Sending & Receiving Money From Someone Without a Bank Account

How to Send Money to Someone Without a Bank Account

Many people send and receive funds via their checking account, the hub of their financial life. But not everyone has an account. In fact, an estimated 4.5% of U.S. households (approximately 5.9 million) were “unbanked” in the most recent year studied, according to the FDIC. This means that, in their household, no one held a checking or savings account at a financial institution such as a bank or credit union.

Not having a bank account can make it more challenging to send and receive money, but it’s not impossible. Here, you’ll learn how you can move funds around without a bank. Read on to learn:

•   Key considerations before choosing a money transfer method

•   What options are available for sending and receiving funds without a bank account.

What to Consider Before Choosing a Transfer Method

As with all financial services, you don’t want to rush and just go with the first method available. Each option you review will probably have its pluses and minuses. If you are trying to send or receive money without a bank account, do your research. Consider these important factors as you move toward making your decision.

Reliability

Reputation matters, always — and especially with something as important as money. You want to use services that have been around long enough to have a track record. You can start by asking your inner circle of friends and family to hear what they use. You can read online reviews as well at trusted sites. Key things to consider are whether money transfers were completed successfully, on time, and without excessive charges.

Transfer Cost

Without a bank account, you may not have the ease of, say, having your paycheck direct-deposited via Automated Clearing House (or ACH) or using a debit card. In fact, you may have to spend time and money to send or receive some cash. So read the fine print on the options you are considering to make sure you’re clear on the fee structure.

When it comes to how to transfer money from one account to another, what will you be charged for and what’s free? Will there be certain criteria to meet in order for a transaction to be done without fees? You don’t want any surprises.

Security

Security is critical. When it comes to cash changing hands, you want to feel confident about safety. You don’t want to risk your hard-earned dough getting stuck in the ether somewhere or vanishing entirely. Look into what layers of protection are in place, such as two-step authentication, data encryption, and an adequate privacy policy. Fraud and identity theft are rampant these days, so safeguarding financial information is a must.

💡 Quick Tip: Help your money earn more money! Opening a bank account online often gets you higher-than-average rates.

Options for Sending and Receiving Money Without a Bank Account

With all those factors in mind, here are specific options you may have to send or receive funds without a bank account involved.

Mobile Wallets

Here’s one idea for how to send money to someone without a bank account: mobile wallets, or digital wallets. These are smartphone apps where you can store your debit and credit cards. Apple Pay, Google Pay, and Samsung Pay are a couple of examples you may have heard of. These services offer a way to pay a friend without cash exchanging hands. Or you might receive funds. Some points to note:

•   There are often no fees involved, and you may enjoy cash back and other rewards for completing a transaction with your linked card.

•   Both the sender and receiver must have the same digital wallet for the transaction to be free. If you have PayPal or Venmo, your recipient needs to have them too in order to do a peer-to-peer or P2P transaction.

•   Fees may apply when using extras like expedited transfers or paying by credit card, and mobile wallets in the US are often restricted to transfers within our country.

•   Mobile wallets can get all sorts of information as you use them — your name, mailing and email addresses, mobile number, records of your calls and texts, your contacts and calendar, the unique ID number of your mobile device, account information, what you buy and where and for how much. Not everyone is comfortable with sharing all of that personal data.

Money Orders

Money orders may seem like they’ve gone the way of the dinosaur, but they still serve a purpose, including offering a way to send money without a bank account (or to someone who is unbanked). Some details:

•   You get one from the post office or stores like CVS and Western Union, among others.

•   They may not be the fastest way to send money without a bank account.

•   The recipient will need to show identification to cash it.

•   Prices vary depending on the service you use and how much money is sent, but they can be reasonably priced. For instance, at the post office, you may pay $2.10 for a money order up to $500 and $3.00 for one that’s more than $500, up to $1,000. By the way, money orders are typically capped at $1,000. You could buy multiple ones if you need to transfer more than that amount.

Credit Cards

If you don’t have a bank account to fund the transfer, know that some money transfer services allow you to pay by credit card. Then, your recipient will be able to pick up cash pretty much instantly. It’s easy and convenient, but it’s likely to be more expensive than other methods.

For example, Cash App allows you to use a credit card to send funds, but will charge you 3% of the transaction value, and then the credit card you’ve linked may also charge you interest or fees. This might not be your first choice if you have less pricey options available.

Prepaid Debit Cards

A prepaid debit card is another way to move money when a person doesn’t have a bank account. It shares some features of a credit card, debit card, and gift card.

•   It is a debit card that’s been pre-loaded with money, and you can generally use it at any retailer (online or in person) that accepts credit cards.

