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Sometimes, a financial account like a checking account will sit dormant, or unused, for an extended period, and an inactivity fee will be charged. Usually, a bank, credit union, or other financial institution will start to assess an inactivity fee after six months of no activity in the account. However, some banks may wait up to a year before applying inactivity fees to the account.

To better understand and steer clear of this annoying fee, read on. You’ll learn:

•   What is an inactive account fee?

•   How much are inactive account fees?

•   Can you reverse an inactive account fee?

•   How can you avoid inactive account fees?

What Is an Inactive Account Fee?

What is an inactivity fee and why does it get charged? Banks or other financial institutions apply inactivity fees or dormancy fees when financial accounts just sit, without money going in (deposits) or out (withdrawals). Perhaps the account holder isn’t conducting any kind of activity at all; not even checking the balance for a stretch of time.

Financial institutions can apply these inactivity fees to all sorts of accounts, like brokerage or trading accounts, checking accounts, and savings accounts. These fees are a way for banks to recoup some of the costs they incur when maintaining dormant accounts and can trigger the account holder to reactivate the account.

Recommended: What Happens if a Direct Deposit Goes to a Closed Account?

How Do Inactive Account Fees Work?

Here’s how inactive account fees work:

1.    No transactions occur within the account. Let’s say you opened a savings account to fund your next vacation. But life got in the way, and you forgot about it for six months, leaving it inactive. Keep in mind, the definition of inactivity may vary by the financial institution. So, while some banks may only require you to conduct a balance verification to keep the account active, others may require, say, a bank transaction deposit or a withdrawal, to keep the account active.

2.    The account is flagged for inactivity. Since money isn’t flowing in or out of the account, the financial institution flags the account. After this happens, some financial institutions may send a notification to the account holder before they begin charging a fee. The notice allows the account holder to take action before fees begin racking up. But other banks may not send a notification before they begin charging you inactivity fees. That means you are responsible for keeping tabs on your accounts so you can ensure they are up-to-date.

3.    The financial institutions begin charging inactivity fees to the account. Usually, the financial institutions will begin charging an inactivity fee between several months to a year after the last transaction took place within the account.

The account will be deemed a dormant bank account if these fees go unnoticed for a few years. Every state has a different timeline for determining when accounts are dormant. For example, California, Connecticut, and Illinois considered accounts dormant after three years of inactivity. On the other hand, an account requires five years of inactivity in Delaware, Georgia, and Wisconsin to move to the dormant category.

Once the account is considered dormant, the financial insulation will reach out to let you know that if you don’t attend to the account, it must be closed and transferred to the state — a process called escheatment. But, even if your account funds end up with the state, the situation isn’t hopeless. There are several ways to find a lost bank account and hopefully retrieve any unclaimed money.

Recommended: What Is the Difference Between a Deposit and a Withdrawal?

How Much Do Inactive Account Fees Cost?

Inactive account fees can range between $5 to $20 per month, depending on the bank.

Remember, only some financial accounts have inactivity fees. However, if your account does have inactivity or dormancy fees, guidelines must be outlined in the terms and conditions of the account. Check the fine print or contact your financial institution to learn the details of these and other monthly maintenance fees.

Why Do Banks Have Inactive Account Fees?

One of the primary reasons banks charge inactivity fees is that states govern accounts considered inactive and abandoned. Usually, an account that has had no activity for three to five years is considered abandoned in the eyes of the government.

Depending on the state’s laws, the financial institution may have to turn over the funds to the Office of the State treasurer if the account is deemed abandoned. At this point, the Office of The State Treasure is tasked with finding the rightful owner of the unclaimed asset.

Since banks do not want to hand over funds, they may charge an inactivity fee as a way to keep the account active. Thus, the financial institution won’t have to give the account to the state, keeping the money right where it is.

Additionally, inactive accounts cost financial institutions money. So, to encourage the account holder to start using the account, they charge inactivity fees. While some financial institutions send inactivity notices, others may not. Therefore, if your account has been inactive for a long time, you may only notice the fee once your bank account is depleted. At this point, the financial institution may choose to close the account.

Recommended: Can You Reopen a Closed Bank Account?

Can You Reverse an Inactive Account Fee?

