Guide to Passbook Accounts

Today, it’s common to check your savings account balance on your smartphone, send money to a friend after they covered the cost of lunch, or snap a picture of a paper check to make a mobile deposit. But before the advent of the internet and smartphones, banking was done in person, and people used pen and paper to keep track of everything.

One of the relics of that time period is the passbook savings account. While most consumers now have a traditional or online savings account, passbook savings accounts are still in use today. And, depending on your financial and personal style, it might be an option that you find useful.

But what is a passbook savings account, how do they work, and why would anyone want to open one? We’ll dive in below.

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What Is a Passbook Savings Account?

A passbook savings account is a type of savings account that comes with a notebook or ledger (called a passbook) to track your deposits and withdrawals.

Unlike other bank accounts, which may allow you to take out funds at an ATM, transfer money electronically, and check your balance online, a passbook account requires in-person transactions at the bank or credit union, with a physical log of the activity.

Recommended: How Many Bank Accounts Should I Have?

How Do Passbook Savings Accounts Work?

Before computers, consumers had to visit their local bank branch to deposit or withdraw cash from their savings account. Period. They’d bring their physical passbook with them, and the bank teller would update the passbook with information about the transaction and their new balance.

Nowadays, most consumers choose traditional savings accounts or online savings accounts. While they may still be able to visit banks in person, they can also monitor their accounts online, move money electronically, and swing by the ATM to make deposits and withdrawals.

But passbook accounts are still around. While the bank tellers now handle things electronically, consumers are still issued a physical passbook and must visit the branch in person to withdraw and deposit cash.

Why would someone want this kind of account today?

•  People might choose passbook accounts because of the added requirement of visiting in person. If they consider themselves bad with money, this process could make it harder to irresponsibly withdraw and spend their money.

•  Others might like having more control over — and insight into — their finances.

•  Some consumers may appreciate the added layer of security since it would be harder for a criminal to drain the account.

Pros and Cons of Passbook Savings Accounts

Passbook accounts are hard to come by these days, but it’s not impossible to open one. Just as there are pros and cons to online banking, so too are there benefits and downsides to a passbook savings account, such as:

Pros of Passbook Accounts

Cons of Passbook Accounts

Less temptation to spend your savingsInconvenient to access money
Enhanced feeling of control over your accountPotentially low annual percentage yield (APY) compared to online savings accounts, depending on the institution
Added layer of security by requiring in-person transactionsRequires safekeeping of physical ledger
Ideal for people who aren’t good with computersChallenges if you relocate to a place without branch access

Passbook Accounts vs. Savings Accounts

In many ways, passbook accounts and savings accounts are similar, but they also have several notable differences. Let’s break down how they’re alike — and how they’re not.

Similarities

Consider these points:

•  Both savings and passbook savings accounts are deposit accounts that are meant for saving, not spending. Over time, you should expect your money to grow unless you withdraw funds for major purchases, like a house down payment.

•  That means both types of savings accounts earn interest, though the amount they earn can vary. Some traditional savings accounts may earn as little as 0.01% interest while high-yield online accounts may earn significantly more, such as over 4% as of mid-2023.

Passbook savings accounts generally can’t compete with high-yield online accounts, but you’d need to check with specific banks to know what interest you’d earn.

•  Like traditional savings accounts, passbook accounts are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per depositor, per ownership category, per insured institution.

If the account is at a credit union, it would have the same level of insurance, but from the National Credit Union Association or NCUA vs. FDIC.

Differences

While savings accounts and passbook savings accounts have the same purpose — saving money and earning interest — how these accounts work is quite different:

•  Access to funds: With a traditional savings account, you can generally access your funds in person or at an ATM. Most accounts now let you manage your money online as well, meaning you can transfer money between accounts with the click of a button. With a passbook savings account, you must visit a branch in person.

•  Monitoring your account: Similarly, traditional bank accounts send monthly statements, on paper or online. With most banks nowadays, you can access your account details at any time online via a computer or smartphone.

With a passbook account, however, all the information lives in the physical passbook, and you’ll only update it at the bank when making transactions. Note: Some banks, like First Republic, may now let account holders check information online.

Are Passbook Savings Accounts Still in Use?

