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A certificate of deposit (or CD) is considered a type of savings account, but a CD locks up your money for a fixed time period in exchange for a higher rate of interest than a standard savings account.

While a savings account allows you to access your cash at any time, you typically purchase a CD for a set period of time during which you can’t withdraw the funds without paying a penalty. Typical CD terms can vary from one month to five years, but can be even longer.

Here’s a closer look at how CDs work, how they compare to other savings vehicles, and their pros and cons.

Is a Certificate of Deposit Just a Savings Account?

A CD has some similarities to a savings account, but several differences. It’s a financial product designed to help consumers save their money, and because CDs typically pay a fixed rate of interest, they can offer savers a predictable return over time.

However, unlike a savings account, CD holders aren’t able to access the funds in their account whenever they feel like it — at least not without paying an early withdrawal penalty, (in most cases). CD holders are also not allowed to deposit more money into an existing CD, generally speaking, although they can buy another CD.

In exchange for giving up the ability to freely withdraw the money in a CD, the institution rewards CD holders with higher interest rates than they’d see in a typical savings account.

What Is APY vs Interest Rate?

An annual percentage yield, or APY, on a CD or savings account tells you how much interest you’ll earn on your money over one year. It includes the interest on the initial deposit, plus the interest on the interest that accumulates, which is called compound interest. An interest rate, on the other hand, only accounts for interest earned on the original amount.

An APY helps you avoid complicated calculations and compare different savings options to find the best yield. Longer term CDs generally pay higher APYs. However, that is not always the case, so it’s important to shop around and compare APYs and terms to find the best CD for your needs.

What Is a Jumbo CD?

A jumbo CD requires a higher minimum deposit than that required by regular CDs, typically $100,000 or more. In return for tying up a large sum of money, jumbo CDs tend to pay higher rates.

Like regular CDs, jumbo CDs are considered risk-free investments, as they’re typically insured up to $250,000 by the Federal Deposit Insurance Corp. (FDIC). CDs offered by credit unions have the same protection under the National Credit Union Administration (NCUA).

Recommended: Are Certificates of Deposit Worth It?

How Does a Certificate of Deposit Work?

When a customer goes to open a CD they’ll be asked to put down a lump sum, often a minimum of $500 to $1,000.

The initial deposit placed in a CD is called the principal, because it is essentially a loan the consumer is offering to the bank. The interest the customer collects is what the bank pays for the privilege of borrowing their money.

Certificates of deposit also carry a “term,” much like a loan does; the term is the amount of time the funds must be left in the CD in order to glean the advertised interest rate. The term might be as short as a few months or as long as a decade. The day the term is over is also known as the CD’s maturity date.

Long story short: When opening a CD, a customer deposits a set amount of money for a set amount of time and agrees to leave it untouched in return for a relatively high fixed APY they’ll earn on the principal once the CD matures.

But how high, exactly, are the rates we’re talking about?

Certificate of Deposit Rates

Certificates of deposit are attractive savings options because they usually offer higher rates than the traditional savings accounts, but are also a lower-risk option than, for example, investing in the stock market.

Since funds in CDs are FDIC-insured, account holders can rest with some assurance that their cash won’t simply disappear (as it might when invested in shares of a company).

As of February 2025, the national average rate for a normal savings account is 0.61% APY, whereas the national average rate for a 12-month CD is 1.83% APY. The national average rate for a 60-month CD is about 1.53%. Online banks typically offer higher rates for savings accounts, and it’s possible to find CDs with higher than the average rates by shopping around.

But it’s possible to find CDs with even higher rates than that by shopping around.

Certificate of Deposits: Fine Print

There are a few more things it’s important to know about CDs before deciding to open one.

Generally, CDs automatically renew once the term is up if the account holder doesn’t take the money out. The bank will typically roll over the existing CD into a new CD with the same term, though the APY may be different. (For example, a one-year CD whose funds aren’t collected on the maturity date would be rolled over into a new one-year CD.)

Most financial institutions offer CD holders a grace period, or a fixed amount of days after the maturity date, during which the account holder can decide whether to withdraw the funds, transfer them to a new account or CD, or allow them to roll over.

Finally, but importantly, most CDs are generally subject to an early withdrawal penalty, which is incurred if the money is accessed prior to the maturity date. Early withdrawal penalties are determined by each financial institution. Depending on the policy, account holders could lose out on interest, or even lose some of their principal deposit.

