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If you’ve been denied a personal loan recently or don’t think a personal loan is right for you, you might feel at a loss as to how to cover a large expense or fund a major project.

The good news is, there’s no shortage of personal loan alternatives that suit a variety of situations. Let’s take a closer look.

Credit Card

A credit card offers you a line of credit that can be used for a variety of purchases. You can borrow up to a set credit limit, and each month that you carry a balance, you’ll owe at least the minimum payment. Credit cards are generally seen as a better option for smaller, everyday purchases, while a personal loan may make more sense for larger, more expensive items, such as a house or car.

Using a credit card responsibly can be a good way to establish your credit history, so long as you make timely payments each month. And some cards may come with perks, such as rewards points or travel rewards.

On the downside, if you don’t pay off the full balance of your credit card each month when it’s due, then your balance will accrue interest. (And credit cards typically have higher interest rates than personal loans.) If you continue to make charges on the credit card while only making minimum monthly payments, then it will take you even longer to pay off the balance. To find out how much interest you’ll pay on any balance, you can use a credit card interest calculator.

Applying for one credit card can ding your credit score by just a few points. But applying for multiple cards at once could raise red flags for lenders and can drag down your credit score.

Pros

•   Can tap into funds as needed and repay as you go

•   Can build credit as long as you make on-time payments

•   Some cards come with perks such as rewards points and travel-related benefits

Cons

•   Can have higher interest rates than personal loans

•   May take you longer to pay off the balance if you only make the minimum payments

•   Applying for too many cards at once may hurt your credit

Recommended: Personal Loan vs. Credit Card

Personal Line of Credit

A personal line of credit is a type of revolving credit line that can be used for many different things. Like credit cards, a personal line of credit has a maximum credit limit, and borrowers are required to make a minimum monthly payment. Once the debt is repaid, money can be withdrawn once again. Personal lines of credit may be secured, which require collateral, or unsecured, which do not require collateral.

When comparing a personal line of credit vs. a personal loan, you may discover that a personal line of credit allows you to access money over time instead of all at once. This level of flexibility may reduce interest charges, because you’re only taking out the money you plan on using right away. And generally speaking, the interest rates on a personal line of credit tend to be lower than those on a credit card.

However, it can be difficult to qualify for an unsecured line of credit with a good interest rate, as they’re more risky for the lender. Plus, the flexibility of a line of credit could make it easy for borrowers to take on more debt or take longer to pay off what they owe.

Pros

•   Typically has a lower interest rate than credit cards

•   Funds can be used for a variety of purposes

•   You can access funds as you need them

Cons

•   May be difficult to qualify for an unsecured line of credit with a good interest rate

•   Can be easy to take on more debt or take longer to pay off the balance

Recommended: Personal Line of Credit vs. Credit Cards

Home Equity Loan

If you’re a homeowner and meet certain requirements, you may have the option to take out a home equity loan. This means you’re essentially borrowing against the equity you’ve built in your home.

Like a personal loan, funds from a home equity loan are disbursed in one lump sum, and you owe monthly payments for the life of the loan. Your home secures the loan, and because of that, lenders tend to offer a lower interest rate than they would on most unsecured loans. Interest rates are usually fixed.

It’s worth noting that repayment begins right away, and if you fall behind on your payments, you risk losing your home. In addition, the loan amount is set, so if you need more money, you’ll need to apply for another loan.

Pros

•   Low interest rate

•   Can borrow large amounts of money

•   Funds can be used for a wide variety of purposes

Cons

•   Risk losing your home if you fall behind on payments

•   Repayment begins immediately

•   Loan amount is set

Home Equity Line of Credit (HELOC)

Like a home equity loan, a home equity line of credit (HELOC) is secured by the equity you’ve built in your home, and your home is used as collateral.

One of the main differences is that a HELOC offers a revolving line of credit, which means you can tap into funds as needed and only pay interest on what you borrow. There are usually low or no closing costs involved with a HELOC, and the interest rate is likely to be variable.

There are some potential drawbacks to keep in mind when comparing HELOCs vs. personal lines of credit. For starters, you may have to pay closing costs on the loan amount, though some HELOCs come with low or zero fees. Your interest rate will likely change with the federal funds rate, which means that over time, your monthly payment amount may fluctuate. Also, if you fail to make payments and the loan goes into default, you risk losing your home.

Pros

•   Only borrow what you need

•   Lower initial interest rates than unsecured loans

•   Repayment terms can be flexible

Cons

•   Can lose your home if the loan goes into default

•   Variable interest rates

•   Can be upside-down on your mortgage (i.e., you owe more on your home than what it’s worth)

Retirement Loan

Also known as a 401(k) loan, a retirement loan is a type of loan where you borrow from your retirement account and pay yourself back over time with interest. You can typically borrow against a 401(k), 403(b), or 457(b) retirement plan.

Per IRS guidelines, you can borrow up to $50,000 or 50% of your account balance, whichever is less. Unless you’re putting the money toward buying your primary residence, you have five years to repay your loan and need to make quarterly payments.

