SoFi

If you’re often surprised (and not in a good way) when you open up your credit card and bank statements and see how much money you spent, you’re not alone. In this scenario, there could be a simple solution: a personal cash flow statement.

Creating a personal cash flow statement can give you a clear picture of your monthly cash inflow (money you earn) and your monthly cash outflow (money you spend). Armed with that intel, you can determine if you have a positive or negative net cash flow.

The process is relatively simple. It involves doing some basic math calculations with a month or two worth of bank statements and bills. Once you have your personal financial statement, you’ll know where you stand and likely be better able to budget your money.

What Is a Personal Cash Flow Statement?

“Cash flow” is a term commonly used by businesses to detail the amount of money flowing in and out of a company. Companies often use cash flow statements to determine how well the business is generating income to pay its debts and operating expenses.

As in the corporate world, tracking your personal cash flow — all money entering and leaving your bank accounts each month — can provide you with a snapshot of your financial condition. You might learn, for example, that you have less leftover at the end of each month than you thought or that you are indeed operating at a shortfall.

Once you have the numbers down in black and white, you can then make any needed changes, such as cutting your expenses, increasing income, and making sure that your spending is in line with your goals.

So, how do you set up one of these cash flow statements? You may find a personal cash flow statement template or a personal cash flow statement example online, but what follows will explain how to create one.

How to Build a Personal Cash Flow Statement

Creating a personal finance cash flow statement isn’t hard. But for starters you’ll want to understand the two sides of the cash-flow seesaw.

Key Components of a Personal Cash Flow Statement

A cash flow statement has two main components: inflows and outflows. Your cash inflow is any after-tax earnings that are available for use. That would include your net salary, if you are a salaried employee, income from any side hustle you may have, dividend income if you have investments in non-retirement accounts and aren’t reinvesting your dividends, etc. Your outflow is all the ways you spend money, such as housing, transportation, food and dining out, debt payments, insurance premiums, clothing and grooming, and entertainment.

Listing All Your Sources of Income

A good first step when creating a personal cash flow statement is to get out all of your pay stubs, bank statements, credit card statements, and bills or review them online.

Next, list any and all sources of income — the inflow, such as salaries, anything you make from side hustles, interest from savings accounts, income from a rental property, dividends from investments, and capital gains from the sale of financial securities like stocks and bonds.

You might want to exclude money in accounts that aren’t available for spending. For example, you may not want to list dividends and capital gains from investment accounts if they are being automatically reinvested or those that are part of a retirement account from which you aren’t actively taking withdrawals.

Since income can vary from one month to the next, you might choose to tally inflow for the last three or six months in order to come up with an average.

Once you’ve collected and listed all of your income for the month, you can then calculate the total inflow.

Listing All of Your Expenses

Now that you know how much money is coming in each month, you’ll want to use those same statements and bills, as well as any for debts (such as mortgage, auto loan, or student loans) to list how much was spent during the month.

Again, if your spending tends to fluctuate quite a bit from month to month you may want to track it for several months and come up with an average.

To create a complete picture of how much of your money is flowing out each month, you’ll want to include necessities like food and gas, and also discretionary expenses, such as trips to the nail salon or your monthly streaming services. Remember to include infrequent expenses such as birthday gifts for loved ones, annual insurance premiums, and the like.

Once you’ve compiled all of your expenses, you can calculate the total and come up with your total outflow for the month.

Determining Your Net Cash Flow

To calculate your cash flow, all you need to do is subtract your monthly outflow from your monthly inflow. The result is your net cash flow.

A positive number means you have a surplus, while a negative means you have a deficit in your budget.

A positive cash flow is desirable, of course, since it can provide more flexibility. You can decide how to best use the surplus. There are a variety of options. You could choose to save for an upcoming expense, make additional contributions to your retirement fund, create or add to an emergency fund, or, if your savings are in good shape, consider splurging on something fun. “An integral part of financial wellness is having a cash reserve. Research shows that having cash to cover the unexpected has a big impact on financial stress, anxiety, and satisfaction,” says Brian Walsh, CFP® and Head of Advice & Planning at SoFi.

A negative cash flow can signal that you are living a more expensive life than your income can support. Some people refer to this as not living within your means. In the future, maintaining this habit could lead to additional debt.

When creating personal cash flow statements, it’s also possible to have net neutral cash flow (all money coming in and going out is fairly equal). In this case, you may still want to jigger things around if you are not already putting the annual maximum into your retirement fund and/or you don’t have a comfortable emergency cash cushion.

Examining Cash Inflows vs. Cash Outflows

Having established a personal finance cash flow statement, you may begin to see some patterns. There may be a particular month in which you receive three paychecks instead of two, enhancing your cash flow. Or there may be a month when some big bills hit all at once — a property tax bill and a winter heating bill, for example. Knowing your inflow and outflow can help you know how much cash to have on hand and do some personal cash flow planning in advance.

The Difference Between a Personal Cash Flow Statement and a Budget

A personal cash flow statement provides a comprehensive look at what is currently coming in and going out of your bank accounts each month. You might think of a cash flow statement telling you where you are, financially speaking.

Whichever budget method you use, on the other hand, helps you to reach your short-term personal financial goals — as well as longer-term goals — by giving you a spending plan that is based on your income and expenses. A budget can provide you with some general spending guidelines, such as how much you should spend on groceries, entertainment, and clothing each month so that you don’t exceed your income — and end up with a negative net flow.

Creating a budget can also be a good opportunity to check in with your financial goals.

•   Are you on track for saving for retirement?

•   Are you tackling the credit card debt that has been spiraling due to high interest rates?

•   Do you want to amp up your emergency fund? How can you make your money work for you by being strategic about saving?

•   How are you progressing on paying off your student loan, car payment, or mortgage (or all of the above)?

How Cash Flow and Budget Work Together

Whatever your goal, a well-crafted budget could serve as a roadmap for personal cash flow planning, helping to ensure that you keep your spending in line. And a good record of cash flow can help you understand when money will come into your account so that you can pay the bills you’ve budgeted for.

When to Focus on Cash Flow vs. Budgeting

Some people love to track their finances and will thoroughly enjoy checking in with their cash flow and budget monthly, if not more often. But for others, there are times when it’s especially helpful to be looking at cash flow. Let’s say you’d like to be paying your credit card bill in full each month, but are carrying a balance. Examining an established year-long cash-flow record can help you determine in what month you’ll likely have extra money to put toward paying off that balance.

Using a cash flow statement can also be helpful if your income fluctuates from month to month: You can budget money toward savings in the higher-income months so that you’ll be able to cover your expenses without a negative cash flow in the leaner times. And you can aim to budget lower expenses in the low-cash-flow months — for example, perhaps you plan to avoid eating out in January and set your entertainment budget accordingly.

Using Your Personal Financial Statement to Create a Simple Budget

Because a cash flow statement provides a comprehensive look at your overall spending habits, it can be a great jumping off point to set up a simple budget.

When you’re ready to create a budget, there are a variety of resources:

•   Break out a pencil and paper or buy a journal for this purpose

•   Use an app that’s part of your bank’s suite of tools

•   Download an app that isn’t connected to your financial institution but offers budgeting services

•   Try out spreadsheet templates and printable worksheets you find online.

A good first step in creating a budget is to organize all of your monthly expenses into categories.

Spending categories typically include necessities, such as rent or mortgage, transportation (like car expenses or public transportation costs), food, cell phone, healthcare/insurance, life insurance, childcare, and any debts (credit cards/loans).

You’ll also need to list non-essential spending, such as travel, streaming services, concert and movie tickets, restaurants, clothing, etc.

You may also want to include monthly contributions to a retirement plan and personal savings into the expense category as well.

