SoFi

Endorsing a check for a minor is a pretty straightforward process. It means printing their name on the back of the check and designating them as a minor. Then, print your name and define your relationship to the minor. Third, sign underneath your name. Finally, it’s a good idea to write the account number so the bank can deposit the check into the appropriate account.

That said, handling a check for your child can raise some issues. After all, how do you endorse a check for a minor if they don’t have a bank account? Fortunately, most banks and credit unions allow parents to deposit such checks into their accounts. You can also use a check made out to a minor as an opportunity to open a custodial account and begin your child’s financial education.

Here are the details on endorsing a check for a minor and how it can facilitate financial literacy.

What Is a Check Endorsement?

A check endorsement is when you sign the back of a check that’s been made out to you. Signing your name on the back and providing your account number allow you to deposit or cash the check. If you have a joint bank account, one or both account holders should sign the check.

Signing over a check is also possible. This is a process that allows you to transfer the right to deposit the check to someone else.

Process of Endorsing a Check for a Minor

Endorsing a check for a minor is similar to endorsing a check for yourself, with a few extra steps in the process. Here’s how to endorse a check for a minor.

•   Flip the check so its back is facing upwards. Print the minor’s name where the endorsement section is. Following the printed name, add a hyphen and write “minor.”

•   Below the minor’s name, print your full name. Following your name, add a hyphen and write the best word that describes your relationship to the minor such as parent or guardian.

•   Finally, sign the check and write your account or the minor’s custodial account number.

Recommended: How Do You Write a Check to Yourself?

Can a Check Made to a Minor Be Deposited Into the Parent’s Account?

Guidelines vary among banks and credit unions for depositing a child’s check into a parent’s account. Generally, banks and credit unions will deposit checks made out to children into the parent’s account. Banks and credit unions usually do this when the child doesn’t have a bank account.

Either way, ask your bank or credit union for their endorsement policy on the child’s checks and endorse them as instructed to ensure you can deposit the check. You may need to provide supplemental documents and your child’s ID.

On the other hand, your bank might encourage you to open a bank account for a minor; you may also hear this referred to as a custodial account for your child. While this account is separate from yours, you’ll control it until your child turns 18 or older.

A custodial account is an excellent way to teach kids money management and show them how to use banking services. Although a minor isn’t technically unbanked if they don’t have a custodial account, opening one can help them acclimate to banks and credit unions and set them up for financial success as an adult.

Recommended: What Does It Mean to Be Unbanked?

Tips for Endorsing a Check for a Minor

With money becoming increasingly digital, matters such as ordering checks and handling them can be challenging for people of all ages. Follow these tips to have a smooth experience when endorsing a check for a minor.

•   Ask your bank for their rules and conditions for how to endorse a check for a minor.

•   Read the front of the check to verify your child is the payee.

•   Print your child’s name and your name on the back and specify who each person is (minor and parent).

•   Adding your account number or your child’s custodial account number under your signature ensures the bank will deposit the money in the correct account.

•   Keep in mind how long checks are good for. Typically, checks expire after six months, so it’s best to endorse and deposit them as soon as possible. In addition, hanging onto a check without depositing it increases the chance of losing it.

Getting Your Child Started With Banking

Opening a bank account for a minor can introduce your child to healthy money management and improve financial literacy. Here are some tips for parents who want to show their children the ropes.

•   Open a custodial bank account. Shop around for a custodial account for your child that can earn an annual percentage yield (APY) and charge no fees. In addition, you can deposit your child’s checks into this account to grow their savings.

   Plus, these accounts usually give control to the parent until your child reaches 18 or older and can take over. You may hear these accounts referred to as UGMA (Uniform Gift to Minors Act) accounts.

   However, for some accounts for minors, your bank may allow joint control between the child and the parent. This may be referred to as kids’ bank accounts at some financial institutions.

•   Involve your child in the process. Instead of managing the custodial account alone, bring your child to the bank to help open the account. They can bring their identification and speak with the banking staff. Ask ahead of time if they offer memorable experiences for children, such as viewing the safe deposit boxes. The more your child enjoys the bank or credit union, the more they may interact with their account.

•   Remind your child that saving is vital. Again, bringing in a real-world example can help. For instance, the next time you have an unexpected expense such as a car repair or emergency dental work, use it as a teaching moment. Explain that saving money helps smooth out financial bumps in the road.

•   Explain financial fundamentals. For example, teaching your child about compound interest can motivate them to save more. You can also create a budget showing what their allowance income lets them afford each month and set long-term goals, such as buying a scooter.

•   Keep up the flow of information as your child gets older. While a first-grader isn’t ready to peruse financial documents, middle-schoolers can begin to understand how to read an account statement from their custodial account. Likewise, your child’s first job can provide a lesson about paychecks and income taxes.

   In addition, the prevalence of phone and internet use has given rise to financial scams over text messages and email. It’s wise to educate and warn kids about this so they don’t become a victim.

The Takeaway

Endorsing a check for a minor requires an additional step or two compared to endorsing your own; the trick is knowing what information you need. Whether you deposit the money into your account or your child’s custodial account, the endorsement process is an opportunity to expose your child to the world of banking. It’s never too early to teach financial literacy, and depositing checks at the bank is a great jumping-off point.

