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When you piggyback on someone else’s credit card, you become an authorized user on their account. Usually, this is in service of establishing credit for the first time or boosting your credit score.

While piggybacking credit can serve as an important tool as you establish firm financial footing, there are also situations in which it can be risky. Because of this, it’s important to understand how piggyback credit works before using this strategy.

What Is Credit Card Piggybacking?

When piggybacking credit, you become an authorized user, or a secondary account holder. As a secondary cardholder, you may receive your own card and account number. You’ll be allowed to make purchases on the account, but you aren’t necessarily responsible for payment. This differs from joint accounts or for loans that are cosigned, where all parties are responsible for payment.

The primary account holder will be able to view all of the purchases and will ultimately be responsible for making all payments. You’ll likely enter into some sort of agreement with the primary account holder to pay them back for any purchases that you make. You may also agree not to use the account at all.

Piggybacking can refer to other types of debt as well, such as a piggyback mortgage loan. Here, the term is used slightly differently and usually refers to a second mortgage, a home equity loan, or a home equity line of credit (HELOC).

How Does Credit Card Piggybacking Work?

Before we get into how piggybacking works, it’s worth considering why your credit score is important. Your credit score is a three-digit number that provides a visual indicator of your creditworthiness. Credit card companies, banks, and other lenders will look at your score to determine how risky it is to extend credit to you.

Borrowers with the highest scores are seen as the lowest risk. In other words, they are the most likely to pay their bills on time, and the least likely to default on their debt. Lenders are often willing to extend the most favorable credit card terms and conditions, including interest rates, to these borrowers.

Individuals with lower scores are seen as presenting higher potential risk. Their low scores indicate that they’ve likely had trouble paying their bills on time in the past. As a result, lenders may be less willing to extend credit, and if they do, it may come with higher interest rates to compensate the lender for the increased risk they’re taking on.

If you don’t have a credit history or are looking to give yours a boost, credit card piggybacking can help. That’s because when you become an authorized user on someone else’s card, their credit history for that account has an impact on yours.

When you become an authorized user, that account pops up in your credit report. If the primary account holder has a long history of paying their bills on time, or they keep their balance low, this might have a positive effect on your credit. If the account has been open for a long time, say 15 years, it will read on your credit report as a 15-year account. As length of credit history has an effect on your credit score, this can prove helpful in boosting your score.

Beware, however, that the impact on your credit score doesn’t always move in the positive direction. If the primary account holder misses payments, for example, the account could have a negative effect on your credit.

Recommended: When Are Credit Card Payments Due

Does Piggybacking Credit Actually Work?

Piggybacking on a credit card does actually work, but not all of the time. For one, not all credit card companies will report a secondary account holder to the credit reporting bureaus, which include Equifax, Experian, and TransUnion.

What’s more, when you become an authorized user, you’re not necessarily learning to use credit cards responsibly — especially if you’re not using the account or making purchases and having to pay them off on time. For more on building healthy credit card habits, check out these credit card rules.

Is Piggybacking Illegal?

Piggybacking is not illegal. In fact, under the Equal Credit Opportunity Act, Congress determined that authorized users cannot be denied on existing credit accounts. This rule applies even if the person being authorized is a stranger.

That said, there are situations in which becoming an authorized user is a deceptive practice and may entice you into some fraudulent situations. (More on this below.)

What Is Person-to-Person Piggybacking?

Person-to-person piggybacking involves becoming an authorized user on the account of a significant other, family member, or friend. For example, young adults often become an authorized user on their parent’s credit card as they seek to build credit for themselves.

Eventually, that young adult will have built enough credit to get a credit card of their own and will be financially stable enough to be able to pay it off on time. At this point, they can decide to drop from their parents’ account.

What Is For-Profit Piggybacking?

Here’s where things get tricky. If you don’t have a friend or family member who’s willing to make you an authorized user on their account, you can seek out the help of a tradeline service. A tradeline is another word for a revolving credit account or installment loan on your credit report.

The tradeline service can match you with a stranger who has good credit, and for a fee, they’ll add you to their account. The cardholder receives a portion of that money, and you won’t receive a physical card or access to the account.

Tradeline services first appeared in 2007, and since then they haven’t been without controversy. For one thing, the practice of purchasing a tradeline can be seen as a method of deceiving lenders into thinking you have better credit than you do. If perceived as fraud, this could have some legal ramifications. To discourage this type of piggybacking, FICO even tweaked its scoring formulas to make it less effective.

Engaging a tradeline service can also be pricey. Depending on what type of credit you’re looking for, it may cost you as much as $4,000.

It’s also important to understand that you’re only authorized on the cardholder’s account for a short period of time. While your credit may receive a boost in the short-term, when you’re dropped from the account, your credit score may fall as well.

Recommended: What is a Charge Card

Risks of Credit Card Piggybacking

In addition to the considerations above, there are other risks to be aware of when piggybacking, especially when doing so through a third party. Here are some further risks of piggybacking credit to consider if you’re thinking about doing it:

•   You have to give out your private information. This includes your name, address, and Social Security number. The service and cardholder may not have your best interests at heart, and providing them with your data may put you at risk for fraud and identity theft.

•   It’s not looked on favorably by lenders. Lenders look to your credit score to learn how well you’re able to manage your debts. If they learn that you’ve used a tradeline service, they may lose trust in you and be less likely to extend credit to you.

