## How to Calculate Annual Percentage Yield (APY)

Annual percentage rate, or APY, is the rate of interest earned on a savings or investment account in one year, including compound interest (the interest you earn on interest). Unlike the nominal interest rate, which does not consider the impact of interest compounding, APY provides a more accurate picture of how much you’ll earn in an account over the course of one year. This allows you to compare different financial products and make informed decisions about where to put your money for the best returns.

Read on to learn the basic APY meaning, how to calculate annual percentage yield, and some of the limitations of APY.

## Understanding Annual Percentage Yield (APY)

An abbreviation for annual percentage yield, APY indicates how much interest a bank account, such as a high-yield savings account or certificate of deposit (CD), earns in one year, expressed as a percentage.

An APY includes the effect of compounding interest, which is when you earn interest on both the money you’ve saved (principal) and the interest you earn. Depending on the bank and type of account, interest on an account can compound (i.e., get calculated and added) yearly, monthly, quarterly, or daily. The more frequently an account compounds, generally, the more the account will earn.

That’s why it’s important to consider APY — and not just the interest rate — when looking for a bank account. Comparing APYs helps you compare financial products as apples to apples by letting you know the real return on the account. Almost all savings accounts, and some checking accounts, have an APY.

### Simple Interest vs Compound Interest

Understanding APY involves knowing the difference between simple and compound interest. With simple interest, an account holder earns interest only on the principal, or the initial amount of money they deposited. With compound interest, on the other hand, an account holder earns interest on the principal along with the accrued interest.

Compound interest helps your money grow faster, as you’ll earn interest on your interest. The frequency of compounding is important; the more often your interest compounds, the more money you’ll generally earn. An account may compound interest daily, monthly, quarterly or annually.

When it comes to savings and investment accounts, simple interest is less common than compound interest.

Recommended: Difference Between APY vs Interest Rate

## Calculating APY

There is a specific formula for calculating APY. To use it, you’ll need to know your interest rate and how frequently the interest compounds.

APY = (1 + r/n)^n – 1

Where:

•   ^ = to the power of

•   r = the nominal interest rate

•   n = the number of compounding periods per year

### APY Calculation Examples

To see how much compounding frequency can affect your APY, let’s look at four examples with the same interest rate but four different compounding periods (annually, quarterly, monthly, and daily).

•   Annual compounding interest: n = 1

•   Quarterly compounding interest: n = 4

•   Monthly compounding interest: n = 12

•   Daily compounding interest: n = 365

Assume a nominal interest rate (r) of 5.00%.

Annual compounding interest:

APY = (1 + .05/1)^1 – 1

APY = 5.00%

Quarterly compounding interest:

APY = (1 + .05/4)^4 – 1

APY = 5.09%

Monthly compounding interest:

APY = (1 + .05/12)^12 – 1

APY = 5.12%

Daily compounding interest:

APY = (1 + .05/365)^365 – 1

APY = 5.13%

As you can see, the more often interest is compounded, the higher the APY is. Choosing an account or investment that compounds daily will yield a higher amount earned from interest at the end of the year.

Fortunately, you don’t have to do any fancy calculations to learn the APY of a bank account. To help people compare accounts and accurately estimate possible earnings, banks are required to display account APYs.

Recommended: Use this APY calculator to start comparing APY.

### Fixed vs Variable APY

Another factor to consider with APY is whether it is fixed or variable. Savings accounts, checking accounts, and money market accounts are typically variable rate accounts. This means the APY can change over time depending on market conditions.

Fixed rate accounts, on the other hand, have an APY that does not change during the term of the account. For example, a certificate of deposit (CD) account usually has a fixed APY for the term of the CD. No matter what happens to market rates, the APY will stay the same.

Both types of APYs have pros and cons. Locking in a fixed APY can be beneficial if market rates go down after you open the account. However, it could be a negative should market rates go up, since you won’t benefit from the increase.

Recommended: What Is a High-Yield Checking Account?

## Limitations and Considerations of APY

Knowing the APY for an account or investment can tell you a lot, but there are other factors to consider when choosing where to put your money. Here are a few other things to keep in mind.

•   Fees and penalties: Some financial products come with monthly and incidental fees or penalties that can impact the effective return. APY calculations typically do not account for these additional costs, so it’s a good idea to consider them when evaluating the overall profitability of a deposit account or investment.

•   Liquidity: While CDs often have higher, fixed APYs compared to traditional savings accounts, your money is tied up until the maturity date. That means you can’t access that money in the event of an emergency if you want to earn the interest you were promised upon investing.

