SoFi

SoFi does not currently offer all the products and services in this article. Our content covers a variety of financial topics for educational purposes only.

An Individual Development Account (IDA) is a special type of matched savings account that’s designed to help lower-income individuals and households achieve their financial goals. IDAs were first introduced in the 1990s as part of a federal initiative to encourage wealth-building among financially challenged populations.

The IDA program is specifically designed to encourage saving toward one of three goals, including home ownership. There are certain requirements that must be met to qualify for an Individual Development Account.

This article takes a closer look at how these accounts work and their pros and cons.

What Is an Individual Development Account (IDA)?

An IDA is a bank account that allows lower-income Americans to set aside money to fund specific goals. Generally, money in an IDA can be used for one of three purposes:

•   Purchasing a home

•   Starting a business or supporting an existing business

•   Paying for post-secondary education or training

Some programs may allow you to use the money for other things, such as buying a car or a computer.

IDAs are matched savings accounts that are funded partially with grant money. The IDA program can also provide other benefits to participating savers, including financial literacy training and homebuyer education.

How Does an Individual Development Account Work?

Individual Development Accounts work by encouraging participants to save and then matching a percentage of those savings to fund specific financial goals. A sponsoring organization, which may be a nonprofit or a state government agency, partners with banks and other financial institutions to offer IDA accounts to underserved populations.

In terms of the matching component, IDAs are similar to 401(k) plans in that savers can essentially receive money for participating. The match is designed to act as an incentive to encourage account owners to save. The IDA savings match varies by program.

For example, you may be eligible for a 1:1 match, meaning you get $1 for every $1 you save. Other programs may offer a 5:1 match instead, so you get five times the contributions for every dollar you save (that means $5 to every dollar you tuck away). IDA programs can also cap the total maximum match allowed at a set dollar amount. The cap may be in the $4,000 range, though it could be higher or lower. These IDA programs typically last up to five years.

Once you reach your target savings amount, you can then use that money to fund your goals. So if you save $25,000, including your contributions and the match, you could then use that money to put a down payment on a home or start a business under the guidelines of the IDA program. Account minimum balance requirements and fees may be waived for IDA savers.

One word of caution: If you stop saving before you reach the goal amount or if you use the funds for a purpose other than described by the IDA, you may risk forfeiting the matching money.

History of Individual Development Accounts (IDAs)

The idea for IDAs was first proposed in 1991 by author Michael Sherraden. In his book, “Assets and the Poor: A New American Welfare Policy,” Sherraden proposed IDAs as a means of introducing real assets into the lives of poorer populations that might otherwise lack them. Specifically, the IDA was meant to be a tool for encouraging personal responsibility in building wealth.

In 1996, the Personal Responsibility and Work Opportunity Reconciliation Act reformed welfare programs and included IDAs as an eligible use for federal funds.

How to Open an Individual Development Account

If you’d like to open an Individual Development Account, the first step is locating programs in your area. The Administration for Children and Families offers an online mapping tool to help you locate IDA programs in each state.

Once you find an IDA program provider near you, you can contact them to find out the specific steps you need to take to open an account and which banks they partner with. Keep in mind that you’ll also need to meet the following eligibility requirements to have an IDA.

Earn Less Than 200% of Federal Poverty Level

Income is a key eligibility requirement for IDAs. Your income has to be below 200% of the federal poverty level for your household size. These levels are set by the federal government and are also used to determine eligibility for other benefits, such as Medicaid. You can use an online federal poverty calculator to determine whether your income falls within the guidelines.

Have a Paying Job

A paying job is another requirement for opening an Individual Development Account. If you’re planning to buy a home, for instance, the government wants reassurance that you’ll be able to save money now and make your payments later. There are, however, no specifications on what kind of job you need to have.

Asset Restrictions

The IDA program assumes that participants aren’t starting out with significant wealth. So another condition for eligibility may be a $10,000 cap on assets. You can, however, typically exclude the value of one home and one car from this total.

Must Take Free Financial Literacy Courses

Financial literacy and education courses are typically provided and required by IDA programs. These courses are designed to educate participants about financial basics, such as budgeting, saving, and debt. A participant might learn financial hacks, such as how a parent can set up a kids’ savings account for a child, even though the minimum age to open a bank account in one’s own name is 18. This can give a child a head start on accumulating money. Or perhaps the course highlights the value of creating an emergency fund savings account to achieve greater financial stability.

Programs can also offer additional topic-specific classes on concepts such as home buying and business planning. The idea here is that an IDA isn’t just helping you build wealth — it’s also teaching you how to manage it wisely.

Pros and Cons of an Individual Development Account (IDA)

Individual Development Accounts are designed to help people who participate in them build wealth and get ahead financially. Those are among the upsides of these accounts. There are, however, some disadvantages to weigh against the potential benefits. Here’s a closer look:

Pros	Cons
•   Matched savings can help you fund your goals more quickly. •   The money you receive in matching contributions isn’t taxable to you. •   Financial literacy courses can help make you more knowledgeable about money.	•   IDAs offer limited flexibility, since they can only be used to fund specific goals. •   Not everyone is eligible to open and contribute to an IDA. •   Saving money in an IDA isn’t guaranteed to improve your financial outlook. •   You may risk forfeiting the matching money if you can’t meet your goal or if you use the funds for something other than approved expenditures.

Alternatives to an Individual Development Account (IDA)

An IDA isn’t the only way to save money toward your financial goals. Some of the other possibilities for saving money include:

•   Establishing a money market account

•   Opening a brokerage account

•   Setting up one or more high-yield savings accounts

•   Contributing to a 401(k) or IRA

•   Building a CD ladder with multiple certificates of deposit

Each savings option has pros and cons, and you may need to spend a little time learning about each one. If you don’t know how a money market account works, for example, that could make it more difficult to choose the best account for your savings.

And in terms of whether an IRA vs. 401(k) is better for retirement saving, the answer depends on your goals and tax situation. In addition, not everyone has access to a 401(k) account and may need to find other ways (such as an IRA) to save for their future.

