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If you’re often surprised (and not in a good way) when you open up your credit card and bank statements and see how much money you spent, you are not alone. Or perhaps your pain point comes when you check your bank balance and worry that your cash outflow may be exceeding your cash inflow. In either scenario, there could be a simple solution: a personal cash flow statement.

Creating a personal cash flow statement can give you a clear picture of your monthly cash inflow (money you earn) and your monthly cash outflow (money you spend). Armed with that intel, you can determine if you have a positive or negative net cash flow.

And while it may sound intimidating, creating a personal cash flow statement is relatively simple. All you need to get started is to gather up your bank statements and bills for one month (or more). Then, it’s a matter of some basic calculations.

Once you have your personal financial statement, you’ll know where you currently stand. You’ll also be able to use your personal financial statement to help you create a budget and goals for increasing your net worth.

Here’s how to start getting your financial life back into balance.You’ll learn:

•   What is a personal cash flow statement?

•   How can I create a personal cash flow statement?

•   What is the difference between a personal cash flow statement and a budget?

•   How can I use a personal cash flow statement to create a budget?

What Is a Personal Cash Flow Statement?

“Cash flow” is a term commonly used by businesses to detail the amount of money flowing in and out of a company.

Companies can use cash flow statements to determine how well the business is generating income to pay its debts and operating expenses.

Just like the ones used by companies, tracking your own cash flow can provide you with a snapshot of your financial condition.

You might learn, for example, that you have less leftover at the end of each month than you thought or that you are indeed operating at a shortfall.

Once you have the numbers down in black and white, you can then make any needed changes, such as cutting your expenses to save money, increasing income, and making sure that your spending is in line with your goals.

So, how do you set up one of these cash flow statements? You may find a personal cash flow statement template or a personal cash flow statement example online, but let’s walk you through how and why to create one, so you get the most benefit out of the process. These steps can simplify things.

How to Build a Personal Cash Flow Statement

Listing All Your Sources of Income

A good first step when creating a personal cash flow statement is to get out all of your pay stubs, bank statements, credit card statements, and bills.

Next, you’ll want to start listing any and all sources of income — the inflow.

Cash inflows generally include: salaries, anything you make from side hustles, interest from savings accounts, income from a rental property, dividends from investments, and capital gains from the sale of financial securities like stocks and bonds.

Since a cash flow statement is designed to give a snapshot into the overall flow of where your money is coming from and where it is going, you might want to avoid listing money in accounts that aren’t available for spending.

For example, you may not want to list dividends and capital gains from investment accounts if they are being automatically reinvested, or are part of a retirement account from which you aren’t actively taking withdrawals.

Since income can vary from one month to the next, you might choose to tally inflow for the last three or six months in order to come up with an average.

Once you’ve collected and listed all of your income for the month, you can then calculate the total inflow.

Listing All of Your Expenses

Now that you know how much money is coming in each month, you’ll want to use those same statements and bills, as well as any for debts (such as mortgage, auto loan, or student loans) to list how much was spent during the month.

Again, if your spending tends to fluctuate quite a bit from month to month you may want to track it for several months and come up with an average.

To create a complete picture of how much of your money is flowing out each month, you’ll want to include necessities like food and gas, and also discretionary expenses, such as trips to the nail salon or your monthly streaming services.

Small expenses can add up quickly, so it’s wise to be precise.

Once you’ve compiled all of your expenses, you can calculate the total and come up with your total outflow for the month.

Determining Your Net Cash Flow

To calculate your net cash flow, all you need to do is subtract your monthly outflow from your monthly inflow. The result is your net cash flow.

A positive number means you have a surplus, while a negative means you have a deficit in your budget.

A positive cash flow is desirable, of course, since it can provide more flexibility. You can decide how to best use the surplus.

There are a variety of options. You could choose to save for an upcoming expense, make additional contributions to your retirement fund, create or add to an emergency fund, or, if your savings are in good shape, consider splurging on something fun.

A negative cash flow can signal that you are living a more expensive life than your income can support. In the future, maintaining this habit could lead to additional debt.

When creating personal cash flow statements, it’s also possible to have net neutral cash flow (all money coming in and going out is fairly equal).

In that case, you may still want to jigger things around if you are not already putting the annual maximum into your retirement fund and/or you don’t have a comfortable emergency cash cushion.

The Difference Between a Personal Cash Flow Statement and a Budget

A personal cash flow statement provides a comprehensive look at what is currently coming in and going out of your bank accounts each month.

A cash flow statement tells you where you are.

A personal budget, on the other hand, helps you to get where you want to go by giving you a spending plan that is based on your income and expenses.

A budget can provide you with some general spending guidelines, such as how much you should spend on groceries, entertainment, and clothing each month so that you don’t exceed your income — and end up with a negative net flow.

