How to Make End of Year Donations

Tax-Deductible or Not? Your Guide to End-of-Year Donations

At the end of the year, when holiday celebrations and expressions of gratitude are in full swing, many people think about making a charitable donation. Maybe it’s the animal shelter around the corner from your home, or perhaps it’s a scholarship fund at your alma mater that does amazing work. Whatever pulls at your heart and makes you feel like you’re doing the right thing can be a good cause for donations.

From early fall right up to December 31 can be a great time to dip into your bank account and give. Also, it’s a good time to squeak by with a contribution before the calendar year comes to a close.

The organization you give your money to benefits. You get to enjoy the good feeling that comes with supporting a project or cause that you believe in. And you may also be able to lower your tax bill.

Here are some things you may want to consider when planning and making your end-of-year charitable donations. Read on to learn:

•   What qualifies as charitable giving?

•   Can you deduct charitable contributions?

•   How much of a charitable donation is tax deductible?

•   How can I maximize my charitable giving?

What Qualifies as Charitable Giving?

In the eyes of the Internal Revenue Service (IRS), a charitable donation is a gift of money, property, or other asset that you give to a qualifying organization, known as a 501(c)(3). To find out if an organization you’d like to support is eligible to receive tax-deductible contributions, you can search for it on the IRS’s database .

You may want to keep in mind that money or assets given to political campaigns or political parties do not qualify as tax-deductible donations. In fact, no organization that qualifies as a 501(c)(3) can participate in political campaigns or activities.

Organizations that engage in political activities without bias, however, can still sometimes qualify. So, a group can educate about the electoral process and remain within guidelines. They just have to go about it in a nonpartisan way.

Recommended: What is a Charitable Gift Annuity and How Does it Work?

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Open a SoFi Checking and Savings Account with direct deposit and get up to a $300 cash bonus. Plus, get up to 4.60% APY on your cash!


Can I Deduct My Year-End Charitable Donation?

In the past, charitable donations could only be deducted by tax filers who itemized their deductions. That means that rather than take the standard deduction, they chose the more complicated path of listing all of their eligible expenses.

There was a reprieve from this under the CARES Act which went into effect as the coronavirus pandemic unfurled. The IRS implemented a special new provision that allowed individuals to easily deduct up to $300, and joint filers to deduct up to $600, in donations to qualifying charities in 2021, even if they didn’t itemize. During this extremely stressful time, charitable giving became a bit easier for some thanks to this provision.

However, it’s important to note that this provision expired as of January 2022. Going forward, itemization is the way to go.

Recommended: 26 Tax Deductions for College Students and Other Young Adults

How Much of a Charitable Donation Is Tax-Deductible?

Wondering how much of a tax break you might get for your giving? The IRS sets limits on how much of a charitable contribution you can deduct from your taxes, and these are frequently updated. The amount is typically expressed in terms of the percentage of your adjusted gross income (AGI) that you may claim.

In 2021, this limit was increased to a full 100% of a person’s AGI. This change was made to entice people to donate to charities during what were perhaps among the most challenging times of the COVID-19 pandemic.

This guideline, though, has shifted for 2022. The limits were lowered again to an individual being allowed to deduct no more than 50% of their AGI for cash contributions to a charity. The top figure is 30% of AGI if you make a non-cash contribution, such as stock shares.

Of course, you are welcome to donate as much as you like. Just keep in mind that any charitable giving above those figures is not eligible for a deduction at tax time. Whether you’re looking to give $50 to your favorite local organization, or you’re considering a much larger charitable donation, these tax changes make it a particularly good time to do so.

Recommended: How to Reduce Taxable Income for High Earners

Tips for Making End-of-Year Donations

To ramp up both the impact and benefit of a charitable donation, here are some strategies you may want to keep in mind:

Making a Timely Donation

Don’t lose track of your timing: The deadline for charitable donations is December 31. If you’re looking to deduct the donation in the current tax year, you will want to make sure your charity has ownership of whatever asset you are donating by the close of business on the 31. You may also want to make sure that your preferred payment method is accepted by the charity so it doesn’t get kicked back and cause delays. Putting a reminder in your calendar for, say, mid-December can be a good way to make sure you don’t run late with your giving.

Recommended: What Happens If I Miss the Tax Filing Deadline?

Taking Advantage of Company Matching Programs

Your place of employment might have a matching program for charitable giving. They might, for example, match your donation amount dollar for dollar up to a certain amount. If so, it could significantly bump up the amount you could otherwise afford to give.

If you’re unsure about whether your company has a program, it can be worth reaching out to your HR department for further information.

Giving Rewards on Your Credit Card

If you are giving on a budget, you might consider donating rewards you earn on your credit cards, such as hotel points or airline miles. This can be a great way to use points or other rewards that would otherwise just expire. Many credit card companies, hotels, and airlines will make it easy to give your rewards to nonprofit organizations.