•   Prepaid debit cards may be associated with credit card networks; think MasterCard or Visa, for example. This means they can be used anywhere that accepts that kind of plastic.

•   These cards may be riddled with fees. For instance, you might get hit with a fee for card activation, making a purchase, adding money to the card, and/or withdrawing money at an ATM. You’ll want to read the fine print because these fees may make prepaid cards a less attractive option.

Recommended: Alternatives to Traditional Banks

Cash or a Check

Cash is king and can be a super-simple way to send or receive funds, even if you don’t have a bank account, provided you can safely hand over the bills. If the two parties involved are in different locations, this becomes a lot riskier. Mailing cash is probably never a wise move.

Checks are also a time-honored way to transfer money; the person who receives it can then cash the check, perhaps paying a fee since they don’t have a bank account. But if you use mail to send the payment, a lost check situation can occur or a check might be stolen. So, there could be some risk involved.

Money Transfer Services

Money transfer services can be a godsend. No bank account is required for either the sender or recipient. It’s easy. In addition to in person retail outlets, you can now access money transfer services like Western Union and MoneyGram online.

•   It’s a quick transaction; money can arrive as early as the same day.

•   You have some flexibility, such as sending money transfers to a debit card or a mobile wallet.

•   Pay attention to fees, though, as they vary and depend on the amount you’re sending and more. For example, if you use Western Union to send money to someone in Mexico, the fee could be anywhere from $4.99 to $26.49 or more, depending on the specifics.

The Takeaway

Having a bank account can be a cornerstone of good money management, but there are a number of Americans who don’t have one. If, for whatever reason you are without one or you want to transfer money with someone who doesn’t have an account, there are still ways to send and receive money. These include digital wallets, money orders, money transfer services, and other options. Some will have fees and security risks, among other downsides. Take your time to explore the safest, most convenient, and affordable choice for your situation.

If you are an account holder in this situation, you might also see what options your financial institution offers to simplify transfers.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.


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

Can I transfer money to someone without a bank account?

Yes, there are a number of options to transfer money if someone doesn’t have a bank account. These include using a money transfer service, prepaid debit card, mobile wallet, or money order.

What is the best way to transfer money to someone without a bank account?

What’s best depends on the two people involved. What are any time constraints, what is cost-effective, and what method is most convenient? Once these and other factors are considered, you can determine the best method, which might be a money transfer service, a mobile wallet app, a money order, or a prepaid debit card.

How much does it cost to send money without a bank account?

Costs vary depending on the method you use, the amount of money you’re sending, and whether it is being transferred domestically or internationally. While a domestic money order from the U.S. Postal Service will cost up to $3.00 for an amount between $500 and $1,000, you might wind up paying considerably more for other transactions.


Photo credit: iStock/santypan

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


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

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

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

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

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

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


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

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.

SOBK0124028

Read more
woman writing in notebook

How Much Cash Should I Have on Hand?

Are you wondering, “How much cash should I have on hand?” There are two ways to look at this question. One meaning is how much actual currency (say, $20 bills) you should keep in your wallet or at home. Another way to look at that question is how much liquid money should you have available in case of emergency, such as cash in a savings account vs. equity in your home, which can be a challenge to tap into quickly.

This guide will cover both of those scenarios and help you understand the importance of having some cash accessible when it’s needed, whether in case of an emergency or everyday spending. Read on to learn the specifics.

How Much Cash Should You Have If You’re Still Working?

First, consider how much cash the typical person who’s working should have available. You may be at a stage of life when you are putting away money towards certain financial goals, such as retirement or your child’s college education. That’s money you don’t want to touch.

Which is why you also likely need to have money in an emergency fund. This is money you can quickly access if you have an unexpected medical or car repair bill or if you were to lose your job. This money can tide you over and help you avoid resorting to using your credit cards to pay for things. Credit card debt is high-interest debt, with interest rates currently over the 20% mark on average.

Financial experts usually advise that people add up their monthly expenses: housing, food, healthcare, utilities, discretionary spending, etc. Then, you want to sock away three to six months’ worth of those monthly expenditures. That money doesn’t have to be accumulated all at once. You might automate your savings and have a small amount transferred from checking into an emergency savings account every time you get paid.

What’s nice about an emergency fund is that the money is immediately accessible when you need it. Unlike, say, the equity in your home, your invested funds (the value of which can rise and fall), and a valuable family heirloom, the cash is ready and available. A good place to keep it might be in a high-yield savings account, where it will be insured up to the FDIC or NCUA limits.

💡 Quick Tip: An online bank account with SoFi can help your money earn more — up to 4.60% APY, with no minimum balance required.