And if you don’t have emergency savings in place, put that on the spending list as well, so you can start saving toward that every month. How big an emergency fund do you need? Use an emergency fund calculator, and aim to cover at least three to six months’ of living expenses.

Once you have a sense of your monthly earnings and spending, you may want to see how your numbers line up with general budgeting guidelines. Financial counselors sometimes recommend the 50/30/20 budget rule, which looks like this:

•   50% of money goes toward necessities such as a home, car, cell phone, or utility bills.

•   30% goes toward your wants, such as entertainment and dining out.

•   20% goes toward your savings goals, such as a retirement plan, a downpayment on a home, emergency fund, or investments, and extra payments on debt.

Recommended: What Are Cash Flow Loans?

Improving Your Net Cash Flow

If your net cash flow is not where you want it to be or, worse, dipping into negative territory, a budget can help bring these numbers into balance. The key is to look closely at each one of your spending categories and see if you can find some ways to trim back.

Reducing Discretionary Expenses

One of the easiest ways to change your spending habits can be to cut some nonessential expenditures. If you’re paying for cable but mostly watch streaming services, for example, you could score some real savings by getting rid of that service and its bill.

Not taking as many weekend getaways and cooking more often instead of getting takeout could add up to a big difference. If you tend to be a compulsive or impulsive shopper, you might take steps to understand your triggers, change your behavior, and rein in the outflow of money.

Increasing Income and Optimizing Bills

You may also look into ways you may be able to change the other side of the equation — the inflow of funds.

•   One option could be asking for a raise.

•   Another could be training for a higher-paying field.

•   Or you might find an additional income stream (making more money is a key benefit of a side hustle).

Living on a budget may also require looking at the bigger picture and finding places for more significant savings. For example, maybe rent eats up 50% of your income, and it’d be better to move to a less costly apartment. Or you might want to consider trading in an expensive car lease for a less pricey or pre-owned model. There may also be opportunities to lower some of your recurring expenses by finding a better deal or negotiating with your service providers.

Avoiding Common Cash Flow Mistakes

As with any data reporting, a cash flow statement is only as accurate as the information you put into it. If your cash flow records don’t reflect your actual expenses because you’ve failed to make a category for a particular type of expense, then your record isn’t going to reflect reality. Some expenses are easy to categorize. Others are harder to fit into “transportation” or “housing” so you may have to create a “miscellaneous” line to capture these expenses.

Cash-flow trackers can make it very easy to see where the money is going, but a common cash flow mistake is the “set it and forget it” approach. If you pay for your streaming services, car insurance, or other service for a year without even thinking about it, take time to assess these outflows every six months or so and ask yourself if you could find a cheaper option by shopping around.

The Takeaway

One of the most important steps toward achieving financial wellness is cash flow management — making sure that your cash outflow is not exceeding your cash inflow. Creating a simple cash flow statement can show you exactly where you and your money stand. It can also help you create a budget that can give you greater control over your finances and achieving your goals.

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, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy 3.30% APY on SoFi Checking and Savings with eligible direct deposit.

FAQ

How do you create a personal cash flow statement?

To create a personal cash flow statement, gather information on how much you typically take in (income) after taxes per month and how much your outflow (spending and saving) is. That captures the amount you spend on necessities, like housing and food, as well as wants and debt payments. When you subtract the outflow from the income, you’ll see where your cash flow stands.

What is the importance of a personal cash flow statement?

A personal cash flow statement is an important way to track your personal spending and see where pain points may be. It will also reveal if you are going into debt or if you have surplus funds you can put toward future goals. Also, a personal cash flow statement can be an important factor in establishing your budget.

What is the difference between a personal balance sheet and a cash flow statement?

A personal balance sheet captures your assets (money in the bank and real estate, for instance) and liabilities (your credit card balance and any loans), which allows you to determine your net worth. A cash flow statement, on the other hand, tracks your spending versus your income, to see whether you are operating with a deficit, a surplus, or if you are breaking even.

How often should you update a personal cash flow statement?

At the very least, updating your personal cash flow record annually is a good idea. But once you have established a spreadsheet and tracked cash flow retroactively for a few months, it’s not a bad idea to keep going and track the entire year — particularly if your income ebbs and flows. This will enable you to see whether big expenses such as property taxes or an annual life insurance premium hit during a month when your income tends to be lower. You can then be prepared for this in the future by setting aside money in advance.

What tools or apps can help you track personal cash flow?

You can track cash inflow and outflow using a simple spreadsheet that you create yourself. Or you can use a tool such as Monarch or Tiller which can pull data from your accounts if you give permission.

---

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

^Early access to direct deposit funds is based on the timing in which we receive notice of impending payment from the Federal Reserve, which is typically up to two days before the scheduled payment date, but may vary.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/.
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.

*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

SOBNK-Q126-021

Read more

It’s that time of year again: Typically, by midnight on April 15, taxpayers must e-file or mail their federal and, if applicable, state tax returns for the previous calendar tax year to avoid penalty. Well before the deadline, though, it’s wise to do your prep work, hunting down the necessary documents, finding a tax pro or software to help you through the process, and learning about any new tax deductions or credits you might be eligible for.

It can definitely be a challenge to get organized, but by following certain steps, you can be ready to file properly and on time. Here, we’ll help you along with important tips, including:

•   When is tax filing season?

•   How do you prepare for tax season?

•   Should you hire a tax pro?

•   Which tax documents do you need?

•   By when do you need to file taxes?

When Is Tax Filing Season?

Tax season typically begins at the end of January. If you are filing your 2025 tax return, the IRS will start accepting and processing your tax returns at the end of January 2026.

You should receive a Form W-2 by January 31st or, with any mail delay, soon thereafter. The same deadline applies to 1099-NEC forms for independent contractors. Each financial institution that paid you at least $10 of interest during the year must send you a copy of the 1099-INT by January 31st as well.

The due date for individuals to file their taxes is usually April 15th of a given year or, if that falls on a weekend, the next following weekday.

It’s generally not a good idea to wait until the last minute to prepare for tax filing. If you work for one employer, your taxes may not be complicated, but if you have side gigs or you’re self-employed, your tax returns can take a while to fill out.

13 Tax Prep Tips for 2025

Before filing, here’s how to prepare for the upcoming tax season.

1. Decide on Hiring a Pro or DIY

You can either prepare and file your taxes on your own or hire a professional. If you choose the latter, you can go to a tax preparation service like H&R Block or contact a local accountant or other tax pro. Some people feel more secure with a professional who can guide them through the process, know the latest deductions, and perhaps help them avoid IRS audit triggers.

The costs for a professional vary, and the more complicated a return is, generally the higher the costs will be.

The IRS has a tool where taxpayers can find a tax preparer near them with credentials or select qualifications. Doing so will mean paying a fee. How much? Tax preparation could run anywhere from $300 to $600 (or more), depending on where you live, how complicated your tax situation is, and how your tax professional charges for services.

Or, you could use software which is likely to cost less but require a greater investment of your time. For instance, TurboTax prices range from $89 and up, depending on whether you need additional features, like online assistance.

Recommended: How to File Taxes for Beginners

2. Consider Other Tax-Filing Options

You might also want to try this alternative: IRS Free File lets you prepare and file your federal income tax online for free. There are two options, based on income.

•   You can file on an IRS partner site if your adjusted gross income was approximately $89,000 or less. This is a guided preparation, and the online service does all the math.

•   Those whose income is higher and who know how to prepare their own taxes can choose the fillable forms option. The forms-based product can do basic calculations but will not provide step-by-step guidance. Also there is no state tax filing with this option.

Recommended: How to Pay Less in Taxes: 9 Simple Steps

3. Collect Tax Documents

Gathering the right papers is an important part of preparing for tax season. By the end of January, you should have received tax documents from employers, brokerage firms, and others you did business with. They include a W-2 for a salaried worker and Form 1099-NEC if you were self-employed (gig worker or freelancer) or did independent contractor work amounting to over $600 last year.