Recommended: Reasons Why It’s So Hard to Save Money Today

Certificates of Deposit: Pros and Cons

CDs can play an important role in an overall savings strategy because they balance growth and risk management. But as with any financial product, CDs have both drawbacks and benefits, which should be considered carefully before opening one.

Pros of CDs

•   Because CDs are FDIC-insured, they’re a relatively low risk account. The FDIC insures up to $250,000, which means if an FDIC-insured institution goes out of business, account holders with a CD would receive their principal and interest, up to $250,000.

•   Higher interest rates are available for CDs than for traditional savings accounts, making it easier to see a higher return on investment.

•   For savers who are worried about spending down their savings, a CD provides a safe place to place cash, where it’s locked up for a certain period of time.

Cons of CDs

•   Although CDs carry higher interest rates than some other types of savings vehicles, they don’t have the same kind of earning potential that stock market investments can have. By investing your money in a CD you’re losing out on potentially much higher market returns (but you’re also protected from market risk).

•   CD holders generally don’t have the ability to withdraw their money at any time, at least without being subject to a penalty. That makes a certificate of deposit a poor choice for certain savings goals, like an emergency fund, which should be readily available.

•   Savers will owe taxes on the earnings in the account, which effectively lowers the amount you earn. Be sure to take this into consideration shopping around for the best APY.

Where to Open a Certificate of Deposit

Certificates of deposit are available from a wide variety of financial institutions, including national and regional banks, credit unions, and some online-only financial institutions.

Shopping around can help ensure consumers find the best rates and most favorable terms for their needs.

That said, there are also some alternatives to opening a certificate of deposit that are worth considering carefully.

Alternatives to Opening a Certificate of Deposit

Although CDs can be a great way to earn interest, they’re far from the only high-interest account option out there. Here are a few options to mull over.

High-Yield Savings Accounts

Although typical savings accounts offer a relatively low interest rate, high-yield savings accounts are available from some banks. This option helps consumers combine growth potential with the ability to access their money as they need it, and can be a good alternative to CDs for those who aren’t ready to lock away their money for many months or years.

Certain high-yield accounts may offer a higher APY. However, there may be fine print involved requiring that savers meet certain terms in order to maintain that rate, such as making a minimum number of transactions per month or maintaining a minimum account balance.

It’s a good idea to review all the account terms carefully before opening any kind of financial account.

Money Market Accounts

Money market accounts are another option which, similarly to CDs, tend to offer higher interest rates than your typical savings account does. And unlike CDs, money market account holders are generally allowed to write checks or process debit transactions against their funds, which are still covered by FDIC insurance.

While money market accounts can earn higher interest rates than traditional savings accounts, there may be monthly restrictions on the number of deposits and withdrawals. Money market accounts may also require a high minimum balance in order to avoid monthly fees.

Stock Market Investments

Finally, for consumers focused on growing their money in the long-term, investing in the stock market can provide a lot of potential for growth. Historically, the S&P 500 — an index tracking 500 of the largest corporations in the U.S. — has seen an average annual return of 11.7% over the last decade.

Of course, an investment account is very different from a savings account or CD in that there is no FDIC insurance on the funds. Investments in the stock market are vulnerable to market fluctuation, and there’s no guarantee that investments will be safe and make money. It is important to remember that investments have no guarantee and are subject to potential losses.

That said, many financial professionals and advisors still recommend long-term investing as one of the best ways to grow wealth over time and as a part of an overall plan for long-term financial goals like retirement.

The Takeaway

A CD is a type of savings account that pays a fixed interest rate on money held for an agreed-upon period of time. Investing in a CD can be a good choice if you’re looking to put aside money for a set period of time and earn more than you could in a regular savings account. If you’d prefer to have more access to your funds, however, a money market account or high-yield savings account could be a better choice.

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.

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.

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/.
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.

 
SOBNK-Q125-011

When the interest rate and annual percentage rate (APR) are calculated for a loan — especially a large one — the two can produce very different numbers, so it’s important to know the difference when evaluating what a loan will cost you.

Basically, the interest rate is the cost of borrowing money, and the APR is the total cost, including lender fees and any other charges.

Let’s look at interest rates vs. APRs for loans, and student loans in particular.

What Is an Interest Rate?

