SoFi

A growth savings account is a savings account that earns a significantly higher rate of interest than a standard saving account. This enhanced interest rate means your money will grow faster, which sounds of course like a good thing.

But are these accounts always a good bet? Important points to consider are:

•   What is a growth savings account?

•   How do growth savings accounts work?

•   The pros and cons of a growth savings account

•   How to open a growth savings account.

What Is a Growth Savings Account?

So, what is a growth savings account? Growth savings accounts are similar to regular savings accounts, except they tend to earn more, even 20 times as much, interest than traditional savings accounts. Depositing money in a growth savings account (which may also be called a high-yield savings account) makes it easier to grow savings safely, while keeping those funds accessible.

You may get the best interest rate on a growth savings account at an online bank or credit union versus a traditional, or bricks-and-mortar, bank. However, even at their best, these savings accounts typically don’t have the very high growth of, say, a well-chosen stock portfolio, the kind that could have you living off investment interest.

How Do Growth Savings Accounts Work?

Growth savings accounts function in a similar manner to regular savings accounts. You open the account, put some funds in, and can continue to add to the money as you like, all the while earning interest. The difference is you’ll earn more interest, thanks to their higher rates. This may make it one of the more appealing places to put your cash, especially when saving for short- or medium-term goals, such as building up an emergency fund or taking a European vacation.

As you shop for a growth savings account, you’ll likely find a broad range of rates. Odds are a traditional bank will offer an interest rate well below 1.00% (perhaps 0.02%) at press time. An online bank with growth savings accounts may offer rates of 1.00% or more.

Worth noting: Any interest earned in a growth savings account or a regular savings account may need to be reported as taxable income.

Also, at some financial institutions, you may be limited to only six withdrawals or transfers a month, as is the case with standard savings accounts. For each following withdrawal, you could face a fee or even have your savings account closed or converted into a checking account. A number of banks have relaxed this rule; check with yours to see if they still cap the number of withdrawals per month.

Pros of a Growth Savings Account

Here are a few examples of advantages that come with opening a growth savings account.

Higher Interest Rates

Because growth savings accounts can offer higher interest rates, the money held in a growth savings account tends to grow faster than money held in traditional savings accounts that earn lower interest rates. When determining what is a good interest rate, also look into minimum balances. You may see that the more money you put on deposit, the higher the rate you earn can be.

Accessible Form of Growth

Keeping money in a savings account is a great way to earn interest. It also means your money stays very accessible, which wouldn’t be the case if you invested in the stock market or opened a certificate of deposit (CD), which should be left untouched for a specific term.

Good Way to Build an Emergency Fund

Because these funds are fairly accessible, a growth savings account is a great place to build an emergency fund. That way, the emergency fund can continue to grow until it might be needed.

Cons of a Growth Savings Account

There are also some downsides to growth savings accounts worth keeping in mind before opening one.

Limited Growth Opportunity

Yes, growth savings accounts do earn more interest than traditional savings accounts. However, when considering your long-term savings options, there may be more strategic investments that can enhance growth. If, for instance, you’re saving for retirement, which is a few decades away, you might take a look at the stock market for growth.

Withdrawal Limits

Growth savings accounts generally provide easier access to funds than keeping money in investments. That said, you may only be able to make six withdrawals or transfers per month, or else you risk running into fees or having your account closed or converted to a checking account. Check, though, with your bank about whether this six-transaction limit still holds true. Many financial institutions have abandoned this guideline over the last couple of years.

Earnings Are Taxable Income

The interest earned in a growth savings account can count as taxable income. Compare this to the growth that occurs in a Roth Individual Retirement Account (IRA). There, you won’t pay any income tax on investment earnings.

Pros of Growth Savings Accounts	Cons of Growth Savings Accounts
Higher interest rates	Accessible form of growth
Good way to build an emergency fund	Limited growth opportunity
Possible withdrawal limits	Earnings are taxable income

Recommended: What is a Roth IRA and How Does it Work?

Choosing a Growth Savings Account

When you’re looking for ways to earn more interest on your money, a growth savings account might be a good option. Shop around to find the best fit for your needs. Here are a few factors to keep in mind when looking for a new growth savings account:

•   Interest rates

•   Minimum balance requirements

•   Fees

•   Account features

•   Mobile app

•   Other product and service offerings

It’s important to note that a lot of growth savings accounts come from online banks that don’t have in-person banking locations. Keep that in mind if you prefer to manage your account in-person.

How to Open a Growth Savings Account

While each banking institution will have its own process, opening a growth savings account typically includes the following steps:

•   Fill out the application. When filling out a growth savings account application, you’ll usually provide details like your name, Social Security number, proof of address (say, from a utility bill), and government-issued photo ID.

•   Choose the account type. There may be different savings account types, such as an individual account or a joint account (to share with a spouse or family member). Select the kind that’s right for your needs.

•   Designate beneficiaries. It’s important to choose a beneficiary for your growth savings account, just as you might select a beneficiary for a 401(k) plan. This is the person who would receive the account’s funds if your were to become incapacitated or pass away.

