Mar
25
2025

REITs vs. REIT ETFs: What’s the Difference?

By | invest, Investing, Terminology | Comments Off on REITs vs. REIT ETFs: What’s the Difference?

Both real estate investment trusts (REITs) and exchange-traded funds (ETFs) that invest in REITs offer some benefits of real estate investing, without having to own any properties directly. The main differences between a real estate ETF vs. REIT lie in how they’re structured, dividend payouts, taxes, and the fees investors might pay to own them.

Also, REITs are considered alternative investments, which means they tend not to move in sync with traditional investments like stocks and bonds.

Key Points

•   REITs and REIT ETFs offer benefits of real estate investing without direct property ownership.

•   Differences between REITs and REIT ETFs include structure, dividend payouts, taxes, and fees.

•   REITs are considered alternative investments and may not move in sync with traditional investments.

•   REITs generate income through rents, while REIT ETFs own a collection of REIT investments.

•   Investors can buy and sell shares of REIT ETFs on stock exchanges, while REITs can be publicly traded, non-traded, or private.

Overview of REITs

A real estate investment trust is a legal entity that owns and operates income-producing properties. REITs can hold a single property type or multiple property types, including:

•   Hotels and resorts

•   Self-storage facilities

•   Warehouses

•   Retail space, including shopping centers

•   Apartment buildings or multi-family homes

•   On-campus housing

•   Assisted living facilities

REITs that own and manage properties typically generate most, if not all, of their income through rents. Some REITs may also invest in mortgages and mortgage-backed securities. REITs that invest in mortgages can collect interest on those loans.

There are two conditions to qualify for a REIT. A company must:

•   Derive the bulk of its income and assets from real estate-related activities

•   Pay out at least 90% of dividends to shareholders

Companies that meet these conditions can deduct all of the dividends paid to shareholders from corporate taxable income.

💡 Quick Tip: Alternative investments provide exposure to sectors outside traditional asset classes like stocks, bonds, and cash. Some of the most common types of alt investments include commodities, real estate, foreign currency, private credit, private equity, collectibles, and hedge funds.

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What Is a REIT ETF?

An exchange-traded fund or ETF is a pooled investment vehicle that shares some of the features of a mutual fund but trades on an exchange like a stock. A REIT ETF is an exchange-traded fund that owns a basket or collection of REIT investments.

While REITs own properties, REIT ETFs do not. REIT ETFs have a fund manager who oversees the selection of securities held in the fund. The fund manager also decides when to sell off fund assets, if necessary.

A REIT ETF may be actively or passively managed. Actively managed ETFs often pursue investment strategies that are designed to beat the market. Passively managed ETFs, on the other hand, aim to mimic the performance of an underlying market benchmark or index.

Recommended: What Is a Dividend?

How REIT ETFs Work

REIT ETFs work by allowing investors to gain exposure to a variety of real estate assets in a single investment vehicle. For example, a REIT may hold:

•   Stocks issued by REITs

•   Other real estate stocks

•   Real estate derivatives, such as options, futures, or swaps

Investors can buy shares of a REIT ETF on a stock exchange and sell them the same way. Like other ETFs, REIT ETFs charge an expense ratio that reflects the cost of owning the fund annually. Expense ratios for a REIT ETF, as well as performance, can vary from one fund to the next.

REIT ETFs pay dividends to investors, which may be qualified or non-qualified. The fund may give investors the option to reinvest dividends vs. collecting them as passive income. Reinvesting dividends can allow you to purchase additional shares of a fund, without having to put up any money out of pocket.

A REIT ETF might track the performance of the MSCI US Investable Market Real Estate 25/50 Index, which offers investors access to multiple REIT property sectors, including:

•   Data centers

•   Health care

•   Hotels and resorts

•   Office space

•   Industrial

•   Real estate

•   Retail

•   Telecom

What’s the Difference between REITs and REIT ETFs?

REITs and REIT ETFs both offer opportunities to invest in real estate, without requiring investors to be hands-on in managing property. There are, however, some key differences to know when considering whether to invest in a REIT vs. REIT ETF.

Structure

REITs are most often structured as corporations, though they can also be established as partnerships or limited liability companies (LLCs). The Internal Revenue Service (IRS) requires REITs to have a board of directors or trustees who oversee the company’s management. As mentioned, REITs must pay out 90% of dividends to shareholders to deduct those payments from their corporate taxable income.

A REIT may be categorized in one of three ways, depending on what it invests in.

•   Equity REITs own properties that generate rental income.

•   Mortgage REITs focus on mortgages and mortgage-backed securities.

•   Hybrid REITs hold both properties and mortgage investments.

REIT ETFs are structured similarly to mutual funds, in that they hold multiple securities and allow investors to pool funds together to invest in them. The fund manager decides which investments to include and how many securities to invest in overall.

Both REITs and REIT ETFs are structured to pay out dividends to shareholders. And both can generate those dividends through rental income, mortgage interest, or a combination of the two. The difference is that structurally, a REIT ETF is a step removed since it doesn’t own property directly.

Investment Style

REITs and REIT ETFs can take different approaches concerning their investment style. When comparing a REIT vs. REIT ETF, it’s helpful to consider the underlying investments, fund objectives, and management style.

An actively managed REIT, for example, may generate a very different return profile than a passively managed REIT ETF. Active management can potentially result in better returns if the REIT or REIT ETF can beat the market. However, they can also present more risk to investors.

Passive management, on the other hand, typically entails less risk to investors as the goal is to match the performance of an index or market benchmark rather than exceed it. Fees may be lower as well if there are fewer costs incurred to buy and sell securities within the fund.