It never hurts to call your bank and request a reversal of inactivity fees. However, if the financial institution is unwilling or unable to reverse the fees, you may want to compare different account options to find a type of deposit account that better suits your needs.

Make sure to compare all fees and any interest rates that might be earned to identify the right account for your needs.

Tips to Avoid Inactive Account Fees

Inactive account fees are a nuisance. But, there are several ways you can avoid them entirely. Here’s how:

•   Set up recurring deposits or withdrawals. Establishing a direct deposit into or out of your account can help keep it active and avoid inactive account fees.

•   Review accounts regularly. Checking your financial accounts and spending habits regularly can help you keep tabs on your money and also decide if keeping a specific account open is worth it.

•   Keep contact information up-to-date. If your account becomes inactive, some banks may attempt to contact you before charging you an inactive account fee. If you have the wrong information on file, you may never receive a heads-up about the additional fee.

•   Move money to another account. If you don’t want to maintain an account, it’s best to move the money to an account you actively manage. Then close the account once the money has been transferred. That way, you’ll dodge fees and streamline your financial life.

Recommended: How to Remove a Closed Account from Your Credit Report

The Takeaway

When you don’t use an account, your financial institution could begin assessing an inactivity fee. You can avoid these charges by keeping watch of your bank accounts and setting up automatic deposits or withdrawals. If you discover you’re not using your account, you can empty and close it, so you don’t have to worry about extra fees.

Remember, some banks charge fees while others don’t. When you open an online bank account with SoFi, you can avoid account fees and earn a competitive APY. What’s more, our Checking and Savings account lets you do your spending and saving in one convenient place. It’s all part of banking better with SoFi.

FAQ

Can a bank shut your account down if you have an inactive account fee?

Yes; if there has been no activity on your account for a while (the timeframe will likely vary by financial institution), your bank generally has the right to close your account. Plus, it’s not required that they notify you of the closure.

Are inactivity fees the same as dormancy fees?

Yes; inactive and dormancy fees are the same. They are both applied to the account when it’s inactive for an extended time.

Besides inactivity fees, what other fees do banks often charge?

ATM fees, maintenance fees, overdraft fees, and paper statement fees are just a few fees banks levy on their bank accounts. Before you open an account, make sure you understand the type of fees that accompany your account, so there are no surprises down the road.

Photo credit: iStock/Prostock-Studio

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.

SOBK1222045

There’s no doubt about it, trying to live on minimum wage is no easy feat. This is especially the case with the cost of living consistently increasing while the federal minimum wage hasn’t budged since 2009. And, according to the Economic Policy Institute, the value of the federal minimum wage is now at the lowest point since 1956, when it was 75 cents an hour, which is equal to $7.19 today.

However, if you are making minimum wage, don’t despair. How to survive on minimum wage can be difficult, but it’s not impossible. The key is not only keeping track of your spending and cutting costs where necessary but also creating and sticking to a realistic, doable budget.

If you’re living on minimum wage, learn how you can stretch your dollars and even manage to sock some money away for that rainy day fund. Read on to find out:

•   What is considered minimum wage

•   How to live on minimum wage

•   How to save when you earn minimum wage

What is Considered Minimum Wage?

The federal minimum wage, created by Congress in 1938 under the Fair Labor Standards Act (FLSA), establishes a base hourly rate at which employers are required to pay their employees. The current federal minimum wage is $7.25, and as noted earlier, that’s an amount that’s remained the same since 2009.

Many states, cities, and municipalities have realized the federal minimum wage is extremely low. They have therefore passed their own minimum wage laws, offering a higher amount, generally ranging from about $10 to $16 an hour. In addition, many companies (such as Amazon, Costco, Target, and Walgreens) have also enacted their own higher minimum wage, eclipsing the federal minimum wage.

In situations where an employee is subject to both federal and state minimum wage laws, the worker is entitled to the higher of the two minimum wages. For instance, Georgia’s basic minimum wage is $5.15 per hour, but since the federal rate is higher, employers must pay the federal wage of $7.25.

What about tipped employees, such as waitstaff? According to the U.S. Department of Labor, employers may pay the employee no less than $2.13 an hour in direct wages. There is a condition, though. If that amount plus the tips don’t add up to at least the federal minimum wage, the employer must make up the difference. In a number of states, the direct wage for tipped employees is higher than $2.13 per hour to help ensure a livable wage. Worth noting: When an employee is subject to both the federal and state wage laws, they are also entitled to the provisions providing the greater benefit.