•   Deposit funds. Some banks require a minimum initial deposit, so you may need to make that deposit to open the account.

•   Create login information. If the growth savings account is set up through an online bank, it will be necessary to create login information such as a username and password for the online account. Be sure to create a complex password with at least one capital letter, numbers, and symbols.

While there may be another step or two in some situations, that’s how to open a bank account.

The Takeaway

Everyone wants to earn more interest on their savings account. Growth savings accounts can do just that vs traditional savings accounts since they tend to have higher interest rates. These accounts can be a good way to increase the funds in your savings faster. They are not, however, for everyone nor for all situations. In some cases, investing can help earn more money on savings and help you achieve long-term financial goals.

If you are looking for a new growth savings account, see what SoFi offers. We’re dedicated to helping you bank smarter. Here’s a great example: When you open a new bank account online with direct deposit, you’ll earn a super competitive 4.60% APY and pay zero account fees. That means your money grows faster and won’t be eroded by miscellaneous charges. You’ll also get access to your paycheck two full days early.

If you are looking for a new growth savings account, see what SoFi offers. We’re dedicated to helping you bank smarter. Here’s a great example: When you open a new bank account online with direct deposit, you’ll earn a competitive APY and pay zero account fees. That means your money can grow faster and won’t be eroded by miscellaneous charges. You’ll also get access to your paycheck two full days early.

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

FAQ

How do growth savings accounts work?

Growth savings accounts function similarly to traditional savings accounts. The only difference between these account types is that growth savings accounts tend to have higher interest rates.

What does “growth account” mean?

A growth account — also known as a high-yield account — offers a higher interest rate than traditional savings accounts. This higher interest rate leads to more growth on deposited funds.

How much interest does a growth savings account earn?

Interest rates change all the time, so it’s hard to nail down an exact number on what to expect with a growth savings account. That being said, growth savings accounts typically offer an annual percentage yield (or APY) of 1.00%, and sometimes even more than 2.00%.

---

Photo credit: iStock/Eoneren

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

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

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

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

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

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

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

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

SOBK0222017

Read more

What is a callable CD? A callable CD is a certificate of deposit that pays interest like a regular CD, but can be “called” or redeemed by the issuing bank before the maturity date, thus limiting the return for the investor.

Investors who own regular CDs can count on getting back their principal, plus a fixed amount of interest, when the CD matures. But those who own callable CDs may not get the interest they expected if the bank calls the CD early.

Callable CD interest rates tend to be higher because of this potential risk. Here’s what else you need to know about callable CDs.

What Is a Callable CD?

A callable CD, like a callable bond, means that the bank has the power to terminate the CD before the maturity date. This typically happens if there is a drop in interest rates.

For example, if an investor buys a 2-year callable CD, the bank could close it out as soon as six months after it’s opened, or any time after that, at six-month intervals; it depends on the terms of the CD. The investor would then get back their principal and the amount of interest earned up to that point.

Note that only the issuer has the ability to call the CD early. The investor must leave their money in the CD until it’s called, or it reaches maturity, or they will face an early withdrawal penalty.

How Does a Callable CD Work?

Callable CDs are similar to regular CDs, which are time-deposit accounts offered by banks and credit unions. These accounts provide a fixed interest rate on the funds the account holder has deposited for a specific term (usually a few months to a few years).

But unlike a regular CD, a callable CD has a “call” feature which allows the financial institution to decide whether it wants to stop paying the account holder the higher interest rate. At that point, the issuer can close out the CD and return the funds to the investor, plus any interest earned up to that point.

The bank typically offers a premium interest rate to account holders in exchange for the risk that the CD might be called.

Recommended: APY vs. Interest Rate: What’s the Difference?

Callable CD Example

Let’s say an account holder decides to deposit $10,000 into a callable CD that has a three-year maturity with a 5% interest rate. The bank, however, decides to call the CD after a year because interest rates dropped, and the bank can now offer CDs at a 4% interest rate.

In this case, the account holder would get their $10,000 back along with the interest accrued prior to the bank’s redemption of the CD: roughly $500 versus more than $1,500 the investor might have earned if they had been able to hold the CD to maturity.

Are Callable CDs FDIC Insured?

Yes. Callable CDs, like most types of CDs, are insured up to $250,000 by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Association (NCUA), if the CD is issued by a credit union. If there is a bank failure, federal deposit insurance protects the money held in a callable CD up to that amount.

Maturity Date vs Callable Date

The maturity date is when the certificate of deposit reaches maturity and the investor can redeem the CD for the principal plus interest accrued during the length of the CD, and they can choose to take the earnings or renew the CD.

The callable date is the earliest date at which the CD issuer can close the CD. The first callable date can be as soon as six months after the CD was opened, and can occur any time after that, at six-month intervals (e.g. one year, 18 months, two years, and so on).

Be sure to read the terms of any CD, but especially callable CDs, as the callable date can vary. For example, you could buy a callable CD with a 5-year maturity date and a one-year callable date (the earliest date the issuer can call the CD). That means, at the very least your money would earn a year’s worth of interest.