An interest rate is the rate you pay to borrow money, expressed as a percentage of the principal. Generally, an interest rate is determined by market factors, your credit score and financial profile, and the loan’s repayment terms, among other things.

How Interest Rates Work

Most people who take out a home mortgage loan opt for a fixed-rate mortgage. The borrower repays the amount borrowed, plus interest, in equal monthly installment payments over a period of 10, 15, 20, or 30 years. The higher the interest rate, the more they will pay each month and over the life of the loan. To see how interest rates affect payment amounts, try plugging different rate numbers into a mortgage calculator.

Some homebuyers opt for an adjustable-rate mortgage. In this scenario, there is typically an introductory period with an interest rate that might be lower than the available rate on a fixed-rate loan. But after that, the rate can periodically adjust (up or down), following market rates.

What Is APR?

If a loan were to have no other fees, hidden or otherwise, the interest rate and APR could be the same number. But because most loans have fees, the numbers are usually different.

How APRs Work

An APR is the total cost of the loan, including fees and other charges, expressed as an annual percentage. Compared with a basic interest rate, an APR provides borrowers with a more comprehensive picture of the total costs of the loan. The bulk of mortgage fees come in the form of closing costs and origination fees. Generally, closing costs average 3% to 6% of your mortgage loan principal, but each lender is different. Some borrowers also pay for mortgage points, also known as discount points, to lower the interest on their home loan. All of this would factor into the APR. Understanding these costs can help you get a clear picture of the total cost of a loan.

The federal Truth in Lending Act requires lenders to disclose a loan’s APR when they advertise its interest rate. In most circumstances, the APR will be higher than the interest rate. If it’s not, it’s generally because of some sort of rebate offered by the lender. If you notice this type of discrepancy, ask the lender to explain.

APR vs. Interest Rate Calculation

The bottom line: The interest rate percentage and the APR will be different if there are fees (like origination fees) associated with your loan.

How is APR Calculated?

To calculate APR, you first need to add the interest and the total fees for your loan. Then you divide by the principal amount borrowed. Divide the result by the total number of days in your loan term (for a 20-year loan, for example, you would divide by 7,300). Multiply the result by 365 (to get a yearly number) and then again by 100 (to arrive at an APR percentage).

Here’s the APR formula:

Let’s say you’re comparing loan offers with similar interest rates. By looking at the APR, you should be able to see which loan may be more cost-effective, because typically the loan with the lowest APR will be the loan with the lowest added costs.

So when comparing apples to apples, with the same loan type and term, APR may be helpful. But lenders don’t always make it easy to tell which loan is an apple and which is a pear. To find the best deal, you need to seek out all the costs attached to the loan.

You may find that a low APR comes with high upfront fees, or that you don’t qualify for a super-low advertised APR, reserved for those with stellar credit.

How Are Interest Rates Calculated?

Calculating the total interest you’ll pay on a home loan is pretty simple with online tools. You can see the total interest you’ll pay on a loan quickly by plugging your loan amount, interest rate, and loan term into a mortgage calculator. (If you want to see what your monthly payment will be when you factor in property taxes and home insurance, use a mortgage calculator with taxes and insurance.)

How APR Works on Home Loans

Not all homebuyers understand the true cost of their mortgage loans. If you’re considering multiple loan offers (perhaps you’ve gone through mortgage prequalification with a few lenders), you can look at the APRs on the offers to compare them against one another.

One caveat regarding APR: Because fees associated with a home mortgage are usually paid at the beginning of the loan, the APR won’t reflect the true annual cost of the loan if you sell the property or refinance before the mortgage term is up.

How Interest Rates Work on Home Loans

Most home mortgages are amortizing loans, so although the monthly payment on a fixed-rate loan remains constant, the amount of interest you’ll pay with each payment will differ. Typically, more of a borrower’s monthly payment is made up of interest early in the life of the loan; as the loan ages, the reverse is true and more of the payment chips away at the principal. An amortization table for your loan should be provided in your loan documents.

Benefits of Government-Backed Mortgages

Some would-be homeowners find themselves comparing different types of mortgages (as well as different interest rates and APRs) when considering how to finance their purchase, and government-backed mortgages will have a different profile than conventional loans.