Pros

•   Don’t have to go through a lengthy application process

•   Doesn’t impact your credit

•   Loan repayments are automatically taken out of your paycheck

Cons

•   Can’t borrow more than $50,000

•   Missing out on compound interest and growing your retirement funds

•   If you file for bankruptcy, you’re still on the hook for paying off the loans

Peer-to-Peer Loan

Also known as social lending or crowd lending, a peer-to-peer loan (P2P loan) is a financing model where individuals borrow from others through an online platform. In turn, the financial institution is cut out of the picture, and individuals can borrow from individual investors or lenders.

The main draw for lenders is that they might earn more on the interest than if they put their money in a savings account. Borrowers might be eligible for lower interest rates or less-strict lending criteria. What’s more, the funding process is often quicker than going through a bank — an application may be approved within minutes and funds disbursed within a few business days.

Pros

•   Flexibility in how funds can be used

•   Speedy funding process

•   May qualify with fair credit

Cons

•   Often have origination fees (up to 8% of the loan)

•   Might have a higher interest rate

•   Might have late fees

Salary Advance

If you have an urgent financial need or personal emergency, you might be able to get part of your future paycheck now. In essence, it’s a loan from your employer, with the expectation that you’ll pay it back.

Your company might charge a fee or interest rate to cover the extra paperwork and accounting. However, it could be a solid way to pay for an emergency, provided you know the terms, restrictions, and what a salary advance entails.

Pros

•   Easy repayment methods (i.e., funds are automatically deducted from your paycheck)

•   Can provide easy, quick access to funds

•   Interest rates may be lower than other types of loans

Cons

•   Not offered by all employers

•   May need to meet eligibility requirements, such as a minimum number of years of employment and no previous paycheck advance requests

•   Might get complicated if you leave your job and haven’t repaid the advance

•   Smaller-than-usual paychecks could make it more difficult to make ends meet

Mortgage Refinance

A mortgage refinance is when you’re swapping your current mortgage for a new one. There are different reasons why this route might be attractive for you, such as locking in a lower interest rate or a lower monthly payment. With a cash-out refinance, for example, you replace your existing mortgage with a new mortgage for more than the previous balance. You receive the difference in cash.

Pros

•   You can receive a tax break if funds are used for home improvements

•   Can have relatively lower interest rates than other types of financing

•   Can stretch out your repayment period

Cons

•   Can risk foreclosure if you aren’t able to keep up with payments

•   Will need to pay closing costs

💡 Quick Tip: In a climate where interest rates are rising, you’re likely better off with a fixed interest rate than a variable rate, even though the variable rate is initially lower. On the flip side, if rates are falling, you may be better off with a variable interest rate.

Small Business Loan

If you plan on using a personal loan for business-related reasons, you might consider a small business loan instead. There’s no shortage of financing for small businesses, and lenders include banks, credit unions, online lenders, P2P platforms, and loans backed by the Small Business Association (SBA).

The requirements, loan amounts, and options might vary widely among lenders and loan types. But in general, lenders will look at your personal credit score, finances, and debt-to-income ratio. You’re also often required to provide a business plan.

Pros

•   Longer repayment terms

•   Flexible business-related uses

•   Typically have better interest rates

Cons

•   Slower financing times

•   Rigorous documentation requirements

•   Might need to provide collateral

The Takeaway

There are pros and cons of personal loans, so if you decide to explore other funding options, rest assured there’s no shortage of personal loan alternatives. Examples run the gamut from home equity loans and HELOCs to personal lines of credit and credit cards and more.

By knowing what’s out there and weighing the advantages and disadvantages of each, you’ll stand a stronger chance of figuring out what is best suited for your needs, preferences, and situation.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

FAQ

What alternatives to personal loans are the most popular?

The most popular options for personal loans are credit cards, retirement loans, home equity loans, home equity lines of credit (HELOCs), peer-to-peer loans (P2P), and a cash-out refinance.

Each option has its pros and cons and different lending requirements. And each may be better suited for specific borrowers.

Why would you need to use an alternative to a personal loan?

You might need a personal loan alternative if you don’t qualify for a traditional personal loan, or, if, after doing your research, you’ve found that it isn’t the best option for your needs.

Can you use personal loan alternatives even if you have a personal loan?

Yes, you can use personal loan alternatives if you currently have a personal loan. However, if you have multiple loans, it’s important to ensure you can keep up with the payments.

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Photo credit: iStock/zamrznutitonovi

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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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When shopping around for lending options for a major project or immediate financial need, a personal loan might be on your list. And besides the interest rates and terms, the loan amount is a large determining factor in which option you decide to go with.

So how much can you get for a personal loan? Whether you’re looking for a large personal loan or a small one, the lending criteria is the same. Let’s take a look at how much lenders typically offer, what factors play into the size of a personal loan that you can get, and when it makes sense to get a personal loan.

How Much Do Lenders Offer?

How much can you get for a personal loan? Amounts vary by lender, but typically start as low as $600 and go as high as $50,000. Some lenders, including SoFi, offer personal loans up to $100,000.

The amount you actually get approved for depends on a handful of criteria, which we’ll dig into below.

Recommended: Can I Increase My Personal Loan Amount?

