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Nowadays there are plenty of options for moving money around, and two of the most common, ACH and checks, have some key differences. Both of these popular payment methods are convenient and secure, so it can be hard to know which one to choose. But in your financial life, there will probably be times when one is a lot better suited to your needs than the other. Don’t worry, we’re going to walk through everything that’s important to know about ACH payments and checks to help you use the right method.

Keep reading for a breakdown of ACH vs. check, the pros and cons of each, and how they stack up. Then you’ll totally understand the differences between the two.

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What Is ACH and How Does It Work?

An ACH transfer (named after the Automated Clearing House network) is an electronic banking transaction that is processed through the ACH network. The network is a major financial hub, made up of around 10,000 institutions. Through the ACH network it is possible to process the following transactions:

•   Direct debits

•   Direct deposits

•   Direct payments

•   Electronic checks (eChecks)

•   Electronic funds transfers (EFTs)

Businesses and consumers have the option of using ACH transfers to make direct payments (known as ACH debit transactions) or direct deposits (ACH credit transactions). Some financial institutions even make it possible to schedule and pay bills electronically via ACH transfers. You are probably familiar with ACH transactions when you set up autopay on an account, whether its a utility bill or your gym membership.

You may wonder how long ACH transfers take. Because they are electronic, ACH transfers can clear banks in a matter of a few business days as long as there are enough funds in the account. However, there are times where ACH transactions will take longer. This is especially common if a transaction is suspected to be fraud.

However, for something like a direct deposit of a paycheck, ACH can be quite quick. When the payment hits your checking account, it’s immediately available. You don’t have to run around with a paper check that needs to be deposited. That can make a big difference between getting paid by ACH vs. a check, for sure.

Pros and Cons of ACH

Like any financial tool, ACH transfers have some advantages and disadvantages worth considering. Here’s a closer look at some important pros and cons.

What is a Check?

A check is a payment method that involves making a payment using a paper check that has the payment amount and the payee’s bank account information on it. Once someone writes a check, the recipient can cash it and receive the funds.

Pros and Cons of Using a Paper Check

Checks are one of the most basic and time-honored financial tools at your disposal. They allow you to move money around without paying a fee, and they are a secure way to do this. What’s more, checks create a paper trail with proof that funds have been received.

But they can wind up costing you, they can take longer than you might expect, and sadly, there are scams that prey upon those who use checks. Let’s see what some of the pros and cons of using a check to make payments or to receive payments are in chart form.

ACH vs Check: The Differences

Now that we’ve examined both separately, let’s look at what the difference is between ACH and checks side by side. It’s important to note that both have their own unique set of advantages and disadvantages, but overall stack up against each other fairly evenly. Much of the choice about which to use will depend on your particular circumstances and preferences. Here’s the difference between ACH and checks.

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Which Should You Consider Using?

There’s no right or wrong answer when it comes to choosing a check over an ACH transfer. Both have unique advantages and disadvantages. Consider these scenarios:

•   Because it’s possible to set up recurring ACH transfers, that can be a much more convenient option if someone wants to schedule ongoing payments such as rent or bills.

•   Checks, which are very secure and convenient, may be a better fit for one-off payments such as paying the babysitter or a hairdresser.

As you see, the decision depends on what best suits your needs for a particular transaction.

The Takeaway

It’s worth understanding the difference between check and ACH payment options. Both ACH transfers and checks offer benefits. They are very secure, can transfer money within a few days, and provide easy ways to make payments. Neither is better than the other; they’re just different. Which one is the “best” will often depend on the unique preferences of both parties involved in the transaction. You may well find yourself toggling between the two during your everyday financial life.

While you’re thinking about which kinds of payments work best for you, consider this great way to bank better with SoFi. Our linked checking and savings accounts, when opened with direct deposit, offer an easy way to help your money grow. You’ll earn a super-competitive APY, pay no account fees, and get access to your ACH paycheck up to two days early.

FAQ

Is an ACH payment a check?

No, ACH payments are an electronic transfer processed through the Automated Clearing House network, which is a network made up of around 10,000 financial institutions. A check is a different kind of payment, using a paper document and being processed in a different way.

Is ACH better than checks?