When thinking about your own banking choices, it’s wise to look for multiple better banking features. When you open an online SoFi Checking and Savings account, for instance, you can take advantage of a competitive APY and not pay any account fees that can nibble away at your balance. Plus, SoFi offers features like Vaults and Roundups to help savings grow faster, and qualifying accounts with direct deposit can get paycheck access up to two days early.

FAQ

Can a child endorse a check?

A child too young to write or sign their name cannot endorse a check. For older children, banks and credit unions generally require parents to write and sign their name under the child’s name. They also must include their relationship to the child and add the account number for the deposit.

Can a minor deposit a check into their own account?

A minor can deposit a check into their account if their parent or guardian endorses it and if the minor is old enough to use banking services. Each bank or credit union sets rules for how old a minor must be to access banking services.

Can you use mobile deposit to endorse a check to a minor?

You can use the mobile deposit to endorse a check for a minor by printing their name on the back of a check with a hyphen and the word “minor.” Then, under the minor’s name, print your name with a hyphen and the word “parent” or another descriptor for your relationship with the minor. Then, sign the back and write your account number or the minor’s custodial account number. Lastly, use your phone to complete the check’s mobile deposit.

How can a minor cash a check?

A minor can cash a check if their parent or guardian endorses it and the minor is old enough to use banking services. Each bank or credit union determines the age requirements for banking services.

Photo credit: iStock/Drazen Zigic

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.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

SOBK0123012

Earning a bonus at work can be a reason to celebrate, but keep in mind that the money gets taxed, just like regular income. While you may be told the gross amount that’s coming your way, the amount you actually deposit can be significantly less once the withholding comes out.

So how does your employer calculate how much to withhold from your bonus? Learn the details here, including:

•   Why are bonuses taxed?

•   How are bonuses taxed?

•   Are taxes on bonuses higher than standard income taxes?

•   What can you do to lower the taxes on a bonus?

Why Are Bonuses Taxed?

The answer to “Why are bonuses taxed?” is simple, albeit a bit circular: The IRS considers bonuses to be taxable income.

The IRS doesn’t categorize bonuses as regular wages, however; instead, it labels bonuses as “supplemental wages,” meaning there are specific guidelines for employers when withholding taxes.

That said, there are two different ways that a bonus can be taxed, which may or may not impact which tax bracket you’re in.

How Are Bonuses Taxed?

All bonuses — whether performance-based, sign-on, or holiday — are subject to income taxes, just like regular income. But how are bonuses taxed, numerically speaking?

Because bonuses are folded into Box 1 (“Wages, tips, other compensation”) on your W-2 tax form, you’ll likely wind up paying the same amount of taxes on the bonus as the rest of your income.

However, your employer may have withheld money from your bonus check differently from how it withholds taxes from regular earnings. That means when you receive the bonus payment, there could be a larger or smaller percentage of tax withheld than you’re used to.

Employers have two methods for withholding taxes on bonus payments:

1.    The percentage method

2.    The aggregate method

Recommended: Tax Season 2023: A Guide to Understanding Your Taxes

The Percentage Method

Many employers use the percentage method to withhold taxes from bonus payments. Why? Because it’s much easier for the employer.

For this method, the IRS allows companies to withhold a flat 22% rate of bonus payouts. It’s straightforward math for employers, nice and easy! They don’t have to check the recipient’s details, such as the salary and tax bracket.

A couple of points to consider:

•   If you earn $89,075 or more as an individual, a 22% rate might be lower than your usual tax withholdings.

•   If you earn $41,775 or less as an individual, however, it might be higher than your usual tax withholdings.

•   The flat 22% applies to all bonuses equal to $1 million or less.

•   If your bonus is larger than $1 million, your employer is required to use this method — and taxes on a bonuses above $1 million are computed at a flat 37% rate.

And remember: Just because your employer withholds 22% of your bonus, that doesn’t necessarily mean that’s what you actually owe. When you file your tax return, you may find that you overpaid (and are due a refund) or underpaid (and owe additional money). This will typically depend on your tax bracket and how much you’ve already paid through other withholdings and/or estimated quarterly payments.

Recommended: Tips for Your First Physician Sign-On Bonus

The Aggregate Method

If your employer tacks your bonus payment onto your regular paycheck, the company can instead use the aggregate method to withhold a portion of the bonus.

In this bonus taxation scenario, your employer would treat this combination payment as a regular (but larger) paycheck and withhold funds based on the withholding specifications on your W-4. That is, it would withhold the percentage of your paycheck for tax purposes that reflects your exemptions and filing status.

Recommended: How to File Your Taxes for the First Time

Can You Lower the Taxable Amount on a Bonus?

If your regular wages are your primary (or only) source of income, it’s easy to estimate which tax bracket you’ll be in when you go to file — and you can set up tax withholdings based on that estimate.

But if you receive a large, unexpected bonus that increases your income enough, you might graduate to a higher tax bracket for that excessive income. This means you would owe more in taxes and may have underpaid throughout the year.

