woman making deposit on phone

The Problems with Checking Account Interest Rates

When was the last time you thought about your checking account? If you’re like many people, it was probably the last time you wrote a check or paid a bill that wasn’t set up on autopay.

Checking accounts tend to exist in the background of our lives, warranting so little thought that many of us are still using accounts we first set up in high school or college.

Although we rarely think about their logistics, checking accounts impact almost every aspect of our lives–we use them for everything from buying groceries with our debit cards to transferring money back and forth between friends to paying our monthly bills.

The truth is, however, that your checking account could be hurting your financial health through low-interest rates.

Fortunately, there are alternatives to low (or no) interest checking accounts, such as high-yield checking accounts. And, many people are even choosing to leave checking accounts behind altogether and put their money into cash management accounts that often provide higher interest rates with fewer fees and restrictions.

Here’s what you need to know about checking account interest rates, and what you can do to start earning more on your spending account.

What is the Average Checking Account Interest Rate?

In return for putting money in your checking account, many banks pay interest. Checking account interest is a set percentage of the total amount of money you keep in your account and is paid out periodically. Unfortunately, checking account interest rates have been slowly decreasing.

In fact, the average checking account interest rate is only 0.04%, which means that even if you left $5,000 in your checking account for a year, you’d only earn $2 in interest.

While 0.05% is the average, plenty of banks are only paying out 0.01% in interest rates. Banks with 0.01% interest rate will pay merely 10 cents in annual interest for each $100 in your account.

Sometimes banks with low checking account interest rates also charge fees to maintain your account. Because interest rates are not high enough to offset the cost of these fees, you might actually be losing money by using your checking account.

Checking Account Interest Rates vs. Inflation

There’s another major downside to keeping your cash in a checking account with a minuscule interest rate: inflation. While many of us think that cash is king, the fact of the matter is that the dollar devalues over time as inflation rises.

Inflation, which is the increase in prices over time, means your dollar has less purchasing power than it did when you first got it. In short, each of your dollars is worth less as inflation increases.

When your grandpa complains about having to pay $15 to see a movie when tickets were only 46 cents in 1950, he is talking about the effects of inflation. The value of a movie ticket is the same, but it takes much more cash to make that purchase.

When we plan for the future and save for retirement, we all tend to assume that our money will be worth the same amount in the future as it is today. That’s why many of us don’t worry about leaving our cash languishing in a checking account with a low-interest rate.

The truth, however, is that your money may well have less purchasing power in the future due to inflation. The pennies that many banks pay you in interest won’t help you avoid inflation.

That means that on top of losing money in fees paid to your bank to keep your checking account open, you may also end up with money that is worth less by the time you wish to withdraw it.

A .05% interest rate is not enough to counteract the current inflation rate in the U.S., which is 2.9% .

Alternatives to Low-Interest Checking Accounts

The good news is that there are a couple of alternatives to leaving your money sitting in a checking account with an extremely low interest rate, or no interest at all.

High-Yield Checking Accounts

One option is going with a high-yield checking account, sometimes referred to as a “rewards” checking account, which are often offered by smaller banks, online banks, and credit unions.

These accounts can have interest rates as high as 4%, but it can be important to read the fine print.

Often, these rates come with restrictions that limit the amount of money that can earn the higher rate, such as only the first $3,000. The rest of your cash may be then subject to a much lower rate.

Also, because many high-yield checking accounts are offered by regional banks or credit unions, you may run into difficulty finding in-network ATMs.

Before opening a high-yield checking account, it can be a good idea to find out about any monthly or other types of fees, including fees for going to an out-of-network ATM, as these could erode the higher interest rate.

You may also want to make sure the institution offers a user-friendly website and mobile app.

Cash Management Accounts

A cash management account is an account that combines the services of a spending account and a savings account in one product.

These accounts are often offered by online financial service providers and can, in many cases, provide above-average interest rates and reasonable or no fees due to the low overhead.

Indeed, some cash management accounts have annual percentage yields that are higher than what many brick-and-mortar banks offer for their savings accounts.

Cash management accounts also often come with mobile check deposits, broad ATM networks, check writing, autopay, money transfers, overdraft programs and more.