A government-backed mortgage such as an FHA loan or a VA loan may have a low down payment (or no down payment), which is a key benefit, especially for first-time homebuyers, who typically have fewer resources to pull from. It may also have different upfront fees than a conventional mortgage. An FHA loan, for example, usually requires mortgage insurance. If the borrower makes a down payment of 10% or more, after 11 years the lender can remove the mortgage insurance requirement, but many borrowers need to refinance to get rid of the insurance payment. The cost of this mortgage insurance factors into the APR.

The Takeaway

APR vs. interest rate is a key factor you’ll want to consider when deciding on a loan, because the APR reflects the fees involved in the loan. Even when it comes to government-backed home loans, fees are part of the story. So don’t just look at a loan’s interest rate — take the time to compare the APR as well.

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

FAQ

What’s a good APR?

A good APR will depend on your individual profile as a borrower, with your credit score being a key factor. To see how the APR you’re being offered on a home loan compares with the national average, search for “national average XX-year mortgage APR” (with XX being your loan term in years). Then look at the percentages side by side.

What’s a good interest rate?

A good interest rate is one that’s below the posted national average interest rate for your loan type when you search online. Borrowers with less-than-stellar credit scores won’t qualify for the best rates, however, so what’s a good interest rate for you will depend on your personal credit score and financial profile.

Does 0% APR mean no interest?

Zero percent APR means that no interest is charged for a set period of time. This is a term commonly seen on credit card offers and car loans. If you go this route, make sure you note the length of the no-interest promotional period and that you make your payments on time during the period, as missing payments can trigger interest to build on the debt.

Does refinancing your mortgage help lower rates?

Refinancing your mortgage may help lower your interest rate if rates have dropped since you initially purchased your home, or if your credit score and other aspects of your financial profile have improved significantly. It’s important to consider closing costs associated with a refinance, however, before deciding that it makes sense to chase a lower rate.

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

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

SOHL-Q125-064

A mobile wallet can be a great way to pay for things as you go through your day without having to carry an actual, potentially cumbersome, wallet with you. Instead, an app holds digital versions of your credit, debit, loyalty, and ID cards, allowing you easy access when needed.

But you may wonder which of the mobile wallet options are best, how safe these transactions are, and whether it wouldn’t just be better to slip your debit card in your pocket on most days.

Read on to learn more.

What Is a Mobile Wallet?

A mobile wallet is just what it sounds like: It’s a virtual wallet that lives on your mobile device (aka your cell phone). It can store credit cards and charge cards, as well as debit, loyalty, and store card information. This allows you to quickly and easily pay for goods and services with your smartphone, smartwatch, or another mobile device. No more digging through your bag or backpack for your “real” wallet and fishing out cash or the right piece of plastic.

Mobile wallets (sometimes called digital wallets) can go a step further, too. You can also stash insurance cards, ID, coupons, concert tickets, boarding passes, and hotel key card information in them. Some digital wallets also enable you to send money to friends, as well as receive payments.

You may also be able to use your mobile wallet instead of a physical card at some ATMs for contactless withdrawals.

How Does a Mobile Wallet Work?

Here’s how a mobile wallet works:

•   You install the app and type in your personal and payment information, which is securely stored. (Unique identifying numbers are used to store your details vs. your actual card or account information.)

•   When you are ready to make a payment with the mobile wallet, a technology called NFC (near-field communication) typically kicks in. This allows the two devices (your mobile wallet and the vendor’s reader) to communicate. Typically, you will wave your device over the merchant’s terminal or tap your device against it.

•   As the two devices communicate, your transaction will likely go through. Funds will transfer, and you will usually be pinged with a confirmation.

Recommended: How to Deposit Cash at an ATM

What Is the Best Mobile Wallet App?

The major mobile wallets are:

•   Apple Pay

•   Google Pay

•   Samsung Pay

These may come already installed on mobile devices. Although they differ in layout, these mobile wallet apps have the same basic function that allows you to pay with a phone tap.

Other ways to make payments on the go include mobile wallets you can download from app stores, including wallets from banks, PayPal, and merchants such as Walmart, and Starbucks.

Deciding which mobile wallet is best will largely depend upon your own personal needs, which options are compatible with your device, how you like to manage your money, and what your financial goals are. A couple of points to keep in mind:

•   When choosing a mobile wallet app, be aware that a mobile wallet offered by your credit card company may only be accepted at certain retailers.

