What Is an International Bank Account Number (IBAN)?

Guide to International Bank Account Numbers (IBANs)

When trying to transfer payments to a bank overseas, not having a standardized process to identify bank accounts can easily turn into a quagmire. If you’re making a payment internationally, two major identifiers help standardize financial transfers made overseas — IBANs and SWIFT codes.

Let’s shine a light on what an international bank account number (IBAN), the difference between IBANs and SWIFT codes, and which countries use them:

What is an International Bank Account Number?

In a nutshell, IBAN’s meaning is International Bank Account Number, and it’s a one-of-a-kind identifier that banks use to refer to a specific bank account in any of 70+ countries around the world. In turn, banks use that info to swiftly send money between accounts in different countries.

While IBANs allow for sending and receiving funds, they aren’t used for withdrawing funds or for transferring ownership of accounts.

How Does an International Bank Account Number Work?

Now that you know what an IBAN is, let’s look at how this numbering system identifies bank accounts in other countries. If you want to send or receive payments internationally, the IBAN can help you identify a specific bank account and do so.

An IBAN is a standardized numbering system that includes up to 35 alphanumeric characters. While the length of an IBAN varies by country, the sequence remains the same: A two-digit country code, a two-digit check digit, followed by the remaining characters. This includes the bank code, branch code, and account number.

IBANs are very much a part of the daily financial flow today. You may not have had international transactions in mind when you took the time to open a bank account, but they are becoming quite common. Whether doing business with a vendor overseas or shopping online for items that wind up being stocked on another continent, financial transfers across country lines happen frequently.

IBAN vs. SWIFT Code

Both IBANs and SWIFT (aka Society of Worldwide Interbank Financial Telecommunications) codes are globally recognized and accepted banking transfer identifiers. They play a part in making sure a transfer goes through successfully, and they help keep international finance running smoothly.

They are not, however, the same set of digits. The main difference between an IBAN and a SWIFT code lies in what they identify. Whereas a SWIFT code identifies the financial institution, the IBAN points to a specific bank account. Both work in tandem to help a transaction proceed.

To provide a bit more detail, here are a few other key differences between IBANs and SWIFT codes:

•  While an IBAN works more to identify a bank, branch, and bank account numbers, SWIFT identifies a particular bank during a transaction.

•  SWIFT Codes are issued by the Society of Worldwide Interbank Financial Telecommunications, which is a member-owned cooperative. The SWIFT banking system is a messaging network that enables financial institutions around the world to talk to one another securely. IBANs, on the other hand, are issued directly by the financial institutions.

•  Whereas IBANs are alphanumeric codes that are up to 35 digits, SWIFT codes include alphanumeric code that’s either 8 or 11 characters.

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Requirements for International Bank Account Numbers

IBANs contain a very specific sequence of characters to ensure that they encode the information needed to identify a bank account. They are up to 35 characters long, and include:

•  A country code (two digits)

•  Check digits (two digits); this validates the routing numbers and accounts. It is sometimes referred to as a control code.

•  A Basic Bank Account Number (BBAN); this is an alphanumeric sequence that’s up to 28 characters long and represents a country-specific bank account number (which could represent different types of bank accounts, such as checking or savings).

While the format is standardized around the globe, the length of the code varies depending on the country.

It’s worthwhile to note that when using an IBAN to send or receive payments, there might be a processing fee or commission on the transfer.

Do All Countries Use IBANs?

While more than 70 countries use IBANS, not every nation does. IBANs are generally used in the majority of banks in the Eurozone and other European countries. Parts of the Middle East, the Caribbean, and North Africa also use IBANs.

Some countries, such as Austria, Croatia, France, and the Netherlands make IBANs mandatory. Other countries don’t require the use of IBANs, but it is recommended. These include Albania, Brazil, Costa Rica, and the Virgin Islands.

Lastly, there are countries that don’t use IBANs. Australia, New Zealand, Canada, and the U.S. fall into this camp.

Why Were IBANs Created?

As you might imagine, the world of international bank transactions can be very complex. The IBAN system was developed to smooth the process and minimize errors. By having such specific information about a bank account compressed into 35 or fewer digits, there’s less opportunity for mistakes and delays to occur, and for the related fees to be charged.

What Does an IBAN Number Look Like?

An IBAN is up to 35 digits of alphanumeric code. The length of the code varies according to the country. Regardless, an IBAN always begins with a two-digit country code, and a two-digit check digit. The rest of the code will vary in length depending on the country.

Here are some examples of IBANs:

Albania: AL 35 202111090000000001234567
Denmark: DK 95 20000123456789
Spain: ES 7921000813610123456789

When Is an IBAN Number Required?

An IBAN number is required if you’re sending or receiving money from a country that participates in using IBANs. If you’re going to start the process of wiring money to a country with a financial system that uses IBANs, you’ll need the IBAN to wire funds.

How Can I Get an IBAN?

If IBANs are available in both the country you live in and in the recipient’s country, you can obtain an IBAN by reaching out to your bank or checking on your bank statement. The person you’d like to send or receive money from will also need to to get their IBAN by contacting their bank or looking at their bank statement.