How They’re Traded

Individual REITs can be publicly traded, public but non-traded, or private. Publicly traded REITs are bought and sold on stock market exchanges and are regulated by the Securities and Exchange Commission. Public non-traded REITs are also subject to SEC regulation but they don’t trade on exchanges.

Private REITs, meanwhile, are not required to register with the SEC, nor are they traded on exchanges. These types of REITs are most often traded by institutional or accredited investors and may require higher buy-ins.

REIT ETFs trade on an exchange like a stock. You can buy shares of a REIT or REIT ETF through your brokerage account. If you decide you’re no longer interested in owning those shares you can sell them on an exchange. Unlike traditional mutual funds, share prices for REIT ETFs can fluctuate continuously throughout the day.

The Takeaway

Real estate can be an addition to a portfolio for investors who are interested in alternative investments. Whether it makes sense to choose a real estate ETF vs. REIT, or vice versa, can depend on your short and long-term financial goals, as well as your preferred investment style.

Ready to expand your portfolio's growth potential? Alternative investments, traditionally available to high-net-worth individuals, are accessible to everyday investors on SoFi's easy-to-use platform. Investments in commodities, real estate, venture capital, and more are now within reach. Alternative investments can be high risk, so it's important to consider your portfolio goals and risk tolerance to determine if they're right for you.


Invest in alts to take your portfolio beyond stocks and bonds.

FAQ

Do REIT ETFs pay dividends?

REIT ETFs pay dividends to investors. When considering a REIT ETF for dividends, it’s important to assess whether they’re qualified or non-qualified, as that can have implications for the tax treatment of that income.

What are the risks of investing in REITs?

REITs are not risk-free investments, and their performance can be affected by a variety of factors, including interest rates, shifts in property values, and limited liquidity. In some cases, the dividend payout from a REIT can provide steady returns, but this is not always the case, as real estate conditions can fluctuate.

Do REITs have fees?

REITs can charge a variety of fees, which may include upfront commissions, sales loads, and annual management fees. REIT ETFs, meanwhile, charge expense ratios and you may pay a commission to buy or sell them, depending on which brokerage you choose. Evaluating the fees for a REIT or REIT ETF can help you better understand how much of your returns you’ll get to keep in exchange for owning the investment.

About the author

Rebecca Lake

Rebecca Lake

Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.


Photo credit: iStock/Maks_Lab

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest is a trade name used by SoFi Wealth LLC and SoFi Securities LLC offering investment products and services. Robo investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser. Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC.

For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.

An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. This and other important information are contained in the Fund’s prospectus. For a current prospectus, please click the Prospectus link on the Fund’s respective page. The prospectus should be read carefully prior to investing.
Alternative investments, including funds that invest in alternative investments, are risky and may not be suitable for all investors. Alternative investments often employ leveraging and other speculative practices that increase an investor's risk of loss to include complete loss of investment, often charge high fees, and can be highly illiquid and volatile. Alternative investments may lack diversification, involve complex tax structures and have delays in reporting important tax information. Registered and unregistered alternative investments are not subject to the same regulatory requirements as mutual funds.
Please note that Interval Funds are illiquid instruments, hence the ability to trade on your timeline may be restricted. Investors should review the fee schedule for Interval Funds via the prospectus.

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

Exchange Traded Funds (ETFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or by emailing customer service at [email protected]. Please read the prospectus carefully prior to investing.

Fund Fees
If you invest in Exchange Traded Funds (ETFs) through SoFi Invest (either by buying them yourself or via investing in SoFi Invest’s automated investments, formerly SoFi Wealth), these funds will have their own management fees. These fees are not paid directly by you, but rather by the fund itself. these fees do reduce the fund’s returns. Check out each fund’s prospectus for details. SoFi Invest does not receive sales commissions, 12b-1 fees, or other fees from ETFs for investing such funds on behalf of advisory clients, though if SoFi Invest creates its own funds, it could earn management fees there.
SoFi Invest may waive all, or part of any of these fees, permanently or for a period of time, at its sole discretion for any reason. Fees are subject to change at any time. The current fee schedule will always be available in your Account Documents section of SoFi Invest.

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.

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Mar
25
2025
What Is Regulation T (Reg T) & What Does It Do?

Regulation T (Reg T): All You Need to Know

By | Growing Wealth, invest, Investing, Terminology | Comments Off on Regulation T (Reg T): All You Need to Know

Regulation T, or “Reg T” for short, is a Federal Reserve Board regulation governing the extension of credit from brokerage firms to investors (also called margin accounts). In margin trading, Regulation T is used to determine initial margin requirements. An investor who fails to meet the initial margin requirements may be subject to a Reg T call, which is one type of margin call.

Understanding Regulation T and Regulation T calls is important when trading securities on margin.

What Is Regulation T?

Regulation T is issued by the Federal Reserve Board, pursuant to the 1934 Securities Exchange Act. The purpose of Reg T is to regulate how brokerage firms and broker dealers extend credit to investors in margin trading transactions. Specifically, Regulation T governs initial margin requirements, as well as payment rules that apply to certain types of securities transactions.

Margin trading means an investor borrows money from a brokerage to make investments. This allows the investor to potentially increase their investment without putting up any additional money out of pocket. For example, an investor may be able to put up $10,000 to purchase 100 shares of stock and borrow another $10,000 on margin from their brokerage to double their investment to $20,000.

Regulation T is central to understanding the inner workings of margin accounts. When someone is buying on margin, the assets in their brokerage account serve as collateral for a line of credit from the broker.

The borrowed amount is repaid with interest. Interest rates charged on margin accounts vary according to the brokerage and the amount borrowed. Trading on margin offers an opportunity to amplify returns, but poses the risk of steeper losses as well.