Is Minimum Wage Livable?

The term living wage refers to the amount of earnings a person or family needs to cover basic expenses. These can include groceries, utility bills, housing, healthcare, transportation, and childcare. The goal of paying employees a livable wage is to prevent people from falling into poverty and allow them to have a decent, satisfactory standard of living.

Unfortunately, the cost of living in the U.S. has risen over the decades, especially during recent inflationary times, and the minimum wage has failed to keep up with the prices of goods and services. According to a 2021 report from Drexel University, individuals working full-time at minimum wage cannot afford the above mentioned basic necessities in any location across the country. The bottom line: For most people, earning $7.25 an hour doesn’t cut it as providing a living wage.

For instance, before taxes, a full-time employee working 40 hours a week on federal minimum wage takes home only $15,080 a year, falling $4,640 well below the $19,720 poverty line for a family of two. A full-time worker getting minimum wage with a family of four falls $14,920 below the poverty line of $30,000.

The report also says a true living wage, one that supports a basic standard of living without housing or food insecurity, would fall between $20 and $26 or higher per hour, depending on the state.

Raising the federal minimum wage to $15 an hour has been an ongoing hot-button issue. The Raise the Wage Act of 2021 is a bill that proposes increasing the minimum wage for regular employees over a five-year period. While the bill is currently being debated in Congress, many companies (as noted above) have taken it upon themselves to pay their workers a higher wage.

17 Tips for Living on Minimum Wage

So, how to live on minimum wage? Here are 17 ways that can make it easier to survive on a minimum wage salary and even set aside some money for savings:

1. Evaluate Your Overall Spending

A first step to getting a hold on your finances is to know how much you’re bringing in per month versus how much is going out. One way to do this is to record all of your expenses. Begin tracking your spending for 30 days. Include everything, including the change you put in the tip jar at a coffee shop.

Doing so will give you an overview of exactly where your money is going and help you determine where you may need to make some cuts. Seeing a spending pattern may also pinpoint any causes of overspending, like not being able to say no to a restaurant invite when you really can’t afford it.

2. Create and Stick to a Budget

Having a budget provides you with a structure so you can organize your finances and live better within your means. When you’re not bringing home a lot of bacon, it’s vital to make sure you know exactly where your money is being spent each month. A line-item budget can help you track your spending in various categories and make adjustments as needed.

One common budgeting method to consider is the 50/30/20 rule. With this, you allocate 50% of your income to your needs (essentials), 30% for wants (nonessentials), and the remaining 20% towards savings. This guideline can help you manage your money better.

3. Put Some Money Towards Savings

The thought of saving when you’re barely scraping by can seem impossible. But if you’re making minimum wage, even putting $5, $10, or $20 a paycheck towards savings can add up over time. You might even set up an automatic transfer from your checking account into savings a day or two after every payday. It’s as effortless as automatic bill payments and can help you build up a nest egg.

Doing so can also get you in the habit of saving and even help improve mental health. One University of Arizona study found people who save money report less psychological distress and have improved financial satisfaction.

4. Look Into Government Benefits

Another “how to survive on minimum wage” tip: Millions of low-wage earners in the U.S. qualify for federal and state government assistance benefits. This aid can help lower costs of food, healthcare, housing, and more for those surviving on minimum wage.

Some of the most popular programs include Medicaid and Child’s Health Insurance Program (CHIP), Supplemental Nutrition Assistance Program (SNAP) or food stamps, Temporary Assistance for Needy Families (TANF), and more. To see what benefits you might qualify for, visit benefits.gov .

5. Save on Food

Obviously, minimizing dining out and ordering takeout will lower your food bill. Some other ideas:

•   People and families living on minimum wage can qualify for SNAP or food stamps to help offset grocery costs.

•   Consider shopping at less expensive supermarkets, using coupons, buying the store or generic brand, and if applicable, ask if the store has a customer club card so you can get additional discounts.

•   Buying in bulk and stocking up on frozen foods and pantry staples such as bread, milk, eggs, peanut butter, pasta, beans, rice, tuna, and canned soups can help when money is particularly tight.