In addition, the IBAN website also has a handy tool to calculate your IBAN code based on your country, bank code, and account number.

Alternatives to IBANs

As mentioned before, some countries don’t use IBANs. One alternative, as previously mentioned, are SWIFT codes or BICs (Bank Identifier Codes). These identify financial institutions, but they don’t point to specific bank accounts. So to send or receive money internationally, you’ll need additional information, such as an account number. For instance, financial institutions in the U.S. and Canada use a mix of routing and account numbers.

What’s the difference between a routing vs. an account number? A routing number identifies the financial institution, while the account number is linked to an individual account.

(One vocabulary note: When performing financial transactions, you may hear some people use the term ABA number. That’s the same thing as what most people call a routing number.)

Here’s one more example of an alternative to IBANs: New Zealand and Australia use SWIFT codes to send or receive payments, and Bank State Branch (BSB) codes for local money transfers.

The Takeaway

While the U.S. doesn’t use the IBAN (International Bank Account Number) system, when you are sending or receiving funds from overseas, you’ll need the other party’s IBAN. This number contains vital information that will help funds to safely and quickly get to the intended account in another country. IBANs play an important role in keeping international financial transactions flowing.

If you’re looking to open a bank account closer to home, however, see what the mobile banking app from SoFi offers. When you sign up for our Checking and Savings with direct deposit, you’ll earn a competitive APY, pay zero account fees, and have all the convenience that an online bank can deliver.

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

How do I find my international bank account number?

If you live in a country with banks that use IBANs, you can typically find your IBAN on your bank statement. You can also contact your bank to locate your unique IBAN.

What is the difference between an IBAN and an account number?

An account number is specific to the individual and identifies their account, while an IBAN layers in more information. It’s an alphanumeric sequence that contains an account number, along with a bank code, bank branch code, and country code, and location code.

Which countries use an IBAN?

More than 70 countries globally use IBANs. The Eurozone and other European countries use them, as do some parts of the Caribbean, the Middle East, and North Africa and other areas.


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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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Guide to Transaction Deposits

Guide to Transaction Deposits

Bank transaction deposits are monetary deposits made into transaction accounts, also known as checking accounts. Transaction deposits allow a person to have ready access to their money held at a depository financial institution, such as a bank or credit union, without delay or advance notice. They differ from non-transaction deposits, which are deposits made into non-transaction accounts. Non-transaction accounts come with restrictions on when or how often you can access your money.

What Are Transaction Deposits?

A transaction deposit (sometimes also called a demand deposit) is a banking term that refers to a deposit made into a transaction account that is readily available for use — meaning you can use the money any time for other transactions.

The most common example of a transaction account is a checking account. This type of account allows account holders to make unlimited deposits, withdrawals, payments, and transfers. In other words, you can use the account as often as you want to get cash, make purchases, pay bills, and/or deposit cash at an ATM.

Savings accounts that allow account holders unlimited access are also considered transaction accounts. Typically, however, savings accounts come with withdrawal and transfer limits (such as a certain number per month). As a result, they are generally considered non-transaction accounts.

Understanding Transaction Deposits

Transaction deposits can be made at a branch of the bank, at an ATM, and by transferring funds from another account. If you set up direct deposit with your employer (such as SoFi direct deposit), these deposits also qualify as transaction deposits.

If you want to access a transaction deposit, you can so for in a number of different ways, including:

•   Withdrawing money at a branch or ATM

•   Transferring the money to another account

•   Writing a check

•   Using auto-pay

•   Making a wire payment

Transaction Deposits vs Non-Transaction Deposits

To better understand transaction deposits, it helps to know the difference between the two main types of deposit accounts: transaction accounts and non-transaction accounts.

Transaction accounts allow account holders easy access to their money. These accounts may earn interest, but typically they do not.

Non-transaction accounts, such as most savings accounts, money market accounts, and certificates of deposit (CDs) typically earn interest, providing a return on the account holder’s investment. However, deposits made into a non-transaction account (called non-transaction deposits) are not as fully accessible as transaction deposits. Account holders may be limited or restricted from accessing all or some of the money, or they may need to make a request for a withdrawal.

For example, if you open a CD, your money is locked up for a certain period of time. If you want to access the money before the CD matures, you will typically pay a penalty. With many savings and money market accounts, the bank will impose limitations on the number of transactions you can make each month. If you exceed that limit, you may be charged a withdrawal fee.

Here’s a look at transaction accounts vs non-transaction accounts:

Transaction Accounts

Non-Transaction Accounts

Unlimited number of transfers or payments to third parties There may be a limit on the number of withdrawals and transfers of money that are allowed per statement period
Typically not interest-bearing Typically interest-bearing
Can make an unlimited number of transfers between your own accounts at the same institution May have penalties for withdrawing too much money or too many times
Payable on demand May require seven days notice to withdraw funds
No maturity period May be subject to a maturity period
Examples include checking accounts Examples include money market deposit accounts, certificates of deposit, and savings accounts

Real Life Examples of Transaction Deposits

A checking account is an example of a transaction account where transaction deposits are made. The key feature of a transaction account, and the deposits made into it, is that the money is liquid, or readily available. There are no requirements for leaving the money for a set amount of time like there are with a time (or term) deposit account, such as a CD.