Increase your buying power with a margin loan from SoFi.

Borrow against your current investments at just 4.75% to 9.50%* and start margin trading.

*For full margin details, see terms.

💡 Quick Tip: When you trade using margin, you’re using leverage — i.e. borrowed funds that increase your purchasing power. Remember that whatever you borrow you must repay, with interest.

How Reg T Works

Regulation T works by establishing certain requirements for trading on margin. Specifically, there are three thresholds investors are required to observe when margin buying, one of which is directly determined by Regulation T.

Here’s a closer look at the various requirements to trade on margin:

•   Minimum margin. Minimum margin represents the amount an investor must deposit with their brokerage before opening a margin account. Under FINRA rules, this amount must be $2,000 or 100% of the purchase price of the margin securities, whichever is less. Keep in mind that this is FINRA’s rule, and that some brokerages may require a higher minimum margin.

•   Initial margin. Initial margin represents the amount an investor is allowed to borrow. Regulation T sets the maximum at 50% of the purchase price of margin securities. Again, though, brokerage firms may require investors to make a larger initial margin deposit.

•   Maintenance margin. Maintenance margin represents the minimum amount of margin equity that must be held in the account at all times. If you don’t know what margin equity is, it’s the value of the securities held in your margin account less the amount you owe to the brokerage firm. FINRA sets the minimum maintenance margin at 25% of the total market value of margin securities though brokerages can establish higher limits.

Regulation T’s main function is to limit the amount of credit a brokerage can extend. It’s also used to regulate prohibited activity in cash accounts, which are separate from margin accounts. For example, an investor cannot use a cash account to buy a stock then sell it before the trade settles under Reg T rules. It may be beneficial to review the basics of leveraged trading to deepen your understanding, too.

Why Regulation T Exists

Margin trading can be risky and Regulation T is intended to limit an investor’s potential for losses. If an investor were able to borrow an unlimited amount of credit from their brokerage account to trade, they could potentially realize much larger losses over time if their investments fail to pay off.

Regulation T also ensures that investors have some skin in the game, so to speak, by requiring them to use some of their own money to invest. This can be seen as an indirect means of risk management, since an investor who’s using at least some of their own money to trade on margin may be more likely to calculate risk/reward potential and avoid reckless decision-making.

Example of Reg T

Regulation T establishes a 50% baseline for the amount an investor is required to deposit with a brokerage before trading on margin. So, for example, say you want to open a margin account. You make the minimum margin deposit of $2,000, as required by FINRA. You want to purchase 100 shares of stock valued at $100 each, which result in a total purchase price of $10,000.

Under Regulation T, the most you’d be able to borrow from your brokerage to complete the trade is $5,000. You’d have to deposit another $5,000 of your own money into your brokerage account to meet the initial margin requirement. Or, if your brokerage sets the bar higher at 60% initial margin, you’d need to put up $6,000 in order to borrow the remaining $4,000.

Why You Might Receive a Regulation T Call

Understanding the initial margin requirements is important for avoiding a Regulation T margin call. In general, a margin call happens when you fail to meet your brokerage’s requirements for trading in a margin account. Reg T calls occur when you fall short of the initial margin requirements. This can happen, for instance, if you’re trading options on margin or if you have an ACH deposit transaction that’s later reversed.

Regulation T margin calls are problematic because you can’t make any additional trades in your account until you deposit money to meet the 50% initial margin requirement. If you don’t have cash on hand to deposit, then the brokerage can sell off securities in your account until the initial margin requirement is met.

Brokerages don’t always have to ask your permission to do this. They may not have to notify you first that they intend to sell your securities either. So that’s why it’s important to fully understand the Reg T requirements to ensure that your account is always in good standing with regard to initial margin limits.

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

The Takeaway

Regulation T is used to determine initial margin requirements — i.e. the amount of cash an investor must keep available relative to the amount they’ve borrowed. Margin trading may be profitable for investors, though it’s important to understand the risks involved. Specifically, investors need to know what could trigger a Regulation T margin call, and what that might mean for their portfolios.

An investor who fails to meet the initial margin requirements may be subject to a Reg T call, which is problematic because they are restricted from making additional trades until they deposit the 50% initial margin requirement. If the investor doesn’t have cash on hand to deposit, then the brokerage can sell off securities in the account until the initial margin requirement is met.

If you’re an experienced trader and have the risk tolerance to try out trading on margin, consider enabling a SoFi margin account. With a SoFi margin account, experienced investors can take advantage of more investment opportunities, and potentially increase returns. That said, margin trading is a high-risk endeavor, and using margin loans can amplify losses as well as gains.

Opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.¹

About the author

Rebecca Lake

Rebecca Lake

Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.


Photo credit: iStock/loveguli

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest is a trade name used by SoFi Wealth LLC and SoFi Securities LLC offering investment products and services. Robo investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser. Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC.

For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.

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.

Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Before an investor begins trading options they should familiarize themselves with the Characteristics and Risks of Standardized Options . Tax considerations with options transactions are unique, investors should consult with their tax advisor to understand the impact to their taxes.

Utilizing a margin loan is generally considered more appropriate for experienced investors as there are additional costs and risks associated. It is possible to lose more than your initial investment when using margin. Please see SoFi.com/wealth/assets/documents/brokerage-margin-disclosure-statement.pdf for detailed disclosure information.


¹Probability of Member receiving $1,000 is a probability of 0.026%; If you don’t make a selection in 45 days, you’ll no longer qualify for the promo. Customer must fund their account with a minimum of $50.00 to qualify. Probability percentage is subject to decrease. See full terms and conditions.

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Mar
25
2025

What Are Blue Chip Stocks?