Though passbook accounts are uncommon, they’re still in use today. You can open a passbook account at certain local and regional banks. Some examples of financial institutions still offering passbook accounts include:

•  Middlesex Savings Bank (Massachusetts)

•  Union Bank (Vermont and New Hampshire)

•  Cathay Bank (largely California, but other locations in Washington, Texas, Illinois, and New England)

•  Naveo Credit Union (Massachusetts)

•  Dollar Bank (Northeast Ohio, Western Pennsylvania, and parts of Virginia and Maryland).

Recommended: How to Switch Banks

The Takeaway

Passbook savings accounts are less common today with the advent of computers and online banking. While most consumers would prefer electronic access to their account, passbook accounts offer unique perks for people who prefer to bank exclusively in person. It may be a good way for them to manage their money.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with 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 up to 4.60% APY on SoFi Checking and Savings.

FAQ

Do any banks still have passbook accounts?

Some banks still offer passbook accounts. Passbook savings accounts are less common today, as most consumers prefer to manage their money online. That said, some local and regional banks and credit unions in your area may offer passbook savings account options.

What is a disadvantage of a passbook savings account?

A major disadvantage of passbook savings accounts is that you can’t access your money electronically. You have to go to a branch in person to withdraw or deposit funds. You usually can’t even get an account summary online; instead, your physical passbook is the only source of information you have about the account.

What is the interest rate on a passbook savings account?

Interest rates on passbook savings accounts will vary by financial institution, but they’re sometimes competitive with traditional savings accounts. That said, they are often less than high-yield online savings accounts. Remember that you’ll want to choose a bank that is geographically convenient, as you’ll have to visit in person to access your money.


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SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
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.


SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.


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.

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What Are Excessive Transaction Fees?

Excessive transaction fees are penalties incurred by consumers when they make too many withdrawals from a savings account or money market account in a single month.

These fees were once mandated by federal law (Regulation D), but they became optional for banks to leverage at the start of the pandemic, as its economic impact became apparent. These charges are still optional today; some financial institutions collect them; others don’t.

Since most people want to avoid fees as often as possible, read on to learn how excessive transaction fees work and how much they cost.

What Is an Excessive Withdrawal Fee?

Excessive transaction fees, also called excess transfer fees, withdrawal limit fees, or excessive withdrawal fees, refer to penalties for excessive withdrawals from a savings or money market account. Historically, Regulation D restricted consumers to six “convenient transfers and withdrawals” each month.

Banks and credit unions could start leveraging these fees after as few as three transactions per month, though the regulation specified a savings withdrawal limit of six. If consumers regularly exceeded the regulatory six, financial institutions legally had to take action, like converting from a savings account to a checking account or closing it altogether.

Though Regulation D has changed since the COVID-19 crisis and looks to stay that way indefinitely — meaning convenient withdrawals aren’t capped at six a month — some banks have chosen to maintain the excessive transaction fee.

Get up to $300 when you bank with SoFi.

Open a SoFi Checking and Savings Account with direct deposit and get up to a $300 cash bonus. Plus, get up to 4.60% APY on your cash!


Recommended: What Is the Difference Between a Deposit vs. Withdrawal

Types of Transactions Considered

Not every withdrawal from a savings account counts toward the transaction limit. Below are the types of transactions that could get you to the six-a-month max:

•   Electronic funds transfers (EFTs), like when you transfer money from your savings account to checking account (or transfer money from one bank to another)

•   Automated Clearing House (ACH) payments, including online bill pay

•   Pre-authorized transfers, like overdraft transfers to avoid overdraft fees

•   Wire transfers

•   Online and phone transfers

•   Debit card and check transactions drawing from the savings account.

Notably absent from this list are in-person withdrawals at banks and ATMs. Such withdrawals do not count toward the transaction limit. You can also move funds from savings to checking at an ATM or with a teller in person without it counting toward your limit.

Worth knowing: Some banks may also impose ATM withdrawal limits.

How Much Do Excessive Transaction Fees Cost?

Though Regulation D previously specified a maximum of six convenient withdrawals, it did not specify the amount of the resulting excess transfer fee. Financial institutions were free to set that amount — and still are today, if they continue to charge excessive transaction fees.