For that reason, you may want to lower your taxes on your bonus. While you can’t ask the IRS to tax your bonus less, you can look for ways to lower your taxable income for the year so that you stay within a lower tax bracket.

Recommended: What Are the Tax Benefits of Marriage

Tips for Lowering the Amount You Are Taxed on a Bonus

So you’ve just received a hefty bonus check but are concerned about paying taxes on it, especially if it’s large enough to bump you up to a higher tax rate. What can you do? Here are some ways to handle the tax burden:

•   Anticipating the bonus: If your total compensation includes an anticipated bonus, you can submit a W-4 with your employer at any point to increase withholdings throughout the year to account for the bonus you’ll eventually earn. It won’t lower your taxable income, but by withholding slightly more money from each paycheck, you may be able to avoid owing a large amount when you go to file your taxes. Making sure your W-4 is up to date is an important part of preparing for tax season.

•   Investing your bonus in a tax-advantaged account: An easy way to avoid paying taxes on your bonus is to invest it in a tax-advantaged account, like a 401(k) or traditional IRA. Money invested in these is pre-tax, and it’s usually a good idea to save money for retirement anyway.

   Depending on your health insurance plan, you may also be able to contribute to a health savings account (HSA) for medical costs. An HSA is also a tax-advantaged account.

•   Donating your bonus: You could use your bonus to make an end-of-year donation to a charity. That can be a tax deduction that would lower your taxable income. Of course, that means you don’t get to keep the money, but if you’re passionate about a nonprofit, it may be worth it to hand over your bonus.

   Keep in mind, however, you can only deduct charitable contributions if you’re itemizing deductions. This strategy won’t work if you plan to take the standard deduction.

•   Working with an accountant: Paying for an accountant can get expensive, but they may have additional strategies to help you reduce your taxable income. On top of that, they can help you analyze your bonus to make sure you actually have to pay taxes on it. All monetary bonuses are indeed taxable, but the IRS doesn’t tax certain fringe benefits from employers, such as tickets for entertainment events.

•   Deferring your bonus: This might sound odd, but you could ask your employer to defer your bonus until next year. This would allow you to update tax withholdings in the new year so you’re prepared for the additional income. In addition, it would enable you to focus on tax deductions and tax-advantaged investments during the next tax year to reduce your taxable income.

   Also, if you expect to make less in the following year, it could be beneficial to receive your bonus then — there’s less risk of getting bumped up to a higher tax bracket.

The Takeaway

Earning a bonus can be great: It’s money that you weren’t guaranteed or perhaps even expecting, and now you can use it to fund emergency savings, pay down debt, invest for retirement, or even treat yourself to something nice. But just remember: Bonuses are subject to income taxes, so Uncle Sam will take a chunk out of the check.

Planning to jump-start your emergency savings by depositing a bonus payment? Consider opening an online bank account to help your money grow faster. With a SoFi Checking and Savings account, you’ll earn a competitive annual percentage yield (APY), pay no account fees, and get to spend and save in one convenient place. That’s what we call better banking!

FAQ

How much is the typical yearly bonus?

The typical yearly bonus depends entirely on your employer, industry, job level, job performance, and salary. Often, employers pay bonuses as a portion of your job salary.

If you want to see what other employees in your industry typically make for bonuses, you can look at employee-reported salary data on job sites such as Glassdoor and Salary.com.

How can bonuses impact your finances?

If you aren’t expecting a bonus and receive one, this could be a major boost to your finances. You could stash the unanticipated bonus in your emergency fund, contribute to a retirement account or HSA, or even spend it on yourself or your family, purchasing something you couldn’t otherwise afford.

However, remember that bonuses are taxable income. Your employer likely took out 22% already to cover the taxes. However, if the bonus is large enough to put your income over a certain threshold, you might move up in tax brackets and owe more than expected when you go to file.

Are there bonuses that are not taxable?

The IRS considers bonuses to be taxable income. Any cash bonus will be subject to income taxes. However, the IRS has exceptions for what it calls “de minimis fringe benefits,” which include things like:

•   Occasional food, such as doughnuts in the morning or a meal for a lunch and learn

•   Tickets to a sporting event or concert

•   Group-term life insurance for your spouse or dependent (as long as the face value is $2,000 or less)

Photo credit: iStock/AJ_Watt

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 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.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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.

SOBK0123010

Scams targeting seniors are increasing at a frightening rate. Fraud victims over 60 reported roughly $1.7 billion in losses in 2021, according to the Federal Investigation Bureau (FBI). From government impersonation scams to tech support scams to lottery scams, it’s easy to be conned if you don’t know what to look for. Falling victim to a scam can leave you financially vulnerable and make recovering challenging.

Unfortunately, no one is immune to becoming a victim of fraud. While there is no antidote or way to guarantee you won’t be taken advantage of, becoming familiar with common scams and learning strategies to protect yourself can help you avoid becoming a fraud victim.

Read on to learn:

•   Why scams on elderly people are so common

•   What are the most popular kind of scams targeting seniors

•   How to protect yourself and loved ones from falling for these cons.