The Takeaway

Low interest rates, combined with increasing fees and other restrictions, has created a situation in which many people are actually losing money through fees, or risking the devaluation of their money by keeping it in a low-interest checking account.

Fortunately there are other options that offer easy access to your spending money but also higher interest, such as high-yield (or rewards) checking accounts, which are often offered through smaller and online banks, as well as credit unions.

Looking for Something Different?

You may also want to consider a cash management account, such as SoFi Money®.

With SoFi Money, you can earn competitive interest, spend, and save all in one account. You can also write checks, use a debit card, send and receive money, and withdraw cash at 55,000+ (fee-free) ATMs worldwide.

Check out everything SoFi Money has to offer today.



SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
Neither SoFi nor its affiliates is a bank. SoFi Money Debit Card issued by The Bancorp Bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
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.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

MN18132

Read more
man studying forms

Comparing the Different Types of Deposit Accounts

Maybe you’re saving money for a down payment on a home, or perhaps you’re planning a trip to France to see, once and for all, just how many croissants you can eat in one day.

But where are you going to put that cash as you sock it away? After all, you probably want to earn interest on that money while you’re waiting to use it.

That’s where interest-bearing accounts can come into play. There are actually many different types of interest-bearing accounts to choose from, and they all have differences in terms of ease of access to your cash, the annual percentage yields (APY) offered fees, and terms.

If you’re feeling confused or overwhelmed by all the different account options that are available these days, not to worry. Below we break down some of the most common types of deposit accounts, including the advantages and disadvantages of each.

Basic Checking and Savings Accounts

A checking account usually has very low monthly account fees or no monthly account fees. It allows you to write checks and get an ATM card or debit card. You might get access to online and mobile banking apps so that you can mobile deposit money and pay your bills.

These basic checking accounts rarely pay you interest, which means that it may not make sense to keep significant amounts of money in them.

You may be better off using them just as an account to deposit your paycheck into before you either use that money to pay bills or transfer your cash into other accounts to save it.

On the other hand, most savings accounts don’t charge account fees, although some require that you have a certain minimum balance and if you go below that amount they will charge you a fee.

With savings accounts, you can’t usually write checks or get a debit card. You may, however, be able to get an ATM card that could be used to make transactions at any ATM within the bank’s network.

Savings accounts typically pay more in interest than a checking account, but they typically still don’t pay a lot. You may also be limited to making no more than six transfers or withdrawals from a savings deposit account per statement cycle, or pay extra if you go over your allowed transactions. While the Federal Reserve has lifted the six-transaction limitation on savings accounts due to the pandemic, many banks still impose some transfer and withdrawal limitations on savings accounts.

Other Interest-Bearing Deposit Account Options

High-Interest Savings Accounts

Some banks offer special, high-interest savings accounts that can offer much higher rates than traditional savings accounts. Some institutions don’t charge monthly fees for these accounts while others do but will waive them if you meet a balance minimum.

As with all savings accounts, you may be limited in terms of the number of withdrawals or transfers you can make each month.

One good place to look for this type of account is at an online bank. Because these institutions typically have lower operating expenses than brick-and-mortar banks, they can often offer rates that can be considerably higher than traditional banks, and may also be less likely to charge monthly fees.

Money Market Accounts

A money market account is a type of deposit account that pays interest on deposits and allows withdrawals.

Money market accounts are similar to standard savings and checking accounts, except that they typically pay higher interest rates, require higher initial deposits, and may also require minimum balances, which can run anywhere from $100 to $10,000.

Some money market accounts require a minimum of $25,000 to earn the best interest rates.

Unlike standard savings accounts, some money market accounts also come with a debit card and checks, although institutions may require that they not be used more than six times per month.

You may want to keep in mind that a money market account is very different from a money market fund. A money market account is a federally insured banking instrument, whereas a money market fund is an investment account.

Typically, money market funds invest in cash and cash-equivalent securities. It is considered low risk but doesn’t have a guaranteed return.

Certificates of Deposits (CDs)

A certificate of deposit (CD) is a product offered by consumer financial institutions, including banks and credit unions, that provides a premium interest rate in exchange for leaving a lump-sum deposit untouched for a certain period of time.

