SoFi

If you’re like over 93% of Americans, you get paid by direct deposit, meaning funds are electronically transferred directly into your bank account, with no checks or cash changing hands.

But did you know that in some states in the nation, it’s not your choice whether or not you get paid this way? Some businesses are allowed to require that their staff be paid by direct deposit. From the employer’s point of view, this can be a real advantage. It means they don’t have to go to the time and expense of cutting checks. Everything can be automated. Some workers, though, might not love this policy, as they might be unbanked or prefer not to share their account details.

Here, you will learn more about this topic, including:

•  What is direct deposit?

•  Which states allow employers to require direct deposit?

•  What are ways to accept direct deposit?

•  What are the pros and cons of direct deposit?

What Direct Deposits Are

First, consider what a direct deposit is and how it works.

•  A direct deposit occurs when money is moved from one bank account to another without the use of a physical check. For example, an employer might shift money from its bank account to an employee’s bank account on payday.

•  Banks use the Automated Clearing House (ACH) network to coordinate electronic payments and other automated money transfers between financial institutions.

•  When you receive a direct deposit, money goes directly into your bank account, without the need for any intermediary steps, such as accepting the transfer, as you would if you were to deposit a check.

•  The money is cleared automatically through the ACH and is available immediately. With paper checks, banks might put a temporary hold on the funds while they wait for the check to clear. It can sometimes take some time for a check to clear; several days even.

Because it does away with a lot of cumbersome paperwork, direct deposit has become more and more popular. Direct deposit is not only used to transfer paychecks from employer to employees, but also for things like tax refunds and payments from retirement accounts.

Some government agencies have done away with direct deposit entirely. The Social Security Administration, for example, no longer cuts paper checks and requires people to accept their benefits via direct deposit or a reloadable debit card.

Which States Allow Required Direct Deposit?

Depending on state law, the answer to, “Can employers require direct direct deposit?” may be yes. State law is not always cut and dried, however.

The rules may depend on whether an employee works in the public sector or for a private company. And rules may not apply to all employers equally.

Here’s a look at direct deposit laws by state; these are the states that allow some form of mandatory direct deposit.

Why Some States Allow Required Direct Deposit

In some states, it is believed that direct deposit is a reliable payment method. Its benefits are that payment arrives on time in a secure way. There are no checks for employees to worry about depositing or that could be lost.

Employers who want to make direct deposit mandatory must meet federal requirements for allowing the employee to choose which bank receives the deposit or the employer may determine the bank. In the latter situation, the employer would also have to offer the option of payment by check or cash.

Can You Be Fired for Refusing Direct Deposit?

In some cases, an employee may want to refuse direct deposit. This could be because they are unbanked. Trying to force a person to accept direct deposit could be unintentional discrimination. This situation could require a case-by-case review.

If you feel you don’t want direct deposit and are being forced to do so, it may be worthwhile to check with your HR department about possible work-arounds.

4 Ways to Accept Direct Deposit

There are several ways to accept direct deposit. Consider these options.

Bank Account

You can have direct deposit go into a checking or savings account. Typically, you’d fill out your banking information (such as your account and routing number) with your payroll department and perhaps provide a voided check.

Investment Account

You may be able to direct some or all of your direct deposit to an investment account.

Prepaid Debit Cards

You could send direct deposit to a prepaid debit card, such as American Express’ Bluebird Card.

Payment Apps

If you are receiving direct deposit, another option could be to have it go to a payment app, such as PayPal or Cash app.

Recommended: What If Direct Deposit Goes to a Closed Account?

Advantages of Direct Deposit

Whether or not direct deposit is required, there can be some distinct upsides for employers and employees.

Convenience

Direct deposit takes a lot of the legwork out of receiving a paycheck. The funds are deposited automatically and regularly, requiring no trips to the bank or mobile deposits. You don’t need to be home to receive the check. So if you’re on vacation or working far from your regular stomping grounds, your check will go through without lifting a finger.

You may also be able to send some of your paycheck to a savings account, which is a way to automate your savings.

Organization

Keeping track of paper checks can be a pain for employers and employees, who may end up having to file away hard copies of records, such as pay stubs, for future reference. Electronic transfers provide a paperless transaction history that both parties have access to. The transaction history doesn’t need to be stored in a physical place, so it can be referenced from anywhere at any time.