•   Fixed vs. variable: A high-yield savings account may advertise a high APY right now, but it is likely variable. This means that as the market changes, the interest rate could go down. It’s a good idea to routinely check how much interest your savings account (or checking account or money market account) is earning. If the APY has significantly dropped, you may want to consider opening a bank account with a higher APY elsewhere.

•   Inflation: Inflation erodes the purchasing power of money over time. While APY provides a return rate, it does not account for inflation. To understand the real rate of return on any type of account or investment, it’s important to adjust an APY for inflation.

•   Taxes: Interest earned on savings accounts is typically subject to taxes. The APY does not consider the impact of taxes on the effective return. So it’s important to factor in tax obligations when evaluating the net return on an investment.

## The Takeaway

Understanding and calculating APY is essential for making informed financial decisions. Whether you’re evaluating savings accounts or investment products, APY provides a clear picture of the true return, accounting for the effects of compounding interest. By comparing APYs, you can see how different savings vehicles stack up against each other. This can help you choose the most profitable options and optimize your financial growth.

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

### What is the difference between APY and APR?

APY stands for annual percentage yield and tells you how much interest you’ll earn on a deposit or investment account over the course of one year, including compounding interest (which is when your interest also earns interest). APR stands for annual percentage rate and represents the annual cost of borrowing money. It includes the interest rate plus any fees and costs associated with the loan or line of credit to reflect the real cost of borrowing.

### How do you calculate the APY for a savings account or investment?

To calculate the annual percentage yield (APY) for a savings account or investment, you can use this formula:

APY = (1 + r/n)^n – 1

Where:

•   ^ = to the power of

•   r = the nominal interest rate

•   n = the number of compounding periods per year

Banks and credit unions are required to display the APY of their financial products, so you generally don’t need to do any calculations. If you know the APY and how much you’ll be depositing, you can use an online APY calculator to determine how much interest you’ll earn by the end of the year.

### What factors can affect the APY of a financial product?

The main factors that affect the annual percentage yield (APY) of a financial product are the nominal interest rate and how often the interest compounds (meaning gets calculated and added to the account). Generally, the higher the interest rate and the more often it compounds, the higher the APY.

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 recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“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, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

As an alternative to direct deposit, 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.

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.

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.

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

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## Can You Refinance Student Loans More Than Once?

Refinancing your student debt can have many benefits, including saving money on interest, lowering your monthly payments, or changing your repayment terms. But can you do it more than once? And, if so, should you?

Yes. And maybe.

There is no limit on how many times you can refinance your student loans. If your finances and credit have improved since you last refinanced and/or market interest rates have gone down, it may be worthwhile to refinance your loans, even if you’ve refinanced before.

That said, refinancing multiple times isn’t always worthwhile. Here are key things to consider before you refinance your student loans more than once.

## How Many Times Can You Refinance Student Loans?

Technically, there is no limit to the number of times you can refinance your student loans with a private lender. In fact, as long as you qualify, you can refinance your student loans as many times and as often as you’d like. And given that lenders often don’t charge prepayment penalties or origination fees, there may be no extra cost involved with refinancing your student loans again.

Refinancing student loans again generally makes the most sense when your finances or credit score improves or interest rates decline. In these cases, it may be possible to save thousands of dollars in interest by reducing your interest rate by a couple percentage points.

If you’re not able to get a lower rate, however, refinancing may not make sense, especially if it extends your repayment term, leading to higher costs.

Also keep in mind that if you only have federal student loans, refinancing with a private lender may not be your best option, since it means giving up government protections like income-driven repayment plans and Public Service Loan Forgiveness.

## When Should You Consider Refinancing Your Student Loans Again?

If you’ve already refinanced your loans with a private lender, here are some key reasons why you might consider refinancing again.

### Your Financial Situation Has Changed

If you have experienced a significant improvement in your credit score, income, or overall financial health since your last refinance, you may be eligible for a better loan rate and terms than you did even a year ago. In fact, some borrowers with limited or poor credit might refinance their loans multiple times as their credit score improves and they become more desirable applicants.

### Interest Rates Have Come Down

Student loan rates are not only tied to your creditworthiness, but also current economic conditions. If market interest rates have dropped since your last refinance, you might be able to secure a lower rate, reducing your overall interest payments. Even a small reduction in interest rates can lead to substantial savings over the life of the loan.

It’s a good idea to keep an eye on market trends and compare current rates to what you’re paying to determine if refinancing again makes financial sense.