By | Financial Independence, Growing Wealth, invest, Investing, Terminology | Comments Off on What Are Blue Chip Stocks?

Blue chip stocks are generally issued by large, well-established companies that have a history of reliable growth. These companies are often financially sound, they’re typically considered lower risk; many blue chip stocks also pay dividends.

In other words, blue chip stocks are the big, stable ocean liners of the equity markets. Dazzling outperformance is not what blue chip investors are after. Rather, you may want to consider these large-cap stocks in the slow-but-steady corner of your equity allocation, as part of your diversification strategy.

Key Points

•   Blue chip stocks tend to be bigger, more stable companies, often with a long history and slow but steady growth.

•   Because blue chip companies are typically past their rapid growth phase, many can afford to distribute some of their profits to shareholders via dividends.

•   The advantage of investing in blue chips is that they have a low risk profile, and may provide stability in a portfolio — potentially with more growth than fixed-income securities.

•   For some investors, the disadvantage of blue chips is that these companies tend to be in the low-and-slow category of returns.

What Is a Blue Chip Stock?

First, let’s answer the obvious questions: Why blue chips? The origin of the term “blue chip stocks” is believed to originate with the game of poker, where traditionally the blue chips have the highest value.

While there is no fixed definition for blue chips, generally speaking blue chip stocks are known for being large, stable, and reliable. Blue chip companies can also share some other characteristics.

Common Traits of a Blue Chip Stocks

•   They’re well-known. Blue-chip stocks can be found in almost any sector, from consumer goods to big pharma. Companies like Morgan Stanley, Disney, Oracle, Coca-Cola, and Pfizer are considered blue chip stocks.

•   They’re industry leaders. Most blue chip stocks are not newcomers. Rather they’ve demonstrated a history of innovation as well as financial stability, which makes them well-established industry leaders, and a potential anchor for a defensive investing strategy.

•   They’re big. Many blue chip companies have a market cap of $10 billion or more, and many are larger. Market capitalization is a measure of a company’s value, and it’s calculated by multiplying the share price by the number of shares outstanding.

•   They’re well established. Most blue chip stocks are not newcomers. Rather they’ve demonstrated a history of financial stability, which can make them an important part of a defensive investment strategy.

•   They have a long track record. Owing to their longer histories, many blue chip stocks have overcome market challenges, but that does not make them “safe” investments. But they may be considered lower risk than, say, growth stocks.

•   They meet certain standards. You’ll often find blue chip stocks listed on the Dow Jones Industrial Average, S&P 500 Dividend Aristocrats, or the Bridgeway Blue Chip 35 Index. Some of these indexes can have stringent rules that only the most financially stable companies could meet.

•   They pay dividends. Blue chip stocks typically pay out dividends, or a share of the company’s profits, to shareholders.

Taken together, these qualities can make blue chips an important part of a defensive investment strategy.

Investors may want to consider them when they’re researching stocks to buy through an online brokerage or a traditional one.

10 of the Biggest Blue Chip Stocks

Here is a selection of 10 U.S. blue chip companies from Morningstar’s Best Companies to Own list. They are the largest by market cap, as of February 21, 2025.

These companies have been around for decades, and because of their consistent performance history, they’re considered blue chip stocks today. You may want to consider them when you’re thinking about portfolio diversification.

•   Anheuser-Busch InBev (BUD)

•   Pfizer (PFE)

•   Nike (NKE)

•   Taiwan Semiconductor Manufacturing (TSM)

•   Roche Holding (RHHBY)

•   Alphabet (GOOGL)

•   Danaher (DHR)

•   Caterpillar (CAT)

•   Merck (MRK)

•   Nestle (NSRGY)

Pros and Cons of Investing in Blue Chip Stocks

Like any investment, blue chip stocks have their potential benefits and drawbacks. Before investing in blue chip stocks, you may want to weigh the positives and negatives of these types of stocks on your overall investment strategy.

Benefits of Blue Chip Investments

Blue chip stocks can offer investors certain benefits:

•   They’re here for the long term. Many of these companies are global in reach, with immense resources and real staying power. Thus, blue chip stocks may be more stable than smaller companies in their sectors — but with the ability to innovate and maintain their status.

•   They can be lower risk. Blue chip stocks are often considered lower risk stocks because of their size and market history in the market. As noted above, many of them also pay dividends, which benefits investors.

•   They’re highly liquid. Because these companies trade frequently, but are typically not volatile, investors can generally be confident in these stocks’ value when selling.

•   They’re easy to follow. The companies behind many blue chip stocks tend to be well known, which means announcements and news around them is likely to make the front page of the financial section.

Potential Drawbacks of Blue Chip Stocks

There’s no such thing as a “sure thing,” especially in investing, and the drawbacks of blue chip stocks prove this point. Here are a few cons to keep in mind when considering blue chips for your portfolio.

•   They may fall harder. The old adage “the bigger they are, the harder they fall” may apply here. Just because a blue chip stock has a solid history does not ensure a profitable future, and legacy brands can fall behind nimble newcomers.

•   Limited growth. Though these companies typically have longevity on their side, they are often past their prime growth years. This is why blue chip companies also have a reputation for less volatile and lower risk.

•   They may be expensive. Blue chip stocks tend to be well-known brands and can be a desirable part of people’s investment strategies. For that reason, you’re unlikely to get a deal on them.

Investing in Individual Blue Chip Stocks

Like a well-balanced meal, investing in blue chip stocks can be one part of a healthy portfolio. Those looking to make blue chip stocks a part of their balanced investment strategy may first consider investing in individual stocks.

If the price per share is too steep for an investor’s budget, investors can consider fractional share investing, which allows the purchase of a fraction of a stock instead of the whole share, starting at just $5. Restrictions do apply for fractional shares.