•   Food banks or pantries can be another resource. You can search for one in your area at FeedingAmerica.org .

6. Find Additional Ways to Increase Your Income

If you are struggling to make ends meet, you might also think about how you could bring in more income.

•   This might be the time to look for a higher-paying job or simply ask your boss for a raise.

•   Investigate getting a side hustle on your off hours like driving for Uber, Lyft or delivering food for DoorDash, GrubHub, or Instacart. You could also consider house cleaning, babysitting, dog walking, or pet sitting for extra money.

•   Have a marketable craft or hobby? Try selling your creations on Etsy or at a craft fair.

•   If you have unwanted stuff that others might want, put it up for sale on Facebook Marketplace, eBay, or your community’s neighborhood group. A garage or yard sale can also bring in some bucks if you’ve got enough to peddle.

7. Lower Your Housing Costs

Housing is where Americans spend the largest share of their paycheck, according to the U.S. Bureau of Labor Statistics. With the prices to rent or own a home consistently rising across the country, this can be a major issue for those living on minimum wage.

A 2022 report by the National Low Income Housing Coalition found that the average minimum-wage worker must work 79 hours per week (the same as approximately two full-time jobs) to afford a one-bedroom rental home at the fair market rent.

If you’re paying more than you can afford for housing, there are ways to cut the costs.

•   Consider downsizing to a smaller home or apartment, moving to a more affordable area in your town or city, getting a roommate, or living with a friend or family member while you save.

•   Look into applying for affordable public housing in your area, specifically established for eligible low-income people. The U.S. Department of Housing and Urban Development (HUD) oversees public housing agencies in your state or city. You can find your local housing authority office at hud.gov or by calling 800-955-2232.

8. ​​Work Towards Reducing Your Debt

When you’re not bringing in a lot of money, it’s easy to accumulate debt, especially by using credit cards to get by till the next paycheck. This can leave you with high credit card bills due at the end of the month and increase the chance of a minimum payment you can’t afford. You can tackle the problem in a few ways:

•   Consolidate your debt by rolling multiple debt payments into one.

•   Consider a balance transfer onto one credit card with a zero or low-interest promotional rate. These can provide a period of time during which you can pay down debt before the interest rate rises.

•   Seek out help from a reputable non-profit organization such as the National Foundation for Credit Counseling (nfcc.org ), a professional credit counselor, or certified financial planner who can help you create a plan to start tackling your debt.

9. Minimize Healthcare Costs

Healthcare can take a big bite out of a tight budget. These moves may help lower those expenses:

•   Medicaid and the Children’s Health Insurance Program (CHIP) are among the government programs providing free or low-cost health care to some low-income families and individuals. To determine if you’re eligible, go to Healthcare.gov where you can also fill out an application.

•   Work towards saving on prescription drug costs at participating pharmacies with a discount card or coupons offered by companies such as GoodRx, SingleCare, or America’s Pharmacy.

•   Try a variety of free things you can do to stay healthier. Take a walk, ride your bike, pick up a basketball game, or do free workout videos on YouTube.

10. Look to Save on Transportation

Owning a car and maintaining it can be costly. Here, some ways to lower expenses:

•   Consider the alternatives to car ownership, such as public transportation, carpooling, walking, or riding a bike.

•   When you drive, try to limit extraneous trips to reduce mileage and wear and tear on your car.

•   Save money on gas by comparison shopping at your local fuel stations.

•   See if you can lower your car insurance payment with good driver discounts or by skipping extras that you don’t really need, like car rental coverage or emergency roadside assistance.

11. Make the Most of Tax Breaks

When it comes time to file your taxes, make sure you’re taking advantage of whatever tax credits and deductions are offered for low-to-moderate-wage employees, such as the Earned Income Tax Credit, Child Tax Credit, or the Child and Dependent Care Credit. If you qualify, you can use the credits to help reduce the amount of taxes you owe and possibly increase your refund.

Recommended: What Tax Bracket Am I In?

12. Check Your Paycheck Withholding Amount

When you start a new job as a regular employee, your employer will have you fill out a W-4 form to determine how much tax money should be withheld from your pay and sent to the IRS for you. This is determined by what your tax filing status is (single or married, for example) and whether you have any dependents.