Resource Saving

Sending money via the ACH is often cheaper for employers than printing and mailing paper checks. Generally, it is free for employees to receive payment through the ACH. It’s also greener, allowing businesses to cut back on the amount of paper, ink, and energy that they consume.

Security

It is possible for paper checks to be lost or stolen, and even for someone to fraudulently cash them. Issuers may charge a fee to replace lost checks, and the process of stopping payment on stolen checks may be slow and expensive.

Generally speaking, direct deposit provides a safer alternative for transferring cash since there is no physical item to be lost or stolen.

There are some potential security issues when setting up direct deposit, as banking information must be exchanged between employees and employers. Making sure that the information is passed through secure channels to a person you can trust can help ensure that direct deposit is set up securely.

Speed

How long does a direct deposit take? The swiftness of direct deposit transactions is one of the key benefits. Money often hits your account nearly immediately after a transaction is made. And transactions usually occur at midnight the night before payday, meaning direct deposits may arrive in an employee’s account long before a paper check would arrive in the mail.

Disadvantages of Direct Deposit

Despite the benefits of direct deposit, there are some reasons that the process can be disadvantageous.

Costs and Fees

In some cases the cost of opening and maintaining a bank account can be burdensome for employees, reducing the amount of their take-home pay. Iowa protects against this possibility by disallowing mandatory direct deposit if it becomes a financial burden.

Lack of Attention

Because direct deposit is automatic, you may forget to check deposits in your bank account regularly. That means that if any problems occur, they may go on for a long time before you catch them.

You can avoid this issue by setting up alerts with your bank every time you receive a deposit to quickly see if everything is correct, and if not, nip any problems in the bud.

Cyber Threats

Though direct deposit provides a relatively secure way to transfer money, that doesn’t mean it’s immune to cyber criminals looking to steal sensitive financial information and bank fraud. Protections against cyber threats include using complicated passwords and password protection and avoiding phishing scams that might give fraudsters access to emails and data.

Setting Up Direct Deposit

To set up direct deposit, you must first have a checking or savings account or another acceptable way to receive the funds, such as a payment app. Then, follow these steps:

•  To receive electronic payments, you will likely provide your account information to your employer. There may be a specific form that you are asked to fill out, you may be asked to provide a voided check for checking accounts, or you may simply be asked to provide your account information in an email.

•  Once again, always be sure you are sending your information to someone you trust and through a secure channel. You may want to avoid sending sensitive information, like account numbers, through email, instead handing information directly to a person or providing it over the phone.

•  Your employer may ask you for other information, such as the name of the account holders on your checking or savings account (if you are using one), your mailing address, and your Social Security number.

•  Employees can list multiple accounts for direct deposit, which can help them accomplish their financial goals. For example, a worker could direct a portion of the paycheck to a checking account and another to a savings account. That way savings are automated while ensuring that enough is in checking to cover bills.

Opening a SoFi Checking Account

Speaking of divvying up earnings to meet specific needs, SoFi Checking and Savings is a good candidate for that — plus much more.

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.

FAQ

Can you deny an employee direct deposit?

Whether or not direct deposit must be offered is a matter of state law. If direct deposit is required, then an employer must offer it.

Can you be fired for not having direct deposit?

When an employer wants to use direct deposit but an employee doesn’t want to accept that form of payment, there may well be a work-around, such as getting paid by a payment app. Finding a solution in this way can keep a situation from getting to the point of an employee thinking about quitting or an employer wondering about taking action.

Which states allow mandatory direct deposit?

In certain circumstances, employer direct deposit laws make it mandatory in Alabama, Alaska, Indiana, Iowa, Kentucky, Louisiana, Maine, Massachusetts, Michigan, Minnesota, North Carolina, North Dakota, Oklahoma, South Dakota, Tennessee, Texas, Utah, Washington, West Virginia, and Wisconsin.

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.

SOBK0723019

It’s a common (and frustrating) experience to have to pay a fee when you access your cash at an out-of-network ATM.

Currently, this kind of transaction will cost you $4.66 on average. When you are just trying to get $20 to buy an old book at a flea market or to buy some street food, that can be a lot!