Choosing to invest in an individual stock might be a good way to get a feel for the market, or it might be a way to take a more active investment strategy. Either way, a brokerage can handle an investor’s single blue chip stock purchase.

Blue Chip Funds: An Alternative to Individual Stocks

If no individual stock strikes your fancy, but you still want to get into the blue chip game, you might consider investing in index funds or ETFs that focus on blue chip stocks.

Various index funds and ETFs typically hold a diversified basket of stocks, often in line with a stock market index that tracks a segment of the market. Choosing an index fund or ETF that tracks large-cap stocks, the S&P 500, or the Dow Jones Industrial average can be one way to invest in a wide range of blue chip companies and add diversification.

The Takeaway

A company’s stock may earn a blue chip designation when they have a strong performance history, consistent returns, excellent financials, and over time they’ve become industry leaders.

For investors who are ready to start investing, blue chip stocks can be a solid choice, offering reliable performance — but not one that’s likely to deliver a lot of growth. As such, blue chips are often viewed as being conservative (i.e., lower risk). Being conservative can be an important part of an investment strategy, and investors may want to include other investments as well.

Invest in what matters most to you with SoFi Active Invest. In a self-directed account provided by SoFi Securities, you can trade stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, options, and more — all while paying $0 commission on every trade. Other fees may apply. Whether you want to trade after-hours or manage your portfolio using real-time stock insights and analyst ratings, you can invest your way in SoFi's easy-to-use mobile app.


Invest with as little as $5 with a SoFi Active Investing account.

FAQ

Where did the term “blue chip” come from?

The term “blue chips” may have come from poker, where blue chips are traditionally worth more than other chips.

What are some examples of well-known blue chip companies?

There are blue chip companies in every industry. Some well-known blue chips include companies like Wells Fargo, Anheuser Busch, Nike, Caterpillar, and Pfizer.

What are the potential downsides of blue chip investments?

While blue chips are considered steady and reliable, they aren’t immune to market volatility, and can be vulnerable to more nimble competitors. Blue chips also tend to be expensive, and more conservative than, say, growth stocks — something to bear in mind when constructing a balanced portfolio.

How do I invest in blue chip stocks?

Blue chip stocks are generally available to investors directly through a brokerage account, as well as through mutual funds and ETFs, which offer a basket of stocks. It’s also possible to purchase fractional shares of blue chip stocks.

There are limitations with fractional shares to consider before investing. During market hours fractional share orders are transmitted immediately in the order received. There may be system delays from receipt of your order until execution and market conditions may adversely impact execution prices. Outside of market hours orders are received on a not held basis and will be aggregated for each security then executed in the morning trade window of the next business day at market open. Share will be delivered at an average price received for executing the securities through a single batched order. Fractional shares may not be transferred to another firm. Fractional shares will be sold when a transfer or closure request is initiated. Please consider that selling securities is a taxable event.

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest is a trade name used by SoFi Wealth LLC and SoFi Securities LLC offering investment products and services. Robo investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser. Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC.

For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.

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

Exchange Traded Funds (ETFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or by emailing customer service at [email protected]. Please read the prospectus carefully prior to investing.

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

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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Mar
24
2025

Can You Get a HELOC on an Investment Property?

By | Growing Wealth, Home Ownership, mortgage, Terminology, Tools & Calculators | Comments Off on Can You Get a HELOC on an Investment Property?

A home equity loan, or HELOC, is a revolving line of credit that’s secured by your home. You can use a HELOC to access the equity you have in your home, which is the difference between what you owe on your home and what it’s worth.

It’s possible to get a HELOC on an investment property if you meet a lender’s requirements. There are both pros and cons to using a home equity line of credit on an investment property, which is important to understand before moving forward.

Key Points

•   To qualify for a HELOC on an investment property, a loan-to-value (LTV) ratio below 75% to 80% is typically required.

•   A credit score of 670 or higher is generally needed for a HELOC on an investment property.

•   Advantages of a HELOC include flexible access to cash, potentially lower interest rates, and possible tax deductions.

•   Disadvantages include difficulty in qualifying, reduced equity, and unpredictable interest rates.

•   Alternative financing options include a HELOC on a primary home, a personal loan, and a cash-out refinance.

Understanding HELOCs for Investment Properties

An investment property HELOC is a home equity line of credit that’s secured by an investment property that generates income. This might be a home that you exclusively rent out full-time or one that you rent seasonally.

Typically, when someone gets a HELOC, they borrow against their primary residence (the home they live in). Your home secures the HELOC, and the amount you can borrow is based on your credit scores and the amount of equity you have.

An investment property equity line of credit works much the same way, but the difference is that it’s tied to your rental home. You might tap into your investment property equity using a HELOC to:

•   Fund renovations or repairs on the property

•   Consolidate high-interest debts

•   Pay for a large expense

•   Cover a financial emergency

Investment property HELOCs, like HELOCs generally, have a draw period of 5 to 10 years, in which you can access your credit line. This is followed by a repayment period that may last 5 to 25 years.

Recommended: HELOC Definition

Eligibility Criteria for Investment Property HELOCs

Qualifying for a HELOC on a primary residence usually isn’t that different from getting a home loan to buy property. Getting a HELOC for investment property, however, may entail jumping through a few additional hoops.

Equity Requirements

The first requirement for a home equity loan or HELOC on investment property is equity. (Again, equity is the difference between what you owe on the home and what it’s worth.) Lenders use something called the loan-to-value (LTV) ratio to measure your home equity. Your LTV ratio is the amount you’re financing compared to what your home is worth.