Pros of Callable CDs

There are several advantages that come with opening a callable CD.

•   Callable CDs typically pay higher interest rates compared to regular CDs. Since account holders are taking on the risk of the bank redeeming the callable CD prior to its maturity, the account holder gets a higher interest rate in exchange for taking on this risk.

•   Like most CDs, callable CDs are relatively low-risk investments. If the bank decides to terminate the CD before its term, you will still receive the original deposit amount as well as the interest that accumulated until that time.

•   In the event of a bank failure, your money is federally insured up to $250,000 (unlike putting money in the stock market where your investment can significantly drop in value or fall to zero).

Cons of Callable CDs

While there are positives to callable CDs, these saving vehicles can have some downsides.

•   If the account holder needs access to capital and has to withdraw their money prior to the callable CD’s date of maturity, the account holder is subject to early withdrawal penalties which can eat up some or all of the interest earned.

•   In the event that interest rates decline, there is a possibility that the bank could call the CD early, in which case the account holder would not receive the same return they would have if the callable CD were to finish its full term.

Where to Open a Callable CD

If you have allocated money in an emergency fund and are looking for a lower risk savings vehicle to build up your funds, you can open a callable CD with a bank or credit union. The financial institution should be FDIC-insured National Credit Union Administration-insured so your money is protected.

The Takeaway

If you are looking for investments that are lower risk, provide predictable returns, and are protected by federal insurance, callable certificates of deposits might fit the bill. Callable CDs can take your savings to another level by paying a higher fixed interest rate for a specific period of time. The risk the account holder has to take is the possibility of the bank exercising the call option, and closing the account before the CD matures. Fortunately, account holders are compensated for this risk with a higher interest rate compared with regular CDs.

If you’re interested in earning a higher rate on your savings, consider opening an online savings account with SoFi. You won’t pay any account fees or overdraft fees, and you can earn a competitive APY.

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

FAQ

What is a callable vs a non-callable CD?

Callable CDs are certificates of deposits that pay interest for a specified term like a traditional CD does, but the callable CD rate tends to be higher because the bank is allowed to redeem the CD before it reaches maturity. A regular CD does not have a call feature.

Why would a bank call a CD?

Usually, a bank would call a CD in the event of falling interest rates. In this case, the bank redeems the CD because with a drop in rates, the bank can then pay lower rates to its CD holders.

Can you lose money on a callable CD?

No, but you might get less money than you’d hoped. In a callable event, the account holder receives the principal along with interest that was accumulated up to that point in time, instead of receiving the return for the full term of the CD.

---

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

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

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

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

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

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

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

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.

Photo credit: iStock/hallojulie
SOBK0422003

Read more

A Doctor of Pharmacy (Pharm.D.) degree is a four-year, licensed professional degree that teaches students how to fill prescription medications and how to educate patients about using prescriptions safely. Pharmacy school can be expensive, adding up to nearly $200,000 dollars on the high end.

With that price tag, it’s not a surprise that pharmacy students may have to rely on a few different sources of financing to pay for school, sometimes using a combination of savings, grants, scholarships, and student loans. This article will review the pharmacy school costs, the amount pharmacists can make, and nine tips for paying for pharmacy school.

How Much Does Pharmacy School Typically Cost?

The cost of pharmacy school can vary depending on where you enroll, the location, and the extent to which public dollars support the university you plan to attend. As mentioned, the complete cost of pharmacy school can add up to $200,000. The cost can swing higher for students who opt for an out-of-state institution. The American Association of Colleges of Pharmacy (AACP) lists the tuition and fees for pharmacy school l for the 2021-2022 academic year on its website, which can help you compare costs at the pharmacy schools you may be considering.

For example, the first school on the list, Auburn University, costs $22,392 for in-state pharmacy students and $42,552 for out-of-state students. Mandatory fees cost $404 for 33 credit hours for students in their first year. However, in the fourth year, it costs $26,733 for in-state students and $56,973 for out-of-state students, with $197 for mandatory fees for 46 credit hours.

It’s worthwhile to compare the costs of various institutions before you make a decision. However, remember that financial aid can potentially bring the costs down further, so don’t rely completely on the published tuition prices. A conversation with the financial aid office at each school may give you a more in-depth analysis of how much it will actually cost, taking your personal situation into account.

Is Pharmacy School Worth It?

For the right individual, pharmacy school can be worth it. The costs of pharmacy school may seem daunting, but the professional perks, ability to become a part of a healthcare team, job opportunities, and career stability can mean that pharmacy school is the right option for many individuals. The high salary of pharmacists may also make pharmacy school worth it.

How Much Can Pharmacists Make?

The 2020 median pay for pharmacists was $128,710 per year, or $61.88 per hour, according to the Bureau of Labor Statistics (BLS). It’s worth knowing that the job outlook for pharmacists will decline -2% from 2020 through 2030. However, that shouldn’t stop you from pursuing a pharmacy degree if it’s your true interest.

