Rebuilding Trust in a Marriage After Financial Infidelity

Rebuilding Trust in a Marriage After Financial Infidelity

Marriage is a wonderful but challenging institution. It is supposed to be built on trust and honesty, but infidelity does occur — and it can be devastating. That holds true for financial infidelity, too: Maybe one partner racks up a major amount of debt without disclosing it, or each spouse is keeping a secret account “just in case.” When this kind of behavior takes root and is then exposed, it can do serious harm to a union.

But if financial infidelity in marriage occurs, it doesn’t necessarily mean the partnership is on the rocks. In fact, with the right approach, a marriage can emerge even stronger. Read on to find out:

•   What is financial infidelity?

•   What are the warning signs of financial infidelity?

•   How can you prevent financial infidelity?

•   How can you recover from financial infidelity?

What Is Financial Infidelity?

Financial infidelity occurs when one person in a relationship hides, manipulates, or falsifies information about their financial position, bank accounts, or transactions. The problem can be unintentional to start with but then grow into a significant problem with severe detriment to the relationship.

For example, one spouse may offer to take care of the bills and the finances, and the other spouse trusts them to be responsible. However, the spouse who pays the bills may begin to spend excessively unbeknownst to their partner. They might spend on clothing, stocks, expensive meals out, or any other expense. The result of these splurges could do harm to both partners’ finances, even though only one is aware of it and responsible for it.

What Are Some Common Examples of Financial Infidelity?

Financial infidelity can occur in a variety of situations; whether both couples work or only one spouse doesn’t; whether they have joint vs. separate bank accounts. There’s no one main type.

Here’s a closer look at the different forms of financial infidelity that can occur in a marriage.

Spending Money in Secret

As mentioned above, if one partner splurges and keeps that secret, it can be a form of financial infidelity. This can impact a couple’s shared goals, such as saving for a down payment on a house. Some spouses may establish how much they can spend without having to consult the other. This can help keep the finances fair and avoid this kind of secret spending.

Hiding Debt From One Another

Not disclosing debt to a partner is dishonest and can negatively impact both spouses. For joint bank accounts and credit cards, both partners are equally liable for any debt. For this reason, it’s wise if couples discuss their financial situation early in their relationship, before they enter into a financial partnership to avoid any surprises later on.

Hiding Accounts From One Another

Some people may hide bank accounts from their partners, perhaps considering it their secret “mad money” on the side. While spouses don’t need to know everything about each other’s lives, they do need to be transparent about finances to be on the same page working toward the same goal.

Lying About Income

A spouse might disclose that their income is lower than it really is. They may then use the difference for their own purposes, rather than for shared goals.

Why Do People Commit Financial Infidelity?

There is no one reason why people lie about finances in a marriage, but many do. According to a survey by U.S News & World Report, close to a third of couples experience financial infidelity. Here are three possible explanations.

•   Embarrassment. An individual who has financial difficulties might be ashamed to disclose their financial circumstances when they marry or live with another person. So rather than confess, they hide their debt, say, or a salary that’s lower than they said it was.

•   Revenge. In an unhappy relationship, one partner may tap into shared wealth to exact revenge or punish the other. This behavior, known as “revenge spending” can increase debt (particularly credit card) debt that is not likely to be repaid if there are irreconcilable differences.

•   Emotional issues. One spouse may have an addiction or psychological problem that causes them to act irresponsibly with money. For example, they might have compulsive buying behavior (CBB; which some people refer to as a shopping addiction), bipolar disorder, substance abuse, or gambling.

What Are the Effects of Financial Infidelity?

The most immediate effect of discovering financial infidelity is probably loss of trust. The longer-term consequences can be financial difficulties and, ultimately, divorce. Here’s a closer look:

•   Loss of Trust. When one person in a relationship or marriage withholds, hides, or misconstrues information, they abuse the trust that the person places in them.

•   Financial Difficulties. If one partner has hidden their debt or another financial minefield from the other, it can cause problems for their shared finances. They may both experience cash flow issues and have trouble paying bills and saving.

•   Lower Credit Score. Acting irresponsibly with money, failing to pay bills, or falling deeper into debt will likely cause a lower credit score for the parties involved.

•   Divorce. The problems that result from financial infidelity can lead to separation and divorce.

Tips for How to Deal with Financial Infidelity

Can a marriage survive these kinds of money problems? In all likelihood, yes, provided both partners are committed to moving ahead together. Also worth noting: According to an AICPA survey, seven in 10 married or cohabiting Americans have argued about finances in the past year, but they don’t all divorce. That bolsters the idea that there is a road forward.

Here are some signals that trouble is brewing. Know them so you can hopefully spot them early and save your marriage if financial infidelity occurs.

Watch for Signs

Look out for signs that your spouse’s financial management is suspect. For example, are they unwilling to discuss financial issues? Have you noticed a sudden change in your spouse’s spending? Do you suspect your spouse is hiding information about their finances or lying about money?

If you cannot ask questions and get an honest answer about your marital finances, there is a problem to address.

Keep Tabs on Your Finances

Keeping an eye on your finances will help you recognize problems and tackle them immediately. Do you notice that your spouse isn’t contributing to your retirement account anymore? Are you falling behind on bills and struggling to catch up? These are signals that something has changed.

Get Involved

If one spouse has been holding the purse strings, it’s probably time for that to change. A marriage is an equal partnership, and both partners should play a role in managing the finances. It’s not fair for one partner to bear all the financial responsibility and decision-making. Getting involved is also a good way to stay informed about your shared finances.

If financial infidelity has occurred, you and your partner have options. You might work it out between the two of you, or you might consult a couples counselor, try financial planning, or see a financial therapist (which combines interpersonal and money advice).

Tips for Preventing Financial Infidelity

There are steps you can take to avoid financial infidelity in a marriage and repair missteps. A good place to start is for both partners to have a clear picture of each other’s financial position and their spending habits from the outset. But it’s never too late to sit down (with or without a financial advisor) and develop a plan for managing finances and building wealth. Here, some tactics to try:

Have Frequent Meetings

Agree to meet with your spouse regularly to discuss finances. It could be weekly at first as you get into a rhythm, sort out bank accounts and bills, develop a plan and commit to money goals, and create a budget. But once you are on sound footing with a system, the meetings could be less frequent, perhaps monthly.