Here are some common examples of transaction deposits:

•   Direct deposits from your employer into your account

•   Check or cash deposits made at your bank

•   Cash deposited at an ATM

•   Mobile deposits

•   An electronic funds transfer (EFT) made into your account

•   Payments from third parties

•   Refunds from vendors

Restrictions of Transaction Deposits

There are some instances, however, where a bank may impose some restrictions or a waiting period on certain deposits made to transaction accounts. This could happen if you deposit a large check that requires verification, or if the account is new and the account holder doesn’t yet have an established history. Once the holding period ends, the funds are fully accessible.

Non-transaction deposits, however, come with far more restrictions. In the past,
The Federal Reserve’s Regulation D restricted withdrawals from money market accounts and savings accounts to six per month. If you went over this limit, the bank would charge you a fee. If you consistently went over this limit, they could convert the account to a regular (non-interest-bearing) account. However, the Federal Reserve suspended Regulation D in April 2020. Banks can now set their own restrictions on savings account transactions, and they can vary from one bank to another.

Recommended: How Long Does the Direct Deposit Transaction Take?

Advantages of Transaction Deposits

There are a number of advantages that come with transaction deposits. These include:

•   Money is readily available

•   No maturity period

•   No eligibility restrictions

•   No limit on the number of deposits, withdrawals, or transfers the account holder can make

•   No early withdrawal penalties

•   Sometimes interest-bearing

Disadvantages of Transaction Deposits

The main disadvantage of transaction deposits is that the money being deposited will generally earn no, or only a small amount of, interest.

The Takeaway

A transaction deposit is a deposit made to a transaction account, such as a checking account. This type of account is ideal for everyday banking, since you can generally put money in and take money out whenever you like.

Non-transaction deposits are the opposite — these are deposits made to non-transaction accounts, which include savings accounts, money market accounts, and CDs. With a non-transaction account, you will face some restrictions in when and how often you can access your money. However, the advantage of non-transaction deposits is that this money will typically earn more interest than a transaction deposit will

If you’re interested in getting the benefits of both types of accounts in one, consider opening a high interest bank account. You’ll be able to easily access your money with mobile banking and through the Allpoint Network of 55,000+ fee-free ATMs, while also earning a competitive APY if you set up direct deposit. Plus, you won’t pay any monthly fees or other common account fees.

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 is a bank deposit transaction?

A bank deposit transaction is a deposit into a transactional bank account, such as a checking account. It includes direct deposits, transfers, and deposits made at a bank or ATM,

Is a deposit considered a transaction?

Yes, a deposit is considered a transaction. Any money moving into and out of your account is considered a transaction.

What banks offer transaction deposits?

Any bank that offers a checking account is a bank that offers transaction deposits.


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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.

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Guide to Altered Checks and How to Spot One

Guide to Altered Checks and How to Spot One

Check fraud, financially damaging to its victims, has been going on for decades.

Here’s how it happens: When a check is altered (most commonly the payment amount or recipient name), this is a form of check fraud.

Keep reading to find out what constitutes an altered check and how to spot it.

What Is an Altered Check?

What is considered an altered check? It’s a normal paper check that was altered fraudulently. Essentially, if someone writes a check and another person changes the amount on the check (usually by adding an extra zero at the end of the check amount or by changing the payee’s name) in order to commit fraud, this is considered an altered check.

The payer or payee who was defrauded needs to report this fraud within a year to help ensure the loss will be covered. If a bank has reason to believe a check has been altered fraudulently, it can legally refuse to cash it.

The Office of the Comptroller of the Currency (OCC) advises not leaving large spaces in the number and amount lines when writing a check to help avoid fraudulent alterations from occurring.

Altered checks are one of the most common types of check fraud. Other types include forgeries, counterfeit checks, and remote checks (this is when there is a false statement that says the account holder authorized a check in lieu of their signature).

Who is liable when a bank finds an altered check? According to the Uniform Commercial Code (UCC) — which addresses altered checks in Section 3-407 — the liability can affect multiple parties, including:

•   The check writer

•   The check cashier

•   The bank that presents the check

•   The bank that verifies and cashes the check

It’s not always easy to know when a check is good.

To help soften the blow of altered check fraud, consumers can benefit greatly from examining their bank statements after they write a check to ensure the right amount is processed.

If you do find evidence of an altered check, you should ideally report the loss within 30 days, but you have to do so within one year if you want to be reimbursed for the loss.

Recommended: How to sign over a check to someone else.

Example of an Altered Check

Not sure what an altered check looks like? Let’s review an example of an altered check to make it easier to learn how to spot one.

Let’s say a check is made out to a dollar amount of $1,000. Look closely at that payment amount. Ask yourself these questions:

•   Does the last zero look like the same type of ink was used to write it and was written in the same style of handwriting?

•   Does that final zero appear to cross over a period?