Employers will send the documents in the mail or electronically.

Investors might receive these forms:

•   1099-B, which reports capital gains and losses

•   1099-DIV, which reports dividend income and capital gains distributions

•   1099-INT, which reports interest income

•   1099-R, which reports retirement account distributions

Other 1099 forms include:

•   1099-MISC, which reports miscellaneous income (such as prize money or payments received for renting space or equipment)

•   1099-Q, which reports distributions from education savings accounts and 529 accounts

If you won anything while gambling, you’ll need to fill out Form W-2G. If you paid at least $600 in mortgage interest during the year, you’ll receive Form 1098, which you’ll need to claim a mortgage interest tax deduction.

A list of income-related forms can be found on the IRS website.

Last year’s federal return, and, if applicable, state return could be good reminders of what was filed last year and the documents used. That can help you pinpoint any missing tax documents.

4. Look Into Deductions and Credits

Wondering whether to take the standard deduction or itemize deductions? The higher figure is the winner.

The vast majority of Americans claim the standard deduction, the number subtracted from your income before you calculate the amount of tax you owe.

For tax year 2025, the standard deductions are:

•   $15,750 for single filers and those married filing separately

•   $31,500 for those married filing jointly

•   $23,625 for heads of household

Individuals aged 65 or older or who are blind can claim an additional standard deduction of $1,550 (for married filers) or $1,950 (for single or head of household filers).

For tax year 2026, the standard deductions are:

•   $16,100 for single filers and those married filing separately

•   $32,200 for those married filing jointly

•   $24,150 for heads of household

Individuals aged 65 or older or who are blind can claim an additional standard deduction of $1,600 (for married filers) or $2,000 for single or head of household filers).

Individuals interested in itemizing tax deductions can look into whether they’re eligible for a long list of deductions like a home office (and, if eligible, whether to use the simplified option for computing the deduction), education deductions, healthcare deductions, and investment-related deductions.

•   You own a home and the total of your mortgage interest, points, mortgage insurance premiums, and real estate taxes are greater than the standard deduction.

•   Your state and local taxes (including real estate, property, income, and sales taxes) plus your mortgage interest exceed the standard deduction.

•   You spent more than 7.5% of your adjusted gross income for out-of-pocket medical expenses.

Then there are tax credits, a dollar-for-dollar reduction of the income tax you owe. So if you owe, say, $1,500 in federal taxes but are eligible for $1,500 in tax credits, your tax liability is zero.

There are family and dependent credits, healthcare credits, education credits, homeowner credits, and income and savings credits. Taxpayers can see the entire tax credits and deductions list on the IRS website.

Recommended: What Tax Bracket Am I In?

5. Be Sure to Include Dependents’ IDs

Details count (a lot) when filing your return, and one important point to include is the Social Security numbers for any children and other dependents. If you omit this, you may lose any dependent credits, like the Child Tax Credit, that you qualify for.

Also know that if you are divorced, only one parent can claim children as dependents.

6. Update Beneficiary Designations

On the subject of children, tax time is a good time to review and update beneficiary designations. While it won’t change your tax-filing calculations, it will potentially reduce the tax burden your beneficiaries may pay on what they inherit after you die.

7. Add to Your Retirement Contributions

As you get ready for tax filing, it’s wise to check your progress towards your retirement fund (hopefully you have one). Money that you put into a 401(k), 403(b), or other tax-deferred account reduces your taxable income. In other words, it helps minimize your tax bill. The contributions you make generally aren’t taxed until you decide to withdraw funds.

If you feel you can afford to contribute more, know that for 2025, the 401(k) contribution limit for employees is $23,500, with an additional $7,500 for catch-up contributions for taxpayers who are age 50 or older. For 2026, the 401(k) contribution limit is $24,500, with an additional $8,000 for those age 50 or older. In both 2025 and 2026, those aged 60 to 63 may contribute up to an additional $11,250 instead of $7,500 and $8,000 respectively, thanks to SECURE 2.0.

However, it’s important to be aware that under a new law regarding catch-up contributions that went into effect on January 1, 2026, individuals aged 50 and older who earned more than $150,000 in FICA wages in 2025 are required to put their 401(k) catch-up contributions into a Roth account. Because of the way Roth accounts work, these individuals will pay taxes on their catch-up contributions upfront, but can make qualified withdrawals tax-free in retirement.

8. Take Any Required Minimum Distributions

Another tax-filing tip: If you’ve reached retirement age, make sure you take any distributions that are necessary. You generally must begin taking annual withdrawals from your traditional IRA, SEP IRA, SIMPLE IRA, and retirement plan accounts starting with the year you turn 73. When you reach the minimum age, you can delay your first mandatory withdrawal until April 1 of the following year. From then on, however, you must take your annual required minimum distribution (RMD) by December 31. If you miss the RMD deadline, you may get hit with a penalty of 25% of the RMD total.

9. Make a Final Estimated Tax Payment

Taxpayers who do not have taxes withheld from their paychecks can pay estimated taxes every quarter to avoid owing a big chunk of change come Tax Day.

Quarterly estimated taxes are typically due on April 15th, June 15th, and September 15th, with the fourth due on January 15th of the following year.

10. Apply for a Payment Plan If Needed

What happens if you discover, at tax filing time, that you can’t pay the full amount you owe? One option is to pay as much as you can and then set up a payment plan with the IRS for the rest. This is a method that gives you a longer time frame in which to pay what you owe. Depending on whether you have a short-term or long-term IRS payment plan , there may be setup fees.

11. File Electronically

Here’s an important tip: Prioritize filing electronically, especially if you anticipate receiving a refund. Electronic returns can typically be processed more quickly than paper ones, which means you’ll get your infusion of cash that much sooner.

Another benefit of filing this way is that your return is much less likely to have errors. Electronic returns tend to have just 0.5% with errors. But for “hard copy” paper returns, that number ratchets up to about 21% with mistakes.

12. Decide Whether to File for an Extension

What if you don’t quite have your act together and your tax filing materials ready to roll on time? It happens. If you need more time to prepare your federal tax return, you can electronically request an extension by filing Form 4868 by the April tax filing due date. This gives you until October 15 to file a completed return. Just keep in mind: Even if you file an extension, you are required to pay any taxes you may owe by the April deadline.

13. Avoid Tax Season Scams

Filing a tax return can be enough to keep you busy without worrying about getting scammed. But unfortunately, there are fraudsters out there, trying to take advantage of the season. For instance, you might get an email, phone call, or even a text message that says it’s from the IRS. They may say there’s an issue with a return of yours and that they need to speak with you ASAP. Don’t fall for it: The only way the IRS will ever communicate with you is via U.S. mail, unless you are involved in some kind of litigation with them.

The Benefits of Getting Prepared Early

Now that you’ve learned more about tax filing, here are some reasons to get started sooner rather than later on your return.

•   Avoid deadline anxiety. For some people, procrastination can lead to a lot of stress as the filing date approaches. They risk having to pull the proverbial all-nighter to get their return done on time or wind up blowing the deadline. By starting sooner, you can chip away at the process of pulling materials together and completing forms and breathe a little easier.

•   Dodge processing delays. If you file earlier, you are likely to slip in before the deluge of returns hits the IRS’s offices. You might even get your refund (if you’re due one) sooner.

•   Take the time to plan. Perhaps you know you’re going to owe money. Or, maybe you’re not sure if that’s the case. In either scenario, starting the tax-filing process earlier will give you time to see what you may owe and then figure out how to pay any funds that are due.