If you choose to have too much money taken from each paycheck, yes, you’ll get it back in the form of a tax refund, but it might be more useful to have that extra money during the year. You can change or update the withholding information on your W-4 form with your employer at any time. What’s more, you should do so if you experience any type of personal life change, such as marriage, divorce, or having a child.

13. Mind Your Utility Usage

Americans pay up to $613.00 a month for utility costs, according to a study from Move.org. This can add up to half a minimum wage-earner’s monthly paycheck.

Fortunately, there are many ways to lower your utility bills that can help with the challenge of how to live on minimum wage.

•   Switch to using more energy-efficient light bulbs and you can save on average $225 a year, recommends the U.S. Department of Energy.

•   Avoid phantom energy usage: Turn off or unplug any appliances not in use, even those sitting idle still drain some energy from the outlet.

•   Save up to 10% on heat and cooling costs by setting your thermostat back seven to 10 degrees back from its normal setting for eight hours a day (such as when you are out at work).

•   Switching to doing cold water washes can save on gas and electricity needed to heat water.

•   If you need new appliances, opt for ENERGY STAR labeled machines that use less water and energy than standard ones.

•   Get rid of any extra cable channels you don’t watch or downsize to a more basic plan.

•   If you’re having trouble making payments, call your utility companies and see if you can negotiate rates or be put on a financial assistance payment plan.

14. Take advantage of any employer-sponsored benefits

Make sure you use any plans your employer offers, such as health insurance, retirement accounts like a 401(k), daycare services, or paid time off. These things can be priceless to any employee but especially if you’re surviving on minimum-wage.

15. Look for Cheap or No Cost Things to do

Living on a low-income salary doesn’t mean you have to sit home and give up on fun. But instead of pricey entertainment and eating out, consider these ideas.

•   Check to see if any museums have a day where admission is free.

•   Grab a slice of pizza with a friend for a cheapie lunch.

•   Take a walk or bike ride; visit the library to check out free books and DVDs.

•   Host a potluck gathering with friends.

16. Check Out Your Local “Buy Nothing” Groups

Neighborhood “buy nothing” groups, where people post things they want to give away, have become popular. These community networks can be a great way to get clothing, food, toys, appliances, and furniture absolutely free.

Not sure where to start? Visit BuyNothingProject.org or search Facebook to see if there’s a buy nothing group near you.

Recommended: 15 Creative Ways to Save Money

17. Be Kind to Yourself

Living on a minimum wage income can be a constant source of anxiety and stress. But think about thriving rather than just surviving on minimum wage. Be sure to practice self-care. There are lots of low-cost or free ways to reward yourself, from camping out to treating yourself to a fancy coffee to finding free live music in your area.

The Importance of Having a Savings Account

When you’re living paycheck to paycheck, saving money can feel like an impossibility. But opening a high APY savings account is a wise move. It’s a place where your money can securely grow over time, thanks to the interest it earns. It’s also a place that may be less tempting to tap into than your checking account, and it’s less risky than, say, investing in the stock market.

You can save for a specific financial goal, such as moving to a bigger apartment, or let it build as a nest egg for your retirement. Another reason it’s important to have some savings? You need an emergency fund for life’s unexpected and expensive moments, such as having a sick pet, needing a car repair, or suddenly losing your job.

Financial experts generally advise having at least three to six months’ worth of living expenses socked away. This cash can help prevent your using credit cards or money in your checking account slated for bills when an urgent need crops up.

Can You Open a Bank Account While Earning Minimum Wage?

Yes. You don’t have to have a high-paying job in order to open a bank account. Anyone in the U.S. who is 18 years old or older can open a bank account on their own, and that includes people who are unemployed or have no income at all.

It’s important to know that many traditional banks require you to make a minimum deposit when opening a bank account, which can be anywhere between $25 and $100. However, some banks, especially online ones, will allow you to open an account with no minimum balance required.

What to Look for in a Bank on a Minimum Wage Salary

If you earn a minimum wage, you’ll likely want a bank that doesn’t have a lot of hurdles to opening an account or charge a lot of fees. Look for these features:

•   No extra fees: Some banks tack on extra fees for different reasons, such as using an ATM not in their network, overdraft fees for having to cover for insufficient funds, or a monthly maintenance or service fee. Look for a bank that doesn’t charge these fees.