9 Tips for Paying for Pharmacy School

Think of paying for pharmacy school as a pie. There are many ways to pay for pharmacy school by dividing that pie. For example, various pieces of the pie might make up scholarships, grants, loans, and money out of your own pocket. No matter how you slice the pie, every dollar you contribute is an investment into your career and your future. We’ll discuss scholarships, including university, pharmacy, and private scholarships as well as grants in the next section.

Scholarships

Scholarships are funds that you don’t have to pay back. You can get scholarships as a pharmacy student from a number of different sources, including from the university that you plan to attend as well as through designated pharmacy scholarships and private scholarships.

It’s worth considering other interests beyond pharmacy. Scholarships may be awarded based on heritage, location, or even hobbies or special skills. Maybe you have talents in another area that qualify you for additional scholarships.

University Scholarships

Pharmacy colleges and schools traditionally offer direct financial assistance to pharmacy students through various sources, including alumni associations and local chapters of pharmaceutical organizations and fraternities.

Consider setting a meeting with the financial aid office at the university you plan to attend to learn more about specific scholarships from each pharmacy school you’re interested in attending.

Pharmacy Scholarships

Local and state pharmaceutical associations, practicing pharmacists, drug manufacturers, and wholesalers may offer pharmacy scholarships to promising pharmacists as well.

For example, 10 pharmacy students annually can receive a $5,000 Walmart Health Equity Scholarship. Students must be accepted or enrolled in the professional curriculum at a U.S. college or school of pharmacy, and show evidence of leadership skills, academic success, and must have a preference to serve rural or medically underserved patients.

Here’s another example: Five underrepresented minority students can receive the CVS Health Minority Scholarship for Pharmacy Students annually. Students must be African American, Hispanic or Latino, American Indian, Native Hawaiian, and/or Pacific Islander students, as well as U.S. citizens or permanent residents. Each successful candidate will receive a single $7,000 scholarship.

Private Scholarships

Private scholarships come from companies, service groups and organizations, foundations, and individuals. For example, Tylenol offers a scholarship for students pursuing careers in healthcare, including pharmacy. There may also be scholarships available from local or regional organizations.

2. Grants

Like scholarships, you do not have to repay the money you receive from grants. Grants, which are typically based on need, can also be awarded based on merit. Filling the Free Application for Federal Student Aid (FAFSA®) automatically considers you for federal grants based on need. You may also become eligible for state grants. Your college or university can give you more information about the types of grants you’re eligible for through your pharmacy program.

3. Federal Student Loans

You may be wondering how to pay for pharmacy school without loans. It’s possible to do it through a combination of scholarships, grants, and savings, though many people take advantage of federal student loans from the federal government through the U.S. Department of Education. Federal student loans have fixed interest rates and benefits such as income-driven repayment plans. Just like obtaining an auto loan or a mortgage, you must pay back loans with interest.

Federal student loans are a type of federal financial aid, and to apply, you must file the FAFSA. Learn more about the requirements for this application in SoFi’s comprehensive guide to the FAFSA.

You can qualify for two types of federal student loans for pharmacy school: Direct PLUS Loans and Direct Unsubsidized Loans.

Direct PLUS Loans

Pharmacy students can take advantage of Direct PLUS Loans, also called graduate PLUS loans or direct grad PLUS loans, to help finance graduate and professional school. The Graduate PLUS Loan comes from the U.S. Department of Education for graduate or professional students. In order to get one, your school must participate in the Direct Loan Program.

The Direct PLUS Loan is not need-based, which means you can get it no matter your income level. You can borrow up to the full cost of attendance and can use the money to pay for tuition, room and board, and fees. Your school will subtract other financial aid you receive (such as scholarships, grants, and fellowships) from the full cost of attendance and award you the difference with a Direct PLUS Loan.

The interest rate is 6.28% for Direct PLUS Loans first disbursed on or after July 1, 2021 and before July 1, 2022.

Direct Unsubsidized Loans

Similar to student loans for undergraduates, you can tap into Direct Unsubsidized Loans. You can borrow up to $20,500 per year with the Direct Unsubsidized Loan, and the interest rate is 5.28% if disbursed between July 1, 2021 and July 1, 2022. “Unsubsidized” means that the government doesn’t pay the interest while you’re in school and during the grace period.

It’s generally a good idea to first consider opting for the Direct Unsubsidized Loan, over a Graduate PLUS Loan. Why opt for the Direct Unsubsidized loan first?

You’ll pay more in interest for the Direct PLUS Loan (6.28% interest rate).

4. Private Student Loans

Private student loans do not come from the federal government. They can come from a bank, credit union, or another financial institution and can be used to help finance college or career school. The amount you can borrow depends on the costs of your degree, but also depends on personal financial factors (such as your credit score and income).

You may have gotten advice that suggested exhausting all of your federal grant and loan options before you consider private loans because interest rates are usually higher compared to federal student loans. Additionally, private student loans don’t qualify for the same borrower protections as federal student loans, like income-driven repayment plans or deferment options. However, private student loans can be an option to consider if you need additional funding to cover your pharmacy school expenses.