Creating a budget can also be a good opportunity to check in with your financial goals.

For example:

•   Are you on track for saving for retirement?

•   Are you interested in tackling the credit card debt that has been spiraling due to high interest rates?

•   Do you want to amp up your emergency fund?

•   How are you progressing on paying off your student loans?

Whatever your goal, a well-crafted budget could serve as a roadmap to help you get there.

Recommended: 9 Smart Ways to Pay Off Student Loans

Using Your Personal Financial Statement to Create a Simple Budget

Because a cash flow statement provides a comprehensive look at your overall spending habits, it can be a great jumping off point to set up a simple budget.

When you’re ready to create a budget, there are a variety of resources:

•   Break out a pencil and paper or buy a journal for this purpose

•   Use an app that’s part of your bank’s suite of tools, like SoFi Relay®

•   Download an app that isn’t connected to your financial institution but offers budgeting services

•   Try out spreadsheet templates and printable worksheets

A good first step in creating a budget is to organize all of your monthly expenses into categories.

Spending categories typically include necessities, such as rent or mortgage, transportation (like car expenses or public transportation costs), food, cell phone, healthcare/insurance, life insurance, childcare, and any debts (credit cards/loans).

You’ll also need to list non-essential spending, such as cable travel, streaming services, concert and movie tickets, restaurants, clothing, etc.

You may also want to include monthly contributions to a retirement plan and personal savings into the expense category as well.

And, if you don’t have emergency savings in place, put that on the spending list as well, so you can start saving towards that every month. How big an emergency fund do you need? Aim to cover at least three to six months’ of living expenses.

Once you have a sense of your monthly earnings and spending, you may want to see how your numbers line up with general budgeting guidelines. Financial counselors sometimes recommend the 50/30/20 budget rule, which looks like this:

•   50% of money goes towards necessities such as a home, car, cell phone, or utility bills.

•   30% goes towards your wants, such as entertainment and dining out.

•   20% goes towards your savings goals, such as a retirement plan, a downpayment on a home, emergency fund, or investments.

Recommended: Guide to Practicing Financial Self-Care

Improving Your Net Cash Flow

If your net cash flow is not where you want it to be or, worse, dipping into negative territory, a budget can help bring these numbers into balance.

The key is to look closely at each one of your spending categories and see if you can find some ways to trim back.

The easiest way to change your spending habits is to cut some of your nonessential expenditures. If you’re paying for cable but mostly watch streaming services, for example, you could score some real savings by getting rid of that service and its bill.

Not taking as many weekend getaways and cooking more often instead of getting takeout could start adding up to a big difference. If you tend to be a compulsive or impulsive shopper, you might take steps to understand your triggers, change your behavior, and rein in the outflow of money.

Living on a budget may also require looking at the bigger picture and finding places for more significant savings.

For example, maybe rent eats up 50% of your income, and it’d be better to move to a less costly apartment. Or you might want to consider trading in an expensive car lease for a less pricey or pre-owned model.

There may also be opportunities to lower some of your recurring expenses by finding a better deal or negotiating with your service providers.

You may also want to look into any ways you might be able to change the other side of the equation — the inflow of funds.

Some options might include asking for a raise or finding an additional income stream (making more money is a key benefit of a side hustle).

The Takeaway

One of the most important steps towards achieving financial wellness is cash flow management — i.e., making sure that your cash outflow is not exceeding your cash inflow.

Creating a simple cash flow statement for yourself can be an extremely useful tool. It can show you exactly where you stand and help you create a budget that can bring the inflow and outflow of money into a healthier balance.

Creating — and sticking with — a budget that creates a positive net cash flow and allows for monthly saving can help you build financial security and future wealth.

If you need help with tracking your spending, a Checking and Savings account with SoFi may be a good option for you.

With SoFi Checking and Savings, you can see your weekly spending on your dashboard, which can help you make sure you are on track with your budget. What’s more, when you open an online bank account with direct deposit, you can earn a competitive APY, and you won’t pay any account fees. This combo can help your money grow faster.

FAQ

How do you create a personal cash flow statement?

To create a personal cash flow statement, gather information on how much you typically take in (income) after taxes per month and how much your outflow is. That captures the amount you spend on necessities, like housing and food, as well as wants and debt payments. When you subtract the outflow from the income, you’ll see where your cash flow stands.

What is the importance of a personal cash flow statement?

A personal cash flow statement is an important way to track your personal spending and see where pain points may be. It will also reveal if you are going into debt or if you have surplus funds you can put towards future goals. Also, a personal cash flow statement can be an important factor in establishing a personalized budget.

What is the difference between a personal balance sheet and a cash flow statement?