Another important bit of advice: If you choose to open a savings account, keep in mind that you have options. Your decision may determine the interest rate you earn and the fees you pay. For example, a college student bank account (if you’re eligible for one) might charge fewer fees than a traditional savings account.

You may also be debating whether to open a joint vs. separate bank account if you’re married and want to save for a goal such as a down payment on a house. Having a joint account for shared savings goals or expenses and separate accounts for individual goals could help you to strike the right balance. But again, do your research to find the option that best suits your financial style and goals.

Recommended: Savings Account vs Money Market Comparison

The Takeaway

Individual Development Accounts (IDAs) were created to help lower-income individuals secure financial stability. Thanks to matching funds, an IDA can accelerate a person’s savings toward such expenses as buying a home. However, not everyone is eligible for these accounts, and the funds, once saved, can only be used on certain expenses. Still, it’s an opportunity for those who qualify to gain a stronger financial footing and therefore definitely worth considering.

Another way to boost your financial wellness is by partnering with a top-notch financial institution for your bank account.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Better banking is here with SoFi, named the #1 Bank in the U.S. for the fourth year in a row by Forbes (2026).* Enjoy up to 3.10% APY on SoFi Checking and Savings.

FAQ

How do I get an IDA account?

To open an Individual Development Account (IDA), you’ll need to meet the eligibility requirements. Assuming that you’re eligible, you can then contact an IDA program near you to learn what steps are necessary to open an account.

What is a federal IDA?

The federal Individual Development Account (IDA) program is a savings match program that’s designed to help underserved populations build wealth. Money in a federally funded IDA can be used to buy a home, pay for higher education expenses, or start a business.

Can I take money out of my IDA?

Money in an Individual Development Account (IDA) can be withdrawn to fund a specific goal. For example, if you’re ready to buy a home, you can take money from your account to fund the down payment or closing costs, or if you’re starting a business, you can withdraw IDA money to cover operating costs. However, if you take out the money for other purposes, you may need to forfeit the matching funds.

---

About the author

---

Photo credit: iStock/HAKINMHAN

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2026 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 5/28/26. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

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

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

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

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
We do not charge any account, service, or maintenance fees for SoFi Checking and Savings. We do charge transaction fees for outgoing wire transfers, Instant Transfers, and global remittance transfers. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/.
^Early access to direct deposit funds is based on the timing in which we receive notice of impending payment from the Federal Reserve, which is typically up to two days before the scheduled payment date, but may vary.

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


¹SoFi Bank is a member FDIC and does not provide more than $250,000 of FDIC insurance per depositor per legal category of account ownership, as described in the FDIC’s regulations. Any additional FDIC insurance is provided by the SoFi Insured Deposit Program. Deposits may be insured up to $3M through participation in the program. See full terms at SoFi.com/banking/fdic/sidpterms. See list of participating banks at SoFi.com/banking/fdic/participatingbanks.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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

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

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

SOBNK-Q126-146

Read more

ChexSystems is a nationwide credit reporting system that collects information about bank accounts that are now closed. It compiles data on red flags, such as whether a bank account was closed due to numerous overdrafts or suspicious financial transactions.

Many (but not all) financial institutions rely on ChexSystems data to decide whether or not to approve an application for a new checking or savings account. If you have a bank account or plan to open one, it’s helpful to understand what goes into a ChexSystems report and why it might matter to you.

What Is ChexSystems?

Authorized by provisions in the Fair Credit Reporting Act (FCRA), ChexSystems is a risk management tool for financial entities that are checking an individual’s banking history.

ChexSystems compiles information that can help financial institutions gauge whether a customer is creditworthy before granting them an account. The information that ChexSystems compiles is based only on closed accounts, not current ones, and can reveal whether past accounts were closed voluntarily or due to negative behavior, such as repeated overdrafts or suspected fraud.

Negative marks typically stay on a ChexSystems report for up to five years. If a financial institution sees any kind of negative activity on a ChexSystems report, the applicant may be denied a bank account.

The information in your ChexSystems report can also be used to generate a ChexSystems consumer credit score. This is separate from consumer credit scores generated using information from the three major credit reporting bureaus to help lenders decide who may qualify for a loan.

What Is in a ChexSystems Report?

Not everyone will have a file with ChexSystems. Those who have a clean banking record may not be listed. However, those who have had bank accounts closed in the past for negative reasons will likely have a report with ChexSystems.

A report will usually include basic identifying information, such as your name, address, phone number, and date of birth. It will also include details about your banking history, such as:

•   Suspected fraudulent activity

•   Non-sufficient funds (NSF) or overdraft activity

•   Inquiries (when someone has viewed your ChexSystems report)

•   Check cashing inquiries

•   Returned checks reported by retailers

•   History of checks ordered

•   Checking account closures

ChexSystems only collects information for closed accounts, and negative behaviors typically stay on file for five years, as noted above. Current checking accounts do not show up on a ChexSystems report.

Worth noting: If you’ve ever had a security freeze in place, that will usually show up on your ChexSystems report, as will identity theft alerts.

Recommended: Why Is Having a Good Credit Score Important?

How to Get a Copy of Your ChexSystems Report

You can get a copy of your ChexSystems report for free once every 12 months under the Fair and Accurate Credit Transaction Act (FACTA),, similar to the way you can request a free copy of your credit reports once a year from the three main credit bureaus.

You can request your ChexSystems report online, by phone, or by mail:

•   You can complete and submit the Consumer Request for Disclosure Form online.

•   You can call 1-800-428-9623 Monday through Friday, 8am to 7pm CST.

•   You can mail a Consumer Request for Disclosure Form to ChexSystems, Inc., Attn: Consumer Relations, PO Box 583399, Minneapolis, MN 55458.

ChexSystems also offers options for people with visual or hearing impairments. In addition, the ChexSystems website details ways to obtain a report for those under age 18 or for an adult for whom you have power of attorney.

There is an exception to this once-a-year free report rule: If you’ve been denied a bank account, you can request a copy of your ChexSystems report to understand the factors behind the bank’s decision, even if less than a year has passed since the last time you pulled a report. The bank is required to specify the reason for the denial, too.