Typically, excessive transaction fees cost between $3 and $25 per transaction. Under the current form of Regulation D, financial institutions must disclose the fee amount (if applicable) at account opening; if the bank changes the amount afterward, it must legally notify you at least 30 days before the change.

If you’re not sure what your bank charges, you can typically find this information on the bank’s website or in the fine print of your account documents.

Recommended: What Are Bank Transaction Deposits?

Why Do Banks Charge Excessive Transaction Fees?

Before the Federal Reserve suspended the portion of Regulation D requiring that banks charge excessive transaction fees, the answer was easy: Banks charged excessive transaction fees because they legally had to.

The federal government created Regulation D to ensure that financial institutions had enough cash reserves available. Though this meant consumer funds were a little less liquid in a savings account or money market account, banks made such accounts appealing to consumers by offering interest on those funds. Consumers who wanted easier access to their money could use a checking account.

Now that the Federal Reserve has eradicated that mandate, some banks choose to continue to charge fees. The reasoning for this decision may vary at each financial institution, though banks generally leverage fees to make a profit (they are a business, after all!).

And remember: The federally imposed transfer limit previously served to ensure banks maintained proper cash reserves; banks still charging this fee may be doing so to discourage excessive withdrawals and thus protect their reserves.

Recommended: Smart Short-Term Financial Goals

Tips to Avoid Excessive Transaction Fees

How can you avoid excessive transaction penalties? Consider these tips to cut out this common bank fee.

•   Finding a bank that doesn’t charge excess transfer fees: Some banks do not charge excessive transaction fees.

•   Using your checking account: Banks may leverage fees when you make too many savings withdrawals by swiping a debit card, writing a check, or paying bills online. Rather than using your savings account for such transactions, you may benefit from using a checking account, where such fees don’t apply, and making withdrawals from the cleared funds in that account.

•   Banking in person or at ATMs: Withdrawals at physical bank branches and ATMs typically don’t count toward your limit. By using these options to take funds out of your savings account (or money market account), you should be able to avoid excessive withdrawal fees. Just keep in mind that there may be ATM withdrawal limits in terms of how much you can take out in a certain time period.

•   Making fewer (but bigger) withdrawals: If you’re able to anticipate your needs throughout the month, you may be able to make one or two big electronic funds transfers from savings to checking each month, rather than several smaller ones. Doing so may mean you can avoid excess transfer fees.

•   Opting out of overdraft coverage: If your savings account is tied to your overdraft program and you overdraw too many times in one month, you could wind up paying an excessive transfer fee. You can avoid this by opting out of overdraft protection (though it’s crucial that you understand what that means for your checking account if you overdraw). Or you might tap a line of credit (say, by using a credit card) as the source for your overdraft protection instead of your savings account.

•   Getting bank alerts: Checking your bank account activity is good for several reasons, including fraud monitoring and low balance alerts (to avoid overdrafts). Opting into banking notifications can also help you keep track of when you’re approaching the monthly withdrawal limit.

The Takeaway

Though federal regulations have changed since the onset of COVID-19, many banks and credit unions still charge excessive transaction fees. To avoid such fees, it’s important to monitor your monthly transactions and find other ways to access your savings. For example, you may be able to avoid excessive transaction fees by using ATMs or making fewer, larger transfers and/or withdrawals. Finding a bank whose policies are flexible and suit your needs is a wise move too.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with 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 up to 4.60% APY on SoFi Checking and Savings.

FAQ

How much are excessive transaction fees?

Excessive transaction fees can typically range from $3 to $25 each, depending on the institution’s policies.

Do all banks charge excessive transaction fees?

Not all banks charge excessive transaction fees. Before signing up for any account, it’s a good idea to read the fine print, including the fee structure. Federal law requires that banks disclose these fees to consumers.

Why do banks charge excessive transaction fees?

Regulation D was initially created to ensure banks could maintain enough cash reserves. Though Regulation D no longer limits convenient withdrawals to six, many banks still charge these fees, potentially to protect their reserves and/or to make a profit.


Photo credit: iStock/MTStock Studio
SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
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.


SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.


Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Pros and Cons of Having No State Income Tax

Pros and Cons of Having No State Income Tax

Right now, nine states do not charge state income taxes, which means residents in those states don’t need to file a state-level tax return. While an obvious benefit of that is a reduction in their annual tax liability, are there also drawbacks to living in a state without income taxes?

Here, learn the pros and cons of no state income tax. This intel can help you determine if living in a state with no income tax is better for you.

Which States Have Zero State Income Tax?

Currently, nine states do not have state income tax on earned income:

•   Alaska

•   Florida

•   Nevada

•   New Hampshire*

•   South Dakota

•   Tennessee

•   Texas

•   Washington

•   Wyoming

*New Hampshire currently charges state taxes on interest and dividends but not on income, but it is set to phase this out after 2026, as Tennessee has recently done.

Get up to $300 when you bank with SoFi.

Open a SoFi Checking and Savings Account with direct deposit and get up to a $300 cash bonus. Plus, get up to 4.60% APY on your cash!


Recommended: Earned vs. Unearned Income on Taxes

What Are the Pros and Cons of Having No State Income Tax?

At first blush, having no state income tax sounds like a win for Americans — and for many high-earners, it might be. However, there are also downsides to living in a state with no income taxes. Here’s a closer look.

Pro: You’ll Spend Less Money on Income Taxes Overall

While nearly everyone must file federal taxes, residents in states without income taxes will benefit from a lower overall tax bill each tax season. This can be a boost to one’s financial health.

Con: You’ll Likely Spend More on Sales and Property Taxes

Just because states don’t charge income taxes doesn’t mean they’re not getting revenue through different types of taxes. States without income taxes sometimes have higher sales and property taxes, for example.

Tennessee, Washington, Nevada, and Texas are all in the top 20 states with the highest combined state and local sales tax. New Hampshire, Texas, and Florida all have property taxes higher than the national average — with the former two in the top 10 states overall.

An added con to this: Unlike income taxes, which get progressively higher based on your income level and resulting tax bracket, sales taxes are the same no matter how much you make. That means lower-income taxpayers shoulder a heavier tax burden in states with no income taxes, according to the Institute on Taxation and Economic Policy.

Pro: Tax Filing Is Easier

If you live in a state without income tax, filing can be a breeze. You’ll have one less tax filing deadline to worry about.

Those who reside where state tax is collected, however, may need to invest in professional tax software or an accountant to handle their state taxes. This is of course an added expense — and creates extra steps in the tax filing process.

Con: There’s Less in the Budget for Infrastructure and Education

States use income taxes to fund projects like improving infrastructure and investing in education. Without income taxes, there could be less in the budget for such investments.

For instance, Nevada, Florida, Tennessee, and South Dakota are all among the top 10 states that spend the least amount of money per K-12 student, per a report from the Education Data Initiative. The common thread? These four states don’t have income taxes.

Pro: Having No Taxes Can Attract People to Move to the State

A lack of state income taxes may be a selling point for many people looking to move, whether they are looking for a more affordable lifestyle, a welcoming state to retire in, or to be closer to friends and family.

Why does this matter? An influx of residents to a state can be a boon to the local economy.

Con: Cost of Living May Be Higher

Though it’s not the case across all nine states without income taxes, the cost of living could be higher. Four out of the nine states were among the 20 most expensive states to live in last year: Alaska, New Hampshire, Washington, and Florida.

Now, here’s how the pluses and minuses stack up in chart form:

Pros

Cons

Less money spent on income taxesPotentially higher sales and property taxes
Easier tax filingPotentially lower infrastructure and education spending
Potential state population growthPotentially higher cost of living

Why Do Some States Have Zero State Income Taxes?

Some states may choose to enact a no-state-income-tax policy to encourage Americans to move there from other states and thus boost their economy. IRS and Census data backs up this theory.

It may also reflect local political sentiment: Conservative politics tend to favor lowering taxes, while progressive politics often prioritize the social programs that can be achieved through higher taxes.

Recommended: Tips on Saving Money Daily

Do States With No Income Tax Save Residents Money?

States with no income taxes save residents money — on their income taxes. However, many states without income taxes can be expensive in other ways. They might have a higher sales tax, higher property taxes, and/or a higher cost of living.

Before deciding on a move to a state without income taxes, it’s a good idea to view the whole picture by researching sales and property tax rates and overall cost of living.