•   Interest-bearing account: A bank account that allows you to earn money on your deposits can only help your money grow. Many banks don’t pay interest on checking funds, or pay a sliver of a percentage on savings. Shop around for a better annual percentage yield (APY).

•   No monthly minimum balance requirements: Many banks charge a monthly fee if you don’t keep a minimum balance in your account. Search for one without any rules on how much money you’re required to have in there.

•   Low-to-no minimum deposit requirements: You may find some banks have a minimum amount of money you have to deposit in order to open an account. It could be as low as $10. However, you can also find banks that don’t require any deposit at all to start an account.

Banking with SoFi

People who live on a minimum-wage salary can benefit from creating and sticking to a budget, finding ways to cut costs, knowing about financial assistance programs, and finding a trusted online bank offering zero account fees, no balance or deposit minimums, and no service charges.

Banking with SoFi can help your money grow, whether you’re earning a lot or a little. When you open an online bank account with direct deposit, you’ll earn a competitive APY, have no monthly minimum balance requirements, and pay no account fees. Another plus? Qualifying accounts get paycheck access up to two days early.

FAQ

Is minimum wage a liveable salary?

It can be, depending on where you live, your expenses, and how much of a minimum wage you’re earning. Many states, cities, and even companies offer a higher minimum wage than the federal wage of $7.25, making it easier for people to survive. That said, in some parts of the country, you would have to work almost two full-time minimum wage jobs just to afford a one-bedroom rental.

What are some tips for lowering expenses when earning minimum wage?

Housing, transportation, and food are the biggest expenses for the average American household. Some ways you can lower these costs is downsizing your housing situation or getting a roommate, limiting restaurant meals, cutting grocery costs, and opting for public transportation. In addition, it can be worthwhile to research local and federal programs that can help you lower expenses and get more for your money, from food stamps to Medicaid.

Can you open a bank account when earning minimum wage?

Yes, you can, but it’s wise to shop around for a bank that doesn’t charge any excess fees or require a monthly minimum balance requirement. Also look for ones that pay a competitive APY on your savings and possibly your checking balance as well.

Photo credit: iStock/AsiaVision

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.

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.

SOBK0123016

A payee of a check is the person or business to whom the check is made out and who will receive funds.
While checks may not be used as often as they once were, they are still an important way to make payments, and one that can require a bit of knowledge to use properly.

Understanding who is the payee is one of those details. Read on for more information on this key aspect of checks, including:

•   What is a payee?

•   What is a payee vs. payor on a check?

•   How can payees receive money?

•   How can you identify the payee on a check?

•   How can you handle checks safely?

What Is a Payee?

What is the payee? As briefly noted above, the payee is the individual who receives the payment. When a payment is made via a check, their name is written on the payee line.

A paper check is a form of payment that transfers money from one bank account to another. For a check to be valid, it has to have the recipient’s name (aka the payee), payment amount, and date written on it clearly. Checks can be a very convenient way to make a payment or to give someone a gift. They are also considered to be fairly secure forms of payment as only the person named on the check can cash the check.

It’s also possible to make a payment via an electronic check. The way an electronic check (which can also be called an e-check) works is essentially the same as a paper check minus the paper. It’s possible to send a check digitally and the payment will be transferred via an ACH (automated clearing house) network.

Payee vs Payor: What’s the Difference?

Who is the payee? Here’s the difference:

•   The payee is the party receiving the payment when someone writes a check.

•   The payor on the other hand is the party who is making the payment. It’s also common to hear the payor referred to as the payer. The individual who writes the check is the payer.

It is possible for the payor and the payee to be the same person. An individual can pay themselves via a check by writing their own name on the payee line. This is commonly done when transferring funds from one account to another or from one bank where the individual has an account to a second bank they have an account at.

Recommended: 7 Ways to Tackle Financial Stress

Ways That Payees Can Receive Money

What does payee mean? While one meaning is the recipient of a check, that’s not the only way a person or business can be paid. Payees can also receive funds by a variety of different payment methods, such as:

•   Cash: Yes, dollar bills (and other denominations) still have a place around the world.