Typically, lenders look for an LTV ratio of 85% to 90% if you’re getting a HELOC on a primary residence. So you’d need 10% to 15% equity to qualify.

The required LTV for a HELOC on investment properties, on the other hand, might be 75% or 80% instead. Essentially, you’d need more equity to qualify.

Why? Because it’s a riskier loan for the lender. If you were to experience financial hardship, you would likely want to preserve the home you live in and would prioritize payments on that mortgage above those on your investment property.

A HELOC on rental property, like any HELOC, is a junior lien — which means that it takes a backseat to first mortgage liens for repayment. So if you did lose your investment property to foreclosure, your first mortgage on the property would get paid off from the proceeds of the sale before a HELOC lender would be paid. Read our detailed HELOC loan guide to learn more about this borrowing option.

Credit Score Standards

A credit check is typical for a home equity line of credit. For most mortgages, including HELOCs, lenders look for a FICO® credit score of 620 or higher. (FHA loans accept borrowers with scores as low as 500.)

Credit score requirements may be higher for HELOCs, however, since there’s more risk for the lender. So you may need a score of 670 or better to qualify. That’s a “good” credit score, according to FICO.

If your credit could use some improvement, focus on paying bills on time and reducing your overall debt levels. You could also improve your credit utilization by requesting higher limits for your credit cards. Just don’t run up more debt against your new limit.

Property Type and Condition

Aside from your finances, lenders also scrutinize the property when deciding whether to approve a HELOC on an investment property. An in-person appraisal may be required to assess its condition and make sure that it’s an eligible property type.

Since the home secures your HELOC, the lender will want to make sure that it’s accurately valued and in good shape. The lender may also ask questions about your tenants and leasing agreement to assess how consistent your rental income is.

Pros and Cons of Using a HELOC on an Investment Property

Should you get a HELOC for an investment property? There are some compelling reasons to consider it, but there are downsides as well. It’s important to weigh both sides before making a decision.

Advantages

Here’s what a HELOC on a rental property has to offer, in terms of benefits.

•   Convenience. A HELOC offers flexible access to cash for home improvements, emergencies, or any other reason.

•   Low rates. HELOCs may be less expensive than other borrowing options, such as personal loans or credit cards.

•   Possible tax deduction. You can deduct the interest you pay if you’re using a HELOC exclusively to renovate or repair your investment property.8 This rule may change after the 2025 tax year; consult a tax advisor about all deductions.

•   Lower payments initially. You may only have to make interest payments in the draw period.

•   Less risk. If you experience a significant financial setback and default on the line of credit, at least you aren’t risking your primary residence.

Disadvantages

Getting a HELOC on investment property isn’t always the right move. Here are some downsides of an equity line on investment property to consider.

•   Difficult to qualify. Not all lenders offer HELOCs for rental properties and it may be challenging to find one that will approve you.

•   Unpredictability. If you have a variable-rate HELOC, your interest rate is subject to change, which could make your payments less affordable if rates rise.

•   Cost. Lenders may charge higher interest rates or higher fees for HELOCs on investment property, adding to your overall cost.

•   Shrinking equity. Taking out a HELOC reduces your available equity, which could put you at risk of becoming upside down if home values decline.

•   Less flexibility. Any balance owed on a HELOC often needs to be paid when you sell the house. This might affect how quickly you can sell your investment property should you wish to do so.

Alternative Financing Options

A HELOC isn’t the only way to get cash when you need it. You might consider other possibilities, including:

•   HELOC on your primary home. If you can’t get a HELOC on an investment property, you may still qualify for one on the home you live in. Shopping around to compare mortgage rates can help you see what you might qualify for.

•   Personal loans. Personal loans let you borrow a lump sum of money, and unlike a HELOC, they aren’t tied to your home.

•   Credit cards. Credit cards could be a good alternative to a HELOC if your card has a low rate or you’re earning generous rewards when you spend. For instance, you might use a card that earns cash back at home improvement stores to save money on remodeling projects.

•   Cash-out refi. A cash-out refinance replaces your existing mortgage loan with a new one. You take your equity out in cash at closing. This could be a simpler way to get access to funds and potentially lower your rate and/or monthly payments.

Recommended: Mortgage Preapproval

Steps to Obtain a HELOC on an Investment Property

Getting a HELOC on a rental property takes some planning. Here’s what you’ll need to do.

Assess Your Financial Situation

First, look at where you are financially. Consider your:

•   Credit scores

•   Income

•   Existing debt (including mortgage payments for your primary residence, rental property, and credit cards)

•   Budget and expenses

•   Home equity

•   Borrowing needs

You can use a home equity calculator to gauge whether you have the right LTV required to get a HELOC on an investment home. A HELOC repayment calculator can help you estimate how much of your budget might go to payments. If you haven’t checked your credit, you can pull your reports for free through AnnualCreditReport.com or with free credit monitoring.

Prepare Necessary Documentation

If you think a HELOC is the right move, the next step is organizing your documents. Generally, you’ll need to have copies of your:

•   Pay stubs

•   W-2s

•   Tax returns for the most recent year

•   Bank account statements

If you’re self-employed, your lender might ask for a profit and loss statement and cash flow statement. You may also need to provide two years’ worth of tax and income statements versus one.

Submit Your Application

Assuming you’ve chosen a lender, the next step is applying. If you’re applying for a HELOC online, you should be able to upload any supporting documentation the lender requests.

As you go through the application, complete all required fields and double-check for accuracy. Once you submit your application, the lender will take the next steps which are checking your credit and scheduling an appraisal.

You’ll need to pay the appraisal fee, along with any other closing costs. The appraisal fee is usually due upfront, while other fees can be paid on closing.