Recommended: 3 Factors That Affect Student Loan Interest Rates

### You’re Looking for Different Loan Terms

Changing loan terms can also be a reason to refinance again. Perhaps your initial refinance resulted in a longer loan term to lower your monthly payments, but now you’re in a better financial position and can afford higher payments to pay off your loan faster.

Conversely, you might need to extend your loan term to lower monthly payments due to a change in financial circumstances. Just be aware that extending your repayment term can cost you more money in interest over time.

## What Are Some Advantages of Refinancing Multiple Times?

Before you decide to refinance your student loan again, it’s important to know the advantages and disadvantages of this strategy. Here’s a look at some of the pros of refinancing more than once.

•   Save money: Refinancing multiple times can help you take advantage of lower interest rates as your financial situation improves or as market rates decrease. Each reduction in interest rates can save you money over the life of your loan. You can also shorten your loan term to pay off your debt faster, which can also reduce what you pay in interest.

•   Better lender benefits: Refinancing with a different lender can provide access to better benefits, such as more flexible repayment options and hardship programs (such as deferment or forbearance). Choosing a lender that offers these benefits can provide additional financial security.

•   Promotional offers: Some lenders will offer special promotions or discounts for refinancing with them — if you see a great deal, it may be worth making the switch to that lender.

## What Are Some Disadvantages of Refinancing Multiple Times?

Refinancing again also has potential drawbacks. Here are some to consider.

•   Credit impact: When you formally apply for a refinance, the lender runs a hard credit inquiry, which can negatively affect your credit score. While a single inquiry has a minimal impact, multiple inquiries in a short period can lower your credit score.

•   You could end up paying more: If you refinance to a longer repayment term, or even the same term every few years, you’re extending the amount of interest payments you make. This can keep you in debt longer and increase the total amount of interest you pay. If you refinance to a variable-rate student loan, the rate could also go up during the life of the loan.

•   Time and effort: The process of refinancing can be time-consuming, involving research and making comparisons between lenders, as well as paperwork and credit checks. Doing this multiple times requires a significant investment of time and effort. It might not always be worth it if you won’t save much money with your new loan.

## Things to Look for When Refinancing

If you’re considering another refinance, it’s important to look at the following factors to ensure you’re making a smart financial decision.

•   Interest rates: Compare the offered interest rates with your current rate to ensure you’re getting a better deal.

•   Fixed vs. variable rates: Variable-rate loans have interest rates that typically start off lower, but can fluctuate based on market rates. The rate could climb if the rate or index it’s tied to goes up (and vice versa). Variable-rate loans might be a good choice for shorter-term loans. The longer the loan term, the bigger the chance of a rate hike.

•   Loan terms: Evaluate the terms of the new loan, including the length of the loan and monthly payment amounts. Keep in mind that a longer term can lead to lower payments but increase the total cost of your loan in the end.

•   Fees and costs: Be aware of any fees associated with the refinance and calculate whether the savings outweigh these costs.

•   Lender reputation: Research the lender’s reputation and customer service to ensure you’re working with a reliable and supportive institution.

•   Borrower benefits: Consider the benefits offered by the lender, such as flexible repayment options, forbearance, or deferment.

Recommended: How Soon Can You Refinance Student Loans?

## Refinancing Your Student Loans With SoFi

Refinancing student loans multiple times can be a strategic move to save money and better manage your debt. While there’s no limit to how many times you can refinance, it’s important to carefully consider the costs, benefits, and your financial goals each time.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

## FAQ

### Can I consolidate student loans more than once?

Typically, you can’t consolidate federal student loans into a Direct Consolidation Loan more than once. However, you may be able to do this if you have federal loans that were not included in a previous consolidation, or you previously consolidated loans under the Federal Family Education Loan (FFEL) consolidation program. Remember that federal consolidation does not lower your interest rate.

With private student loan consolidation, called refinancing, there is no limit on the number of times it can be done. Each refinance creates a new loan with new terms, so you’ll want to evaluate the benefits, interest rates, and any potential fees before deciding to refinance again.

### How many times can you refinance a loan?

There is typically no set limit on how many times you can refinance a loan, including student loans. As long as you qualify, you can refinance your student loans as many times and as often as you’d like. Each refinance involves taking out a new loan to pay off the existing one, so it’s important to consider factors like interest rates, loan term, and any associated fees.

### How many times can you take out student loans?

There’s no set limit on how many student loans you can take out, but the federal government and private lenders do impose lending limits based on dollar amount.