Recommended: Things to know before applying for private student loans

5. PSLF Programs

The Public Service Loan Forgiveness (PSLF) Program is a federal student loan forgiveness program. More specifically, you may qualify to have the remaining balance on your Direct Loans forgiven after you have made 120 qualifying monthly payments under a qualifying repayment plan. You must work full-time for a qualifying employer in order to qualify and your employer must be a qualifying organization such as a federal, state, local, or tribal government organization or other nonprofit organization.

You must have Direct Loans or consolidate other types of federal student loans into a Direct Loan, repay loans under an income-driven repayment plan, as well as make 120 qualifying payments toward your student loans. The requirements for PSLF can be quite strict, so be sure to read the requirements closely.

For more information about PSLF programs and to learn more about your eligibility, contact your loan servicer, which is the entity that services your loan.

6. Pharmacy Internships

Pharmacy internships can be instrumental in your budding career as a pharmacist in helping you understand how pharmacies operate, learning the ins and outs of customer service, helping you dive into inventory management, and learning the professional skills necessary to become a pharmacist. You may also learn more from pharmacist professionals about leading a pharmacy team and help you bring tangible professional experience back to the classroom.

You may also want to look into pharmacy fellowships, which provide financial support in an external or internal capacity (in or out of the university environment). Assistantships also provide financial support in an academic department through teaching, research, or administrative responsibilities.

7. Work Part Time

You may want to consider working a part-time job in conjunction with pharmacy school. For example, if you attend school from 8am to 4pm, you may want to seek a part-time job after hours.

However, it’s important to consider your time constraints and whether you can succeed in your coursework. Consider your ability to manage your time before you take on a part-time job. However, for the right student, taking on a job can help pay for college tuition and give you an additional source of income. Networking opportunities and skill development can come from a part-time job, even if it doesn’t relate to pharmacy.

8. Borrow From Family

Do you have a family member who really wants to give you money for your education? You may seriously consider borrowing from your parents or a sister or brother (or whoever else wants to lend you money).

Just remember that it could strain family relationships if you fail to pay back the loan. It’s a good idea to have a plan in place to repay your relative(s) as well as create boundaries, so both parties feel good about the arrangement.

9. HRSA Loans

The Health Resources and Services Administration (HRSA), an agency of the U.S. Department of Health and Human Services, improves health care for geographically isolated and vulnerable individuals.

The Department of Health and Human Services (HHS), through the HRSA, also offers several loans for health services students. For example, Health Professions Student Loans are available to individuals who study pharmacy (as well as dentistry, optometry, podiatry, or veterinary medicine). Pharmacy students who show financial need may also be able to tap into Loans for Disadvantaged Students (LDS). Health professions student loans have fixed interest rates of 5%, lower than both Direct Unsubsidized Loans and PLUS loans. They also allow 12 months of grace periods, while most other loans only offer six months of grace periods. In addition, health professions loans are subsidized, which means you don’t pay interest on the loan while you’re in school, nor do you pay additional loan fees.

However, they come with a few downsides: Not all schools participate, and there are no set borrowing limits. You also can’t tap into income-driven repayment plans or PSLF.

Private Student Loans for Pharmacy School

If you’re looking for options to cover the remainder of your pharmacy school costs, consider private student loans with SoFi.

SoFi offers competitive rates, flexible repayment options, zero origination fees, late fees, or insufficient funds fees. You can check your interest rate in a few minutes.

Let SoFi help you with the details of paying for pharmacy school.

FAQ

Can you use FAFSA for pharmacy school?

Absolutely! It’s generally a smart idea to file the FAFSA for pharmacy school, no matter your financial situation. The FAFSA can give you access to a range of financial aid options, including scholarships (your school will consider your eligibility based on the FAFSA results), grants, loans, and work-study. You want to be able to put together the best financial aid options for your needs, and the best way to do that involves filing the FAFSA.

Does CVS or Walgreens pay for pharmacy school?

CVS and Walgreens both offer pharmacy scholarships, like the ones we listed above, the https://www.aacp.org/resource/walmart-health-equity-scholarship-pharmacy-students
Walmart Health Equity Scholarship and the CVS Health Minority Scholarship for Pharmacy Students . If you work for either company, you may also qualify through each company’s employee tuition reimbursement program. Check with the human resources department at each company for more details.

How much can pharmacists make after graduating?

The 2020 median pay for pharmacists was $128,710 per year, or $61.88 per hour, according to the Bureau of Labor Statistics (BLS). The job outlook for pharmacists will decline -2% from 2020 through 2030.

---

Photo credit: iStock/cagkansayin

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 Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

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 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.

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.

SOPS0322011

Read more

A letter of credit is a business-to-business document guaranteeing that the provider of goods or services to a buyer will receive payment. As part of a sales agreement, a seller may require the buyer to deliver a letter of credit before a deal takes place.