A personal balance sheet captures your assets (money in the bank and real estate, for instance) and liabilities (your credit card balance and any loans), which allows you to determine your net worth. A cash flow statement, on the other hand, tracks your spending versus your income, to see whether you are operating with a deficit, a surplus, or if you are breaking even.

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.

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.

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

SOBK0422025

With the popularity of digital payment apps and credit cards, paper checks are being used less than ever. According to a recent Federal Reserve study , for the last three years reviewed, the value of checks used fell each year, while that of ACH (automated clearing house) transfers and card payments grew.

No doubt, checks may be declining in popularity. But don’t count them out yet: Whether it’s a birthday gift from a grandparent or a medical reimbursement, checks are still kicking around. Checks are often considered a secure form of payment, and they might be the only form of payment some people (like your landlord) accept.

Remember, they’re still money. Don’t make the mistake of cashing a check just anywhere. Read further for a few suggestions and surprises, including:

•   How to cash a check

•   Where to cash a check without a fee

•   Ways to deposit a check if you don’t have a bank account.

How to Cash a Check

Before running off to the bank or ATM around the corner, you may want to ensure that you have what you need to successfully deposit your check. Generally, in order to cash a check, the following information is required:

•   Bank account You typically need an account to deposit a check. Most banks will allow you to cash a check, but if you don’t have an account with them, they may charge a fee.

•   ID or debit card Depending on the means used to deposit the check, you might also need a form of ID or your debit card to successfully complete the transaction.

•   PIN number Whether banking by ATM or teller, you will probably be required to enter your PIN number to confirm the transaction.

•   Completed deposit slip Each bank has a variation in the deposit slip, but most ask for a person’s name, account numbers, and the amount of cash and check the customer is depositing. This typically needs to be completed for the transaction to go through.

Another thing to keep in mind is the timing of the deposit. Personal checks are valid up to six months after they’ve been issued, but it’s generally agreed that they should be deposited as quickly as possible. Otherwise, the issuer might forget about the check, and the person depositing the check could wind up learning that there are insufficient funds in the issuer’s account. This can lead to high fees on both sides from a bounced check. Whether you are hit with non sufficient funds (NSF) vs. overdraft fees will depend on your specific situation.

The only exception to the above timing rules is U.S. Treasury checks, traveler’s checks, or USPS money orders. U.S. Treasury checks are valid for a year after issuing. Traveler’s checks and money orders never expire.

Where can I Cash a Check?

Branch Bank or Credit Union

Perhaps the most old-school way to cash a check is going into a bank branch or credit union and depositing the check with a teller in-person. This can be a fast solution because the amount being deposited is confirmed on-site — there’s less likely to be a delay in the funds hitting a person’s account. What’s more, it can be the easiest option when you are looking for where to cash a check for free.

To deposit a check at a bank branch, a person will need to complete a deposit slip, and endorse their check. To endorse a check for a teller, a person needs to sign the back of the check, where indicated.

With a deposit slip and endorsed check in hand, customer’s might also be asked for their bank’s corresponding debit card or a photo ID for verification. From there, the check is validated and funds will be available in the account once the check clears, which can take up to two days.

Credit unions can be very convenient as well. If you bank at a shared branch credit union, that means you are part of a larger network of allied credit unions. You might be able to walk into any of these credit unions and cash your check.

While depositing to a bank or credit union branch can be fast, you may be limited by the branch’s hours and locality. If you have an account with an online-only financial institution, visiting a brick-and-mortar location to deposit a check may not be an option.

Fortunately, there are other methods to cash a check.

Check Writer’s Bank

You may be able to cash a check by going to a branch of the bank where the check writer holds an account. For instance, let’s say you want to cash a check without a bank account. You are unbanked but now have received a check you want to cash. You could go to a branch of the bank it was drawn upon to get funds. So if the check says Citigroup on it, you could see if a location near you might cash it. Because the bank holds the check writer’s account, they will likely be able to see that the check is good and pay you.

This tactic can also work with government-issued checks at any large bank. You may be able to have it cashed almost anywhere because government checks are typically so reliable.

Recommended: What Is a Cashier’s Check?

ATMs

Depositing a check via ATM has its advantages and disadvantages. Unlike bank branches, many ATMs are accessible 24 hours a day. Thanks to their smaller square footage, they can be more common than ATMs inside bricks-and-mortar banks.

How to deposit a check by ATM can vary somewhat. Older ATM models may still ask a customer to fill out a deposit slip envelope before inserting the check into the machine. Other newer models simply use on-screen prompts and scanning to verify the deposit amount.

Regardless, customers are generally required to endorse the check with their signature and enter their PIN when making an ATM deposit. Reading the on-screen prompts can help clarify the steps at the specific ATM you are using.

On the downside, checks deposited via ATM may take longer to be available in the bank account. This is because ATMs are only serviced at specific times, and deposits often then need to be verified in person by a teller at the bank. Customers are also usually limited to depositing checks in the ATMs of financial institutions where they are an account holder.