For federal student loans, there are annual and aggregate (lifetime) limits based on your degree level and dependency status. For private student loans, lenders set their own annual and aggregate student limits. Often, they will cover up to the annual cost of attendance minus other financial aid each year.

SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.

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.

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 .

SOSL-Q224-1920974-V1

## Using Your 401(k) to Pay Down Debt

It may be tempting to tap your 401(k) retirement savings when you have pressing bills, such as high-interest credit card debt or multiple student loans. But while doing so can take care of current charges, you may well be short-changing your future. Early withdrawal of funds can involve fees and penalties, plus you are eating away at your nest egg.

Learning about the rules for withdrawing money from your 401(k) and the costs associated with deducting money in this way can help you make the right decision. Also valuable: Knowing some alternatives to 401(k) loans to pay off debt.

## What Are the Rules for 401(k) Withdrawal?

Tax-deferred retirement accounts, such as 401(k) plans and 403(b) plans, were designed to encourage workers to save for retirement. So the rules aren’t super friendly when it comes to withdrawals before age 59 ½.

When you make a 401(k) withdrawal, it removes money from your account permanently — you don’t pay the money back. You should expect to pay taxes on the amount you withdraw. Depending on your age, you may have to pay an early withdrawal penalty as well. (You’ll learn more about these costs below.)

Depending on your financial situation, however, you may be able to request what the IRS calls a hardship distribution. Employer retirement plans aren’t required to provide hardship distribution options to employees, but many do. Check with your HR department or plan administrator for details on what your plan allows.

According to the IRS, to qualify as a hardship, a 401(k) distribution must be made because of an “immediate and heavy financial need,” and the amount must be only what is necessary to satisfy this financial need. Expenses the IRS will automatically accept include:

•   Certain medical costs

•   Costs related to buying a principal residence

•   Tuition and related educational fees and expenses

•   Payments necessary to avoid eviction or foreclosure

•   Burial or funeral expenses

•   Certain expenses to repair casualty losses to a principal residence (such as losses from a fire, earthquake, or flood)

You still may not qualify for a hardship withdrawal, however, if you have other assets to draw on or insurance that could cover your needs. And your employer may require documentation to back up your request.

You probably noticed that credit card and auto loan payments aren’t included on the IRS list. And even the tuition requirements can be tricky. You can ask for a hardship distribution to pay for tuition, related educational fees, and room and board expenses “for up to the next 12 months of post-secondary education.” The student can be yourself, your spouse, your child, or another dependent. But you can’t use a hardship distribution to repay a student loan from when you attended college.

💡 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.

## Understanding 401(k) Withdrawal Taxes and Penalties

Even if you can qualify for a hardship distribution, plan on paying taxes on the distribution (which is generally treated as ordinary income). Unless you meet specific criteria to qualify for a waiver, you’ll also pay a 10% early withdrawal penalty if you’re younger than 59 ½.

Example: If you’re 33 years old, and you have enough in your 401(k) to withdraw the \$20,000 you need to pay off an urgent credit card bill.

•   Unless you qualify for a waiver, you can expect to pay a \$2,000 early withdrawal penalty.

•   Then, when you file your income tax return, that 401(k) distribution will most likely be counted as ordinary income, so it will cost you another 25% or so in taxes.

•   If the added income bumps you into another tax bracket, your tax bill could be higher.

But taxes and penalties aren’t the only costs to consider when you’re deciding whether to go the distribution route.

## Taking a Loan from Your 401(k)

You may be able to avoid paying an early withdrawal penalty and taxes if you borrow from your 401(k) instead of taking the money as a distribution.

A loan lets you borrow money from your 401(k) account and then pay it back to yourself over time. You’ll pay interest, but the interest and payments you make will go back into your retirement account.

But 401(k) loans have their own set of rules and costs, so you should be sure you know what you’re getting into. Also, depending on your employer, you could take out as much as half of your vested account balance or \$50,000, whichever is less.
​​

### Pros:

•   There are some appealing advantages to borrowing from a 401(k). For starters, if your plan offers loans (not all do), you might qualify based only on your participation in the plan. There won’t be a credit check or any impact to your credit score — even if you miss a payment. And borrowers generally have five years to pay back a 401(k) loan.

•   Another plus: Although you’ll have to pay interest (usually one or two points above the prime rate), the interest will go back into your own 401(k) account — not to a lender as it would with a typical loan.

### Cons:

•   You may have to pay an application fee and/or maintenance fee, however, which will reduce your account balance.