Recommended: Credit Card Rewards 101: Getting the Most Out of Your Credit Card

Donating Assets from your Brokerage Account

If you’re looking to lower your capital gains tax, you may want to consider donating assets from your brokerage account to a nonprofit. This may take some time and planning, but the benefits of donating an over-allocated position that’s outperforming can be worth it.

You may be able to receive tax advantages and rebalance your portfolio, while also helping an organization increase its assets.

Recommended: What Tax Bracket Am I In?

Setting up a Recurring Donation

You can get a headstart on next year by creating a recurring contribution now. Many organizations allow you to donate monthly through their websites using a credit card, so you might be able to earn rewards at the same time. By establishing your donation plans now, you won’t have to even think about end-of-the-year giving next year.

Keeping Good Records

If you want to deduct your donation on your taxes, you’ll want to make sure you have the right receipts to back up the transaction.

You’ll want to keep records of your donations. For cash donations under $250, you’ll either need a bank record (like a canceled check or bank statement) or a written acknowledgment from the charity which includes the date and amount of your contribution.

For cash donations over $250, a bank record isn’t insufficient. Instead, you’ll need something in writing from the charity which includes the date and amount of your donation.

If you are making noncash donations valued at $500 or more, you’ll need to fill out one or more of the IRS Form 8283 . If the donation exceeds $5,000 in value (say, if you gift a car you no longer need to a favorite local organization), you’ll also need to get a written appraisal from a qualified appraiser. The appraisal only needs to be submitted to the IRS if the donation’s value exceeds $500,000. If less than that, you can simply hold onto the appraisal in case you are audited.

Speaking with a Professional

An accountant can help answer any questions you may have about how tax laws will impact your tax contribution, as well as help you make the most strategic and efficient charitable donation.

Recommended: Are 401k Contributions Tax Deductible? Limits Explained

The Takeaway

Giving can be a good idea for a number of reasons. In addition to helping a nonprofit organization meet its operating costs for the year, you can feel good about what you are doing with your money, and you may also benefit from tax deductions.

Giving can also help you get the new year started on the right foot. If you’re looking for other ways to get your financial life in order (now, or any time of year), you may also want to consider signing up for an online bank account with SoFi.

When you open a SoFi Checking and Savings with direct deposit, you’ll earn a hyper competitive APY, and you’ll pay no fees.These two perks can help your money grow faster. You’ll also spend and save, all in one convenient place; how simple is that?

Start saving for the things that matter most to you with SoFi.


Photo credit: iStock/ThitareeSarmkasat

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.

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 recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit 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, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

As an alternative to direct deposit, 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.

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How Long Does It Take to Open a Bank Account?

How Long Does It Take to Open a Bank Account?

Depending on whether you are opening an account online or in person, this process can take anywhere from a few minutes to an hour. Whether you are opening a checking account or a savings account can also make a difference in how much time you will need to invest. Here, we’ll review what to expect when you open a new bank account, and we’ll also share some tips to help you accomplish this important financial task as quickly as possible. We’ll also offer guidance if, for some reason, you can’t open a bank account right now but are looking for ways to put your money in a safe place. Ready? Let’s get started.

What to Do Before Opening a Bank Account

To begin opening a new bank account, you’ll need to make two key decisions: where you’ll open the account and the type of account you want. Options about where to park your funds typically include the following:

•   Banks

•   Credit Unions

•   Online Financial Institutions

When people use the term bank, they are usually referring to brick-and-mortar ones, including the large national chains as well as smaller, more local ones. You can physically visit them, typically through a lobby or drive-through, and they offer a range of savings and lending services.

Credit unions, on the other hand, are a different kind of financial institution (usually brick and mortar as well). With this structure, account holders are members. Some credit unions are national; others are more regional in terms of their reach and their branches. Members usually need to meet certain guidelines to join, perhaps related to their job or geography, and they can often benefit from lower loan rates and higher interest when saving.

Online banks offer services that are likely to be similar to brick and mortar banks. However, account holders will bank through a website and/or mobile app. Because online banks don’t have the expense of physical locations to maintain, they can typically offer better interest rates and charge fewer fees than traditional banks.

Once you have made a decision about whether traditional or online banking or a credit union feels like the right fit for you, you’re ready to move ahead to the next step. The second key decision is what kind of account to open, perhaps a checking, savings, or money market account.

With a checking account, the account holder opens a checking account by depositing money into this account, whether in person, online, or through direct deposit. They then have the ability to write checks, use a debit card, or use an online payment system (like PayPal) to make purchases, pay bills, and so forth. Sometimes, the money in the account may earn interest.

With a savings account, once the money is deposited, the goal is usually for it to grow, perhaps as an emergency savings account or one designed to save up for a larger purchase. Financial institutions will differ in the interest rates they’ll pay, so you may want to shop around and see where you can get the best deals, noting whether there are minimum balance requirements and other qualifications required.

