Financial Topics Archives | Page 43 of 784

Mar

2024

What Is Market Value? How to Calculate and Use It

Market Value: Definition and Methods to Calculate It

By Laurel Tincher | Growing Wealth, invest, Investing, Terminology | Comments Off

Market value is a common term used in value investing to describe how much a company or asset is worth on exchanges and financial markets. Essentially it is the value of a security in the eyes of market investors. Understanding the current standing of a business in its particular industry and the broader market is important when making investing decisions.

What Is Market Value?

Market value, also referred to as OMV, market capitalization, or “open market valuation,” is the price of an asset in an investment marketplace or the value the asset has within a community of investors. It is calculated by multiplying current share price in a marketplace by the number of outstanding shares. Read on to learn what market value is and how to calculate market value.

The market value represents the price that investors will pay for an asset, and therefore changes significantly over time. The more investors will pay for the asset, the higher the market value.

What investors are willing to pay depends on various factors, including the fundamentals of the asset itself, as well as the business cycle and current levels of demand for that asset. Market value could be anything from under $1 million for small businesses to more than $1 trillion for large corporations.

It’s easy to determine the market value of frequently traded assets (by looking at their current prices), but harder to determine the market value of illiquid assets, such as real estate or a company, that don’t trade very often. Market value per share is a company’s market value divided by its number of shares.

Get up to $1,000 in stock when you fund a new Active Invest account.*

Access stock trading, options, auto investing, IRAs, and more. Get started in just a few minutes.

*Customer must fund their Active Invest account with at least $25 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.

Factors that Impact Market Value

Many factors determine market value, including a company’s profitability and its debt levels. Market value fluctuates significantly over time. Market values often move in tandem with the overall market sentiment.

During bull markets or economic expansions, market values often increase, and during bear markets they go down. Other factors influencing market value include:

• The company’s performance

• Long-term growth potential

• Supply and demand of the asset

• Company profitability

• Company debt

• Overall market trends

• Industry trends

• Valuation ratios such as earnings per share, book value per share, and price-to-earnings ratio (P/E ratio)

Earnings per Share

The higher a company’s earnings per share, the more profitable it is. A more profitable business has a higher market value, and vice versa.

Book Value per Share

Investors calculate a company’s book value per share by dividing its equity by its total outstanding shares. A company with a higher book value than market value may have an undervalued stock.

Price-to-Earnings Ratio (P/E Ratio)

Investors calculate P/E ratio by dividing a company’s current stock price by its earnings per share amount. A higher P/E ratio means a stock’s price market value might be high relative to its earnings.

💡 Quick Tip: When you’re actively investing in stocks, it’s important to ask what types of fees you might have to pay. For example, brokers may charge a flat fee for trading stocks, or require some commission for every trade. Taking the time to manage investment costs can be beneficial over the long term.

How Is Market Value Calculated?

There are multiple ways to calculate market value. Here’s a look at a few of them:

Income method

There are two methods of calculating market value using income:

• Discounted Cash Flow (DCF): To find discounted cash flow, investors project a company’s future cash flow and then discount it to find its present value. The amount it gets discounted reflects current market interest rates along with the amount of risk the business has.

• Capitalized Earnings Method: With capitalized earnings, investors find the value of a stable, income-producing property by taking its net operating income over time and dividing it by the capitalization rate. The capitalization rate is an estimate of how much potential return on investment the asset has.

Assets Method

Using the assets approach, investors find an asset’s fair market value (FMV) by determining how many liabilities and adjusted assets a company has, including intangible assets, unrecorded liabilities, and off-balance sheet assets.

Market method

Using a market-based approach, there are a few more ways market value can be determined:

• Public Company Comparable: This company compares similar businesses that are in the same industry or region and about the same size. Ratios like P/E, EV/Revenue, and EV/EBITDA can help compare all the similar companies.

• Precedent Transactions: Using the precedent transactions method, market value reflects how much investors paid for other similar company’s stock in previous transactions. Investors can get a sense of how much a company’s value is by looking at similar companies.

Example of Market Value

Using the capitalized earnings valuation method, here’s an example of the market value calculation. The formula used when calculating via capitalized earnings is as such:

Market value = Earnings/capitalization rate

Earnings are rather self-explanatory, and the capitalization rate is the required rate of return for investors, a number reached by subtracting a company’s expected growth rate from the investor’s expected rate of return. For this example, we’ll make things simple and say that the capitalization rate is 10%, and the company’s earnings are $1 million

Using the formula: Market value = $1 million/10%

That calculates to $10,000,000.

💡 Quick Tip: Look for an online brokerage with low trading commissions as well as no account minimum. Higher fees can cut into investment returns over time.

Limitations of Market Value

Market value is a very useful tool for understanding how much a company is worth and whether it is a good time to invest or sell its stock. However, it has a few limitations:

• Fluctuation: Company stocks go up and down every day, and, therefore market value also always changes. Various factors affect market value, and it is very dynamic, which is important for investors to keep in mind when making trading decisions.

• Precedent data: It’s easier to find market value for established businesses because it requires historical pricing data to find it. New businesses don’t have such data, making it harder for investors to determine their market value.

The Takeaway

Market value is very useful for analyzing a stock. It is easiest to calculate market value of assets such as stocks and futures that are traded on exchanges because it is easy to access their market prices. Market value for less frequently traded assets can be difficult and requires some assumptions and calculations.

