printed receipt. If the ATM is out-of-network, this service may come with a fee.

Some ATMs do make it possible to access their services without a debit card present. This is known as a cardless withdrawal. These types of withdrawals are typically supported by a smartphone app that uses technology such as a QR code instead of a debit card. This can provide the ATM with the account information it needs to complete the transaction.

Things You Can’t Do at an ATM

ATMs do have limitations; here are some things consumers may not be able to do at an ATM.

•   Withdraw coins

•   Open a new checking account or savings account

•   Close an account, such as an individual bank account or a joint bank account

•   Send a money order

•   Purchase a cashier’s check.

How Much Are ATM Fees?

It may be free to use an in-network ATM, but when there isn’t one around and you need cash (or to conduct another transaction), you’ll likely be hit with a fee for using an out-of-network device.

It’s wise to read the fine print associated with your checking account to better understand what kind of fees you may need to pay to use an ATM. It can also be helpful to make note of where some local in-network ATMs are or use your bank’s app or website to find them. This can make avoiding ATM charges easier.

How much can ATM fees be?

•   The average out-of-network fee is currently $4.86. This typically includes a $1.64 fee levied by your bank and an average of $3.22 charged by the ATM’s owners.

•   Additionally, if you are traveling internationally, you may have fees of, say, $2 to $5 to make withdrawals as well as a conversion fee.

Worth noting: Several banks will waive fees when their clients use an out-of-network ATM. If you often rack up many out-of-network ATM fees, you might want to look into which banks offer this service.Or you could look for a bank account with no fees.

How to Find an ATM

If you need cash or you want to deposit a check, here are a couple of ideas for how to find an ATM:

•   You can usually use your mobile banking app to find ATMs. There may be a map function or tool, or you may be asked to enter a zip code to see nearby devices.

•   If you bank at a traditional vs. an online bank, you can visit a branch which will often have ATMs available.

•   There are third-party services that can help you access surcharge-free ATMs.

To make this process easier, you can bank with a financial institution that has a large network of ATMs you can use without a fee. Allpoint, STAR, and MoneyPass are examples of these networks.

How to Withdraw Money from an ATM

Withdrawing money from an ATM is relatively simple, but there are several actions you’ll need to take.

Step-by-Step Guide to Withdraw From an ATM

When withdrawing cash from an ATM, follow these steps.

1.    When prompted by the screen, insert your debit card into the machine.

2.    Enter your PIN number. This is the custom PIN (personal identification number) associated with the debit card linked to your bank account.

3.    Choose the transaction type. In this case, it would be a withdrawal.

4.    Pick the account to access. If you have multiple bank accounts, this step will make sure the money is coming from the right place.

5.    You’ll likely be prompted to enter the dollar amount you want to withdraw (or press the option showing your choice of amounts), and you may be asked to select your bill denominations.

6.    Take the card back. Now it’s time to complete the transaction. Many ATMs will prompt you to take your card back and then the machine will dispense your cash.

How Much Money Will an ATM Let You Take Out?

There are typically limits on how much you can withdraw from an ATM. (This is often done to make sure there is enough cash in the machine to go around vs. a few customers draining the funds.)

•   Daily withdrawal limits are typically between $500 and $5,000.

Check with your bank to learn its limits and whether it determines that by calendar day or by a 24-hour period.

Recommended: What is a Money Market Account?

How to Deposit Money at an ATM

You can also learn how to use an ATM machine to deposit money. Just keep in mind that only certain ATMs will accept deposits, so you’ll want to be aware that depositing money may not be a possibility at the ATM closest to you.

1.    Find an in-network ATM or an ATM that allows deposits to the bank associated with your debit card.

2.    Insert your card and enter your PIN (typically a 4-digit code).

3.    Choose “deposit” as your transaction type.

4.    Select the account you want to receive the deposit.

5.    Type in the exact amount of the intended deposit.

5.    Insert the cash or check. If it’s a check, endorse the back first; then follow the on-screen instructions to get your card back and a receipt, if desired.