The bank determines the terms of a CD, including the duration (or term) of the CD, how much higher the rate will be compared to the bank’s savings and money market products, and what penalties will be applied for early withdrawal.

CDs offer different term lengths that can range from one month to 20 years. Interest rates tend to be higher for longer terms. Some CDs have a minimum deposit amount that can be over $1,000 or more, though there are banks that offer CDs in any amount.

Sounds good? Well, it is if you know you won’t be touching that money for the entire term length. If you suddenly need the money, then you will likely have to pay a penalty to withdraw money early from your CD.

While you can get no-penalty CDs or early withdrawal CDs, it’s a good idea to make sure to read the fine print, as many of these accounts only have no penalties or withdrawal fees if you take money out during the first few weeks after you invest. In return for that withdrawal window, you often give up a significant amount in APY.

If ease of access is a concern, it might make sense to invest in CDs that feature fewer restrictions around withdrawals. Or, you could set up a CD ladder strategy where you buy CDs that have different maturity dates, ensuring access to funds as your CDs mature at staggered intervals.

High-Yield Checking Accounts

Though interest is normally associated with savings, and not checking, accounts, many financial institutions offer high-yield checking accounts.

These interest-bearing accounts, sometimes called rewards checking, work like regular checking accounts and come with checks and an ATM or debit card.

In return for getting a higher interest rate, these accounts often come with rules and restrictions. You may, for example, only earn the higher rate on money up to a certain limit. Any money over that amount would then earn a significantly lower rate.

You may also be required to make a certain number of debit card purchases per month and sign up for direct deposit in order to earn the higher (or rewards) rate and to avoid a monthly fee.

The benefit of an interest-bearing checking account is that you’ll always have access to your money and you may have fewer limitations on how you can use your account than you might with a savings account, all while still earning a bit of interest.

Cash Management Accounts

A cash management account is a cash account offered by a financial institution other than a bank or credit union, such as a brokerage firm. These accounts are designed for managing cash, making payments, and earning interest all in one place.

Cash management accounts often allow you to get checks, an ATM card, and online or mobile banking access in order to pay your bills. They also typically pay interest that is higher than standard savings accounts.

Cash management accounts also generally don’t have as many fees or restrictions as traditional savings accounts, but it’s important to read the fine print.

Before opening a cash management account, you may want to ask about monthly account fees and minimum balance requirements.

Some brokerage firms require a sizable opening deposit and/or charge monthly fees if your account falls below a certain minimum. Others will have no monthly fees and no minimums.

The Takeaway

If you’re looking for a safe, convenient place to keep your money and also earn some interest while you’re at it, there are a number of great options to pick from.

You might consider opening a high-interest checking or savings account at a traditional or online bank, or, if you don’t need to access the money every day, you may also want to look into a money market account or CD.

Looking for Something Different?

Another option is to open a cash management account, such as SoFi Money®. With SoFi Money, you can earn a competitive interest rate, spend, and save–all in one account.

You can also write checks, set up bill pay, and have access to 55,000+ (fee-free) ATMs worldwide.

Check out everything a SoFi Money cash management account has to offer today.



SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
Neither SoFi nor its affiliates is a bank. SoFi Money Debit Card issued by The Bancorp Bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
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.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

SEO18110

Read more
How to Read a Credit Report

How to Read a Credit Report

Your credit report contains a large amount of information about your financial life and payment history. If you have credit cards or loans, for instance, those accounts and how you pay them are included in your credit report.

Credit reports are created by three national credit reporting agencies: Equifax, TransUnion, and Experian. Credit card issuers and lenders can pull these reports and review them in order to determine your creditworthiness.

These reports can also be accessed by consumers (like you). The Fair Credit Reporting Act requires each of the credit reporting companies to provide you with a free copy of your credit report, at your request, once every 12 months. In response to the coronavirus pandemic, however, you can now get a free credit report weekly through April 2022.

It can be a good idea to request your credit reports using Annual Credit Report.com at least once a year. This can help you ensure that the information is used to calculate your credit scores is accurate and up to date. It can also alert you to fraud or identity theft.

Unfortunately, reading your credit reports can sometimes be confusing, especially if it’s the first time. Below, we explain how to read a credit report, as well as common credit report errors to look out for.