•   There’s the potential for fraud. Be on the lookout for shady tradeline companies with fraudulent practices. Beware any company that tells you that you can hide bad credit or a bankruptcy using a credit privacy number. The number they’re trying to provide might actually be someone else’s Social Security number, which would put you at the heart of an identity theft scam.

•   It could hurt your credit. You might also be duped into buying an account that’s gone into default, which could hurt your credit.

•   There’s the potential for address merging, which is fraudulent. Sketchy companies may also try to use a process called address merging, by claiming that the authorized user lives at the same address as the account holder. This is fraudulent, and indicates that you are not working with a reliable company.

•   You may not give yourself the chance to build healthy financial habits. The best way to keep your credit score up is to not take on more debt than you can afford and to make payments on time. If you don’t give yourself experience with doing that, you may not learn healthy financial behaviors.

•   It could get you in over your head down the road. Boosting your credit to a point that doesn’t reflect your actual credit activities can land you in a bit of hot water if you qualify for a loan only to realize later you can’t actually afford it. You don’t want to end up in a place where you’re wondering if you can pay a credit card with a credit card.

Is Credit Card Piggybacking Right for You?

Credit card piggybacking may be right for you if you’re building credit for the first time and need a way to get your foot in the door.

If you do decide to try piggybacking credit, it may be best to piggyback on the credit of someone close to you. Only turn to tradeline services if there are no other options available, and make sure to carefully vet any options and consider the costs involved.

Alternatives to Credit Card Piggybacking

Piggybacking isn’t the only way to build your credit.

There are many different types of credit cards. Secured cards, for instance, require you to make a security deposit to receive a line of credit, which makes them easier for people with no credit history to qualify for. The credit limit on the card is often equal to the security deposit amount.

You can also look for tools that allow you to get credit for paying off bills and utilities on time. For example, Experian, one of the major credit reporting bureaus, offers Experian Boost as a free service.

Recommended: Does Applying For a Credit Card Hurt Your Credit Score

Tips for Managing Your Credit History

As you build your credit history, there are important steps that you can take to help ensure your credit score is as high as possible:

•   First and foremost, always pay all or your bills on time.

•   Next, you’ll want to have a diverse mix of credit, such as credit cards, student loans, auto loans, or a mortgage.

•   Keep your credit utilization below 30%. For revolving credit, credit utilization measures how much of your credit limit you are currently using. You can calculate it by dividing your credit card balance by your loan limit.

•   Work to keep hard inquiries at a minimum. When you apply for credit, you trigger what is known as a “hard inquiry.” These can temporarily lower your credit score, especially if there are many in a short period of time.

You’ll also want to be diligent about monitoring your credit report. You can request a free credit report from each of the three credit reporting bureaus once a year. That means, you could be checking your credit report every four months. Look for mistakes on the report and alert the reporting bureaus immediately if you spot anything that’s amiss. Learning to ready your credit report can also clue you into areas of your credit that need your attention and may be dragging down your score.

Recommended: Tips for Using a Credit Card Responsibly

The Takeaway

Piggybacking credit — becoming an authorized user on another person’s credit account — can be an important tool for building credit. Yet, you only get a benefit with credit card piggybacking if the person’s account is in good standing. If they miss a payment, it could have a negative impact. And if you use a third-party tradeline service, you could be putting your personal information at risk.

Weigh these factors carefully before choosing to build credit using this strategy, and be sure to consider other options. When you’re ready to strike out on your own, consider a credit card from SoFi, which offers up to 2% unlimited cash back rewards and no annual fee. If you’re interested, you can learn how to apply for a credit card with SoFi today.¹

The SoFi Credit Card offers unlimited 2% cash back on all eligible purchases. There are no spending categories or reward caps to worry about.¹

Take advantage of this offer by applying for a SoFi credit card today.

FAQ

Is piggybacking credit illegal?

Piggybacking credit is not illegal. In fact, Congress has said, under the Equal Credit Opportunity Act, that no authorized users can be denied on existing credit accounts, even if that credit account belongs to a stranger.

How much can piggybacking raise your credit score?

According to one recent study, individuals with poor credit could see a jump of nearly 12% after three months when becoming an authorized user. Those with better credit saw a smaller bump. Individuals with excellent credit only saw a 1% change in their credit score after three months.

Does piggybacking credit still work in 2022?

Piggybacking still works in 2022, though credit reporting bureaus credit scoring companies may frown on it. FICO, for one, has adjusted its scoring to limit the effect of becoming an authorized user.

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¹See Rewards Details at SoFi.com/card/rewards.

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.

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

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

The SoFi Credit Card 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.

¹Members earn 2 rewards points for every dollar spent on purchases. No rewards points will be earned with respect to reversed transactions, returned purchases, or other similar transactions. When you elect to redeem rewards points into your SoFi Checking or Savings account, SoFi Money® account, SoFi Active Invest account, SoFi Credit Card account, or SoFi Personal, Private Student, or Student Loan Refinance, your rewards points will redeem at a rate of 1 cent per every point. For more details please visit the Rewards page. Brokerage and Active investing products offered through SoFi Securities LLC, member FINRA/SIPC. SoFi Securities LLC is an affiliate of SoFi Bank, N.A.

Photo credit: iStock/Morsa Images
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Protecting yourself against credit card hackers — criminals that engage in credit card fraud and identity theft — is a vital part of using your credit card responsibly. Understanding how credit card hacking works and the many ways thieves can gain access to your personal financial information can help you protect both your physical credit card and your digital credit card account information.