Money market accounts are another fairly common option. These are typically used to hold money that the account holder doesn’t intend to spend right away. Many money market accounts also come with convenient check-writing/debit-card features if you do want to tap the funds you’ve deposited. This type of account earns interest. (Opening an investment bank account is another option to explore if you are seeking an account that will grow your money as you save toward a longer-term goal. However, unlike the other accounts we have mentioned, these will not be FDIC-insured, so consider how much risk of loss you can tolerate.)

How Long Does It Take to Open a Bank Account?

If time is of the essence — say, you’ve just moved to a new town and need to get your banking set up, or you are a recent grad who’s just starting on “adulting,” you may wonder, “How long does it take to make a bank account?” Allow us to fill you in next.

Various kinds of financial institutions have different processes and timelines for creating a bank account. Completing the steps to open an account may be faster online than in person.

Online

Online applications typically have fields where you can quickly enter information or check a particular box. So, you may be able to complete the information in 15 minutes, especially if you have all of your personal data at hand.

Physically

It may take a bit longer to physically apply at a brick and mortar because you may need to wait in a line to see a teller and you may need to fill in the application by hand. Then, in general, figure that a bank may take a couple of days to verify your information and respond. Plus, if checks and/or a debit card are involved, those will usually be physically mailed to you, which can take a week to ten days till receipt.

Get up to $300 when you bank with SoFi.

Open a SoFi Checking and Savings Account with direct deposit and get up to a $300 cash bonus. Plus, get up to 4.60% APY on your cash!


How to Open a Bank Account

Once you know the type of account you want to open and where, you can go to a physical location during banking hours or open the account yourself online, anytime and anywhere. Be prepared with government forms of ID, which can include a driver’s license, state ID, military ID, or passport. Also have your Social Security number handy.

Financial institutions will ask for personal information, including your name, address, telephone number, date of birth, and Social Security number to verify your identity. (Opening an account without IDs is possible, but will take some additional steps.)

The financial institution may check your credit before opening up the bank account. Usually, if they do, it is what’s known as a “soft” pull or inquiry that won’t appear on your credit report’s history. What’s more, the prospective account holder typically doesn’t need to have stellar credit to qualify; it’s just a checkpoint as the bank gets to know you and understand if you pose a risk in terms of keeping your account in good shape. If you’re concerned about this step for any reason, ask about the bank’s policy before proceeding.

Once an account is approved, you’ll need to agree to terms and conditions, perhaps by signing a physical document at a brick-and-mortar location or by checking an “I agree” button online. Then, you can make a deposit of funds that’s at least enough to meet the financial institution’s minimum requirement.

💡 Further help: What Do I Need to Open a Bank Account?

What to Do If You Cannot Open a Bank Account

If you’re turned down for a bank account (yes, unfortunately; it does happen), the first step can be to check the rejection letter for a reason. If that isn’t clear, then ask the financial institution why the account couldn’t be opened right now. Also ask about the timeframe to remedy the situation and/or reapply. How long does it take to get a bank account approved after a rejection? It’s possible that the solution is simple, perhaps requiring more information or a clarification.

If credit history is an issue, you can work on fixing that. In the meantime, you could try other financial institutions with different guidelines. It may be easier to be approved by an online bank. Also, some banks have products specifically designed for people who are trying to build or repair their credit. They may come with more restrictions but can serve as a bridge between now and when you can qualify for other bank accounts.

The Takeaway

If you’re ready to open a bank account, whether it’s a checking or a savings account, you’ll have choices of doing so at a brick-and-mortar bank, an online bank, or a credit union. Typically, working with an online bank will be your quickest option, with an account potentially being set up in just a few minutes. The same process at a physical bank can take an hour (not including travel time), and you will possibly then need to wait for approval of your application. Depending on your needs, you may find that an online bank is able to get you up and running, ready to receive funds, and pay your expenses in the shortest possible time, which can be super-convenient in today’s hectic world.

SoFi: Online Banking to Suit Your Needs

SoFi Bank, N.A. knows you don’t have time to wait in line and meet with a bank representative for half an hour, an hour, or more just to open an account. That’s why we’re ready to help you open an bank account online as quickly and easily as possible, with just a few clicks. What’s more, you can benefit by getting your paycheck up to two days early, paying no account or overdraft fees, and reaching your financial goals more quickly. Even more reason to check us out: We are offering checking and savings accounts with a competitive APY.

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

3 Great Benefits of Direct Deposit

  1. It’s Faster
  2. As opposed to a physical check that can take time to clear, you don’t have to wait days to access a direct deposit. Usually, you can use the money the day it is sent. What’s more, you don’t have to remember to go to the bank or use your app to deposit your check.

  3. It’s Like Clockwork
  4. Whether your check comes the first Wednesday of the month or every other Friday, if you sign up for direct deposit, you know when the money will hit your account. This is especially helpful for scheduling the payment of regular bills. No more guessing when you’ll have sufficient funds.

  5. It’s Secure
  6. While checks can get lost in the mail — or even stolen, there is no chance of that happening with a direct deposit. Also, if it’s your paycheck, you won’t have to worry about your or your employer’s info ending up in the wrong hands.