More specifically, letters of credit are often vital in international trade where the two parties involved are not yet familiar with one another. Letters of credit facilitate new trade and prompt payments.

Read on to learn more, including:

•   What a letter of credit is

•   How a letter of credit works

•   What the different types of letters of credit are

•   The pros and cons of letters of credit

•   How to get a letter of credit.

What Is a Letter of Credit in Banking?

Here’s what a letter of credit in banking is: It’s a document that a bank issues to a seller that guarantees payment from their customer for an order or service. The bank where the buyer’s business account is held usually assumes responsibility for the payment for the goods. However, the conditions laid out in the letter of credit must be fulfilled. The bank or financial institution charges the buyer a fee for guaranteeing the payment and issuing the letter.

Letters of credit are common in international trade situations because various factors can affect cross-border transactions. It’s not necessarily a matter of the buyer having a bad credit score. Rather, the deal may involve different legal frameworks, a lack of familiarity between the parties involved, and geographic distance.

How a Letter of Credit Works

When used properly, letters of credit can work to minimize credit risk and smooth international trade. A vendor selling products or services overseas may want assurance that a buyer of their products or services will pay. Perhaps the buyer is new to them or just a new business, period.

So how does a letter of credit work? It serves as a guarantee from a bank that it will pay the vendor once the requirements are met. The letter lays out the conditions of payment, such as the amount, the timing of the payment, and the delivery specifications. The letter can help the business placing the order build their credit, too.

The bank charges the buyer a fee for issuing a letter of credit (often around 0.75% to 1.5% of the amount of the deal), but it also does the due diligence to assure creditworthiness. The bank requires collateral or security from the buyer for the payment guarantee. In essence, the bank acts as a third party facilitating the deal.

Recommended: Why is Having a Good Credit Score Important?

Types of Letters of Credit

The following are four types of letters of credit.

•   Commercial Letter of Credit: The issuing bank pays the seller directly. For a stand-by letter of credit, the bank only pays the seller if the buyer cannot transfer funds.

•   Revolving Letter of Credit: The bank guarantees payment for a number of transactions within a set period.

•   Traveler’s Letter of Credit: Travelers can make withdrawals in a foreign country. The issuing bank guarantees to honor any withdrawals.

•   Confirmed Letter of Credit: A seller using a confirmed letter of credit involves a secondary bank, typically the seller’s bank. They guarantee payment if the first bank fails to pay.

You may also hear an irrevocable letter of credit mentioned; this is a letter of credit that can’t be changed or canceled unless all parties agree.

There is also a stand-by letter of credit which may be used when deal requirements are not initially met; see below for more details.

Letter of Credit Example

Here’s an example of a letter of credit: Wells Fargo provides commercial letters of credit and stand-by letters of credit within two weeks. The funds are secured through deposits at Wells Fargo, and the terms are renewable. These documents can help reassure parties doing business internationally, with new-to-them businesses or clients who have recently started a business.

The Money Behind a Letter of Credit

When it comes to letters of credit, you may wonder, Where do the payment funds for a letter of credit originate? The party paying for the goods or services typically deposits funds in advance to the bank that issues the letter of credit to cover the payment. Alternatively, the amount might be frozen in the payer’s account or the payer might borrow from the bank using a line of credit.

When Does Payment Happen?

Payment usually occurs when the seller has completed all the stipulations in the letter of credit. For example, the seller might have to deliver the goods to a specific address or onto a ship for transportation in the case of international trade. In the latter case, shipping documents would serve as proof that the requirements for payment have been fulfilled. They might trigger the payment transaction.

What to Watch Out for

Here are some common mistakes sellers may make when relying on a letter of credit for payment.

•   Failing to check all of the requirements in the letter of credit.

•   Failing to understand the documents required for the deal.

•   Failing to confirm whether the time limits for delivery and payment are reasonable.

•   Failing to meet the time limits.

•   Failing to get the necessary proof of delivery documents to the bank.

Letters of Credit Terminology

Here are some terms and phrases to know if you may be using letters of credit.

•   Advising bank: This is the bank that informs the seller that the letter of credit has been completed. The advising bank is also called the notifying bank.

•   Applicant: The party or the acquirer of products or services who applies for the letter of credit from the bank.

•   Beneficiary: The party, or seller, who will receive payment. The seller usually requests a letter of credit to guarantee payment.

•   Confirming bank: The bank that guarantees the payment of the required funds to the seller. If a third party is involved, the confirming bank is the bank most familiar to the seller.

•   Freight forwarder: A shipping company that provides the transportation documents to the seller.

•   Intermediary: These are companies that link buyers and sellers and may use letters of credit to ensure transactions are executed.

•   Issuing bank: The bank that issues the letter of credit.

•   Negotiating bank: If a third party is involved, the negotiating bank works with the beneficiary and the other banks involved. They likely determine the letter of credit requirements to complete the transaction.

•   Shipper: The transportation company that ships goods.