How to Clean Up Your ChexSystems Report

To clean up your ChexSystems report, you’ll first need to get a copy of it, if you haven’t done so already. You can then dispute any negative information you may find. This can help improve your ChexSystems profile if you can get the information removed.

You can reach out to the bank that shared any negative information about your past account and offer to make good on any outstanding obligations. The bank could agree to remove the negative information.

Going forward, you can prevent any further negative information from being reported by practicing good banking habits, such as:

•   Maintaining positive balances across accounts so you don’t land in overdraft

•   Keeping records of checks and deposits to avoid bounced checks

•   Protecting your banking information to prevent fraud

•   Reporting any suspected fraud to your bank right away

These actions won’t erase a negative ChexSystems file, but they can help you to stay on your bank’s good side.

Does a ChexSystems Report Affect Your Credit Score?

Your ChexSystems report doesn’t affect your consumer credit scores directly. FICO® credit scores, for example, are based on how responsibly you manage credit and debt. For example, it can reveal how often you pay bills late, how much of your available credit you’re using, and how often a hard credit inquiry shows up on your report.

Those are some of the main factors that affect credit scores.

But there could be a ripple effect. If your ChexSystems report makes it difficult or impossible to open a bank account, you might have a hard time paying bills when they are due. If, as a result, you send payments late, that could lower your credit score.

Options if You’ve Been Denied a Bank Account Due to ChexSystems

If you’ve been denied a checking account because of a negative ChexSystems report, it helps to know what to do next. You have a few options.

•   Clean up your ChexSystems file. Request a copy of your ChexSystems report to understand why you were denied. Review your report for any errors or inaccuracies, and dispute any errors you find. Or, if you owe a debt to your previous bank, you could pay it off and request that the bank remove the mark against you.

If you’re successful in cleaning up your report, you can ask the financial institution you recently applied to if they would reconsider the denial. You might also try opening a savings account with the new bank first, see if you can build a relationship, and then add a checking account.

•   Try another bank. Find a bank that doesn’t rely on ChexSystems reports to evaluate potential clients. They are out there and can be found with a little research.

•   Consider a second chance bank account. These are designed for people who have been denied a checking account previously. These accounts may have higher fees or more restrictions than regular bank accounts. They can, however, help you establish a positive banking history and, if managed well, transition to a standard checking account in the future.

•   Use prepaid debit cards in the short term for spending and bill payment. You can load funds onto these cards (which typically charge fees) and then take care of daily needs with that money.

The Takeaway

ChexSystems is a nationwide reporting system for closed bank accounts. Qualified institutions may access ChexSystems reports to evaluate individuals who are applying for new checking or savings accounts. Being listed in ChexSystems means you likely have negative incidents on your closed accounts (e.g., overdrafts, fraud, unpaid negative balances). This can prevent you from opening new accounts. In this situation, you can focus on cleaning up your ChexSystems report or try some workarounds so you can manage daily financial transactions.

SoFi is among the banks that do not rely on ChexSystems when reviewing account applications.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Better banking is here with SoFi, named the #1 Bank in the U.S. for the fourth year in a row by Forbes (2026).* Enjoy up to 3.10% APY on SoFi Checking and Savings.

FAQ

What happens if you are on ChexSystems?

If you have a file on ChexSystems, you may find it hard to open a bank account. ChexSystems gathers negative information about people’s past bank accounts, such as past overdrafts or involuntary account closings.

Can you remove yourself from ChexSystems?

It may be possible to remove yourself from ChexSystems if your report includes an error or inaccurate information. You’ll need to dispute the information through ChexSystems to have it corrected or removed from your file. Or if, say, you owe overdraft charges on a now-closed account, you could contact your former bank, pay what you owe, and see if it’s willing to remove the negative information from ChexSystems.

How do I know if I am in ChexSystems?

You can request a free copy of your ChexSystems report annually. If there’s a report on file for you (those in good standing may not be listed), getting this record can reveal the details of the negative information.

How long does a person stay in ChexSystems?

Generally, negative information can stay on a ChexSystems report for up to five years. If you have multiple negative items on your ChexSystems report, the five-year reporting time frame applies separately to each one.

Which banks report to ChexSystems?

ChexSystems doesn’t specify which banks use its reporting system. If you’re unsure whether a bank reports to ChexSystems or reviews ChexSystems reports when you apply for a new account, you can call the bank and ask. You can also ask whether second chance banking is an option, in case you’re denied a traditional bank account.

---

About the author

---

Photo credit: iStock/atakan

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2026 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 5/28/26. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

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

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

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

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
We do not charge any account, service, or maintenance fees for SoFi Checking and Savings. We do charge transaction fees for outgoing wire transfers, Instant Transfers, and global remittance transfers. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/.
^Early access to direct deposit funds is based on the timing in which we receive notice of impending payment from the Federal Reserve, which is typically up to two days before the scheduled payment date, but may vary.

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


¹SoFi Bank is a member FDIC and does not provide more than $250,000 of FDIC insurance per depositor per legal category of account ownership, as described in the FDIC’s regulations. Any additional FDIC insurance is provided by the SoFi Insured Deposit Program. Deposits may be insured up to $3M through participation in the program. See full terms at SoFi.com/banking/fdic/sidpterms. See list of participating banks at SoFi.com/banking/fdic/participatingbanks.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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

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

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

SOBNK-Q126-141

Read more

An electronic check, or eCheck, is an electronic version of a paper check. Instead of writing out a check and handing (or mailing) it to the recipient, you enter your banking information and the payment amount online and authorize a transfer of funds from your bank account to the payee’s bank account.

Electronic checks are a fast, safe, and convenient form of payment, but they do have a few downsides. Here’s what you need to know.

What Is an Electronic Check (eCheck)?

An electronic check, or eCheck, is an electronic money transfer designed to perform the same function as a traditional paper check. You can often use an eCheck to pay bills, shop on an online marketplace, or make other types of payments.