•   A potentially more impactful cost to consider is how borrowing a large sum from your 401(k) now could affect your lifestyle in retirement. Even though your outstanding balance will be earning interest, you’ll be the one paying that interest.

•   Until you pay the money back, you’ll lose out on any market gains you might have had — and you’ll miss out on increasing your savings with the power of compound interest. If you reduce your 401(k) contributions while you’re making loan payments, you’ll further diminish your account’s potential growth.

•   Another risk to consider is that you might decide to leave your job before the loan is repaid. According to IRS regulations, you must repay whatever you still owe on your 401(k) loan within 60 days of leaving your employer. If you fail to pay off the outstanding balance in that time, it will be considered a distribution from your plan. And when tax time rolls around, you’ll have to include that amount on your federal and state tax returns, where it will be considered ordinary income.

If you’re under age 59 ½ and the loan balance becomes a distribution, you may also have to pay a 10% early withdrawal penalty. There may be similar consequences if you default on a 401(k) loan.

Recommended: Pros & Cons of Using Retirement Funds to Pay for College

## How Early 401(k) Withdrawals Can Impact Your Financial Future

Now that you know more about cashing out a 401(k) plan or taking a loan from your retirement account, also take a big picture view of what early withdrawals can mean.

•   On the plus side, you can potentially pay off a loan and escape the monthly payments that are costing you. For instance, the money could go toward a high-interest credit card debt, which could be a big relief and lower your money stress. It could take those monthly payments off the table and free up cash in your monthly budget.

•   However, on the downside, there’s more to consider other than the penalties and taxes. By taking money out of your retirement fund, you are losing the chance for this money to grow and provide for you in your later years. Compound interest creates the potential for your initial investment to increase significantly over time. So every dollar you take out now could mean several dollars less in retirement.

•   Essentially, withdrawing from your 401(k) now is like borrowing money from your future self, because you’re losing long-term growth. Even if you put back in the initial funds you had invested, you won’t have that long runway, time-wise, to recoup the growth.

Recommended: Using a Personal Loan to Pay Off Credit Card Debt

## Alternatives to Cashing Out a 401(k) to Pay Off Debt

When it comes to paying down debt, your 401(k) isn’t the first or only place you can look for relief. There are some solid alternatives.

•   Refinancing your student loan or auto loan can mean getting a lower interest rate than you’re currently paying. This can lower your monthly payments. Or you might extend the term of the loan, which is another way to lower the monthly payments.

However, if you have federal student loans, keep in mind that refinancing will mean you forfeit some benefits and protections, such as forbearance or deferment. Plus, if you refinance for a longer term, you are likely paying more in interest over the life of the loan.

•   If you have credit card debt or other high-interest debt, you could look into a credit card consolidation loan. Debt consolidation loans are personal loans that are designed to pay off your current loans or credit cards, ideally with lower monthly payments.

You can get these loans from a bank, credit union, or online lender, often by filling out a quick form and sending a few scanned documents. But it’s important to remember that this is still taking on debt, even if it’s debt with different terms. While extending your loan term means you’ll likely pay more in interest over the life of your loan, it might be a worthwhile move to ensure you can cover your debt payments.

## What Are Some Ways of Minimizing Risks to Your Retirement?

If you decide using a 401(k) to pay off debt is your best (or only) option, here are a few things that could help you lower your financial risk.

•   Stop using your high-interest credit cards. If you continue to use your credit cards, and then have credit cards and the 401(k) loan payments to make every month, you could end up in even more financial trouble.

•   Continue to make contributions to your 401(k) while you’re repaying the loan — at least enough to get your employer’s match.

•   Don’t overborrow. Creating a budget could help you determine how much you can comfortably pay each quarter while staying on track with other goals. And try to stick to taking only the amount you really need to dump your debt and no more.

## The Takeaway

While using your 401(k) to pay down debt is possible, it’s often not the best financial move you can make. That’s because 401(k) withdrawals often come with taxes and penalties that can eat up a third of your loan amount. Taking a loan from your 401(k) has its own disadvantages, including interest charges and strict repayment rules if you leave your job. But the most compelling reason is the effect that withdrawing retirement savings will have on your future lifestyle: Because of compounding interest, every dollar you withdraw results in several dollars of lost investment gains.

Before you use your 401(k) to pay off debt, consider other available alternatives, such as a personal loan.

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

### How much is the penalty for an early 401(k) withdrawal?

If you withdraw funds from your 401(k) before age 59 ½, you will likely be assessed a 10% penalty, plus there may be fees involved and income tax due.