Calculating market value can be useful for investors of all stripes, but it can be easy to get lost in the math. Be sure to double-check your math and consider the limitations of market value before making investing decisions.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

For a limited time, opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.

FAQ

Is market value the same as market capitalization?

Market value is the price at which a buyer purchases an asset, and can refer to a company or a security such as a stock, future, or asset. Market cap is the value of the total number of outstanding shares of a company, based on their current market value.

Is market value the same as book value?

Market value and book value per share, or explicit value, are different and can be very different amounts, but they are often used in conjunction by investors looking to gain an understanding of an asset’s value. Book value is the net value of a company’s balance sheet assets, while market value is the price at which a buyer purchases an asset.

Photo credit: iStock/SeventyFour

SOIN0124042

Mar

2024

30 Best High Paying Good Jobs For Extroverts That Pay Well in 2023

25 Best Jobs for Extroverts That Pay Well in 2024

By Jacqueline DeMarco | Financial Independence, Life & Career, relay | Comments Off

The right career is one that capitalizes on an individual’s unique combination of skills, interests, and personality. Extroverts, for instance, tend to flourish in certain jobs and industries that introverts may not care for. And the worst jobs for extroverts are likely ones that attract introverts.

For all you extroverts out there, we’ve rounded up dozens of well-paying jobs that would be lucky to have you on board.

How to Know If You Are an Extrovert

Before we look at jobs for extroverts that pay well, it’s important to understand what an extrovert is. An extrovert is someone who draws their energy from the outside world. Extroverts often feel comfortable in group settings and social situations. They tend to make good leaders because they enjoy working with people.

Check your score with SoFi

Track your credit score for free. Sign up and get $10.*

Common Characteristics of Extrovert Jobs

Good jobs for extroverts are ones that involve working with other people to solve problems. Because extroverts thrive on the energy they get from connecting with others, they tend to do well in jobs that require a lot of collaboration and human interaction.

On the other hand, good jobs for introverts allow them to focus intensely without interruptions from colleagues.

Do Extroverts Make More Money Than Introverts?

Being an extrovert can lead to a high-paying career. But extroverts don’t necessarily make more money than introverts. Education level, age, experience, and career choice can all greatly impact how much someone earns. Even your location factors in, as high-paying jobs vary by state.

💡 Quick Tip: When you have questions about what you can and can’t afford, a spending tracker app can show you the answer. With no guilt trip or hourly fee.

30 Best Jobs for Extroverts That Pay Well

What jobs are good for extroverts? Anyone looking to start a career or switch careers might consider one of these well-paying jobs for extrovert personalities. This list includes both jobs that don’t require college and those that do. Some even offer six-figure salaries.

Recommended: What Trade Makes the Most Money?

1. Insurance Sales Agent

Median Pay: $57,860 per year

Job Growth Outlook: 6%

Job Description: Work in an office or travel to meet clients. The role also has potential as a work-at-home job for retirees.

Requirements: High school diploma or equivalent

Duties:

• Build relationships with potential customers

• Sell insurance policies

• Answer product questions

2. Musician and Singer

Median Pay: $39.14 per hour

Job Growth Outlook: 1%

Job Description: Perform music in a studio or live setting for an audience. Professionals can make union wages or charge by the song or performance.

Requirements: No formal educational credential

Duties:

• Play instruments live or in studio

• Sing songs live

• Record songs

3. Actor

Median Pay: $17.94 per hour

Job Growth Outlook: 3%

Job Description: Perform in a live setting or for film and television recordings. Professionals make union wages.

Requirements: Professional or on-the-job training

Duties:

• Perform in live theater

• Promote products in commercials

• Act in movies and television shows

4. High School Teacher

Median Pay: $62,360 per year plus excellent benefits

Job Growth Outlook: 1%

Job Description: Teach academic lessons to high school students and prepare them for college or the job market.

Requirements: Bachelor’s degree

Duties:

• Prepare lesson plans

• Teach students in a classroom

• Grade papers

5. Human Resources Manager

Median Pay: $130,000 per year

Job Growth Outlook: 5%

Job Description: Plan and coordinate the administrative functions of a workplace.

Requirements: Bachelor’s degree

Duties: Work in office environments to help recruit and retain talent, and achieve business goals.

• Recruit and hire employees

• Make decisions about competitive pay and benefits

• Mediate workplace conflicts

Recommended: Is $100,000 a Good Salary?

6. Public Relations Specialist

Median Pay: $67,440 per year

Job Growth Outlook: 6%

Job Description: Develop and maintain the public image of the individuals and businesses they represent. Those with high-profile clients tend to earn the most.

Requirements: Bachelor’s degree

Duties:

• Write press releases

• Create public image strategies

• Provide damage control in crisis situations

7. Physician and Surgeon

Median Pay: $229,300 per year

Job Growth Outlook: 3%

Job Description: Diagnose and treat illnesses and injuries.

Requirements: Medical doctor degree

Duties:

• Diagnose illnesses

• Prescribe medications

• Perform surgeries

Recommended: Is $100,000 a Good Salary?

8. Barber and Hairstylist

Median Pay: $33,400 per year plus tips

Job Growth Outlook: 8%

Job Description: Cut, color, and style client hair. Stylists at higher-end salons can make good money in salary and tips.