Other Transactions You May Be Able to Complete at an ATM

Now that you know how to withdraw money at an ATM and deposit as well, these are some of the other things banking customers may be able to do at these devices.

Cash Checks and Deposit Money Orders

Some bank’s ATMs may let you cash checks for free and deposit money orders.

Make Bill Payments

At some financial institution’s ATMs, you might be able to pay your mortgage, home equity loan, or credit card bill you have with them at an ATM.

Get a Cash Advance From a Credit Card

You may be able to get a cash advance from a credit card (though this typically carries a high interest rate, so proceed with caution).

Tips to Keep Yourself Safe at ATMs

With both in-person and online banking, security is important. When using an ATM machine, it’s important to learn how to do so safely, whether making a deposit or withdrawal. Here are some tips:

•   Be aware of your surroundings. If there is someone loitering around an ATM (especially at night), you might want to go elsewhere. If you are making a deposit, you might want to consider making a mobile check deposit instead.

•   Consider using ATMs located inside bank branches.

•   Have your card already in your hand as you approach the ATM versus fumbling through your pockets or bag while at the ATM.

•   Cover the keypad when entering in the PIN number so no one else can see it. Some keypads are designed in such a way as to help protect your personal information as you type in those digits.

•   Review ATMs closely for misaligned card readers, skimming devices (more on that in a moment), or suspicious markings before using one.

•   If you are withdrawing cash, put it away ASAP when you receive it. Don’t walk away from the ATM with cash in your hands.

Also be aware that there are ATM scams. One common one involves card skimmers, a device that a fraudster attaches to an ATM (or gas pump card reader) in order to fraudulently collect the account information of users. Inspect card readers for signs of tampering; you may try to wiggle an ATM’s card reader to see if it is loose to help detect card skimmers.

If you have reason to be concerned, it could be wise to avoid this ATM and look for another one.

The Takeaway

ATMs can offer a convenient way to access a number of essential banking services such as withdrawing cash without having to actually visit a branch location during business hours. It’s important to pay attention to ATM fees, which are typically easier to avoid when using an in-network ATM. It’s also essential to keep safety in mind to avoid theft or fraud when using an ATM.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Better banking is here with SoFi, named the #1 Bank in the U.S. for the fourth year in a row by Forbes (2026).* Enjoy up to 3.10% APY on SoFi Checking and Savings.

FAQ

What should I do if the ATM dispenses the wrong amount?

Contact your bank — or the owner of the ATM, if the device is out-of-network (their contact information should be listed on the ATM) and explain what happened. Keep your receipt, and follow the advice given.

What happens if an ATM eats my debit card?

If your card gets stuck in an ATM, wait a few minutes to see if it is a temporary glitch. You can also try pressing the cancel button to see if the machine reboots. If not and the ATM is outside a branch of your bank, call the bank on your cell phone and ask if a representative can come out to assist you. If the ATM is at another location, you probably won’t be able to get the card back. In that case, use your bank’s mobile app to put a freeze on the card right away so that no one else can use it, and call your bank to request a replacement card.

How many times can I use an ATM?

How many times you can use an ATM often depends on how much money you withdraw each time. Most banks limit the dollar amount someone can withdraw (usually $500 to $5,000) per day. Check your bank for its withdrawal limits.

Can I use my debit card at any ATM?

You can generally use a debit card to withdraw cash at any ATM, even if it is out-of-network. However, making a withdrawal at an out-of-network ATM typically involves having to pay fees. You may not be able to make deposits at an out-of-network ATM.

How long does an ATM deposit take to clear?

With many banks, cash deposits are available by the next business day. Your cash deposit may even be available the same day if you make the deposit before your bank’s daily cutoff time. And at some banks, cash deposits may be available immediately if you use their ATMs. However, if you use an out-of-network ATM, deposits generally take longer to clear.