To issue an eCheck, you need to provide your bank account number, the bank’s routing number, and the payment amount, and then authorize the transaction by accepting a website’s terms and conditions. The eCheck is then processed by the Automated Clearing House (ACH), a secure system that facilitates electronic payments and money transfers between banks. Once authorized, the funds leave your checking account and get deposited into the payee’s checking account.

Since an eCheck is in an electronic format, it can be processed in fewer days than a traditional paper check. Electronic checks also generally have more security features than standard checks, including authentication, digital signatures, and encryption.

How Does an eCheck Work?

The process of paying by eCheck involves three basic steps:

•   Authorization: First, you need to fill out your eCheck through an online payment portal. You then click “Submit,” which authorizes the payee to withdraw the payment amount from your checking account. In some cases, you can provide your banking information and authorize an eCheck over the phone.

•   Processing: The business’s payment processor receives the eCheck and sends a payment request to the ACH network. The ACH network then confirms that the funds are available in your account.

•   Settlement: Once the transaction is verified and approved by the ACH network, the funds are transferred from your account to the payee’s account.

How Long Does an eCheck Take to Clear?

The time it takes for an eCheck to clear can vary. It can take approximately three to six business days, though some may clear faster than that., The reason for the potentially longer processing time is that the ACH network processes payments in batches, not one by one. Once the eCheck processing starts, the network has to verify your bank information and perform security checks, which can sometimes take a few days.

Also, keep in mind that eChecks aren’t processed on weekends and holidays. So if you send an eCheck on a Friday, the payee may not receive the funds until the middle or end of the following week.

Recommended: Cleared Funds: Definition and Breakdown of Funds Clearing Time

Advantages and Disadvantages of eChecks

Note that eChecks have a number of advantages, but also a few drawbacks. Here are some things to keep in mind.

Advantages

•   Cost-effective: Electronic checks are often cheaper than paper checks, since you don’t need to pay for paper checks or stamps. And unlike using a credit card (which may come with a surcharge), eChecks generally don’t trigger a processing fee.

•   Convenience: Electronic checks eliminate the need for physical checks, reducing the time and effort required for writing, mailing, and processing paper checks. You can quickly initiate and authorize them online or over the phone.

•   Security: Electronic checks offer enhanced security features, such as encryption and authentication, to protect sensitive financial information. This reduces the risk of fraud and unauthorized transactions.

•   Environmentally friendly: eChecks contribute to environmental sustainability by minimizing paper waste and the resources required for printing and mailing.

Disadvantages

•   Clearing time: Electronic checks can take several days to clear, which may be longer than for other electronic payment methods. This can be a drawback for those who require immediate access to funds.

•   Possibility for errors: While eChecks reduce the risk of errors compared to paper checks, there is still a possibility of making a mistake in entering your bank account information or routing numbers. Such errors can delay the transaction process.

•   Limited acceptance: Not all businesses or individuals accept eChecks as a form of payment. This can limit the usability of eChecks in certain situations.

•   Potential for fraud: As with any electronic payment method, eCheck payment may be subject to fraud or unauthorized transactions. You want to be sure to share your bank account information only with trusted merchants.

What’s the Difference Between ACH and eChecks?

The terms ACH and eCheck are often used interchangeably, but they refer to different aspects of the electronic payment process.

ACH (Automated Clearing House): ACH is a network and system used for processing a wide range of electronic payments, including electronic checks. The network facilitates the transfer of funds between banks and ensures the secure processing of transactions.

Electronic check: An eCheck is a specific type of payment that is processed through the ACH network. It’s an electronic version of a traditional check and involves the transfer of funds from one bank account to another.

In short, the ACH network is the infrastructure that enables various types of electronic payments, including eChecks. An eCheck is a type of transaction that uses the ACH network for processing.

Is Paying by eCheck Safe?

Yes, paying by eCheck is generally considered safe, thanks to several security measures in place. Most notably, eChecks use encryption to protect your sensitive financial information during transmission. This ensures that the data is secure and cannot be intercepted by unauthorized parties. Electronic checks also require timestamped digital signatures to help prevent fraud.

Recommended: Are Mobile Payment Apps Safe?

The Takeaway

Electronic checks are essentially the digital version of traditional paper checks. These checks are facilitated by the ACH network, an electronic network used by U.S. financial institutions. Funds are electronically withdrawn from the payer’s checking account, transferred over the ACH network, and deposited into the recipient’s checking account.

Electronic checks are a safer alternative than paper checks and also faster to clear and cheaper to issue. However, eChecks take longer to process than paying with a debit or credit card, and they aren’t accepted everywhere.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Better banking is here with SoFi, named the #1 Bank in the U.S. for the fourth year in a row by Forbes (2026).* Enjoy up to 3.10% APY on SoFi Checking and Savings.

FAQ

How do I pay with an eCheck?

The process of paying with an eCheck mirrors that of writing a traditional check, but in a digital format. If the business you’re paying accepts eChecks, you simply need to enter your bank account number, the bank’s routing number, and the payment amount on a secure online payment portal. You then authorize and submit the eCheck.

Does it cost money to send an eCheck?

Not typically. Merchants generally have to pay a small processing fee for accepting eChecks, but this cost is not usually passed on to the consumer.

Can you reverse an eCheck?

Yes, but you have to act quickly. To reverse an eCheck, notify your bank as soon as you know you want the payment halted, ideally within the same day you initiated it. Once the payment clears, your bank may not be able to reverse the process.

---

About the author

---

Photo credit: iStock/kazuma seki

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2026 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 5/28/26. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

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

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

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

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
We do not charge any account, service, or maintenance fees for SoFi Checking and Savings. We do charge transaction fees for outgoing wire transfers, Instant Transfers, and global remittance transfers. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/.
^Early access to direct deposit funds is based on the timing in which we receive notice of impending payment from the Federal Reserve, which is typically up to two days before the scheduled payment date, but may vary.