It’s much more common to see an altered dollar amount than a changed name because it’s a lot easier to add a zero at the end of a series of numbers than it is to change a name completely.

Can an Altered Check be Cashed?

It is possible to cash an altered check, but fortunately it’s fairly difficult to pull off these days, thanks to advanced security efforts. Banks use high-tech watermarks and other authentication and fraud detection methods to make it very hard to cash altered checks.

One of the reasons that banks take fraud detection so seriously is because the liability can fall on the bank if they fund an altered check.

Is It Illegal to Alter a Check?

It is illegal to alter a check and if the amount of the check is more than $1,000, altering it is considered a felony. For altered checks of less than $1,000, this crime would be prosecuted as a misdemeanor. All jurisdictions have differing penalties, and these penalties can vary depending on factors such as the check amount.

All forms of check fraud are illegal, including counterfeiting and payroll fraud.

What Types of Checks Are Typically Altered?

Let’s take a closer look at the most common types of checks to be altered.

Cashier’s Checks

How safe is a cashier’s check? It functions similarly to personal checks. The main difference between them is that with a cashier’s check the bank or credit union that issued the check guarantees that it will cash. Despite the fact that cashier’s checks have added security features like watermarks and signatures from two bank employees, they can still fall prey to check fraud.

Traveler’s Checks

A traveler’s check is a paper document someone can use to make purchases while traveling in other countries instead of using a normal check or cash. All traveler’s checks have unique serial numbers that make it possible to get refunds if the checks are lost or stolen. It’s important to be careful when traveling as criminals look for tourists to steal from.

Recommended: Can you deposit traveler’s checks in your bank account?

Money Orders

Money orders can be more secure than personal checks, but they can still be altered, so it’s always a good idea to pay close attention to the details. Similar to a cashier’s check, a money order is guaranteed by the issuer of the check, but instead of a bank this can be the U.S. Postal Service or a retailer.

Tips for Banking Securely

Check out the following tips for consumer protection.

Monitor all Bank Accounts

Keeping an eye on the transaction history of a checking or savings account can help consumers catch fraudulent behavior like altered checks while there’s still time to remedy the situation.

Frequently Change Passwords

It’s a good idea to change your online banking and other passwords frequently and not to use the same password for multiple different accounts to help avoid someone stealing login information and using it to commit financial fraud. It’s also helpful to not include personal information (name, birthday, etc.) in a password and to use a mix of upper- and lower-case letters, special characters, and numbers when creating a new password.

Only Access Online Bank Accounts From Secure Locations

You shouldn’t log onto their online bank account when using shared public WiFi at your favorite coffee shop. It’s best to only ever log into important accounts when using a secure connection like at home so no one can intercept and steal account login information.

Recommended: Cashing a check without a bank account.

Banking With SoFi

Check fraud is an unfortunate reality and that’s why it’s a good idea for consumers to keep an eye on recent bank transactions to make sure any checks they wrote were cashed for the correct amount. A fraudulent check is a check with altered information on it — such as the amount or payee information.

There are steps consumers can take to protect their financial lives when banking. For example, it’s always best to bank with a financial institution that is FDIC (banks) or NCUA (credit unions) insured.

All SoFi Checking and Saving accounts receive industry-standard FDIC insurance of up to $250,000 per member. Open an online bank account with SoFi. When you sign up for Checking and Savings with direct deposit, you’ll earn a competitive APY on savings, and you don’t have to pay any account or overdraft fees.

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

How do you tell if a check is altered?

More often than not, the payment amount is the part of a check that is fraudulently altered. Check the payment amount closely to see if it looks like an extra zero was added at the end or another number was changed.

How long does a bank have to return an altered check?

If you notice an altered check, ideally you should report it to the bank within 30 days. That being said, consumers have up to one year to report the loss to their bank in order to get the amount of the check returned to them.

What happens if you deposit a fake check without knowing it?

If you deposit a fake check without realizing you are doing so, you may be liable but oftentimes you aren’t. The bank that credited the account could choose to later reverse the funds if the check is found to be fraudulent. All banks have different policies regarding fraudulent checks.


Photo credit: iStock/AntonioGuillem

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.

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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Guide to Postal Banking

Guide to Postal Banking

A lot of people may not realize all that they can accomplish when running errands at the post office. Not only can they take care of mailing packages and picking up a fresh book of stamps, but in some cases they may be able to pursue financial services too — similar to what one might find at a bank.

Keep reading to learn more about what postal banking (also known as post office banking) entails. Among the topics covered are:

•   What is postal banking?

•   How does postal banking work?

•   What is the Postal Banking Act?

•   Why are some people opposed to postal banking?

•   What are the pros and cons of postal banking?

•   What are alternatives to postal banking?

What Is Postal Banking?

So, exactly what is postal banking? Postal banking involves a post office providing some level of basic financial services similar to a bank. This is a fairly common practice throughout the world, and it used to be common in the U.S. as well.

Many people are currently advocating to bring this service back to the U.S. It could provide a low-cost solution for America’s large unbanked population (aka people who don’t have any bank accounts, let alone multiple bank accounts).