How Much Cash Should You Have If You’re Retired?

If you are retired, the same basic thinking holds true about how much cash to have available. Whether you are on fixed income or still bringing in some kind of paycheck, you will want to have at least three to six months’ worth of living expenses available.

Some experts suggest that those who are retired should keep more than that amount in cash available. They believe that 12 to 24 months is a wiser number. That way, if you are hit with a major medical bill that you can’t negotiate down, you will be able to tap your cash vs. sell off investments. That’s an example of why an emergency fund is a priority.

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 Much Cash Should I Keep at Home?

Now that you understand how much cash to have available in a liquid form, consider how much literal cash (as in the bills you get when using an ATM) to keep on hand.

Of course, you don’t want too much cash sitting in a drawer when it could be safely in a bank or credit union, earning interest. But it can be wise to keep at least $100 or $200 on hand.

For instance, you might imagine what would happen if a mammoth storm came through and knocked out power to a portion of your town and many businesses were closed. You might need to fill your gas tank to drive to the next town over to get food, or you might have to pay for some emergency supplies or to refill a medication prescription.

While some people may want to keep more than that amount “just in case,” the prevailing wisdom is to have no more than $1,000. If you keep that much cash in your house, you may want a home safe. Otherwise, theft, fire, and simply forgetting where you stashed it could be issues.

How Much Cash Should I Keep in My Wallet?

How much money you need to keep in cash in your wallet will vary. Many people today use their debit card and payment apps for daily spending and carry very little or even no cash. But having some money, perhaps $100 or so, can be a wise move.

You might wind up needing to buy something at a local, cash-only business. Or you might be purchasing something from a store that adds a surcharge for those who use cards or mobile payment apps, to recoup the fees they are charged. Having a bit of money in your wallet could help you out in this and other situations.

Where Should I Store My Cash?

You might consider keeping day-to-day money in a checking account, and emergency money in a separate savings account. That way, you don’t need to battle the constant temptation to spend it. Keeping cash in an account insured by the Federal Deposit Insurance Corporation (FDIC) and that earns a solid interest rate are wise moves as well. Online banks typically offer these features.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.


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 much cash should the average person keep at home?

According to one recent survey, the largest segment of Americans keep less than $100 at home, with between $101 and $500 being the next most common amount. About one in six don’t keep any money at all. That said, it can be helpful to have some cash on hand in case of emergency.

How much cash does the average person carry?

The average American carries $67 in cash, but that figure can vary widely.

Why do people keep large amounts of cash at home?

Some people may feel their money is safest at home, close at hand. Others may be unbanked and not have a bank account in which to stash their cash. Still others may want the reassurance of knowing they have some dollars available if, say, there were an emergency situation.

Is it wise to keep cash at home?

It can be wise to keep some cash at home. Perhaps you want to run to the farmers market and make a purchase in cash without stopping at an ATM. Or maybe there’s an emergency situation, and your local ATM is out of cash. Having cash on hand can be very helpful.



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


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

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

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

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

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

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


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

SOBK1023023

Read more
Guide to Filing Your Taxes for the First Time

Beginner’s Guide on How to File Taxes

Welcome to the wonderful world of filing taxes, a key aspect of adulting. The process can be intimidating, especially for first-timers, but you will get the hang of it. Actually, once you’ve filed a couple of times, it can get easier, because you know just which documents and numbers you’ll need to complete your forms. That applies whether you file on your own or work with a tax preparer.

So, here’s a great starting point for learning how to file taxes when you aren’t so familiar with the procedure. Read on for the details you need, including:

•   What you need to file taxes

•   Where you can file your taxes

•   How can you pay your taxes

•   Tips for first-time tax filers

•   Mistakes to avoid when filing your taxes.

What Do You Need to File Your Taxes?

If this is your first time filing, it’s a good idea to gather everything you need before you sit down at a computer or with an accountant. Here’s what you’ll need:

•   Social Security number: If you aren’t sure, ask your parents or legal guardians. Once you start filing taxes, it’s a good idea for you to keep your Social Security card and other important documents, like your birth certificate, instead of leaving them at your parents’ house.

•   Wage and income information: For most first-time filers, this will simply be a W-2 form from your employer.

◦   If you did any freelance or contacted work, you should receive 1099 forms from each entity that paid you.

◦   If you have a bank account or investments that earned interest, and you will have received forms for those, typically a 1099-INT or 1099-DIV.

•   Documentation for tax credits and deductions: When doing your taxes at a young age, it is unlikely that you will qualify for many tax credits and deductions, if any at all. And because the standard deduction has increased significantly over the years, you will likely take the standard deduction (instead of itemized), for which you won’t need any documentation.