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Photo credit: iStock/Eva-Katalin

This content is for educational and informational purposes only. The products, services, or features discussed may not currently be available via the SoFi platform. Any references to third-party products, services, or companies do not constitute an endorsement, recommendation, or solicitation by SoFi. Readers should independently evaluate their options and consider their individual financial needs and circumstances before making any decisions. ©2026 SoFi Technologies, Inc. All rights reserved.
SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2026 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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Whether a $40,000 salary is considered good can depend on a variety of factors. For a recent grad in a small town where the cost of living is low, that might be an annual income that pays the bills. In addition, a $40,000 salary works out to about $19.23 an hour, more than double the federal minimum wage of $7.25.

But a $40,000 salary is not typically enough for a household to live comfortably in most parts of the United States. According to the U.S. Census, the median household income was $83,730 in 2024. What’s more, in 2026, a $40,000 salary would fall below the federal poverty guideline for households of six or more people. Here’s a closer look at the $40K salary figure.

How Does a $40,000 Salary Compare to the American Median Income?

Here’s a look at how earning a $40,000 annual income compares to that of your fellow Americans. The U.S. Census Bureau reported that the median household income in 2024 was $83,730, so a single $40,000 salary falls well below the midpoint. Combined with a second income, though, it could still contribute to a household reaching that level.

Could this salary be considered good? Consider the following:

•   As an individual, you may find that $40,000 is a good entry-level salary.

•   Couples living the DINK lifestyle (which stands for dual income, no kids) and who each make $40,000 would be well above the median household income. Plus, they would have the additional costs of raising children as part of their budget.

$40,000 Salary Breakdown

It can be helpful to know what a $40,000 salary translates to as a monthly budget, weekly paycheck, or even hourly rate. This may help you decide if $40K is a good salary.

Here’s how it breaks down:

•   Monthly income: $3,333.33

•   Biweekly paycheck: $1,538.46

•   Weekly income: $769.23

•   Daily income: $153.85

•   Hourly income: $19.23

*Based on 260 working days a year

**Based on 2,080 working hours a year

And remember: That’s before taxes; that’s not likely to be the amount that’s deposited in your checking account when you are paid. If you are single and make $40,000 a year, your top federal tax bracket is at 12%. The applicable tax bracket rates apply only to income above the standard deduction, so your effective rate on the full $40,000 is lower. You may also owe state, city, and even school district taxes, as well, depending on where you live. It’s important to keep that in mind as you plan and assess how to pay bills and save with this salary.

Can You Live Individually on a $40,000 Income?

It is possible to live individually on a $40,000 income. In fact, you may be able to afford the average monthly expenses for a single person and work on your saving and investing goals.

Your location will have the largest impact on how far your dollars will stretch. Areas with a lower cost of living will likely be easier to afford for an individual on a $40,000 income.

As an individual, you can help your salary go further by looking for ways to save money, like:

•   Having a roommate or renting out a room in your house if you own one

•   Cooking at home instead of eating out

•   Buying a used car or, depending on where you live, relying on public transportation

•   Finding a high-yield savings account

💡 Quick Tip: When you feel the urge to buy something that isn’t in your budget, try the 30-day rule. Make a note of the item in your calendar for 30 days into the future. When the date rolls around, there’s a good chance the “gotta have it” feeling will have subsided.

Best Places to Live on a $40,000 Salary

If you can afford moving expenses and aren’t tied to a specific location for work, you can make your dollars go further more easily in certain locations in the United States. U.S. News & World Report analyzed 859 cities for its 2026-2027 Best Places to Live rankings, using median gross rent and annual housing costs for mortgage-paying homeowners. Among its list of the most affordable places to live in the U.S., these five cities had the highest ratings:

•   Eagle Pass, Texas

•   Enid, Oklahoma

•   Weirton, West Virginia

•   Midland, Michigan

•   Decatur, Illinois

However, there’s more to moving than just the expenses and the job. Before packing up a rental truck, consider whether you are comfortable leaving behind friends, family, and familiar places.