Share Responsibilities of Finances

Use the meetings to hold each other accountable. Discuss how decisions should be made on purchases. How are you going to save toward retirement? Decide who will be responsible for what when it comes to the finances, but ensure that both of you are involved.

Communicate All Financials

Review everything — mortgage or rent payments, joint bank accounts, individual bank accounts, credit card payments, car loans, insurance, savings and investments, liens, and credit scores. If both of you have a clear picture of your financial situation, it’s easier to come up with ideas for cutting costs or making financial decisions.

Create a Joint Budget

Try budgeting as a couple, not two separate budgets for you as individuals. As a couple, create and follow a budget. A household budget is unlikely to do its job if members of the household overspend or hide information. If spouses can start working together toward a common goal, trust can be established or, after an instance of financial infidelity, rebuilt.

Recommended: Is a Joint Account Right for You?

Address Any Issues

As the two of you go over the finances, issues are bound to arise. And money can be a very charged topic. Do your best to discuss things calmly. If one person gets defensive, consider taking a break and resuming the meeting at a later time. If you are guilty of financial infidelity, admit it, apologize, and use this as an opportunity to get back on track.

Can a marriage survive financial infidelity? Yes, it can. But each spouse must be open to working through the problem, repairing the damage, adopting a forgiving attitude, and moving forward with transparency and trust.

The Takeaway

Financial matters can be a leading cause of divorce. While partners do have the right and the need for some privacy, financial infidelity is a serious issue. If one partner is hiding money, debt, or income information from the other, it can feel like betrayal and can negatively impact both spouse’s financial futures.

Financial infidelity does not, however, have to mark the end of a marriage. It can be the start of a stronger commitment to work together toward financial stability and greater respect. It starts with a willingness to talk openly and regularly, behave responsibly fiscally, shoulder the financial responsibilities, and admit blame if you are in the wrong.

Managing your finances together can be simple and transparent when you open an online bank account with SoFi. Our Checking and Savings gives you tools to track your cash at a glance. Set up your account with direct deposit, and you’ll also earn a super competitive 2.50% APY with no account fees, which can help your money grow faster.

Check out all the amazing perks you’ll enjoy when you bank with SoFi: great interest rates, no fees, and more!

FAQ

Can marriages survive financial infidelity?

A marriage can survive financial infidelity if both partners are committed to rebuilding the trust that has been lost. This requires accepting responsibility. Going forward, both partners need to develop a plan to communicate openly and regularly about finances and to work toward mutual goals. Lastly, both should play a part in managing finances.

Is financial infidelity a leading cause of divorce?

Money is often cited as one of the leading causes of stress in a marriage and one that can lead to divorce. Money touches every aspect of our lives and dictates how we live, so it is an extremely sensitive and personal topic, which can trigger major issues in a relationship.

Is financial infidelity the same as cheating?

Financial infidelity can have the same impact as an affair; both destroy trust in a relationship. Whether one or the other is worse depends on your point of view. Both can be overcome, and trust can be rebuilt with commitment and the right approach.


Photo credit: iStock/Stadtratte

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Inflation, Cryptocurrency, and How They Interact

Inflation, Cryptocurrency, and How They Interact

When it comes to crypto and inflation, certain cryptocurrencies have been touted as assets that can protect against inflation. But lately, with rising interest rates and declining crypto prices, crypto isn’t proving to be the inflation-fighter many had hoped.

For example, gold has been a popular hedge against inflation, as it holds value well and doesn’t tend to be volatile. For several years, many people put Bitcoin in a similar category — as a fairly stable store of value.

But crypto values aren’t holding steady in the face of growing inflation — not even Bitcoin. It remains to be seen whether different types of crypto can indeed be an inflation hedge or not.

Understanding Inflation and Cryptocurrency

Inflation

Inflation occurs when a fiat currency such as the U.S. dollar decreases in value over time, which in turn causes the price of goods and services to rise.

Inflation can occur when there is an extra supply of currency, when money is printed faster than it’s needed in the market. It also happens as the price of goods increases, which can be because of various factors — meaning it takes more and more units of a currency to purchase the same products.

The Federal Reserve Bank aims to keep inflation at 2%, and uses monetary policies to keep it at that rate and not go higher.

The question is: Is crypto a good hedge against inflation, given current conditions?

Cryptocurrency

Understanding how cryptocurrency works will help to shed some light on why these digital currencies have been considered an inflation hedge, even though crypto is a relatively new asset class.

Cryptocurrencies are digital and decentralized, meaning they are maintained by peer-to-peer (P2P) networks, and created using distributed ledger technology (blockchain) and through P2P review. This is accomplished through different consensus methods, which vary depending on the coin.

So, during inflationary times for the U.S. dollar — when purchasing power is declining and the cost of goods is rising — the role of the Federal Reserve, the central bank that governs the dollar, is key. But cryptocurrencies aren’t beholden to a governing body like that, and thus cannot be controlled or manipulated in the same way that fiat currencies can. This is why many believed or hoped that cryptocurrencies, particularly Bitcoin, would be impervious to inflationary conditions.

Do Cryptocurrencies Experience Inflation?

The terms “inflationary” and “deflationary” refer to whether the supply of a cryptocurrency is growing (inflationary) or shrinking (deflationary). These terms are somewhat separate from the traditional concept of inflation, which focuses on the cost of goods and services.

Bitcoin is largely considered an inflationary crypto because its supply is still increasing, similar to Dogecoin. That said, some consider Bitcoin to be deflationary, because the supply can only increase to a hard cap of 21 million coins, and the rate that they get released to the market through mining decreases over time (a process called “halving”, because the number of Bitcoin mined per block is cut in half every four years). For now the supply of Bitcoin is still increasing, until it has all been mined around the year 2140.

Once all 21 million Bitcoins have been mined, Bitcoin will not be inflationary or deflationary. It will be disinflationary, meaning it has a stable supply and constant monetary base.