◦   If you’re a student, also look for the form 1098-T from your school, which details tuition payments you have made and funds received (such as grants), to help you identify whether you are eligible for any deductions. In addition, be aware that some college scholarships or grants may be considered taxable income.

•   Bank account info: If you expect to receive a refund and want the money electronically deposited into your bank account, you need to have your account number and routing number at the ready. If you owe money, you can pay from your bank account, a credit or debit card, or a paper check or money order.

The IRS also advises checking with parents before filing to see if they are claiming you as a dependent.

💡 Quick Tip: An online bank account with SoFi can help your money earn more — up to 4.60% APY, with no minimum balance required.

Where Can You Fill Out Your Taxes?

When learning how to do taxes for the first time, one big question is exactly where to get this done. The IRS allows you to fill out your taxes in several ways, either on paper or electronically.

Filing Online

You can file online directly through the IRS website with a tool called IRS Free File. And if your adjusted gross income (AGI) is $79,000 or less, the IRS even offers free guided tax preparation. Even if you brought in more than $79,000, the IRS makes all its tax forms available for e-file free of charge.

However, navigating tax forms can be overwhelming. Purchased tax software comes with educational resources and interactive platforms that prompt you for the correct information. Using tax software could help filers avoid math errors and find deductions and tax credits they may not have otherwise known about.

As a filer, it’s up to you to research popular tax software solutions (such as TurboTax, H&R Block, TaxSlayer, and TaxAct) and find the option that suits you best. Prices can range from about $25 to $89 and up.

Filing Manually

The old method of filing by hand with pen and paper is still possible, but the IRS has warned that returns filed on paper can take six or more months to process.

Because pen and paper can lead to more errors, it is a good idea for first-time and veteran filers to utilize free or purchased online software or even a tax professional.

Recommended: How Long Does It Take for the IRS to Mail Tax Refund Checks?

Filing With a Professional

Tax professionals can file manually and online, but the IRS encourages all accountants to utilize the online option. For a speedy return and fewer errors, most tax professionals will likely file electronically for you.

As a first-time filer, your tax situation will not likely be complex enough to warrant a tax professional. But as your finances become more complicated — with investments, real estate, small business ownership, and more — a tax accountant may make sense.

Another benefit of working with an accountant can be their training and knowledge. A professional may be able to help you find (legal) ways to pay less taxes.

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 Do You Pay Your Taxes?

When filing taxes for the first time, there’s a good chance you will not owe anything. In the event that you do owe the government money, however, you have multiple options for paying your taxes:

•   Direct Pay: The amount owed will be debited from a checking or savings account.

•   Credit or debit card: You can pay your outstanding tax balance with a debit or credit card online. This is a nice option if you have cash back rewards, but you will typically be paying a high interest rate if you carry a balance.

•   Check or money order: The IRS still accepts checks in the mail, as well as money orders.

•   Installment agreement: If you cannot afford your tax bill all at once, you can use the IRS Online Payment Agreement tool to apply for an installment plan.

Filing Tips for First-Timers

Feeling nervous about doing taxes for the first time? Here are some tips for making the experience easier; consider them steps for how beginners can file taxes.

1. Watch Your Income

To determine if you need to file, you can watch your income throughout the year. Once you pass a certain threshold, you will be required to file. This filing threshold can vary depending on your situation, so you’ll need to check out the IRS filing requirements .

If you know that you will make enough money to pay taxes, it’s a good idea to ensure your employer is withholding the proper amount of money from each paycheck for federal, state, city, and even school district taxes. If you believe your employer is not withholding enough (or is withholding too much), the IRS recommends filling out a Form W-4 to change your withholding.

Recommended: What Tax Bracket Am I In?

2. Gather All Necessary Documents

Tax documents will start arriving in the mail or digitally early in the new year, typically near the end of January or in early February. As these documents come in, it’s wise to store them in a safe place, like a manila folder in a fire safe or an encrypted folder on your computer. When it’s time to file, you’ll be able to access all your tax forms quickly and easily, rather than hunting all over for them. Being organized this way can also help you be aware of any missing tax documents.

If your tax situation is more complex — for instance, if you are self-employed, receive student loans, or make charitable donations — it’s a good idea to hold on to relevant forms throughout the year. Self-employed individuals, for example, may want to save receipts for business expenses incurred throughout the year. These can help you claim tax deductions for freelancers.

3. Learn About Potential Credits

When filing taxes for the first time, you may not be eligible for many tax credits. Tax preparation software, a tax professional, or even the IRS’s guided filing tool may be able to help you find out which credits you qualify for.