Recommended: Tax-Friendly States that Don’t Tax Pensions and Social Security Income

Is Living in a State With No Income Tax Better?

Some taxpayers may say that living in a state with no income tax is better, but others might not. In general, high-income earners benefit more from a lack of state income taxes, since they may enjoy reduced taxes. Low-income earners, however, may actually shoulder more of the tax burden when states generate revenue from sales tax.

Taxpayers should also consider how much they value lower taxes versus more social programs and investments in things like infrastructure and education. Each individual will have their own opinion.

The Takeaway

States without income taxes may save you a lot of money when it’s time to file taxes, but there may be hidden costs of living in such states, like higher sales and property taxes. Before moving, it’s important to consider the full picture to better understand the potential impact on your finances.

Regardless of where you live, it can be a wise money move to take advantage of a high-yield bank account to grow your savings. When you open a SoFi Checking and Savings account, you’ll enjoy a competitive annual percentage yield (APY) on deposit and pay no account fees, both of which can help your cash grow more quickly. Plus, there’s the convenience factor: You’ll spend and save in one place, and qualifying accounts can access their direct deposit paycheck up to two days early.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall. Enjoy up to 4.60% APY on SoFi Checking and Savings.

FAQ

Are other taxes higher in states with no income tax?

Though it varies, it is common for states without income taxes to make up for that lack of revenue through other forms of taxes, primarily sales and property taxes.

Are food costs more in states with no income tax?

Food costs contribute to a state’s total cost of living. In 2022, four of the 20 most expensive states to live in had no income taxes. While that doesn’t inherently mean food costs are higher in such states, it may validate that a disproportionate number of states with no income tax have higher costs of living.

Is living in a state with no income tax better for low- or high-income taxpayers?

High-income taxpayers benefit more from living in states with no income taxes. The more money you make, the higher percentage of your income you must pay in taxes, so high-earners will likely save more.

In addition, states with no income tax may see less spending on education, which can affect the quality of learning for students. High-income earners can probably more easily afford private schools for their children; such schools do not rely on taxes to operate. Low-income earners may not be able to afford private schools.


Photo credit: iStock/mihailomilovanovic

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.

SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.


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.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
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.


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What to Do if My Debit Card Expires

My Debit Card Expired! What Do I Do?

If your debit card expired, it can no longer make purchases or payments whatsoever. You’ll need to request a new card from your bank if they haven’t already sent you a new one. Once you have that card, you’ll need to activate it and shred your old one for security reasons.

Your debit card can be a vital player in your ongoing financial life. It’s your primary link to your bank account. It allows you to pay for items at stores, restaurants, and online businesses. In addition, debit cards are quicker than checks and don’t accrue interest charges like credit cards do.

As a result, staying ahead of your debit card’s expiration date is critical to uninterrupted use. Here’s a closer look at this process, including:

•   Why debit cards expire

•   What happens when a debit card expires

•   How to renew a debit card

•   Tips for using a debit card well

What Happens if My Debit Card Expires?

You might not realize that your debit card expired until you try — and fail — to use it. However, it’s best to stay on top of that critical date. Otherwise, if your card expires, the following can occur:

•   You can’t make purchases with an expired debit card.

•   Automatic payments linked to your debit card, such as subscriptions or utilities, will stop.

•   You’ll have to contact your bank about getting a new debit card if they haven’t already sent it.

•   You’ll have to use alternative payment methods until you get a new card.

Get up to $300 when you bank with SoFi.

Open a SoFi Checking and Savings Account with direct deposit and get up to a $300 cash bonus. Plus, get up to 4.60% APY on your cash!


Replacing an Expired Debit Card

What to do when your debit card expires? Generally, your bank will send you an updated debit card in the mail a month before yours expires. However, if that hasn’t happened, keep these steps in mind:

•   If you don’t receive one as the expiration date draws closer, it’s best to follow up with your bank about getting a new card. You can usually call your bank or log into your account online and ask for a new card. This can often take a week or so; perhaps less time if you pay a fee for expedited delivery.