Who Can See Your Credit Report?

Your credit report is accessed whenever a lender (or an employer or landlord) does what’s known as a hard credit inquiry. This is when a business will access your credit report to make decisions about your creditworthiness.

Hard credit inquiries will appear on your credit report, so you should recognize any credit inquiries that appear.

They may also subtly affect your credit score. Multiple inquiries in a short period of time may signify to lenders that you’re seeking multiple loans, which may bring up concerns about your financial stability.

However, your credit score will not be impacted when you request a copy of your own credit report.

Reading Your Credit Report

When you get your credit reports, it’s a good idea to closely read each section. These sections typically include:

Personally Identifiable Information (PII)

This section of the report is used to identify you. It contains basic information like your name, address, and place of employment. You may also find previous addresses and employer history.

Your current and previous salaries will not be included though. Also, your employment history doesn’t affect your credit score. It’s included on your credit report only to verify your identity.

When scanning this area you’ll want to make sure that your name, address, and employer match up. Any incorrect or unfamiliar personally identifiable information (like company names you don’t recognize or employers you never worked for) may be a sign of identity fraud.

Credit Summary

This section summarizes information about the different types of accounts you have, including credit cards and lines of credit, mortgages and other loans, and any accounts that have been sent to collections.

For each account, it will include the date opened, balance, highest balance, credit limit or loan amount, payment status, and payment history.

As you read this section, you’ll want to make sure that all the information looks familiar. It’s not unusual for a credit report to have slightly dated information, such as a higher balance because you just paid off a bill this month, but all information should seem recognizable. In particular, you’re looking for:

•   Unfamiliar accounts
•   Late payments that do not align with your records
•   Balances that do not match your records

Public Records

The information in this section is pulled from public records and may include debt collections or bankruptcy information.

If you have any debt collections and bankruptcy on your record, it’s important to remember that they aren’t permanent and there’s a statute of limitations that the information is on your credit report.

•   Chapter 13 bankruptcy — deleted from your credit report seven years after filing date.
•   Chapter 7 bankruptcy — deleted from your credit report ten years after filing date.
•   Late payments — deleted from your credit report seven years after they occur.
•   Payment defaults — deleted from your credit report seven years after they occur.

If you see information that’s not familiar, you’ll want to flag it, since this could be a sign of identity theft. You may also want to flag any information that is still on your credit report after the statute of limitations has expired.

Credit Inquiries

Credit inquiries list all parties who have accessed your credit report within the past two years.

Credit inquiries can be a red flag for identity theft, so it’s a good idea to make sure you recognize any recent credit inquiries. These could be from lines of credit you opened, such as applying for a credit card, or from applying for a loan.

What To Do If You Find Errors on Your Credit Report

None of the information on your credit report should look unfamiliar. One of the main reasons why you want to read your credit report is to make sure that your credit report matches your records.

But sometimes there can be discrepancies. If you detect an error on your report, such as a payment incorrectly reported as late, you’ll want to file a formal dispute with the credit reporting company, as well as the entity that provided the information (such as a credit card company)

When writing a dispute letter, you’ll want to include:

•   A clear explanation of what is wrong in the credit report.
•   Supporting documentation showing that the information is inaccurate (such as a copy of a paid bill).
•   Request for the information to be fixed.

By law, the credit reporting company must investigate your dispute and notify you of their findings.

If you notice an error that suggests identity theft (such as unknown accounts or unfamiliar debt), it’s a good idea to sign up with the Federal Trade Commission’s (FTC’s) IdentityTheft.gov site in addition to alerting the credit bureaus.

The FTC’s tool can help users create a recovery plan and figure out the next steps, which may include placing a security freeze on your accounts.

The Takeaway

It’s easy and free to gain access to your credit reports from the three major bureaus. Taking advantage of this service can help you maintain good credit, and good overall financial health.

Reviewing your credit report can give you a chance to correct any errors and make sure your credit report is an accurate representation of your financial situation. It can also alert you to any fraudulent activity.

In addition, reading your credit report can help you understand how creditors see you as a borrower and cue you into any potentially problematic information that may manifest into a lower credit score than you would like.

For example, if you have high utilization (the amount of debt you carry) across your cards, it may be beneficial to focus on paying down some of your debt.