What Determines How Big of a Personal Loan You Can Get?

The amount a lender offers and the amount you qualify for aren’t always one and the same. There’s a handful of financial and credit criteria that can impact the loan amount, rates, and terms. Let’s look at the main factors:

Credit Score

In general, the higher your credit score, the larger the loan amount, the more favorable the terms and interest rates. On the flip side, the lower your credit score, the smaller the loan amount, and the less favorable your terms and interest rates.

Lenders usually have credit score requirements. The minimum required credit score for a personal loan varies but can start at 580. To get the best terms and rates, you usually need a credit score of at least 640.

Recommended: Can a Personal Loan Hurt Your Credit?

Debt-to-Income Ratio

Your debt-to-income ratio (DTI) is your monthly debt payments divided by your gross monthly income. It’s expressed as a percentage. For example, let’s say your monthly income (before taxes, withdrawals, and other deductions are taken out) is $5,000, and your total debt obligations are $2,000. In that case, your DTI is 40%.

For the most part, lenders would like to see a DTI no higher than 35% to 40%. But if you have a high credit score, you might get approved with a slightly higher DTI.

Lender Amount Limits

The amount you can borrow may be limited by how much funding you can receive from your lender. Let’s say your credit is stellar, you have low DTI, steady employment, and a good income. But if the lender’s max personal loan amount is $50,000, then the most you can potentially borrow is $50,000.

Applying as An Individual or Jointly

If you’re applying for a personal loan with another applicant and their credit is strong, you might be eligible to borrow more money. However, not all lenders let you apply jointly, so you’ll want to check beforehand.

Income and Employment History

How much you can borrow also depends on your income and employment history. If you bring in a certain amount of money and have steady work for the last few years, that could boost the approval amount.

Some lenders may give more weight to your income and employment history. In turn, you might be able to get a higher loan amount with a lower credit score and a higher debt-to-income ratio.

Collateral

Not all personal loans require you to provide a valuable asset, such as your home or car, to back up the loan. But if you’re looking into a secured loan, you might be able to get a higher max amount on your personal loan than if you went the unsecured loan route.

Offering collateral and getting a secured loan means you could get a bump in your personal loan amount. Remember, not all lenders offer secured personal loans. If a lender does offer both secured and unsecured loans, you can compare quotes from the same lender for either option.

Loan Purpose

A lender might only allow you to use the loan for certain purposes. For instance, some lenders specialize in credit card debt consolidation loans. Lenders that offer greater flexibility might have limits on how much you can borrow depending on the loan purpose.

For example, the limit on using the loan proceeds for childcare expenses and large purchases might be different than if you’re planning to use the funds toward a major home improvement project.


💡 Quick Tip: Before choosing a personal loan, ask about the lender’s fees: origination, prepayment, late fees, etc. SoFi Personal Loans come with no-fee options, and no surprises.

Calculating How Much You Can Borrow

Determining how much you can borrow requires you to know your financial situation, how much you’d like to borrow, and what you can reasonably afford to pay off on a regular basis.

To start, jot down the repayment term and rate you anticipate receiving. If you get prequalified, that can give you a fair estimate on your loan amount.

Next, you’ll want to figure out the following numbers:

•   Income before taxes.

•   Additional income you get on a regular basis (i.e., rental property income, alimony, disability benefits).

•   If you’re filing jointly, you’ll also need to include the other applicant’s income.

•   Tally up your existing debt. This might include credit card debt, other personal loans, a car loan, or student loan debt.

That can help you figure out how much you can afford for your monthly payment.

How to calculate your borrowing power

If you’re mulling over the possibility of debt consolidation, you can use a handy personal loan calculator to gauge how much you’d save on interest or how much your monthly payment will be lowered by rolling over your existing debt to a new one.

Otherwise, you can punch in basic numbers, such as the loan amount, interest rate, and repayment term, to figure out what your monthly payment shakes out to.

Recommended: Pros and Cons of Personal Loans

Does a Personal Loan Make Sense?

Personal loans do have the word “personal” in them. So whether it makes sense for you to take out a personal loan depends on your unique situation and circumstances.

Here are some scenarios where getting a personal loan might be a good idea:

•   You need a large sum upfront. If you need a chunk of cash for a big-ticket purchase or to fund a home improvement project, a large personal loan can provide you with the money to cover a purchase.

•   You have a good credit score. The higher your score, the higher the loan amounts, and the better your rates and terms will most likely be.

•   You’re using the funds for something you really need. If you need the money to cover a financial shortfall, unexpected emergency, or much-needed home remodeling project, it could be a sound move to take out a personal loan.

•   You need the money quickly. The processing and funding times for a personal loan can be a lot faster than other funding choices, such as a home equity loan or HELOC.

•   You want to consolidate high-interest debt. If you qualify for a lower interest rate, lower monthly payments, and more flexible repayment terms, it could make financial sense to take out a debt consolidation loan.

Now, let’s walk through instances when a personal loan may not make sound financial sense:

•   You can’t keep up with monthly payments. If you’ve looked at your situation, do the math, and realize that you’ll have a hard time staying on top of your monthly payments, then a personal loan might not be the right choice for you at the time.