### Can you take a loan from your 401(k)?

Your 401(k) plan may allow you to take a loan. This can be subject to fees and taxes, and, if you change jobs while you have the loan, the whole amount could become due.

### What are alternatives to a 401(k) withdrawal to pay off credit card debt?

You might consider a personal loan (aka a debt consolidation loan) to help pay off the loan. You would look for a loan that offers for favorable terms than your card does to help you lower your monthly payment and get out of debt.

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.

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 .

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

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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.

SOPL-Q224-1940017-V1

## Pay Down My Debt or Save Money: What to Consider

Should I save or pay off debt? It’s a tough financial choice. Prioritizing debt repayment can help you pay off what you owe faster, freeing up more money in your budget for saving. It can also help you spend less on interest charges. But that approach can also backfire. If you delay saving and get hit with an unplanned expense, you can end up with even more high-interest debt.

Whether it makes sense to pay off debt or save depends largely on the specifics of your financial situation. The right decision might actually be to try to do both.

## When You Should Consider Paying Down Debt First

In certain situations, it makes sense to prioritize paying off debt over putting money into savings. This could be the best path forward if:

•   You have high-interest debts. High-interest debt, such as credit card debt, can quickly accumulate and become overwhelming. The longer it takes to pay off, the more interest you’ll accrue, making it harder to escape the debt cycle.

•   Your debt is causing you significant stress or anxiety. If having debt hanging over you keeps you up at night and you want to clear your balances as quickly as possible, putting debt repayment ahead of saving might make sense, provided you have at least some money in the bank for emergencies.

•   A large portion of your income is going toward monthly debt payments. Having a high debt-to-income ratio (DTI) not only limits your financial flexibility, but can also negatively impact your credit score. A lower score could make it hard to secure loans at low interest rates or even rent an apartment in the future.

## Strategies to Pay Down Debt

Once you commit to paying down your debt, you’ll want to come up with a plan for how to do it. Here are some strategies to consider.

•   Avalanche method: With this approach, you list your debts in order of interest rate. You then funnel any extra money toward the balance with the highest rate, while paying the minimums on the other debts. Once the highest-interest debt is paid off, you move to the next highest, and so on. This strategy minimizes the amount of interest you pay over time.

•   Snowball method: With the snowball method, you list your debts in order of size, ignoring the interest rate. You then funnel extra money towards the smallest debt, while paying the minimum on the rest. When the smallest balance is paid off, you move on the next-smallest debt, and so on. This can provide psychological benefits by giving you quick wins and motivating you to continue.

•   Debt consolidation loan: A debt consolidation loan is a type of unsecured personal loan with fixed interest rates and repayment terms. If you have multiple debts, consolidating them into a single loan with a lower interest rate can simplify payments and reduce the total interest paid.

•   Balance transfer: For credit card debt, a balance transfer to a card with a low or 0% introductory rate can help you save money on interest and pay off your debt faster. Just be sure that you’ll be able to pay off the balance before the promotional rate ends. If not, you could end up paying more in interest than you are now. Also be aware of transfer fees.

•   Automate your debt payments: Setting up automatic payments ensures you never miss a payment, which helps avoid late fees and keeps you on track with your debt repayment plan.

## When You Should Consider Saving First

Aggressively paying off debt isn’t always the best first choice, however. You may want to prioritize saving money over paying down debt if:

•   You have little to no emergency savings. Without a cushion of savings in the bank, an unplanned expense or loss of income could result in racking up even more debt, putting you further in the hole.

•   You have low-interest debts. If you have debts with relatively low annual percentage rates (APRs) and don’t feel unduly burdened by them, it’s fine to focus on saving, while paying off your loans according to schedule.

•   Your employer offers a 401(k) match. If your employer offers a retirement savings plan along with a company match, it’s a good idea to try to contribute at least enough to get the maximum employer match. This is essentially free money you could be missing out on.

Recommended: 10 Ways to Save Money Fast

### Determining How Much to Save

How much you should be saving will depend on your age and situation, but here are some general guidelines to keep in mind.

•   Emergency fund: Experts recommend building an emergency fund of three to six months’ worth of expenses and stashing it in a high-yield savings account. If you’re self-employed or work seasonally, you may want to aim closer to eight or even 12 months’ worth of expenses.

•   Retirement savings: If your employer offers a 401(k) match, you’ll want to contribute at least enough to get the full match, then build from there. One rule of thumb is to work up to saving at least 15% of your pretax income each year, including employer contributions.