FAQ

What do I need to open a bank account?

Financial institutions will typically want to see government forms of ID, such as your driver’s license, state ID, passport, or military ID. You’ll need to share personal information, such as your name, address, phone, and email address, along with your date of birth and Social Security number. Also, you often need to make an initial deposit of funds, although specifics vary by bank.

How much money do you need to open a bank account?

It depends! Financial institutions vary in terms of how much they require as a minimum deposit amount, with some not having one at all. Sometimes, banks will charge a fee if you don’t maintain a certain balance in your account, so compare financial institution policies to find one that works well for you.

How fast can I open a bank account?

If you’re referring to the actual process of applying, it can be as fast as 15 minutes or so. Approvals, however, may take anywhere from an instant to a couple days, especially at brick-and-mortar banks. Also, it can take a week or more to get physical checks and/or a debit card by snail mail.


Photo credit: iStock/Vladimir Sukhachev

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 recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit 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, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

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

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

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

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

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


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


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

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What to Know About Removing a Hold on a Bank Account

What to Know About Removing a Hold on a Bank Account

After making a deposit to a bank account, in many cases, not all of the money is immediately available for use. This temporary delay in the availability of funds is called a “hold.” When a particular deposit will become available depends on funds availability, and each financial institution has its own policies on this guided by federal regulations.

While these policies are in place for the bank’s protection as well as your own, it can be frustrating when you can’t spend your own money, which may lead you to wonder how to remove a hold on a bank account.

What Is a Hold on a Bank Account?

When a financial institution puts restrictions on an account holder’s ability to withdraw or otherwise use their funds, this is what’s called a “hold.” A hold typically lasts a relatively short amount of time, perhaps a day or two. If the restrictions go beyond five days, this may be referred to as an “account freeze.”

Financial institutions use the information in Federal Regulation CC to create their own holds policies. These policies usually provide information on the timing of funds availability based on the type of deposit being made, when it was made during a business day and the amount of the deposit.

Why Banks Place Holds on Money

Overall, a bank uses a hold to protect the institution from possible loss if the funds don’t clear from the institution where the money is being drawn. Basically, the bank wants to ensure that a check is legitimate and that it won’t bounce.

Financial institutions may also place holds if they suspect fraud and are investigating. This can in turn protect the account holder.

How Long Holds Last

The length of a hold depends on a number of factors, with deposits potentially clearing on the same day or in up to 11 days.

When it comes to a check deposit, the Federal Reserve requires that the first $225 must be made available to the account holder on the next business day (which doesn’t include weekends or bank holidays). Amounts from $226 to $5,524 should be made available within two business days after the deposit, and amounts over $5,525 should generally be available on the fifth business day. Banks may give you faster access, depending upon their policies.

In general, deposits going into a new account may have longer hold periods, which may be worth keeping in mind if you’re considering closing a bank account. Other reasons that could trigger a longer hold include:

•   An older check

•   A check that’s being redeposited

•   Deposits where an involved party has a history of overdrafts

•   Instances where there’s suspicion of fraud

Meanwhile, official checks like cashier’s checks, certified checks and government checks should clear on the day of deposit.

How to Remove a Hold on a Bank Account

As for how to remove a legal hold on bank accounts, you do have a few options, including reviewing your bank’s policy or contacting your bank. You could also simply wait it out. Here’s more on each of your possible options.

Wait It Out

If you’re not in a hurry to spend or transfer the funds being held, you can simply wait until the hold is taken off, given holds usually only last a matter of days. Keep in mind, however, that those days are business days — if there’s a bank holiday or a weekend coming up, your wait is bound to be longer.

Review Your Bank Policy

A notice of funds availability must be included on pre-printed deposit slips, but Regulation CC notes that it only needs to state that deposits may not immediately be available for withdrawal. So if you’d like to learn more specific information about the length of holds, you can often find your bank’s policies online or by contacting them. This information is also typically provided to you when you first open your account.

Armed with this information, you may be better able to plead your case with the bank to lift the hold — especially if you find out the hold is outside the norms.

Contact Your Bank

As a third option, call, email or stop by a branch of your bank to ask about specifics of its hold policy. You can ask your bank to provide an explanation for the hold or sometimes even to release the hold. In most cases, you won’t be able to do anything about the hold though, and because all banks have them, you can’t switch banks to avoid them either.

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Open a SoFi Checking and Savings Account with direct deposit and get up to a $300 cash bonus. Plus, get up to 4.60% APY on your cash!


How to Prevent Holds

Rather than worry about how to remove a hold on a bank account, it might be helpful to take proactive steps to prevent a hold in the first place. Read on for some suggestions for reducing or eliminating hold lengths in a variety of situations.

For Paychecks

If your employer offers it, sign up for direct deposit. This means that your paycheck will be electronically transferred through the Automated Clearing House (ACH), and these deposits usually clear more quickly — often becoming available the next business day. (Here’s more on the effect ACH payments have on deposits and how quickly they’re cleared.) Plus, many financial institutions make paychecks that are electronically deposited immediately available.