•   You have time to save for your major purchases and goals. If you aren’t in a financial pinch and don’t need the money right away, you might be better off saving instead.

•   You don’t need to take out a large amount of money. Unless you have good reason to take out a sizable amount of cash, then it probably doesn’t make financial sense to get a personal loan. Other options, such as a personal line of credit, might be a better move.

Alternatives to Personal Loans

If you’re on the fence about taking out a certain type of personal loan, know that other options exist. Here are other routes to take:

Credit card. If you’re already shouldering a lot of credit card debt and are paying a lot in interest fees, this might not be the best choice for you. But if you need to borrow a small amount — and can reasonably pay off your balance in a short amount of time — then a credit card provides easy access to funding.

Personal line of credit. Don’t need a lump sum upfront and anticipate needing to tap into funds for different purposes? Then a personal line of credit, which is similar to a credit card, might be a better fit.

Peer–to-peer loan. If you’re struggling to qualify for a personal loan with a traditional lender, you might have better odds of getting approved for a peer-to-peer (P2P) loan. Instead of being funded by a financial institution, P2P loans are funded by individuals who serve as investors and are loaning the money. The lending criteria for P2P loans tend to be less stringent than traditional loans.

Home equity loan or home equity line of credit (HELOC). If you’re a homeowner who has built equity in your home, you could qualify for a home equity loan or home equity line of credit (HELOC). Because you are offering your home as collateral, you typically can qualify for higher loan amounts. Plus, home equity loans or HELOCs tend to have less stringent lending criteria.

If possible, consider waiting to take out a personal loan until you’ve worked on building your credit, reduced your debt loan, are earning a higher income, or have a more stable employment history.


💡 Quick Tip: Just as there are no free lunches, there are no guaranteed loans. So beware lenders who advertise them. If they are legitimate, they need to know your creditworthiness before offering you a loan.

The Takeaway

How much of a personal loan you can get depends on a handful of factors, such as what’s available from the lender, your credit score, debt-to-income ratio, and employment history. Plus, it’s important to get your head around what you can reasonably afford to pay each month.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

FAQ

What is considered a large personal loan?

Most lenders offer a maximum personal loan amount of $40,000 to $50,000, and some lenders, including SoFi, offer lending amounts of up to $100,000. But just because a lender offers that doesn’t mean you’ll get approved for it. You’ll also want to be mindful about not taking on more than you need.

How much is too much to ask for a personal loan?

There’s no specific number that constitutes “too much” for a personal loan. That said, an amount might be considered too high if you don’t have a good reason to take out that much money and if you aren’t able to afford the monthly payments.

Does the size of a personal loan affect a credit score?

As your personal loan payments are reported to the three major credit bureau agencies, the size of your personal loan can impact your credit. Your payment history is the largest contributing factor, but loan size can also influence your score.

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Photo credit: iStock/Ridofranz

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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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Automatic payments from your bank account can be a convenient way to pay your bills and subscription charges on time. But the day may come when you need to know how to stop automatic payments on a debit card. This could involve changing your account settings, revoking authorization, or contacting your bank.

Canceling your automatic payments with certain vendors and financial institutions can occasionally be a hassle. And sometimes, if you’re not paying attention, months can go by without you realizing that recurring fees are still being deducted from your account.

Here, you’ll learn four effective ways to stop automatic payments when the time comes to do so.

4 Ways to Stop Automatic Payments

If you’re someone who tends to forget to pay bills in a timely manner, automatic payments attached to your debit card can be a financial lifesaver.

Automatic transfers or ACHs (automatic clearing house) can transfer money from your checking account on a specific date to a business, without any checks being written or credit card interest charges being incurred. This method can be used to cover a myriad of life’s expenses, including the cost of a gym membership, cell phone bills, and your favorite streaming services.

But there are some downsides to automatic payments being applied via your debit card. Maybe you accidentally signed up for recurring payments? Perhaps that monthly shipment of protein shakes was initially exciting, but now you’re sick of drinking strawberry-flavored liquids for lunch. Nobody wants to get stuck paying for something they don’t want.

If you want to keep autopay withdrawals from happening, you’ll need to know how to stop recurring debit card payments. Failure to do so can result in a drain on your bank account, and your sanity.

Federal law grants you the right to cancel an automatic debit card payment, or stop ACH payments, even if you previously permitted them. There are generally no fees or penalties for canceling an automatic payment preference.

Here are 4 tips on how to cancel an automatic payment.

1. Turning Off Automatic Payments in Your Account

These days, most utility companies and vendors invite you to automate your finances. When you create an online account, they will encourage you to sign up for automatic payments. This makes it more likely that they will receive your money in a timely fashion and it may allow them to cut down on monthly billing efforts. It also can make it easier for you to stop an automatic payment.

Your automatic payments can usually be set up and terminated simply by switching an option in your settings. Sign in with your username and password and select “opt out of automatic payments” in your personal account. This action is typically performed in the “billing and payment” section in the site menu. If you need help, a customer service representative can often guide you via online chat or over the phone.