•   Other savings goals: For other savings goals, such as a vacation, large purchase, or down payment for a house, you’ll want to set a timeline and break down the total amount into manageable monthly savings targets. For savings goals that are five-plus years away, like paying for a child’s education, consider contributing to investment accounts that can potentially yield higher returns over time.

Recommended: How to Set and Reach Your Savings Goals

## Tips on Balancing Paying Debt and Saving

If you have high-interest debt under control and already have some cash in the bank to cover a minor emergency (like a car or home repair), consider saving and paying down debt at the same time. Here are some tips to help you manage both.

•   Create a budget: A basic budget can help you track your income, expenses, and savings. The key is to allocate specific amounts for debt repayment and savings to ensure both are addressed every month.

•   Automate saving: Once you have target monthly savings amounts, it’s a good idea to set up automatic transfers to your savings accounts. This ensures consistent saving without the temptation to spend the money.

•   Increase income: You might want to explore ways to boost your income, such as taking on a side gig, freelancing, or asking for a raise. You can then use the additional income to pay down debt faster and/or boost your savings.

•   Cut unnecessary expenses: Review your expenses and identify areas where you can cut back. Redirect these funds toward debt repayment and saving.

•   Use windfalls wisely: If you receive a bonus, tax refund, or any unexpected sum of money, consider using it to pay down debt or boost your savings rather than going on a shopping spree.

## The Takeaway

Saving and paying down debt is a balancing act. Which is more important? There’s no one-size-fits all answer. Generally speaking, you’ll want to fund your emergency savings account and take advantage of an employer match on retirement savings before you aggressively focus on debt payoff. After that, you can focus on saving and knocking down debt at the same time.

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

### Is it better to pay off debt or have money saved?

You may want to prioritize saving over debt payoff if you don’t have an emergency fund, aren’t taking advantage of an employer’s 401(k) match, and/or have low-interest debts. If, on the other hand, you have a solid emergency savings fund, high-interest debts (like credit card debt), and no employer retirement match, you may be better off focusing your efforts on paying down debt over saving.

### How much money should I save before paying down debt?

Before aggressively paying down debt, it’s a good idea to save three to six months’ worth of living expenses in an emergency fund in a high-yield savings account. If you don’t have any savings to draw on to cover an unexpected expense or event, you may have to rely on high-interest credit cards to get by, which would compound your debt.

### What bills should I pay down first?

You generally want to prioritize paying down high-interest debt first, such as credit card balances and payday loans, as they accrue interest rapidly. Next, focus on any other unsecured debts, like personal loans, followed by secured debts (like car loans and mortgages), which tend to have lower interest rates.

Photo credit: iStock/malerapaso

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 recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“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, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

As an alternative to direct deposit, 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.

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.

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.

SOBK-Q224-1920547-V1

## How to Catch up on Bills When You’re Behind

Sometimes life throws a few curveballs your way. When those curveballs include unexpected expenses (like an emergency car repair or medical bills) or a job loss, it can be hard to keep your budget on track. This may lead to paying some bills late, or not at all, which only puts you further in the hole, thanks to interest and late fees. Your credit can also take a hit.

While you may not be able to get back in the black overnight, there are ways to regain control of your finances and work toward financial stability. Read on for simple strategies that can help you get caught up on bills, plus tips on how to avoid getting behind in the future.

## 6 Tips for Getting Caught up on Bills

Falling behind on bills can feel overwhelming, but it’s a challenge that many people face at some point. The key is to face missed payments head on and come up with a plan to gradually bring all of your accounts up to date. These tips can help.

### 1. Make a Master List of Bills

A good place to start is by organizing your bills and making a master list of everything you owe. This includes rent/mortgage, utilities, insurance, credit card payments, personal loans, and any other debts. Consider organizing them by due date, amount owed, and interest rates. Having a clear picture of your financial obligations helps you prioritize and plan your payments more effectively. This list will serve as a roadmap to ensure you don’t overlook any bills and can systematically address each one.

### 2. Reach Out to Your Creditors

Communication with your creditors is crucial when you’re struggling to keep up with payments. Companies and creditors may be willing to work with you if you explain your situation honestly. They may offer solutions such as extended payment deadlines, reduced interest rates, or temporary payment plans. And you don’t have to wait until your accounts are severely delinquent — reach out as soon as you know you’re having trouble. Proactive communication can prevent additional fees and negative marks on your credit report.