For Large Deposits

If you know that you’re owed a large sum of money, ask for it to be paid by certified check, cashier’s check or a form of government check (such as a money order purchased at the United States Post Office). These types of official checks typically clear quickly, usually by the next day. As another option, you could ask for the funds to be wire transferred.

Note that next-day availability only applies to the first $5,525 of the deposit, with the rest made available in a reasonable timeframe.

For Deposits in Person

Making your deposits in person is a good way to prevent delays in funds availability. Doing so through an ATM or through an app, on the other hand, can result in longer holds.

For Deposits Into a Separate Account

This strategy doesn’t help to remove a hold on bank account funds but it can help to prevent an overdraft due to a hold: Deposit funds that may come with a longer hold into an account that you don’t use regularly to pay expenses, such as your savings account. (Note that when funds are being held, you can’t transfer money to another bank from that deposit until it’s cleared.)

When Using Your Debit Card

When using your debit card, consider asking the merchant whether they intend to place a hold on your account and what the amount of that hold may be. Spots where “pre-authorization” holds can be common include hotels, gas stations and car rentals.

If you foresee the hold being an issue, consider paying with a method other than your debit card, such as a credit card, or transfer additional funds into your checking account to act as a buffer. It can also be helpful in this scenario if you’ve linked bank accounts.

The Takeaway

Financial institutions create hold policies for funds deposited into bank accounts under the guidance of the Federal Reserve. Holds generally are placed for two reasons: to ensure that funds are cleared and to protect the account holder when fraud is suspected. How long a hold lasts depends on a variety of factors, including the type of deposit, when the deposit was made, a bank’s specific policies and the age of the account, among others.

If you’re looking for a way to get your paycheck up to two days early, consider banking with SoFi. The checking and savings option has no overdraft fees and offers access to over 55,000 ATMs.

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

FAQ

Why is the bank holding my deposit?

In general, financial institutions place holds for two main reasons: First, they want to make sure that a deposit will clear as a way to protect themselves and, second, sometimes they’ll place a hold on funds because they suspect fraud and are taking actions to protect the account holder.

What can I do if my deposit is placed on hold?

You can check your bank’s hold policies (usually given to you when the account was opened and/or available on the bank’s website) to see if you can wait it out. Or, you can contact the financial institution for more information about your situation and to request for the hold to be lifted.

How long do I have to wait before my deposit is released?

In general, the first $225 of a non-cash deposit must be made available on the next business day. The next $226 to $5,524 must be available in two business days, and amounts over $5,525 must typically be made available on the fifth business day. There are exceptions in either direction though, and keep in mind that these estimated time frames only apply to weekdays, not weekends or bank holidays.

How long can a bank put your account on hold?

A bank hold can last anywhere from one day to 11 days. In general, however, holds last for less than five days. The exact length of a hold will depend on a number of factors.

Why is my bank account on hold?

Two common reasons for a specific deposit being on hold include the bank enforcing its holds policy to ensure that the deposit clears, or there is concern about fraud. If the entire account is frozen, contact your financial institution for specifics. Note that if you have concerns about identity theft or other forms of fraudulent activity on your bank accounts, you can consider a credit freeze or credit lock to protect yourself while the situation is being resolved.


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


SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit 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, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

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

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

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

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

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


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

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

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Does Opening a Checking/Savings Account Affect Credit Score?

Does Opening a Checking or Savings Account Affect Credit Score?

In most cases, opening a checking or savings account is not reported to the major credit reporting bureaus and will not have an impact on your credit score. The same holds true for normal bank transactions and account balances.

That said, there may be some cases when a bank will perform what is known as a “hard pull” when you open an account, requesting access to your credit file. This can temporarily lower your credit score. Let’s take a closer look at how your banking activity can impact your credit – and the best way to keep that score of yours as high as possible.

Consider Your Options Before Choosing a Bank to Avoid a Hard Pull Penalty

Banks and other lenders usually make a hard pull, or hard inquiry, when you apply for credit. This action will lower your credit score slightly and temporarily. While the hard pull will stay on your credit report for two years, its impact on your credit should only last for a few months.

While your credit score is updated regularly, here’s why you should be concerned about too many of these in-depth credit checks. Several hard pulls on your credit report at the same time can make it look like you’re taking on too much credit and therefore might have a hard time paying your debts back.

When you open a bank account in person or online, the good news is that most banks will perform what is known as a soft pull. This sort of informal credit check when you apply to open checking at a bank has no impact on your credit score. (As mentioned above, in some rare cases, a bank will also make a hard pull when you open checking and/or savings. For example, some overdraft protection programs are considered a line of credit, so a bank may make a hard pull before approving you.)

If you’re worried about how a hard pull might affect your credit score, especially if you’re actively seeking credit, ask a bank whether they use them and under what circumstances. If they do plan on doing a hard inquiry, it may be worth considering banks that avoid this option.