Why Are Elderly People Often Targeted for Scams

Fraudsters want money. Since older individuals are perceived to have more money in the bank, scammers assume seniors are easy targets. However, this doesn’t mean that you are not exempt from common money scams if you’re a low-income senior. You still must proceed with caution to protect your assets.

Other reasons swindlers target seniors with scams on elderly people includes:

•   Isolation. Loneliness can make seniors more vulnerable to elderly fraud scams since they strongly desire to build social relationships. This can make them more willing to engage with scammers by phone.

•   Overly trusting. According to the Federal Bureau of Investigation (FBI), elderly folks are more trusting than other generations, making them vulnerable to con artists.

•   Lowered cognition. Age can increase the probability of cognitive decline as well as conditions like dementia. As a result, it’s hard for these folks to remember things like the amount of money they have in the bank or differentiate between real and fake. This means a fraudster could impersonate a banker or someone close to an aging individual with dementia, and they may not know the difference.

•   Insecurities. Some scammers bully victims into doing what they want, like handing over their bank information. Or the fraudster plays on their insecurity about health care or Social Security. They may threaten that if they don’t pay a medical bill, their health coverage will be canceled. Cultivating this fear may motivate a senior to go with whatever the con artist requests.

•   Embarrassment. Many elderly folks are embarrassed after being scammed, so they choose not to report the crime. Because many of these crimes go unreported, cybercriminals know they can fly under the radar by targeting seniors.

13 Scams Against the Elderly to Be Aware Of

Fraudsters use a variety of scams on the elderly. Here are some common old people scams you can watch out for.

1. Malware Scams

With this scam, the cybercriminal will send an email containing an innocent-looking malware link the recipient can download. Perhaps the link will supposedly download family photos from a relative or allow the user to update a compromised password. Once the recipient hits download, the link could install ransomware or other software that can harm the computer. Such software allows the scammer to access private information on your computers, such as tax files or other financial documents.

2. Lottery or Sweepstakes Scams

At first glance, receiving an email or phone call stating you’ve won the lottery or a sweepstake seems exciting. Unfortunately, fraudsters use this strategy as a scam on the elderly, cheating them out of hundreds or maybe thousands of dollars.

Here’s how it works: The scammer will tell you you’ve won a prize through a lottery or sweepstakes. But, to receive your winnings, you must pay the taxes upfront. Once you do so, they will send the remaining funds. But, unfortunately, your payday never comes, and the fraudster runs off with the victim’s cash that was sent as “taxes.”

Recommended: Budgeting for Elderly Family Members or Loved Ones

3. Robocall Scams

Robocalls automatically contact a large number of people across the world. While some robocalls contact people legally, others use robocalling as a gateway to scam many individuals efficiently. One example of a robocall scam targeting the elderly is the caller stating that there is an “impending lawsuit” that you’re involved in. The caller claims to be someone from a law enforcement agency or the government and tells the victim that a fine must be paid immediately to avoid litigation.

Another example is the “can you hear me” scam. This scam entails someone calling you and asking if they can hear you. Once you say “yes”, they record the call and hang up. They can use this signature voice recording to authorize purchase on your credit card.

4. Government Impersonation Scams

Government imposter scams targeting the elderly involve the fraudster contacting an elderly individual claiming to be someone from a government organization like Medicare, the Social Security Administration, or the IRS. The fraudster may say the victim owes back taxes that must be paid right away or they might be arrested or deported, depending on the situation.

The government impersonator will demand a specific type of payment such as a prepaid debit card or wire transfer. Usually, to make the call seem more legitimate, they will use a Washington D.C. area code, making the victim think the call is real.

5. Grandparent Scam

In the grandparent scam, a swindler will call an older adult impersonating one of their grandchildren. Once the senior picks up the phone, the fraudster will say, “Grandma, do you know who this is?” When the confused senior gives a response, guessing it’s a younger relative, the scammer will agree to secure their trust.

After the trust is built, the swindler will ask for money for a financial problem but beg them not to tell the rest of the family. They often request a money transfer or prepaid card since both may not require ID to access the funds.

6. Investment Scams

Investment scams involve someone illegally selling financial instruments with a promise of a guaranteed return and low risk. Or they might offer a get-rich-quick scheme. A common investment scam targeting seniors is when someone encourages an older adult to invest in digital assets such as Bitcoin.

In 2021, investment scams resulted in over $239 billion of loss for people over 60 years old.

7. Health Insurance and Medicare Scams

As a U.S. citizen or permanent resident, you’re eligible for Medicare once you reach age 65. Because swindlers know seniors usually have Medicare, it’s an easy way to target them. With this scam, the fraudsters will impersonate a Medicare representative and require personal information. Or they may offer fake services that the victim can purchase. However, these services never come to fruition, but the fraudsters do get the details they could use to commit identity theft or other ploys.

8. Sweetheart Scams

A sweetheart or romance scam is a scam on the elderly that plays on the victim’s emotions to entice them to hand over money. With this, the imposter will connect with a senior online and develop a relationship. Once they have the victim’s trust, they ask for money for financial issues such as debt.

Imposters usually prey on seniors who are isolated and crave human connection or widows/widowers who have just lost their spouses.