•   When you receive your new debit card, you can activate it by following the directions on the card. Typically, you can use the website or call the phone number on the activation sticker. You can also likely activate it by inserting it into an ATM (hopefully in-network, to avoid incurring ATM fees), entering your PIN, and withdrawing cash. The process may be somewhat different depending on your financial institution’s policies.

•   Once you’re sure your new card works, it’s best to shred your old card. Throwing away an intact card invites the possibility of identity theft or bank fraud. To augment your security measures, you can discard portions of the shredded cards in different trash containers or throw away several bits at a time.

•   Lastly, think about where you automatically use your debit card online. It’s vital to update your payment information where you linked your old debit card. For any bills you linked your debit card to (like your phone or electricity bill), log into your account and update your payment information.

   The reason: Once your debit card expires, you won’t be able to make payments, and you could fall behind on your bills, which is exactly what you don’t want to happen when you automate your finances.

How Long Do Debit Cards Usually Last Before They Expire?

A debit card usually lasts two to five years from the date your bank issues it. You can use your debit card until the first day of the month after expiration. For example, if your card’s expiration date is January 2024, then your card will work through January 31, 2024. Then, on February 1, your card will become inactive.

Recommended: Features of Mobile Banking

Why Do Debit Cards Have an Expiration Date?

It might seem inconvenient when your debit card expires, but banks require a debit card renewal for practical reasons. Consider the following:

•   The change of expiration date and security code combats fraud. In other words, the new card’s information helps prevent criminals from successfully hacking into your funds, thereby keeping your bank account safe online.

•   Debit cards can get worn out with use. For example, the stripe or magnetic chip can become defective after several years. Or, the card might suffer scratches or begin to peel. Therefore, getting a new card preempts these scenarios.

•   Card technology improves regularly. For instance, cards have gone from swiping to insertion and tap-to-pay in the last decade. As a result, getting a new card can allow you to take advantage of tech advances that increase convenience and security.

Will Transactions Go Through if My Debit Card Is Expired?

An expired card cannot make transactions or payments. Period. So, it’s crucial to get that debit card renewal before your current one expires.

Remember, an expired card doesn’t mean your bank account is frozen, empty, or deactivated. You can still make ACH payments if your card is expired — but an expired card can’t transact payment or let you use an ATM.

Do I Have Debit Card Access Even After It Expires?

The primary issue with an expired debit card is you can’t use it to pay in any context. However, you can access your bank account if your debit card expires, pay by ACH, and use mobile banking features. In addition, your bank account will still be active.

Tips for Using Your Debit Card Wisely

Your debit card is an essential financial tool that enables purchases, provides rewards, and more. In that way, it can contribute to your sense of financial security. Follow these tips to make the most out of your debit card:

•   Memorize your PIN instead of storing it on your computer or other device. That way, no one can steal it and gain access to your account. And please: Don’t write it on the back of your debit card either.

•   Don’t use an obvious PIN that anyone could easily guess, such as your birth year or 1234.

•   Shred and then throw away all expired cards.

•   Stay up to date on your account balance, so you don’t overdraft your account.

•   Use cash instead of your card if the merchant charges a card usage fee. (Some retailers require a minimum purchase of $5 or more to prevent the card fee.)

•   If your debit card provides points or cashback rewards, use it as much as possible without overspending. Also, keep in mind whether your card might have a daily spending or withdrawal limit, restricting card usage.

•   Check account statements monthly, and let your bank know about any unfamiliar transactions, as they could be a sign of fraud.

•   Be aware of transaction fees, when they will be charged, and whether the fee varies, depending on where you use your debit card.

Lastly, notify your bank immediately if you lose your debit card, so you aren’t financially responsible for fraudulent charges. Here’s how this works:

•   When you report your card stolen within two days, there is a $50 cap on the fraudulent charges you must pay for.

•   When you report within 60 days, a $500 cap applies to fraudulent charges you’re responsible for.

•   You’re financially responsible for all fraudulent charges if you don’t report your card stolen within a 60-day window.

Quickly reporting the loss will help you avoid financial responsibility for extra charges that aren’t yours.

Recommended: Debit Card vs. Credit Card

The Takeaway

A debit card that’s expired can threaten to derail your financial life for a period of time, inconveniencing you as you try to pay for transactions and access cash. Being suddenly unable to use your card for purchases is frustrating and can even cause you to miss payments on crucial bills. Therefore, proactively communicating with your bank about a card that will expire soon can save you a headache.