Recommended: Tax Preparation Checklist 2025: Documents You Need to Gather

The Takeaway

“Tax prep” isn’t a phrase signaling that big fun is on the way, but putting off the inevitable probably isn’t the best choice. To save yourself stress, you’ll want to prepare for tax season as early as possible by gathering documents and information, choosing a preparer or getting ready to DIY, and learning about tax credits and deductions.

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, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy 3.30% APY on SoFi Checking and Savings with eligible direct deposit.

FAQ

When can I start filing my taxes?

Tax filing season typically begins at the end of January. For example, the Internal Revenue Service (IRS) will begin accepting 2025 tax returns on or about January 26, 2026.

Should I use a tax preparer?

It’s a personal choice whether to hire a tax preparer or file your taxes yourself. A tax preparer will likely reduce the time you have to spend doing your taxes and can apply their professional knowledge to help you know what credits and deductions you qualify for. However, you will have to pay a fee for this service, which could run anywhere from $300 to $600 (or more), depending on where you live and how complicated your tax situation is.

What documents do I need to prepare for tax season?

You’ll need to gather a variety of documents for tax season, including income received (W-2s and/or 1099s to show earnings, and 1099s that reflect interest and dividends earned), records of deductions (relating to home ownership, charitable donations, medical expenses, educational costs, and the like). And, of course, you’ll need personal information like your Social Security number and that of any dependents.

---

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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.

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/.
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 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.

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.

SOBNK-Q424-105
CN-Q425-3236452-118
Q126-3525874-045

Read more

Having a 9-to-5 job is a good way to make your core income, but if you want to earn more money to pay down debt, build up savings, or pay bills, a side hustle could help you supplement your earnings. According to 2025 surveys, 27% to 45% of American adults are working side jobs to bring in more money.

Fortunately, there are quite a few side hustles with a low startup cost, as well as those that require no special skills. Read on to learn what these low-investment side hustles are and how to get started. You could soon be on your way to earning some extra income.

Why Start a Low-Cost Side Hustle?

You may wonder about the requirements and start-up costs for launching a side hustle. Will you need to withdraw money from your online checking account to buy expensive equipment, or head back to school for a certain degree?

Not at all. It is possible to start low-investment — and even no-investment — low-effort side hustles. Whether it’s delivering groceries, narrating audiobooks, or becoming a virtual assistant, many people are able to find a side hustle with a low startup cost and no degree required to supplement their income.

One of the benefits of a side hustle can be introducing you to what might become a steady source of extra money. Or you could discover a new career that you love.

Get good enough at your new gig and who knows — you could even end up with a side hustle to fund your early retirement!

21 Low-Cost Side Hustle Ideas for 2026

So what are some low-cost, low-effort side hustles to try? Here are 21 top side hustles on a budget — some are also small business ideas, should you decide you want to pursue them full-time.

Digital & Online Side Hustles

There are a number of side gigs that require nothing more than a laptop, or even just your phone, to start up. These include:

1. Selling an Online Course

If you know more than the average person about a specific topic that you’re passionate about — be it makeup application, flipping houses, or cooking — you can make educational content with only your smartphone and some screen-recording software. It’s a good example of a side hustle with low startup costs.

You don’t even have to worry about designing a website to host the courses you create. Websites like Skillshare and Udemy may host your content (but they will take a chunk of your sales). However, they already have built-in audiences. That can mean little or no marketing would be necessary on your part.

How much you might earn selling online courses depends largely on how many people buy them and the prices you charge.

2. Narrating Audiobooks

Websites like Fiverr and ACX.com have made it easier for aspiring voice-over artists (or just people looking to pick up some extra cash) to narrate audiobooks. To be successful, it’s a good idea to have a background in acting, an ability to use different voices and accents, and good enunciation.

As with many side gigs, you might have to start by taking unpaid work to establish a portfolio. Volunteering to read for the blind can be a great way to get your foot in the door. It doesn’t hurt to have your own website promoting your skills; just make sure there are demos on the site. Once you start working for pay, rates can vary widely by the project and how much experience you have — starting at about $10 an hour and going up to as much as $350 an hour.

Startup costs may include a high-quality microphone, noise-canceling headphones, and the proper software (Audacity, which is free, and GarageBand, which is free for Apple users, are options).

3. Tutoring

If you have a degree in a specific subject, such as math or science, and experience in and/or a talent for explaining concepts to others, you may be able to find work online or in person as a tutor. This could be a good side hustle for college students, who are steeped in a particular topic. You can try posting about services on social media and running local ads, or you might find work on tutoring platforms like iTutor or Varsity Tutors.

If you are interested in tutoring for standardized test prep, it can be a good idea to seek certification. Though not required, it can make it easier to land clients. Search online for options; SAT tutors can earn more than $20 an hour or much more, depending on experience and location.

4. Selling Digital Products or Crafts on Etsy

If you enjoy making crafts and artwork, you might find a market on Etsy or other online marketplaces to sell your stuff. Custom signs, homemade soaps and candles, knitted scarves and blankets, and handmade jewelry are just a few examples of what artists currently sell. This can be a good opportunity to turn a hobby you love into an income stream.

How much you can earn depends on a variety of factors, including what you make, the prices you charge, and how much you sell. Your costs will include the price of materials and shipping, as well as listing and transaction fees, but you can set your own prices for your items to help offset those. To get started, check Etsy’s selling guide for beginners.

5. No-Code Web Design

Though the number of active websites is always changing, there were about 200 million at the end of December 2025. And someone had to make each one, which highlights another one of the low-investment side hustles you could pursue.

Platforms like WordPress, Squarespace, and Wix make it easier for non-coders to build semi-customized websites. If you’re a fast learner or have some experience in website building, this could be an easy way for you to make some quick cash. Freelance web designers earn almost $35 an hour on average across the U.S.

You can start by making your own website to advertise your offerings. It might be a good idea to connect with friends, family, classmates, colleagues, and even local nonprofits to offer your services for free so that you can build a portfolio. Then, once you have enough examples to showcase, you can start looking for clients for paid work.

6. Get Paid for Your Social Media Posts

Not everyone can be a famous influencer, but if social media and video content are your forte, you might consider building on your social media presence, from TikTok to YouTube. Even micro-influencers, with 10,000 to 100,000 followers on Instagram, can earn between $100 and $500 per post. You could have your earnings direct-deposited into a checking account (and even potentially get a direct deposit bonus offer).

While it takes time, dedication, and some luck to have tens or hundreds of thousands of followers, it can be a path to making some cash from content you probably enjoy creating. Everything from DIY renovation to makeup tutorials to movie reviews could be fair game as your subject matter.

7. Being a Transcriptionist

If you’re a fast typer, you might find side-hustle success as a transcriptionist. Companies like Rev and GoTranscript may be seeking your skills.

This is a job you can do from home (in sweat pants, no less) for as many or as few hours as you would like. Rev says its transcriptionists can make $156 monthly for 15 jobs, and some transcriptionists can make considerably more.

Your startup costs might only include a pair of noise-canceling headphones and audio player software.

8. Social Media Management

If you spend a lot of time on social media, you might be able to turn it into a lucrative side gig. Smaller, local companies might not have the manpower or know the first thing about creating Instagram Reels or going live.

You might start by updating your LinkedIn to show that you are looking for clients in the social media space. A website highlighting your own personal social media stats might be a good idea, too. To kick off your side hustle, you could consider building your portfolio by offering free services to a nonprofit or local business with a limited budget.

A social media manager who is just starting out might earn $15 an hour; those with more experience may earn four times that amount or more.

Keep in mind: Running your own personal Instagram is very different from running social for businesses. Taking a few online courses on Udemy or another platform to learn best practices for social media management could be extremely valuable.

9. Proofreading and Writing

If you have an English degree and you are an avid reader and wordsmith, you might be able to find freelance side gigs as a proofreader or even a writer. Some might be one-off projects, like proofreading someone’s novel; others could be recurring, like working as a contributing writer to a travel website.