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


¹SoFi Bank is a member FDIC and does not provide more than $250,000 of FDIC insurance per depositor per legal category of account ownership, as described in the FDIC’s regulations. Any additional FDIC insurance is provided by the SoFi Insured Deposit Program. Deposits may be insured up to $3M through participation in the program. See full terms at SoFi.com/banking/fdic/sidpterms. See list of participating banks at SoFi.com/banking/fdic/participatingbanks.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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

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

SOBNK-Q126-144

Read more

In the ever-evolving landscape of real estate, the U.S. foreclosure market often unveils key trends that will shape the future of homeownership. According to property data provider ATTOM, 42,430 properties had foreclosure filings in April 2026, down 8% from the previous month but 18% higher than a year ago. Rob Barber, CEO of ATTOM, notes that “While overall filings declined from the previous month, the year-over-year increases suggest lenders may be working through distressed inventory as higher borrowing costs and affordability challenges impact some homeowners.” Filings for the first quarter of 2026 were up 26% year-over-year.

Nationwide, one in every 3,388 housing units had a foreclosure filing in April 2026. States with the worst foreclosures rates in April 2026 included Delaware, South Carolina, and Florida. Borrowers should stay up to date on their home loan payments and work closely with their lender to explore options for assistance if needed.

Read on for the foreclosure rates in April 2026 – plus the top three counties with the worst foreclosure rates in each state.

50 State Foreclosure Rates

Check out the April 2026 foreclosure rates for all 50 states — beginning with the state that had the lowest rate of foreclosure filings per housing unit.

50. Vermont

In 49th place for population, the Green Mountain State ranked 50th for its foreclosure rate in April. Of the state’s 339,042 housing units, 16 homes went into foreclosure at a rate of one in every 21,190 households. The three counties in the state with the most foreclosures were: Rutland, Bennington, and Orange.

49. Rhode Island

The eighth-least populous state placed 49th for highest foreclosure rate in April. A total of 28 homes were in foreclosure out of 485,932 total housing units, making the foreclosure rate for the Ocean State one in every 17,355 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Providence, Kent, and Newport.

48. Kansas

The Sunflower State ranked 48th for highest foreclosure rate in April. With 1,293,635 homes and a total of 86 housing units in foreclosure, the 35th most populous state’s foreclosure rate was one in every 15,042 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Hodgeman, Comanche, and Harper.

47. West Virginia

Ranked 39th in population, the Mountain State claimed the 47th spot in April, 2026. It has a total of 861,325 housing units, of which 63 were in foreclosure. This means that the foreclosure rate was one in every 13,672 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Roane, Taylor, and Fayette.

46. Mississippi

>

Ranked 34th in population, the Magnolia State had 152 foreclosures out of 1,341,114 total housing units. This puts the foreclosure rate at one in every 8,823 homes and into the 46th spot in April. The counties with the most foreclosures per housing unit were (from highest to lowest): Issaquena, Covington, and Washington.

45. New Hampshire

The Granite State, and the 41st most populous state in the U.S., ranked 45th for its foreclosure rate. New Hampshire had 75 of its 648,472 homes in foreclosure, making for a foreclosure rate of one in every 8,646 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Coos, Carroll, and Cheshire.

44. Tennessee

Ranked 16th in population, the Volunteer State endured 396 foreclosures out of its 3,143,670 housing units. This puts the foreclosure rate at one in every 7,939 households and in 44th place for the month of April. The top three counties with the most foreclosures per unit of housing were: Sequatchie, Haywood, and Obion.

43. Washington

Sorted as 13th in population, the Evergreen State ranked 43rd for its foreclosure rate in April. Of its 3,306,620 housing units, 433 were in foreclosure, making the state’s foreclosure rate one in every 7,637 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Cowlitz, Mason, and Grays Harbor.

42. Wisconsin

With 371 foreclosures out of 2,778,572 total housing units, America’s Dairyland and the 20th most populous state secured the 42nd spot with a foreclosure rate of one in every 7,489 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Pepin, Sauk, and Racine.

41. Massachusetts

The 15th most populous state ranked 41st for highest foreclosure rate in April. Of the Bay State’s 3,030,406 housing units, 445 were in foreclosure, making for a foreclosure rate of one in every 6,810 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Plymouth, Hampden, and Bristol.

40. Hawaii

The Paradise of the Pacific, and the 40th most populous state, also ranked 40th for highest foreclosure rate. Of its 567,896 homes, 88 were in foreclosure, making for a foreclosure rate of one in every 6,453 households. The three counties with the most foreclosures were (from highest to lowest): Hawaii, Honolulu, and Kauai. Thinking of buying a home in Hawaii — or any state where you don’t currently live? Study the cost of living by state to understand what to expect.

39. South Dakota

The Mount Rushmore State nabbed the 39th spot for its foreclosure rate in April. Having 405,114 total housing units, the fifth-least populous state had a foreclosure rate of one in every 6,430 households with 63 properties in foreclosure in April. The counties with the most foreclosures per housing unit were (from highest to lowest): Hyde, Brule, and Aurora.

Recommended: Tips on Buying a Foreclosed Home

38. Oregon

The 27th most populous state ranked 38th for highest foreclosure rate in April. Of the Pacific Wonderland’s 1,857,992 homes, 292 were in foreclosure, making for a foreclosure rate of one in every 6,363 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Lake, Klamath, and Jefferson.

37. Kentucky

With a total of 2,023,116 housing units, the Bluegrass State saw 333 homes in foreclosure, landing it in 37th place in April. This puts the foreclosure rate for the 29th most populous state at one in every 6,075 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Jefferson, Boyd, and Franklin.

36. Connecticut

With 264 of its 1,541,822 homes in foreclosure, the Constitution State had the 36th-highest foreclosure rate at one in every 5,840 households. In this 29th most populous state, the counties that had the most foreclosures per housing unit were (from highest to lowest): South Central Connecticut, Naugatuck Valley, and Northwest Hills. The cost of living can have an impact on homeowners’ ability to afford their mortgage payments, and Connecticut has a relatively high cost of living compared to other U.S. states.

35. Missouri

Coming in at 19th in population, the Show-Me State took the 35th spot for highest foreclosure rate in April. Of its 2,825,287 homes, 484 were in foreclosure, making for a foreclosure rate of one in every 5,837 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Lawrence, Oregon, and Monroe.