The services that some postal offices offer when conducting postal banking can include things like cashing checks, paying bills, and issuing small loans.

How Does Postal Banking Work?

As briefly noted earlier, when postal banking is in place, a local post office can legally act like a type of bank branch. It may offer some simple banking services like bill payment processing and check cashing. Some post offices may even have the ability to issue small loans.

(It probably won’t have services like international payments via SWIFT system banking, though, or other less common transactions.)

It’s not that common anymore for U.S. post offices to offer services like these, but some do still sell money orders. If someone wants to safely pay a bill or send money to an individual without a checking account, a money order can really come in handy. It’s also possible to cash money orders at post offices in the U.S.

Some people are lobbying for U.S. post offices to expand their services on the financial front and provide more of the services that banks typically do.

The History of Postal Banking

In the past, postal banking in the U.S. was fairly common. Between 1922 and 1967, the Postal Savings System made it possible to deposit money into government-backed, interest-earning accounts at the post office. Eventually, however, commercial banks began to raise their savings account interest rates. With dwindling consumer interest in the Postal Savings System, the program ended in 1967.

In 2014, interest in postal banking in the U.S. began to surge again, thanks to a white paper released by the U.S. Postal Service Office of Inspector General. This white paper garnered a lot of attention after pointing out that underserved, unbanked households spent more than $2,400 a year on average on fees and interest paid by turning to alternative financial sources. The solution to this expensive problem could be postal banking.

Fast forward to October 2021, and the Postal Service teamed up with the American Postal Workers Union to launch a small pilot postal banking program in four cities. At these post offices, customers can access services like bill payments, cash checking, and ATM withdrawals. It’s too early to say if this pilot program will lead to more widespread access to postal banking.

What Is the Postal Banking Act?

The previously mentioned white paper led to a bill known as the Postal Banking Act being sponsored in 2020 by Sen. Kirsten Gillibrand (D-N.Y.) and co-sponsored by Sen. Bernie Sanders (I-Vt.) and Sen. Jeff Merkley (D-Ore.). This act would allow the U.S. Postal Service to provide some basic financial services. As of 2022, this act has been introduced but has not moved onto the next stage of being passed by the Senate.

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!


Why Is There Opposition to Postal Banking?

There is some opposition to bringing back postal banking services in the U.S. One key issue is that some believe the U.S. Postal Service isn’t equipped to handle adding banking services. Opponents argue that these days, plenty of banks have low-cost programs that the unbanked can turn to. They may believe that the U.S. Postal Service should focus on optimizing its core offerings instead of diversifying.

Advantages of Postal Banking

To better understand the possible advantages of postal banking, consider these upsides:

Makes Financial Service More Accessible

For those that are unbanked, postal banking can provide a more affordable and accessible option for financial services. As a result, fewer unbanked individuals would need to turn to expensive alternatives like payday loans and check-cashing stores. They would have a simple way to cash checks and possibly a safe way to transfer funds from one account to another.

Low Cost

Again, postal banking can be more affordable than commercial banking. Sure, all financial institutions need to survive, and fees are how banks make money. But, as previously noted, postal banking can provide a much more affordable alternative to payday loans and check-cashing stores.

Convenient

Regardless of whether a person is unbanked or not, it can be very convenient to, say, cash a check while already running errands at the post office.

Disadvantages of Postal Banking

There are also some downsides of postal banking that need to be taken into consideration. These include:

A Big Undertaking

Some opponents of post office banking believe that the U.S. Postal Service isn’t prepared to launch a nationwide postal banking service. They feel it’s too big of an undertaking to contemplate and could interfere with the day-to-day mail service or other tasks.

Commercial Banking Can Be More Robust

Today, many banks and credit unions have low-cost banking programs that can better serve unbanked consumers. They may help them open personal and business bank accounts at reasonable rates.

How Postal Banking May Help Those Who Are Unbanked

As noted above, many believe that postal banking can make financial services much more affordable and accessible to the unbanked community. This community sometimes turns to pricey, predatory payday loan providers and check-cashing stores. They do so because they don’t have access to commercial banking services. Postal banking would cost less for these consumers and could provide them with options.

Future of Postal Banking in the United States

At this point, the future of postal banking in the U.S. is unclear. Time will tell if postal banking can become more common.

Alternatives to Postal Banking

Because it doesn’t appear that U.S. postal banking will be a common option any time soon, let’s look at some other options consumers have for accessing affordable banking services.

Credit Unions

Credit unions are not-for-profit organizations, so they tend to charge lower fees than commercial banks. This can make them a more affordable option. They also tend to offer higher interest rates on savings products and charge fewer fees in general.

Online Banks

Online banks don’t have the costly overhead associated with running bricks-and-mortar banking locations. They often pass these savings along to their customers by charging fewer and/or lower fees and offering higher interest rates on savings accounts. Online banks can be very accessible since transactions can be done via convenient and safe mobile banking.

Banking With SoFi

What is postal banking? To recap, postal banking — also known as post office banking — occurs when post offices are allowed to offer select financial services to consumers. Postal banking is no longer common in the U.S. and it’s unclear if it will come back anytime soon.