Before filing on your own, it could be wise to review the IRS list of tax credits for individuals to see if any apply to you.

4. Understand Potential Deductions

Similarly, most first-time filers will want to take the standard deduction instead of itemizing because it may offer the larger discount. However, the IRS does offer itemized deductions for student loan interest and work expenses, if you are self-employed.

You can familiarize yourself with IRS deductions, including tax deductions for college students (if that applies) before filing to determine if itemizing deductions is right for you.

5. Hit Your Deadlines

Tax Day in the United States is traditionally April 15, but if that date falls on a Saturday, Sunday, or legal holiday, the tax deadline moves out to the next business day.

If you owe estimated taxes each quarter (say, if you are self-employed), you will need to pay taxes four times a year. Working with a tax accountant may be in your best interest. Members of the Armed Forces may have special rules governing the due date of their taxes.

Individuals can also apply for a tax extension; this extends the due date of filing, but not the due date of payment. That means you might get a six-month extension to file the paperwork, but if you have not paid what you owe by April 15, you could be subject to late penalties.

Do You Need to File Taxes Every Year?

Not everyone is required to file tax returns every year. It all comes down to your unique tax situation and how much you earned. However, if you earn income throughout the year, there is a good chance you will need to file. It’s a good idea to review the IRS filing requirements or speak with an accountant if you are not sure.

Tax Filing Mistakes to Avoid

Working with tax preparation software or an accountant can help avoid some common mistakes when filing taxes, but familiarizing yourself with some of the most common errors can be helpful, no matter how you’re filing:

•   Forgetting about state and city. We often think about federal income taxes, but your city and state (and maybe even school district) could also have their own taxes that you are required to pay.

•   Not filing. Income thresholds can change each year. It’s always a good idea to check whether you are required to file taxes for a given year even if you didn’t have to for the previous year.

•   Not checking with parents. If you are filing taxes for the first time, your parents are likely used to claiming you as a dependent. Talking with them about dependent status before filing could be a smart move.

•   Filing without all your forms. Getting taxes over with early can relieve a lot of stress (and means you can get your tax refund early), but if you have any tax form stragglers, like a 1099, that appear in the mail after you’ve completed your taxes, you might land in trouble with the IRS.

•   Entering in the wrong info. Tax preparation is not something to speed through. Even though e-filing helps avoid simple pen-and-paper mistakes, it’s still possible to incorrectly enter things like your birth date or Social Security number. Slow and steady — with lots of double- and triple-checking — wins the race.

The Takeaway

Filing taxes as a beginner can be intimidating, but if you put some time and organizational effort into the process, it can go smoothly. You’ll also be better prepared for next year’s Tax Day once you’ve filed. Whether you do your own taxes or work with a tax professional, it’s wise to gather the necessary paperwork, understand your potential credits and deductions, and file on time and precisely.

The fastest way to get a tax refund, if you’re due one, is a direct deposit into your bank account. If you’re a first-time filer, it’s wise to have an account ready to receive any funds heading your way.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.


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 happens if you make an error on your taxes?

As soon as you realize you have made a mistake on your taxes, you can amend it with Form 1040-X or by calling the IRS at 800-829-1040. In general, the IRS does not consider mistakes to be tax fraud, though you may end up paying late penalties. If you have intentionally made errors and the IRS catches you, you could be charged with a tax crime.

How much income do I need to make in order to pay taxes?

The amount of income that you need to make to pay taxes can fluctuate each year and depends on your filing status (single; head of household; married, filing jointly; married, filing separately; qualifying widow/widower). For the most recent tax season, a single filer under 65 needed to make $13,850 or more to file.

What is the deadline for filing taxes?

In general, the tax deadline in the U.S. is April 15. If this date falls on a weekend or legal holiday, the deadline shifts to the next business day. Members of the military may have special rules affecting their deadline, and self-employed individuals typically must pay quarterly estimated taxes throughout the year.

How can I avoid tax scams?

The best way to avoid tax scams is to educate yourself on what they look like. The most common tax scams are email phishing scams and phone scams. Remember that the IRS will never email you requesting personal or financial information nor will the IRS call you and threaten legal action or leave pre-recorded, urgent messages.


Photo credit: iStock/PeopleImages

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


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

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

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

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

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

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


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

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.

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.

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.

SOBK0124073

Read more
Can a Certificate of Deposit (CD) Lose Value?

Can a Certificate of Deposit (CD) Lose Money?

While it’s unlikely, a certificate of deposit (CD) could lose money if you withdraw funds before you’ve earned enough interest to cover the penalty charged. Typically, CDs are safe time deposits that guarantee an interest rate for the term that you agree to keep money at a financial institution. In fact, CDs are considered one of the lowest-risk savings vehicles available. But, if you pull your money out before the maturity date, you might take a loss.