Read on to learn how to protect your credit card from hackers, as well as what to do if your credit card is hacked.

What It Means for a Credit Card To Be Hacked

A credit card hack occurs anytime your credit card or credit card account number falls into the wrong hands. That information is then used fraudulently to make purchases and/or to engage in identity theft.

Credit card theft can entail everything from stealing your wallet to hacking into large databases holding hundreds of thousands of credit card numbers.

Recommended: What is a Charge Card

Ways Credit Cards Can Be Hacked

Thieves use a variety of ways to get their hands on your credit card information. The biggest money scams in the U.S. are now done digitally through email, text messages, or fake websites. But there are still plenty of old-fashioned scammers who use snail mail, phone calls, and in-person ruses.

Here are some of the most common forms of both types of fraud:

•   Lost or stolen wallet containing credit cards. An old but still common trick for credit card thieves is to steal the physical card, then use it and the information it contains to make fraudulent purchases. In addition, if other personal information is included in your stolen wallet, such as your address and even your Social Security number, thieves can use your identifying information to set up other fraudulent credit accounts.

•   Phishing. Another common credit card hacking method is for a thief to attempt to get ahold of your credit card information through a phone call, text message, or email in which they impersonate a legitimate institution. For instance, a phishing email that appears as if it’s from your banking institution may entice you to click a link that takes you to a page where you’re then asked to enter your account information.

•   Dumpster diving. Criminals search through trash to find discarded statements, receipts, and other documents that contain your credit card number and identifying information such as your name and address. They then use that information to make fraudulent purchases or engage in identity theft.

•   Data breaches. Professional hackers can break into large retail, bank, financial, healthcare, social media, and other websites and steal reams of personal information that often include credit card and other personal financial information from thousands of users. The usual aim is to resell that data on the dark web. From there, criminal buyers use the data to commit credit card fraud and identity theft. If your data is on file at a breached site, you’re at risk.

•   Credit card skimmers. Thieves also can use gadgets that can extract your credit card information when you swipe it to pay or to withdraw money from an ATM. These most commonly are found at gas stations or on outside ATMs, though they’re becoming less common with the introduction of chip technology.

•   Inside jobs. Unscrupulous wait staff, store clerks, health-care billing workers, and others with access to credit card data may take a photo or otherwise copy your card information and use it to make fraudulent purchases. On a larger scale, sometimes these workers are part of a criminal ring that helps access financial data from thousands of individuals that’s then sold on the dark web.

•   Public Wi-Fi networks. Your credit card also may be vulnerable to a credit card hack if you use a public internet connection, which is why it’s important to follow cybersecurity tips. If someone is monitoring the network and you enter any sensitive information, such as your account information, a thief may be able to swipe it.

Protecting Your Physical Card

Although digital credit card theft is more common than ever, plenty of old-fashioned thieves are still out there and would like to get their hands on your physical card. So, it makes sense to stay diligent. Taking these steps can help:

•   Don’t reveal your physical card. Avoid giving your physical card to anyone, and never post photos on social media with your credit card showing.

•   Black out the security code on the back of your card. Instead, you can file it in your password manager or another safe place. If your card is stolen, it’s harder for thieves to use the account information for online purchases if they don’t have your security code.

•   Don’t sign your card. You can limit fraudulent in-person purchases if your stolen card is unsigned. You can write “See ID” in the blank area, then show your ID to store clerks in lieu of a signature. When a thief is asked for ID, they won’t be able to provide it, potentially preventing the transaction from going through.

•   Use a protective sleeve or wallet. These can protect your card from being read by a technical device.

•   Report lost or stolen cards immediately. If your card is compromised, make sure to alert your credit card issuer immediately. They will then close your card and issue a new one immediately. This is also a good idea if you’re notified that you’ve been part of a data breach.

Recommended: Does Applying For a Credit Card Hurt Your Credit Score

Protecting Your Credit Card Account Information

In addition to your physical card, you need to protect your credit card data as well. Big credit card data hacks can mean your personal financial details and credit card account information are vulnerable. But there are steps you can take to protect yourself:

•   Only use reputable shopping sites. Often, fraudulent sites are set up as a ruse to collect credit card information. When you shop online, always buy from trusted merchants.

•   Avoid using your credit card when you’re on public WiFi. It can be easy for criminals to pick up your data when you’re using public internet networks. As such, you’ll want to avoid entering any personal or sensitive information while you’re using these networks, even if you’re on your own personal device.

•   Check your account frequently. Don’t just wait for your statement to arrive in your email every month. Get in the habit of regularly monitoring your credit card activity online, especially if you find your credit card keeps getting hacked. If you find a suspicious charge, report it immediately.

•   Be wary of phishing scams. You may get an authentic-looking email, text or phone call asking for your credit card information. This may be a completely cold call or a data thief looking to fill in information they may not have for you, such as your expiration date or CVV security code. Never give your information to anyone asking for it. Banks, credit card companies, retailers, and other reputable places only take your information if you contact them.

•   Use smart passwords. Use strong passwords that include lowercase and capital letters, numbers, and symbols. Change your passwords frequently and remember that if it’s easy for you to remember, it’s probably easy for a thief to figure out. Password manager software can help you generate and keep track of strong passwords.