If you’re looking for a new bank that could help your money grow faster, you may want to consider SoFi Checking and Savings. When you open a new bank account online with direct deposit, you can sidestep the usual bank fees, and earn 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.

FAQ

Why did the postal service stop banking?

The Postal Savings System — a program that made it possible to deposit money into government-backed, interest-earning accounts at the post office (a post office bank account of sorts) — ended in 1967. That’s when commercial banking became more competitive and popular, which contributed to less interest in this program.

Can a post office be a bank?

Currently in the U.S., post offices cannot act as a bank. This may change in the future, thanks to a resurgence in interest in postal banking.

Would postal banking save the post office?

While postal banking may help keep post offices busier and better funded, this isn’t a guarantee. Some opponents to postal banking worry that taking on postal banking may actually be challenging and potentially damaging to the U.S. Postal Service.


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.

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.

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Guide to Achieving a Better Life Experience (ABLE) Accounts

Guide to Achieving a Better Life Experience (ABLE) Accounts

An ABLE account — short for Achieving a Better Life Experience — is a tax-advantaged savings vehicle that’s designed for eligible people with disabilities. Designated beneficiaries can use an ABLE savings account to set aside money to pay for qualified disability-related expenses.

An ABLE savings account can offer substantial tax benefits for qualified individuals, as contributions grow tax deferred and qualified withdrawals are also tax free. Also referred to as a 529 A account (owing to its similarity to a 529 college savings plan), the ABLE account is designed to make saving and investing more advantageous for people with disabilities and their families.

What Is an ABLE Account?

An ABLE account is a tax-advantaged savings account for people with disabilities and their families. ABLE savings accounts allow people to pay for qualified disability expenses (QDEs) without impacting their ability to qualify for Medicaid or other government assistance programs.

The Achieving a Better Life Experience Act became law in December 2014. The intention behind the ABLE Act and the creation of ABLE accounts was to ease financial stress associated with paying for many of the QDEs associated with different disabilities. Qualified expenses include: housing, education, assistive technologies, specially equipped vehicles, and even food.

Under the ABLE Act, states have the authority to establish an ABLE disability account program. As of June 2022, all 50 states offer at least one ABLE savings account program, according to the ABLE National Resource Center. However, plans are currently inactive in Idaho, North Dakota, South Dakota, and Wisconsin.

How Do ABLE Accounts Work?

An ABLE account is a type of tax-deferred savings account similar to a 529 college savings plan. These accounts work by allowing designated beneficiaries to contribute money, up to prescribed limits.

The money can come from various sources, including individual or corporate contributions, or a trust. The money in an ABLE savings account does not affect your eligibility for other government benefits.

Also like a 529 plan, the money grows on a tax-deferred basis and can be withdrawn tax free when it’s used to pay for qualified disability expenses. Broadly speaking, QDEs are any expenses a person with disability pays in order to maintain their health, independence, and quality of life.

However, withdrawals from an ABLE savings account for non-qualified expenses can result in those distributions being subject to tax. Using money in an ABLE disability account for non-qualified expenses could also affect eligibility for government assistance.

Benefits of an ABLE Account

Generally speaking, ABLE savings accounts are designed to make paying for certain expenses easier for people with disabilities. Here are some of the main advantages of opening an ABLE savings account.

Tax-Deferred Growth and Tax-Free Withdrawals

One of the main draws of ABLE accounts is their tax-advantaged status. The money that goes into an ABLE account can be invested and allowed to grow on a tax-deferred basis. As long as distributions are used to pay for QDEs, withdrawals are always 100% tax-free.

ABLE accounts have an edge over savings accounts, since designated beneficiaries can invest their money in the market. That means they have an opportunity to grow their savings through the power of compound interest.

Flexibility

The ABLE account allows for flexibility, since the money can be used to pay for a wide range of disability-related costs. With a traditional 529 plan, savers are limited to using funds to pay for education-related expenses. The ABLE savings account allows designated beneficiaries (i.e. the disabled individual or family member) to use the money for the categories noted above — housing, transportation, technology, food, etc. — as well as employment training, health and wellness costs, legal and administrative fees, and more.

Friends, family members, and others can contribute to ABLE accounts on behalf of the designated beneficiary, up to the annual limit. For 2022, the annual contribution limit, including rollovers from 529 plans, is $16,000.

And beneficiaries don’t have to worry about those contributions affecting their ability to qualify for Medicaid, Supplemental Security Income (SSI), or other forms of government aid, assuming they’re within certain limits. To learn more about who can make qualified contributions, check the ABLE website, or consult the ABLE program in your state.

Financial Autonomy

ABLE accounts afford designated beneficiaries with a measure of financial independence, since they can set up an ABLE account themselves and make contributions on their own behalf. Individuals can also manage the account, and decide how to invest their savings and when to take qualified distributions for eligible expenses.

An ABLE account can give a person with disabilities more control than something like a special needs trust, a type of trust fund. In a special needs trust, the trust grantor sets aside assets for a disabled beneficiary but that beneficiary doesn’t have a say in how the money can be used.

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!