Recommended: How to Transfer Money From One Bank to Another

Mobile Deposit

If you are thinking “Where can I cash my check for free?” but don’t want to go to a branch or if you have your account at an online bank, technology can help.

Using mobile deposit to cash a check is as simple as taking a photo with your phone. It’s quick and convenient and allows you to deposit money from almost anywhere. More and more financial institutions allow the mobile deposit of checks through their app.

Customers take an image of both sides of the check so the financial institution can create a “digital copy” of the check. Instead of endorsing the check with only a signature, customers may be required to write “For Mobile Deposit Only” or a similar message on the back of the check.

Once the bank or financial institution accepts the images, the funds can sometimes immediately become available in the customer’s account, which is a benefit of mobile deposit. However, depositors should keep the check on hand for up to two weeks, or until the amount is cleared. Otherwise, they could end up overdrafting in the event that the funds ultimately don’t clear.

Retail Stores

Did you know that many retail stores will cash a check for you? For example, national chains like Walmart and Kmart may allow some customers to cash checks for a small fee (say, $4). You’ll endorse the check to them and then get your cash. Some grocery stores may offer this privilege at their customer service counter as well.

Keep in mind that there are usually limits to how much cash you can get (perhaps up to $1,000), you’ll likely pay a fee as mentioned, and you may find that not every location will extend this courtesy. It may be wise to call and find out before you head over to a store for this purpose.

Apps

There are a variety of apps that let you deposit a check or convert it to cash on the go. You might use an app like Ingo Money to snap a photo of your paycheck and direct it to a prepaid or debit card or your PayPal account. Fees are involved (say, $5 plus between 2% and 5% of the check’s value), though you may be able to avoid these if you don’t mind waiting 10 days for the funds to arrive.

Another option is to deposit the check to your PayPal Balance account. Again, if you want your money sooner than 10 days, there will be a $5 fee plus between 2% and 5% of the check’s amount. Many other apps are available; shop around for the one that best suits your needs.

Prepaid Cards

While this won’t work if you are in a rush to get your cash, another option is to deposit a check to a prepaid debit card. When the check clears, you’ll be able to swipe away with the debit card.

Depending on the kind of card you select, you may be able to download an app, take a photo of your check with your phone, and then upload it to activate the card. Read the fine print, though; there are often fees involved if you use this check cashing method.

Check-cashing Stores

Check-cashing stores are exactly what they sound like: retail locations that offer to give you cash for your check. They are often part of payday loan shops, and — just as with payday loans — they often charge very high fees. You may want to think of them as a last resort. You can likely get your cash for less via another method.

Mail-In

Another option a depositor might choose is to mail the check into their bank and ask them to deposit it. This will likely take the most time to become available in a bank account, but most banks will offer this service. Why might you need to do this? Perhaps you don’t have mobile deposit and are heading out of town on a work assignment or vacation. Sending the check on its way before you leave can be a good bet.

To mail a check in for deposit, first, check with your bank to confirm its mailing address. Depending on the size of the bank, there may be multiple addresses where the check can be sent. You may want to send the check by a trackable method to help ensure that it reaches its destination.

You’ll likely need to endorse the check; it’s probably wise to write “For deposit only” with the endorsement as an additional safety measure. Depositors may also be required to fill out a deposit slip to include with the check. Confirm the specific requirements with your financial institution.

Recommended: What to Do if Your Check Is Lost or Stolen

Fee-Free Deposit With SoFi

Whether it’s a refund, birthday gift or payment for watching the neighbor’s cat, checks still fall into our hands at least once in a while. While you may not get them frequently, there are numerous ways to deposit them, each with its own unique benefits and drawbacks.

SoFi Checking and Savings® makes accessing your cash extra easy with mobile check deposits and fee-free use of 55,000+ Allpoint ATMs worldwide. What’s more, we can help your money grow faster. When you open a SoFi online bank account with direct deposit, you’ll earn a competitive APY and pay no account fees.

FAQ

Where is the cheapest place to cash a check?

“Where can I cash a check for free?” is a common question. The cheapest place to cash a check is likely the bank or credit union where you have an account. It should be completely free. If you don’t have a bank account, your next best option is likely a major retailer like Kmart or Walmart, which will probably charge a small fee of a few dollars.

Where can I cash a check without having a bank account?

If you don’t have a bank account, you may be able to cash the check for a small fee. You could try the check writer’s bank (that is, the bank that issued the check you receive); a retail store (a grocery store or mass merchant); loading the check onto a prepaid card; or using a check-cashing store, though this should be a last resort as it is likely the most expensive option.

What app will cash a check immediately?