Other coins are not as clear cut. Ethereum is considered an inflationary currency, because its supply is increasing — even with the so-called Ethereum Merge — but under a certain protocol, some ETH are burned.

Cryptocurrencies can have very volatile values over short periods of time, making them a risky asset class. Even if they do maintain value when a national currency decreases in value, consumer purchasing power is still affected if the price of goods and services increases — and consumers can’t necessarily rely on crypto as a steady store of value to combat that.

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Crypto vs Fiat Currencies in Periods of High Inflation

During periods of high inflation, fiat currency decreases in value and consumers’ purchasing power goes down. Cryptocurrencies that have a fixed supply could theoretically protect against inflation, and this has been one of the benefits of using crypto for some investors, but the reality is a bit more complicated.

Crypto During Inflation

Although crypto has been talked about as a hedge against inflation, in reality that hasn’t exactly held up, as evidenced by events in 2021 and 2022.

Inflation has been fairly low over the past several years, so the crypto hedge theory hasn’t really been tested thoroughly, but 2022 has seen a sharp increase in inflation along with a crash in both the stock market and cryptocurrencies, suggesting that crypto may not be as safe a hedge as was previously thought.

Also, since so much institutional money has gone into crypto in recent years, some think that helps to explain why crypto tends to follow the broader market and is getting more closely correlated with the S&P 500 and the Nasdaq. It’s difficult to say, as there is no historical precedent that provides a clear comparison for the current situation.

For an asset to be a good hedge against inflation, it needs to be stable and trustworthy. Having a fixed supply is in Bitcoin’s favor, but Bitcoin’s short-term volatility makes it a somewhat unreliable hedge against inflation, although it may be inflation resistant. It might go up in value when the U.S. dollar goes down, but if it then sees a dramatic downswing it may not keep up with the pace of inflation.

For this reason, many investors have returned to gold since the recent drops in the crypto market. On the other hand, the long-term prospects of Bitcoin and other cryptocurrencies have much more potential for growth than another ‘safe’ asset such as gold.

An alternative to cryptocurrencies like Bitcoin is stablecoins. Stablecoins are pegged to an external asset’s value, such as a national currency, making them more stable than other cryptocurrencies. There are stablecoins backed by many different fiat currencies, making it pretty easy to trade between those pegged to the U.S. dollar and other currencies as inflation rates change.

However, holding a stablecoin backed by the U.S. Dollar won’t protect against inflation.

Fiat Currencies During Inflation

Fiat currencies are the opposite of cryptocurrencies in that central banks can create more of them at any time. When more money gets printed, this creates inflation risk. The value of the fiat currency decreases, so the same amount of money will no longer buy the same amount of goods.

Fiat Currencies

Cryptocurrencies

Regulated by central authoritiesDecentralized
Supply can be increased by central banks; fiat is considered inflationaryCrypto can be inflationary or deflationary because supply can be increased or decreased
Lose value when inflation risesMay lose or gain value when inflation rises

Tips on Hedging Against Inflation

There are several ways one can possibly protect their money from inflation. These include:

•   Gold and precious metals

•   Commodities

•   Bonds

•   Real Estate Investment Trusts (REITs)

•   The S&P 500

•   Real Estate

•   International diversification

•   Treasury Inflation Protected Securities (TIPS)

💡 Here are more tips and details on hedging against inflation

The Takeaway

During periods of inflation — when purchasing power is declining and the cost of goods is rising — the Federal Reserve can intervene by adjusting monetary policy. Because cryptocurrencies aren’t beholden to a governing body like that, they cannot be manipulated in the same way that fiat currencies can. This is why many believed or hoped that holding cryptocurrencies, particularly Bitcoin, would act as an effective hedge against rising prices.

Crypto is still a relatively new asset class, so in the future it may prove to be a solid hedge against inflation, but it is still a developing and immature sector. Overall, it’s too early to say whether crypto is an effective hedge, but investors are looking to alternatives to the traditional choices of gold and bonds since those are no longer proving reliable.

That said, some believe that Bitcoin is tied more to monetary policy and asset inflation/deflation, not to core inflation. There are some signs indicating that that is the case and it may hold to be true in the future. Between 2020-2022 there have been so many dramatic world events as well, so it’s difficult to pinpoint exactly what crypto is tied to.

Regardless of the current market climate, there may be other reasons to invest in crypto — particularly its long-term prospects. If you’re interested in trading cryptocurrencies, you can set up an Active Invest account with SoFi Invest® and open a crypto trading account from there. SoFi’s secure and convenient app lets you research, track, buy and sell crypto, stocks, ETFs, and other assets right from your phone or laptop, 24/7. And you can get started with just a few dollars.

Trade crypto and get up to $100 in bitcoin! (Offer is available through 12/31/22; terms apply.)

FAQ

Is the crypto market causing inflation?

No. The decline in value of many cryptocurrencies in 2022 coincided with a period of inflation in the broader U.S. economy, but that was not caused by the crypto markets.

Does crypto help with inflation? Does it hurt?

Crypto isn’t inherently good or bad for inflation. It is a way to diversify funds away from cash or stocks, which may help protect against inflation — although crypto does not have a long enough track record to know for sure.

Can cryptocurrencies suffer from inflation?

Not exactly. Cryptocurrencies don’t behave like traditional fiat currencies. They aren’t regulated and they don’t offer a consistent store of value, thus they generally aren’t used to make basic consumer purchases. So a drop in crypto values may impact investors’ portfolios, but not the cost of living.

Can you use cryptocurrencies to hedge against inflation?

Cryptocurrencies may be a way to protect against inflation, but they are very volatile and are becoming increasingly correlated with the broader market, so there is no guarantee they will hold value as other currencies decrease.


Photo credit: iStock/akinbostanci

Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments. Limitations apply to trading certain crypto assets and may not be available to residents of all states.
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The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).
2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.
3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.
For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal.Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or prequalification for any loan product offered by SoFi Bank, N.A., or SoFi Lending Corp.
2Terms and conditions apply. Earn a bonus (as described below) when you open a new SoFi Digital Assets LLC account and buy at least $50 worth of any cryptocurrency within 7 days. The offer only applies to new crypto accounts, is limited to one per person, and expires on December 31, 2022. Once conditions are met and the account is opened, you will receive your bonus within 7 days. SoFi reserves the right to change or terminate the offer at any time without notice.