Requirements: Postsecondary nondegree award

Duties:

• Cut and color hair

• Style hair for special events

• Provide other appearance services such as shaving

9. Bartender

Median Pay: $29,380 per year plus tips

Job Growth Outlook: 3%

Job Description: Mix and serve cocktails, wine, and beer to customers. Bartenders at higher-end establishments make most of their money in tips.

Requirements: No formal educational credential

Duties:

• Mix and serve drinks

• Offer beverage recommendations

• Track inventory

10. Skincare Specialist

Median Pay: $38,060 per year plus tips

Job Growth Outlook: 9%

Job Description: Provide face and body treatments to clients in a spa or salon setting.

Requirements: State-approved cosmetology or esthetician license

Duties:

• Assess clients’ skin needs

• Offer skincare services like facials

• Consult on skincare regimens

11. Dentist

Median Pay: $159,530 per year

Job Growth Outlook: 4%

Job Description: Diagnose and treat dental problems.

Requirements: Doctoral degree

Duties:

• Treat patients’ gums, teeth, and mouth

• Create treatment plans

• Check for cavities and other dental issues

12. Registered Nurse

Median Pay: $81,220 per year

Job Growth Outlook: 6%

Job Description: Provide patient care.

Requirements: Bachelor’s degree and professional licensing

Duties:

• Provide care in hospitals, physicians’ offices, home healthcare settings, and nursing care facilities

• Communicate with patients about their needs

• Educate patients and the public about health conditions

13. Waiter

Median Pay: $29,120 per year plus tips

Job Growth Outlook: -3% (decline)

Job Description: Take customer orders and serve food and drinks. Waiters at higher-end restaurants and catering companies can make a decent salary and excellent tips.

Requirements: Relevant work experience

Duties:

• Take orders from customers

• Serve food and drinks

• Keep a clean and organized work environment

Recommended: What Trade Makes the Most Money?

14. DJ

Median Pay: $20.46 per hour

Job Growth Outlook: -4% (decline)

Job Description: Act as an emcee for events such as weddings and award ceremonies. Popular DJs can earn hefty appearance fees for a few hours of work.

Requirements: Relevant work experience

Duties:

• Play music

• Create playlists

• Host events

15. Political Scientist

Median Pay: $128,020 per year

Job Growth Outlook: 7%

Job Description: Study the origin, development, and operation of political systems and plan political strategies.

Requirements: Master’s degree

Duties:

• Study political systems

• Create reports and presentations

• Consult on strategy

16. Advertising Sales Agent

Median Pay: $58,450 per year

Job Growth Outlook: -7% (decline)

Job Description: Sell advertising space to businesses. Many sales agents work on commission and can bring in high incomes.

Requirements: Relevant work experience

Duties:

• Sell advertising space for radio, television, newspapers, and other media platforms

• Meet sales quotas

• Maintain client relationships

17. Real Estate Broker and Sale Agent

Median Pay: $52,030 per year

Job Growth Outlook: 3%

Job Description: Assist clients in the buying and selling of real estate. Successful agents can make big commissions on home sales.

Requirements: High school diploma or equivalent

Duties:

• Help clients find properties

• Negotiate sales contracts

• Host open houses

18. Interpreter and Translator

Median Pay: $53,640 per year

Job Growth Outlook: 4%

Job Description: Convert information from one language into another.

Requirements: Bachelor’s degree

Duties:

• Translate between languages for a variety of organizations

• Speak simultaneous translations during meetings

• Translate documents, such as books and business materials

19. Advertising, Promotions, and Marketing Manager

Median Pay: $138,730 per year

Job Growth Outlook: 6%

Job Description: Plan advertising and marketing efforts to generate interest in a business’s products and services.

Requirements: Bachelor’s degree

Duties:

• Develop marketing campaigns

• Create special promotions

• Oversee the creation of advertisements

20. Flight Attendant

Median Pay: $63,760 per year

Job Growth Outlook: 11%

Job Description: Assist passengers and respond to safety issues and emergencies.

Requirements: High school diploma or equivalent and certification from the Federal Aviation Administration

Duties:

• Navigate safety issues

• Serve food and beverages

• Assist with putting away luggage

21. Lawyer

Median Pay: $135,740 per year

Job Growth Outlook: 8%

Job Description: Advise and represent businesses, government agencies, and individuals on legal matters.

Requirements: Law degree and passing a state bar exam

Duties:

• Advise clients

• Represent clients in court

• Review and draft contracts

22. Physical Therapist Assistant

Median Pay: $57,240 per year

Job Growth Outlook: 19%

Job Description: Help patients regain movement and manage pain after an illness or injury

Requirements: On-the-job training

Duties:

• Set up equipment

• Care for patients

• Work with physical therapists to help patients make progress

23. Marriage and Family Therapist

Median Pay: $56,570 per year

Job Growth Outlook: 15%

Job Description: Work with couples and families to resolve relationship challenges.

Requirements: Master’s degree

Duties:

• Provide counseling to patients

• Help mediate conflict

• Offer mental health support

24. Interior Designer

Median Pay: $61,590 per year

Job Growth Outlook: 4%

Job Description: Work with individuals or businesses to plan, source, and arrange decor.

Requirements: Bachelor’s degree

Duties:

• Make indoor spaces functional and aesthetically pleasing

• Consult with clients

• Choose essential and decorative objects

25. Career Counselor

Median Pay: $60,140 per year

Job Growth Outlook: 5%

Job Description: Help clients choose a career path.