There are a variety of check-cashing apps that will help you cash a check immediately. These include Ingo Money, PayPal, Western Union Netspend, and Brink’s Money. Depending on the app, you can send the funds to a prepaid card or a linked account.

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.

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President Joe Biden signed the Inflation Reduction Act in Aug. 2022. While the law’s name alludes to the Biden administration’s desire to bring down historically high price growth, analysts say its impact will be felt in domestic energy production, climate investments, and drug price reform. And the measures laid out in the law could save consumers thousands of dollars a year.

Because the new law could lower energy bills and provide tax and other incentives for consumers, it’s important to know what’s in the new law so you can take advantage of potential savings. Here is a rundown of the Inflation Reduction Act and how it could save you money.

What Is the Inflation Reduction Act?

The Inflation Reduction Act of 2022, or the IRA for short, is a law intended to curb inflation by reducing the deficit, promoting domestic energy production, and lowering healthcare costs. President Joe Biden signed the IRA on Aug. 16, 2022.

The Biden administration and Congressional Democrats pushed to pass this legislation to tackle the highest levels of inflation the United States has experienced in more than 40 years. Additionally, the lawmakers wrote the law intending to combat climate change by investing in domestic energy production and carbon-reducing and green technologies.

Analysts estimate that the IRA will raise more than $700 billion in savings and revenue over 10 years through new taxes and tax and prescription drug pricing reform. This revenue will be raised, in part, through a 15% corporate minimum tax, a 1% stock buyback fee, and enhanced Internal Revenue Service (IRS) tax enforcement.

In contrast, the law will lead to more than $400 billion in new spending and tax cuts related to climate, energy, and healthcare initiatives. In all, the new law may reduce the federal budget deficit by about $300 billion over the next ten years.

Recommended: How to Protect Your Money During Inflation

Will the Inflation Reduction Act Reduce Inflation?

Experts believe the Inflation Reduction Act will have a negligible effect on bringing down inflation in the short term.

Inflation, which rose 8.5% annually in July 2022, is near the highest it has been since the early 1980s. The Federal Reserve started to raise interest rates in early 2022 to bring down prices, but it remains to be seen if the monetary policy moves will effectively curb inflation. Nonetheless, economists believe that short-term inflation reduction is the job of the Federal Reserve.

However, over the medium- to long-term, fiscal policy, like the Inflation Reduction Act, could reduce consumer costs. Specifically, analysts have said that the law’s measures to increase oil, gas, and clean energy production and lower prescription drug prices may bring down inflation over the next ten years.

How the Inflation Reduction Act May Save You Money

Proponents of the Inflation Reduction Act say that the law will cut consumers’ energy bills by $500 to $1,000 per year due to lower fuel prices, electricity rates, and more efficient energy consumption.

The law may also make it more affordable for consumers to purchase electric vehicles and deliver a range of tax incentives and rebates that provide direct, material benefits to consumers.

Because many of the Inflation Reduction Act’s consumer benefits come from rebates and tax credits, it’s best to talk with a financial and tax expert to understand how you may benefit from the law.

Recommended: A Guide to Understanding Your Taxes

Home Energy

The law extends a tax credit through 2032 for households and consumers who make energy-efficient home upgrades. Households can get up to $1,200, or 30% of the total cost, in tax credits for energy efficiency improvements like new doors, windows, or insulation. Additionally, households can get up to $2,000 in tax credits for installing efficient heating, cooling, and water heating equipment, such as a heat pump.

These credits take effect immediately; households can claim the credit for new purchases. Households can also claim these credits multiple times in subsequent years. For example, a household can claim the tax credit in both 2022 and 2023 if they buy and install new windows for a bedroom this year and new windows for a kitchen next year.

The Inflation Reduction Act also provides a 30% annual tax credit through 2032 — and phases down after 2032 — for households that install clean energy systems like solar energy, wind, geothermal heat pumps, fuel cells, and battery storage.

Recommended: Solar Panel Financing in 4 Ways

The law also sets aside $8 billion for a state-run program for low- and middle-income households that provide rebates for new, energy-efficient upgrades. These rebates are:

•   Up to $1,750 for a heat pump water heater

•   Up to $8,000 for a heat pump for heating or air conditioning

•   Up to $840 for an electric stove, cooktop, range, or oven; or an electric heat pump clothes dryer

•   Up to $4,000 for an electric breaker box upgrade

•   Up to $1,600 for insulation, air sealing, and ventilation

•   Up to $2,500 for electric writing

These rebates may be available to buyers who make 80% or less than the area median income (AMI), while buyers who make up to 150% of the AMI may see a smaller benefit. Eligible households or individuals may not receive more than $14,000 in rebates.