First Trade AmountBonus Payout
LowHigh
$50$99.99$10
$100$499.99$15
$500$4,999.99$50
$5,000+$100

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Crypto vs Stocks: 8 Key Differences Traders Should Know

Crypto vs Stocks: 8 Key Differences Traders Should Know

Whether to invest in crypto vs. stocks may sound like a crazy debate to longtime traders and investors. The two asset classes couldn’t be more different — in terms of how they’re structured (one is digital, one has real-world value), how volatile they are (crypto’s swings can be more dramatic), where you store these assets, and more.

So, is crypto better than stocks — or are stocks better than crypto? Each one offers its own compelling set of opportunities, as well as risks. For new traders considering investing in crypto, here are some things to review as you enter the crypto vs. stocks debate.

Stocks: A Quick Review

When thinking about the difference between crypto and stocks, the first point to remember is that a share of stock represents a percentage of ownership in a tangible, brick-and-mortar business.

While stocks and whole sectors go in and out of fashion with investors, the stock itself still corresponds to a portion of a functioning company, with a price that reflects the value of that company. By contrast, cryptocurrencies are wholly digital, and that impacts their value, their real-world viability, and how they are traded.

Recommended: What Is a Stock? A Closer Look

Cryptocurrency: A Quick Review

Cryptocurrencies are types of digital assets that are created and stored digitally, using blockchain technology.

The main difference between crypto vs. stocks is that stocks are a share of ownership, while cryptocurrencies don’t have any intrinsic value, unlike fiat currencies. Fiat currency, like the U.S. dollar, is money that’s issued and backed by a central bank or government. Cryptocurrencies are wholly digital, and are not issued or overseen by a government, bank, or any other central authority.

And because they’re super volatile, most types of crypto aren’t currencies in the traditional sense. Their real-world value as a means of purchasing goods and services is limited right now.

The value of a cryptocurrency reflects a variety of factors, including current supply and demand for that currency. In some cases, it also reflects a faith in the underlying technology that powers the currency, or a particular innovation that a certain crypto stands for.

Recommended: What Is Cryptocurrency? A Beginner’s Guide

8 Major Differences Between Crypto and Stocks

Cryptocurrencies and stocks are very different assets. Here’s a look at some of the characteristics that set them apart.

1. Ownership

To purchase and own stock, you typically need a brokerage account to handle the transaction. That account is verified by information like your address, Social Security number, signature and more. This offers some protection in the event of identity theft or fraud.

Cryptocurrency offers more anonymity, but less security. You keep your coins or other digital assets in a crypto wallet, which can be fully virtual or it can exist on a USB drive. That anonymity may create unique risks, such as losing crypto to hackers or forgetting your password and losing access to your account. Or you could misplace your USB drive, and lose all your crypto.

Recommended: What Is A Crypto Wallet?

2. Exchanges

Stock exchanges have existed in some form or another for more than three centuries, most famously on Wall Street, in New York City. Cryptocurrency exchanges, on the other hand, are fairly new. The largest one, Binance, launched in 2017. Coinbase, another major player, was created in 2012.

Binance had a daily trading volume of about $76 billion, as of August 2022. At the same time, the Nasdaq, which is just one small part of the global stock market, had a trading volume that was nearly three times that amount. And the Nasdaq is only 14.5 % of the total stock market by some estimates.

3. Liquidity

Smaller markets also affect the ability to trade in and out of your investments, whether they’re stocks or cryptocurrencies. That ability to trade at will is called liquidity. Investors typically consider stocks highly liquid, since there are so many active traders in the stock market.

With cryptocurrency, on the other hand, liquidity varies quite a bit from one form of crypto to another. Bitcoin is more liquid than most cryptocurrency, simply because it has a higher trading volume. That means there are more buyers and sellers who want to trade if you want to get in or out of that particular cryptocurrency.

Both stock investors and crypto investors can fall victim to slippage, which involves losses when you have to sell a large amount of an asset during a period of low liquidity. However, the risk is higher for crypto owners, given the lower levels of liquidity in the crypto markets.

4. Volatility

There is volatility and risk involved in buying both crypto and stocks. Both assets can go up or down in value, and it’s nearly impossible to time the market to know exactly the best time to buy or sell.

While the stock market has a well-earned reputation for volatility, the broader market has tended to go up over the course of decades, with an average total return of about 10%. Since past performance is no guarantee of future returns, and public stocks must publicly report on their finances, investors have access to several sources of information to make decisions about purchasing those securities.

On the other hand, cryptocurrency is more likely to undergo sudden, drastic changes in value, sometimes without warning, leaving some to particularly wonder why crypto can be so volatile. Those swings can lead to potentially huge wins for crypto traders, but it can also create large losses in a very short period of time. More than 1,600 forms of crypto have vanished altogether in recent years. While it is possible for public companies to go bankrupt, they’re far less likely to lose all of their value than most cryptocurrencies are.

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5. Trading Costs

Every time an investor buys or sells stocks, they may have to pay transaction fees, such as commissions, that eat into their returns. Even investors who purchase low-fee, no-load index mutual funds — which are essentially baskets of stocks — have to pay fees that cover the costs of running the fund.

The costs of actively managed funds, and for trading through a brokerage account, may be higher.

The difference between stocks and crypto here isn’t substantial, because crypto trading can also come with substantial costs. Crypto exchanges charge fees. And there are “gas fees,” which are the costs extracted by a network for various transactions on the blockchain. Those fees vary widely from one form of crypto to another.

Some networks will raise the gas fees to speed up transactions. But by some estimates, the leading marketplaces charge at least 1.5% in fees to buy or to sell crypto. That will wipe out any gain under 3%.

6. Regulation

There are national agencies such as the Securities and Exchanges Commission (SEC) in the United States, which oversee stocks and stock markets. The regulation by those companies ensures a certain level of transparency into the publicly traded companies.