The Takeaway

Getting a HELOC on an investment property can unlock extra cash, but it may not be suitable for every situation. Before you move forward with a home equity line of credit, it’s important to know what you can expect and how a HELOC tied to an investment property is different from one tied to your primary home.

SoFi now partners with Spring EQ to offer flexible HELOCs. Our HELOC options allow you to access up to 90% of your home’s value, or $500,000, at competitively lower rates. And the application process is quick and convenient.


Unlock your home’s value with a home equity line of credit from SoFi, brokered through Spring EQ.

FAQ

What are the typical interest rates for HELOCs on investment properties?

HELOCs on investment properties tend to have higher interest rates than HELOCs on primary residences, or mortgages used to buy a home. You may pay several percentage points more to borrow, and it’s entirely possible to see double-digit HELOC rates.

Are there tax implications when using a HELOC on an investment property?

You might be able to deduct the interest you pay on a HELOC for your rental property if you’re using the money for repairs or improvements. You’ll need to consult a tax advisor, however, and be mindful that this rule may change after the 2025 tax year.

How does a HELOC on an investment property affect my credit score?

HELOCs show up on a credit report. When you apply for a HELOC, it adds an inquiry to your report, which can knock a few points off your score. As long as you pay your HELOC on time, however, you can get those points back.

Can I use a HELOC from my primary residence to fund an investment property?

You can use a HELOC from your primary residence to fund an investment property, but it isn’t always easy. Lenders may be more stringent with credit, income, and equity requirements when you borrow against your primary home to buy a rental home.

What are the risks associated with taking a HELOC on an investment property?

The primary risk associated with getting a HELOC on an investment property is losing the home to foreclosure. If you can’t manage the added debt load or your rental income dries up, you could risk the loss of the property if the bank takes it back.

Photo credit: iStock/gorodenkoff

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

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24
2025

Tips for Spotting a Fake Money Order

By | Financial Topics, Terminology | Comments Off on Tips for Spotting a Fake Money Order

A money order can be a convenient way to make payments or receive funds, but fake ones are out there, perhaps without the usual watermarks or in too high denominations. These fraudulent paper documents can leave you vulnerable to being scammed.

Knowing how to tell if a money order is real can protect you against financial losses. Read on to learn how to spot a fake money order.

Key Points

•   Fake money orders often lack watermarks, have incorrect amounts, or show signs of tampering.

•   Verifying authenticity of money orders involves checking serial numbers and consulting the issuer to confirm legitimacy.

•   Accepting fake money orders can lead to financial loss and legal issues, underscoring the need for caution.

•   Reporting money order scams to the issuing entity and your bank is crucial to prevent further fraud.

•   Protecting yourself involves avoiding money orders from strangers and verifying payment methods before acceptance.

Common Money Order Scams

First, a quick refresher on what a money order is. It’s a common way to pay for things when you can’t or don’t want to write a check, use a debit card, or pay cash. When someone purchases a money order, they’re getting a financial instrument that the recipient can cash or deposit just like a check.

Typical places to buy money orders include financial institutions, U.S. Post Office branches, Western Union and similar businesses, and major retailers (such as Walmart). Money orders are usually only available in denominations up to $1,000, and the fee to get one is usually just a dollar or two.

Money orders are often used by scammers as a means of fleecing unsuspecting victims out of their money. Some scams are obvious but others are more subtle in nature. Here, some specifics:

•   Fake buyers. Scammers may target people who are selling items on Craigslist, Facebook Marketplace, or other online forums by making a purchase and sending payment via money order. However, the money order is a fake, and by the time the seller deposits it into their bank account and learns the truth, the scammer has made off with their item.

•   Fake sellers. It’s also possible to fall prey to a money order scam if you’re trying to purchase something online. The seller, who appears legitimate, may ask you to send payment via money order while sending you a tracking number for the item you purchased. When the item arrives, however, you’re left holding nothing but an empty box while the scammer has cashed the money order and disappeared. Or worse, nothing ever arrives at all.

•   Refund scams. Another common money order scam involves buyers who purchase something from you, mail a fake money order, and then say they’ve changed their minds. They ask you to refund the amount of the money order and send it back to them via wire transfer or through a person-to-person payment app. Meanwhile, you try to deposit the money order when it arrives, only to find out it’s a fake and you’ve lost money.

•   Overpayment scams. One money order scam involves a buyer paying you for something via money order, only the amount is more than the purchase price. They’ll say they made a mistake and ask you to refund the difference. You do so, then find out later that you’ve been paid with a counterfeit money order. You are out the amount you refunded the buyer.

•   Deposit scams. Scammers may try to take advantage of your goodwill by offering you a money order in exchange for cash. They might claim they don’t have a bank account to deposit the money order into and you agree, thinking you’re doing someone a favor. However, you end up losing money when your bank refuses to accept the fake money order.

Recommended: Can You Purchase a Money Order With a Credit Card?

Tips for Spotting a Counterfeit Money Order

Fake money orders may not be easily recognizable at first or even second glance. Taking a close look at the money order can help you identify some clues that may suggest it’s a fake. Here’s what to look for to detect counterfeit money orders.

•   Watermarks. If you’re trying to cash a postal money order, the lack of watermarks is a sign that it’s a fake. The Postal Service includes a series of repeating watermarks on its money orders. If those are missing, you might have a counterfeit money order on your hands.

•   Dollar amounts. Check if the dollar amount matches the amount that the money order is supposed to be for. Are there any signs that someone has tried to erase or write over the dollar amounts or add an extra zero or two? Those can indicate attempted tampering or forgery.

•   Money order limits. Domestic postal money orders cannot exceed $1,000; the same is usually true for Western Union money orders within the U.S. International postal money orders cannot be more than $700. If you receive a money order that exceeds the allowed limit, then it’s likely a fake.