Once you’ve turned off your automatic payment feature, it might be wise to document the event. Take a picture of a confirmation message and note the date.

2. Revoking Authorization from Companies

If you can’t turn off your autopay option through an online account, you may have to contact the company directly and revoke the automatic payment authorization. Some vendors will email or mail you what’s known as a “Revoke Authorization” form.

Once you’ve received the Revocation of Authorization form, fill it out, and keep a copy for yourself before emailing or mailing it back. That way, if the automatic payment charges continue, you’ll have evidence of cancellation to show to your banking institution.

3. Calling Your Bank or Credit Union

Another way to stop automatic payments from your debit card is to contact your bank directly. They may ask you to pen a letter to formally revoke authorization, stating that the company and dollar amount is no longer allowed to be electronically debited from your checking account.

Your bank may also have a Revoking Authorization form you can fill out online or in person. Once the form has been processed, any further attempt by the company to withdraw funds can be dealt with by your bank.

4. Issuing a Stop Payment Order

Instead of filing a form to revoke authorization, you could issue a stop payment order. A stop payment order gives your bank or credit union permission to block a company or vendor from taking money from your account. This process could be done over the phone, in an email, or in person. Some banks may charge a fee for this service.

Keeping an Eye On Your Bank Account

It is possible, even after taking actions to cancel your automatic payments, that you may still see funds being withdrawn from your bank account. While this is frustrating, you may have to contact the vendor or your bank a second time. It’s a good idea to frequently check your bank account to be sure the automatic payments have stopped. Regular check-ins can be part of managing your checking account in a big-picture way too.

Dealing with Unauthorized Automatic Payments

Paying attention to your bank account can also help keep your online accounts safe. Your bank may even alert you to fraudulent charges — automatic payments being made without your consent for things you never signed up for.

Should You Consider Closing a Bank Account?

It’s good to know how to cancel all automatic payments that seem suspicious. One surefire way to avoid recurring fraudulent charges is to close your bank account completely. But this is a drastic measure that could cost you more time and fees.

Instead, contact your bank or credit union. In many cases, they will credit you for the false debit, block the vendor from making future attempts, and suggest further security measures.

Recommended: How to Switch Banks

Should You Cancel Your Debit Card?

If a company keeps making erroneous or unauthorized automatic payments, one way to put a stop to it is to cancel your debit card and receive a new one. In the cases of fraudulent charges by an unknown vendor, your bank will strongly suggest this in order to protect you.

Knowing When to Give Bank Authorization

In order to effectively stop an automatic payment before it happens, be sure and issue the Revoke Authorization form or stop payment order at least three business days before the automatic payment is due, to give your bank time to process the request.

Remember, stopping an automatic payment doesn’t mean you don’t owe money for products received or services rendered. You’ll have to cancel the service agreement completely, or be on top of paying what you owe by the due date through online payments, mailing a check, or other arrangements.]

The Takeaway

Automatic payments from your checking account are a simple and popular way to pay what you owe on time. They can help you avoid late fees and a trip to the mailbox. If you have an online account, you can discontinue an auto payment with only a few clicks. In most cases contacting the company or vendor directly can also get the job done, or you can ask your bank for help. No one can force you to continue automatic payments against your will, and the control of your bank account is in your hands.

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 does it cost to stop an automatic payment?

There are typically no fees when you stop an automatic payment option in your online account or if you do so by contacting a vendor directly. However, a bank might charge a processing fee for issuing a stop payment request.

What happens if you close a bank account with automatic payments?

If you close a bank account, companies and vendors will no longer be able to automatically deduct monthly payments tied to that account. You will have to make other arrangements to pay what you owe or discontinue any service agreements.

Will getting a new debit card stop recurring payments?

Yes. A new debit card comes with a new number. You will have to contact companies with your new card information to continue automatic payments.

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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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Who doesn’t like a bit of extra cash in their pocket? And earning money from spending you’re already doing is arguably even better. If you prefer cash-back rewards with your credit cards, a card that features a 2% cash back flat rate — meaning 2% back on all purchases — can be a solid way to reap rewards.

Let’s go over the ins and outs of what 2% cash back actually means, as well as the pros and cons of a 2% cash-back credit card, to help you determine whether it’s worth your while.

What Is Cash Back?

Cash back is a form of reward that cash-back credit cards offer that allows you to earn money back on purchases you make. Other examples of credit card rewards include points or travel miles.

With a flat-rate cash-back card, all of your purchases earn the same amount in cash back. Other credit card issuers might offer higher cash-back rates on certain spending categories, such as on gas or groceries.
Meanwhile, some may feature rotating bonus categories to give your rewards-earning abilities a boost. For example, you might earn 5% cash back in the fall months on purchases made at restaurants and on gas.

You can redeem the cash-back rewards you earn in the form of a check, bank transfer, or gift card, or as a statement credit. Other options might include making a charitable donation or making a purchase through the issuer’s online portal. Depending on the credit card, there might be a spending threshold you need to meet before you can redeem your cash-back rewards.

What Is 2% Cash Back?