•   Stand-by letter of credit: A subsequent letter of credit that’s used when a deal requirement has not been met. For example, if payment does not occur within the specified timeframe, a stand-by letter of credit would then be used to help guarantee that the deal goes through.

Pros and Cons of Letters of Credit

A letter of credit provides security for both parties involved in a trade, but it can also add costs and time to business transactions.

Pros	Cons
•   Reduces the risk that payment will not be made for goods or services, thereby providing security •   Allows for additional requirements to be built into a letter of credit, such as quality control and delivery stipulations •   Provides transaction security for both the buyer and the seller •   Forges new trade relationships	•   Incurs bank fees for the letter of credit, which increases the cost of doing business •   Adds time by preparing a letter of credit; transactions can be delayed •   May require a separate letter of credit for each transaction •   Demands that the buyer usually provide collateral to the bank

How to Get a Letter of Credit

Getting a letter of credit typically requires a few steps. It’s wise to get the necessary paperwork together first. Various documents will usually be listed as requirements for a trade, such as a shipping bill of lading, a commercial invoice, insurance documents, a certificate of origin, and a certificate of inspection.

Here are the steps typically taken to obtain a letter of credit.

1.    The buyer and seller come to agreement on the sale terms and the use of a letter of credit.

2.    The buyer contacts their bank where they have a checking account and requests a letter of credit and provides necessary documents.

3.    The issuing bank prepares the letter based on the terms of the sales agreement and sends it to the confirming bank or advising bank, which is typically in the seller’s home country.

4.    The confirming bank verifies the terms and forwards the letter to the seller.

5.    The goods can then be shipped, and the exporter sends documentation to the advising or confirming bank.

6.    Document verification and settlement of payment can then occur.

When to Use a Letter of Credit

A letter of credit is beneficial for sellers entering into a new trade relationship or an international trade relationship. It can provide assurance that the seller will receive payment because the issuing bank guarantees payment once the requirements have been met. Sellers may also use the guarantee of payment to borrow capital to fulfill the buyer’s order.

The Takeaway

A letter of credit is usually requested by an exporter or seller to minimize credit risk. The buyer of the goods or services applies to a bank and requests a letter of credit based on the sales agreement. This document helps guarantee that payment will be made. It can provide priceless peace of mind when conducting international trade or doing business with a new customer.

Here’s another path to financial peace of mind: Banking with SoFi. Your money is FDIC-insured and secure, and it grows faster. Open a new bank account with direct deposit to earn a competitive APY and pay zero account fees.

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

FAQ

How much does a letter of credit cost?

A typical fee for a letter of credit is typically 0.75% percent to 1.5% of the amount of the deal, but the rate will vary depending on the country and other variables.

How do you apply for a letter of credit?

Once the terms of a trade are agreed upon between the buyer and the seller, a buyer contacts their bank to request a letter of credit. They then gather the required documentation and fill out an application with that bank.

Why do you need a letter of credit?

The parties involved in a trade typically use a letter of credit to minimize risk. For the seller, a letter of credit can guarantee payment for goods once certain requirements have been met and the buyer confirms their creditworthiness as a trade partner.

---

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

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

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

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

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

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

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

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.

Photo credit: iStock/Lesia_G
SOBK0422039

Read more

You may be familiar with digital artworks that have been turned into non-fungible tokens (NFTs) and sold to collectors. Now NFT music, or music NFTs, are emerging as the hot new crypto collectible.

What does NFT mean, and why have these virtual products taken the world by storm? An NFT is basically a piece of intellectual property that has been minted into a non-reproducible digital asset that is logged on a blockchain.

NFTs, and NFT music, are also part of a broader technological shift toward digital products and lifestyles that reflect the emergence of Web 3.0, also known as Web3, a blockchain based evolution of Web 2.0.

We’ll explain what music NFTs are, how they work, and more, below.

What Are Music NFTs?

Music NFTs are digital assets that grant holders the ownership rights to music clips. Like other NFTs, which grant their holders ownership to images or digital artwork, NFT music does so with audio recordings. By minting music NFTs (read more if you’re asking yourself “what is NFT minting?”), musicians and artists are able to provide original digital assets to interested investors, while adding to their own revenue streams.

This is critical given that the music industry has been undergoing a massive transformation since the days of Napster, with streaming services and copyright issues compromising legacy systems. Artists have sought to find ways to leverage technology for their own benefit. And NFTs, based on blockchain technology, have emerged as a promising income source.

NFTs have gained popularity in recent years in large part due to the pandemic. Many artists generate revenue through touring — by selling merchandise, and getting a cut of ticket sales. But when the pandemic struck, all of that revenue dried up. As such, some turned to music NFTs as a way to incorporate a new revenue stream.

How Do Music NFTs Work?

Music NFTs work more or less the same way that other NFTs work in that they grant ownership to a unique piece of property to the holder. They use the same underlying cryptocurrency technology, blockchain, that cryptos such as Bitcoin are built on. Music NFTs, then, take the form of digital tokens, which their owners keep safely in digital crypto wallets.