By contrast, cryptocurrencies remain largely unregulated.

That’s a benefit to some investors, who may have mixed feelings about government regulation. Decentralized networks run each cryptocurrency, with individuals focused on maintaining their technology and ensuring the integrity of the project.

Because the issue of crypto regulation is in flux, cryptocurrencies and exchanges remain at risk of facing drastic transformation or elimination. For example, a key debate in 2022 has been the question of whether crypto is a security or a commodity.

7. Trading Hours

The stock markets are usually only open during business hours in their home country, Monday through Friday, and closed on holidays on weekends.

By contrast, the crypto market runs around the clock, every day of the year. The 24/7 availability of the crypto markets may be one reason why crypto is so volatile. As decades of research on the stock market has shown, investors often succumb to emotional impulses that can drive their investment behavior. Time off can help restore a sense of control and order.

8. Diversification

Many investors aim to build a portfolio with diversified holdings that perform differently in different markets. In general, stocks often perform in correlation with the broader economy and are impacted by factors like inflation, unemployment rates, interest rates, and more.

Some proponents of cryptocurrency believe that it’s a non-correlated asset, meaning that this asset class doesn’t react to market events like traditional securities such as stock and bonds. Some also believe that it could act as a hedge against inflation, making it a valuable counterweight in a portfolio that has more inflation-sensitive assets.

Pros and Cons of Investing in Crypto

The question of investing in crypto vs. stocks comes down to the advantages and disadvantages of each, and what matters to your goals and risk tolerance.

Pros

Crypto is a new and, for some investors, an exciting asset class with many potential opportunities. It’s driven by cutting-edge technology, which is itself driving many new digital assets and innovations.

When the cryptosphere first launched with Bitcoin in 2009, it was considered an outlier. Now owning crypto is key to participating in nascent digital economies, like Web 3.0.
While investors can buy and sell stalwarts like Bitcoin, Litecoin, Ethereum, Dogecoin, Solana, and others, there are thousands of newer, smaller coins that may bring new technologies and new opportunities.

That makes for a market with sudden outsize gains (as well as stomach-churning losses), and the endless promise of new frontiers.

Cons

Speaking of sudden losses, one of the big disadvantages to investing in crypto is how vulnerable the technology can be to cyber attacks. Entire coins have been wiped out, billions of dollars have been lost (maybe more), and the truth is that until there are real crypto regulations on the books, those kinds of risks are going to be endemic to the crypto space.

The cost of owning and trading crypto is also unpredictable, thanks to the fluctuating costs on different exchanges and crypto networks. Just completing transactions on different networks can come with hidden costs.

Pros and Cons of Investing in Crypto

Pros

Cons

Potential for big gainsPotential for huge losses
Exciting new technology, essential for Web 3.0 and other innovationsHighly unregulated and vulnerable to cyber attacks
Opportunity to invest in new coinsCoins can lose value and disappear

Pros and Cons of Investing in Stocks

Stocks may seem old-school next to crypto, but after hundreds of years the stock markets aren’t going anywhere, and investing in stocks vs. crypto still offers some advantages (as well as some risks).

Pros

Investors who put their money into stocks enjoy the benefits of an asset class that’s long established and highly regulated. This also makes trading stocks simpler and more straightforward. It’s almost impossible to “lose” stocks you own, because of guardrails that protect investors, thanks to existing structures and regulations.

While stocks can be volatile and risky, overall stocks may be less vulnerable to hackers. Their value doesn’t hinge only on digital functionality, but the performance of an underlying entity — the company the stock represents. Therefore stocks have intrinsic value.

Cons

While the swings of the stock market still occur, some investors now handle that volatility by investing in stocks for the long term. You’re less likely to see wild gains in the stock market, the way you are with the crypto market.

Stock investors may not be as vulnerable to cyber attacks and hacks, compared with crypto investors, but there are plenty of vulnerabilities in the existing markets. The stock market is highly complex, and new securities and investment products enter the market frequently — think robo advisors, various derivatives, and more — with accompanying opportunities and risks.

Pros and Cons of Investing in Stocks

Pros

Cons

Wall Street is highly regulated, with many protections for investorsInvestors may not have the same kind of opportunities for outsize gains
Stocks are less vulnerable to cyber crimes and hacksThe stock market is highly complex, and new products pose new risks
Stocks have intrinsic value

The Takeaway

Stocks and cryptocurrency couldn’t be more different. Stocks offer investors a tangible piece of ownership in a company (even if it’s a tiny fraction of that company), whereas crypto assets don’t have intrinsic value. They are wholly digital and decentralized, which means they’re not regulated by a central authority like the Securities and Exchange Commission, which is one of the many agencies that help oversee the stock market and keep it safe for investors.

That said, of course, cryptocurrencies are new and exciting investments that present many opportunities that stocks, being more traditional, may not.

To some degree, investors can benefit from investing in both stocks and crypto, especially these days. When compared with crypto, stocks now seem like a fairly steady long-term play. And investing in crypto is going to be necessary in order to take part in the growing global digital economies, like Web 3.0.

If you’re ready to start building a portfolio with stocks or cryptocurrency — or both — one great way to get started is by opening an Active Invest account with SoFi Invest. You can buy stocks, ETFs, fractional shares, IPO shares — and you can set up a crypto trading account as well, to trade crypto any time, 24/7.

Trade crypto and get up to $100 in bitcoin! (Offer is available through 12/31/22; terms apply.)

FAQ

Does cryptocurrency work like stocks?

No. Cryptocurrencies are bought and sold on crypto exchanges; the fees are unpredictable; and many types of crypto are so new they don’t have a track record, and it’s hard to establish their value. Stocks are well established and highly regulated securities that can be bought and sold via a traditional brokerage or app, in a variety of forms — including index funds and exchange-traded funds, and more.

Is crypto a better investment than stocks?

It depends on your priorities. If you’re looking for super high-risk, potentially high-return investments — and you’re willing to face big losses — crypto might be your bag. If you prefer a long-term investment with less risk and the potential for relatively steady average returns over time, stocks could be your friend.