If you’re in the market for a new debit card, you can open an online bank account with SoFi and enjoy many perks. For instance, you’ll receive up to 15% cash back when you use a debit card linked to a SoFi Checking and Savings account at select local merchants, and you’ll have access to the global Allpoint Network of no-fee ATMs. In addition, you’ll enjoy spending and saving in one convenient place, earning a competitive annual percentage yield (APY), and paying no account fees. All this can help you manage your money more easily and maybe even grow your funds faster.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall. Enjoy up to 4.60% APY on SoFi Checking and Savings.

FAQ

Do I need to reach out to a bank if my card expires?

Reaching out to your bank if your card expires allows you to obtain a replacement debit card as soon as possible. Although banks usually send your new card ahead of time, it’s possible the card went to the wrong address or was never sent. Calling your bank or chatting with a bank representative online if your card expires can help minimize the waiting period for a new card.

Do the debit card numbers stay the same after they expire?

When your debit card expires, you’ll receive a replacement card with a new expiration date and security code. These numbers change to improve the security of your bank account.

What should I do with my old debit card?

You should shred or otherwise cut up your old debit card after you receive and activate the new one. Throwing away an intact card without shredding it means someone could easily steal your financial information.


Photo credit: iStock/fizkes

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
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.


SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.


Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Endorsing a Check for a Minor

Guide to Endorsing a Check for a Minor

Endorsing a check for a minor is a pretty straightforward process. It means printing their name on the back of the check and designating them as a minor. Then, print your name and define your relationship to the minor. Third, sign underneath your name. Finally, it’s a good idea to write the account number so the bank can deposit the check into the appropriate account.

That said, handling a check for your child can raise some issues. After all, how do you endorse a check for a minor if they don’t have a bank account? Fortunately, most banks and credit unions allow parents to deposit such checks into their accounts. You can also use a check made out to a minor as an opportunity to open a custodial account and begin your child’s financial education.

Here are the details on endorsing a check for a minor and how it can facilitate financial literacy.

Get up to $300 when you bank with SoFi.

Open a SoFi Checking and Savings Account with direct deposit and get up to a $300 cash bonus. Plus, get up to 4.60% APY on your cash!


What Is a Check Endorsement?

A check endorsement is when you sign the back of a check that’s been made out to you. Signing your name on the back and providing your account number allow you to deposit or cash the check. If you have a joint bank account, one or both account holders should sign the check.

Signing over a check is also possible. This is a process that allows you to transfer the right to deposit the check to someone else.

Process of Endorsing a Check for a Minor

Endorsing a check for a minor is similar to endorsing a check for yourself, with a few extra steps in the process. Here’s how to endorse a check for a minor.

•   Flip the check so its back is facing upwards. Print the minor’s name where the endorsement section is. Following the printed name, add a hyphen and write “minor.”

•   Below the minor’s name, print your full name. Following your name, add a hyphen and write the best word that describes your relationship to the minor such as parent or guardian.

•   Finally, sign the check and write your account or the minor’s custodial account number.

Recommended: How Do You Write a Check to Yourself?

Can a Check Made to a Minor Be Deposited Into the Parent’s Account?

Guidelines vary among banks and credit unions for depositing a child’s check into a parent’s account. Generally, banks and credit unions will deposit checks made out to children into the parent’s account. Banks and credit unions usually do this when the child doesn’t have a bank account.

Either way, ask your bank or credit union for their endorsement policy on the child’s checks and endorse them as instructed to ensure you can deposit the check. You may need to provide supplemental documents and your child’s ID.

On the other hand, your bank might encourage you to open a bank account for a minor; you may also hear this referred to as a custodial account for your child. While this account is separate from yours, you’ll control it until your child turns 18 or older.

A custodial account is an excellent way to teach kids money management and show them how to use banking services. Although a minor isn’t technically unbanked if they don’t have a custodial account, opening one can help them acclimate to banks and credit unions and set them up for financial success as an adult.

Recommended: What Does It Mean to Be Unbanked?

Tips for Endorsing a Check for a Minor

With money becoming increasingly digital, matters such as ordering checks and handling them can be challenging for people of all ages. Follow these tips to have a smooth experience when endorsing a check for a minor.