To better understand ATM fees and avoid paying them, read on. You’ll learn typical costs and smart ways to dodge those extra charges and keep more of your hard-earned cash.

Common ATM Fees

Bank account holders typically pay no fees for using in-network ATMs, whether you’re dipping your card or doing a cardless withdrawal. However, these machines may not always be conveniently located.

Indeed, more than half of ATMs today are owned and serviced by independent operators and their affiliates — not banks. If you use an out-of-network ATM, you could end up paying a fee to your bank, as well as a fee to the ATM operator.

So how much are ATM fees? Here are some typical charges for using an ATM:

Non-Network Fee

This fee can be charged by your bank for using a non-branded or non-partner ATM. It’s kind of like going to a doctor that’s not on your insurance plan — you might be able to do it, but it could be more expensive.

On average, this charge accounts for about $1.52 of the total fee, according to Bankrate. The fee can apply to any type of transaction performed at an ATM, including withdrawals, transfers, and even balance inquiries. Typically, you won’t be told about such fees at any time during your ATM transaction.

ATM Surcharge

This one comes from the ATM owner, and is often labeled as a “convenience charge.” The average U.S. surcharge currently runs $3.14. However, surcharges can vary by state and venue, and you may encounter higher amounts in places where ATMs are in greater demand.

If you’re at an entertainment venue or theme park in a popular tourist destination, for instance, you could pay considerably more.

When using an ATM that isn’t part of your bank’s network of machines, the machine usually notifies you about a fee charged by the bank or company that operates the ATM.

Foreign ATM Fees

Traveling overseas can come with even more watch-outs, such as foreign transaction fees on both purchases and ATM withdrawals.

When using an ATM in a foreign country, you can incur a fee of around 1% to 3% of the transaction amount. Some financial institutions, however, have no foreign transaction fees, and can be worth looking at if you frequently travel overseas.

What Are Average ATM Fees?

As mentioned above, ATM fees can take a bite out of your money. Here are specifics on how much ATMs charge, as of the end of 2022:

•  The average out-of-network fee that a bank charges its customers is $1.52.

•  The average surcharge by the ATM’s owner/operator when you use an out-of-network terminal is $3.14.

•  The total average out-of-network fee is the sum of these two numbers, or $4.66 per transaction.

5 Tips to Avoid ATM Fees

If having to pay money to access your money grinds your gears, there’s some good news — it is possible to avoid ATM fees or at least encounter them less frequently.

Here are some strategies:

1. Scouting out ATMs in Advance

Finding out where your financial institution’s in-network ATMs are located in your area, or where you are traveling to, can save you money and hassle. These may be ATMs branded with the institution’s name and logo, or in a network of partner ATMs, such as Allpoint or Star. You can research this on your bank’s website or app.

2. Getting Extra Cash When You Use an ATM

Fees are typically charged per transaction, so one way to avoid charges is to withdraw more cash than you need whenever you go to the ATM, and then keep it in a safe place. This can yield significant savings when you are traveling overseas, where surcharges can be significantly higher than domestic ATM fees. You may want to keep in mind, however, that there are usually some ATM withdrawal limits.

3. Asking for Cash Back at the Register

Many retailers and convenience stores offer cash back when you make a purchase using your debit card. This can be a convenient way to get cash without paying an ATM fee. It can be a good idea, however, to make sure that neither the retailer, nor your bank charges a cash-back fee.

4. Switching to a Different Bank

Not all banks charge out-of-network ATM fees. If you’re getting hit with fees, especially double fees, you may want to consider switching to an institution that has a larger ATM network, doesn’t charge ATM fees, and/or refunds ATM fees charged by machine providers.

Online vs. traditional banks often have generous policies regarding ATM fees. They typically don’t have their own ATM networks, but will partner with large networks and may refund some fees charged by out-of-network ATM providers.

5. Using a Peer-to-Peer Payment App

With a peer-to-peer (P2P) payment app, like Venmo, or a similar service offered by your financial institution, you can easily pay your friends without cash with just a few taps on your phone -– and avoid a trip to the ATM entirely. And mobile payment can be safe, instead of carrying cash.

Banking With SoFi

One way to avoid ATM fees is to bank with a financial institution that has a robust network of cash machines, like SoFi.

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.

FAQ

How can you avoid ATM fees?