Worst Places to Live on a $40,000 Salary

A $40,000 salary might not go far enough in a city with a high cost of living. According to the 2026-2027 Best Places to Live rankings from U.S. News, these five cities are among the most expensive in the U.S., requiring significant wealth to live comfortably:

•   Westminster, California

•   Newport Beach, California

•   San Rafael, California

•   Spring Valley, New York

•   El Cajon, California

Tips for Living on a $40,000 Budget

How can you (and possibly your family) live on a $40,000 budget? It’s important to cut costs, look for deals, pay down your debt, and build up savings for an emergency.

But living on a small salary doesn’t mean you have to completely give up entertainment. Remember that it’s OK to treat yourself to the nice things in life from time to time, as long as they are within reason. Everyone needs some fun in their life.

Here are some important tips for living on a $40,000 budget:

Carefully Tracking Your Expenses

First things first, get an understanding of your current spending habits. Your bank may offer tools that make this easy to analyze or you can download apps or check websites that make this easier.

Consider what bills you have every month, whether they are set up as automated bill pay, and, if so, when do they get processed? (This will help you schedule your bills and avoid getting hit with late fees.) Make a list of all your recurring expenses (mortgage or rent, student loans, car payment, phone, insurance, and utilities), and then analyze how much on average you’re spending on more variable expenses like groceries, gas, clothing, and entertainment.

What can you cut? What bills can you negotiate down? Where can you reallocate money toward savings?

Recommended: 20 Commonly Forgotten Monthly Expenses

Getting on a Budget

Now that you have an idea of what you’re currently spending, it’s time to design a budget around what you should be spending.

Start by plugging in necessary monthly expenses; these are things you must pay for each month, like your home, insurance, and food. Only once you can see that these basic needs are met should you begin to budget for things like dining out or new clothes, also known as wants vs. needs.

Not sure where to start? Do some online research on how to make a budget. There are different techniques including a line item budget and the 50/30/20 budget rule.

Consider using the 50/30/20 budget calculator below to get an idea of how your budget could be broken down.

You might also check out what tracking and budgeting tools your financial institution offers. Many (especially online banks) offer a suite of tools.

Getting Out of Debt

As you consider how to manage daily life on a $40,000 salary, it’s wise to pay attention to the role that debt plays in your personal finances. Mortgage and student loan debt are structured to be paid off over decades, and can be considered by some to be good debt, as the interest rates are often relatively low and timely payments build your credit history. The rates on credit card debt, however, can be high and therefore more detrimental to your finances (and mental health). If you have serious credit card debt, consider cutting back expenses as much as you can so you can focus on paying off your debt.

You can tackle your debt using the snowball method or the avalanche method. You may also consider a debt consolidation program or potentially a balance-transfer credit card, depending on your situation. However, transferring debt to another credit card involves risk. In addition to possibly steep transfer fees, a low or 0% introductory APR offered by a new card may jump to a high rate once the introductory period ends or a payment is missed.

Talking to a debt counselor can be helpful, as well. Nonprofits, such as the National Foundation for Credit Counseling (NFCC), may offer free or low-cost services.

Saving Your Money

If you are debt-free (house, car, and student loan payments aside) and still have wiggle room in your budget after accounting for necessary expenses and a little bit of fun money, you can allocate some of your $40,000 salary toward your saving goals. These might include vacations, a house down payment, renovations, or a wedding. An emergency savings fund is often a good place to start.

Recommended: Emergency Fund Calculator

💡 Quick Tip: An emergency fund or rainy day fund is an important financial safety net. Aim to have at least three to six months’ worth of basic living expenses saved in case you get a major unexpected bill or lose income.

Investing Your Money

After you have gotten a handle on your expenses, designed a budget, and opened a savings account, you might consider if there is enough leftover from your $40,000 salary for investing.