34. North Dakota

The Peace Garden State’s foreclosure rate was one in every 5,716 homes. This puts the fourth-least populous state — with 377,281 housing units and 66 foreclosures — into 34th place. The counties with the most foreclosures per housing unit were (from highest to lowest): Sargent, Bottineau, and Renville.

33. Maine

Ranked 42nd in population, the Pine Tree State placed 33rd for highest foreclosure rate in April. With a total of 751,876 housing units, Maine saw 138 foreclosures happening, for a foreclosure rate of one in every 5,448 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Aroostook, Piscataquis, and Penobscot.

32. Nebraska

Ranking 37th in population, the Cornhusker State placed 32nd in April. It had a foreclosure rate of one in every 5,430 homes. With a total of 863,444 housing units, the state had 159 properties in foreclosure. The counties with the most foreclosures per housing unit were (from highest to lowest): Merrick, Thayer, and Frontier.

31. Virginia

With 764 homes in foreclosure, the 12th most populous state ranked 31st for highest foreclosure rate in April. Having 3,684,756 total housing units, the Old Dominion saw a foreclosure rate of one in every 4,823 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Colonial Heights City, Emporia City, and Hopewell City.

30. New Mexico

The 36th most populous state claimed the 30th spot for highest foreclosure rate in April. Of the Land of Enchantment’s 956,964 homes, 204 were in foreclosure, making for a foreclosure rate of one in every 4,691 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Valencia, Chavez, and Torrance.

29. Alaska

The Last Frontier saw 70 foreclosures in progress in April, making the foreclosure rate one in every 4,568 homes. This caused the third-least populous state, with a total of 319,781 housing units, to claim the 29th spot. The boroughs with the most foreclosures per housing unit were (from highest to lowest): Anchorage, Kenai Peninsula, and Sitka.

28. Arizona

Sorted as 14th in population, the Grand Canyon State withstood 703 foreclosures out of its total 3,192,839 housing units. This puts the foreclosure rate at one in every 4,542 homes and into the 28th spot in April. The counties with the most foreclosures per housing unit were (from highest to lowest): Pinal, Mojave, and Cochise.

27. Louisiana

Sorted as 25th in population, the Pelican State placed 27th for highest foreclosure rate. Louisiana had an April foreclosure rate of one in every 4,403 households, with 479 out of 2,108,902 homes going into foreclosure. The parishes with the most foreclosures per housing unit were (from highest to lowest): Livingston, Tangipahoa, and West Baton Rouge.

26. New York

With 2,037 out of a total 8,585,241 housing units in foreclosure, the Empire State claimed the 26th spot in April. The fourth-most populous state’s foreclosure rate was one in every 4,215 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Cortland, Orleans, and Orange. Utility costs can be high in New York, and understanding what percentage of income should go to utilities can help homeowners budget for mortgage payments.

25. Arkansas

Listed as the 33rd most populous state, the Land of Opportunity ranked 25th for highest foreclosure rate in April. The state contains 1,394,673 housing units, of which 332 were in foreclosure, making its latest foreclosure rate one in every 4,201 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Cleveland, Arkansas, and Jefferson.

24. Colorado

The 21st most populous state ranked 24th for highest foreclosure rate in April. Of the Centennial State’s 2,589,053 housing units, 671 were in foreclosure, making for a foreclosure rate of one in every 3,858 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Morgan, Clear Creek, and Logan.

23. Oklahoma

The Sooners State landed the 23rd spot in April. With housing units totaling 1,775,127, the 28th most populous state saw 466 homes in foreclosure, a rate of one in every 3,809 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Cleveland, Canadian, and Tulsa.

22. Wyoming

The country’s least populous state claimed the 22nd spot for highest foreclosure rate in April. With 277,141 housing units, of which 75 were in foreclosure, the Equality State’s foreclosure rate was one in every 3,695 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Carbon, Washakie, and Niobrara.

Recommended: What Is a Short Sale?

21. Michigan

Ranked 10th in population, the Wolverine State secured the 21st spot with a foreclosure rate of one in every 3,677 homes. With a total of 4,622,236 housing units, the state had 1,257 active foreclosure filings. The counties with the most foreclosures per housing unit were (from highest to lowest): Jackson, Newaygo, and Wayne.

20. Montana

Listed as 44th in population, the Treasure State rated 20th for its foreclosure rate in April. With 144 foreclosures out of 528,419 housing units, Montana’s foreclosure rate was one in every 3,670 homes. The counties with the most foreclosures per housing unit were: Prairie, Sheridan, and Toole.

19. Pennsylvania

The Keystone State had the 19th-highest foreclosure rate, unchanged from its position the previous month. The fifth-most populous state saw 1,632 homes out of 5,806,452 total housing units in foreclosure, making the state’s foreclosure rate one in every 3,558 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Delaware, Jefferson, and Philadelphia.

18. Iowa

The Hawkeye State had the 18th highest foreclosure rate in April. With 412 out of 1,437,699 homes in foreclosure, the 31st most populous state’s foreclosure rate was one in every 3,490 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Jasper, Monroe, and Appanoose.

17. Maryland

The state known as America in Miniature took 17th place for highest foreclosure rate in April. Ranked 18th for population size and with a total of 2,560,784 housing units, the state has a foreclosure rate of one in every 3,334 households due to its 768 properties in foreclosure. The counties with the most foreclosures per housing unit were (from highest to lowest): Baltimore City, Caroline City, and Charles.

16. Minnesota

Ranked 22nd for most populous state, the Land of 10,000 Lakes obtained the 16th spot for its foreclosure rate in April. It has 2,545,030 housing units, of which 766 were in foreclosure, making the state’s foreclosure rate one in every 3,322 households. The counties with the most foreclosures are Jackson, Wilkin, and Dodge.

15. California

The country’s most populous state ranked 15th for highest foreclosure rate in April. Of its impressive 14,644,735 housing units, 4,419 were in foreclosure, making the Golden State’s foreclosure rate one in every 3,314 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Lake, Madera, and Kern.