How can crypto markets impact stock markets?

As of September 2022, what happens in the crypto markets seems somewhat correlated with what happens in the stock markets. Meaning, investors in each market are behaving similarly – as when the Fed raised interest rates, and both stock values and crypto values dropped. That said, it’s not clear that one market impacts the other, but that investors handle stocks and crypto in similar ways.


Photo credit: iStock/ljubaphoto

SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).
2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.
3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.
For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal.Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or prequalification for any loan product offered by SoFi Bank, N.A., or SoFi Lending Corp.
Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments. Limitations apply to trading certain crypto assets and may not be available to residents of all states.
2Terms and conditions apply. Earn a bonus (as described below) when you open a new SoFi Digital Assets LLC account and buy at least $50 worth of any cryptocurrency within 7 days. The offer only applies to new crypto accounts, is limited to one per person, and expires on December 31, 2022. Once conditions are met and the account is opened, you will receive your bonus within 7 days. SoFi reserves the right to change or terminate the offer at any time without notice.

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What Companies Accept Dogecoin and Other Cryptos as Payment?

Which Companies Accept Dogecoin and Other Cryptos as Payment?

A growing list of businesses accept cryptocurrencies like Dogecoin as a form of payment, especially as crypto itself becomes more widespread and commonplace. Though Dogecoin is not as big or as popular as Bitcoin or Ethereum, it’s still gaining more and more acceptance among merchants and service providers.

That’s a list that includes airlines, professional sports teams, and many more.

Recommended: A Guide to Meme Stock Investing

Dogecoin Basics

Dogecoin, as of September 24, 2022, is valued at around $0.06, with a total market cap of more than $8.5 billion. While this may seem like a lot — and enough to put it in the cryptocurrency top ten, according to CoinMarketCap — it’s still relatively small compared to Bitcoin (valued at $19,000 with a $366 billion market cap) or Ethereum ($1,345, $164.4 billion). Yet, it’s still one of the top cryptos by market cap.

Recommended: SoFi’s Crypto Guide for Beginners

History of Dogecoin

Jackson Palmer created Dogecoin in 2013 as both a reference to the then-popular meme and to what was then seen as an explosion of interest in Bitcoin. In early 2018, during another huge runup in crypto prices, Dogecoin’s market cap reached more than $1 billion, which may have been seen as extreme at the time (it would fall back down to around $400 million), but was nothing compared to what was coming.

Between April and May of 2021, Dogecoin’s market cap rose from around $8 billion to almost $95 billion. After values dropped in 2022, it’s currently at around $8.5 billion. So, if you had hopes to see Dogecoin to $100, or to the moon, those hopes have likely been dashed for now.

Recommended: How to Read Crypto Charts

While traders can buy and sell Dogecoin like any cryptocurrency on mainstream exchanges like Coinbase, it does not have the buzzing hive of developer activity and use in businesses that others do. That’s slowly starting to change.

More than 240,000 people have signed a Change.org petition aimed at getting Amazon to start accepting the coin. While that request hasn’t gotten much traction, there are some businesses that have decided to start accepting it as a means of payment.

How Dogecoin Works

As for how Dogecoin actually works, it’s more or less the same as Bitcoin. Dogecoin is a virtual currency that lives on a blockchain network, operating off of a proof-of-work protocol. That means that participants on the blockchain network can mine new coins.

Transactions are verified and recorded on the blockchain, and new coins are produced, or mined, every minute.

15 Companies That Accept Dogecoin as Payment in 2022

1. The Dallas Mavericks

The NBA basketball team, owned by billionaire Mark Cuban, is not afraid of the occasional stunt to get attention. In March 2021, the basketball team said in an official statement that it would be accepting Dogecoin for both tickets and merchandise. Cuban explained the reasoning for the decision:

   “The Mavericks have decided to accept Dogecoin as payment for Mavs tickets and merchandise for one very important, earth-shattering reason, because we can! Because we can, we have chosen to do so. We have chosen to do so because sometimes in business you have to do things that are fun, engaging and hopefully generate a lot of PR. So we will take Dogecoin, today, tomorrow and possibly forever more. For those of you who would like to learn more about Dogecoin we strongly encourage you to talk to your teenagers who are on TikTok and ask them about it. They will be able to explain it all to you”

There are some other sports teams that accept cryptocurrencies, too, like the NBA’s Sacramento Kings, the NFL’s Tennessee Titans, the NHL’s San Jose Sharks, and MLB’s Oakland Athletics.

2. AirBaltic

Around the same time the Mavericks said they would begin accepting Dogecoin as payment, the European airline AirBaltic made a similar announcement.

“As an innovative airline, we always strive to search for ways to improve the customer experience starting from the booking process. Over the years around 1,000 clients have used the payment option, which may not seem like a lot, but still offers passengers a unique payment option hard to find elsewhere,” the airline’s CEO Martin Gauss said in a statement.

AirBaltic is majority owned by the Latvian state, adding an official level of approval to a cryptocurrency that, as its founder has said whenever anyone would ask, is meant to be a joke.

3. Newegg

The electronics online retailer said in April 2021 that it would start accepting Dogecoin. “We’re committed to making it easy for our customers to shop however works best for them, and that means letting them complete transactions with the payment method that suits them best. To that end, we’re happy to give Dogecoin fans an easy way to shop online for tech,” a Newegg executive said in a statement.

4. The Kessler Collection

The Kessler Collection owns several luxury hotels throughout the United States. In March 2021, the company said it would “accept Bitcoin, Ethereum, Dogecoin.” The company specifically pointed to cryptocurrencies hitting “an all-time high” as a justification for the expansion of the number of currencies they would accept.

5. Twitch

Twitch is a digital streaming service traditionally used by gamers to broadcast their gaming and associated commentary. Though it’s owned by Amazon, which does not accept Dogecoin or other cryptocurrencies as a valid form of payment, you can use Dogecoin on Twitch. Users can tip streamers in a variety of cryptos, in fact.