It can be challenging to set aside money for investing on a tight budget, but regularly putting even small amounts into an investing account gives individuals the opportunity to build wealth over time, with the help of compound returns. Returns are never guaranteed with investing, and losses are always possible. However, a longer time horizon gives a portfolio time to potentially recover from temporary market downturns.

How can you start investing? If your employer offers a 401(k) match, contributing enough to receive the full match means you’re not leaving part of your compensation unclaimed. You can also look for automated investing opportunities so you don’t have to worry about building a portfolio from scratch.

The Takeaway

Whether $40,000 a year is a good salary depends on a variety of factors. For a single person just out of school, living in a relatively inexpensive town, it might be adequate. For a family of four in a major city, it is likely a challenging sum to subsist on.

With a $40,000 salary, it’s important to follow smart financial strategies, like budgeting and cutting expenses, as well as finding a banking partner that’s right for your needs.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Better banking is here with SoFi, named the #1 Bank in the U.S. for the fourth year in a row by Forbes (2026).* Enjoy up to 3.10% APY on SoFi Checking and Savings.

FAQ

Can you live comfortably on $40,000 a year?

Individuals may be able to enjoy a reasonably comfortable lifestyle in more affordable regions on $40,000 a year, provided their budget accounts for their necessities, savings goals, and discretionary spending. Families, however, may struggle with this salary, especially in areas with a higher cost of living.

What can I afford making $40K a year?

If you are an individual living on $40,000 a year in an area with a low to moderate cost of living, you can typically afford monthly expenses like food, housing, and utilities and still have enough for a few fun expenditures, like entertainment. If you are frugal and build a budget, you may also be able to pay down debt, build your savings, and even invest a little.

Is $40,000 a year considered middle class?

Pew Research Center defines a middle-income household as one earning between two-thirds and double the national median, adjusted for household size. Against the 2024 median household income of $83,730, that puts the national range at roughly $55,800 to $167,500. A single person earning $40,000 falls below that range on their own, though the threshold varies by metro area and household size, and a second earner can move a household into it.

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Photo credit: iStock/Prostock-Studio

This content is for educational and informational purposes only. The products, services, or features discussed may not currently be available via the SoFi platform. Any references to third-party products, services, or companies do not constitute an endorsement, recommendation, or solicitation by SoFi. Readers should independently evaluate their options and consider their individual financial needs and circumstances before making any decisions. ©2026 SoFi Technologies, Inc. All rights reserved.
SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2026 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

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Contactless payment allows you to make a transaction simply by tapping a contactless card or payment-enabled mobile device over a payment terminal. It’s simple, convenient, and growing in popularity: In one 2025 survey, more than half (51%) of U.S. respondents said they use contactless payment.

While there are a number of benefits of contactless payments, there are also a few key things to know about this payment method, including how safe it is.

Read on to learn how tap-and-go technology works, and how secure contactless payment is.

How Do Contactless Payments Work?

Contactless payment, sometimes called “tap to pay,” uses near-field communication (NFC) to let consumers pay by tapping or waving a card, phone, or smartwatch near a payment terminal. A digital wallet stores payment information, like your credit card information, on your mobile phone or smartwatch. Both the payment device and the payment terminal have NFC chips that communicate wirelessly when they’re close together.

Instead of sending your actual card number, however, the system uses tokenization — replacing your number with a secure, random token. The token is transmitted to the payment processor, which contacts your bank to approve the transaction. If authorized, the payment is typically completed in seconds.

Recommended: Guide to Mobile Wallets: What They Are and How They Work

What Transactions Are Eligible for Contactless Payment?

For contactless credit card payment to work, both the terminal and card need to have the technology.