•   Credit card: You can swipe, insert, or tap your way to pay for goods or services.

•   Cashier’s check or certified check: These are secure forms of payment with additional assurances beyond a standard check.

•   Money order: These are available for purchase at U.S. post offices and via services like Western Union

•   Electronic transfer: Examples of this include when your paycheck is put into your checking account by direct deposit

•   Mobile wallet payment: Say you have dinner with a friend, but you pay for it and your friend pays you back via Apple Pay/Apple Cash or a similar app.That’s an example of a mobile payment in action.

All of these payment formats have different advantages and disadvantages. So it’s important to research all options individually to see which one is the most convenient, costs the least, and is the most secure. Sometimes you aren’t given a choice about how to make a payment (such as a landlord having a specific preference for how they want to receive rent payments), but many individuals and vendors accept a handful of different payment methods.

How to Identify a Payee on a Check

Figuring out who a payee on a check is isn’t hard, especially since all checks follow the same format. If someone is reading a check and wants to know who the payee is, all they have to do is look at the top of the check where it says “pay to the order of.” This part of a check is known as the payee line, and it designates who can cash the check.

The payee can be an individual or a business when paying bills. When filling out a check, it’s important to write the individual or business’s full name (so if it’s Jane Smith Brown, don’t write J.S. Brown). The payee’s name must be spelled correctly, or they may not be able to cash the check.

Recommended: Differences Between a Deposit and a Withdrawal

Tips for Handling a Check Safely

Fraud can happen with a variety of payment formats, including check. When making a payment via check, it’s important to keep security top of mind to help avoid check fraud (which is notoriously difficult to resolve). These are some tips that can help consumers handle checks safely:

•   Fill out the check using a pen so the payee’s name and the payment amount can’t be changed.

•   Double-check that the payee’s name and the payment amount is correct.

•   Print clearly when filling out a check; cursive writing can lead to mistakes.

•   Don’t sign a blank check — ever. If you do, there’s the risk that a thief or the payee could fill in whatever amount they want.

•   If possible, don’t send checks by mail since they can be stolen. This is especially true for checks for a large amount of money.

•   If you must mail a check, try to use security envelopes, which are the kind that aren’t see-through, so a potential thief can’t tell there is a check inside.

•   When mailing a check, mail it via the post office, versus leaving it in a residential mailbox to be picked up.

•   If you are concerned about making a mistake when sending a check, you can always choose to do an ACH payment instead. When transferring money via ACH, it’s actually possible to reverse mistakes. Another option could be a wire transfer, which may be reversible if one acts quickly enough.

And what if you are receiving a check? Follow these pointers:

•   It’s important to deposit it fairly soon. Otherwise it might get misplaced and expire. How long are checks good for? Typically, they are valid for six months.

•   It’s wise to only cash a check from someone the payee is familiar with and that the check is for the correct amount. It’s best not to cash a check that is for more money than is owed. Here’s why: A common form of check fraud is to give someone a check for more money than they owe and then to ask for a refund. The victim sends the refund, only to discover the check they deposited bounced, meaning they have lost money on this transaction.

•   You may be able to sign the check over to someone else (say, a friend you owe money to); make sure you follow the correct steps carefully to ensure a smooth transaction.

The Takeaway

Financial terminology isn’t necessarily complicated. Wondering who is the payee of a check? The payee is the individual receiving payment via check, and they are usually the only individual who can cash the check (unless it gets signed over). Making a payment via check is very convenient, but it’s important to keep safety top of mind when making a payment this way, especially if the payor plans to mail the check.

Whether you are receiving or writing checks or do most of your transactions electronically, opening an account with an online bank can simplify your financial life. For instance, with a SoFi Checking and Savings account, you can spend and save in one convenient place and have options like Vaults and Roundups to help your cash grow.
You’ll also earn a competitive annual percentage yield (APY), and pay no account fees, which is also part of our better-banking benefits. Another perk? Qualifying accounts with direct deposit can access their paycheck up to two days early.

FAQ

What are payee requests?

If someone comes across a payee request, this is usually because they are filling out a form that is requesting the proper information to pay someone. Information such as their name, address, and bank account and routing numbers may be required, depending on the chosen form of payment.