6. Tesla

As of early 2022, electric car maker Tesla accepts crypto. Tesla accepts Dogecoin, too, but not all Tesla products are eligible for purchase with crypto, though, so take note before you try and pre-order a Cybertruck with your DOGE holdings.

7. Keys4Coins

Keys4Coins is a digital PC games store, which sells a number of different products and services in the gaming sphere. As the name of the company suggests, it does take coins (crypto coins) as a form of payment, too, including Dogecoin.

8. AMC

You can also buy movie tickets at AMC Theaters with Dogecoin and Shiba Inu, using the company’s mobile app. AMC’s leadership made the announcement in early 2022, and have said that they will accept other cryptocurrencies in the future, too.

9. GameStop

GameStop has embraced its place in the meme space, and has started accepting meme coins, like Dogecoin, as a form of payment. GameStop is getting deeper into the crypto space with NFTs and metaverse projects, too, and is also accepting a short list of other cryptos as well.

10. Bitrefill

Bitrefill is a digital platform that allows customers to buy gift cards or even cell phone air time with crypto. Given the wide range of gift cards available from the retailer, it could be a good way to get a lot of utility from your crypto holdings. Bitrefill accepts Dogecoin, and several other cryptos.

11. Sling TV

You can even pay for your monthly television subscription with Dogecoin, as Sling TV has partnered with a crypto payment processor to accept crypto payments. Along with Dogecoin, you can pay for Sling TV with Bitcoin, Bitcoin Cash, and Ethereum.

12. Menufy

Menufy is an online ordering platform designed for use by restaurants. It allows restaurants to accept cryptocurrency payments through a crypto payment processor. There are thirteen in all, including Dogecoin.

13. ExpressVPN

For those seeking to cover their tracks on the internet, a VPN can go a long way. And now, you can pay for a VPN service using crypto like Dogecoin. ExpressVPN accepts several cryptocurrencies in exchange for using its service.

14. Sheetz

Sheetz, a chain of convenience stores in the eastern United States, is unique among businesses of its type in that it will accept crypto at the gas pump and in the store. That includes Dogecoin, along with Bitcoin and Ethereum.

15. Various Non-Profits

There are many non-profit organizations that allow people to donate money to, or pay them using Dogecoin and cryptocurrency. An internet search will yield many, many results.

Bitcoin

Dogecoin

Ethereum

Tether

Bitcoin Cash

NeweggYesYesYesNoYes
Dallas MavericksYesYesNoNoNo
The Kessler CollectionYesYesYesNoNo
AirBalticYesYesYesNoYes
TwitchYesYesYesNoYes
TeslaNoYesNoNoNo
Keys4CoinsYesYesYesNoYes
AMCYesYesYesNoYes
GameStopYesYesYesNoNo
SheetzYesYesYesNoYes
BitrefillYesYesYesYesNo
Sling TVYesYesYesNoYes
MenufyYesYesYesNoYes
ExpressVPNYesYesYesNoNo

Pros and Cons of Using Dogecoin for Purchases

There are some considerations, or pros and cons, to take into account when using Dogecoin to make purchases.

On the pro side, Dogecoin’s user base is growing, and so is the potential number of businesses that might accept it. And since Dogecoin is modeled after Bitcoin, it’s relatively easy to transact. It’s also easy to exchange for fiat or other cryptocurrencies, as Dogecoin is listed on most major crypto exchanges.

Conversely, though it’s become more popular, Dogecoin is still not accepted by many businesses, relatively speaking. It’s also worth noting that it’s an incredibly volatile asset, and could lose value before you’re able to make a purchase. Finally, there’s no supply cap for Dogecoin, which could affect its value going forward.

Pros & Cons of Making Purchases With Dogecoin

Pros

Cons

Growing in popularityStill not widely accepted
Easy to transactFluctuations in value
Easy to exchangeNo supply cap

Buying Crypto Today

While merchants have not begun accepting any types of cryptocurrencies, many do accept Dogecoin. Given its volatility, however, it can be hard to know whether using Dogecoin to make purchases will end up saving or costing the buyer money.

If you’re interested in buying Dogecoin or other cryptocurrencies, a great way to get started is an online crypto trading platform. With SoFi, you can use the app to buy cryptocurrency, including coins like Bitcoin, Ether, Dogecoin (unavailable in New York), Cardano, Litecoin, and a wide selection of other cryptos.

Trade crypto and get up to $100 in bitcoin! (Offer is available through 12/31/22; terms apply.)

FAQ

Which retailers will accept Dogecoin?

Many retailers accept Dogecoin, such as Sheetz, GameStop, and Newegg. It’s likely that more will in the future, too.

How many companies accept Dogecoin as payment?

It’s hard to pin down just how many companies accept Dogecoin as payment, but the list is likely growing by the day. As cryptocurrency becomes more commonplace, it’s likely that more companies will accept it as payment, and Dogecoin may be among those cryptos.

Does Amazon take Dogecoin?

No, Amazon does not accept Dogecoin as a form of payment. In fact, it doesn’t accept any cryptocurrencies at all.


Photo credit: iStock/Ksenia Raykova

SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).
2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.
3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.
For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal.Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or prequalification for any loan product offered by SoFi Bank, N.A., or SoFi Lending Corp.
Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments. Limitations apply to trading certain crypto assets and may not be available to residents of all states.
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.
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.
2Terms and conditions apply. Earn a bonus (as described below) when you open a new SoFi Digital Assets LLC account and buy at least $50 worth of any cryptocurrency within 7 days. The offer only applies to new crypto accounts, is limited to one per person, and expires on December 31, 2022. Once conditions are met and the account is opened, you will receive your bonus within 7 days. SoFi reserves the right to change or terminate the offer at any time without notice.

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How Does a Thrift Savings Plan (TSP) Loan Work?

How Does a Thrift Savings Plan (TSP) Loan Work?

Thrift Savings Plans (TSPs) are retirement plans for federal employees and members of the uniformed services. They offer the same kinds of benefits and tax advantages that private employers can offer their employees through a 401(k).

Like 401(k)s, TSPs allow savers to take out loans from their own savings. Borrowing against your retirement can be risky business, so it’s important to understand the ins and outs of TSP loans before you make a decision.