9. Phishing Scams

With a phishing scam, the imposter will send an email or text from what appears to be a legitimate source like your bank. They will request you verify personal information such as your Social Security number or log-in credentials. Once given this information, it’s difficult to keep a bank account safe online, and funds can be stolen.

10. Tech Support Scams

For victims over the age of 60, tech support scams are the most commonly reported type of fraud. Tech scams against the elderly typically involve a fraudster impersonating a recognizable tech company offering to fix an issue that doesn’t exist. They may also offer to renew fraudulent software. This imposter will then direct the victim to make a payment via wire transfer, overnight check, or prepaid credit card. They are then able to walk away with those funds.

Recommended: Tips to Keep Your Credit Card Safe from Hackers

11. Inheritance Scams

Similar to lottery or sweepstakes scams, imposters tell the victim that they have a distant relative who left them a large sum of money after their passing. All the victims need to do is pay the taxes and fees. Once that happens, the imposter says they will send the large sum of money to their account. But, the inheritance never comes, and the victim loses their money to fraud.

12. Credit Card Advance Scams

An elderly fraud scam involving a credit card advance works like this: An imposter will put a legitimate credit card company’s name (like Visa) on a credit card ad. The ad will offer an instant pre-approval of thousands of dollars of cash upfront. The catch is that you must pay the annual fee first, which usually requires the victim to provide their Social Security number and bank information. Remember, lenders and creditors usually need to know your credit score before loaning money.

Recommended: Identity Theft and Credit Card Fraud Statistics: 33 Eye-Openers

12. Caregiver Scams

Unfortunately, strangers are not the only ones trying to defraud the elderly. Caregivers or family members may also exploit and attempt to scam on elderly. They can do so by swiping cash from their wallet or requesting money for bogus expenses.

13. Home Repair Scams

Home repair scams involve a scammer showing up to your doorstep offering repair services like window replacement or a kitchen renovation. Then they will request an upfront payment or trick you into applying for a loan. After you make your payment, they never show up to do the work.

What Happens if You Are Victim to One of These Attacks?

It’s no surprise that victims of fraud suffer financial consequences. However, the severity depends on the exact crime. Unfortunately, many of these cons can wreak havoc with your checking and savings accounts and beyond. For example, if a fraudster steals your identity, the financial hardship could continue for months or even years. In addition, it can damage your credit, tamper with Social Security benefits, mess up tax returns, and compromise your bank and investment accounts. All of which can be an uphill battle to restore order.

Not only does falling victim to these crimes compromise your financial security, but it can take a toll on your emotional, physical, and social state. Therefore, that’s why protecting yourself or loved ones from elderly fraud scams is so important.

If you are a victim of an elderly fraud scam, here are a few steps to take:

•   Pay close attention to bank and investment accounts. Keep tabs on your bank activity so that you can spot suspicious transactions.

•   Change your passwords. If you think the scammer hacked your accounts, update your passwords.

•   Jot down every detail of the crime. Do your best to write as much information about the crime as possible. Information includes dates, times, email addresses, etc.

•   Report the crime. It’s best to report the incident to the Federal Trade Commission, the primary agency that collects scam reports. To report your scam, you can contact the FTC via phone at 1-877-382-4357 or online . Once you report the crime, the FTC will provide next steps for moving forward. It’s always wise to reach out to your bank or financial institution to make them aware of the incident.

Recommended: What Someone Can Do with Your Bank Account and Routing Number

Ways to Protect Yourself (And Loved Ones) From Elderly Scams

One of the best ways to protect yourself and loved ones from elderly scams is to avoid making quick financial decisions. Take a closer look at this point, along with several other ways you can protect yourself from scammers.

•   Take time to act if someone is trying to pressure you into making an immediate payment. Tell them you need to think about it. Legitimate businesses and government entities won’t force you to make a split-second decision.

•   Update your computer’s security software.

•   Avoid clicking on links or attachments from unknown senders.

•   Research domains to ensure they are legitimate before engaging in business online.

•   Make your social media account private.

•   Avoid sending wire transfers to someone you don’t know, even if you have a relationship with them online.

•   Reach out to your bank or financial institution if it seems they are attempting to communicate with you. You can find official numbers on the back of your credit card. Don’t assume that just because someone says they are calling “from your bank” that they are telling the truth.

•   Avoid unsolicited communication such as calls or emails that say you’ve won a prize.

•   Don’t make a deal with someone (say, a supposed tradesperson or utility-company representative) who shows up at your home. Request their contact information and tell them you will reach out at a later date.

•   Be skeptical of those who ask you to submit payment using a prepaid gift card.

Recommended: Helping Elderly Family Members Manage Their Finances

The Takeaway

As the world becomes more technologically advanced, so does the sophistication of scammers attempting to access your money and identity. Fraudsters are lurking around every corner in the hope that you will slip up and share your personal information. To keep you and your loved ones safe, avoid engaging in money activities with folks you don’t know and do your best to protect your personal information at all costs.