Recommended: How to Negotiate Medical Bills

### 3. Pay Priority Bills

All bills are not equally important, and when funds are limited, it’s essential to prioritize which bills to pay first. You might start with necessities that ensure your basic living conditions, such as housing, utilities, and food. These are critical to maintain your daily life and stability. Next, you may want to focus on any bills that have legal consequences if left unpaid, such as child support and taxes. Secured debts, like car loans, should also be a priority to avoid repossession. Once these essentials are covered, you can move on to other debts.

### 4. Pay Bills with the Highest Interest Rates

High-interest debt can quickly spiral out of control, making it harder to catch up. After prioritizing essential bills, consider paying down debts in order of interest rate, from highest to lowest. This repayment strategy, known as the avalanche method, can save you money in the long run by reducing the amount of interest you’ll pay over time. Consider making larger payments toward these debts while maintaining minimum payments on lower-interest obligations.

### 5. Cut Unnecessary Expenses

To free up more money for paying bills, take a close look at all of your monthly expenses and identify areas where you can cut back. Dining out, subscription services, gym memberships, and entertainment are examples of expenses you may be able to cut until your finances are in better shape. Creating a bare-bones budget can help you focus on what’s necessary until you’re caught up. Redirect the money saved from cutting expenses toward paying down your debts. Even small savings can add up and make a significant difference over time.

Increasing your income can provide a much-needed boost to catch up on bills and put more padding in your checking account. Consider taking on a part-time job, freelancing, or selling items you no longer need. If you have any special skills or hobbies, you might look into starting a side business. Or you might explore opportunities to work extra hours or seek a raise at your current job. While increasing your income may require additional effort and time, the extra money can help you get back on track faster.

## How to Avoid Falling Behind After You’re Caught Up

Once you’ve managed to catch up on your bills, it’s important to implement strategies to avoid falling behind again. Here are some ways to help you stay on track.

### Create a Budget

A well-structured budget is the cornerstone of good financial management. Now that things are more stable, you might want to take a closer look at what’s coming and going out each month to ensure that your spending aligns with your priorities. One simple budgeting framework to consider is the 50/30/20 rule. This suggests dividing your after-tax income into three main categories, with 50% going to “needs,” 30% going to “wants,” and 20% going to savings and debt payments beyond minimums.

### Enroll in Autopay

Automating your bill payments is one of simplest ways to avoid missing payments and getting hit with late fees. Consider setting up autopay for your recurring bills, such as rent, utilities, and credit card payments. To make sure you don’t accidentally overdraft your account, put reminders on your calendar or set up alerts on your phone before each bill is due. That way you can make sure you have sufficient funds in your account to cover these automated payments.

### Build an Emergency Fund

An emergency fund acts as a financial safety net, allowing you to cover unexpected expenses without disrupting your regular budget. Aim to save at least three to six months’ worth of living expenses in a separate, easily accessible account, such as a high-yield savings account. Start small if necessary and gradually build up your fund over time. Having an emergency fund can prevent you from relying on credit cards or loans if you get hit with an unexpected expense or loss of income and can help you maintain your financial stability.

## The Takeaway

Catching up on bills when you’re behind can be challenging. Fortunately, by assessing your situation and coming up with a strategic pay-off plan, it’s possible to get back on track. Staying proactive and disciplined can help you avoid falling behind again and allow you to work toward long-term financial stability and growth.

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

### What to do when you can’t catch up on bills?

Consider making a list of all your outstanding bills, then prioritizing the ones that are for necessities (housing, for instance) and those with the highest interest rates. To free up funds to pay off your bills, you may need to temporarily cut or reduce unnecessary expenses, like dining out, streaming services, and entertainment. It’s also a good idea to reach out to your creditors and explain your situation. They may be willing to work with you by offering a more manageable payment plan and crediting late fees.

### What bills should I prioritize?

If you’re behind on bills, you’ll want to prioritize any bills relating to necessities, such as housing and utilities. Next, you might focus on obligations that, if neglected, could have legal consequences (like past-due taxes or child support), followed by secured debts (like an auto loan or mortgage) to avoid repossession. After that, you might prioritize high-interest debts (like credit cards), since the longer it takes to pay them off, the more expensive they get.

### Why is it so hard to catch up on bills?

Catching up on bills can be challenging due to high-interest rates that make debts grow quickly. Having a limited income, getting hit with unexpected expenses, and poor financial habits (such as lack of budgeting or overspending) can also make it difficult to catch up once you fall behind.

Photo credit: iStock/Ratana21

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 recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“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, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

As an alternative to direct deposit, 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.