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If you’ve ever wondered about the difference between what shows up on your bank account as an available balance vs. current balance, you are not alone. It can be perplexing to sometimes see two different figures for the amount of cash sitting in your account.

The truth is, both are correct. A current balance reflects the amount of money in a checking or savings account at any given moment. The available balance, on the other hand, shows you the current balance, plus or minus any transactions that are pending but have not yet been processed fully.

Financial institutions share these two balances with their customers to give as detailed a picture of funds on deposit as possible. While it may be confusing at first glance, once you understand the difference, it can actually help you stay in better control of your cash.

Read on to learn more about current vs. available balances on your bank accounts.

What is Current Balance?

The current balance of an account is a reflection of the amount of funds that are moving throughout a checking account or savings account at any given time.

This is a compilation of both credits and debits — incoming and outgoing funds — within an account. It includes transactions that have been completely processed on both ends and posted to an account.

Pending transfers or payments that have been authorized but have not been fully processed yet may be listed in your transaction history but are not included in the tally. So any debit card payments, mobile deposits, or automatic bill payments that haven’t been fully processed will not be calculated into the current balance.

For example, let’s say Brian’s checking account balance is $200.

•   On Monday, his employer deposits an $800 payment into his account that clears and posts on the same day, raising Brian’s current balance to $1,000.

•   On Wednesday, Brian uses his debit card to pay $100 for dinner, and the restaurant places a hold on his account for the amount. Because the payment is pending and awaiting processing, Brian’s current balance is still $1,000.

•   However, if on Friday the restaurant charge is fully processed and posted onto his account, his current balance would drop to $900.

What is Available Balance?

An available balance is the current balance of a checking account or whatever type of savings account you may have, minus any pending payments and deposits. In essence, it takes the total amount of all fully processed and posted credits and debits, and subtracts the total amount of any pending payments that have yet to be fully processed, providing a more accurate reflection of the money in your account that remains available to be spent.

For example, Danielle’s checking account balance is $500. She uses her debit card to pay a $100 internet bill, and her landlord cashes her $300 check for her rent — both payments appear on her account as pending.

Despite her current balance being $500, her available balance is only $100 due to the pending payments. If she were to make other payments totaling more than $100, she will risk an overdraft fee and having a negative bank balance.

Recommended: Different Types of Savings Accounts You Can Have

What is the Difference Between Current Balance and Available Balance?

If an account goes a week or two without any activity, its available balance and current balance will likely be in sync. However, once purchases and payments are made with a debit card, that is when the available balance is likely to fluctuate.

The key difference between a current balance and an available balance is “promised payments.” A current balance is the total amount of money in an account including money that has been promised to other people or businesses. An available balance, on the other hand, is the specific amount of money available that has not been promised to any person or business. While spending the full amount of a current balance with pending payments could result in overdraft or NSF fees, spending the full amount of an available balance should not.

Generally, when a current balance and available balance differ, here’s the likely situation:

•   The available balance is the lower of the two, and it’s nearly always due to a pending payment.

•   In some less common cases, an available balance may appear larger than the current balance. This could be due to receiving a refund from a purchase or the reflection of a bank overdraft protection buffer on an account. Either way, in this case, it would be wise to contact your bank for a better understanding of your current account standing.

How Long Does It Take for a Current Balance to Become an Available Balance?

The amount of time it takes for an available balance to sync back up with a current balance depends on the specific amount of processing time needed to complete each pending transaction.

Those times can vary depending on the type of transaction and how quickly the establishment processes it. The account holder’s ability to refrain from spending with their debit card and adding more pending payments to the account is also a major factor.

As a general rule of thumb, individual pending payments can take as little as 24 hours or as long as 3 days to be completely processed and posted to an account. The process requires communication and confirmation between the banks of the account owner and the establishment they purchased from.

If a transaction remains pending for up to a week, it would be wise to contact the merchant or your bank for clarity.

Which Balance Should I Rely On?

The current balance and available balance each serve their own purpose and both can be relied upon as an accurate representation of a checking or saving account. However, there are specific instances when it would be better to reference one over the other.

•   If you’re planning on making a purchase or withdrawal, that is an instance where it would be more beneficial to reference the available balance on your account. It’s the best way to know exactly how much money is available to be spent without disrupting any other pending payments.