3 Money Tips

1. Typically, checking accounts don’t earn interest. However, some accounts do, and online banks are more likely than brick-and-mortar banks to offer you the best rates.
2. When you overdraft your checking account, you’ll likely pay a non-sufficient fund fee of, say, $35. Look into linking a savings account to your checking account as a backup to avoid that, or shop around for a bank that doesn’t charge you for overdrafting.
3. If you’re faced with debt and wondering which kind to pay off first, it can be smart to prioritize high-interest debt first. For many people, this means their credit card debt; rates have recently been climbing into the double-digit range, so try to eliminate that ASAP.

FAQ

How many elderly people fall victim to scams every year?

According to the Federal Bureau of Investigation, in 2021, over 92,000 elderly Americans reported being the victim of a financial scam, resulting in roughly $1.7 billion of losses.

What should I do if I have fallen victim to a scam on the elderly?

If you have fallen victim to a scam, consider contacting your bank (if your bank accounts were involved), the local police, the Federal Trade Commission (FTC) , and the Adult Protective Services division close to you. You can find your local Adult Protective Services contact information here .

What can a scammer do with my information?

When a scammer accesses your personal information like your Social Security number, they can claim Medicare on your behalf, open a credit card, take out loans in your name, or steal your tax refund. Likewise, when a fraudster has your bank account and routing number, they can potentially shop online, write fraudulent checks, and transfer money.

Photo credit: iStock/FG Trade

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.

SOBK1122016

Checking accounts and debit cards are both key to storing and accessing your money for making everyday payments. Think about how often you use them as you pay bills, grab a latte, and check your balance to see if you can afford some new shoes.

Though they are linked, they are two separate financial tools — and it’s possible (though uncommon) to have one without the other.

So what’s the difference between a checking account and debit card? Read on to learn the full story, including:

•   What is a checking account?

•   What is a debit card?

•   Can you have a debit card without a checking account?

•   What are the pros and cons of checking accounts?

•   What are the pros and cons of debit cards?

•   How can you find the right checking account and debit card for you?

What Is a Checking Account?

A checking account is a type of bank account that allows you to access your money when you need it for paying bills or making purchases. Unlike other deposit accounts (like saving accounts), checking accounts allow you to make regular withdrawals by writing checks, swiping your debit card for purchases, or taking money out of an ATM.

Most checking accounts are insured by the Federal Deposit Insurance Corporation (FDIC) or NCUA (National Credit Union Administration), meaning your funds are protected up to $250,000 per depositor, per bank, per ownership category. You can typically fund your checking account through bank transfers and via direct deposit from your employer.

You can also connect your checking account to a peer-to-peer payment app like Venmo or Cash App to send money to and receive money from friends and family. Some banks may even offer built-in payment programs through their mobile apps.

Some checking accounts charge monthly fees while in other situations you can open a free checking account. Banks charging fees for accounts may offer ways to waive the fees. Other “fine print” details to consider when selecting a checking account include minimum balance requirements, overdraft fees, and annual percentage yield (APY).

Recommended: How Much Money Do You Need to Open a Checking Account?

What Is a Debit Card?

A debit card is a form of payment that gives you access to the funds in your checking account.

You can use a debit card online and in person to make purchases, wherever that card is accepted. You can even add your debit card to mobile wallets, like Apple Pay or Google Pay. You typically must use a unique personal identification number (PIN) to use the card for in-person purchases and ATM withdrawals.

Unlike a credit card that allows you to loan money from the card issuer, a debit card only gives you access to the funds in your checking account. If you don’t have enough funds in your account to cover a purchase, the transaction may be declined or you may overdraw the account (and face overdraft fees).

You can also use a debit card to withdraw cash at ATMs. Most banks and credit unions offer a network of fee-free ATMs where you can safely take out cash without incurring charges. You may also be able to request cash back at the point of sale at some businesses when paying with your debit card.

While we typically think of debit cards as a component of a checking account, consumers without a checking account can purchase a prepaid debit card, load funds onto it, and spend it at stores like a bank debit card.

Do You Automatically Get a Debit Card When Opening a Checking Account?

Most checking accounts come with debit cards nowadays, but it’s always a good idea to confirm before opening up a new account. Upon account creation, the bank or credit union will generally send your debit card in the mail. In some cases, you may have to request the debit card.

Not all debit cards are created equal. When looking for a checking account with a debit card, you may want to prioritize one that:

•   Has a large network of ATMs

•   Doesn’t charge fees for card replacements

•   Doesn’t charge foreign transaction fees

•   Offers cash back on debit card purchases.

Can You Have a Checking Account Without Having a Debit Card?

While most checking accounts come with debit cards these days, it’s still possible to encounter a checking account that doesn’t have a debit card. However, you’re more likely to find a checking account that no longer supplies free paper checks to members.

Debit Card vs. Checking Account

Let’s break down the difference between a checking account vs. a debit card.

The best way to think about the difference between checking accounts and debit cards? A checking account is a deposit account for storing and spending your money; a debit card is a common tool to access the money in that deposit account.

Pros and Cons of Checking Accounts

Now that you know how a debit card vs. checking account stacks up, here’s a closer look at checking accounts. These accounts are a staple of personal finance and, as such, offer plenty of benefits to consumers. There are also some downsides to be aware of.

Here are some of the pros and cons of checking accounts:

Pros

•   Easy access to funds: A checking account allows you to make purchases (in person or online), pay bills, and receive direct deposit paychecks.