As with most side hustles of this nature, having an online portfolio is a good idea. That means you might want to take some low-paying (or free) gigs at first until you’ve proven to potential clients that you’re worth your rate. Clients often post job listings on sites like Indeed, Upwork, FlexJobs, and Fiverr.

You may need to learn or brush up on specific style guides, like AP and Chicago. But it can be worth it: Proofreaders with some experience may pull in $25 to $50 per hour. Writers who are intermediate level currently average about $28 to $35 an hour for freelance work, while those who are experienced may pull in $50 to $100 an hour.

Recommended: High-Paying Jobs That Don’t Require a Degree

10. Being a Virtual Assistant

At large companies, the executives typically have their own assistants. But leaders at small businesses often wear many hats, from scheduling to accounting to sales. These leaders often need help but can’t afford an assistant full-time.

That’s where virtual assistants come in. These contracted administrative assistants might handle a wide range of tasks that business decision-makers don’t want to do or don’t have time for. This could include data entry, scheduling, bookkeeping, travel arrangement, email management, or even social media posting.

If you’re organized and have done this kind of work before, it can be a good side hustle with no special equipment or training needed. The median hourly rate is typically $19 but could be closer to $30 or more, depending on your level of expertise and the exact role.

11. Testing Websites and Apps

If you spend a lot of time online and using apps on your phone, you could put your knowledge and experience to good use by becoming a user tester for websites and apps.

Here’s how it works: Companies are looking for honest feedback on their digital products, and they will often partner with testing platforms to recruit testers. For this gig, you’ll review the products and give your opinion on such things as user experience, functionality, ease of navigation, design, layout, and so on.

To become a tester, you can apply on platforms like Userlytics and User Testing. You could earn up to $30 per test. Once you start getting paid, you can deposit the money from your phone right into your bank account.

12. Affiliate Marketing

If you are an online content creator on Instagram, TikTok, or YouTube with a devoted following, this could be an ideal role for you. As an affiliate marketer, you’ll earn money by recommending products you use and like by providing a tracking link to the product that’s unique to you. Every time someone uses the link to purchase the product, you’ll get a percentage of the sale.

To get started in affiliate marketing, decide on your area of interest or expertise like fitness or travel. Next, you can choose an affiliate program that corresponds to your area through an affiliate marketplace or network such as Flex Offers or Amazon Associates, or by reaching out to brands directly. Then you’ll get started by promoting specific products in stories, posts, or videos on your platform.

How much you’ll earn depends on the size of your audience, the amount of traffic your link sends to the brand or company, and the rates you negotiate with the brand. Commissions for products might be anywhere from 1% to 20%. Just be aware that you will need to follow FTC rules and alert your audience whenever you’re earning money with affiliate links.

Service-Based & Offline Side Hustles

Digital side hustles aren’t the only way to go. There are plenty of hands-on side hustle opportunities, such as:

13. Renting Your Clothes Out to Others

If you have a sense of style that’s always garnering compliments, or you’ve invested in luxury label items over the years, you might find that others are willing to pay to borrow your clothes. Sites like Le Ora and Tulerie offer platforms for listing your clothes and earning some cash. Since you already own the clothes and accessories, this could be a low-cost side business.

How much you make will depend on how much clothing you have to rent, how prestigious its label is, and how in demand the styles are.

14. Flipping Furniture

Flipping furniture can be as easy as canvassing neighborhood groups on social media to see people listing furniture for free or a very low price. If a piece seems to have any value, you can claim it and then list it for sale on Craigslist, Facebook Marketplace, or Nextdoor.

You can also shop for cheap used furniture at garage sales, thrift stores, and estate sales.

To make a little more per piece, you could add a fresh coat of paint and maybe install new hardware. This can be a fun, creative way to bring in money. How much you make varies, depending on what and how much you sell.

15. Driving With Rideshare Services

Startup costs for Uber and Lyft are arguably high; you need a car after all. But if you already own a vehicle that meets a rideshare program’s criteria (and you’re already paying for the car insurance), you could start offering rides with nothing more than the cost of a tank of gas.

Plus, this is a side hustle that can really fit your schedule; you could do it on weekends or whenever you have a day off. Nationwide, rideshare drivers make about $21 an hour.

16. Delivering Food and Groceries

If driving people around doesn’t appeal, consider freelance food delivery instead. Today, your options are plenty, including DoorDash and Uber Eats.

This is a good time to get in on the food delivery game; food delivery app usage skyrocketed in 2020 and continued to grow in the following years. In 2025, food delivery in the U.S. grew more than 21%.

Delivering takeout isn’t your only option. You can also deliver groceries with apps like Instacart, as well as through many grocery chains. While the pay will vary, you might make $15 to $20 per hour plus tips, which you can easily transfer into your checking or savings account with mobile banking.

17. Giving Music Lessons

If you play an instrument and you enjoy teaching, you might be able to give music lessons on the side. Having a degree in music may be helpful in lining up potential clients, but it’s not a prerequisite.

You can set your own rates, but finding students initially may require lower prices or even free lessons for family and friends, just to build out a network of students who will offer referrals and testimonials. The good news is that you can offer lessons from your home, and students will generally bring their own instruments, which means you’ll have very low — or no — startup costs.

18. Pet Sitting and Dog Walking

If you love animals and you’re good with them, pet sitting and dog walking could be a natural fit. You may be able to find people in your neighborhood whose dogs you can walk regularly during the week when they’re at work. And/or you can also take care of pets when their owners are away.

To find clients, put up signs in your neighborhood and post your services on social media. Volunteer to take care of your friends’ pets and ask them to offer testimonials and referrals on your behalf.

You can also sign up for gigs through a platform like Rover or Wag, though they will take a cut of the money you earn. Speaking of earnings, pet sitters make about $16 an hour in the U.S.

19. House Sitting

As a house sitter, you’ll take care of someone’s home while they’re away — and earn money and get free accommodations while you’re at it. The duties you’ll perform as a house sitter typically depend on the particular job and what the homeowner wants. You may need to clean, water plants, bring in mail, and take care of any emergencies that might occur, like a leaking pipe. If the owner has a pet you may be asked to take care of them as well.

To get gigs as a house sitter, you typically need experience, as well as good references. After all, you’ll be caring for and living in someone’s home and they’ll want a house sitter they can trust. Start out by house sitting for friends or neighbors, and ask them to be references for you.

You can find house sitting jobs on websites like House Sitters America or through word of mouth. You can post your house sitting services on social media and even create a website that details your experience and offers testimonials. House sitters typically make just over $16 an hour nationwide.

20. Local Tour Guide

If you live in an area that draws travelers, becoming a local tour guide could be a fun side hustle. For example, if you live in a town with a rich heritage or interesting sights, or in an area that’s historic or has unique landmarks, you may be able to offer your services by giving tours to visitors.

Be sure to bring your particular expertise into the equation as well. If you are a history buff, food lover, or nature enthusiast, you could share your passion with others by introducing them to remarkable spots in your area and giving them insider information about each one.

Whatever your interest or specialty is, you’ll need to create a website to promote your services and develop tour itineraries to help draw customers. You could also join a platform such as ToursByLocals! that can connect you with clients. Local tour guides across the country earn, on average, $23 an hour.

21. Reselling Thrifting Finds

This side hustle involves finding items at thrift stores that you can turn around and quickly and easily resell or “flip” on an online platform. The trick is to locate items that other people want so you can earn a profit, and choosing one specialty can help give you direction and a niche.

To get started, think about what you’re interested in. For instance, if you’re a cook, you might decide to specialize in kitchen equipment or coveted vintage dishes and bakeware. Once you’ve decided on the items you plan to focus on, do some research to see what sells on eBay and Facebook Marketplace. Get a sense of what you should be able to buy them for at thrift stores, and how much you can mark them up and resell them for. What you can earn varies widely depending on what and how much you sell.