If you’re wondering, ‘What does 2% cash back mean exactly?,’ here’s how it works. Earning 2% cash back simply means that for every $100 you spend on your credit card, you’ll get $2 back. So if you were to spend $1,000, that’s $20 back in your pocket — though you’ll then have to redeem that cash back in order to make the rewards usable.

How 2% Cash-Back Credit Cards Work

As mentioned previously, having a 2% cash-back credit card means you’ll earn 2 cents back for every $1 you spend using the card, or $2 for every $100, and so forth.

There might not be a limit to how much you can earn in cash back. However, in other cases, the card may cap the amount of cash-back rewards you can earn for either regular spending or spending in bonus categories.

Pros and Cons of 2% Cash Back

While a 2% cash back card does come with some advantages, there are some drawbacks as well. Let’s take a look at both:

Pros and Cons of a 2% Cash Back Card
Pros	Cons
Easy to use	Higher APRs compared to non-rewards credit cards
Can rack up rewards quickly	Earning caps may apply
Often no annual fee	Don’t often offer travel rewards or perks

Pros

•   Easy to use: A major benefit of a 2% cash-back credit card is that the rules are simple: You spend money, and get a certain amount back. Plus, redeeming rewards is usually pretty straightforward, and you have a choice of how to do so.

•   Can rack up rewards quickly: If you use your credit card for everyday purchases, you’ll accrue rewards fairly fast. Of course, only put everyday purchases on your card if you can afford to pay them off, and always use your card responsibly, considering what a credit card is and the implications overspending can have for your credit score.

•   Often no annual fee: Many cash-back cards don’t have an annual fee. That means you won’t need to worry about spending enough to offset the fee.

Cons

•   Higher APRs compared to non-rewards credit cards: While your annual percentage rate (APR) on a card partly depends on your credit and other financial factors, rewards credit cards like cash-back cards tend to carry higher interest rates. If you keep a balance on your account, you can expect to pay a pretty penny in interest, given how credit cards work.

•   Earning caps may apply: While some credit cards allow you to earn unlimited cash-back rewards, others place a limit on how much you can earn. If you’re looking to max out your rewards potential, a cap could make that harder to do.

•   Don’t often offer travel rewards or perks: If you’re hoping to earn rewards that apply to travel, such as airline trips or hotel stays, a cash-back credit card likely isn’t the form of rewards credit card for you. While some cards may offer travel redemption options, most don’t, and many also charge foreign transaction fees.

Recommended: When Are Credit Card Payments Due

Is a 2% Cash Back-Credit Card Worth It?

Whether a 2% cash-back credit card is worth it really depends on how you’ll use the credit card. This includes what types of purchases you’d like to make, and if you plan on using your card for bills and everyday expenses, such as gas and groceries. If you use the credit card regularly, you’ll be able to earn a greater amount of cash-back rewards.

However, you’ll also want to balance that spending with sticking to important credit card rules, like not spending more than you can afford to pay off. Because rewards credit cards tend to have higher interest rates, it’s important to avoid carrying a balance so you don’t cancel out the cash back you earn.

A cash-back rewards card might not be worth it if you prefer to use your credit card rewards for travel. In that case, a travel rewards credit card typically will offer more lucrative ways to earn points or miles to use on trips.

Recommended: How to Avoid Interest On a Credit Card

Guide to Using a 2% Cash-Back Credit Card

If you get a 2% cash-back card, here are some tips to keep in mind to use it effectively:

•   Read the redemption rules. Familiarize yourself with credit card requirements, and see if there are any limits on how much cash back you can earn. Similarly, check if you need to hit a minimum amount in cash-back earnings before you can redeem those rewards.

•   Be intentional with your purchases. Devise a plan for how you intend to use your cash-back credit card. Perhaps you would prefer to use it on big-ticket items, or maybe on seasonal purchases, such as during the holidays or back-to-school season. This will help you make the most of your card.

•   Choose how you’ll receive your rewards. You’ll also want to decide whether you plan on receiving the cash-back in the form of an ACH transfer to your account, as statement credit, or as a check dropped in the mail. You also might be able to use your rewards by making online purchases through the credit card’s shopping portal, or by purchasing gift cards or donating to charity.

Recommended: Does Applying For a Credit Card Hurt Your Credit Score

Maximizing 2% Cash-Back Earnings

If you have a cash-back credit card, it’s worth your while to take the time to determine how to maximize your earnings. Here are several ways to do so.

Use Your Card For Everyday Purchases and Bills

Consider using your cash-back card on major spending categories to earn the most on rewards. For example, if you spend $4,500 a year on food for you and your family and put all of your groceries and dining expenses on your card, you’ll get $90 in cash-back on just that spending alone.

You might also consider putting your recurring bills and subscription services on your credit cards. This will allow you to scoop up points in areas you already spend.

Just make sure you aren’t spending beyond your means. Keep an eye on your expenditures, and commit to paying off your balance in full each month.

Put Big-Ticket Buys on Your Card

If you’ve been saving up for a sleek new laptop or coveted designer shoes, consider putting that cost on your 2% cash-back card. That way, you can get the item and earn a bit of cash back on the purchase.