•   Merchant wallets will typically only work in that merchant’s store or online. For instance, the Starbucks wallet will only work at Starbucks. Enjoy that latte, but don’t expect to buy new boots at the mall with it.

Setting up and Using a Mobile Wallet

Here’s how to set up most of the major mobile wallet apps:

•   You launch the app (it may be pre-installed on your device), take a photo of your card or enter its information (such as your credit card number), and follow the step-by-step instructions.

•   This process is then repeated for all other cards entered. Generally, even if you load up several credit cards into your mobile wallet, only one of them will be your default payment option. That card will be the one that is used to process a purchase. If you want to use a different card, you may need to change the default card before you make the transaction.

•   Beyond credit and debit cards, the app may also walk you through configuring peer-to-peer payments like Apple Cash or Google Pay fund exchanges. You may also be able to link your PayPal account.

•   You may be able to import retail store rewards cards, as well as museum or library memberships cards, event tickets, and airline boarding passes. This may involve scanning a QR code or selecting the “add to wallet” button in an email or a text message from the issuer.

•   When you are ready to pay for purchases using your mobile wallet, you’ll want to make sure the merchant accepts mobile money. These businesses can typically be identified through a contactless payment indicator (usually a sideways Wi-Fi symbol).

•   To pay, open your digital wallet app if necessary, hold the phone near the wireless reader or tap your device against the terminal. This will authorize the payment. Your phone’s screen will typically confirm the transaction.

💡 Quick Tip: Don’t think too hard about your money. Automate your budgeting, saving, and spending with SoFi’s seamless and secure mobile banking app.

Are Mobile Wallets Safe?

Overall, mobile wallets are considered to be safe. Here’s why:

•   Unlike credit cards, which can be copied by card-skimming devices, the card information you load into a mobile wallet is encrypted. That means that your actual card or account numbers are never shared with the merchant.

•   Unlike credit cards, which can be copied by card-skimming devices, the card information you load into a mobile wallet is encrypted. That means that your actual card or account numbers are never shared with the merchant.

•   In the case of theft, it’s not possible for anyone to use a mobile device to make a payment without providing the required security credentials.

These safeguards actually make mobile wallets more secure than carrying physical credit cards and cash, which can easily be compromised.

Pros and Cons of Using Mobile Wallets

Is a mobile wallet right for you? Here are some key pros and cons you may want to consider.

Mobile Wallet Pros

Here are some of the upsides of using a mobile wallet.

•   They’re convenient. If you’re out and about without your wallet or bag, you can still make purchases, as well as use your coupons and rewards cards. You may also be able to get cash at an ATM or check a book out of the library, all from your mobile device. What’s more, they often allow for a contactless payment, meaning they can be extra quick and easy.

•   They’re secure. Mobile wallets provide a layer of security you don’t get with cash or using a debit or credit card. Your payment information is saved in one protected, central location. Card numbers are never stored in the app itself but are instead assigned a unique virtual number. This protects your money even if your smartphone is lost or stolen.

•   They can help you track your spending. A mobile wallet can help you track and better manage your spending. All of your transaction information is stored in the app so it’s easy to see how much you’re spending and where each week. You might even wind up using a credit card more responsibly.

Mobile Wallet Cons

There are also some downsides to mobile wallets to be aware of.

•   They’re not accepted everywhere. There are still some industries where cash is the only currency accepted. Even in businesses that do take credit, not all of them accept mobile wallets. To accept a mobile wallet, businesses need to have payment readers that take NFC payments, and not all of them have these terminals. This can cause a problem if a mobile wallet is all you have on hand.

•   Your phone could die. Cell phones often run out of battery and, if you’re without a charger, that handy mobile wallet will no longer exist. That can put a crimp in your shopping plans or become a major problem if you have important documents such as train passes or concert tickets stored in your mobile wallet.

•   You may end up overspending. The use of mobile wallets can be similar to that of using a credit card. Because cash isn’t physically leaving your hands, spending can feel less real, which can be a cause of overspending. If you have spending issues, a mobile wallet can make it easy to spend mindlessly and swipe or tap too often.

4 Tips for Using Your Mobile Wallet

To keep your mobile wallet safe, keep these tips in mind:

1.    Do your research before downloading payment apps. Look for reliable brands/companies, many positive reviews, and a significant number of downloads. Avoid untested apps; they could be a kind of scam and contain spyware or malware.