How to Manage Your Side Hustle Income

A very important factor in a successful side hustle is how you manage your money. Taking the time to plan for this in the beginning can help you keep your finances organized.

Tracking Expenses and Revenue

Track the money you make from your side hustle (aka your revenue) separately from your other income and your personal funds so you know exactly how much you’re making. You could set up a separate bank account for your side business to help with money management by shopping around for the best high yield savings account or whatever type of account suits your needs.

Another option is a bank account that lets you put your different types of savings into different “buckets.” You could do this by starting a high-yield savings vault. One vault or bucket could be for your side hustle, another could be for the vacation you’re saving up for, and so on.

It’s also crucial to track the expenses you incur from your side hustle. Keep them separate from your personal expenses and it will be easier to manage them come tax time.

Understanding Self-Employment Taxes

As an individual with a side hustle, you are generally considered self-employed, and the income you make from your side hustle is considered self-employment income by the IRS. That means you will need to report the income on a Schedule C (Profit or Loss From Business) with your tax return. Any self-employment earnings over $400 are taxable, and you’ll also need to file a Schedule SE (Self-Employment Tax) to cover Medicare and Social Security requirements.

The good news is that you may be able to deduct expenses for your side hustle from your taxable income. You can typically deduct such things as the cost of materials, tools or equipment, mileage, home office expenses, and even a portion of your internet and cell phone bills if you do your work online. Keep records and receipts of all your business expenses so that you can accurately report them.

Finally, as a self-employed person, you will need to pay quarterly taxes since taxes aren’t taken out of your paycheck the way they are with a traditional job.

You may want to consult a tax professional about all this since it can be complex and it’s important to get it right.

The Takeaway

A side hustle can help you earn extra money in your free time for relatively low startup costs and without requiring a degree. From virtual assistant to social media manager to house sitter, there are a variety of options an aspiring part-time entrepreneur can choose from.

How much you can earn generally depends on the type of job you choose and how many hours you devote to it, among other factors. To track your earnings and any expenses, you can put the money from a side hustle in a separate bank account, which makes it easier to manage.

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, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy 3.30% APY on SoFi Checking and Savings with eligible direct deposit.

FAQ

Which low-cost side hustles pay the most?

Generally speaking, side hustles that involve digital skills, such as web designer and social media manager, may pay more than some others. But many side hustles allow you to set your own rates and hours, so the gig may be as lucrative as you make it, depending on the hours invested.

Do I need an LLC for a side hustle?

You are not required to have an LLC (limited liability company) for a side hustle. However, you might choose to set up an LLC if and when: You start making a significant amount of money; you’re worried about liability (without an LLC you may be personally responsible for accidents and injuries), and if you are planning to turn your side hustle into a bigger business. Essentially, an LLC is a business structure that protects you and your personal assets from liability; it also has certain tax advantages.

Can you start a side hustle with $0?

Yes, it’s possible to start a side hustle without paying a dime. Some side hustles typically have no startup costs at all, such as a dog walker or pet sitter, virtual assistant, writer or proofreader, and tutor.

What are the best low-effort side hustles?

Some of the best low-effort side hustles use items you already have, such as renting out your clothes or a room in your home. Others involve using your skills, such as making social media posts if you’re a big social media user, or teaching music if you’re a musician. One low-effort side hustle almost anyone can do is user testing of websites and apps.

How do I find time for a side hustle with a full-time job?

If you have a full-time job, you can choose a flexible side hustle that allows you to set your own hours and that you can do in your free time, such evenings and weekends. Also, look for a side hustle that allows you to devote as much — or as few — hours as you want. Some possibilities include pet sitting and house sitting, tutoring, giving music lessons, and driving with a ride share service.

---

Photo credit: iStock/Yana Iskayeva

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

^Early access to direct deposit funds is based on the timing in which we receive notice of impending payment from the Federal Reserve, which is typically up to two days before the scheduled payment date, but may vary.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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.

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.

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.

SOBNK-Q126-008

Read more

It’s time to file your taxes again. But before you do, it’s a good idea to consider whether there are any last-minute tax moves you can make to lower your tax liability and/or simplify the tax filing process.

Read on to learn some tax tips before April 15th arrives.

Why End-of-Year Tax Prep Is Important

The end of the year and start of the new year can be an ideal time to get your affairs in order for the upcoming tax season, especially when it comes to reducing your tax burden. One way to do that is through what’s known as tax-loss harvesting (you’ll learn more details below).

This and other financial moves can be complicated and may require additional preparation or the assistance of a tax preparer or financial planner, which is why an early start can be important.

It’s also a key moment to make sure that you have all the information you need to file properly. If you are missing tax forms, now’s the time to work on getting them before you get too close to the April 15th filing deadline.

Smart Tax Prep Moves to Make

Ready to learn the details? Here are eight moves to make by the end of the year that could save you time and money when Tax Day rolls around.

1. Look at Tax Code Changes

The Internal Revenue Service’s tax code can and does change regularly. Tax brackets can shift (say, in response to inflation’s impact). In addition, the standard deduction often rises, which can help lower your taxable income. For example, for tax year 2025 (filing in April 2026), the standard deduction for married couples filing jointly is $31,500; in tax year 2026, it goes up to $32,200. For single filers, the standard deduction is $15,750 for tax year 2025 and $16,100 for tax year 2026.

2. Grab All Available Itemized Deductions

It’s also a great time to review what itemized deductions you may have. Beyond state and local packages, you’ll also want to consider any medical expenses, charitable donations, home mortgage interest, or any losses you may have incurred as the result of a natural disaster or theft.

Keep in mind you can still make charitable donations, schedule doctor’s visits, and pay for certain expenses before the end of the year to potentially offset your taxes.

3. Review Your Contribution Limits

Some of the contributions you can make include putting money in your (health savings account (HSA)), 529 college savings account, and your Individual Retirement Account (IRA). For HSAs and IRAs you generally have until April 15 to make these contributions.

Contributions to a traditional IRA or HSA often can reduce your taxable income, as long as you are eligible to contribute and to take a deduction. While contributions to a Roth IRA can help you save on taxes in the future, they won’t reduce your current tax liability.

Here are contribution limits for tax year 2025 as well as what to expect for 2026:

•   IRAs: The annual contribution limit for a traditional and Roth IRA is $7,000 for 2025 and $7,500 for 2026. Those 50 and older can contribute an additional $1,000 per individual in 2025 for a total of $8,000 per year, and an additional $1,100 per individual in 2026 for a total of $8,600.

•   HSAs: In 2025, you can contribute up to $4,300 if you are covered by a high-deductible health plan (HDHP) just for yourself, or $8,550 if you have coverage for your family. In 2026, you can contribute up to $4,400 if you are covered by a HDHP for yourself, or $8,750 if you have family coverage. Those age 55 and older can contribute an additional $1,000 in both years.

•   529s: Individual states sponsor 529 plans and set varying total account maximums. You’ll also want to keep in mind that the IRS counts contributions to 529 plans as gifts. Individuals can gift up to $19,000 to a 529 plan in 2025 and in 2026, without those funds counting against the lifetime gift tax exemption amount.

4. Consider Tax-Loss Harvesting

Tax-loss harvesting can be a tool to offset losses in non-retirement accounts. Simply put, tax-loss harvesting allows you to use realized losses to offset any gains. So, if you have investments that are below cost basis, you may want to discuss your situation with your financial planner or tax advisor to see if tax-loss harvesting is a good option.

Recommended: Tax Season Help Center 2025

5. Review Your Savings

Were you able to save some money over the last year but haven’t invested it yet? If it’s just sitting in your savings account, now may be the time to consider some tax-efficient investing.