Your card may even come with added perks, such as purchase protection or an extended manufacturer’s warranty.

Look for a Card With No Annual Fee

A card without an annual fee means you won’t need to spend as much to make the cash-back rewards worthwhile. Case in point: If you get a card with a $40 annual fee, you’ll need to put $2,000 in purchases to break even at a 2% cash-back rewards rate.

Pay Off Your Balance in Full Each Month

As cash-back credit cards tend to have higher APRs, make it a point to pay off your card in full. This will help you avoid racking up interest charges, which can cut into the cash-back rewards you earn.

Recommended: What is a Charge Card

Strategize When You’d Like to Redeem Your Cash Back

To maximize your 2% cash-back rewards card, it helps to be intentional with how you choose to redeem your cash-back rewards as well as when you do so. For instance, if you tend to dig a debt hole during the holidays, use your rewards to pay for gifts and other related expenses. Or, you can put the rewards you’ve accumulated toward a statement credit, or redeem it for a gift card for your loved one.

The Takeaway

Whether a 2% cash-back credit card is right for you may depend on a few considerations, such as how often you plan to use the card, whether you may purchase higher-priced items with it, and if you plan to pay off the balance in full each month. It’s also important to understand all of the rules that apply to the credit card. Some cards have limits on how much you can earn in cash back or have annual fees that could cut into the value of your rewards.

A 2% cash-back credit card that’s used regularly, however, can provide you with a steady stream of extra cash that could benefit your budget, and you can also be strategic about how you redeem the rewards depending on your needs at a given time.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

Is 2% cash back good for credit cards?

A 2% flat-rate, cash-back credit card can be a strong choice as a go-to credit card if you intend to use your card for everyday spending. Earning rewards at a flat rate and in this manner is simple and straightforward, as you don’t have to worry about keeping track of rotating categories or figuring out point conversion values.

Is 2% cash back better than points?

A 2% cash back credit card is a no-hassle, straightforward way to earn rewards. While you might earn more points on a travel card, redemption values and ways to redeem points on a travel rewards card can be more complicated. A flat-rate cash-back card can be a good choice to use as a foundation. Then, you can also open a travel card if it makes sense for your needs.

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Photo credit: iStock/LaylaBird

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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Learning how to achieve and maintain a good credit score is a crucial part of your financial health. Not only can it be a badge that says your financial life is in good shape, it can also help you access credit and get approved for loans and insurance at more competitive rates. Being approved for lower interest rates and premiums can in turn save you tens of thousands of dollars over your lifetime.

A solid credit score can also have other perks, such as helping you get approved for products with better features, such as rewards credit cards.

While there’s no one size fits all solution on how to keep a good credit score, there are some best practices you can follow. Read on to learn more about this topic and actual tactics, including:

•   What is a credit score?

•   How can you maintain a good credit score?

•   What are tips to keep your credit score high?

•   How can new credit card users establish a credit score?

What Is a Credit Score?

A credit score is a three digit number ranging from 300 to 850 that is an indicator of your credit behavior. Your score is calculated based on your credit history from all three credit bureaus — Experian, Equifax, and TransUnion — and is based on how lenders may perceive your risk as a borrower.

What exactly does that mean? By reviewing your past use of credit, your score reveals if you are more or less likely to pay back your loans on time. If you are more likely to repay your debts in a timely manner, the less risky you are.

The higher your credit score, the more creditworthy you are in the eyes of lenders.

What Affects Your Credit Score?

Several factors can affect your credit score, such as your payment history, the number of loan or credit applications submitted, and the age of your accounts you hold. There are also different scoring models, such as FICO vs. VantageScore. Each weighs factors differently to arrive at a credit score. Meaning, there may be some differences in your credit score.

Lenders may look at one credit score or all of them, plus different qualification criteria when deciding whether to approve you for a loan and at what interest rate.

How Is Your Credit Score Calculated?

Though there are different credit scoring models, most use similar financial behaviors to calculate them.

They’re grouped in the following categories:

•   Payment history: This factor is one of the most important factors in your credit score as it assesses whether you’re likely to pay your loan on time. Credit scoring models will look into current and past account activity, including any late or missed payments.

•   Amounts owed or available credit: The percentage of the available balance you’re using is your credit utilization. The more you are using available credit in your revolving accounts (like your credit cards and lines of credit), the more it could appear you rely too much on credit. This can make you look like a risky person to whom to lend.

•   Age of credit history: The longer your credit history, the more a lender can look into your credit behavior. It’s usually considered good to have a long credit history vs. a very short or recent one.

•   Account types: Having a different mix of loans offers more insight into how you handle various accounts. Credit-scoring models may not, however, use this as a major factor when calculating your score.

•   New or recent credit: The more recent applications you submit for new loans or credit accounts, the more risky you may appear to be. That’s because it may look like you need to rely on credit; that you are quickly trying to acquire different forms of access to funds.

(There are some exceptions, such as shopping around for mortgages within a short span of time.)

8 Tips for Maintaining Your Credit Score

Understanding the importance of a good credit score and what goes into it can help you protect the one you have. The following are eight suggestions on how to maintain a good credit score.