Many credit cards and debit cards have built-in chips, but the chip that permits you to insert instead of swipe is not the same as a contactless card. To determine if your card is able to make contactless payments, look for the universal contactless symbol — a circle with a wave inside (or WiFi symbol turned on its side) — somewhere on the card. Contactless payments are also supported by devices using Apple Pay, Google Pay, or Samsung Wallet.

To determine if a payment terminal is contactless payment enabled, check for the universal contactless payments symbol with a hand next to it on the merchant’s electronic payment terminal, device, or card reader.

Recommended: What is an ACH Payment?

Benefits of Contactless Payment

Tap to pay comes with a number of advantages — here are some of the possible benefits of contactless payment:

•   Ease of use. With contactless payment, users just have to tap their chosen payment method on the terminal. There’s no swiping or inserting for the transaction to go through.

•   Speed. Since there’s no swiping or inserting, contactless payments tend to be faster.

•   Less stuff to carry around. If you’ve uploaded your credit and debit card information to one of the types of digital wallets, you can pay for things without carrying your physical wallet around.

•   Security. Contactless payment is typically more secure than traditional magnetic-strip credit cards. Contactless payments are encrypted. This system generally makes it much harder for credit card scammers to steal people’s credit card information.

Cons of Contactless Payment

However, just like online banking and traditional banking have some pros and cons, contactless payments do have some potential drawbacks, including:

•   Glitches in technology. A card and point-of-sale system might not line up from time to time, resulting in glitches.

•   It’s not available everywhere. While contactless payment is being widely adapted, not every store has it. If there’s no symbol, customers will typically have to insert or swipe to pay. Or they might even choose to use money withdrawn from their checking account to pay in cash.

•   Potential security concerns. Contactless payments do not require a personal identification number (PIN) or signature to authorize. As a result, lost or stolen contactless cards may be used to make fraudulent transactions. You can check with your bank to see what online banking security features they have.

•   Limited transactions. It largely depends on bank policies, but because tap to pay doesn’t require authentication, there may be limits on withdrawals and purchase amounts. For more details on transaction limits, contact your bank or credit card company.

Is Contactless Payment Secure?

Contactless payments are typically safer than payments made with magnetic strip cards. However, as with many payment methods, there are still some risks involved.

How Secure Is Contactless Payment Technology?

Contactless payment technology is generally considered secure, especially when compared to the technology used for magnetic-strip cards. That’s because contactless cards use advanced security features like tokenization to protect financial data.

Tokenization replaces your card number with a unique digital token, making it difficult for hackers to use stolen information. Contactless payment may also eliminate some of the opportunities for thieves to steal – or “skim” — your credit card information, since your card never comes into contact with the payment terminal.

Are Contactless Cards Secure?

Generally speaking, contactless cards are secure, especially when compared to magnetic-strip cards. However there is the risk of theft or loss of the card. Because contactless payment doesn’t require a PIN or signature to authorize payment, if a contactless card is lost or stolen, it might be used to make fraudulent transactions. If your card is lost or stolen, you can put a freeze or lock on the card and report it to the bank immediately.

The Takeaway

While contactless payment isn’t foolproof, it can generally make purchasing transactions faster, easier, and more convenient. It’s also becoming more commonplace as a payment method, and it’s typically more secure than cards with magnetic stripes. You can weigh the pros and cons of contactless payment to determine if it’s right for you.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Better banking is here with SoFi, named the #1 Bank in the U.S. for the fourth year in a row by Forbes (2026).* Enjoy up to 3.10% APY on SoFi Checking and Savings.

FAQ

Can digital pickpockets scan my contactless card?

There is a possibility that a digital pickpocket could scan your contactless card. Radio Frequency Identification (RFID) skimming is a form of digital pickpocketing in which a fraudster uses an RFID scanner, which they might hide in a bag, and stands close to you to try to obtain the data on your card. Contactless cards use encryption, which can make it difficult for your data to be stolen, but a fraudster might be able to pick up enough information in order to make purchases that are considered “card not present,” such as online shopping. You could help protect yourself against this by using wallets or sleeves with RFID-blocking technology for your cards.