Here’s a closer look at this topic, so you can decide if a CD is the right way to grow your money. You’ll learn:

•   What is a CD? How do CDs work?

•   Can you lose money in a CD?

•   What are the pros and cons of CDs?

•   When do CDs work best?

What Is a Certificate of Deposit (CD)?

A certificate of deposit is a savings account offered by banks or credit unions that holds a certain amount of money for a fixed period of time. Some specifics:

•   This time frame can typically range from six months to five years, but you might find even shorter- or longer-term products.

•   There may be a minimum deposit amount, too, of possibly $1,000 or a similar sum.

•   The bank pays you interest over the term of the CD. At the end of your CD’s term (you may hear this referred to as when your CD matures), you receive the money you originally put in along with the interest earned from having your money locked away.

•   CDs can be a more attractive savings vehicle than an ordinary savings account because they may offer higher annual percentage yields (APYs).

•   Typically, the longer your money is in the CD, the higher the rates offered.

•   If you get a CD from a bank that is insured by the FDIC (Federal Deposit Insurance Corporation) or NCUA (National Credit Union Administration), you are typically covered up to $250,000 per account holder, per account ownership category, per insured institution in the very rare event of a bank failure.


💡 Quick Tip: Typically, checking accounts don’t earn interest. However, some accounts do, and online banks are more likely than brick-and-mortar banks to offer you the best rates.

How Standard Certificate of Deposits Work

A CD is similar to a standard bank account, but the difference is CDs have a “lock-in” period where you cannot access the money during that time (the CD’s term). In exchange, you earn interest on the account.

When you open a certificate of deposit, you have to determine how long you are able to keep your money stowed away. This term length generally ranges from six months to several years.
If you need to access the money before the term ends, you will usually pay a penalty for withdrawing the money before the account’s maturity. There are CDs that allow early withdrawal without penalties; these are typically called no-penalty CDs, and the trade-off for this flexibility may offer a lower APY.

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!


Can You Lose Money on a CD?

The risk of having a CD is very low. Unlike how the stock market or a Roth IRA can lose money, you typically cannot lose money in a CD.

There is actually no risk the account owner incurs unless you withdraw money before the account reaches maturity. In this case, the early-withdrawal penalty kicks in and typically may eat up some or all of the interest earned. (Read your account’s terms or check a bank’s website for the specifics.)

But to answer “Can CDs lose money?”: In rare cases, an early withdrawal fee might take a bite out of your principal, too. If, say, you deposit $1,000 in an IRA and earn $15 in interest and then decide to withdraw the funds, hypothetically you could be assessed a $25 fee. In this case, you would wind up with $990 vs. the $1,000 you deposited.

Pros of Investing in a CD

Investing in CDs can be a convenient way to grow your money. High-yield checking and savings accounts can be as well, though. Or perhaps you’re tempted by other investments and wonder how CDs vs. bonds perform. Here, consider some of the benefits specific to certificates of deposit, so you can decide what will work best for you.

•   Security. You can count on a CD for its safety. Make sure to open a CD from a federally insured bank or credit union so your money is secure up to the limits of the insurance ($250,000).

•   Dependability. Instead of having your money sit in a bank and not be sure what returns you will receive as interest rates fluctuate, you can expect to get fixed returns from your CD deposit over a specific period of time.

•   Flexible terms. When opening a CD, account holders get to select from a wide range of term lengths. If you prefer a CD with a shorter maturity date, you can choose a term of a couple of months. Looking for a longer duration? Some CDs may be offered with a 10-year term.

Recommended: CDs vs. Bonds: What’s Smart for Your Money?

Cons of Investing in a CD

As with most financial products (and things in life), there are pluses and minuses to certificates of deposit. Here’s a look at the potential downsides of putting your money in a CD.

•   Lack of access. Once you add money to a CD, you won’t be able to access it until the term is over. During this time, you are not able to add money either.

•   Possible penalties. When you open a CD, you are making a commitment with a financial institution that you will not access that money until the CD matures. (Unless you opt for a no-penalty CD, that is.) If you break that commitment and withdraw money from your CD prior to its maturity date, you will incur early CD withdrawal penalties. This could mean the financial institution withholds an amount of interest on the money you withdraw or could even take some of your principal.

•   Low returns. Yields on a CD can be competitive, but when comparing their returns to those historically earned in the stock market, they’re relatively low. That said, remember that risk plays a role in the market. If you are wondering, “Can you lose money with an index fund or other investment?” keep in mind that the answer may well be “yes.”