Requirements: Master’s degree and licensure for career counselors and advisors in some states

Duties:

• Guide clients toward appropriate career paths

• Interview prep

• Review resumes and cover letters

💡 Quick Tip: Income, expenses, and life circumstances can change. Consider reviewing your budget a few times a year and making any adjustments if needed.

The Takeaway

There are many jobs for extroverts that pay well, from business roles to creative performers. Many jobs don’t offer traditional salary or hourly wages; instead, a large portion of income is made through commission or tips. Some of the jobs we list require college degrees or professional certifications, but many only require a high school diploma or on-the-job training.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

With SoFi, you can keep tabs on how your money comes and goes.

FAQ

What jobs are good for an extrovert?

Many jobs that are a good fit for extroverts are those that involve working with clients or patients in a collaborative setting, such as doctor, lawyer, or hairstylist.

What is the most fun, high-paying job?

A lot of fun, rewarding jobs pay well. For example, a bartender at a high-end restaurant can earn hundreds of dollars a night in tips.

What odd job makes the most money?

A job many people may not expect to make a lot of money is political scientist. This career path can lead to a median annual salary of $128,020.

Photo credit: iStock/Harbucks

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

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.

SORL0124004

Mar

2024

What is the Greenshoe Option? Definition & How it Works

By Laurel Tincher | Growing Wealth, invest, Investing | Comments Off

The greenshoe option allows underwriters involved with IPOs to sell more shares than initially agreed upon: usually up to 15% more. That can occur if there is enough investor demand to purchase the shares.

Because IPO share prices can be volatile, the greenshoe option is an important tool that can help underwriters stabilize the price of a newly listed stock to protect both the company and investors.

Understanding the Greenshoe Option

Also called the over-allotment option, the greenshoe provision is part of an underwriting agreement between an underwriter and a company issuing stock as part of an IPO, or initial public offering. The greenshoe option is the only type of price stabilization allowed by the Securities and Exchange Commission (SEC).

The SEC allows this because it increases competitiveness and efficiency of IPO fundraising. It gives underwriters the ability to stabilize security prices by increasing the available supply. It is the responsibility of an underwriter to help sell shares, build a market for a new stock, and use the tools at their disposal to launch a successful initial public offering.

The greenshoe option got its name when the Green Shoe Manufacturing Company was issued the first over-allotment options in 1919.

💡 Quick Tip: Access to IPO shares before they trade on public exchanges has usually been available only to large institutional investors. That’s changing now, and some brokerages offer pre-listing IPO investing to qualified investors.

How Does a Greenshoe Option Work?

During the IPO process, stock issuers set limits on how many shares they will sell to investors during an IPO. With a greenshoe option, the IPO underwriter can sell up to 15% more shares than the set amount.

IPO underwriters want to sell as many shares as they can because they earn on commission as a percentage of IPO sales.

All of the details about an IPO sale and underwriter abilities appear in the prospectus filed by the issuing company before the sale. Not every company allows their investment banker to use the greenshoe option. For instance, if they only want to raise a specific amount of capital, they wouldn’t want to sell any more shares than necessary to raise that money.

There are two ways an underwriter can over allot sales:

At the IPO Price

If the IPO they are underwriting is doing well, investors are buying IPO shares and the price is going up, the underwriter can use the greenshoe option to purchase up to 15% more stock from the issuing company at the IPO price and sell that stock to investors at the higher market price for a profit.

A Break Issue

Conversely, if an IPO isn’t doing well, the underwriter can take a short position on up to 15% of the issued stock and buy back shares from the market to stabilize the price and cover their position.

The underwriter then returns those additional shares to the issuing company. This is known as a “break issue.” When an IPO isn’t performing well, this can reduce consumer confidence in the stock, and result in investors either selling their shares or refraining from buying them.

The greenshoe option helps the underwriter stabilize the stock price and reduce stock volatility.

Types of Greenshoe Options

There are three types of greenshoe options an underwriter might choose to use depending on what happens after an IPO launches. These options are:

Full Greenshoe

If the underwriter can’t buy back any shares before the stock price increases, this is known as a full greenshoe. In this case, the underwriter buys shares at the current offering price.

Partial Greenshoe

In a partial greenshoe scenario, the underwriter only buys back some of the stock inventory they started with in order to increase the share price.

Reverse Greenshoe

The third option for underwriters is to purchase shares from market investors and sell them back to the stock issuer if the share price has dipped below the original offering price. This is similar to a put option in stock trading.

Recommended: How Are IPO Prices Set?

Greenshoe Option Examples

Here’s an example of how a greenshoe option might work in real life.

Once the IPO company owners, underwriter, and clients determine the offering or initial price of the newly issued shares, they’re ready to be traded on the public market. Ideally, the share price will rise above offering, but if the shares fall below the offering price the underwriter can exercise the greenshoe option (assuming the company had approved it in the prospectus).

To control the price, the underwrite can short up to 15% more shares than were part of the original IPO offering.

Let’s say a company’s initial public offering is going to be 10 million shares. The underwriters can sell up to 15% over that amount, or 1.5 million more shares, thus giving underwriters the ability to increase or decrease the supply as needed — adding to liquidity and helping to control price stability.

💡 Quick Tip: Investment fees are assessed in different ways, including trading costs, account management fees, and possibly broker commissions. When you set up an investment account, be sure to get the exact breakdown of your “all-in costs” so you know what you’re paying.