Checking the available balance will give the most exact account of what is freely available to be spent and will also help you avoid incurring any overdraft fees.

•   If you’re more interested in your account balance as a whole and how much money you have flowing through your account at any given time, that is when you’ll want to reference your current balance. It accounts for every dollar entering and exiting your account at the very moment you check it.

Do keep in mind, however, that the available balance total may change quickly due to any sudden pending transactions, therefore it would be wise to check it daily for the most up-to-date tally.

Recommended: How Often Should You Monitor Your Checking Account?

The Takeaway

Knowing what your account balances mean and how to interpret them is a basic financial skill that can literally save you money. Even the slightest misinterpretation of the two could result in costly overdraft fees and disrupt your financial goals.

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

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

Check out SoFi Checking and Savings.

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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.

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When money moves from one bank to another, you may think it travels in one speedy step, but in truth, an intermediary bank may be involved. When funds move between a sender and a receiving account at the same bank, the money typically moves directly. But if the money is moving from one bank to another, the processing may be more involved and an intermediary bank is likely needed.

As the name implies, an intermediary bank is a bank that acts as a go-between, connecting two different banks. Smaller banks require intermediary banks or correspondent banks to facilitate transactions with other banks, while larger banks may have enough connections to serve as their own intermediaries.

Generally, retail bank customers do not have to worry about finding intermediary banks — instead, they work behind the scenes with the banks themselves.

What Is an Intermediary Bank?

An intermediary bank is a third-party bank that helps facilitate transfers and transactions between two other banks. Often, intermediary banks are dealing with international transactions such as wire transfers between different countries. If you are sending money to others abroad, your bank may end up using an intermediary bank.

You may not be aware of how the intermediary banks work behind the scenes, but be aware that you may be charged additional fees for the work that intermediary banks are doing.

How Do Intermediary Banks Work

If you are doing a bank account transfer, especially to an account in a different country than the one where your own bank is located, it is likely that an intermediary bank will be involved. During a monetary transfer between accounts at different banks, an intermediary bank works in between the sender’s bank account and the account at the receiving bank.

Here’s how the transaction might work:

•   A person with an account at Bank A wants to send money to another person, a client with an account at Bank B.

•   However, Bank A doesn’t have an account or banking relationship with Bank B.

•   Bank A and Bank B do, however, each have an account with Bank C.

•   Funds can be funneled through Bank C, the intermediary bank, to make the transaction successful.

Intermediary Bank Example

Intermediary banks are like an international travel hub through which transfers flow. They are especially important for fund transfers made via the SWIFT (Society for Worldwide Interbank Telecommunications) network.

Here’s a simple example to show how intermediary banks usually work. Let’s say that John is an importer-exporter based in the United States who banks at the Acme Bank. He needs to make a payment to Angela, a supplier of his based in Germany, who banks with Big Bank. He gives Angela’s bank’s information to his bank to make the transfer.

If Acme Bank does not have an account at or a relationship directly with Big Bank (Angela’s bank), it will use an intermediary bank; let’s call it Central Bank. This intermediary bank will have accounts at both Acme Bank, John’s bank in the United States, as well as Big Bank, Angela’s bank in Germany.

Central Bank can transfer the money between the two banks. It will likely charge a fee for their role in the transaction. The transaction will be completed by the three banks working together.

When Is an Intermediary Bank Required?

Any time that money is being transferred between two banks that do not have an existing relationship, an intermediary bank is usually involved. Whether you have a single account or a joint bank account, when you transfer money to a user at a different bank (especially internationally), an intermediary bank will generally be required.

This is likely to occur as a commercial banking transaction. In other words, the use of an intermediary bank is not something the consumer has to initiate.

The Need for Intermediary Banks

Intermediary banks are important as part of the global financial system. Since banks generally do not have accounts with every single bank around the world, there is a need for intermediary banks to help facilitate monetary transfers.

The good news is that you typically do not have to worry about finding an intermediary bank yourself. Instead, the banks themselves have intermediary banks that they use to transfer money between other banks.

When Will an Intermediary Bank Be Involved in a Transaction?

An intermediary bank will usually be involved whenever there is a need to transfer money between accounts at two separate banks. If the sending bank does not have its own account with the receiving bank, it will usually use an intermediary bank.