When you are investing in stocks and exchange-traded funds, investors take on additional risk and are compensated for that risk. But when putting money in a CD, you aren’t taking any risk, which means the returns are lower.

Recommended: What Does Private Banking Offer?

When CDs Work Best

CDs work best when you are able to put away money for a period of time and accumulate interest over the term. There are different scenarios in which a CD can be a great option, such as the following:

Saving for a Purchase in the Near Future

If you are saving up for a big future purchase, such as a home or a car, you can put your money in a CD to help protect it against inflation until you are ready to access those funds.

Building Short-Term Wealth Before You Invest

If you are new to investing and want to build up your funds to have a more consistent strategy, a CD can help. You can often use a short-term CD to steadily grow your cash position before you invest it in the stock market.

Ensuring Returns Without Stock Market Risk

Opening a CD can be a way to grow your wealth, slowly and steadily with low risk. You might consider building a CD ladder to have funds come available regularly in case you need access. This can be a good balance if you are also investing in the market.

The Takeaway

A certificate of deposit is an account you can open at a bank or credit union to lock away your cash for a certain amount of time while earning a predetermined annual percentage yield. CDs are usually considered very safe. If, however, you withdraw your funds before the maturity date, in rare cases, the penalty for doing so could possibly eat into your principal, meaning you’d lose money.

Another way to grow your funds without this kind of potential access issue could be with a high-yield checking and savings account.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.


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

Are CDs safe if the market crashes?

Putting your money in a CD doesn’t involve putting your money in the stock market. Instead, it’s in a financial institution, like a bank or credit union. So, in the event of a market crash, your CD account will not be impacted or lose value.

Is a CD guaranteed to make money?

In return for allowing the bank or credit union to hold your money for a fixed period of time, the bank pays you interest. These payments are guaranteed.

What determines CD rates?

CD rates are determined by a combination of a few factors, such as the CD’s maturity (or term) and what the current interest rate environment is (banks will likely use an index rate, typically that of the federal funds rate). Search online to review the best options.


Photo credit: iStock/MicroStockHub

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


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

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

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

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

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

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


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

SOBK0124029

Read more
Tips on Managing a Checking Account

7 Tips for Managing a Checking Account

Managing a checking account can be a simple process, thanks to all the tools at your disposal today. You can set alerts to let you know if your balance is dipping too low and use your financial institution’s app to see where your funds are flowing, among other conveniences. Doing so can set you up to avoid fees and charges while maximizing rewards and interest you may earn.

Here, you’ll learn seven simple steps to help you manage your checking account with ease.

Why Is It Important to Manage Your Checking Account?

Knowing how to manage a checking account effectively will help you with many aspects of your financial life such as meeting your savings goals and protecting your money. If you don’t know where your money goes, how effective will you be when it comes to creating a budget or assessing whether you can take that last-minute weekend getaway with a friend?

Plus, having good account-management skills will protect you against fraud. For instance, let’s say someone stole your debit card and used it to make purchases. You’d want to detect that ASAP before a bad situation got any worse. If you report any losses within two business days, you’re only on the hook for a maximum of $50 according to Federal laws.

Otherwise, you could lose up to $500 if you report it after two business days but within 60. If you don’t notice the fraudulent charges until after the 60 business-day limit, you’re on the hook for all fraudulent transactions unfortunately.

To recap, good checking account management will help you:

•   Keep tabs on your bank account balance and activity

•   Allow you to better fund savings goals

•   Avoid fraudulent activity and potential money loss.

Now, here are the seven steps that answer the question, “How do you manage a checking account?”

💡 Quick Tip: Don’t think too hard about your money. Automate your budgeting, saving, and spending with SoFi’s seamless and secure online banking app.

1. Know Your Account Balance

Keeping track of your account balance gives you a clearer picture of where you stand financially. Doing so can help you with tasks such as planning for occasional and unexpected expenses, paying off your student loans on time, as well as simply sticking to your budget.

Plus, monitoring your account can help you avoid overdraft fees by preventing your balance from dipping into negative territory. It’s easy to make an online payment or swipe that debit card and forget about it, so figuring out how often to check your balance is a wise idea. (A couple times a week works well for many people.)

You can log into your account online or through the bank’s mobile app, but other ways to check your balance include:

•   Receiving automated text alerts

•   Speaking to a teller at a branch

•   Calling your bank’s customer service hotline

•   Requesting your checking account balance at an ATM.