Not necessarily. Whether or not an ACH is a better payment method than a check depends on the unique preferences of the two parties involved in the payment. That being said, generally ACH payments are free whereas it costs money to buy checks for use.

Is ACH cheaper than checks?

When it comes to check vs. ACH costs, ACH payments can be cheaper than checks in some cases, but not always. ACH payments are free, whereas consumers generally need to buy checks to use for payments. However, you may run into fees when doing an ACH payment.

Is ACH safer than a check?

Both checks and ACH transfers are very secure, but ACH payments are known to be more secure, thanks to the extra layers of protection in place due to encryption that occur during the transfer. Both checks and ACH transfers do require that the identity of the recipient be verified before the transaction can complete. Fraud and mistakes can occur for both payment types.

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

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

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

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

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

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

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

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.

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Income verification documents, which are typically requested when you’re applying to rent a home or apartment, are documents that prove you have a job and are earning an income.

A landlord requests these documents to ensure that you’re earning enough to cover your rent payments each month. The income verification paperwork requested may vary from landlord to landlord, and the documents may also differ, depending on your specific career situation. The landlord is simply doing their due diligence to make sure you can afford the rental.

How to Show Proof of Income to Rent an Apartment

There are a number of ways that prospective renters can show proof of income to a prospective landlord or property management company. The types of documents you need to produce will likely depend on the specific request from the landlord.

Generally, there are a few standard income verification documents that landlords and property managers are looking for:

•  Pay stubs

•  Tax returns or W2 forms

•  Bank statements

•  A letter from your employer

Typically, a landlord will request two forms of income verification. Often, your pay stubs and tax forms will suffice as proof of income. But in some cases, you may need to submit several months’ worth of bank statements. You might even need to ask your employer to write you a letter to assure the landlord that you have a job and do have income.

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How to Show Proof of Income if You’re Self-Employed

If you’re self-employed, the process can be more complicated. You may need to submit 1099 tax forms, or your personal tax returns showing regular and steady income going back a couple of years. Depending on the nature of your self-employment, you may have business tax returns, such as a Schedule C if you own and run a small business, that you can use to verify your income.

You can also use bank statements from your business bank account to show a landlord that you have income. The documents required will likely be similar to those you need when applying for self-employed personal loans. Ask the landlord what will work best for them so you will know exactly what documents you should present.

How to Show Proof of Income for Side Hustles

You may have a side hustle—perhaps you make and sell crafts online, for instance—and that’s similar to owning a small business. And you should be reporting the income you make from your side hustle to the IRS on your tax return. By presenting your tax return to a landlord, you can prove that you’re making side hustle income.

If you’re working for a ridesharing app or food delivery service, the company should be sending you a tax statement with your annual earnings so that you can report them on your tax return. You can always show a copy of that tax statement to a prospective landlord.

Why Proof of Income is Important

Proving your income is important when you rent an apartment—or apply for credit, for that matter—because it shows that you have money coming in every month, and are able to fulfill your financial obligations. In other words, it shows the property owner that you can make your rent payments.

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Understanding Rent-to-Income Ratio

Along with proving your income, you need to make sure that your rent is not eating up too much of your paycheck. That’s where the “rent-to-income ratio” comes into play. It calculates the percentage of your total income that you’re spending on rent.

The general rule of thumb is that you shouldn’t spend more than 30% of your gross monthly income on housing costs. Depending on where you live, those costs may be a higher or lower percentage of your income, but try to aim for around 30%.

To figure out your rent-to-income ratio, divide your total annual earnings by 12, which gives you your monthly earnings, and multiply that number by 0.3 (or 30%). The result is how much you can afford to spend on rent per month.

Annual earnings ÷ 12 x 0.3 = How much you can afford to pay for rent

For example, let’s say you earn $50,000 a year. Divide that number by 12 and multiply it by 0.3 and you get $1,250. That’s what you should aim to spend on rent each month. Depending on where you live, you may need to spend more, but that figure gives you a ballpark of where you should be in order to have enough money to pay for your other expenses and hopefully, contribute to your savings as well.

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How to Best Prepare to Pay Rent

When you are approved by a landlord to rent an apartment, you’ll need to plan and prepare to pay your rent on time and in full every month.