Recommended: How to Open a Bank Account Online

How to Protect Your Credit Score

While opening a bank account likely won’t have an affect on your credit, there are certain other bank-related transactions that may lower your score, such as failing to pay your bank back when you use overdraft.

Your credit score is used by banks and other lenders to determine how risky it is to extend credit to you. The lower your score, the more risk you represent to them, and they’ll offset this risk by offering you higher interest rates. If you have bad credit, lenders may not extend credit at all. If you’re applying for a home, car, or personal loan, this can obviously have major ramifications!

So, as you’re establishing credit, it’s critical that you protect your credit score. The goal is to have access to cheaper credit when you need it. That means if you are not sure whether a hard inquiry will be performed, ask before approving a credit check. You don’t want those hard pulls to pile up! Also, you may receive many different kinds of credit-card offers. Don’t assume more is better, as each one you apply for will likely trigger a hard pull, which in turn can raise red flags regarding your credit worthiness in the future.

Here are some other moves that can help keep your credit score as high as possible.

Avoid Overdrafts

When you dip into the overdraft zone, you’ve spent more than you have in your checking account. If you have overdraft protection, your bank will step in and cover the shortfall. They will usually charge overdraft protection fees, and you’ll have to repay the money using a credit card or money from a savings account.

Overdrafts themselves do not affect your credit score if you promptly pay back the overdraft fees and what you owe. However, failing to do so will have an adverse effect on your credit. If, for instance, you are unable to pay off your credit card or the overdraft is sent to collections – ouch! Your score is likely to tumble.

Avoid overdrafts whenever possible by keeping a close eye on how much money you have in your bank account and never spending beyond that amount. If you’re someone who frequently overdrafts, you may consider dropping overdraft protection. This means your debit card transaction will be declined when you try to make a purchase with money you don’t have. It may be momentarily embarrassing or inconvenient, but it will help protect your credit.

Pay Back Your Debts on Time

We can’t stress this strongly enough: Punctuality counts! Your payment history plays a big role in determining your credit score. It may take into account credit cards, auto loans, student loans, home loans, and other forms of credit. It will show details on late or missed payments, including how much you owed, how delayed a payment was, and how often you’ve missed payments. Late and missed payments will detract from your score and can even stay on your report for up to seven years! So it’s important to pay on time.

Get up to $300 when you bank with SoFi.

Open a SoFi Checking and Savings Account with direct deposit and get up to a $300 cash bonus. Plus, get up to 4.60% APY on your cash!


Don’t Co-sign

Say a friend or family member is having troubling securing credit for themselves due to their bad score. They may ask you to co-sign a loan, using your good credit to help bolster theirs. Your heart may be in the right place and you may want to help, but – in a word – don’t! When you co-sign, you are also taking on responsibility for paying off that debt. That means if the friend or family member fails to make a payment, you’re on the hook for it. What’s more, their missed payments may have a negative impact on your credit score. For this reason, when you are in “protect my credit score” mode, it’s probably prudent to avoid co-signing.

File for Unemployment

If you lose your job and a steady stream of income, you may find it more difficult to pay your bills on time or you may take on more debt. Each of these scenarios can hurt your credit score.

Filing for unemployment can help you replace some of that income stream and prevent you from falling behind. What’s more, there is no public record that keeps track of who is receiving unemployment, and receiving benefits does not affect your score.

Seek Credit Counseling

Sometimes, despite one’s best efforts, debt gets out of hand or a credit score can spiral downward. If you are feeling overwhelmed and not sure of how to improve the situation, get help. Credit counselors are professionals trained to help you with money issues, including setting up a debt management plan as well as preparing and sticking to a budget.

You can find a counselor through nonprofit services, such as the National Foundation for Credit Counseling . With this kind of organization, there is usually no fee for your first counseling session, though there may be fees for subsequent services, such as crafting a debt management plan. These costs should be modest at most.

Be a Prudent Spender

The world has a lot of temptation out there in the form of tricked-out cars and mobile phones, great restaurants and vacation destinations, new clothes and more. But running up credit card charges you can’t pay off on time or taking out too steep loans can damage your credit and leave you deep in debt. Spending within your means can help you avoid this kind of debt.

A budget can help you determine how much you can comfortably spend each month. To build a budget, first tally your necessary expenses, including rent, mortgage payments, utility bills, groceries, insurance and debt payments. Subtract this from your monthly income. The money you have left can be put toward discretionary expenses such as eating out and entertainment, as well as paying down debt and saving. Be especially wary of spending beyond that discretionary limit. That’s where debt loves to live.

Monitor Your Score

You may wonder if checking your own credit score can lower it. The answer is no, and in fact, you should check. You can ask for a free credit report from each of the major credit reporting bureaus — Experian , Equifax , and TransUnion — once per year. Each bureau will display slightly different credit scores. Take a look at each report and make sure it’s correct. If you find any mistakes, let the bureau know immediately.