2. Download Your Bank’s Mobile Banking App

Here’s another idea for how to manage your checking account: If your bank offers a mobile app, it can be a smart idea to download it. Yes, mobile banking is very secure most of the time. By adopting mobile banking, you can easily keep an eye on your checking account. What’s more, you can conduct an array of transactions with just a few clicks, such as paying bills, depositing checks, setting up automated alerts, and transferring money between accounts.

Depending on the mobile app’s features, you may be able to link your debit and credit cards to your account, which makes it easier to purchase and pay for things. There may be other features such as a budgeting section, money management tools, insights into your credit score, and even access to discounts at your favorite retailer.

3. Avoid Paying Extra Fees

Many checking accounts charge monthly maintenance fees, but you may be able to have them waived if you can meet certain requirements. Most commonly, you can skip the monthly fees if you set up direct deposits or maintain a certain account balance.

Perhaps you want to drill down on one kind of fee in particular: those overdraft fees. Those charges can really add up, and if they are left unpaid, they can harm your credit score. Take a bit of time to understand how your bank handles overdraft fees — will it waive it if your account is in good standing, will it charge you a fee and process the payment, or will it reject the transaction totally and assess you a fee?

Plenty of banks also offer options such as overdraft protection. Typically, this means if you’re at risk of having a negative bank balance, they will transfer the overdrawn amount from a linked savings account to your checking account automatically, without any charges. Still, you’ll probably want to set an alert so you’re notified when your checking account reaches a certain balance or hits zero. That way, you can quickly remedy the situation.

💡 Quick Tip: Bank fees eat away at your hard-earned money. To protect your cash, open a checking account with no account fees online — and earn up to 0.50% APY, too.

4. Automate Deposits and Payments

Automation can make your life so much easier. Letting technology assist you with your banking can help you keep on top of tasks such as depositing your paycheck, paying bills, or meeting savings goals.

•   In terms of how to manage a bank account, direct deposit is a great way for your employer to deposit paychecks automatically. In some cases, banks will even give you early paycheck access.

•   Your bank may have automatic bill payment or transfer tools as well. Consider using these for recurring payments to be made automatically, such as ones for subscription services, auto loans, or your mortgage payments. Doing so can prevent missed payments and may be able to help build your credit score.

•   Also, automatically transferring a certain amount each month into a separate account can help you reach your short- and long-term savings goals.

5. Embrace Potential Earnings

Sure, having a nice big cushion of cash in your checking account can make you feel flush. However, keeping excess cash in your checking account could mean you’re losing out on the opportunity to get more out of your funds. Specifically, that money could be earning you more money. As you balance your bank account, you may find there are better ways to make your money work for you.

For instance, there are plenty of ways to earn interest even if you want your cash to remain more liquid. For instance, high-yield savings accounts linked to your checking account can earn you a bit of extra cash while still being very accessible.

6. Take Advantage of Checking Account Perks

To remain competitive, many banks are starting to offer additional perks with their checking account such as:

•   Identity theft protection and assistance

•   Discounts at shopping and dining retailers

•   Extended warranties on purchases

•   Buyer’s protection

•   Health savings cards

•   Cash back on qualifying debit card purchases.

When shopping around for a checking account, consider your financial habits. If you shop frequently at certain retailers, it may be worth taking advantage of an account that offers discounts. Or if you use the ATM frequently, looking for a checking account that reimburses you for third-party ATM fees may be a smart choice.

7. Consider Consolidating

Do you have multiple checking accounts? It’s not uncommon for people to have, say, their main checking account, one that they opened to get some reward or perk, and the one that their parents opened with them in high school. If you can relate, you might benefit from simplifying your finances and consolidating all of them into one main checking account.

That way, all you have to do is log into a single checking account and monitor your finances. Why overwhelm yourself with many accounts to check on and keep track of?

The Takeaway

Managing your checking account is an important path to staying on top of your finances. It will help you keep on your budget, avoid unnecessary fees, and reach your financial goals. Plus, with all the tech tools and alerts available today and the rewards being offered, it can be faster and more profitable than ever.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.


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 it important to manage your checking account?

It’s important to manage your checking account so that you can see where your money is coming from and going to. It can help you understand how you can budget better, reach your savings goals, and even detect fraud.

How often should you manage your checking account?

For many people, checking their bank account once or twice a week works well. You can also take actions like establishing alerts when your account balance falls below a certain threshold or setting up automatic transfers for recurring payments to help save you time.

How should you keep track of what’s in your checking account?

The usual ways to keep track of what’s in your checking account are to use your bank’s app, check your balance online, call customer service, or use an ATM to see how your money is tracking.


Photo credit: iStock/jroballo

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


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

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

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

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

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

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


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

SOBK0124027

Read more
TLS 1.2 Encrypted
Equal Housing Lender