•   Ask your bank for their rules and conditions for how to endorse a check for a minor.

•   Read the front of the check to verify your child is the payee.

•   Print your child’s name and your name on the back and specify who each person is (minor and parent).

•   Adding your account number or your child’s custodial account number under your signature ensures the bank will deposit the money in the correct account.

•   Keep in mind how long checks are good for. Typically, checks expire after six months, so it’s best to endorse and deposit them as soon as possible. In addition, hanging onto a check without depositing it increases the chance of losing it.

Getting Your Child Started With Banking

Opening a bank account for a minor can introduce your child to healthy money management and improve financial literacy. Here are some tips for parents who want to show their children the ropes.

•   Open a custodial bank account. Shop around for a custodial account for your child that can earn an annual percentage yield (APY) and charge no fees. In addition, you can deposit your child’s checks into this account to grow their savings.

   Plus, these accounts usually give control to the parent until your child reaches 18 or older and can take over. You may hear these accounts referred to as UGMA (Uniform Gift to Minors Act) accounts.

   However, for some accounts for minors, your bank may allow joint control between the child and the parent. This may be referred to as kids’ bank accounts at some financial institutions.

•   Involve your child in the process. Instead of managing the custodial account alone, bring your child to the bank to help open the account. They can bring their identification and speak with the banking staff. Ask ahead of time if they offer memorable experiences for children, such as viewing the safe deposit boxes. The more your child enjoys the bank or credit union, the more they may interact with their account.

•   Remind your child that saving is vital. Again, bringing in a real-world example can help. For instance, the next time you have an unexpected expense such as a car repair or emergency dental work, use it as a teaching moment. Explain that saving money helps smooth out financial bumps in the road.

•   Explain financial fundamentals. For example, teaching your child about compound interest can motivate them to save more. You can also create a budget showing what their allowance income lets them afford each month and set long-term goals, such as buying a scooter.

•   Keep up the flow of information as your child gets older. While a first-grader isn’t ready to peruse financial documents, middle-schoolers can begin to understand how to read an account statement from their custodial account. Likewise, your child’s first job can provide a lesson about paychecks and income taxes.

   In addition, the prevalence of phone and internet use has given rise to financial scams over text messages and email. It’s wise to educate and warn kids about this so they don’t become a victim.

The Takeaway

Endorsing a check for a minor requires an additional step or two compared to endorsing your own; the trick is knowing what information you need. Whether you deposit the money into your account or your child’s custodial account, the endorsement process is an opportunity to expose your child to the world of banking. It’s never too early to teach financial literacy, and depositing checks at the bank is a great jumping-off point.

When thinking about your own banking choices, it’s wise to look for multiple better banking features. When you open an online SoFi Checking and Savings account, for instance, you can take advantage of a competitive APY and not pay any account fees that can nibble away at your balance. Plus, SoFi offers features like Vaults and Roundups to help savings grow faster, and qualifying accounts with direct deposit can get paycheck access up to two days early.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall. Enjoy up to 4.60% APY on SoFi Checking and Savings.

FAQ

Can a child endorse a check?

A child too young to write or sign their name cannot endorse a check. For older children, banks and credit unions generally require parents to write and sign their name under the child’s name. They also must include their relationship to the child and add the account number for the deposit.

Can a minor deposit a check into their own account?

A minor can deposit a check into their account if their parent or guardian endorses it and if the minor is old enough to use banking services. Each bank or credit union sets rules for how old a minor must be to access banking services.

Can you use mobile deposit to endorse a check to a minor?

You can use the mobile deposit to endorse a check for a minor by printing their name on the back of a check with a hyphen and the word “minor.” Then, under the minor’s name, print your name with a hyphen and the word “parent” or another descriptor for your relationship with the minor. Then, sign the back and write your account number or the minor’s custodial account number. Lastly, use your phone to complete the check’s mobile deposit.

How can a minor cash a check?

A minor can cash a check if their parent or guardian endorses it and the minor is old enough to use banking services. Each bank or credit union determines the age requirements for banking services.


Photo credit: iStock/Drazen Zigic

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
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.


SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.


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.

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.

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