Do contactless payments require a PIN?

No, contactless payments do not require a PIN for authorization. You simply need to tap or hold your card or mobile device near the reader to pay, and the transaction can go through quickly, even within seconds.

Can I accidentally pay for someone else’s items?

It’s unlikely. The retailer needs to initiate a transaction — typing in the amount and activating the reader — before payment can be made, and your contactless card needs to be within an inch or two of the reader for a payment to go through. So accidental payments are unlikely under normal circumstances.

What should I do if my contactless card is lost or stolen?

If your contactless card is lost or stolen, you can use your bank’s mobile app to put a lock or freeze on your card immediately. Then call the bank and ask them to cancel the card and issue a replacement. Monitor your account for any fraudulent activity.

Are contactless payments widely accepted internationally?

Contactless payments are generally widely accepted globally, including in Europe, Canada, Asia, and Australia. However, small businesses, small towns, and rural areas may not be set up for contactless payment.

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This content is for educational and informational purposes only. The products, services, or features discussed may not currently be available via the SoFi platform. Any references to third-party products, services, or companies do not constitute an endorsement, recommendation, or solicitation by SoFi. Readers should independently evaluate their options and consider their individual financial needs and circumstances before making any decisions. ©2026 SoFi Technologies, Inc. All rights reserved.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2026 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.

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

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Medical payments insurance, also known as MedPay, can help cover medical bills related to injuries from an auto accident — no matter who was at fault.

This coverage, which you can add to your car insurance policy for extra protection, isn’t legally required in most states. But you may want to take a look at what MedPay has to offer before deciding whether to purchase it or not.

Read on for a look at what MedPay covers and how it could help reduce the financial impact if you or one of your passengers requires medical treatment after a car accident.

How Does Med Pay Work?

MedPay is an optional auto insurance add-on that’s designed to help pay for reasonable medical expenses for you and your passengers after a car accident. It may also extend to you or a household member if you’re hit by a car while walking, jogging, or riding a bike — or if you’re injured while you’re a passenger in someone else’s car.

Because MedPay coverage typically kicks in without waiting for an insurer to determine who was at fault, payments are often processed more promptly. And there’s no copay or deductible that you have to pay before MedPay coverage starts.

There are, however, limits on how much MedPay coverage you can purchase. (Usually from $1,000 to $10,000.) So although MedPay can be a useful way to quickly pay off smaller medical bills and other qualifying costs, it isn’t meant as a substitute for other types of insurance, such as health insurance or your auto policy’s bodily liability coverage.

To maximize the benefits of your MedPay coverage, it’s important to contact your insurer as quickly as possible after your accident. And after you file your claim, it’s a good idea to keep track of all communications, costs, and payments.

Recommended: How Does Car Insurance Work?

What Does MedPay Cover?

A wide range of accident-related expenses may be eligible for MedPay, within your chosen coverage limit, including:

•   Doctor visits (including health insurance deductibles and copays)

•   Emergency room visits and hospital stays

•   Prescription medications

•   Lab tests and X-rays

•   Surgical procedures

•   Physical therapy or chiropractic treatment

•   Nursing services

•   Dental treatment

•   Funeral expenses

MedPay doesn’t cover lost wages, treatments that aren’t the result of a car accident, or services you may need because of your injury, such as child care or yardwork. When it comes to those costs, you may have to rely on other types of car insurance coverage.

Recommended: What Does Renters Insurance Cover?

MedPay vs Personal Injury Protection (PIP)

If you’re thinking that MedPay sounds similar to Personal Injury Protection (PIP), you’re right. Both can help cover your medical expenses (or your passengers’ bills) after a car accident, no matter who’s at fault. But there are also some key differences.