Drawbacks of an ABLE Account

While ABLE accounts have some positives, they’re not necessarily right for everyone who has a disability. Here are some of the potential drawbacks to consider when deciding whether to open an ABLE account.

Non-Deductible Contributions

Contributions to an ABLE savings account do not offer a tax break in the form of a deduction. (This is also true of some state 529 plans.) So even if you fully fund an ABLE account up to the annual limit each year, you can’t write those contributions off on your taxes.

Age Restrictions

An ABLE account can only be established for someone who has a blindness or disability that began before age 26. So someone who becomes disabled at age 27 or later would not be able to open an ABLE disability account.

The age requirement puts this type of special needs savings account out of reach for some individuals, though they could still be named the beneficiary of a special needs trust.

Means Testing

Money held in an ABLE account is subject to means testing for the purposes of qualifying for Supplemental Security Income and Medicaid. The first $100,000 in ABLE account assets is disregarded for SSI but going over that limit can result in a suspension of your benefit payments.

The $100,000 account balance threshold doesn’t affect Medicaid eligibility. But if a designated beneficiary passes away with money remaining in their ABLE account, the state can lay claim to those assets in order to recoup any Medicaid benefits that were received.

Opening an ABLE Account

People with disabilities can open an ABLE account in any state, as long as that state’s plan is open for enrollment. The ABLE National Resource Center maintains a map with details for each state’s program, including whether out-of-state residents are accepted.

Once you find an eligible program, you can open an ABLE account online. There’s some basic information you’ll need to provide, including:

•   Your name

•   Date of birth

•   Social Security number

•   Bank account number

Parents can open an ABLE account on behalf of a minor child with disabilities. You also have to meet the definition of a designated beneficiary. In New York, for example, you must be able to show that one of the following is true:

•   You’ve been classified as blind as defined in the Social Security Act

•   You’re entitled to SSI or Social Security Disability Insurance (SSDI) due to a disability

•   You have a disability that’s included on the Social Security Administration’s List of Compassionate Allowances Conditions

•   You have a written diagnosis from a licensed physician documenting a physical or mental impairment which severely limits function, and is expected to last at least one year, or can cause death

Similar to opening a bank account, there may also be a low minimum deposit requirement to open an ABLE account.

Requirements of an ABLE Account

There are certain requirements that must be met in order to open an ABLE account. Generally, you’re eligible for one of these accounts if you:

•   Become eligible for Supplemental Security Income based on disability or blindness that began before age 26; or

•   Are entitled to disability insurance benefits, childhood disability benefits, or disabled widow’s or widower’s benefits based on a disability or blindness that began before age 26; or

•   Certify that you have a medical impairment resulting in blindness or disability that began before age 26.

Again, age and disability status are the most important requirements for ABLE savings accounts. You can open an ABLE account in your home state or in another state, if that state’s program allows non-residents to enroll. It’s important to note, however, that you can only have one ABLE account in your name.

How Much Can You Contribute to an ABLE Account?

The annual contribution limit is pegged to the gift tax exclusion limit each year, which is $16,000 for 2022. Eligible designated beneficiaries can, however, contribute additional money if they’re employed and have earned income for the year.

The IRS limits those contributions to an amount up to the lesser of:

•   The designated beneficiary’s compensation for the year, OR

•   The poverty line amount for a one-person household as established by the Community Services Block Grant Act

For 2022, the allowable amount for persons with disabilities in the continental United States is $12,880. The limit for residents of Alaska is $16,090 while the limit for Hawaii residents is $14,820.

Funds from a 529 college savings account can be rolled into an ABLE account. Any rollovers count toward the annual contribution limit. So if $6,000 have been contributed to the plan for the year already, in theory you could rollover up to $11,000 into an ABLE account from a 529 savings account for 2022.

How Can You Use ABLE Money?

As discussed earlier, money in an ABLE savings account can be used to pay for qualified disability expenses. That means expenses that are paid by or for the designated beneficiary and are related to their disability.

Examples of things you can use ABLE money for include:

•   Education

•   Housing expenses

•   Food

•   Transportation

•   Employment and career training and support

•   Assistance technology and related services

•   Health care

•   Prevention and wellness

•   Financial management and administrative services

•   Legal expenses

•   Funeral and burial expenses

•   Day-to-day living expenses

The IRS can perform audits to ensure that ABLE account funds are only being used for qualified disability expenses. So designated beneficiaries may want to keep a detailed record of withdrawal and how those funds are used, including copies of receipts.

ABLE Accounts vs Special Needs Trusts

A special needs trust (SNT) is another option for setting aside money for disability expenses. In a special needs trust, the beneficiary does not own any of the trust assets but the money in the trust can be used on their behalf. A trustee manages trust assets according to the direction of the trust grantor.

Here’s how ABLE accounts and special needs trusts compare at a glance. You may benefit from consulting a tax professional to understand when and how income from an SNT may be taxed.