•   Security: Checking accounts are typically insured by the FDIC or NCUA.

•   Banking benefits: Depending on the checking account, you may enjoy premium features like mobile check deposit, automatic savings tools, and early paycheck access.

Cons

Checking accounts have a specific and necessary purpose for most consumers, but they do have drawbacks:

•   Low or no interest: In terms of checking vs. savings accounts, checking accounts typically have low APYs — if they earn interest at all.

•   Fees: Some checking accounts may have monthly maintenance fees, overdraft fees, account inactivity fees, and other charges that can add up.

•   Minimum balance requirements: Some checking accounts may require you to maintain a specific amount of funds in your account. They may also require a minimum deposit to open the account.

Here are the pros and cons of checking accounts in chart form:

Pros and Cons of Debit Cards

To better understand the difference between a debit card and a checking account, it can be helpful to consider debit cards’ unique features. These cards also have their fair share of pros and cons.

Pros

Advantages of debit cards include:

•   Easy way to spend and withdraw cash: Debit cards are more convenient than paper checks and give you quick access to your cash at ATMs.

•   No risk of debt: Unlike credit cards, debit cards don’t let you spend money on credit. This means you don’t risk overspending and falling into high-interest credit card debt.

•   No fees or interest: Debt isn’t the only risk of credit cards. You also have to worry about annual fees and annual percentage rates (APRs) when opening a credit card. Neither applies to debit cards.

Cons

Debit cards have drawbacks, as well:

•   Less fraud protection: Credit cards may pose more debt risk, but they typically offer better fraud protection than debit cards.

•   Ability to overdraft: Some banks and credit unions charge fees if you accidentally overdraft using your debit card.

•   Daily spend limits: Your debit card likely has a daily spend limit, and it may be less than you think (possibly $300 or $400). Before using your card for a big purchase, you may want to check with your bank to see if they need to increase the limit temporarily.

Take a look at how these pros and cons look in chart form:

Tips for Finding the Right Checking Account and Debit Card

How can you find the right checking account and debit card for you? Each person’s banking needs are different, but here are a few tips to get you started:

•   Think about the features that are right for you: It’s likely that no checking account will tick all the boxes for you, so it’s a good idea to make a list of the most important features of your ideal checking account. Maybe you want an interest-bearing account that also has a cashback debit card, or perhaps you just want a standard account with no monthly fees or overdraft fees. Deciding on your wish list will help you narrow down the options.

•   Ask friends and family: Getting recommendations from people you trust is a great way to instill confidence in any big financial decision.

•   Consider online banking: Online banks can often offer lower (or no) fees and higher interest rates because of their low overhead. With the advent of mobile banking, including mobile check deposit, online bill pay, and P2P payments, you may find that you don’t miss your brick-and-mortar bank — while enjoying the checking and debit features.

•   Bank in one place: It’s possible to have checking and savings accounts at separate institutions, but you may appreciate the convenience of banking in one place (or in one app). If you already have a credit card or savings account with a specific institution, it might be worth researching their checking account and debit card offerings.

Banking With SoFi

Looking for a new checking account with a debit card? Open an online bank account with SoFi. Our Checking and Savings account allows you to unlock a wealth of banking features, including a competitive annual percentage yield (APY), no account fees, automatic savings tools, and cashback on select local purchases when swiping your debit card.

Bank smarter with SoFi, and see why people love the SoFi debit card and Checking and Savings Account.

FAQ

Is a checking account a debit card?

A checking account is not a debit card. Rather, a debit card is a common way for consumers to spend and withdraw cash from their checking accounts.

Can you withdraw cash without a debit card?

It is possible to withdraw cash without a debit card. If your bank has a physical branch, you can go in person to take out funds. Some banks offer ATM cards for ATM withdrawals, and others may even offer cardless ATMs that allow you to access your funds through a mobile app.

Do checking accounts come with a debit card?

Most checking accounts come with a debit card. The bank may automatically send you the card upon account creation, but in some cases, you may have to request the card before the bank will send it.

Photo credit: iStock/Phiromya Intawongpan

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.

SOBK1222005

If you’re a salaried employee, the amount of money that you bring home with each paycheck plays an important role in your overall financial picture. While there are several dollar amounts that likely appear on your paycheck, two of the most important are your gross income and your net income.

Your gross income represents the total amount of money that your employer has paid you. If you are an hourly employee, it will be your hourly wages multiplied by the number of hours that you worked. If you are salaried, then it is a proportional amount of your total annual salary.

But in terms of net income vs. gross income, the net amount is the sum that is on your paycheck or directly deposited to your bank account. This is the figure that results when you subtract withholding taxes, benefits, and other deductions from your gross salary.

Read on to learn more about these two important ways of expressing income, including:

•   What is gross income?

•   What is net income?

•   How do you compare gross vs. net income?

•   How does net income vs. gross income affect your finances?

What Is Gross Income?