Can you get scammed by a payee?

It is possible to get scammed by a payee. People can request payment for goods and services and may not deliver on their promise. It’s possible for payees to commit a variety of types of fraud.

Can the payee ever be the one who sends the payment?

In most cases, the payee is not the person to send a payment but rather the recipient of funds. The payor (or payer) is the individual who makes a payment. That said, there are instances when a person might make out a check to themself as a way to, say, transfer funds to a different account. In this case, they are both the payee and the payor.

Photo credit: iStock/AndreyPopov

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.

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.

SOBK0123022

A tax identification number (TIN) is a number the IRS, state governments, employers, and individuals use for tax purposes. It’s a vital series of numerals: Individuals need a TIN to file taxes, follow tax laws, and legally work for a U.S. employer. You’ll likely see a spot for this number to be filled in on certain documents relating to being hired or filing your tax return.

Corporations and non-profits also need tax identification numbers to comply with federal and state tax laws. In rare cases, individuals might have a tax identification number when they can’t obtain a Social Security Number, or if they adopt a child or work as a tax preparer.

Your tax identification number plays a key role in managing your taxes. Read on to learn more, including:

•   What is a tax identification number?

•   What are the different kinds of TIN numbers?

•   How do you get a tax identification number?

•   How do you find your TIN?

What Is a Tax Identification Number?

A tax identification number (TIN) is how the Social Security Administration (SSA) and Internal Revenue Service (IRS) identify individuals and corporations for tax purposes in the United States. The IRS and state governments use these numbers to:

•   Collect taxes

•   Provide tax refunds

•   Create identifying tax documents

Knowing your TIN is an important part of understanding your taxes. Without one, you will like face significant issues in your tax-filing and potentially your financial life in general.

How Does a Tax Identification Number Work?

A TIN provides an identity to every U.S. taxpayer, including individuals and corporations. Individuals submit their TIN to employers to show they are eligible to work. The employer also uses the employee’s TIN for tax purposes.

At tax time, putting your TIN on your documents is essential to filing. This number is how the IRS differentiates between taxpayers. After you file taxes, the IRS provides a refund or notifies you of what you owe. Therefore, a TIN is crucial for ensuring your good standing with the IRS by paying the correct amount of taxes. Because different types of taxes apply to individuals and corporations, a TIN number can help distinguish your and your tax-filing history and status as you pay applicable taxes.

Recommended: How to Pay Less Taxes: 9 Simple Steps

Types of TIN Numbers

If you’re wondering what a TIN in taxes is, it’s not a single entity. There are actually five types of TIN numbers that serve various purposes or apply to different kinds of individuals or entities:

•   Social Security Numbers (SSN). A SSN is used for individuals, sole proprietors, and LLCs made of one person needing an SSN.

   How to get one: U.S. citizens usually receive an SSN when they’re born. If not, you can apply for one using IRS Form SS-5 .

•   Employer Identification Number (EIN). An EIN is for individuals and businesses that have more than one member or employ workers.

   How to get one: Employers can obtain an EIN by applying for one on the IRS’s website or submitting Form SS-4 by mail or fax. Applying physically takes more time, while applying online can get you an EIN almost instantly.

•   Individual taxpayer Identification Number (ITIN). An ITIN is for individuals who pay U.S. taxes but don’t qualify for a Social Security Number. Important note: An ITIN does not make you eligible to work in the U.S., receive Social Security payments, or obtain the Earned Income Tax Credit.

   How to get one: You can apply for an ITIN by submitting Form W-7 to the IRS.

•   Adoption Taxpayer Identification Number (ATIN). An ATIN is for individuals who adopt a minor who is a U.S. citizen or resident but don’t have enough time to obtain an SSN for the minor before filing taxes.

   How to get one: You can apply for an ATIN by submitting Form W-7A to the IRS.

•   Preparer Tax Identification Number (PTIN). A PTIN is for individuals who receive payment to file taxes on behalf of others.

   How to get one: You can apply for a PTIN on the IRS’s website or by submitting Form W-12.

Quick Money Tip: Direct deposit is the fastest way to get an IRS tax refund. More than 9 out of 10 refunds are issued in less than 21 days using this free service, plus you can track the payment and even split the funds into different bank accounts.