•   Sign up for two-factor authentication. With two-factor authentication, a one-time code is texted or voiced to your phone when you log into a financial account. This helps to ensure the account holder is the one logging on. Other types of secure authentication, such as face ID, are beginning to be used by some organizations.

Recommended: Tips for Using a Credit Card Responsibly

Steps to Take When Your Credit Card is Compromised

If you think you were a victim of credit card fraud and/or identity theft, it’s important to act fast. The Fair Credit Billing Act (FCBA) limits your financial responsibility for credit card fraud to up to $50, so you won’t be on the hook for more than that in the case of bogus credit card charges that have led you to request a credit card refund. Even better, many major credit card issuers offer zero-dollar liability protection.

But if the thieves go on to use your personal information to commit other types of financial fraud, you may be liable. Acting fast will also help minimize the onerous work involved in untangling identity theft.

Here’s what to do if what to do if your credit card is hacked, or you see suspicious charges on your statement or other signs of fraudulent activity:

Contact Your Credit Card Company

As soon as you spot anything, call your credit card company. Tell them you think your card and card information is vulnerable and request a new card with a new account number. Most credit card issuers will comply right away (unlike if you were falsely disputing a credit card charge). However, you may be without a credit card for a bit while you wait for the new one to arrive.

Sign Up for Fraud Alerts

If you’ve received a letter or other notification that your personal data may have been compromised, you can place a fraud alert at all three credit bureaus — Equifax, Experian, and TransUnion — that may be monitoring your account. This stops unauthorized individuals from accessing your account information for a year, at which point you can request for it to be renewed.

Freeze Your Credit

A stronger step than setting up a fraud alert is to freeze your credit. When you ask for a freeze, the three top credit reporting agencies will make sure no one can ask for your credit report without your approval. The downside: A freeze can make it more cumbersome for you to legitimately apply for new credit.

File a Police Report

If you’re a victim of credit card fraud, you may need to file a police report. You may need that documentation as you move through different steps to report identity theft and other fraud as you try to recoup your losses. Your credit card issuer can help you determine if a police report is necessary. You can also report the fraud to the Federal Trade Commission on its website.

Recommended: When Are Credit Card Payments Due

Credit Card Security and Fraud Protection

There are a number of steps that credit card companies can take to increase credit card security and curb credit card hacks. For instance, some credit cards have two-factor authentication to protect access to your account. At SoFi, for example, we use a device-based security layer in addition to password validation for our credit card. You have the option to receive a security code by text or through Google.

Credit card companies can also offer the option to freeze your card immediately. You often can do so through their website or via their mobile app if you notice suspicious charges or other activity.

And, as mentioned previously, some credit card issuers — including SoFi — offer a zero-liability policy. As long as you report unauthorized or erroneous card transactions no later than 60 days after the first statement on which the problem occurred, SoFi won’t hold you liable for any fraudulent charges.

The Takeaway

Credit card hacks can be costly, onerous, and time-consuming. But you can take steps to avoid hacks by protecting both your physical card and your online credit card information.

Selecting a credit card with identity theft protection, like the SoFi credit card, also can help protect your personal information. And that’s not the only benefit of a SoFi credit card. You also can earn up to 2% cash back when you redeem to save, invest, or pay down an eligible SoFi loan. Find out more about the advantages and apply for a credit card with SoFi today.

The SoFi Credit Card offers unlimited 2% cash back on all eligible purchases. There are no spending categories or reward caps to worry about.¹

Take advantage of this offer by applying for a SoFi credit card today.

FAQ

How can I protect my credit card from being hacked?

You can take a number of steps to fight credit card hacking methods. This includes checking your account regularly for any suspicious charges, being mindful of potential phishing scams, shopping online with caution, and keeping your physical card and your digital card information safe. If anything were to happen, make sure to report any suspicious activity as soon as possible and to use credit freezes and fraud alerts when necessary.

Can a hacker steal my credit card information?

The answer is a definite yes. Credit card hacks include stealing your physical card or credit card information and making fraudulent purchases directly with your account. Or, thieves may use your stolen personal information to set up a new fraudulent account in your name. Credit card hacks also happen when thieves steal reams of credit card and other personal financial information from databases at large retailers, financial institutions, and other places.

Can hackers use a credit card without a CVV?

Yes, although it can be more difficult for hackers to use a credit card without a CVV. The CVV number is often requested in transactions that don’t occur in-person as an additional layer of security to ensure that the person actually has the physical card.

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Photo credit: iStock/Talaj

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.

SoFi cardholders earn 2% unlimited cash back rewards when redeemed to save, invest, a statement credit, or pay down eligible SoFi debt.

The SoFi Credit Card 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.

¹See Rewards Details at SoFi.com/card/rewards.

¹Members earn 2 rewards points for every dollar spent on purchases. No rewards points will be earned with respect to reversed transactions, returned purchases, or other similar transactions. When you elect to redeem rewards points into your SoFi Checking or Savings account, SoFi Money® account, SoFi Active Invest account, SoFi Credit Card account, or SoFi Personal, Private Student, or Student Loan Refinance, your rewards points will redeem at a rate of 1 cent per every point. For more details please visit the Rewards page. Brokerage and Active investing products offered through SoFi Securities LLC, member FINRA/SIPC. SoFi Securities LLC is an affiliate of SoFi Bank, N.A.