Managing your money carefully and paying all of your bills on time can also help you protect your credit.

If you’re looking to take better control of your finances, SoFi Money® can be a good place to start.

SoFi Money is a cash management account that allows you to track your spending right in your mobile dashboard, and makes paying bills easy with electronic bill pay.

Learn how SoFi Money can help you manage your finances.



SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
Neither SoFi nor its affiliates is a bank. SoFi Money Debit Card issued by The Bancorp Bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
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.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s
website
.

SOMN0421034

Read more
woman with a suitcase

Ways to Be a Frugal Traveler

It is said that there are two types of travelers in the world: those who look for a deal and those who don’t.

They could be on the same flight, staying at the same hotel, eating the same food, and taking the same excursions. But, they might be paying wildly different prices for the exact same experience because one chose to do a little research instead.

Being a frugal traveler doesn’t have to mean missing out. In fact, it could mean you are able to experience even more because you cut costs along the way.

Want to be a more frugal traveler? Consider some of these ideas to find some bargains on your next trip.

Timing Your Trip Right

One of the first steps in becoming a frugal traveler is picking a place where you want to go, and can also afford to go. The good news is that no location is necessarily off-limits, as long as you can be flexible on the timing of your vacation.

While you’re not likely to get a great deal on a hotel on Cape Cod for Fourth of July weekend or a cheap flight to the Caribbean over Christmas, you may be able to score a sweet deal if you decide to go to either of those places during what is referred to as “shoulder season.”

The term shoulder season is used by professional travelers and agents around the world to denote the time in-between busy seasons in any given destination.

It’s typically viewed as a less desirable time to visit by lay travelers, but to the pros, it’s often seen as the ideal time to go, since this is the time you may be able to find better deals on flights, accommodations, and more.

Take Mexico as an example. According to Frommer’s , Mexico’s high season begins around December 20th, peaks over New Year’s, then winds down at the end in April.

If you plan a visit during this time you can expect to pay a premium on just about everything as you’re competing with other travelers for space.

If you opt to visit just prior to this, say in November, or just after, in May or June, and you will likely be able to find better deals. As a bonus, there will likely be fewer people around, meaning you might be able to take excursions with fewer people, get restaurant reservations at highly sought after spots, and may even luck your way into a room upgrade at your hotel for free.

Finding Flight Deals

One of the most expensive parts about traveling is the actual act of travel itself. While driving can sometimes be a cheaper mode of transportation, it might not be an option depending on the destination you have in mind.

But there are still ways you can save. Here are a couple of travel hacks that may help you get better deals on airfare.

Signing up for email alerts. Some good news for busy travelers: There are other people out there willing to look for a good deal for you. And they’ll do it for free so long as you subscribe to their email newsletter.

Next Vacay , for example, is a website where users can input their destination, then simply wait for the site to send them daily emails with flight deals.

You may also want to check out Scott’s Cheap Flights , a newsletter that claims to find tickets up to 90% off, as well as Skyscanner , which allows users to set alerts for price drops so you can strike when the iron is hot.

Some of these services will send you deals for both your destination and others in case you need a little inspiration. You may also want to download a few travel apps that will send you price alerts as well.

Booking at the right time–and for the right day. According to a recent study by CheapAir , the best day to buy airfare is roughly 64 days out from your travel date. Anywhere between 95 to 21 days in advance of your departure day, however, consistently yields the lowest prices for travelers (within 5% of the lowest ticket price).

While the day of the week you book doesn’t appear to make much of any difference, the day of the week you travel can. Mid-week flights typically yield the best value.

In fact, CheapAir found that you can spend, on average, about $82 more to fly on a Sunday, than a Tuesday or Wednesday. For a family of four, that adds up to a savings of nearly $300.

Scoring Deals on Accommodations

Hotels base prices on supply and demand, so when there is less demand (say in shoulder season) prices tend to fall. Beyond the season, you can also try looking into checking in and out on less popular days.

If you can check in on a Monday and out on a Friday, for instance, you may be able to save, since mid-week pricing can be cheaper than weekends.

Even if you’re booking at a travel site, it’s also a good idea to frequently check the website of any hotel you’re interested in staying at. There, they may announce different deals and sales. At the very least, you may be able to spot a free room upgrade or free breakfast.