That means having your finances in order. First, you should have a checking account set up. Typically, you’ll pay your landlord by check or through an online portal and either way, you’ll need a bank account in order to do this. You may be surprised to learn that more than 6% of U.S. households (or more than 14 million people) don’t have a bank account. Fortunately, it’s easy to open an account if you don’t have one.

💡 For help, here’s what you’ll need to open a bank account.

Next, make sure that you’re properly budgeting for your rental expenses. You want to make sure that you have enough money in your account to cover the rent when your landlord cashes your check. This budget planner app can help.

There are other expenses that can go along with renting an apartment or home that you may need to pay. Here are a few you should be aware of:

•  Utility bills

•  Renters insurance

•  Parking, maintenance, and fees for amenities such as a gym or pool

Finally, know the terms of your lease. It’s common for rent to go up once a lease expires, which you may discover when you go to re-sign or renegotiate the rent. Unfortunately, renting is not like a fixed-rate mortgage when you have a monthly rate locked in. So don’t be surprised if the costs of staying in your apartment go up after your lease expires.

The Takeaway

Income verification documents offer proof to a landlord or property management company that you have enough money coming in every month to pay the cost of an apartment or home rental. Typically, pay stubs, tax returns, and bank statements are the only forms of documentation you need. However, if you are a small business owner, you may be required to produce additional documents. The good news: Once you are approved to rent, you can start the process of moving in.

Before you rent a home or apartment, it’s a good idea to make sure your financial house is in order, and SoFi can help. You can track your money all in one place, keep tabs on your spending, and save for goals like rent.

FAQ:

Can you rent an apartment with no income?

It is possible to rent an apartment with no income, though it likely will be quite difficult. In this instance, having a high credit score can help, because it shows you have a track record of paying your expenses. A healthy savings account can also be useful to prove you have money in the bank.

Can proof of income for an apartment be faked?

It is possible to fake proof of income for an apartment by using online tools to create fake pay stubs and other documents. This constitutes fraud and is illegal, but it does happen.

Is proof of income different for a student?

Yes, it can be, yes. If a student has no income because they are studying full-time, they may need to get a co-signer like a parent or guarantor in order to secure a lease.

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SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

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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A liquidity pool is a collection of cryptocurrency funds grouped into a smart contract. This smart contract provides users of decentralized exchanges (DEXs) with access to liquidity for their trades. Rather than traditional order books containing buy and sell orders, most DEXs use automated market makers (AMMs) to facilitate trades automatically via liquidity pools.

Continue reading this crypto guide to learn about the innovation of liquidity pools and their various use cases.

How Crypto Liquidity Pools Work

Liquidity pools offer incentives to investors in exchange for locking up tokens in the pool. Most often, incentives come in the form of trading fees from the exchange that utilizes the pool. When someone provides liquidity to a pool, they might gain a liquidity provider (LP) token for doing so. The tokens themselves can be valuable, but also have other functions inside the decentralized finance (DeFi) ecosystem.

Those who provide liquidity typically receive a number of LP tokens proportionate to the amount of funds they have given to the pool. Each time a trade is facilitated using that pool, a portion of the trading fee is divided up and given to those who hold LP tokens.

When someone buys a token on a decentralized exchange, they aren’t buying from a seller in the same way that traditional markets work. Instead, the trading activity is handled by an algorithm that controls the pool. AMM algorithms also maintain market values for the tokens they hold, keeping the price of tokens in relation to one another based on the trades taking place in the pool.

The finer points of just how liquidity pools work is a highly technical topic that branches out into numerous subtopics , which are worth taking the time to understand.

The Importance of Crypto Liquidity Pools

In the beginning, DEXs often had liquidity problems. They tried to mimic traditional exchanges with order books, and this didn’t work very well. At some point, the invention of a liquidity pool was introduced, giving users an incentive to provide liquidity and removing the need to match buyers with sellers using an order book.

This one change helped enable DeFi’s explosive growth of over the last several years, as it gave decentralized exchanges a way to provide liquidity using crowdfunded pools and algorithms.

Purpose of Liquidity Pools in DeFi

The main purpose of a liquidity pool in DeFi is to facilitate transactions without a centralized third party. Through the use of automated market makers (AMMs) and liquidity pools, trades can be executed automatically thanks to the pool. There’s no need for order books containing countless buy and sell orders.