Your gross income is your total salary or wages that you earn before any deductions or taxes are taken out of your paycheck. If you are a salaried employee, your gross income will be the portion of your salary that corresponds to the time period represented on your paycheck. For example, if you have a salary of $52,000 and are paid every two weeks, you will earn a gross income of $2,000 with each bi-weekly paycheck. If you were paid only once a month, however, your gross monthly income would be $4,333.33.

In some cases, an employee might be eligible for overtime pay, which could be reflected in their paycheck as well.

If you are an hourly employee, then your gross income will depend on the total number of hours you work and your hourly wage. If you work 80 hours during a pay period and have an hourly wage of $15/hour, your gross income will be $1,200 (80 times 15). In either case, any tips, bonuses, or one-time additions may also be added to your total gross income.

Recommended: How Long Does a Direct Deposit Take to Go Through?

What Is Net Income?

Here’s the difference between gross income vs. net income: While your gross income represents the total amount of money that you earn in a given pay period, your net income is the amount of money that you’ll actually receive. From your gross income, taxes and common payroll deductions like health insurance and any 401(k) contributions will be subtracted. Other deductions could include wage garnishments or charitable giving via your workplace.

The result is your net income, which may then be sent to your bank account via direct deposit or given to you as a paper check.

Gross vs Net Income: What’s the Difference?

When comparing net and gross income, know this: Your gross income should always be equal to or more than your net income. If you don’t have any of what are known as withholding taxes or other deductions, it is possible that your gross income and net income will be the same. But if you do have any money withheld for taxes, insurance, retirement savings, or other common deductions, they will be subtracted from your gross income. The result is your net income and is also often referred to as “take-home pay.”

Why Do We Go by Gross Income?

When people compare earnings and salary, they often do so by comparing the gross income, and net income isn’t considered. One reason for this is that your gross income is the best indicator to compare the amount of money paid for a particular job or position. The amount of deductions or taxes withheld can vary greatly depending on a person’s situation.

Consider two people that make the same salary — one who is married with children will usually have less taxes withheld than a single person. Also, one person might contribute, say, 10% of their salary to a company-sponsored retirement plan while another chooses not to. Another example could be one person who has deductions that reflect their carrying their family’s health insurance costs while another individual could be married and on their spouse’s plan and therefore have no such deduction.

Another reason that gross income is often a better comparison than net income is because the money that is withheld from your paycheck usually represents actual value that you receive. Money deducted for retirement savings is transferred to your 401(k) account; insurance premiums are used to pay for medical or dental insurance and taxes are paid to the government. Those deductions are serving an important and valuable purpose.

How Do Gross and Net Income Relate to Taxes?

It’s important to understand your taxes and how they relate to your gross and net income. Taxes (along with deductions) are one of the things that is subtracted from your gross income to make up your net income. The more money that you have withheld for taxes from your paycheck, the lower your net income will be. However, this may help minimize the possibility of your owing additional money to the federal or local government come tax season.

How Gross and Net Income Affect Your Finances

While your gross income can be a useful point of comparison in terms of how much you make, it’s your net income that most impacts your budget and finances. When managing your money and wondering whether to focus on your gross or net income, it’s likely that the latter is where you may want to focus.

After all, it’s your net income that represents the money that you actually receive each pay period. This money that you receive each month can be a good starting point as you learn to spend wisely by budgeting.

You can work to best allocate funds to pay your living expenses, make discretionary purchases, pay off debt, and save towards future goals. A line item budget can help you balance your finances and meet your near-term and longer-term goals.

The Takeaway

Gross income and net income are two different points of reference for how much money that you make. Your gross income represents the total wage or salary that you earned during a particular pay period. After any taxes or deductions are taken out, the result is your net income. Your net income is how much money that you actually take home and can be a starting point as you set up your budget.

Understanding how your gross income and net income affect your overall finances is a good first step on the path to a solid financial future. SoFi Checking and Savings can also help you manage your finances. It’s a single, convenient place to spend and save, pays a competitive Annual Percentage Yield (APY), and charges you zero account fees. What’s more, our tools like Vaults and Roundups can help you enhance your savings, and if you open a qualifying account with direct deposit, you can access your paycheck up to two days early.

FAQ

How can I increase my net income?

Because net income and gross income are correlated, one way to increase your net income is to increase your gross income. You might do this by finding a new, higher-paying job or by starting a side hustle. The other option to raise your net income would be to lower the amount of taxes and deductions that are taken out each pay period. This could involve, say, increasing your tax allowances to lower the amount that is withheld for taxes or decreasing your other deductions, such as how much you contribute to retirement savings.

What are some budgeting tips to help you with your income?

One budgeting tip is to make sure you start with your net income and list out all of your expenses. Make sure that your total expenses are less than your total income (this may involve making some cuts) and create a plan to save at least some of the difference. You might want to research such budget guidelines at the 50/30/20 rule for inspiration.

Is gross income more important than net income?

Gross income and net income are both important and useful in different circumstances. For example, if you are wondering whether 40K a year is a good salary, it will depend on your situation. If you are single and/or live in an area with a low cost of living, it might be. But if you are the sole source of income for a family of four, live in a location with a high cost of living, and/or have considerable debt, that same gross income could be a challenge in terms of making ends meet.

Photo credit: iStock/Vasyl Faievych

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 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.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

SOBK0123036