Even if a business thought it could get around the need for intermediary banks (and save money; see more on fees below) by opening multiple bank accounts, its main bank would still probably use an intermediary bank at some point to transfer funds on its behalf.

Difference Between Intermediary and Correspondent Banks

When considering how bank transfers work, you may hear two different terms: intermediary banks and correspondent banks. Depending on which part of the world you’re in, there may or may not be a difference between the terms “intermediary bank” and “correspondent bank.”

•   In some countries, the terms correspondent banks and intermediary banks are used interchangeably.

•   In the U.S. as well as in a few other countries, correspondent banks are often ones that handle multiple types of currencies.

•   Intermediary banks may be smaller banks that only typically handle transactions in one currency.

What Are Some Typical Intermediary Bank Fees?

Because intermediary banks typically do not work directly with consumers, they also do not regularly post a breakdown of the fees they charge. Instead, you can look at your own bank’s fees for financial transactions such as domestic wire transfers or international wire transfers.

The fees that your bank will charge you for these transactions generally include the fees that your bank will have to pay to the intermediary bank it uses. These bank fees can range anywhere from $15 to $50 or more.

Recommended: How Do Banks Make Money?

Who Pays for Intermediary Bank Fees?

Intermediary bank fees are paid in different ways, depending on the specific transaction. Let’s say Person A is sending money to Person B. There are three ways the fees may be handled, depending on what the parties involved agree upon:

•   “OUR” is the code used when the sender will pay all fees. An average fee for an international transfer can be about $70.

•   “SHA” is the code indicating shared costs. Person A will likely pay their bank charges (perhaps $15 to $30 on a typical transaction) and then Person B pays the rest: their bank’s and the intermediary bank’s charges.

•   “BEN” indicates that Person B, the recipient of the funds, will pay all charges.

The Takeaway

If a bank customer wants to send money to someone at a different bank and the two banks involved are not connected, an intermediary bank typically plays a role. Intermediary banks work with other banks to help facilitate monetary transactions such as domestic and especially international wire transfers. You, as a consumer, usually do not have to find or hire your own intermediary bank. However, your bank will likely pass along any intermediary bank fees if you initiate a transaction that requires one.

What about your everyday, basic banking, though? If you’re looking for great interest rates while keeping flexible access to your money, why not open a bank account with SoFi? When you open our Checking and Savings with direct deposit, you can earn a competitive APY and pay no 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

What is an example of an intermediary bank?

An intermediary bank is one that moves funds between other banks. They do not typically work directly with consumers, so you likely neither need to know their names nor contact them. For instance, Bank of America might offer this service, or it might be provided by a foreign bank with which you are not familiar.

Why do you need an intermediary bank?

Intermediary banks are usually used when someone needs to send money to a person with an account at a different bank. An intermediary bank can serve as a middleman and facilitate the transaction. One common example is sending a wire transfer, especially internationally.

How do you find an intermediary bank?

In most cases, you will not need to find your own intermediary bank. The bank you use will have its own intermediary bank that it collaborates with as needed. Depending on what kinds of financial transactions you need, in some cases, you might also want to consider alternatives to traditional banks for international transfers.

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Photo credit: iStock/MicroStockHub

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.

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.

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The Federal Deposit Insurance Corporation (FDIC) and National Credit Union Administration (NCUA) are independent federal agencies that insure their customers’ deposits. The FDIC insures deposits at banks typically up to $250,000 (though there are exceptions¹); the NCUA offers the same insurance and consumer protection but at credit unions.

Account holders don’t have to apply or qualify for this coverage; it comes with different deposit accounts, assuming the institution is a FDIC or NCUA member. The coverage is meant to cover deposits if the institution were to fail; it doesn’t cover investment products or losses.

While these two entities serve similar purposes for consumers, they operate a little differently, with slightly different benefits for account holders. Before setting up a bank or credit union account, it may help to know how they each operate, and how to maximize your coverage.

What Is the FDIC?

FDIC stands for Federal Deposit Insurance Corporation. President Franklin D. Roosevelt established the Federal Deposit Insurance Corporation when he signed the Banking Act of 1933 amid the Great Depression.

The main purpose of the FDIC is to “maintain stability and public confidence in the nation’s financial system.” As part of that remit, the FDIC insures consumer deposits and is “backed by the full faith and credit of the United States government.”