What the Greenshoe Option Means for IPO Investors

The greenshoe option is an important tool for underwriters that can help with the success of an IPO and bring additional funds to the issuing company. It reduces risk for the issuing company as well as investors. It can maintain IPO investor confidence in a newly issued stock which helps to build a long-term group of shareholders.

Although buying IPO stocks can be very profitable, stock prices don’t always increase and sometimes they can be volatile. It’s important for investors to research a company, look at the IPO prospectus, understand what the stock lock-up period and greenshoe options are before deciding to buy.

The Takeaway

Buying shares in IPOs can be a great way to invest in companies right when they go public. Although IPO investing comes with some risks, and IPO stock can be volatile, investment banks and companies going public use tools such as the greenshoe option to minimize volatility.

Whether you’re curious about exploring IPOs, or interested in traditional stocks and exchange-traded funds (ETFs), you can get started by opening an account on the SoFi Invest® brokerage platform. On SoFi Invest, eligible SoFi members have the opportunity to trade IPO shares, and there are no account minimums for those with an Active Investing account. As with any investment, it's wise to consider your overall portfolio goals in order to assess whether IPO investing is right for you, given the risks of volatility and loss.

For a limited time, opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.

Photo credit: iStock/AzmanJaka

SoFi Invest®
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

Investing in an Initial Public Offering (IPO) involves substantial risk, including the risk of loss. Further, there are a variety of risk factors to consider when investing in an IPO, including but not limited to, unproven management, significant debt, and lack of operating history. For a comprehensive discussion of these risks please refer to SoFi Securities’ IPO Risk Disclosure Statement. IPOs offered through SoFi Securities are not a recommendation and investors should carefully read the offering prospectus to determine whether an offering is consistent with their investment objectives, risk tolerance, and financial situation.

New offerings generally have high demand and there are a limited number of shares available for distribution to participants. Many customers may not be allocated shares and share allocations may be significantly smaller than the shares requested in the customer’s initial offer (Indication of Interest). For SoFi’s allocation procedures please refer to IPO Allocation Procedures.

Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.

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: The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.
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.

Claw Promotion: Customer must fund their Active Invest account with at least $25 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.

SOIN1023181

Mar

2024

Can You Make Mortgage Payments With a Credit Card?

By Sarah Li Cain | Credit, Home Ownership | Comments Off

It is very unlikely that you can directly pay your mortgage lender with a credit card. However, there are a few workarounds that can help you pay your home loan with plastic. But it’s important to understand other factors involved when paying your mortgage with this kind of card, such as possible fees and other financial consequences.

Read on to learn how to pay your mortgage with a credit card and what to consider before you do so.

How to Pay Your Mortgage With a Credit Card

It’s highly unlikely that you can pay your mortgage directly with a credit card. That said, there are several ways you can use workarounds to pay your mortgage with a credit card, including using a money order, utilizing third-party services, and getting a cash advance.

Use a Third-Party Service

Some third-party services facilitate mortgage payments using your credit card and send a payment to your lender on your behalf. Companies like Plastiq allow you to use select credit cards (including American Express) to make mortgage payments through their platform.

For the privilege, you’ll most likely need to pay a convenience fee — Plastiq charges a processing fee of 2.9% — each time you make a mortgage payment using your credit card. And, depending on how that payment is delivered (say, check or bank transfer), you may also be charged an additional fixed fee that can range from 99 cents to $39. You may also have the option to make recurring payments or to make your payments manually.

Buy a Money Order

Depending on your location and the retailer, you may be able to purchase a money order with your credit card. Then, you’ll simply take the money order and deposit it at your bank and transfer the amount to your mortgage lender.

Keep in mind that many retailers may not accept credit cards as a form of payment for money orders — it’s best to check ahead of time if you plan to do so. Even if you can, money orders tend to have a limit of $1,000. That means if you want to go this route, it may take you a few transactions before your money orders total enough for your mortgage payment.

Additionally, you may incur a fee for each money order you buy. Also keep in mind that some credit card issuers treat money order purchases as cash advances, which can result in a fee and interest charges at a rate that’s usually higher than the standard purchase APR on a credit card.

Transfer a Balance to Your Bank Account

You could attempt to conduct a balance transfer, with the funds going into your bank account — some credit card issuers may allow this type of transaction. Most commonly, credit card issuers provide cardholders with balance transfer checks to facilitate these types of transactions. There may be balance transfer fees involved, and interest may accrue depending on your credit card terms.

Get a Cash Advance

As another method to pay your mortgage with a credit card, you can get a cash advance at the ATM with your credit card. You’d then deposit the cash into your bank account and use the funds to make your mortgage payments. You could also consider using the funds to purchase a cashier’s check and mail it to your lender.

Going this route most likely means you’ll have to pay a cash advance fee, and interest on cash advances will accrue on your credit card with no grace period and often at a significantly higher rate than on your everyday purchases. Credit limits may be lower for cash advances as well.

Do All Mortgage Lenders Accept Credit Card Payments?

No, most mortgage lenders do not accept credit card payments directly from the borrower.

If you’re curious about why this is, know that paying debt with a credit card isn’t usually a financially responsible move. Mortgage companies likely don’t want the added risk that someone is paying for their home loan with credit vs. cash. Also, it can be expensive for lenders to accept credit cards, given that processing and other fees can take a bite out of every incoming amount of money.