When deploying a tax-efficient investment strategy, it’s crucial to know how an investment is going to be taxed. Ideally, you’d want more tax-efficient investments in a taxable account.

Conversely, you may want to hold investments that can have a greater tax impact in tax-deferred and tax-exempt accounts, where investments can grow tax-free.

Next, it is helpful to know that some investment types are inherently more tax-efficient than others. That insight can aid you in making the best investment choices for the type of investment account that you have. For example, ETFs’ tax efficiency is considered superior to that of mutual funds because they don’t trigger as many taxable events. Investors can trade ETFs shares directly, while mutual fund trades require the fund sponsor to act as a middle man, activating a tax liability.

6. Consider a Roth Conversion

You might have a traditional IRA and wonder if you should convert it into a Roth IRA instead for tax purposes. Deciding to convert a traditional IRA to a Roth IRA comes down to a few factors, all of which are personal to each individual investor. This may make it important to weigh the pros and cons carefully. You may want to discuss this kind of year-end tax move with a financial advisor before making a decision.

An IRA rollover can happen a few ways:

•   Via an indirect rollover, where the owner of the account receives a distribution from a traditional IRA and can then contribute it to a Roth IRA within 60 days.

•   Via a trustee-to-trustee, or direct rollover, where an account owner tells the financial institution currently holding the traditional IRA assets to transfer an amount directly to the trustee of a new Roth IRA account at a different financial institution.

•   Via a same trustee transfer, used when a traditional IRA is housed in the same financial institution of the new Roth IRA. The owner of the account alerts the institution to transfer an amount from the traditional IRA to the Roth IRA.

7. Perform a Financial Checkup

It’s common for life circumstances to change from one year to the next. Maybe you got a new job, had a baby, or bought a new home.

If you’ve experienced changes in your life, consider taking some time now to reevaluate your financial goals, as well as your estate planning. For example, owning a home and being responsible for a mortgage can impact your discretionary spending. Similarly, if you recently became a parent or pet owner, you may think about adjusting your finances to prepare for the added expenses.

💡 Quick Tip: Most savings accounts only earn a fraction of a percentage in interest. Not at SoFi. Our high-yield savings account can help you make meaningful progress towards your financial goals.

8. Top up Your 401(k)

The more you contribute to your 401(k) account, generally the lower your taxable income is in that year. So if you haven’t yet reached your maximum contribution, now may be the perfect time to do so. Here’s some food for thought:

•   If you contribute 15% of your income to your 401(k), for instance, you’ll only owe taxes on 85% of income.

•   Say your annual income is $50,000. If you contribute 15% of your salary annually, $7,500 will be deposited into your 401(k) account, and you will be taxed on $42,500. That could save you thousands on your taxes.

However, here’s one important change to be aware of regarding 401(k) catch-up contributions: Under a new law that went into effect on January 1, 2026 as part of SECURE 2.0, individuals aged 50 and older who earned more than $150,000 in FICA wages in 2025 are required to put their 401(k) catch-up contributions into a Roth 401(k) account. With Roths, individuals pay taxes on contributions upfront (meaning their taxable income for the year would not be reduced), but can make qualified withdrawals tax-free in retirement.

To max out a 401(k) for tax year 2025, an employee would need to contribute $23,500 in salary deferrals; $31,000 if they’re over age 50, and $34,750 if they’re aged 60 to 63, thanks to SECURE 2.0. In 2026, the max for employee salary deferrals is $24,500; those over age 50 can contribute up to $32,500, and those aged 60 to 63 may contribute up to $35,750, thanks to SECURE 2.0.

Some investors might think about maxing out their 401(k) as a way of getting the most out of this retirement savings option. Others may want to put the money elsewhere. Again, talking with a financial professional can help you weigh the implications of these end-of-year money moves.

The Takeaway

The end of the year and then the start of tax season are ideal times to get ready to file your return by April 15th. Specifically, it may be in your best interests to find ways to mitigate your tax bill. You might rethink your retirement savings vehicles or try tax-loss harvesting (selling securities at a loss in order to reduce your tax bill), for instance.

As you are thinking about your finances, you might also take a minute to look at your banking partner and make sure it’s a good fit for your finances.

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, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy 3.30% APY on SoFi Checking and Savings with eligible direct deposit.

---

Photo credit: iStock/Passakorn Prothien

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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.

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/.
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.

SOBNK-Q424-089
CN-Q425-3236452-87
Q126-3525874-052

Read more

Buy now, pay later (BNPL) programs offer a kind of installment payment plan that is essentially a short-term loan. BNLP can give consumers the option of making a big purchase today and spreading out payments over subsequent weeks or months, often interest-free. You’ll find these services offered under such names as Affirm, Afterpay, and Klarna.

Many of the country’s largest retailers — including Target, Walmart, Macy’s, and Amazon — offer buy now, pay later services. This kind of short-term financing can be helpful for shoppers hoping to buy an item over time, but there are pros and cons to purchasing this way.

Read on to learn more about BNPL and how it works, its benefits and drawbacks, and whether it’s a good option for you.

What Is Buy Now, Pay Later (BNPL)?

Buy now, pay later is a way of purchasing an item in which you pay it off over time. It’s similar to layaway, but you get to take possession of the item right away rather than wait until it’s fully paid off.

For instance, if you are buying a new refrigerator with all the bells and whistles, using BNPL means you can get the fridge delivered ASAP and pay it off over time. With layaway, you’d have to wait until your series of payments were made and only then would you get the appliance.

A couple of other important points to note:

•   BNPL can sometimes come with fees and interest, especially if it’s a longer- term repayment plan. In this way, it may be similar to using a credit card and not paying the full balance off at the end of the month.

•   Most buy now, pay later services run a soft credit check (which won’t affect your score). Since they don’t require strong credit, these plans can be an appealing option for consumers with a poor credit rating or no credit history.

•   Buy now, pay later services make money by charging interest and fees on delinquent payments. These lenders also typically charge the merchants fees. Retailers are often okay with this because these financing programs allow customers to spend more at their store, either in person or online.

As noted earlier, some of the leading buy now, pay later providers include Affirm, Afterpay, Klarna, PayPal, and Zip. Some financial groups, like banks and credit cards, also offer BNLP features.

How Does Buy Now, Pay Later Work?

If you are wondering how BNPL works, here’s an example. Say you want to buy a $300 Vitamix Blender, but you hesitate to fork over the entire purchase price upfront. You just don’t have that much spare cash sitting in your bank account. But if you click on a buy now, pay later app or sign up at checkout, you can purchase and receive the item right away.

1. The Checkout Process

When opting for BNPL at checkout, you’ll likely be asked for some credentials, such as name, address, phone number, birthdate, and Social Security number. A soft credit check, which does not impact your credit, is typically conducted to approve or reject your request to use these installment payments.

2. Making the Down Payment

If you are approved for BNPL, payments are typically deducted via your credit card, debit card, or bank account. You are usually able to break up the cost of the item into several (often four) equal, interest-free payments. In the case of the $300 Vitamix, that would come out to four payments of $75 each. Typically, the first payment is due at checkout.

3. Paying Off Installments

The remaining three payments are each due approximately two to four weeks apart. In most cases, the BNLP provider will deduct them directly from your credit card, debit card, or bank account.

Interest and Fees to Watch Out For

Short-term BNPL programs of several often don’t involve the consumer paying any interest or fees over, say, four payments. However, with longer-term BNPLs that last months or even a year or more, interest may be charged, potentially at a high rate — sometimes as high as 35% or so. In addition, if you don’t make payments on time for short-term, or longer-term BNPL programs, you can be hit with fees.

Does Buy Now, Pay Later Affect Your Credit Score?

Buy now, pay later typically doesn’t affect your credit score. However, there are certain instances where your score might be impacted.