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Checks seem a pretty mundane bit of banking, but if you’ve ever received one that says, “Do not convert to ACH” on it, you may wonder what’s going on. Is the check valid? Is it some kind of scam?

Let us help you out. Here, we’ll take a closer look at this situation and what to do with that check. We’ll consider:

•   What ACH, check conversion, and check conversion by ACH mean

•   What it means when a check says “Do not convert to ACH”

•   What happens when you cash a check that has those five little words on it

Now, it’s time to dive in.

ACH System 101

ACH stands for Automated Clearing House, which is an electronic system that transfers funds throughout the United States. This network allows individuals and businesses to move money from one financial institution to another. ACH transfers fuel so many of the transactions that make our financial world go around. Every time you set up automatic bill pay or receive your paycheck by direct deposit or write an eCheck, that’s ACH at work. Apps such as PayPal and Venmo also use the ACH network to send and receive money.

All money that flows through the ACH network is transferred electronically and uses bank-level encryption. In other words, transfers are safe and secure. They protect sensitive information such as your bank account number and a financial institution’s name from thieves.

How Does ACH Work?

ACH transfers are initiated by either making a withdrawal or deposit into an account. You can send money to another account on a one-time basis — such as through an ACH debit to a utilities company or transferring money to a friend for your share of a restaurant meal — or opt into recurring payments. For example, some companies allow you to make automatic payments, such as for subscription services. In either case, you give permission for the receiver to initiate a withdrawal from your account.

Now, let’s consider the flipside: You could receive money; that is, get an ACH credit. This happens when people receive a direct deposit of their paycheck or Social Security.

Once you or someone else initiates a transfer, the request will be processed first by your financial institution. You’re probably curious about how long an ACH transfer takes. Once the ACH transfer request is received, the financial institution will complete the request no later than the next business day. You may be able to expedite the request, as well as schedule a transfer for a future date.

Typically, ACH transfers are faster than other types of transactions, though a potential downside is that it’s only available for transfers within the U.S. (That’s one of the distinctions between an ACH vs. wire transfer, incidentally; the latter has global reach.)

What Is Check Conversion?

Check conversion refers to the process of transforming a check payment into an electronic payment. This usually happens at one of these three points:

•   Point of Purchase (POP), meaning when a purchase is made, say, at a store

•   Accounts Receivable Conversion (ARC), when a business receives a check by mail and then processes it electronically

•   Back Office Conversion (BOC), or when a check is processed electronically after acceptance at, say, the office of a retail location

What Does Conversion to ACH Mean?

Now that you know the different junctures at which conversion may be started, let’s get down to the nitty gritty of just what the “conversion to ACH” process means. Simply put, it describes the fact that a paper check will be converted to a payment that’s processed through the ACH network. In other words, even though a paper check was written and used as payment, it will become an electronic ACH transfer.

Recommended: How to Cash a Check with No Fees

Why Might a Check Be Converted to ACH?

The main reason why a check may be converted is to save time and money when processing payments. Plus, converting a check payment to ACH could be more efficient, as it can help financial institutions detect potential fraud earlier, make fewer mistakes, and even result in fewer returned payments. The service of ACH transfers is typically free to consumers.

Can a Check Be Converted to ACH?

While some may think that checks and ACH are separate entities, in truth, a check can be converted to ACH in many cases. (Unless, that is, the check itself says “do not convert to ACH.”) When converted, processing typically moves swiftly and securely; there’s no check to get lost or be forged, for instance.

Here’s how the conversion usually happens: When the check gets deposited in a checking account, the payment details are captured from the check. Then, the check itself will be stored securely by the financial institution — unless you have the physical check and are making a mobile deposit. If the check is converted in person, then the original check will be voided and given back to the payer.

If the check was converted for ACH, it will typically appear on a bank statement as a direct payment (or withdrawal) in the same section as ATM withdrawals or other forms of electronic payments. It could also appear as a check payment — some banks include a scanned image of the check or include the payment details.

Recommended: How Much are the Average ATM Fees?

What Does It Mean When a Check Says ‘Do Not Convert to ACH’?

When a check says “do not convert to ACH,” it means that the payer does not want to make a payment electronically. Instead, the payment needs to be processed manually from one financial institution to another through the check collection system.

More specifically, it means the financial institution will contact the other financial institution to request the funds, which is then delivered through a local clearinghouse exchange or other form organization like the Federal Reserve Bank.

What Is the Benefit to the Drawee if a Check Says ‘Do Not Convert to ACH’?

Checks that say “Do not convert to ACH” may sometimes be printed when a payer is issuing multiple checks; for example, if a class action suit is being paid out. In this case, perhaps the check issuer does not want the much faster electronic processing of their checks. Perhaps it suits them to have a slower payment process.

What Is the Difference Between ACH and a Check?

The difference between ACH and check payments is the network in which they’re processed. ACH payments are processed electronically through the ACH network, whereas non-converted paper checks are processed through a manual process. In many cases, ACH transfers are processed faster than paper checks, though most checks can be processed within one business day, though you may have to wait for it to clear.

The Takeaway

When it comes to getting paid, the ability to convert a check to or use the ACH network is most likely the most efficient way. That’s because this electronic payment system allows financial institutions to process transactions more quickly and securely compared to paper checks.

Unfortunately, there’s not much you can do if the check you receive says “Do not convert to ACH,” however rare they may be. It’s unlikely that you will receive one in today’s world, but if you do, deposit it and allow the extra time required for it to transform into available cash.