Entertaining Yourself on a Frugal Vacation

While you’re traveling, you’re likely going to want to participate in activities. And you can likely find ways to save on those also.

In a new place, try googling a few free walking tours, which can give you a wonderful sense of a place without having to spend a dime (though it may be polite to tip your tour guide afterwards).

For cheap or discounted tickets to local attractions, consider checking out sites like Groupon, Airbnb Experiences, and local tourism boards.

You may also want to ask your hotel front desk at check-in for tips on things to do and see. Hotels often have partnerships with area attractions and may be able to provide you with a discount.

For restaurants it can be a bit harder to save, but if there’s one fancy place you’ve simply been dying to try, you can often save a fair amount by going for lunch rather than dinner.

Some restaurants run lunch specials or offer a specific lunch menu, where the entrees are a little smaller but also cheaper than they are on the dinner menu.

Setting a Travel Budget

Establishing a budget, and then starting to save for your vacation, can be a key part of the frugal traveler planning process. That’s because your budget can help determine not only where you can go, but what you can do while you are there.

A travel budget can help you to narrow down your choices, and also make sure that you are able to enjoy your trip without having to worry that you are spending more than you can afford.

Below are some categories you may want to include in your budget:

Transportation costs: When budgeting for a trip, you’ll want to decide if you’re going to fly, drive, or take the train. For driving, consider costs like gas and wear and tear on your car. For flying, you’ll want to be sure to include ticket price, baggage fees, airport parking, and destination car rental or taxi.

Lodging: Accommodation cost can seem clear, but you’ll want to be sure to ask about any resort fees and taxes so you can add it to your budget.

Food: It can be a good idea to come up with a cost for breakfast, lunch, and dinner (including tips) for everyone you’re traveling with. If your hotel offers free breakfasts you can put that cost towards another meal.

Activities: You’ll want to have a budget for daily activities and entertainment for each participant in your group.

Extras: You never know when an emergency, a fun activity, or an unplanned happy hour will arise. Adding a buffer to your vacation budget can help you prepare for these extra expenses.

Once you add up all the costs, you can start saving up for your vacation. You could even create a secondary savings account titled “travel fund” so you’ll be even more excited to save.

The Takeaway

Vacations can be costly, especially if you’re traveling with a family. But with a little bit of research and advance planning, you may be able to significantly reduce the price of your next trip.

Simple frugal traveler tricks, like travelling off peak, signing up for travel newsletters, booking your flight around two months ahead, and pre-scouting free and discounted local activities, can help you reduce costs without having to skimp on fun.

You can also make traveling more affordable by setting a budget, saving up for your trip in advance, and staying as close as possible to your spending plan while you are away.

Ready to start saving for your next getaway? You may want to consider opening up a SoFi Money® cash management account.

With SoFi Money’s special “vaults” feature, you can separate your savings from your spending while earning competitive interest on all of your money.

You can even create a “vacation” vault and set up automatic recurring deposits to help you build your travel fund faster.

Let SoFi Money help you save for your next awesome vacation.



SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
Neither SoFi nor its affiliates is a bank. SoFi Money Debit Card issued by The Bancorp Bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
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.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

SOMN19112

Read more
Is it Smart to Buy Your Leased Car_780x440

Is it Smart to Buy Your Leased Car?

When a car lease is expiring, you may need to decide whether to return the car and find a new set of wheels or do a lease buy-out and purchase the car.

Similar to buying a used car, when you purchase a leased car you can likely finance the transaction or pay for it with cash. But how can you know if buying a leased car makes sense?

The decision will depend on your budget, how much you enjoy driving your leased car, the mileage you’ve put on the car, as well as the buyout price.

Below are some key things to know about lease buyouts that can help you make an informed decision.

The Advantages of Lease to Buy

One of the most obvious benefits of a lease buyout is that you already know the car’s history, which is something most used car buyers don’t have (even if you get a used vehicle report, it won’t contain every detail).

If you’ve maintained your car meticulously and always kept it garaged, then you know that you would be purchasing a car that is in excellent condition.

On the flip side, if you haven’t cared for the car as well as you could have, a buyout can be an advantage as well.