Factors to Consider When Paying a Mortgage With a Credit Card

Before paying your mortgage with a credit card, consider the following.

Fees vs Rewards

Similar to those considering paying taxes with a credit card, many people tend to pay their mortgage with a credit card because they want to earn rewards. Since third-party services will charge you fees — or you’ll pay the fees charged directly by your credit card issuer for balance transfers — you’ll want to make sure the value of the rewards outweighs what you’re paying in fees.

Sure, the fees may seem small, but they can quickly add up over time. Also, in many cases, rewards cards may only count certain transactions as eligible for rewards. Many issuers don’t consider balance transfers as qualifying transactions, for example.

The Cost of Interest

If you don’t pay off your balance each month, interest will start to accrue on your credit card — and credit card interest rates are typically much higher than your mortgage interest rate, even if you have a good APR for a credit card.

Additionally, if you go the cash advance route, these transactions may have higher credit card interest rates, and there’s no interest-free grace period.

Effect on Your Credit Score

If your credit card balance starts to get too overwhelming and you miss making the credit card minimum payment, it could negatively impact your score.

Even if you make on-time payments, having a high balance could affect your credit utilization, which is the ratio between your balance and your available credit. The higher your credit utilization, the more it could negatively impact your score.

Challenges You May Face When Paying a Mortgage With a Credit Card

One challenge with using a credit card for mortgage payments is the time it takes to do so. Any of the above mentioned methods will take you some time and effort to complete successfully. That’s because it’s unlikely your lender will accept a direct credit card payment and you will instead have to use a workaround.

There are also the fees to consider — determining whether paying the extra charges and potentially a higher interest rate is worth it takes some careful calculations.

Should You Pay Your Mortgage With a Credit Card?

Making mortgage payments with a credit card may be a good idea if you’re looking for a way to earn more rewards or get some financial breathing room. However, given the downsides, such as high fees and the impact it may have on your credit, you may be better off pursuing other options first. Also keep in mind that using a credit card to pay your mortgage may trigger a higher cash-advance interest rate than your typical interest rate since you can’t pay directly.

Alternatives to Using a Credit Card for Your Mortgage

Here are several options you can choose from instead of paying your mortgage with a credit card:

• Consider mortgage forbearance: If you’re struggling with your payments and experiencing a significant hardship, you can contact your lender to see if mortgage forbearance is possible. This could allow you to temporarily stop paying or have your monthly payments reduced until you can get back on your feet.

• Seek help with a housing counselor: You can find a reputable housing counselor that’s approved by the U.S. Department of Housing and Urban Development (HUD) by contacting the Homeowners HOPE Hotline or using the housing counselor tool on the Consumer Financial Protection Bureau’s website. They could suggest options to help you manage your mortgage payments. You may have to pay a small fee for the service, but it could be more affordable than using a credit card to pay your mortgage.

The Takeaway

While you probably can’t pay your mortgage directly with a credit card, there are workarounds that are possible, as long as you understand what you’re getting into and are strategic about how to do so. Before you move forward with paying your mortgage with your credit card, make sure you weigh the fees involved vs. the rewards you could earn as well as any interest you could accrue and potential impacts to your credit. Understanding the pros and cons of this scenario is an important step in using your credit card responsibly.

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

Can you use a credit card to pay a mortgage?

You probably can’t pay your mortgage directly using a credit card, but you can do so through indirect methods. Some of these include going through a third-party service, making a balance transfer, purchasing a money order using your credit card, or getting a cash advance. Each of these methods will come with its own set of fees and/or higher interest rates.

Can paying a mortgage with a credit card impact credit score?

If you end up with a high balance on your credit card as a result of your mortgage payment, it could negatively impact your score if you have a high credit utilization. Or, if you end up missing or being late on a payment (perhaps you’re struggling to make the monthly payments), then your score could also be impacted.

Are there fees for paying a mortgage with a credit card?

There are fees depending on how you use your credit card to pay for your mortgage. For instance, you may incur balance transfer, cash advance, or third-party fees.

Photo credit: iStock/vgajic

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.

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

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

SOCC0224023

Mar

2024

What Is Credit Card Protection? How It Works

The Ultimate Guide to Credit Card Protection and How to Use It

By Anna Davies | Credit, Financial Independence, money | Comments Off

Beyond making purchases more convenient, credit cards can provide a number of additional and valuable layers of protections. For instance, they can help cover you if you are traveling abroad, buying something pricey or if you were to lose your job or otherwise become unable to pay your bills. Some credit card protections, like travel insurance, are perks of the card included in the annual fee. For others, like credit card payment protection, you may have to opt in and pay an additional fee.

Read on to learn more about the types of credit card protection that are available, how they work, and when they may be worth it.

What Is Credit Card Protection?

Credit cards may offer various forms of protection in their perks and benefits. These protections can help protect your purchases and ensure you don’t pay for charges that aren’t yours.

They can also help you in a dispute with a vendor. For example, if you ordered an item that never made it to you and the merchant won’t give you a refund, you could invoke a credit card chargeback with your credit card company.

Perhaps the most common form of protection associated with the term “credit card protection” is credit card payment protection insurance. This is an insurance plan that you can opt into for a monthly fee that would offer protection if something were to happen that prevented you from paying your bills.