2.    Know how to remotely lock and locate your phone in case it gets lost or stolen. Check your phone’s device manager capabilities before you find yourself in an emergency situation.

3.    Always have appropriate locking technology. Carrying around a phone that doesn’t lock means you could be risking loss.

4.    Review your credit and debit card statements. Make sure those purchases are yours. While mobile wallets are secure, problems can occasionally arise, and you want to be alert.

The Takeaway

A mobile wallet is a digital way to store credit, debit, ID, and gift cards so that purchases can be made using a mobile smart device rather than a physical card.

Mobile wallets can help simplify your financial life. They allow users to make in-store payments without having to carry cash or physical credit cards. They’re easy to use and have hefty safeguards.

However, they aren’t universally accepted. It’s worth your while to determine whether the retailers you frequent accept them to help determine if a mobile wallet is a good option for you.

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.

FAQ

How many places support mobile wallets?

While there isn’t a precise tally of how many retailers and other businesses support mobile wallets, a recent study found that there are 1.75 billion registered mobile money accounts globally, indicating significant adoption of and acceptance of this technology.

Do mobile wallets support all debit/credit cards?

Each mobile wallet will have its own policies, but most credit and debit cards from major banks are supported by, say, Google Pay and Apple Pay. Small business credit cards may also be added, especially those from established banks. You may find, though, that prepaid cards are not supported.

Will mobile payments replace cash?

According to a 2024 study by the nonprofit Global System for Mobile Communications, the mobile money industry saw a 23% increase in transaction volume worldwide in 2023, up to 85 billion annually. However, cash isn’t going away any time soon. According to the most recent statistics from the Federal Reserve, cash is the third-most-used payment instrument in the U.S.

Photo credit: iStock/hiphotos35

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.

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/.
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SOBNK-Q125-009

When applying for financial aid to fund their college educations, students and their parents are often introduced to words they’d never heard of before. To help you learn the lingo, here are definitions of important financial aid terms, plus information about different ways to pay for college.

Award Letter

A financial aid award letter goes by a few different names: merit letter, award letter, a financial aid offer, or a financial aid package. But no matter what you call it, once a student fills out a FAFSA, they’ll receive one of these letters from each college that accepts them. A typical letter will list a student’s cost of attendance, expected family contribution, awarded grants and scholarships, work-study details, and federal student loans. Many schools now provide this information electronically.

Bursar, Student Accounts, or Student Financial Services

The bursar is the office responsible for managing student billing and payments at a college or university. This department handles tuition, fees, and other charges, ensuring that students’ accounts are up to date.

The student accounts office oversees the financial records of enrolled students, including tuition payments, fees, and any outstanding balances. This office ensures that students meet their financial obligations and may assist with setting up payment plans, issuing statements, and explaining charges on a student’s account.

Student financial services is a broader department that combines financial aid, student accounts, and sometimes the bursar’s office to provide comprehensive support. This office helps students understand financial aid packages, manage tuition payments, and explore funding options such as scholarships, grants, and loans.

Cost of Attendance

A student’s cost of attendance (COA) is the total of all costs to attend college in a given year. This includes tuition, room and board, book and supplies, loan fees, costs associated with studying abroad or managing a disability, and more.

The COA is different from an invoice a college may send a student, which is more comprehensive. The COA figure is used to determine how much financial aid a student may be eligible to receive. Anyone who receives a form of financial assistance is not responsible for paying the full COA.

CSS Profile

The CSS Profile (College Scholarship Service Profile) is an online financial aid application used by many colleges, universities, and scholarship programs to determine a student’s eligibility for nonfederal financial aid. Unlike the FAFSA, which is used for federal aid, the CSS Profile provides a more detailed analysis of a family’s financial situation, including income, assets, and expenses. Administered by the College Board, the application helps institutions award need-based grants, scholarships, and institutional aid.

Demonstrated Need

Demonstrated need is the difference between the cost of attendance (COA) at a college or university and a student’s Student Aid Index (SAI), as determined by financial aid applications like the FAFSA or CSS Profile.

Schools use this figure to determine a student’s eligibility for need-based financial aid, including grants, scholarships, and subsidized loans. The higher the demonstrated need, the more financial assistance a student may qualify for, though the amount awarded varies by institution and available funding.