Recommended: Strategies to Lower Your Energy Bill When Working From Home

Electric Vehicles

The Inflation Reduction Act provides a tax incentive for purchasing new and pre-owned clean vehicles, like electric vehicles (EVs) or hydrogen fuel cell cars, and for supporting equipment. The tax credits for clean vehicles are:

•   Up to $7,500 for a new clean vehicle

•   Up to $4,000 for a pre-owned vehicle

However, restrictions on what kinds of clean vehicles are eligible for the tax credit may limit how the incentive benefits consumers. The vehicles must meet specific criteria to qualify for the tax credit, such as:

•   Vehicles must be assembled in North America

•   A certain percentage of a battery’s components must be mined or produced in the United States or a country with a free trade deal with the U.S.

•   The MSRP of a pickup or SUV must not be over $80,000; other personal vehicles must not exceed $55,000

Additionally, to qualify for the tax credit, the income of the buyer of a clean vehicle must not exceed $150,000 if single, $225,000 if the head of a household, or $300,000 if married.

Healthcare

The Inflation Reduction Act is expected to provide benefits to individuals with health insurance coverage under Medicare.

The law enacts prescription drug pricing reform, allowing Medicare to negotiate prices for some drugs starting in 2026. This new measure may impact consumers who are prescribed one of the drugs with negotiated prices, resulting in lowered healthcare costs. Previously, Medicare was not allowed to negotiate drug prices.

Furthermore, the law caps insulin costs for people on Medicare at $35 per month starting in 2023. In 2025, out-of-pocket drug costs for Medicare beneficiaries will be capped at $2,000 per year.

Recommended: Beginner’s Guide to Health Insurance

The Takeaway

Since the Inflation Reduction Act is so new, the overall effects of the law are still unclear. But for now, consumers should be aware of the potential impacts of the law on their wallets. This is especially the case for individuals interested in making energy-efficient upgrades to their homes; the new law provides incentives that could lead to thousands of dollars in savings per year.

Looking for more ways to boost your savings? Consider opening an online bank account with SoFi. When you open our Checking and Savings with direct deposit, you can earn a competitive APY — and not worry about fees or overdraft charges. Plus, eligible account holders have access to their paycheck up to two days early.

Photo credit: iStock/sturti

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.

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

In our efforts to bring you the latest updates on things that might impact your financial life, we may occasionally enter the political fray, covering candidates, bills, laws and more. Please note: SoFi does not endorse or take official positions on any candidates and the bills they may be sponsoring or proposing. We may occasionally support legislation that we believe would be beneficial to our members, and will make sure to call it out when we do. Our reporting otherwise is for informational purposes only, and shouldn’t be construed as an endorsement.

With all the talk of rising interest rates, it’s natural for consumers to assume that the rates on their bank accounts are headed up too.

To fight record inflation, the Federal Reserve (the Fed) has raised the federal funds target rate — a key borrowing rate — four times this year, to a current 2.25% to 2.5% and is expected to do so again in the Fall. This comes after years of the near zero or zero rate levels.

Higher rates result in consumers paying more for mortgages, credit cards, auto loans, home equity lines of credit, and other loans. The Fed rates also affect how much interest is earned on savings accounts, certificates of deposit (CDs), and other accounts. Thus, the silver lining to rising rates would seem to be that the interest on your bank accounts would finally rise above near zero levels.

Unfortunately, that’s not always what happens.

While some banks and financial institutions have raised interest rates on savings, many have not. One reason is simply that it takes longer for some banks to respond to rising interest rates than others. Another issue is that, due to high levels of pandemic saving, many institutions aren’t looking to woo new customers (and more deposits) with attractive interest rates.

Here’s a closer look at why your bank account may not be earning the interest you think it should.

How Fed Rates Affect Banks

When you hear that the Fed has raised (or lowered) interest rates, it is referring to the federal funds rate, which is the target interest rate at which banks borrow and lend money to one another. This has a ripple effect across the entire economy.

When interest rates rise, loans become more expensive for banks and, in turn, consumers and businesses. However, it can also mean higher yields for savers. That’s because, when you have a savings account at a bank, you are effectively letting the bank borrow your money, and the institution pays you interest in return.

In a higher-rate environment, banks may start raising the annual percentage yield (APY) on savings accounts and rewards checking accounts to attract new customers. However, that’s not always how it works, at least not right away.

Recommended: What Is a Good Interest Rate for a Savings Account?

How Banking Lending and Borrowing Works

When you — and all bank customers — make a deposit to your checking or savings account, your bank uses that money to make higher interest loans, such as personal loans, car loans, and mortgages. That’s a chief way banks make money.

With people saving more during the pandemic, banks have seen their deposits skyrocket. The result, at least for the short term, is that many institutions don’t need to attract checking and savings customers with competitive interest rates because they already have plenty of cash on hand to use for lending.