Most of us love the conveniences of banking today, and if you want to make a good thing even better, why not bank with SoFi? Sign up for a new bank account with direct deposit, and you’ll be able to access your paycheck up to two days early. Other benefits: a competitive APY and no account fees at all. That means you keep more of your money, and it grows faster!

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

FAQ

Can an ACH payment be declined?

Yes, an ACH payment may be declined or rejected for a few reasons, the most common one being that the payer doesn’t have enough funds in their account for the transfer. Other reasons include the account was closed by the time the transfer took place, the funds have been frozen, or the payer has stopped the payment request.

What does “ineligible for conversion” mean on a check?

If a check says “ineligible for conversion,” it means the check can’t be converted to an ACH payment. This may be due to the paper the check was printed on. The payee needs to either cash or deposit the actual check at a local branch.

Why would a bank reject a check?

There are several reasons a bank would reject a check, including:

•   You don’t have an account at the bank where you want to cash the check

•   You don’t have proper identification to show to the bank

•   The amount may be too large for the financial institution to process

•   The check is void (for example, the check is old and the payment is no longer valid)

•   The signature on the check doesn’t match what the bank has on file

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Photo credit: iStock/fizkes

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.

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

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

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

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

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

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

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

SOBK0322025

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The answer to the question, “Can you overdraft your savings account?” is: Yes, indeed, you can. Perhaps you forgot to deposit a check into the account and then transferred funds out. Or maybe you moved more money out of the account into your checking than you actually had. These and other glitches can leave you with a negative balance in your checking.

Let’s take a look at what happens if you overdraft your savings account, and what you can do next time to avoid it. We’ll cover:

•  The consequences of overdrawing a savings account

•  Understanding overdraft protection and fees

•  How to avoid overdraft charges

•  Steps to take if you are overdrawn.

Here’s the scoop on overdrafting a savings account.

Consequences of Overdrawing a Savings Account

If you’re curious what exactly it means when you overdraft a savings account, you’re in the right place. Let’s explain: An overdraft happens when there is a withdrawal from your account that results in the balance being below zero — sometimes called a negative balance. There are several ways this can happen. Maybe you withdrew cash from an ATM, an automatic withdrawal was processed, or you wrote a check against your savings account for more than you had in it.

When that negative balance kicks in, a couple of different things could happen. Much depends on your particular financial institution and the terms you agreed to when you opened the account.

Among the possibilities:

•  You’ll be charged an overdraft fee: If you signed an agreement to opt into overdraft coverage, your financial institution will allow you to overdraft on your account for a fee. (That is, they will authorize the transaction and allow for it to be completed, extending you a loan.) The amount of the fee will differ depending on your account and your bank. Some financial institutions may even charge you every day and/or for additional withdrawals while your account is negative. Considering the average overdraft fee is over $30, this cost can really add up.

•  Your transaction is declined: Your financial institution may decline the transaction if you don’t have overdraft protection. In this case, the transaction won’t go through. In addition, you could face a non-sufficient funds, or NSF fee. In many cases this amount is similar to an overdraft fee.

•  Your linked account will be used to cover the cost. This usually happens when you overdraw a checking account, and a linked savings account covers the difference. However, you may be able to link your savings account to another one (typically at the same financial institution) as a backup. If an account goes down to zero or below, then money would be withdrawn from the backup account to complete the transaction. In many cases, this service is free, though that’ll depend on your bank.

Understanding Overdraft Protection and Fees

While we’re on the topic of overdrawn accounts, let’s share a little more detail on overdraft protection and the fees involved. Financial institutions offer overdraft protection programs to help ensure your transactions proceed smoothly in case you reach a negative balance. These programs vary somewhat. Options may include linking a checking and savings account together — funds will be transferred automatically for the negative balance. Or the bank might allow the transaction to go through, and you’ll be charged a fee until you make up for the difference.

Federal regulations require banks to allow account holders to opt into overdraft protection for ATM and debit cards for point-of-sale transactions (or purchases). If you don’t opt in, you won’t be able to overdraft — your bank will deny the transaction. In this case, you won’t be charged any bank fees. However, this may not apply to recurring payments, bank transfers, or checks.

As we mentioned, your financial institution may charge you a fee for each transaction that involves overdraft protection, though banks typically have a maximum amount they’ll charge per day. For example, you transferred $1,200 for your rent payment out of your savings, and you only had $1,000 in your account, you’ll have a negative balance. This results in a $200 overdraft (if you have coverage), plus you’ll pay a $35 overdraft fee. Let’s say you don’t get paid until a week later to make up the difference. In that case, your account will continue to have a negative balance. Let’s say your bank ends up charging you an extra $10 for that week, totaling $45 in fees. It could be higher. Even if your bank denies the transaction, you could still pay the NSF fee of, say, $35.

As you can see, overdrafting on your savings account can get expensive. That’s why it’s a smart idea to rectify the situation as soon as possible and prevent it from happening in the future.

Steps if You Have Overdrawn on Your Account

So let’s say you’ve overdrawn on your savings account. Here’s how to get out of the negative-balance zone:

•  Deposit funds: Once you’ve overdrafted, make a deposit into that account as soon as possible. Doing so can prevent you from being hit with multiple overdraft fees, especially if you know you need to make withdrawals in the next day or so.