ABLE Account

Special Needs Trust

Tax TreatmentGrowth is tax-deferred and qualified withdrawals are tax-free; there is no tax deduction for contributions.Income generated by the trust (i.e. withdrawals) is generally taxable to the beneficiary during their lifetime.
ControlDesignated beneficiaries can control how assets in their account are managed.The trustee manages the trust on behalf of the beneficiary, according to the wishes of the grantor.
Contribution LimitsContribution limits correspond to annual gift tax exclusion limits.No limit on contributions, though the gift tax may apply to contributions over the exclusion limit.
Medicaid/SSI ImpactUp to the first $100,000 in assets is not counted for SSI purposes; balances are not counted for Medicaid eligibility.Assets are not counted toward Medicaid or SSI eligibility.
Use of FundsFunds can be withdrawn tax-free to pay for qualified disability expenses.Funds can be withdrawn for any purpose, though they’re typically used for disability expenses. The beneficiary may owe taxes.
Age RequirementDisability must have occured before age 26.Beneficiaries must be under age 65 when the trust is created.

Alternatives to ABLE Accounts

If you don’t qualify for an ABLE account or you’re looking for ways to save on behalf of a disabled child or dependent, there are other accounts you might consider. Here are some options to weigh when looking for alternatives to ABLE accounts.

Special Needs Trust

As mentioned, an SNT can also be used to pay for disability-related expenses. Establishing a trust can be a little more involved than opening an ABLE account, since you’ll need to create the trust on paper, name a trustee, and fund it with assets. But doing so could make sense if you care for a disabled child or dependent and you want to ensure that they’ll be taken care of should something happen to you.

529 College Savings Account

A 529 college savings account is designed to help parents and other individuals save money for education while enjoying some tax benefits. Contributions can be made on behalf of a beneficiary with disabilities. That money can grow tax-deferred, then be withdrawn tax-free to pay for qualified education expenses.

You might open a 529 college savings account for yourself or your child to help them pay for school without incurring student debt.

Bank Accounts

Opening one or more bank accounts is another way to set aside money to pay for disability expenses. Bank accounts won’t yield any tax breaks but they can allow for convenience and accessibility.

•   In terms of how much money you need to open an account, that depends on the bank. Brick-and-mortar banks might require an opening deposit of anywhere from $5 to $100 while online banks might allow you to open a checking or savings account with as little as $1.

•   Can you open a bank account without ID? No. You’ll need to verify your name and address, typically with a government-issued ID, like a driver’s license.

•   So how long does it take to open a bank account? Not long, if you’re doing it online. Typically, when you have your basic forms of ID ready, the time it takes to open an online account is minimal.

•   When can you create a bank account online? The simple answer is when you’re old enough to do so. Keep in mind that the legal age to open a bank account in your name is typically 18 so if you’re underage, you may need your parents to open the account for you.

•   Online banks and traditional banks can offer a variety of account options. Student checking and savings accounts, for example, are designed for younger teens. Older teens who are headed off to university might be interested in opening a bank account for college students.

Banks can also offer certificate of deposit (CD) accounts and money market accounts.

If you’re wondering whether you can open a bank account no ID needed, the answer is no. You’ll need some form of personal identification, such as a government-issued ID, in order to open a bank account online or at a brick-and-mortar bank.

The Takeaway

An ABLE account can make it easier for someone with disabilities to meet their needs while maintaining control over their finances. With an ABLE account, the money that’s contributed grows tax free, and can be withdrawn tax free to pay for qualified expenses relating to the care of a disabled person. For 2022, the annual contribution limit is $16,000, and the money saved doesn’t impact eligibility for government programs like Medicaid.

Another benefit: Those qualified expenses aren’t limited to health care, say, the way 529 plans are limited to education. The range of expenses include housing, food, transportation, employment — as well as health and wellness and preventive care. The idea of an ABLE account is to help families afford all the things a disabled person might need.

In addition, you may want to consider other options, such as online bank accounts, for growing your savings.

For instance, it’s possible to open a bank account with SoFi right from your laptop or mobile device. You can enjoy the convenience of having an all-in-one Checking and Savings that earns a competitive interest rate when you set up direct deposit. In addition, there are no monthly fees. Plus, you can get paid up to two days early when you enroll in direct deposit.

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 is considered an ABLE account?

An ABLE account is a tax-advantaged account that’s administered through a state program for the purposes of helping persons with disabilities to save and invest money. An ABLE account’s tax status sets it apart from bank accounts, college savings accounts, or Individual Retirement Accounts (IRAs). You can sign up with your state program.

Should you have both an ABLE account and a special needs trust?

It’s possible. An ABLE account can be managed by its designated beneficiary, allowing them control over their finances. Special needs trusts are managed by a trustee on behalf of the beneficiary, meaning they cannot direct how the money is spent. Having both an ABLE account and a special needs trust can help to ensure that someone with disabilities is taken care of financially while allowing them a measure of independence.

Is a Roth IRA an ABLE account?

No. A Roth IRA is a tax-advantaged account that’s used for retirement savings. Roth IRAs are funded with after-tax dollars and qualified distributions are tax-free. They’re not limited to persons with disabilities while an ABLE account is designed to be used specifically for qualified disability expenses.


Photo credit: iStock/FG Trade

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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.


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.

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