Types of Credit Card Protection

Read on for more details on the various forms of credit card protection.

Fraud Protection

One basic benefit of a credit card is typically fraud protection, and this can be why people use credit cards over debit cards or cash. If someone were to steal your credit card number or your physical card, fraud protection shields you from being responsible or liable for charges.

Under the Fair Credit Billing Act (FCBA), creditors cannot “take actions that adversely affect the consumer’s credit standing until an investigation is completed.” This means that all credit card companies will launch an investigation if fraud occurs. During this time, you will not be held liable for the charge in question (though make sure to make your credit card minimum payment so you don’t incur late fees or ding to your credit during the investigation).

Some credit card companies may go beyond that and offer even more fraud protection, including $0 liability. (The FCBA caps liability in case of fraud at $50 if the thief presents the card. The liability is $0 if the card is not physically present, as in the case of someone stealing a credit card number and using it online).

While fraud protection can offer peace of mind, it’s also important to be proactive about recognizing fraud. If you lose your credit card, call your issuer to have the card frozen. And always let your issuer know ASAP if you notice a charge that isn’t yours.

Return Protection

Return protection is another form of purchase protection offered by some credit cards. It allows you to return an item for a set period of time defined in your membership agreement. This return window may offer more leeway than that of the merchant you made the purchase from (for example, 90 days instead of 30 days.)

There are exclusions to what can and can’t be returned. Further, there also may be a cap on the cost of the item being returned, as well as an annual cap per card, though it depends on how your credit card works specifically.

Price Protection

Have you ever bought something, only to see the item go on sale a week later? That’s where credit card price protection comes in. With this perk, you may be able to receive a refund for the difference in price if you purchased the item with your card.

Generally, it’s your responsibility to track price drops. And your issuer may have certain terms, such as limiting the protection to price drops within a set time period. Price protection also may exclude certain types of purchases, such as tickets to sporting events or concerts.

Purchase Protection

Similar to return protection, purchase protection can help protect you if purchases are lost or damaged or if services aren’t rendered or delivered as expected. Generally, you would bring the issue up with the merchant or service provider. But if they don’t initiate a refund, then you can dispute the charge with your credit card company. This process initiates what’s called a credit card chargeback.

There may be limitations and exceptions to purchase protection. It can be a good idea to talk directly with the merchant before reaching out to your credit card company.

Travel Insurance

Travel insurance can be a big reason to put a trip on a credit card. In fact, some card issuers offer insurance as a perk for using the card.

The specifics of credit card travel insurance depend on the card issuer, but it may include insurance for lost luggage or coverage for trip interruption or cancellation. In general, these insurance policies may not be as comprehensive as a standalone policy, but they can provide some peace of mind when planning a trip.

Car Rental Insurance

Car rental insurance is another type of insurance offered as a credit card perk. If you rent a car with the credit card, the card may provide insurance protection in case of damage. Generally, this includes collision/loss damage waiver coverage.

Car rental insurance through your credit card may allow you to forego the (sometimes pricey) insurance options offered by the car rental agency. However, as with any insurance policy, it’s a good idea to read the fine print to know exactly what is and is not covered.

How Credit Card Protection Works

Most protections are part of the overall perks and benefits of the card. But credit card payment protection is a little bit different. It’s generally an opt-in program that offers protection if you are no longer able to pay your credit card bill. The protection offered can be short term, such as for a life event like a change in employment, or long term, extending for 12 to 24 months in the event of a job loss or hospital stay.

Usually, credit card payment protection carries an additional monthly fee. Also note that payment protection doesn’t let you off the hook from paying the bill down the road. Rather, for a set period of time, your credit card issuer would offer a break on making payments or lower your minimum payments due, as well as pause any fees. Your issuer will continue to report your account in good standing during that time.

Tips to Keep Your Credit Card Safe

Protection programs can give you peace of mind. But losing a credit card or dealing with fraudulent activity can be stressful regardless of what protections you have in place. It can also potentially open the door to identity theft, which could potentially harm your credit.

That’s why it’s smart to set up some smart security behaviors. Read on for some tips for how to keep your credit card safe.

Practice Credit Card Protection From Day One

When you’ve applied for a credit card, keep an eye out for the card to arrive in the mail. It should come in between five and 14 days; your issuer may provide a timeline.

If you don’t receive your card within that time period, call your issuer. They will issue you a new one. And as soon as you do get your card, follow the steps to set it up for use.

Keep Your Account Number Private

Don’t write down your credit card account number, expiration date, and CVV. Don’t share this information with anyone else. Also consider whether or not you want to save payment information online. While it can be convenient, it could leave your information vulnerable. If you are using your credit card to make a payment, make sure that you are doing so through an encrypted service.

Keep Your Information Current

Make sure that the email address, mailing address, and telephone number on file with your card issuer are up to date. By doing so, you will be aware of any communication between you and your card issuer. Further, this will prevent a new card from being delivered to the wrong address.

Be Careful With Your Receipts

While federal law prohibits how much credit card information is on receipts, this may not be true in other countries. If you’re traveling abroad, it may make sense to be even more mindful about how you dispose of receipts. Don’t leave them lying around.

Secure Your Devices and Networks

Being mindful of how and when you use your credit card online can help you avoid fraud. Using your own network, rather than public WiFi, can be one security step. It can also be helpful to check that a website uses encryption for payment and that it’s a secure site.