•  Ask to have the fee waived: If this is the first time you’ve had a negative balance, you can contact your financial institution to request to have the fee waived. If you’ve been a loyal customer and have remained in good standing with your accounts up until now, the bank may not charge you.

•  Pay the overdraft fee: If your bank rejects your request to have the fee waived, it’s best to pay it as soon as possible. You can typically do that by making a deposit into the overdrawn account. While your bank won’t take drastic measures like closing your account, do know that letting a bank account sit with a negative balance can wind up hurting your credit score if the matter gets sent to a collection agency.

•  Settle payment with the payee: If your payment didn’t go through, then you’ll need to contact the person or company and make arrangements for alternative payment. Depending on the type of payment, you could face a late or returned payment fee by the payee, which you’ll also need to pay.

Tips for Avoiding Overdraft Fees

Most of us wonder how to avoid account maintenance fees and other charges. Overdraft fees are one of those expenses you likely want to escape. Here are some best practices on how to do so.

1. Sign Up for Text or Email Alerts for Low Balance

Many banks allow you to sign up for email or text alerts when your savings account reaches a certain threshold. By doing so, you have time to deposit additional funds so you won’t risk your bank account going to zero or a negative balance.

2. Check Your Bank Account Regularly and Review Statements

Logging into your account online or through your banking app allows you to quickly see your balance and any upcoming transactions. By keeping on top of your account, you’ll be able to see if you’ll need to have more funds on hand, and you’ll have time to make those deposits. Many people find that checking their account balances a few times a week is a helpful habit.

3. Review and Compare Automatic Payment Dates to Withdraw Dates

Looking at when money actually gets withdrawn from your account will help you plan better. For instance, if you know you’ll have a few withdrawals totaling $600 on the 15th of each month, you can plan to make sure you have that much in the account then. (Having a buffer is nice if you can swing it, too.)

4. Revisit Your Budget

Reviewing your budget occasionally will help you see whether you’re overspending in certain areas. If so, working to cut back on expenses can prevent overdrafts. This is especially important during these inflationary times, when basic living expenses can creep up and require budget recalibration.

5. Build an Emergency Fund

You’ve probably heard the advice that it’s wise to have a rainy-day fund with enough cash in it to cover a few or several months’ worth of expenses. Having this kind of buffer will help when unexpected circumstances arise. These situations could range from a big medical bill to your laptop dying to being laid off. Aim to keep your emergency fund in a separate account, far from your everyday accounts, so you’re not tempted to spend it.

6. Consider Overdraft Protection and Coverage

Check into what your financial institution offers in terms of overdraft protection or coverage, and see if it makes sense for you. This may involve opening what is akin to a line of credit, so proceed carefully to know what it will cost you. Make sure you understand what your responsibilities are, including fees and when a withdrawal from a linked account may occur. It may be a wise move that, while not free, does keep your banking flowing smoothly when you hit a snag in your financial flow.

The Takeaway

Overdrafting on your savings account can happen, and it can result in hefty fees. There are several smart tactics that you can adopt to avoid this scenario — and cope if your balance does wind up in negative territory. Planning ahead for these kinds of money-crunch situations is a wise idea as life is full of unexpected expenses.

Here’s another way to handle potential overdrafts: Bank better with SoFi. Our online bank accounts will cover you for up to $50 in overdrafts with no fee charged if you sign up with qualifying direct deposits. What’s more, we don’t charge you any monthly or minimum-balance account fees, and you’ll be able to access your paycheck up to two full days early. Ready for the icing on the cake? We offer a super-competitive APY to help your money grow faster!

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

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Photo credit: iStock/damircudic

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

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

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

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

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

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

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

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

SOBK0322007

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If you’re wondering what is the difference between a deposit and a withdrawal, the truth is that they are exact opposites: A deposit is money put into a bank account for safekeeping until you need it. A withdrawal is money that’s taken out of your account. At the most basic level, one of these transactions is about getting money and the other is all about paying, or spending.

But that’s not the full story about deposits vs. withdrawals. You have many choices when it comes to getting money into your account and taking it out. Read on for more about how deposits and withdrawals work, their similarities, and their differences. Once you know the different ways that funds can flow through your accounts, you’ll be that much savvier a financial customer.

What Is a Deposit?

A deposit, from the ancient Latin word deponere, means to “place in the hands of another.” In terms of banking, a deposit means you put your money in the hands of a brick-and-mortar or online bank to safely hold it for you. Deposits add to your funds, which helps your bank accounts pay your bills or stash your cash until you are ready to spend it. This influx of money can happen in a few different ways, which we’ll review in a moment.

How a Deposit Works

A deposit involves adding cash or check(s) to your bank account. You can do this in person at a bricks-and-mortar branch of your bank, at ATMs in your bank’s network or, for checks, by using a bank’s mobile app.

You can also receive a deposit by electronic transfer from one bank account to another account (whether yours or someone else’s). For example, if you are paid by direct deposit, that moves money from your employer directly into your account. Or perhaps you receive a government benefit this way. In addition, you might receive funds via a P2P service, like PayPal or Venmo, and could then move the money into your checking or savings account.

Worth noting: Both bricks-and-mortar and online banks offer many different kinds of deposit accounts. You could consider a high-interest checking or savings account at a traditional or online bank, or, if you don’t need to access the money every day, you may want to look into a money market account or a certificate of deposit (CD).

Whether you are a college student with birthday gift money you want to save or a parent raising a growing family, you can find a place to safely put your money and track it until you need it.