Also, when banks pay interest on customers’ savings accounts in a low-rate environment, which has been the case for many years, they may pay more than what they make when they lend to other banks. The result is that some banks have to slash profits to keep paying interest to savers or even go into the red. Now that rates are rising, some of these institutions are holding back on increasing APYs to help make up for those lost profits.

Some Banks Lag Behind the Fed Longer than Others

It may be that your bank will raise rates on your savings or checking account soon. They just haven’t done it in sync with the Fed’s announcements.

Typically, online savings accounts respond more quickly to Fed rate changes. This is because there is generally a lot more competition among online banks for customers (and their deposits). APYs offered by traditional brick-and-mortar banks often react much more slowly to Fed rate increases, and yields hardly ever rise as high as the Fed’s interest rate.

What’s important to remember is that banks don’t increase rates at the same time or at the same rate as the Fed. It’s a good idea to keep an eye on both your savings and your credit accounts to see what moves your bank is making.

A Note About Brick-and-Mortar Banks

Big banks with lots of physical locations generally have higher operating expenses than online banks and, as a result, may be reluctant to offer higher rates that cut into profits.

But that’s only part of the story, says Brian Walsh, senior manager of financial planning at SoFi. Big banks know their customers often experience inertia when it comes to changing banks. “They may have started their account in college or when they were setting up direct deposit at their first job. Those customers tend to just stick around,” he explains. As a result, big banks may determine they won’t lose customers if they don’t raise rates, so they are less likely to do so.

Recommended: Traditional Banking vs. Online Banking: What’s Better for You?

Customers Often Overestimate How Difficult it is to Change Banks

Often banking customers are reluctant to switch because they overestimate the amount of time or paperwork it will take,” says Walsh. They may feel a slightly higher interest rate just isn’t worth the trouble. According to SoFi research from February 2021, a third of 1,600 respondents said they see no benefit to switching their bank or financial institution.

Walsh acknowledges that there is some time involved in changing banks, but notes that the hour or two you spend will likely pay off over time. “The difference between close to zero percent interest on your savings account and 1.80% can add up to a lot of money,” he says.

Recommended: How to Earn More Interest On Your Money

The Takeaway

Even if the Fed is raising rates, banks and other financial institutions don’t necessarily follow, at least not immediately. They may decide it doesn’t fit into their business and profit strategies to raise rates on customer accounts. They may also be counting on the fact that banking customers often experience inertia when it comes to switching to a higher paying bank, especially if they have been using an established institution for a long period of time.

Understanding why your bank account interest rates don’t move in tandem with the Fed’s actions can help determine if you should make a change. If you’re not satisfied with the interest you’re currently earning on your accounts, you may want to consider an online bank account like SoFi’s all-in-one Checking and Savings account. When you open an account with direct deposit, you can earn a competitive APY. Plus, you won’t pay any account fees.

Photo credit: iStock/Brankospejs

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

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

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

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

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

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

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

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

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A share draft account or share draft is a checking account that’s held at a credit union. That’s a simple share draft account definition.

Share draft accounts are similar to checking accounts offered by banks, in terms of how you can use them. There are, however, a few differences that set them apart.

Whether a share draft account or a checking account is right for you can depend on your preferences for managing your money. If you’re thinking of opening a share draft at your local credit, it helps to know how they work. Learn more here, including:

•   What is a share draft account?

•   How do these accounts work?

•   What are the pros and cons of a share draft account?

•   How do share draft accounts differ from typical checking accounts?

What Is a Share Draft Account?

“Share draft account” is how credit unions refer to checking accounts. This terminology reflects in part how credit unions work.

When you join a credit union, you become a member of it. You, along with the other members, have an ownership share in the credit union. That’s a key distinction between a credit union vs. bank. Share draft is used to describe checking accounts belonging to credit union members.

You’ll also see the word “share” used with other types of accounts offered at credit unions. For example, a share account is the credit union equivalent of a bank savings account. These accounts can earn interest so you can grow your money over time.

Share certificates, meanwhile, are the credit union version of certificate of deposit (CD) accounts. You deposit money into a share certificate, which then earns interest until the certificate matures. At maturity, you can withdraw the initial deposit and interest earned or roll it into a new share certificate.

How Do Share Draft Accounts Work?

Share draft accounts work by allowing you to deposit money that you can then spend or withdraw later. Each time you deposit money, you’re essentially buying shares in the credit union that holds your account.

Generally, with a share draft account you can:

•   Pay bills online

•   Withdraw cash at ATMs (though there may be ATM withdrawal limits)

•   Make purchases online or in person using a linked debit card

•   Manage accounts via online and mobile banking

•   Add funds through direct deposit and/or remote deposit capture

•   Write checks

•   Link your debit card to mobile wallet apps

•   Send money to friends and family through Zelle or another mobile payment app

•   Send and receive ACH transfers or wire transfers

There may be various fees associated with these accounts, including monthly maintenance fees or overdraft fees. You may also pay ATM fees, depending on where you withdraw cash. Some share draft accounts pay dividends to credit union members as they’re declared quarterly, biannually, or annually.