Enrollment Status

Enrollment status refers to a student’s classification based on the number of credit hours they are taking in a given academic term, which can affect financial aid eligibility, loan repayment, and other benefits.

Common statuses include full-time, half-time, and part-time, with full-time students typically taking at least 12 credit hours per semester.

FAFSA (Free Application for Federal Student Aid)

FAFSA is the official government form that students must fill out to be eligible for federal student loans and grants. Filling the FAFSA out does not guarantee that a student will receive aid, but it must be completed annually in order to be considered for the upcoming academic year. The information provided will be used to calculate a student’s Student Aid Index (below).

Recommended: Who Qualifies for FAFSA? Find Out if You Do

FAFSA Submission Summary

FAFSA submission summary (formerly known as the Student Aid Report or SAR) is a document provided to students after they submit the Free Application for Federal Student Aid (FAFSA). It summarizes the information reported on the FAFSA, includes the Student Aid Index (SAI), and indicates potential eligibility for federal financial aid.

Financial Aid

Financial aid refers to funding provided to students to help cover the cost of higher education, including tuition, fees, books, and living expenses. It can come from various sources, such as the federal government, state agencies, colleges, and private organizations.

Recommended: FAFSA Grants and Other Types of Financial Aid

Financial Aid Office

The financial aid office is a department within a college or university that assists students in understanding, applying for, and managing financial aid. It provides guidance on available aid options, including grants, scholarships, loans, and work-study programs. The office helps students complete required forms like the FAFSA and CSS Profile, determines eligibility for aid, and processes disbursements.

Financial Aid Officer

A financial aid officer is a professional at a college or university who helps students and families navigate the financial aid process. They assist with completing applications like the FAFSA and CSS Profile, determine eligibility for grants, scholarships, and loans, and provide guidance on payment options.

Financial aid officers also explain award packages, help students understand borrowing responsibilities, and offer advice on managing education costs.

529 Savings Plan

A 529 savings plan is a tax-advantaged investment account designed to help families save for future education expenses. Contributions grow tax-free, and withdrawals for qualified education costs — such as tuition, fees, books, and room and board — are also tax-free. These plans are sponsored by states, educational institutions, or agencies, but funds can typically be used at eligible schools nationwide.

Grant

Grants are used to help fund a qualifying student’s college education, and unlike loans, they typically don’t need to be paid back. They are often based on financial need and are available from private and public organizations. Some grants have criteria that a student must meet, such as maintaining a certain grade point average or declaring a certain major.

Loan

A student loan is a type of financial aid designed to help students cover the costs of higher education, including tuition, fees, books, and living expenses. These loans can come from federal or private lenders, with federal loans typically offering lower interest rates and more flexible repayment options.

Recommended: Private Student Loans

Merit Aid

Merit-based assistance is based upon a student’s abilities and accomplishments. This can include their grade point average, athletic achievements, or another skill. Financial need is not typically taken into account. Students generally receive merit-based aid directly from the college.

Need-Based Financial Aid

Need-based assistance is provided to students based on their financial needs, and is commonly offered by federal and state governments, colleges, and other organizations. There are three types of federally granted need-based financial aid: Pell Grants, work-study programs, and Subsidized Direct Student Loans.

To qualify for federal need-based aid, a student must fill out the FAFSA. Colleges may require additional information for non-federal aid. Simply applying for need-based aid does not mean a student will receive it, though applying early may potentially improve their chances.

Need-Blind Admission

Need-blind admission is a policy used by some colleges and universities where an applicant’s financial need is not considered during the admissions process. This means that students are admitted based on their academic qualifications and achievements, without regard to their ability to pay for tuition or other expenses.

Schools with a need-blind policy often provide financial aid packages to help cover the cost of attendance for admitted students, regardless of their financial background. This approach aims to ensure that all qualified applicants, regardless of financial resources, have equal access to higher education.

Net Price

The net price of college refers to the amount a student and their family will actually pay for college after accounting for financial aid, scholarships, and grants. Unlike the sticker price or listed tuition fees, the net price subtracts any aid offered by the school, making it a more accurate reflection of the cost a student will need to cover.

Net Price Calculator

A net price calculator is an online tool provided by colleges and universities to help prospective students estimate the amount they may need to pay for college after financial aid is applied. By inputting financial information, such as family income, assets, and other relevant details, students can receive an estimate of their net price, including tuition, fees, and potential financial assistance in the form of grants, scholarships, and work-study.