Liquidity pools can also be used for a variety of other purposes, which include:

•   Tranching: dividing up financial products according to risk/reward profiles;

•   Minting synthetic assets, and

•   Providing insurance against smart contract risks.

Another use of liquidity pools involves what’s known as yield farming, which we’ll explain in more detail shortly.

Liquidity Pool Comparisons

What is a liquidity pool in comparison to other, similar DeFi alternatives?

Yield farming is a practice involving the use of multiple liquidity providers in a way that can maximize yield. Staking crypto works much the same way as participating in a pool, although the process may be different.

Liquidity Pools vs Yield Farming

Some DeFi platforms offer additional incentives for users to lock up tokens in the pool. This can be done by providing more tokens for special “incentivized” pools. Being a participant in these pools and getting as many LP tokens as possible is known as liquidity mining.

With a variety of different platforms and liquidity pools available, it can be difficult to determine where the best place to put one’s crypto might be. Yield farming involves locking up tokens in different DeFi apps in such a way as to maximize potential rewards.

Some platforms, like Yearn.finance, can automatically move user funds to different DeFi protocols in accordance with a user’s preferred risk tolerance and desired reward.

Liquidity Pools vs Staking

Staking and using a liquidity pool function in much the same way. In both cases, users lock up tokens and earn rewards. But what’s going on “under the hood” is a much different story.

While liquidity pools are a function of decentralized finance, staking simply involves dedicating tokens to a particular proof-of-stake (PoS) network. Holders of PoS tokens cam elect to lock up some of their funds to help validate transactions on the network. In exchange, they get a chance to earn the next block reward of newly minted coins.

Potential Benefits and Risks of Liquidity Pools

It’s important to look at the risks and benefits when trying to answer the question “what is a liquidity pool.” In general, the risks are numerous, and the big benefit comes in the form of substantially higher yields than those in most traditional markets.

Potential Benefits

The main benefit of crypto liquidity pools is the potential to earn a yield on crypto that would otherwise be idle. With interest rates at historic lows, some investors have begun looking beyond traditional products like certificates of deposit (CDs), Treasury bonds for yield. There are stories of people achieving astronomical yields on their crypto with various DeFi products, although there are just as many stories of people who’ve invested in crypto products and lost everything.

Potential Risks

DeFi might be among the riskiest ventures in crypto. The smart contracts that underlay these platforms sometimes have exploitable bugs in them. Because of the large profit opportunity, these protocols have become a prime target for hackers.

In addition to hacks, some DeFi projects have proven to be outright scams from the start. A “rug pull” is a common type of scam in this area. Rug pulls involve developers creating a project, attracting investor funds, and then shutting down operations while making off with everything people had deposited. Consumers often have no legal recourse in these cases, and tracking down the perpetrators can be difficult, if not impossible.

Investing in DeFi products that use crypto liquidity pools involves the potential for total loss of principal.

The Takeaway

The answer to the question “what is a liquidity pool” gets complicated in terms of the technical aspects. In a nutshell, liquidity pools are crowdfunded pools of crypto used to facilitate trades and perform other functions in DeFi. This method of financing operations has made possible a number of innovative decentralized financial services.

FAQ

What does a liquidity pool do?

A liquidity pool provides liquidity for decentralized exchanges. Most often, liquidity pools are used to facilitate trades in a decentralized manner, although liquidity pools can also be used for other purposes like insurance, tranching, or minting synthetic assets.

How do liquidity pools make money?

Those who provide liquidity to liquidity pools receive tokens that divvy out rewards that come from trading fees. The rewards are proportional to the amount of value locked into the protocol.

How do you participate in liquidity pools?

Participating in crypto liquidity pools requires participating in decentralized finance. This typically involves creating an account on a decentralized exchange, exchanging a token you have for an LP token, and locking up the token in the platform. Most platforms have simple user interfaces that guide users through the process.

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

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

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.
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INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

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 email customer service at [email protected]. Please read the prospectus carefully prior to investing.
Shares of ETFs must be bought and sold at market price, which can vary significantly from the Fund’s net asset value (NAV). Investment returns are subject to market volatility and shares may be worth more or less their original value when redeemed. The diversification of an ETF will not protect against loss. An ETF may not achieve its stated investment objective. Rebalancing and other activities within the fund may be subject to tax consequences.


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