•   PIP is required in more states. Though some states offer both types of coverage, MedPay is currently required in only two states: New Hampshire and Maine. In comparison, 12 states require drivers to have PIP coverage: Delaware, Florida, Hawaii, Kansas, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Oregon, and Utah. These states are all no-fault states, which means drivers involved in a car accident file claims with their own insurance companies, no matter who caused the accident. You must exhaust your PIP coverage before you can file a claim with the at-fault driver’s liability auto insurance.

•   PIP may cover more than MedPay. Along with medical bills and funeral costs, PIP may also cover lost wages or pay for child care. (Coverages vary by state, however, so be sure to review your policy.)

•   PIP has higher coverage limits. PIP coverage limits can go as high as $100,000 or more, while MedPay coverage is generally limited to less than $10,000.

Recommended: Auto Insurance Terms Explained

How Much MedPay Coverage Do You Need?

There are a few factors that you may want to consider when determining how much MedPay coverage you need. These can include:

•   What type of health insurance coverage do you have? If you have reliable health insurance with a low deductible and low copays, you might decide that a lower MedPay limit is all you need.

•   How are you doing financially? Can you afford to pay out of pocket for some of your medical expenses if you’re in an accident? If not, MedPay may help you cover the gaps in your coverage.

•   What does your state require? If you live in a state that mandates MedPay, there may be a required minimum amount.

•   How much will the premiums cost? Depending on the limit you choose, MedPay coverage can be relatively inexpensive compared to other types of insurance.

Recommended: What Does Auto Liability Insurance Typically Cover?

Is MedPay Worth It?

If MedPay isn’t required in your state, you might be wondering if it’s worth adding the extra expense to your auto insurance policy — or how much insurance coverage you really need.

While you’re making that decision, keep in mind that the costs associated with medical care after an accident can sometimes be quite steep. And even if you’re confident you could cover your own expenses — with good health insurance, for example, or out of your own savings — you can’t know if every passenger in your car will have the same resources to pay for their care. If you can manage a small bump in the cost of your auto policy, you might find having that extra layer of coverage is worth it.

It may be helpful to review your overall insurance plan to get a clear idea of what you have and if there are any coverage gaps and then do some comparison shopping to see what it might cost to add MedPay to your plan.

The Takeaway

Adding medical payments coverage (MedPay) to your auto insurance policy could help you pay some or all of the medical bills resulting from an accident — no matter who’s at fault.

In most states, MedPay is optional (unlike PIP coverage, which is legally required in all 12 no-fault insurance states). But even if you don’t have to have it, you may want to consider adding this affordable protection to safeguard yourself, your passengers, and your finances.

When you’re ready to shop for auto insurance, SoFi can help. Our online auto insurance comparison tool lets you see quotes from a network of top insurance providers within minutes, saving you time and hassle.

SoFi brings you real rates, with no bait and switch.

FAQ

Is medical payments (MedPay) coverage required by law?

MedPay coverage is only required in Maine and New Hampshire, but it is available as optional coverage in most other states.

Does MedPay cover passengers in my car?

Yes, MedPay covers passengers who are in your car when you’re in an accident.

Can you use MedPay if you have health insurance?

Yes. MedPay isn’t meant to be a substitute for health insurance, but it can help cover costs your insurance doesn’t — including deductibles and copays.

In which states is MedPay not available?

MedPay coverage is available in every U.S. state except Minnesota, New York, North Dakota, and Oregon.

How do you file a MedPay claim?

To maximize the benefits of your MedPay coverage, it’s important to contact your insurer as quickly as possible after your accident. You may be able to file your claim online at the insurer’s website, or you can call your agent and get information about next steps.

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Photo credit: iStock/Anastasiia Havrysh

Auto Insurance: Must have a valid driver’s license. Not available in all states.
Home and Renters Insurance: Insurance not available in all states.
Experian is a registered trademark of Experian.
SoFi Insurance Agency, LLC. (“”SoFi””) is compensated by Experian for each customer who purchases a policy through the SoFi-Experian partnership.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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