Opening a share draft account is a bit different from opening a bank account. You first need to qualify for membership in a credit union.

The qualification requirements can vary by credit union. In terms of how much money to open an account, initial deposit requirements are usually on the lower side. It might be, say, $5 to $25 in many cases.

Credit unions can impose daily, weekly, and monthly limits on debit card transactions and ATM withdrawals. There may also be limits on check-writing. Customer service availability can depend on the credit union.

Recommended: What Is Monetary Policy?

Pros of Share Draft Accounts

There’s a lot to like about share draft accounts and credit unions in general. Here are some of the main advantages of share draft accounts:

•   Initial deposit requirements are often low

•   Minimum balance requirements may be low or nonexistent

•   Some share draft accounts can earn dividends

•   Banking fees may be lower

•   Benefits and features tend to be similar to bank checking accounts

•   Credit unions can offer numerous ways to access share draft accounts, including online and mobile banking, ATMs, and branches.

There’s one more advantage to opening a share draft account. If you’re a member of a shared branch credit union, you can access your money through a wider network of branches. Shared branch banking means that even if your accounts are held at Credit Union A, you could access them at Credit Union B, which is convenient if you’re traveling.

Cons of Share Draft Accounts

Share draft accounts may not be right for everyone. Before opening one, here are a few potential drawbacks to keep in mind:

•   Membership in a credit union is required to open a share draft account

•   Branch access may be limited if your credit union isn’t part of a shared branch network

•   There may be limits on withdrawals or debit card transactions

•   Dividend rates may be low.

Qualifying for membership in a credit union might be the biggest hurdle to joining one for some people. Credit unions can base membership on things like military affiliation, where you work or attend school, religious affiliation, or employment. The good news is that there are some credit unions that have less stringent requirements and offer membership to a wider range of people. It can be worthwhile to shop around.

How Does a Share Draft Differ From a Traditional Bank Account?

Share draft accounts are similar to checking accounts offered at traditional banks, but they aren’t identical. Here are some of the most important differences between share draft vs.checking accounts.

Fees

Banks are known for charging plenty of fees for checking accounts. Fees are a big part of how banks make a profit. Credit unions, on the other hand, are not-for-profit financial institutions. That means they generally charge their members fewer fees and they can pay higher interest rates on deposit accounts than traditional banks.

Deposit Insurance

Deposits at banks and credit unions can both be insured against institutional failure. Whether your coverage comes through the FDIC vs. NCUA depends on where you keep your accounts. Credit unions are likely insured by NCUA, or the National Credit Union Administration.

The Federal Deposit Insurance Corporation insures deposits at member banks up to $250,000 per depositor, per account ownership type, per financial institution. You may qualify for more deposit insurance if you have accounts in different ownership categories that meet FDIC requirements. This insurance reassures you that your checking account is safe.

The National Credit Union Administration insures deposits at member credit unions up to $250,000 per depositor. Member deposits held in jointly-owned accounts are insured up to $250,000 as well.

Features and Benefits

Credit unions and banks can offer a different range of features and benefits for draft accounts and checking accounts, respectively. There can be a significant difference between what is a premium checking account at a bank and what constitutes a premium share draft account at a credit union, for example. Comparing what’s included with share draft and checking accounts can help you decide which one is better for your needs.

Banking With SoFi

Deciding to open a checking account or a share draft account can help you get a better handle on your money. Both share draft accounts and checking accounts make it easy to deposit funds, pay bills, withdraw cash, or make purchases as needed.

If you’d like to manage money online, you might consider banking with SoFi, where you can get checking and savings in one convenient place. And when you open a bank account online at SoFi with direct deposit, you’ll earn a competitive APY and skip the usual fees.

FAQ

What is the difference between regular share and share draft?

A share account is a savings account held at a credit union. Share accounts can earn interest in the form of dividends. Share draft accounts, however, are similar to a checking account and allow you to make draft withdrawals by writing checks, making purchases with a debit card, or withdrawing cash at ATMs.

What is the difference between a share draft and a checking account?

The difference between a share draft and a checking account is where they’re held. Share draft accounts are offered at credit unions; checking accounts are offered at banks. Share draft accounts can be NCUA-insured while checking accounts at banks have FDIC deposit insurance coverage.

Is a checking account better than a share draft?

A checking account may be preferable to a share draft account if you’d rather keep your money at a bank rather than a credit union. On the other hand, you might lean toward a share draft if you’d rather take advantage of perks that only a credit union may offer. Looking at your money management habits and preferences can help you decide whether a checking account or share draft is the better fit.

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

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

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

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

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

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

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