Do Cash Management Accounts Do Hard Credit Checks?

Cash management accounts are alternatives to traditional bank accounts that are offered by online banks or robo-advisors. As with traditional bank accounts, cash management accounts typically will not perform a hard credit pull when you open an account. It is therefore unlikely to lower your score.

The Takeaway

For the most part, opening a checking, savings, or cash management account will not hurt your credit score. Banks, credit unions, and other providers typically do what is known as a soft pull, not a hard pull, when considering your application. This process should not lower your credit rating nor linger on your report. That said, there may be some activity related to your accounts that can cause your score to drift downward, such as unpaid overdrafts. Do what you can to avoid these, and protect your credit score. It’s the key to opening more financial doors and helping ensure low rates if you do apply for a loan.

Ready to open a new bank account? Explore SoFi® Checking and Savings; we make managing your money extra easy, Not only do you not have to worry about hard pulls on your credit report, but banking with us can have a nice positive impact on your finances.

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

FAQ

What are the 5 C’s of credit?

They are 1) character (overall, are you trustworthy?), 2) capacity (will you be able to maintain your end of a financial arrangement?), 3) capital (do you have sufficient funds to enter this arrangement?), 4) conditions (looking at the big picture, are economic forces favorable to your entering this arrangement), and 5) collateral (if you’re taking out a loan, do you have something of value to offer as security?).

What is a hard inquiry?

A hard inquiry, also known as a hard pull, occurs when you apply for credit and your lender has requested to look at your credit file. A hard pull will temporarily lower your credit score.

Does it hurt your credit to open a checking account?

Generally speaking, opening a checking account does not trigger a hard pull and does not hurt your credit score.

Is there a downside to opening a checking account?

When opening a checking account, it is important to be aware of any fees you may be required to pay or account minimums you’ll need to maintain.

Does opening a savings account require a credit check?

While most banks, credit unions, and other financial institutions do check your credit when you submit an application to open an account, these are most often soft inquiries that don’t impact your credit score.

Does opening a savings account impact your credit score?

As with checking accounts, opening a savings account does not typically trigger a hard pull that would affect your credit score.

Is it bad to open a savings account?

It’s usually a good idea to open a savings account, even if the current interest rates aren’t that high. It establishes a foothold for future savings, and you can open an account with just a little bit of cash – in some cases, you can even start an account without depositing anything.


Photo credit: iStock/svetikd

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 recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit 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, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

As an alternative to direct deposit, 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.

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

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

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Can the Government Take Money Out of Your Account?

Can the Government Legally Take Money Out of Your Bank Account?

If you’re wondering whether the government can take money out of a person’s bank account if they are late on a debt or child support payment, the answer isn’t a simple “yes” or “no.” While the government may not be able to directly tap someone’s bank account in these situations, it can permit other parties to remove the funds. Keep reading for more insight into when and how this can happen.

Times When the Government Can Legally Take Money From Your Account

There are certain situations where the government can allow for money to be removed from a consumer’s bank account without their permission. Let’s look at a few ways this can happen.

Right of Offset

The “right of offset” is a term that refers to the fact that both banks and credit unions are allowed to take money from an account holder’s checking account, savings account, or certificate of deposit in order to pay off a debt on another account held at the same financial institution. While the government isn’t the one directly taking the money out of a bank account, they do legally allow this to happen.

For example, if you have a checking account and a student loan through a single bank and you fail to pay your student loan, the bank has the right to take money from your checking account to pay for missed loan payments. If the student loan was held through a different financial institution where the account holder doesn’t have a checking account open, then no action can be taken.

Financial institutions don’t have to give account holders advanced warning before exercising the right of offset. This is legally allowed as long as they follow all rules surrounding this practice.

Appeasing Both Sides

Taking funds from your account typically only happens in situations such as a student loan being about to go into default when the person holding the loan has money sitting in checking that could cover the debt. To know whether your funds could be tapped in this way, take a look at the fine print. Financial institutions like banks and credit unions usually have language surrounding this right of offset in the agreement that an account holder signs when they open a savings account, checking account, or a CD. All financial institutions will have their own version of how they handle and explain their right of offset process. Typically, credit unions have a bit more leeway when it comes to right of offset while banks need to stick to stricter standards. For instance, it’s usually illegal for a bank to seize money from an account to pay a credit card debt. However, credit unions may be able to do this.

Which Accounts Can Be Tapped

Here’s another reason why it’s really important to pay close attention to this language: Sometimes a bank or credit union has the ability to access the funds in any joint accounts that the main account holder shares with someone else (like a spouse). So if, say, you had a joint checking account at a bank with funds in it, and the bank also held your student loan which was close to default, both you and your spouse could wind up having your money withdrawn to go towards that overdue loan. Luckily, the right of offset isn’t eligible for tax-deferred retirement accounts (such as IRAs), so the money in those accounts can’t be touched.