The FDIC insures $250,000 per depositor, per insured bank, for every account ownership category. “Account ownership category” refers to single account holders, joint accounts, and other accounts like revocable and irrevocable trusts. (See table below.)

If you are a person who keeps a considerable amount of money in a bank, you’ll likely want to know that some banks participate in programs that extend the FDIC insurance to cover millions.

According to the FDIC, a depositor has not lost a single penny of FDIC-insured deposits because of a bank failure.

What Is the NCUA?

NCUA stands for National Credit Union Administration. Though the first credit union opened in the United States in 1909, and there were nearly 10,000 credit unions in the U.S. by 1960, Congress did not create the National Credit Union Administration until 1970.

Like the FDIC, the purpose of the NCUA is to insure deposits made by credit union members and protect those members who own credit unions. (Credit unions are not-for-profit and are owned by the members.)

Also like the FDIC, the NCUA is “backed by the full faith and credit of the United States government,” and insures deposits up to $250,000 per share owner, per insured credit union, for each account ownership category, share accounts, and some IRAs and trusts.

Rivaling the FDIC’s track record, the NCUA states that no member has ever lost a cent from accounts insured through the NCUA.

All federally chartered credit unions are a part of the NCUA while state-chartered credit unions adhere to state-specific regulations. That said, many state-chartered credit unions are also insured by the NCUA.

Recommended: Understanding the Marginal Propensity to Save Theory

FDIC vs NCUA Insurance: Similarities and Differences

So what’s the difference between the FDIC and NCUA? The biggest difference regarding FDIC vs. NCUA is the customers they protect. The FDIC insures deposits for bank customers while the NCUA insures deposits for credit union members. As a customer of a financial institution, you will not likely notice a difference in your day-to-day banking.

In fact, it’s easier to talk about all the ways the FDIC and NCUA are similar. The table below explores these similarities (and minor differences).

	FDIC	NCUA
Year Created	1933	1970
Applicable Financial Institution	Banks	Credit Unions
Insurance Amount	$250,000 per depositor, per insured bank, for each account ownership category	$250,000 per share member, per insured credit union, for each account ownership category
What Is Insured	Checking accounts Savings accounts Money market accounts Time deposits (like CDs) Other deposit accounts	Share draft (checking) accounts Share savings accounts Money market accounts Certificate accounts (like CDs) Other deposit accounts
What Is Not Insured	Stocks Bonds Mutual funds Annuities Treasury securities Life insurance policies Safe deposit boxes (or contents)	Stocks Bonds Mutual funds Annuities Life insurance policies Safe deposit boxes (or contents)
Ownership Types	Single ownership Joint ownership Revocable trust account Irrevocable trust account Certain retirement accounts (like IRAs) Employee benefit plan accounts Corporation/Partnership/Unincorporated Association Accounts Government Accounts	Single ownership Joint ownership Revocable trust account Irrevocable trust account Certain retirement accounts (like IRAs, KEOGHs) Employee benefit plan accounts

What Does NCUA Coverage Protect?

NCUA coverage comes from the National Credit Union Share Insurance Fund (NCUSIF). The following account types are insured via the NCUSIF:

•   Share draft accounts (checking accounts)

•   Share savings accounts

•   Money market deposit accounts

•   Share certificates (like certificates of deposit)

Recommended: The Benefits of a High-Interest Savings Account

What Isn’t Covered by NCUA?

If your credit union carries insurance through the NCUA, you can depend on coverage up to $250,000 for common accounts like a checking or savings account. However, NCUA insurance does not cover:

•   Stocks

•   Bonds

•   Mutual funds

•   Annuities

•   Life insurance

•   Safe deposit boxes (or their contents)

What Does FDIC Coverage Protect?

Insurance through the FDIC covers account types that are comparable to those covered by the NCUA:

•   Checking accounts

•   Savings accounts

•   Money market deposit accounts

•   Time deposits (like certificates of deposit)

The FDIC also notes that its insurance covers Negotiable Order of Withdrawal (NOW) accounts, cashier’s checks, money orders, and other local items issued by a bank.

What Isn’t Covered by FDIC?

The FDIC has coverage exclusions similar to those of the NCUA. Insurance through the FDIC does not extend to:

•   Stocks

•   Bonds

•   Mutual funds

•   Annuities

•   Treasury securities

•   Life insurance

•   Safe deposit boxes (or their contents)

Treasury securities like bills, bonds, and notes are, however, “backed by the full faith and credit of the U.S. government.”