14. Texas

The Lone Star State withstood 3,794 foreclosures in April. With a foreclosure rate of one in every 3,197 households, this puts the second-most populous state in the U.S., with a whopping 12,128,515 housing units, into 14th place. The counties with the most foreclosures per housing unit were (from highest to lowest): Terrell, Caldwell, and Hunt.

Recommended: Are You Ready to Buy a House? — Take The Quiz

13. Alabama

Listed as 24th in population, the Yellowhammer State came in 13th for highest foreclosure rate in April. Of its 2,337,265 homes, 769 were in foreclosure, making for a foreclosure rate of one in every 3,039 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Dale, Calhoun, and Mobile.

12. Georgia

Ranked eighth in population, the Peach State took the 12th spot for highest foreclosure rate in April. Of its 4,541,835 homes, 1,503 were in foreclosure. This puts the state’s foreclosure rate at one in every 3,022 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Bibb, Rockdale, and Douglas.

11. Ohio

The Buckeye State placed 11th in April with a foreclosure rate of one in every 2,977 homes. With a sum of 5,292,391 housing units, the seventh-most populous state had a total of 1,778 homes in foreclosure. The counties with the most foreclosures per housing unit were (from highest to lowest): Marion, Highland, and Logan.

10. Idaho

Ranked 38th in population, the Gem State received the 10th spot due to its 288 housing units in foreclosure in April. With 795,014 total housing units, the state’s foreclosure rate was one in every 2,760 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Canyon, Caribou, and Washington.

9. Utah

The Beehive State placed ninth for highest foreclosure rate in April. Of its 1,223,468 housing units, 460 homes were in foreclosure, making the 17th most populous state’s foreclosure rate one in every 2,660 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Tooele, Daggett, and Garfield.

8. North Carolina

The ninth-most populous state claimed eighth place for highest foreclosure rate. Out of 4,895,668 homes, 2,024 were in foreclosure. This puts the Tar Heel State’s foreclosure rate at one in every 2,419 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Perquimans, Camden, and Jones.

7. Nevada

Ranked 32nd in population, the Silver State took seventh place for highest foreclosure rate in April. With one in every 2,412 homes in foreclosure, and a total of 1,326,471 housing units, the state had 550 homes in foreclosure. The counties with the most foreclosures per housing unit were (from highest to lowest): Clark, Lyon, and Lander.

6. New Jersey

With a foreclosure rate of one in every 2,345 homes, the Garden State ranked sixth for highest foreclosure rate in April. The 11th most populous state contains 3,791,354 housing units, of which 1,617 were in foreclosure. The counties with the most foreclosures per housing unit were (from highest to lowest): Salem, Cumberland, and Gloucester.

5. Illinois

The Land of Lincoln had the fifth-highest foreclosure rate of all 50 states in April. Of its 5,457,452 homes, 2,413 were in foreclosure, making the sixth-most populous state’s foreclosure rate one in every 2,262 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Pike, St. Clair, and Will.

4. Indiana

The 17th largest state by population, the Crossroads of America landed in the fourth-place spot in April with a foreclosure rate of one in every 2,129 homes. Of its 2,976,568 housing units, 1,398 were in foreclosure. The counties with the most foreclosures per housing unit were (from highest to lowest): Clinton, Sullivan, and Lake.

3. Florida

The third-most populous state in the country has a total of 10,256,470 housing units, of which 4,902 were in foreclosure. This puts the Sunshine State’s foreclosure rate at one in every 2,092 homes and into third place, for the second month in a row. The counties with the most foreclosures per housing unit were (from highest to lowest): Union, Lafayette, and Taylor.

2. South Carolina

The 23rd most populous state had the second-highest foreclosure rate in April with one in every 1,745 homes going into foreclosure. Of the Palmetto State’s 2,443,039 housing units, 1,400 were in foreclosure in April. The counties with the most foreclosures per housing unit were (from highest to lowest): Dorchester, Kershaw, and Richmond.

1. Delaware

The sixth-least populous state in the country, the Small Wonder nabbed first place on this list in April. With one in every 1,739 homes going into foreclosure and a total of 464,203 housing units, the state had 267 homes in foreclosure. Having only three counties in the state, the most foreclosures per housing unit were (from highest to lowest): Kent, Newcastle, and Sussex.

The Takeaway

Of all 50 states, Delaware had the most properties in foreclosure per unit of housing and Vermont had the least. As for the states with the highest foreclosure rates, Delaware, South Carolina, and Florida took the top three spots.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

SoFi Mortgages: simple, smart, and so affordable.

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.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
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.
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. Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

SOHL-Q226-123

Read more

Zombie debt is old, settled, or long-forgotten debt that has suddenly come back to life and is now threatening to wreak havoc on your finances. These debts are often purchased on the cheap by third-party debt collection agencies, which then try to collect on them by scaring or tricking unsuspecting consumers into paying up.

While zombie debt can, indeed, be scary, you don’t necessarily have to pay anything to make it go away. In many cases, zombie debt has already been settled or is too old to be collectible. It’s also possible the debt doesn’t even belong to you but has your name attached due to an error or identity theft. Here’s what to do if a collector is hounding you for an old or unfamiliar debt.

Zombie Debt Definition

Zombie debt is generally defined as debt that is more than three years old that has either been settled, forgotten about, or belonged to someone else. While a debt collector is allowed to contact you about this debt, they are not allowed to harass you.

If a zombie debt collector contacts you about a debt that has expired or that has already been paid or settled, you do not need to pay it, and they cannot take you to court to collect the money.

Types of Zombie Debts

Zombie debts often fall into the following categories.

Settled Debts

If you’ve filed Chapter 7 bankruptcy, some of your debts might have been discharged, which means you’re no longer on the hook for paying them back. If a debt is settled, you should have a written agreement that makes it clear you’re no longer legally liable for the debt.

Recommended: Getting Approved for a Personal Loan After Bankruptcy

Debt That Isn’t Yours

Debt that a scammer racked up under your name (by stealing your identity) can come back to haunt you as zombie debt, even though it doesn’t really belong to you. It’s also possible for a collection agency to mistakenly think a certain debt is yours and go after you due to an error.