What Are Thrift Savings Plan Loans?

A TSP loan allows federal workers to borrow from their retirement savings. They must pay interest on the loan; however, that interest is paid back into their own retirement account. In 2022, interest rates were 3%, typically lower than the rate private employees pay on 401(k) loans.

Before you can borrow from your account the following must be true:

•  You have at least $1,000 of your own contributions invested in the account.

•  You must be currently employed as a federal civilian worker or member of the uniformed services.

•  You are actively being paid, as loan repayments are deducted from your paycheck.

•  You have not repaid a TSP loan in full within the last 30 days.

How Do Thrift Savings Plan Loans Work?

There are two types of TSP loans. General purpose loans may be used for any purpose, require no documentation, and have repayment terms of 12 to 60 months.

Primary residence loans can only be used to buy or build a primary residence. They must be repaid in 61 to 180 months, and they require documentation to qualify. You cannot use primary residence loans to refinance or prepay an existing mortgage, add on to or renovate your existing home, buy another person’s share in your home, or buy land only.

Recommended: A Guide to Personal Loans to Buy Land

Pros and Cons of a Thrift Savings Plan Loan

As you weigh whether or not it’s a good idea to borrow from your retirement savings, consider these pros and cons.

Pros of a TSP Loan

Chief among the advantages of borrowing from a TSP are the relatively low interest rates compared to most other loans. Consider that the average interest rate for personal loans is 9.41% according to the St. Louis Federal Reserve.

What’s more, repayment is simple, coming from payroll deductions. There is no penalty for paying back the loan early. And you don’t need to submit to a credit check to qualify for the loan.

Cons of a TSP Loan

Despite the benefits, borrowing from a TSP is often considered a last resort due to certain disadvantages.

First and foremost, when you borrow from your retirement you are removing money from your account that would otherwise benefit from tax-advantaged compounding growth.

If you leave your job with an unpaid loan, you will have 90 days to repay it. Fail to meet this deadline and the entire loan may be reported as income, and you’ll have to pay income taxes on it.

TSP loans are not reported to the credit reporting bureaus, so they don’t help you build credit.

Does a Thrift Savings Plan Loan Affect Your Credit?

TSP loans are not reported to the three major credit reporting bureaus — TransUnion, Equifax, and Experian — so they do not affect your credit score.

Recommended: How Do I Check My Credit Score Without Paying? 

How Long Does a Thrift Savings Plan Loan Take to Get?

Applying for a TSP is a relatively simple process. You can fill out an application online on the TSP website . There is a $50 processing fee for general purpose loans and a $100 fee for primary residence loans. Borrowers who are married will need spousal approval before taking out a loan.

Once the application is approved, borrowers receive the loan amount via check within eight to 13 days.

How Much Can You Borrow From a Thrift Savings Plan?

The minimum you have to borrow with a TSP loan is $1,000. Rules for determining your maximum are rather complicated. You’ll be limited to the smallest among the following:

•  Your own contributions and their earnings in your TSP.

•  $50,000 minus your largest loan during the last 12 months, if any.

•  50% of your own contributions and their earnings, or $10,000, whichever is greater, minus your outstanding loan balances.

According to these rules, $50,000 is the most you can borrow, and you may be limited to as little as $1,000.

Should You Take Out a Thrift Savings Plan Loan?

Because a TSP loan can have a lasting effect on your retirement savings, be sure to exhaust all other loan options before deciding to apply for one. If you are experiencing financial hardship or poor credit has made it hard for you to qualify for another type of loan, a TSP may be worth exploring.

Thrift Savings Plan Loan Alternatives

Before choosing a TSP loan, take the time to research other alternatives.

Credit Card

Credit cards typically carry very high interest rates. The average interest rate is around 14.56%, according to the St. Louis Federal Reserve. That said, if you use a credit card to make a purchase and pay off your debt on time and in full at the end of the billing cycle, you will not have to pay interest on your debt.

Credit cards only get expensive when you carry a balance from month to month, in which case you’ll owe interest. What’s more, the amount of interest you owe will compound. In order to carry a balance, you must make minimum payments or risk late penalties or defaulting on your debt.

Recommended: Differences and Similarities Between Personal Lines of Credit and Credit Cards

Passbook Loan

Passbook loans allow you to borrow money at low interest rates, using the money you have saved in deposit accounts as collateral. That money must remain in your account over the life of the loan. And if you default on the loan, the bank can use your savings to recoup their losses.

Signature Loan

Unlike passbook loans, signature loans do not require that you put up any items of value as collateral. Also known as “good faith loans,” signature loans require only that you provide your lender with your income, credit history, and your signature. Signature loans are considered to be a type of unsecured personal loan.

Personal Loan

A personal loan can be acquired from a bank, credit union, or online bank. They are typically unsecured loans that don’t require collateral, though some banks offer secured personal loans that may come with lower interest rates.

Loan amounts can range from a few hundred dollars to $100,000. These amounts are repaid with interest in regular installments.

Personal loans place few restrictions on how loan funds can be spent. Common uses for personal loans range from consolidating debt to remodeling a kitchen.

The Takeaway

For borrowers in a financial pinch, TSP loans can provide a low-interest option to secure funding. However, they can also have a permanent negative impact on retirement savings, so it makes sense for borrowers to explore other options as well.

SoFi offers low fixed interest rates on personal loans of $5,000 to $100,000. There are no fees, and borrowers only pay principal and interest.

SoFi’s Personal Loan was named NerdWallet’s 2022 winner for Best Online Personal Loan overall.

FAQ

What does TSP loan stand for?

TSP stands for Thrift Savings Plan, a retirement account the federal government offers to its civilian employees and members of the uniformed services.

What is a TSP loan?

A TSP loan allows Thrift Savings Plan holders to borrow from their retirement account. Loans are repaid automatically through payroll deductions, and interest payments are made back to the account.

How long does it take to get a TSP loan?

It takes eight to 13 days to receive a TSP loan from the time of application.


Photo credit: iStock/SDI Productions
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Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
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