How to Know if Your Institution Is Insured by the FDIC or NCUA

Because the FDIC and NCUA insure deposits up to $250,000 for checking and savings accounts (some external programs allow for higher insurance limits with the FDIC), it’s important to know when selecting a new financial institution that it is insured by one of the two organizations.

So how do you know if a bank is insured by the FDIC? The FDIC provides a few easy options:

•   Call and ask. Calling the FDIC is toll-free. You can reach them at 1-877-275-3342.

•   Search online. The FDIC has a database called “Bank Find” that allows you to search for insured banks.

•   Look for the sign. When you enter a brick-and-mortar (aka physical) bank location, look for official FDIC signage.

•   Search the bank’s website. If you fall on the digital side of the traditional vs. online banking debate, you can scour a bank’s website instead. Usually you can find language like “Member FDIC” in the footer if the bank is insured. In fact, you can try it on this page; you’ll see that SoFi’s Checking and Savings account is FDIC-insured.

Determining whether a credit union is insured by the NCUA is just as easy:

•   Check online. Visit the NCUA’s agency website to search a complete directory of federally insured credit unions.

•   Look for the sign. Similar to the FDIC, the NCUA requires federally insured credit unions to place NCUSIF signage in their advertisements, offices, and branches to indicate insurance coverage.

•   Search the credit union’s website. Credit unions that are federally insured will include NCUA verbiage in the footer of their websites, just like banks do for the FDIC.

Remember, some state credit unions may not be federally insured. A credit union that includes “federal” in its name should automatically be insured by the NCUA. If you aren’t sure about a state credit union’s insurance, you can ask a credit union representative on site or over the phone for more information.

Recommended: Where to Store Short-Term Savings

Are All Banks FDIC Insured?

Nearly all banks are FDIC insured — but not all of them. Any bank that is not insured federally through the FDIC likely carries insurance through its state, so your deposits are typically still safe. However, it is a good idea to thoroughly research a bank and its insurance policies before storing any money in an account at the institution.

Are All Credit Unions NCUA Insured?

Not all credit unions are NCUA insured. All federal credit unions are automatically insured by the NCUA, but state credit unions must opt into NCUA share insurance. Those that don’t are typically insured through the state. As with banks, it is a good practice to understand a credit union’s insurance status and how it can affect your money before opening any account.

How to Maximize FDIC and NCUA Insurance

Both the FDIC and NCUA are typically very clear on how much they insure — $250,000 — careful to use specific terminology like “per depositor” or “per share owner”; “per insured bank” and “per insured credit union”; and “for each account ownership category.”

Knowing that, there are a few ways you can maximize your insurance coverage:

Open an Account That Insures for More Than $250,000

As briefly noted above, some banks offer programs that allow depositors to insure their account for more than the usual $250,000 amount. Check with financial institutions to see what may be available that can extend your account insurance to cover millions.

Open Accounts at Multiple Financial Institutions

You receive $250,000 of insurance coverage at each institution with applicable accounts. That means you could open up accounts at multiple banks and credit unions, spread your wealth across those accounts, and wind up with coverage on much more than $250,000.

Use Account Ownership Categories to Your Advantage

Another way to maximize FDIC and NCUA insurance is to utilize multiple account ownership categories. For example, at one bank, you could have a single ownership certificate of deposit with $200,000 and share a joint savings account holding another $200,000 with a partner. Even though you’d be above the $250,000 threshold, these separate account ownership categories each qualify for the max insurance coverage.

Open Accounts for Various Family Members

You, your spouse, and your children could each open a single ownership savings account at the same bank and each deposit $250,000 in your own account. Because each account has a different depositor, each is protected fully for $250,000.

Consider a Revocable Trust

If you and a partner want to put money together and save it as a potential nest egg for a family member, you can create a revocable trust (a type of trust fund). Then you can name beneficiaries for that money should you and the other account owner die. For each beneficiary, the account is insured for $250,000. If you name three beneficiaries, you can deposit $750,000, and it will all be insured.

Recommended: Where to Store Your Mortgage Down Payment

The Takeaway

The FDIC (Federal Deposit Insurance Corporation) and NCUA (National Credit Union Administration) are government agencies that protect consumers’ deposits at banks and credit unions. The two agencies operate similarly and protect the same kinds of accounts, typically up to $250,000. The key difference? The FDIC only insures money at banks while the NCUA only insures credit unions.