That’s because most leases include extra fees for unusual wear and tear on a vehicle, which may show up during the inspection. Keeping the car can be a way to stave off that extra expense.

The same goes if you’ve put a lot of mileage on the car. If you’ve gone way over your lease’s mileage limits, a buyout can be more enticing because it allows you to avoid paying penalties for going over your lease’s limits.

Another potential plus to a buyout is that it can get you out of the lease cycle. When it comes to buying vs. leasing, purchasing a car may end up costing you less in the long run.

While buying typically involves higher monthly costs than leasing, you actually own something in the end. With leasing, you may have lower payments, but you can also get stuck in a cycle of never-ending car payments since you’ll never own the car free and clear.

The Downside of a Lease Buyout

One of the nice things about a lease is that you will always experience a relatively new vehicle every time you renew. For many drivers, the potential extra cost of perpetually leasing is worth that peace of mind.

If you opt to end the lease cycle and buy your car, one downside is that you’ll no longer be driving a new car. In determining the cost of ownership, you will likely also want to factor in the cost (and hassle) of car repairs as the car gets older.

Your monthly expenses might also go up. If you buy out your lease and don’t make a new down payment, your monthly payments will likely be more expensive than your current lease payment.

Another potential downside to buying your leased car is that you may not be getting the best possible price for a used car.

When you get the option to buy a leased car, the vehicle is typically just a few years old and its residual value can be pretty high. It’s possible you could get a better deal by saving up for a car and buying a similar used vehicle on the open market.

Is Buying Your Leased Car a Good Deal?

Before deciding whether to buy your leased car, you may want to compare the buyback price from your lease to the current resale value of the car.

The price of a lease buyout will be based on the car’s residual value, which is the purchase amount set at lease signing, based on the predicted value of the vehicle at the end of the lease.

You can often find this number–it may be called the “buyout amount”, “residual amount,” or “purchase option price”–on your lease contract. If you make your payment online, you may be able to find it by logging onto your account or by calling the bank that holds your lease.

Once you’ve got this number, you can use one of the many online car appraisal tools–such as Kelly Blue Book, Edmunds, or the National Automobile Dealers Association–to help you calculate the trade-in, buyback, and new car fair purchase price of your leased car.

To get the most reliable numbers, you’ll want to be as accurate as you can when you plug in the information about your car, including the manufacturer, options, and current condition.

If your buyout amount is considerably less than the average retail price, and you like the car, buying your car from the leasing company could indeed be a good deal.

Even if it looks like you would end up slightly overpaying, you may not want to dismiss the buyout option altogether.

Buying your leased car may still be a good idea if you’re going to get hit with pricey mileage charges when you return the car. This could end up making the buyout price a better deal than buying a similar used car on the open market.

Negotiating a Good Price for a Lease to Buy

It can be tricky to try to haggle the price of a buyout, since dealerships typically don’t net a profit from selling you a leased car.

One technique that might motivate the dealer to help you is to agree to get your financing from the dealership.

Since dealers often have a number of lenders to choose from, they may also be able to get you a lower interest rate for the buyout loan than you might be able to get from your own bank or credit union.

It can still be a good idea to get a preapproved car loan from your bank or credit union before you go to the dealer so you know what rate you can qualify for. You can then decide later if you want to go with the dealer’s financing.

The Takeaway

Deciding what to do with your leased vehicle when the contract is up can require a little bit of research, and also some math.

It can be a good idea to compare the buyback price to what the car would go for on the open market. You may also want to factor in any additional charges, such as mileage fees, that could make buying out the lease more attractive.

Should you decide to buy the car (or to purchase a different car) and would need to take out a loan to do so, it can also be important to consider what kind of price, down payment, loan term, and interest rate you can afford.

Looking to start saving to buy out your lease, or purchase a different car? SoFi Money® may be able to help.

SoFi Money is a cash management account that allows you to separate your savings from your spending while earning competitive interest on all your money.

Start saving up for your next ride with SoFi Money.



SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
Neither SoFi nor its affiliates is a bank. SoFi Money Debit Card issued by The Bancorp Bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
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.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

SOMN20118

Read more
TLS 1.2 Encrypted
Equal Housing Lender