1. Pay Your Credit Card Bills on Time

Ensuring you’re on top of your bills (not just your credit cards) will help keep a positive payment history in your credit reports. This is the single biggest contributing factor to your credit score at 30% to 40%. Consider setting up automatic payments or regular reminders to ensure you’re paying on time.

2. Keep Your Credit Utilization Low

Your credit utilization is the percentage of the available limit you’re using on your revolving accounts like credit cards. Basically, you don’t want to spend close to or at your credit limit. A good rule of thumb to follow is to now use more than 30% of your overall credit limit.

So if you have one credit card with up to $10,000 as the limit, you want to keep your balance at $3,000 or lower.

3. Maintain Credit History With Older Credit Cards

Even if you don’t use your older credit cards that often, keeping them open means you can maintain your long credit history. Consider charging a small or occasional amount, whether an espresso or gas station fuel-up, to ensure your account stays open. This can reassure prospective lenders that you have been managing credit well for years.

4. Apply for a New Card Only When Important

Consider this as you try to keep a good credit score: Go slow. Since credit-scoring models look at the number of times you apply for new credit, only open one when you really need it. Stay strong in the face of offers to get free shipping or 10% off if you sign up for a card that many retailers promote.

Spreading out your applications is a good idea rather than regularly or heavily putting in a lot of card applications. By moving steadily and choosing a credit card and other types of funding carefully, you likely won’t raise red flags, such as that you need to rely heavily on credit.

5. Frequently Check Your Credit Reports for Errors

Mistakes can happen, and errors in your credit reports could negatively affect your score. You can get your credit reports for free at AnnualCreditReport.com from all three credit bureaus.

It’s wise to check your credit scores regularly, which won’t impact your score. If you see an error — whether it’s an account you don’t own or a bill marked unpaid that you know you took care of — dispute it as soon as possible.

6. Make Payments in Full When Possible

Making payments in full will help you maintain a positive payment history and lower your credit utilization. Both of these can maintain your creditworthiness and save you money on interest charges.

7. Don’t Close Old Credit Cards

Closing your old credit cards could shorten your credit history. It could also increase your credit utilization because it will lower your available credit limit. Even if you make the same amount in purchases, your credit utilization would go up when your credit score updates.

For example, if you currently have an overall credit limit of $28,000 and you have $7,000 in credit card balances, your credit utilization is 25%. If you close a credit card which had a $7,000 limit, you then lower your total available credit to $21,000 your credit utilization will go up to 33%.

8. Live Within Your Credit Means

It can be hard to say no to an invitation to try a pricey new restaurant or not tap to buy when scrolling through social media. But when you let your spending get out of hand, you may use your credit cards too much. It can feel like free money in the moment — but you still have to pay it back. If you overextend yourself, you may find it hard to pay your balance on time and risk a late or missed payment.

Instead, spend only what you can afford and try to avoid lifestyle creep (having your spending rise with your pay increases or even beyond them). That can help provide some guardrails for using credit cards responsibly.

Establishing a Credit Score for New Credit Card Users

Trying to establish a credit score can be a challenge since, ironically enough, you need credit to build credit.

If you are in this situation, there are several options to pursue, such as the following:

•   Open a secured credit card: A secured credit card is one where you’ll put down a refundable cash deposit that will act as your credit line. You can use this to establish credit and apply for an unsecured credit card. Some issuers will upgrade you once you make consistent on-time payments for a predetermined amount of time.

•   Apply for a credit builder loan: These types of loans are specifically geared towards helping you establish and build credit over time. Instead of getting the loan proceeds like a traditional loan, the funds are held in an escrow account until you pay back the loan in full.

•   Become an authorized user: You can ask a loved one, like a parent or even a close friend, if they’re willing to add your name on their credit card account. Doing so means the credit account will go in your credit history. Of course, that doesn’t give you access to use their account without restraint. The guardrails can be established between you and the original card holder.

The Takeaway

Maintaining a good credit score (and keeping that score high over time) comes with perks such as increasing the likelihood of getting approved for loans at more favorable terms. You might qualify for lower interest rates, saving you a considerable amount of money over time.

Using a credit card wisely is one of the ways you can build and maintain your credit score. But that’s not all there is to opening a credit: You also likely want one with great perks.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

How can I maintain my credit score?

You can maintain your credit score by consistently making on-time payments, keeping a low credit utilization, and limiting applications for new credit.

Why is it important to maintain a good credit score?

Maintaining a good credit score can help increase the chances of getting approved for loans with more favorable rates and terms. It can also mean lower insurance premiums.

How can I maintain a good credit score without debt?

You can maintain a good credit score by paying off all your credit card balances each month so you don’t carry that kind of debt. Keeping older accounts open and using them occasionally can also contribute to a good credit score.

What can I do to build a good credit rating?

You can build a good credit rating by ensuring you’re making payments on time, not using all your available credit limit, and being careful in applying for new loans (that is, don’t apply for too many lines of credit too quickly). These are some of the best ways to achieve and maintain a good credit rating.

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Photo credit: iStock/PeopleImages

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.

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 .

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.

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