Time-Barred Debt

In many states, there is a statute of limitations on debt (with the exception of federal student loans). This means that, after a certain time frame, a collector can no longer take legal action to collect the debt. The exact time limit will depend on a number of factors, including the state law that’s noted in your credit agreement and the type of debt it is (such as credit card debt, a car loan, a personal loan, etc.), but it’s typically 3-6 years.

Depending on the state, the statute of limitations period may begin once the first required payment is missed, or it might start from the point when the most recent payment was made, even if that payment was made during collection.

It’s important to note that even if a debt is past its statute of limitations, making any type of payment or acknowledging you owe an old debt can restart the clock.

Debt That’s Fallen Off Your Credit Reports

Negative items on your credit report, such as a late payment or a debt in collection, can stay there for up to seven years. After that, the debt falls off your reports. If, however, you make (or agree to make) a payment on an expired debt, the debt collection agency can report the debt to the credit bureaus, resetting the seven-year clock.

How Does Zombie Debt Work?

Zombie debt is typically older debt. Generally, the original creditor has given up and sold the debt to a third-party collection agency. These agencies often buy up zombie debts in bulk for pennies on the dollar. Even if the debt is past the statute of limitations and they cannot legally collect, they will often still try in the hopes that some consumers will pay out of fear. It’s essentially a numbers game — even if just a few people pay something, the business model can be profitable.

Some tactics that these collectors will use include:

•   Telling you that if you make a partial payment, they will leave you alone

•   Calling themselves a litigation firm

•   Threatening to take you to court if you don’t pay

•   Harassing you with excessive calls and verbal abuse

If you’re on the receiving end of a zombie debt collection, you’ll want to be careful. There is no upside in paying anything on a debt that is past the statute of limitations. In fact, doing so can restart the clock and make it possible for a collector to sue you for the debt and put it back on your credit report.

Recommended: What to Know About Debt Settlement Companies

How to Deal With Zombie Debt Collectors

If a debt collector contacts you about a debt you don’t remember or thought was settled long ago, here are some steps to take.

•   Verify that it’s a legitimate debt. By law, a collector has to give you details about the debt, either when they first communicate with you or within five days of the first contact. These details must include the name of the creditor you owe it to and how much money you owe (written out to include interest, fees, payments, and credits). If the collector doesn’t provide you with this information, you’ll want to request a debt validation letter. It’s also a good idea to get a free copy of your credit report at AnnualCreditReport.com to see if the debt is listed there.

•   Follow up on suspected identity theft. If you believe that your zombie debt is a result of identity theft, you’ll find tips and sample letters to help you dispute it at IdentityTheft.gov.

•   Know your rights. No matter where you live or the form of debt, you have rights. Under the Fair Debt Collection Practices Act (FDCPA), zombie debt collectors are allowed to reach out to you, but they’re not allowed to do the following:

◦   Contact you before 8am or after 9pm without your consent

◦   Reach out to you at work if you’ve requested that they stop

◦   Contact you via text or email or DM you on social media if you’ve asked them to stop

◦   Call more than seven times within a seven-day period

•   Don’t ignore lawsuits. If a debt collector files a lawsuit against you to collect a zombie debt, it’s important that you respond to the lawsuit, either personally or through your lawyer, by the date specified in the court papers to preserve your rights.

•   Don’t accidentally reset the clock. If you make — or even agree to make — a payment on a time-barred debt, the statute of limitations clock may reset. If that happens, the collector can then sue you for the full debt amount, plus interest and fees. Also, be wary of collectors that ask if you want to enroll in a “Fresh Start Program,” as this can also reset the clock on the debt.

•   Dispute the debt if it’s not legitimate. If the debt is not something you legitimately owe (say, it has already been settled, is time-barred, or is not yours), you’ll want to send a dispute letter explaining why you do not owe the debt, ideally via certified mail. The Consumer Financial Protection Bureau offers sample letters that you can use as a guide.

•   Negotiate if you do owe. If the debt in collection is legitimate and you do need to pay it, consider negotiating with the collector for a reduced amount. If they agree, be sure to get the new terms in writing (in case the debt comes back to haunt you, yet again, in the future).

Protecting Yourself From Zombie Debt

To prevent any of your current debts from becoming zombie debts, be sure to make all of your payments on time and in full, and keep records of your payment history. If you have multiple high-interest debts and are finding it difficult to keep up with payments, you might consider getting a debt consolidation loan, ideally at a lower interest rate.

Other debt payoff strategies include getting a no-interest balance transfer card, paying off the most expensive debts first (known as the avalanche payoff method), and negotiating interest rates and payment terms with your lender.

The Takeaway

Zombie debt can rise from the grave to haunt you, but you don’t have to head for the hills or hide in fear. When you know your rights, you can protect yourself against old or expired debt that collectors are trying to cash in on.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

SoFi’s Personal Loan was named a NerdWallet 2026 winner for Best Personal Loan for Large Loan Amounts.

FAQ

Can you ignore zombie debts?

Ignoring zombie debts, which are old debts that have resurfaced, is generally not a good idea. While these debts may be past the statute of limitations, debt collectors can still attempt to collect them. Ignoring their attempts can lead to persistent harassment and, if the debt is legitimate, potential legal action, so it’s better to ask for a verification letter that includes all of the details of the debt.

How can zombie debt collectors legally contact you?

Zombie debt collectors can legally contact you via phone call, letter, email, and even text messages. However, the Fair Debt Collection Practices Act (FDCPA) regulates these communications, requiring collectors to respect certain boundaries. For example, they cannot contact you early in the morning or late at night nor harass you, and they must also identify themselves and provide information about the debt.

What is the zombie debt statute of limitations?

The statute of limitations for zombie debts varies by state and type of debt but often ranges from 3-6 years. Once the statute of limitations expires, the debt becomes time-barred, meaning the collector can no longer sue you to collect it. That said, the debt still exists, and collectors can still attempt to recover it through other means, such as phone calls or letters, so it’s important to verify the specific statute of limitations in your state.

---

Photo credit: iStock/skynesher

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.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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.

SOPL-Q226-044

Read more