Web 3.0 technology is growing as well, and because it’s also decentralized and permissionless, like many forms of crypto, it supports the widespread use of NFTs.

Music NFTs are minted, and then ownership details are grafted into a blockchain network, and when they are transacted, the details of those ownership changes are likewise recorded on the blockchain — similar to various other types of cryptocurrency transactions.

The big difference between NFT music and, say, purchasing a song or album on Amazon or another retailer, is that the NFT owner becomes the actual owner of the song itself. They own the asset, whereas purchasing a digital music track from a retailer only grants you the right to listen to the song. In effect, it’s licensing.

How Music NFTs Are Created

The creation of music NFTs is also the same process as creating image-based NFTs. That process, which is called “minting,” can only begin after there’s an underlying asset to mint. In this case, that would be a song or audio recording of some kind.

Let’s say a musician wants to mint a new song into an NFT and sell it. They would first need to select the necessary tools and platforms, such as which digital wallet they’d want to use for storing their assets, and which platform they’d like to use to execute the transactions (OpenSea is a popular choice, for example, as is Rarible and Mintable).

The musician would also need crypto to pay for minting fees and other transactions, as many platforms only accept crypto.

Using a platform like OpenSea, the minting process involves a few steps, but it’s fairly straightforward. It mostly involves selecting the audio track the musician wishes to mint, adding a title and some cover art, a description, and adding a few additional details.

Finally, the musician would choose a blockchain network to mint onto (usually Ethereum), and then hit the big red button to mint the song into an NFT.

From there, it can be sold to an investor.

Where Music NFTs Are Bought and Sold

The next logical question: Where can you sell or buy music NFTs? Or, how to buy and sell NFTs in general? The answer: An NFT marketplace. And again, there are many out there. OpenSea is one of the more prevalent, but a few simple Google searches will yield many more. It’s up to you to choose one.

In terms of the actual process of buying and selling music NFTs, it’s important to keep in mind that NFTs usually trade for ETH or native blockchain tokens, so you may not be able to fork over cold, hard USD cash in exchange for one.

How NFT Music Is Valued

Music NFTs have value for the same reason that any other digital asset, including other types of NFTs, have value: They’re scarce, and people are willing to pay for them. So, when they go up for sale, their value is ultimately determined by what an investor or music fan is willing to pay for them.

When it comes to music NFTs in particular, artists are creating digital assets — one-of-a-kind assets, at that — that are likely to catch the attention of many would-be NFT owners and investors.

Pros and Cons of NFT Music

NFTs are unique digital assets tied to blockchain technology and various crypto platforms. As such, they have their pros and cons:

Pros	Cons
Provide unique investment opportunities for music fans.	Blockchain platforms may be vulnerable to hacks or even collapse.
Easily purchased and sold with a digital wallet.	The NFT market is highly speculative, with a risk of volatility.
Popular artists are creating NFTs, validating the space.	Unclear what the future of NFTs might be.

Notable NFT Music

One reason that music NFTs have become so popular is that some big-name artists are getting in on the action. Here’s a handful of recent examples that are notable for their success:

•   Kings of Leon: The rock band released an entire album, “When You See Yourself,” as an NFT in March 2021, generating millions of dollars.

•   Grimes: The singer sold a package of songs and digital art in early March 2021, likewise making millions of dollars.

•   3LAU: The electronic musician released a collection of NFTs in February 2021.

•   Haleek Maul: In 2021, the rapper sold four songs as NFTs, earning hundreds of thousands of dollars.

•   Mike Shinoda: Shinoda, a former member of the rock band Linkin Park, has also taken to NFTs, releasing a mixtape last year in the form of NFTs.

The Future of NFT Music

It’s hard to say what the future holds for music NFTs, but it’s hard to ignore the sales number. In 2018, for example, NFT sales overall totaled about $40.7 million. But in 2021 sales reached more than $44 billion — and shows no signs of slowing. Indeed, the prevalence and popularity of many digital assets is likely to grow, given the adoption of Web 3.0 technology.

For musicians, the ability to sell their music as NFTs offers some clear benefits, and possibly could allow them to make more money than they would under a traditional recording contract.

With that in mind, it’s easy to see why many people think music NFTs are here to stay.

The Takeaway

Music NFTs are the music industry’s take on non-fungible tokens, blockchain-based digital assets that allow artists and musicians to sell audio content in a new format. As mentioned, they’ve taken off over the past couple of years largely due to the pandemic, and offer musicians a new way to derive additional revenue from their work.

FAQ

What is NFT music?

Music NFTs are similar to other types of NFTs, except that they comprise audio files rather than digital artwork or pictures.

How can you buy NFT music?

You can purchase music NFTs from an exchange, of which there are many. There are some that are designed specifically for the music industry.

How is NFT music used?

Music NFTs can be used as investments (you hold onto them and hope they gain value so you can earn a return), or for personal enjoyment.

---

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.

Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments. Limitations apply to trading certain crypto assets and may not be available to residents of all states.


Photo credit: iStock/Passakorn Prothien
SOIN0221027

Read more