Garnishment of Wages

Garnishment of wages is another example of when the government permits taking money from someone without their permission. This is a legal procedure that requires an employer withhold part of a person’s earnings in order to repay a debt such as child support. Wage garnishment requires a court order; however, Title III of the Consumer Credit Protection Act (CCPA) protects the person who needs to repay their debt. It says that an employer can’t discharge an employee for having their wages garnished for a single source of debt. However, employee’s with earnings subject to garnishment for a second or subsequent debts do not receive this protection.

Personal earnings such as wages, salaries, commissions, bonuses, and retirement income all qualify for wage garnishment, but tips usually don’t.

Does the Government Take Money From Accounts Often?

Having funds removed from a bank account without the account holder’s permission doesn’t happen all that often. When it does, the account holder can generally anticipate that this scenario is going to unfold, with the exception of it being a right of offset situation and they didn’t read their account holder agreement carefully. Garnishment of wages, however, requires a court mandate and won’t catch anyone off guard.

Let’s look at an example of how these situations can occur. If someone has debt and they don’t respond to a debt collector’s suit against them, the judge usually rules against the person who owes money. The judge may rule that the debt collector can garnish their wages, take a lien out on their property, or take money from their bank accounts.

Get up to $300 when you bank with SoFi.

Open a SoFi Checking and Savings Account with direct deposit and get up to a $300 cash bonus. Plus, get up to 4.60% APY on your cash!


Are Any Funds Exempt?

You may wonder if any kinds of funds are exempt from right of offset and wage garnishment. Let’s take a look at the guidelines in this situation. If the documents you signed when you opened a checking account, savings account, or CD included a right of offset agreement, then you’ve permitted the financial institution to take your money to pay a debt under the terms outlined in the agreement. The agreement is a legal contract, and you’re subject to it as long as you’re an account holder.

In some cases, you might not even learn that your bank or credit union has exercised its right of offset until after the fact. The agreement doesn’t, however, open the door for a financial institution to pull money from your account whenever it wants. For instance, federal law prohibits a federally chartered bank from using the right of offset to pay your overdue credit card bill. Again, it is used to repay a loan that is overdue at the same financial institution.

State laws might also limit a bank’s or credit union’s right of offset. This is the case in California, where a financial institution can’t push your balance below $1,000 when it pulls money from your account to cover a debt. Some states also prohibit draining government benefits like Social Security or unemployment in a right of offset action.
When thinking about wage garnishment, let’s take a look at what the law says. What kinds of funds can be garnished? Title III applies to all individuals who receive personal earnings and to their employers. Personal earnings include wages, salaries, commissions, bonuses, and income from a pension or retirement program, but does not ordinarily include tips.

Ways to Avoid Government Withdrawals

None of these withdrawals are ideal, and there are steps you can take to avoid them. When it comes to right of offset, it’s possible to avoid having this happening with a little communication. If a consumer fears they won’t be able to make a debt payment to their bank or credit union, they can connect with their financial institution to work out a repayment plan. Being upfront won’t make the situation worse and can lead to a potential solution. If someone loses their job, they can talk to their bank about how to manage their debt until they find a new job.

The best way to avoid wage garnishment is to make the required payments, such as child support, on time. Again, if someone is struggling to make a payment because of financial hardship, it’s best to communicate that upfront and to make a plan for recovery instead of falling behind on payments.

The Takeaway

So, can the government take money out of your bank account? The answer is yes – sort of. While the government may not be the one directly taking the money out of someone’s account, they can permit an employer or financial institution to do so.

If someone plans for debt and other required payments properly, chances are that money won’t ever have to be removed from their account without their permission. Even though funds can be unexpectedly withdrawn via right of offset and garnishment of wages, a person usually knows they have debt that’s past due and may not be totally surprised by this turn of events. When falling behind in payments, it’s often a good idea to talk directly with creditors and explain the situation. A new plan may be created that allows the person in debt to avoid these two scenarios we’ve just explored.

A New Way to Bank With SoFi

Want a fresh banking start? SoFi now offers checking and savings accounts! You can earn more on your money with a competitive APY when you direct deposit into a SoFi Checking and Savings account. Here’s another reason to bank with us: You don’t pay any account or overdraft fees.

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FAQ

What is it called when the government takes money from your bank account?

Generally, when someone has money removed from their bank account this occurs through processes known as right of offset or garnishment of wages (which is money taken directly from a paycheck). These processes don’t involve the government directly taking money out of a bank account, but require the government’s approval for a financial institution or employer to do so.

Can the government take money from your checking account?

Through the right of offset, banks and credit unions are legally allowed to remove funds from a checking account. They can do this to pay a debt on another account that the consumer has with that same financial institution.

Can a government take your savings?

Through right of offset, the government allows banks and credit unions to access the savings of their account holders under certain circumstances. This is allowed when the consumer misses a debt payment owed to that same financial institution.


Photo credit: iStock/Douglas Rissing

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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 recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit 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, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

As an alternative to direct deposit, 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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