As a customer of a financial institution, it’s important to know which, if any, of your accounts are insured. A final caveat: While it is rare, not every bank is insured by the FDIC, and not every credit union is insured by the NCUA.

Looking for a checking or savings account that is insured by the FDIC? Check out the all-in-one Checking and Savings account, where your deposits earn a very competitive rate of 4.00% APY with direct deposit. Plus, SoFi recently announced that deposits may be insured up to $2 million through participation in the SoFi Insured Deposit Program. Need more incentives? When you open an online bank account with SoFi, qualifying accounts can paycheck access up to two days early — all for no monthly fees.

Open an FDIC-insured bank account with SoFi today.

FAQ

What does the NCUA not cover?

The National Credit Union Share Insurance Fund, which operates under the NCUA, does not cover stocks, bonds, mutual funds, annuities, life insurance policies, or safe deposit boxes and their contents.

How are the FDIC and NCUA similar?

Both the FDIC and NCUA are government agencies created by Congress to insure consumers’ deposits, including savings accounts, checking accounts, and CDs, up to $250,000 per person, per financial institution, and for each account ownership category. The main difference between FDIC and NCUA is that the FDIC insures banks and the NCUA insures credit unions.

Why are credit unions not FDIC insured?

Credit unions are not FDIC-insured because the FDIC insures banks. Federal credit unions (and many state credit unions) are instead insured by the NCUA.

How much of your money is protected by FDIC or NCUA?

The FDIC insures $250,000 per depositor, per insured bank, for each category of ownership. In theory, you could have more than $250,000 across different account types at different banks, and it would all be insured by the FDIC.

The same is true of the NCUA. The NCUA insures $250,000 per share owner, per insured credit union, for each category of ownership.

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

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

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

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

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

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

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

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Knowing what your discretionary income is (and how to calculate it) can help you make decisions about how to best repay your federal student loans. The U.S. Department of Education calculates discretionary income as your adjusted gross income in excess of a protected amount.

The “protected amount” is typically a percentage of the federal poverty guideline appropriate to your family size. The Saving on a Valuable Education (SAVE) Plan, for example, defines discretionary income as any adjusted gross income you have above 225% of the federal poverty guideline appropriate to your family size.

When it comes to individuals who are considering repaying federal student loans with the SAVE Plan or any other income-driven repayment (IDR) plan, discretionary income can be a major factor in how much they’ll owe each month. That’s because the federal government typically uses a borrower’s discretionary income to determine their monthly payments.

Below we’ll discuss different IDR plans and the ins and outs of discretionary income, so you can figure out a repayment strategy that works for you and your budget.

What Is Discretionary Income?

As mentioned above, the Department of Education calculates discretionary income as your adjusted gross income in excess of a protected amount defined by a federal IDR plan.

Discretionary income under the SAVE Plan, for example, is any adjusted gross income you have above 225% of the federal poverty guideline appropriate to your family size. You’ll have a $0 monthly payment under the SAVE Plan if your annual income doesn’t exceed the protected amount of $32,805 for a single borrower and $67,500 for a family of four in 2023.

If you don’t qualify for a $0 monthly payment on the SAVE Plan, your monthly payment beginning in July 2024 will be set at 5% of discretionary income for undergraduate loans, 10% for graduate loans, and a weighted average if you have both.

Discretionary income as defined by the Education Department is different from disposable income, which is the amount of money you have available to spend or save after your income taxes have been deducted.

How Is Discretionary Income Calculated?

Here’s how federal student loan servicers may calculate your discretionary income:

•   Discretionary income under the SAVE Plan is generally calculated by subtracting 225% of the federal poverty guideline from your adjusted gross income (AGI).

•   Discretionary income under the Income-Contingent Repayment (ICR) plan is generally calculated by subtracting 100% of the federal poverty guideline from your AGI.

•   Discretionary income under the Income-Based Repayment (IBR) and Pay As You Earn (PAYE) federal IDR plans is generally calculated by subtracting 150% of the federal poverty guideline from your AGI.