Outside Scholarship

An outside scholarship is a financial award for education that comes from sources other than the college or university a student plans to attend. These scholarships can be offered by private organizations, foundations, corporations, or government agencies and are typically based on criteria such as academic achievement, community service, or specific interests.

Recommended: SoFi’s Scholarship Search Tool

Priority Date

A priority date refers to the deadline set by colleges or financial aid programs for submitting the FAFSA or other required financial aid forms to receive maximum consideration for aid. Students who apply by the priority date are more likely to qualify for limited funding sources, such as grants, scholarships, or work-study opportunities.

Reserve Officers’ Training Corps (ROTC)

The Reserve Officers’ Training Corps (ROTC) is a college-based program that prepares students for military service as commissioned officers while allowing them to earn a degree. ROTC programs are available for the Army, Navy, and Air Force, and students typically commit to military service after graduation in exchange for financial assistance.

ROTC can significantly reduce or eliminate student loan debt by providing scholarships that cover tuition, fees, and sometimes room and board. Additionally, ROTC graduates who serve in the military may qualify for student loan repayment programs, where a portion of their loans is paid off in exchange for active-duty service.

Recommended: Does ROTC Pay for College?

Residency Requirements

Residency requirements refer to the criteria a student must meet to be considered a resident of a particular state for tuition and financial aid purposes. These requirements vary by state and typically include factors such as the length of time a student has lived in the state, proof of permanent residency (e.g., driver’s license, voter registration), and financial independence from out-of-state parents.

Scholarship

A scholarship is a type of funding awarded to students to help them pay for a college education. They are available through federal and state government sources, colleges, private and public organizations, and more.

Unlike loans, scholarships typically don’t need to be repaid. They can be based on need or merit, or a combination of the two. There is a wide range of scholarship possibilities, so it can be worthwhile for the student to research their options and apply for ones that seem to be a good match.

Recommended: Finding Scholarships for Current College Students

Student Aid Index (SAI)

The Student Aid Index (SAI), formerly Expected Family Contribution, is a number colleges use to determine a student’s eligibility for financial aid. It’s calculated using a formula that considers a family’s income, savings, investments, benefits, family size, and more.

Recommended: How the Middle Class Affords College

Transcript

A transcript is an official record of a student’s academic performance and coursework completed at a school, college, or university. It typically includes details such as courses taken, grades received, credit hours earned, and cumulative GPA.

There are two types of transcripts: Official and unofficial. An official transcript is a certified record of a student’s academic history, issued by the school with an official seal or signature, often sent directly to institutions or employers. An unofficial transcript contains the same information but lacks official authentication and is typically used for personal reference.

Undergraduate

An undergraduate is a student who is pursuing a postsecondary education program that leads to an associate or bachelor’s degree. Undergraduates typically complete general education courses along with coursework specific to their chosen major. Unlike graduate students, they have not yet earned a bachelor’s degree and are in the early stages of higher education.

Work-Study

The federal government’s work-study program provides college students who have demonstrable financial need with part-time jobs to help them earn money for their college education. The program attempts to match a student with work in their area of study or in jobs that benefit the community. Students who are interested in this program should check with their colleges of choice to see if they participate.

Private Student Loans at SoFi

When it comes to how to pay for college, it helps to understand all the available options and how they may be combined. Students and their parents may have money to contribute to help cover the expenses. Scholarships and grants can reduce the bill and typically don’t need to be paid back, while work-study opportunities allow students to earn money to cover some expenses while in college. And lastly, students can rely on both federal and private student loans.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

FAQ

What is a cosigner?

A cosigner helps assure lenders that someone will pay back the loan. Their income and financial history are factored into the loan decision, and their positive credit standing can benefit the student’s loan application.

What’s the difference between a student loan lender and a student loan servicer?

Lenders lend borrowers money to help cover school-related costs. Servicers send borrowers their monthly bill, process payments, field customer service requests, and handle other administrative tasks.

How do I calculate my college costs?

There are several online tools to help students estimate the potential cost of attending college. Net price calculators, for instance, are available on a school’s website and give cost estimates based on basic personal and financial information provided by the student.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 4/22/2025 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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.

SOISL-Q125-016

What is the S&P 500 index? An exploration into the popular market index, along with a look at ways to invest in the S&P 500.