Soft vs. Hard Credit Inquiries

BNLP involves a soft credit check which does not impact your credit. A soft credit check is typically used during preapprovals for credit cards and loans.

With a soft check, the provider would review your credit report and credit score to get an idea of how well you are handling your credit. A hard credit check, on the other hand, happens when you officially apply for a credit card or a loan, typically by filling out an application. A hard check may temporarily impact your credit score, causing it to drop a few points for a few months. But again, BNPL does not involve hard credit checks.

Reporting to Credit Bureaus

Buy now, pay later payments are generally not reported to the credit bureaus. That means by using BNLP, you could miss out on the positive value of on-time payments and lose an opportunity to build your credit score.

However, if you are late with your payments or miss payments, the BNLP provider may report those payments to the credit bureaus and even send your account to collections. This could negatively impact your credit score.

Recommended: Guide to Credit Score Ranges

When to Use Buy Now, Pay Later (and When to Wait)

So why would someone use buy now, pay later? In some situations, and for some items, it may make sense. But in other scenarios, it may not be the wisest option. Here’s how to tell the difference.

Best Scenarios for BNPL

Some of the situations when BNLP could make sense include:

•   When you urgently need an item. Say your oven breaks suddenly and can’t be repaired. BNLP could help you get a new one and take it home right away without you having to shell out for the entire cost at once.

•   If the BNLP offer is interest-free. In this case, it could help you afford an expensive purchase by splitting it into separate payments without interest.

•   When you need to manage your cash flow in the short term. By paying for just one-quarter of an item’s cost at the time of purchase, you can hang onto your remaining money for now, so as not to be left short, and budget ahead for the remaining BNLP payments (a 50/30/20 budget calculator might help with this).

When to Avoid BNPL

But BNLP is not always the best choice. These are some of the times to steer clear of it:

•   When it encourages you to make impulse buys. BNLP could make you want to purchase something you really don’t need and can’t afford.

•   If you’re not sure you can make the payments. Delayed and missed payments will cost you in fees and possibly interest. Plus, they will likely be reported to the credit bureaus and negatively impact your credit. And if the payments are being taken from your bank account and you don’t have enough funds in the account, your account could end up overdrawn (if you use your bank account for BNPL, you may want to check to see if you have overdraft protection).

•   If the BNLP offer comes with a high interest rate. Longer-term BNLP offers may have interest rates that are sometimes as high as 35% or so, which means you’ll end up paying significantly more the item overall.

Pros of Using BNPL

If you’re considering using BNLP, there are some advantages of these programs to be aware of. The following are some possible benefits to factor into your decision.

Enhancing Purchasing Power

Buy now, pay later can allow you to buy something pricey without paying for it upfront. You get to take the item home and have the subsequent payments paid via credit card, debit card, or bank account. Unlike layaway plans, you don’t have to wait until the item is fully paid for before taking possession of it.

Saving Money on Interest

Some BNPL programs may offer consumers the opportunity to save in interest payments on a major purchase. For instance, if you were to buy a new couch with BNPL and pay it off over four months, drawing funds directly from your bank account, you might fare better financially than if you bought it with your credit card and didn’t pay your balance in full. In this scenario, BNPL could help you avoid paying interest on your credit card.

You could use that money to build an emergency fund or add it to your fund if you already have one.

Recommended: Emergency Fund Calculator

Quick Approval

If you apply for BNPL, you typically don’t need to wait more than a few seconds to be approved. This can be considerably quicker than seeking a line of credit via other means.

Potential to Build Credit Score

Some, but not all, lenders are reporting activity on BNPL programs to the credit bureaus. If this is the case and you pay on time, a BNPL purchase could positively impact your score.

Cons and Risks of BNPL

Now that you know about the upsides of BNPL services, it’s important to dig into the potential drawbacks.

Potential for Overspending

This type of payment plan can be so appealing, it may entice people who are already struggling to pay their bills to splurge. It can be quick to apply and be approved, and consumers may overlook the possibility of being charged interest and fees (or even being put in for collection) if payments are late.

Paying Interest and Fees

If a BNPL plan is paid off as planned, the shopper may not incur any interest or fees. But if funds aren’t paid on time or a longer-term plan is chosen, an interest rate of up to 36% may be assessed. Late fees can run anywhere from one dollar to a double-digit percentage of the purchase price. As you see, it can wind up being a very expensive proposition if you cannot stick to the original schedule of paying for your item.

Missing Out on Credit Card Rewards

You can earn credit card rewards and cash back if you use your plastic to pay for a purchase. When you pay via a BNPL service, you miss out on that opportunity.

BNPL vs. Credit Cards vs. Personal Loans

If you’re contemplating using BNPL on a major purchase, take a moment to compare options.

Credit Cards vs BNPL

As noted above, BNPL plans may be able to help you avoid credit card interest fees if you pay the amount due on time and don’t wind up adding it to the balance on your plastic.

However, these plans could encourage you to overspend and possibly add to your credit card debt. In addition, if you pay your BNPL bills on time but this isn’t reported to the credit bureaus, you may be missing out on the opportunity to build your credit score. You may also not receive the cash back or other rewards that could be coming your way when you use your credit card.

Personal Loans vs BNPL

If you are making a single big purchase and feel confident you can stick with the terms of paying off a buy now, pay later plan, that may be a fine alternative to personal loans.

However, if you are, say, redoing a kitchen and need to replace every major appliance, you may not want to wade into that many BNPL payments. If you can’t wait to save the money from your salary either, you might want to look into a personal loan, which can offer a more affordable interest rate vs. credit cards, and help you pay for what you need.

It’s worth noting that you will likely have a hard credit check vs. a soft pull if you go the personal loan route.

The Takeaway

Buy now, pay later plans can allow people to make purchases that they might not be able to easily afford otherwise. If you purchase an item this way, you will be spreading your payments out over a number of weeks or even months. Most of the time, there will be no interest. However, if you miss payments, you’ll likely be hit with fees and your credit score may be negatively impacted.

Another way to afford a major purchase is to simply set money aside each month in your bank account until you have enough to pay in full.

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, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy 3.30% APY on SoFi Checking and Savings with eligible direct deposit.

FAQ

What is the difference between layaway and buy now, pay later?

The main difference between buy now, pay later and layaway is that with BNPL, you can take the item home right away and use it even as you continue to make your installment payments. With layaway, you need to pay for the item in full before you can take it home.

Can I use BNPL for everyday purchases like groceries?

Yes, you can typically use BNPL for everyday purchases like groceries. However, if you miss payments, you can incur fees, and possibly interest, and it could impact your credit. Also, because groceries are an essential, recurring item, continuing to use BNPL to pay for them means that you could end up with a number of different repayment plans to juggle and pay off, which may be difficult.

What happens if I miss a BNPL payment?

If you miss a payment, late fees and possibly interest are incurred. If you are late with payments or miss them entirely and those actions are reported to the credit bureaus, it could negatively impact your credit score.

Do BNPL apps charge interest?

BNLP apps typically don’t charge interest on short-term BNLP plans. But they may offer longer-terms BNPL plans that usually do charge interest, and the interest can be as high as 36%.

How do I return an item bought with BNPL?

Returning an item bought with BNLP can be complicated. Because the BNLP provider has paid for the item in full on your behalf, when you return it, the refund is issued to the BNLP provider. It’s then up to them to apply the refund to your account. To help make the return process easier, find out the provider’s return policy beforehand so you know what to expect, and keep copies of all transactions.

---

Photo credit: iStock/Mikolette

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

^Early access to direct deposit funds is based on the timing in which we receive notice of impending payment from the Federal Reserve, which is typically up to two days before the scheduled payment date, but may vary.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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 .

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.

SOBNK-Q126-006

Read more