•   Discoloration. Any discoloration or what looks like an ink bleed could suggest that someone has tried to alter the money order in some way or that they’ve printed it themselves, which would make it a fake.

Worth noting: While the U.S. Postal Service is a popular place to get money orders, keep in mind that options are available. Money orders obtained through other sources typically deploy different measures to prevent tampering or duplication, which may include watermarks or security strips. You can familiarize yourself with them via their websites or customer service to help detect a falsified money order.

Recommended: 10 Personal Finance Basics

Tips to Verify a Real Money Order

If you receive a money order as payment, here are some steps you can take to ensure it’s not a fake before trying to cash or deposit it.

•   Examine the money order. As mentioned, there are several physical indicators that can tip you off to fake money orders. Once you receive a money order, give it a thorough examination to see if there’s anything that hints that it might be a fake. How to spot a fake money order can involve looking for discoloration, watermarks, and the like.

•   Check the serial number. Money orders are issued with a unique serial number. If you’d like to make sure a money order is real, you can call the customer service number that’s listed on it to double-check that the serial number is legit.

•   Take it to the issuer. Another option for verifying that a money order is real is to take it back to where it was issued. That might mean visiting a post office or calling their verification line at 866-459-7822. Or you might go to a Western Union location or a branch of the bank from which it was issued, or you could try phoning. Someone who works at one of these locations should be able to determine whether the money order is authentic.

•   Wait it out. If someone gives you a money order as payment, you could deposit it into your checking account and wait for it to clear. In the meantime, you would not want to spend any of the funds from the money order, nor would you want to send any money back to the other person until your bank has verified it and made the funds available to you.

You might try one or all of these methods to prove that a money order isn’t a fake. If you send payment to someone else via a money order, it’s also a good idea to keep your receipt so you have a means of tracking it. That could help you avoid any issues later if the person you sent the money order to claims they never received it.

What Happens If You Accept a Fake Money Order?

Accepting a fake money order or any other type of fake check can lead to unintended financial consequences. Here’s what can happen if you try to deposit a counterfeit money order to your bank account:

•   You won’t receive any of the funds the sender promised to you.

•   If funds are deposited, you’ll be responsible for paying the money back to your bank.

•   The bank may charge you a returned item fee for the deposited money order, meaning it cannot be processed.

•   Should you make purchases against the money order amount and the deposit is later reversed, you may be charged overdraft fees if the reversal leaves your account balance in the red.

There is a possibility that you could also get into legal trouble if the bank believes that you knowingly deposited a fake money order. In a worst-case scenario, you may be charged with bank fraud or money laundering, both of which could result in jail time and fines if convicted.

Recommended: 7 Money Management Tips

Ways to Report a Money Order Scam

If you believe you’ve been scammed by someone using a money order, it’s important to report it to try and minimize any financial damage. How you report a money order scam can depend on which entity issued the money order.

•   In the case of postal money orders, to report fraud, call the U.S. Postal Service’s hotline at 800-372-8347.

•   For Western Union money orders, you’d need to get in touch online or by phone; their number is 800-448-1492.

With bank-issued money orders, you could call or visit a branch of the bank. You’ll also want to let your bank know that you’ve received and deposited what you believe is a fake money order. That can prevent the bank from attempting to honor the money order and potentially triggering bank fees for you when it fails to clear.

Tips to Protect Yourself From Being Scammed

Money order scams continue to make the rounds, but that doesn’t mean you have to get taken in. Taking steps to protect yourself can help you avoid potentially costly scams.

•   Avoid accepting money orders from strangers or anyone who isn’t a trusted sender.

•   Ask for alternative forms of payment, such as a wire transfer or person-to-person payment.

•   When sending money orders to others, first verify the identity of the recipient to make sure they’re legit.

•   Look for signs of forgery or tampering if you receive a money order from someone as payment.

•   Attempt to verify a money order before depositing it to a bank account.

Finally, it’s important to trust your gut. If something feels off to you or you’re buying something with a money order, and the deal seems too good to be true, it probably is.

The Takeaway

Money orders can be a convenient way to pay, but they can also leave you vulnerable to scammers. You can attempt to verify money orders before depositing them, using such techniques as checking for watermarks on U.S. Postal Service money orders and looking for signs of tampering with the amount. If you have a bank account, you might consider using other ways to pay bills or send funds to eliminate the odds of being hit by a money order scam.

Looking for a secure home for your money, one that makes transferring funds easy?

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


Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy 3.30% APY on SoFi Checking and Savings with eligible direct deposit.

FAQ

Can you file a complaint about a fake money order with your bank?

If you receive a fake money order and deposit it into your bank account, it’s a good idea to let the bank know as soon as possible. While you could complain to the bank, there may be nothing the bank can do about the scammer, but your actions might help you avoid, say, overdraft fees. You could also report fake money orders to the issuing entity, such as the postal service or Western Union.

Do scammers get your information if you fall victim?

Most financial scams involve the exchange of information. For example, a scammer might ask for your name and address so they can purchase a money order to send to you. Other scams may attempt to gain direct access to your bank account. When buying or selling online, it’s important to use caution, protect your sensitive personal and financial information, and keep it out of the hands of scammers.

What is the most common tell of a fake money order?

A lack of watermarks is usually a sign that a money order is a fake, as most issuers include them as a security measure, most notably the U.S. Postal Service. Other red flags include smudged ink, numbers that don’t match up to the amount the money order is supposed to be, and signs of physical alteration or damage.

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. 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.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

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

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

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

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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.

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

About the author

Rebecca Lake

Rebecca Lake

Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.


photocredits: iStock/Diy13
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