Protect Yourself Online

When you’re using a credit card for payment, it’s important to be cyber-savvy. Credit card scams to try to obtain your information or your credit card number are not uncommon.

You’ll want to be on the lookout for phishing attempts. If a merchant or bank asks you to email your credit card number, call the merchant directly. Know that banks will never ask for sensitive information over email. Also be on the lookout for requests to “verify” your information via email or text. Again, these may well be scams designed to get your account information.

Additionally, pay attention to any odd links, misspellings (such as Citii for Citi), or emails that include a link. Instead of following the link within the email, consider manually typing in the URL of a website.

Check Your Account Often

It can be good to get in the habit of regularly checking your credit card balance. Doing so a few times a week, instead of just waiting for a statement to come out, can alert you to fraud as soon as it happens. And remember, a fraudster could steal your information even if your physical card has always been in your possession.

Report Lost Cards and Fraudulent Activity Right Away

If you see something odd on your credit card balance, let your card issuer know right away. The same goes if you can’t find your credit card.

Even if you’re 99% sure your card is somewhere in your house or car, it can be a wise idea to contact your card issuer. In some cases, they can freeze your card. This means that you’ll be able to unfreeze it once you’ve found it, without getting a new card and a new card number.

Recommended: When Are Credit Card Payments Due?

What Does Credit Card Payment Protection Cover?

In general, credit card payment protection insurance has restrictions regarding when it applies, and it may require documentation.

Some reasons you may be able to request long-term credit card payment protection may include:

• Job loss

• Disability

• Hospitalization

• Death of a child, spouse, or domestic partner

• Leave of absence (for family or child care, or for military duty)

• Federal or state disaster

Meanwhile, you may be able to get short-term protection for the following reasons:

• Marriage

• Divorce

• Graduation

• Childbirth

• Adoption

• Retirement

• New job and job promotion

• A move to a new residence

Situations that may not qualify for payment protection include incarceration or voluntarily leaving your job, such as to pursue higher education.

Pros and Cons of Payment Protection

Is payment protection right for you? That depends. The opt-in program usually costs an additional fee. Plus, while paying your full balance each month is ideal, you could potentially pay the credit card minimum payment if you were going through hard times to keep your account in good standing, though your annual percentage rate (APR) would still apply.

In many cases, it may make sense to focus on bringing down your balance so your minimum payment is relatively low. That way, if the worst were to happen, you might still have enough room in your budget to manage minimum payments.

Pros of Payment Protection	Cons of Payment Protection
Gives you a breath on monthly payments	Will incur an additional monthly fee, adding to your balance
Offers peace of mind	May be other assistance options with no added cost
Helps protect your credit in the event you can’t make payments	Generally limited to two years of assistance
Pauses your credit card’s fees	Limits on what qualifies for protection insurance to kick in

Is Credit Card Payment Protection Worth It?

Weighing the pros and cons of credit card payment can help you assess whether it makes sense for you. If you carry a very high balance and are in the process of paying it down, payment protection may give you peace of mind — especially if you don’t have a good APR for a credit card. But keep in mind that you could potentially switch to minimum payments during a hard time and still maintain your payment history.

To decide if credit card payment protection is right for you, it’s important to read the fine print and assess how these credit card fees would impact your overall financial outlook. Also take into consideration your current financial situation, your savings account balance, and the general stability and security of your job and lifestyle.

Credit Card Protection Scams and How to Avoid Them

As credit cards offer protection, scammers see opportunities — and these can be tailored, beyond just credit card skimming. There are several credit card protection scams that may target card holders, including:

• Phone scams offering loss protection for a fee. Some scammers have been calling people and telling them they may be liable for charges beyond $50 on their credit card. They then try to get people to buy loss protection and insurance programs. If you get this call, know that credit cards include fraud protection at no additional fee — plus, your liability is limited to $50 by law. Call your credit card company if you have any questions about its fraud protection programs.

• Scams claiming your account has been compromised. In this case, the scammer will ask you to provide personal details, such as your credit card number, claiming your account has been compromised. Don’t ever give sensitive credit information over text or via email. If someone calls claiming to be your credit card company, call the company directly from the number on the back of the card. Scammers can mask their true phone number and make it appear as if they are legit.

• Fraudulent text alerts. Scammers also may send text messages asking for your CVV number on a credit card to “fix” a security problem or “verify” or “update” your account. A real credit card company would never ask for this information nor send text messages like this.

• Fake account protection offers. Any account protection should come directly from your credit card company, not from a third party. If you receive these offers, don’t take them up on it.

The Takeaway

Credit card protection can be one of the great benefits of using a credit card. While some credit card protections are standard, including fraud protection, it can be helpful to consider what protection offers are most important to you before paying for additional services.

FAQ

Are there limits to credit card payment protection?

There may be limits on what qualifies for credit card payment protection, and your issuer may need to see proof of hardship. Further, there may be a time limit on how long credit card payment protection is offered.

Is there a time limit on credit card payment protection?

Generally, issuers have a time limit for credit card protection policies. These vary between issuers, but may be as short as several months or as long as two years, depending on the circumstances.

Should I get credit card payment protection insurance?

Credit card protection insurance may incur an additional fee, unlike other protection options offered as part of your overall perks and benefits within your card. That fee can add to your balance. If your credit card balance is at or near $0, credit card payment protection insurance may not be necessary.

Photo credit: iStock/9dreamstudio