Types of Deposits

There are many ways to put money into your bank account today. A generation or two ago, only cash or a check could do the trick, but now you have many options to top up the funds in your bank. To be specific, here are the ways to make a deposit and give your bank account an infusion of cash:

•   Cash deposit at one of your bank’s ATMs or branches

•   Check deposit at one of your bank’s ATMs or branches

•   Check deposit electronically via your bank’s mobile phone app

•   Payroll direct deposit

•   Electronic funds transfer from a linked savings or checking account or via mobile payment services such as PayPal, Venmo, Cash App, or Zelle

What Is a Withdrawal?

Now, let’s take a look at the other vital aspect of banking: withdrawing, or taking money out of your account. You can do that several ways, including using your debit card at an ATM, requesting the money in person from a bank teller, writing a check, scheduling an electronic bill payment, having the money transferred via a payment app, and wiring the money to someone.

As you may know, some of these methods of withdrawing funds can involve fees. If you use an out-of-network ATM, for instance, you can get hit with a charge. Some companies add a surcharge if you sign up for the convenience of electronic payments vs. writing a and mailing a check.

How a Withdrawal Works

The difference between a withdrawal and deposit is that withdrawals draw, or take, money out of your bank account. You might withdraw cash from your bank account to put in your niece’s Bat Mitzvah card, write a check (or authorize an electronic payment) to pay the electricity bill, or use a P2P service to pay a friend back.

Any funds removed count as a withdrawal. Depending on your bank’s checking account terms, you may have limited or unlimited withdrawals. Often, there are savings account withdrawal limits. In the past, the number was typically six per month, though these restrictions have largely been eased in recent years.

Types of Withdrawals

Let’s take a closer look at how to withdraw or debit funds from your bank account. Know these ways to get money out when you need it.

•   Cash withdrawal at ATM with a bank or prepaid debit card (though there will likely be ATM limits to the amount you may withdraw)

•   Cash withdrawal in person at one of your bank’s branches

•   Checks written from your account

•   Cardless withdrawals of cash using phone app at ATMs in your bank network

•   Bank-issued cashier’s check in person or online

•   Cashing a certificate of deposit (CD) at bank (if this is done before the maturity date, you may owe an early withdrawal fee)

•   Funds transfer from brokerage account

•   Electronic funds transfer from a linked savings or checking account or via mobile payment P2P services such as PayPal, Venmo, Cash App, or Zelle

•   Electronic bill pay (recurring or not)

Similarities and Differences Between Deposits and Withdrawals

Deposits and withdrawals are two of the most common banking terms. Here are the differences and similarities you should know. It comes down to deposit (plus) vs. withdraw (minus). Check this chart for more details.

Differences	Deposits	Withdrawals
Adds to bank account balance	✓
Immediately reflected in bank account balance		✓
Transaction can only be done at in-network ATMS	✓
Cashier’s checks can be managed at your bank branch		✓

How Deposits and Withdrawals Are Similar

Here’s what these two kinds of banking transactions have in common.

•   Both can be done in person at ATM or branch in your bank’s network (except for check withdrawals, which can only be completed in person or online).

•   Both can involve electronic funds transfer from a linked bricks-and-mortar, an online savings or checking account, or via mobile payment services, such as PayPal, Venmo, Cash App, or Zelle.

How Deposits and Withdrawals Are Different

Now, let’s take a look at some of the key ways in which these transactions are different.

•   A withdrawal leaves you with less money in the bank while a deposit puts more money in the bank. In this way, they are opposites.

•   A withdrawal will immediately be reflected in your account balance, while a deposit may take longer to show up, until the funds clear.

•   Cash deposits generally have to be made at your bank or bank’s branded ATM network locations, while cash withdrawals can be made at any ATM. (But beware, if the ATM is out of your bank’s network, you could be charged an ATM fee by both the ATM owner and your bank.)

•   Check deposits have to be made at your bank or bank’s branded ATM network locations, or via a bank’s mobile phone app.

•   Check withdrawals via cashier’s checks, on the other hand, are likely only available in person at one of your bank’s or credit union branches. Alternatively, you could request one online from your brick-and-mortar or online bank or credit union.

The Takeaway

Now you know the difference between a deposit and a withdraw. They are inverse transactions: While a deposit adds funds to your account and boosts your balance, a withdrawal whisks money away, subtracting an amount from the funds you have on balance. There are many ways to conduct each of these transactions today, largely due to tech offering new options. You can now do your banking in person or use an array of digital tools to send or receive money.

SoFi can make banking much better than basic. Our high-interest bank accounts are convenient to set up and use, and we offer a competitive APY. You can also write checks, set up bill pay, and have access to 55,000+ (fee-free) ATMs worldwide. Oh, and did we mention? No account fees, period.

See how much your money can grow with SoFi.

FAQ

What is a cash withdrawal?

A cash withdrawal involves converting funds you are holding in an account (perhaps an investment plan, a trust, or a pension) into cash that you can then deposit elsewhere or use.

What is a cash deposit?

A cash deposit is money that you add to your bank account. It could come via an electronic transfer, an ATM deposit, or currency that you hand off to a bank teller.

What is the difference between a deposit and a withdrawal?

The difference between a deposit and a withdrawal is that a deposit adds funds to your bank account while a deposit takes funds away.

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

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

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

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

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

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

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

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

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

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