If you’re filing jointly or you have dependents, that will impact your discretionary income calculations. For married couples filing together, your combined AGI is used when calculating discretionary income. Under an income-driven plan, filing with a spouse can drive up your income-driven monthly payments because of your combined AGI.

So, let’s say you’re in a one-person household and have a 2023 AGI of $40,000. If you are considering the SAVE Plan, you would subtract 225% of the 2023 poverty guideline ($32,805), to get an official discretionary income of $7,195. Monthly, that is a discretionary income of about $600, and your monthly payment beginning in July 2024 will be set at 5% of discretionary income for undergraduate loans, 10% for graduate loans, and a weighted average if you have both.

Borrowers are generally expected to make required loan payments when due. The 2023 debt ceiling bill officially ended the three-year Covid-19 forbearance, requiring federal student loan interest accrual to resume on Sept. 1, 2023, and payments to resume in October 2023.

💡 Quick Tip: Ready to refinance your student loan? You could save thousands.

What Income-Driven Repayment Plan are You Eligible For?

There are four federal IDR plans that have different eligibility criteria and terms. These income-driven repayment plans can reduce monthly payments for people with incomes below a certain threshold.

It should be noted that federal IDR plans don’t apply to private student loans. They’re only an option for federal student loans.

Income-Driven Repayment Plans for Federal Student Loans

The federal Department of Education offers the following four IDR options for eligible federal student loan borrowers:

•   Saving on a Valuable Education (SAVE) Plan

•   Pay As You Earn (PAYE) Plan

•   Income-Based Repayment (IBR) Plan

•   Income-Contingent Repayment (ICR) Plan

All IDR plans generally use discretionary income to determine monthly payments. So, if there is a change in a borrower’s income or family size, their monthly payment could increase or decrease, depending on the change. Borrowers enrolled in an income-driven repayment plan are typically required to recertify their income and family size each year.

The SAVE and ICR plans are open to anyone with eligible federal loans. Under these two repayment plans, the amount owed each month is always tied to a borrower’s discretionary income. This could mean that if an individual’s income increases over time, they may end up paying more each month than they would under the 10-year Standard Repayment Plan.

For the PAYE and IBR plans, eligibility is determined based on income and family size. As a general rule, to qualify, borrowers must not pay more under PAYE or IBR than they would under the 10-year Standard Repayment Plan. Under these plans, the amount owed each month will never exceed what a borrower would owe under the Standard Repayment Plan.

Pros and Cons of Income-Driven Repayment Plans

IDR plans come with trade-offs. While they can lower your monthly payment and help free up your cash flow now, they may extend the life of your loan. The standard student loan payoff plan is based on a 10-year repayment timeline. An income-driven repayment plan can extend your payment timeline to up to 25 years.

This means you’ll be paying off the loan longer and possibly paying more in interest over time. If you stay on an income-driven repayment plan, the government might forgive any remaining balance after 20 or 25 years of payments — or as little as 10 years for SAVE Plan enrollees with original principal balances of less than $12,000. But the amount that is forgiven may be taxed as income.

How Does Discretionary Income Affect Student Loan Payments?

Income-driven repayment plans generally use your discretionary income to dictate the amount you’re required to repay each month. In the case of borrowers enrolled in the SAVE Plan, any required payments beginning in July 2024 will be set at 5% of discretionary income for undergraduate loans, 10% for graduate loans, and a weighted average if you have both.

Recommended: How Is Income Based Repayment Calculated?

How Else Can Borrowers Lower Their Student Loan Payment?

Another potential way for borrowers to reduce their student loan payment is by refinancing student loans. When you refinance your student loans, you take out a new loan with new terms from a private lender. The new loan is used to pay off your existing student loans.

Depending on your financial profile, refinancing could result in a lower interest rate or a lower monthly payment depending on which terms you choose. You may pay more interest over the life of the loan if you refinance with an extended term.

Refinancing federal student loans with a private lender also forfeits your access to federal IDR plans, Public Service Loan Forgiveness, and Teacher Loan Forgiveness.

💡 Quick Tip: When rates are low, refinancing student loans could make a lot of sense. How much could you save? Find out using our student loan refi calculator.

The Takeaway

The government uses discretionary income to calculate your federal student loan monthly payments under a qualifying IDR plan. The SAVE Plan may not provide the lowest monthly payment for eligible borrowers with high salaries.

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

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

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

SoFi 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.

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

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

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.

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

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