There are a few ways to avoid ATM fees: You could bank at a financial institution with a large network of cash machines; you could use a P2P app; you could get cash back at the register; or you might take out more cash in advance, among other strategies.

Are ATM fees worth it?

Whether ATM fees are worth it will depend on the circumstances. If you need cash badly, you might not mind paying a few dollars. But often, people don’t want to spend money to access their money.

Are ATM fees higher at airports?

ATMs may be more expensive at airports. For instance, not all banks or ATM networks are represented at airports. You may have a hard time finding yours and therefore have to use an out-of-network cash machine. In addition, some popular locations, from airports to theme parks to casinos, have been known to have higher than usual fees.

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.

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

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOBK0723014

“But it’s my money!” may be your thought upon withdrawing money from an ATM and discovering that you’ve been hit with a charge. Sometimes, even two charges: One from your bank (which may charge you a few dollars at out-of-network terminals) and one by the operator of the ATM (which can again add a few dollars).

Think about it: If you assessed two $3 fees when using an out-of-network machine to grab $40, you’ve paid $6 or 15% of the amount withdrawn just to get that cash into your pocket.

Fortunately, you can avoid ATM fees. Try these seven simple techniques.

7 Ways to Avoid ATM Fees

Service charges are fairly common these days. You are probably used to getting hit with them when you order movie or concert tickets online, for instance. But if you are merely taking out your very own dollars from an ATM, you likely don’t want to pay for that privilege.

While it may not be possible to always avoid these fees, particularly if you travel frequently, there are some smart strategies for evading those charges. Follow this advice.

Planning Ahead

Before heading out for the day or evening, consider whether or not you may need cash. Some independent restaurants, stores, and barber shops still operate as cash-only businesses. So if you’re testing out a new spot, you may want to check the website so you’re prepared with cash if needed.

If an establishment only accepts cash and you don’t have any, you may get stuck using the nearest ATM, which may result in double fees. It can also be a good idea to get some cash in advance (fee-free) if you’re going to a restaurant, gas station, or store that offers a discount for paying cash.

Choosing Restaurants That Take Credit Cards

A corollary to the above tip is to scope out a restaurant’s payment policies before you head out to dinner. It’s no secret that dining out can be a big expense (especially if you order that nice bottle of wine). Nor is it privileged information that many eateries are cash-only.

It’s wise to check the restaurant’s situation beforehand to make sure they take plastic. Otherwise, you will likely be forced to use the closest ATM, which can get pricey.

Taking Money Out Before Going Out

Another way to avoid ATM fees when dining out: Hit up the cash machine en route or earlier in the week. That way, you know you are covered.

Recommended: Pros & Cons of Living Cash-Only

2. Using Your Bank’s ATMs

Taking some time to familiarize yourself with your bank’s closest ATM locations (considering both home and work) can save you money and hassle down the line. There may be a location finder tool on the bank’s website or app, or you can do a general web search, or even use your phone’s maps app.

Generally, the larger, national banks will have more options for branded ATMs than smaller, regional institutions. Banks of all sizes, however, often partner with large ATM networks in order to expand their customers’ options and provide them with a fee-free banking experience.

3. Finding Partner ATMs

Another way to avoid out-of-network ATM fees is to find those terminals with which your bank has a relationship.

The biggest advantage of partnership networks is the potentially vast number of fee-free ATM locations available. Some of the largest networks even include ATMs in locations like convenience stores, pharmacies, and retailers.

If your bank partners with an ATM network, you may be able to perform ATM transactions at their terminals without getting hit with any fees from your bank, though some locations may still collect ATM surcharges. It can be wise to familiarize yourself with the policies before you start regularly hitting the machines for cash.

The easiest way to find your bank’s partners is to check the back of your debit card. If you see a logo for Allpoint, for example, you can search their app for the closest of their 55,000-plus locations.

This doesn’t automatically mean that your transaction will be entirely fee-free, but either your bank or the partner may waive charges. It’s a good idea to check with your bank for details.

Bank Partner ATMs Explained

What are bank partner ATMs? This means that there is a relationship between your bank and their partner and you can likely use their ATMs fee-free.

These kinds of partnerships can exist for various reasons. Perhaps you bank at a relatively small, local bank network. They may team up with a larger network of ATMs to make it more convenient for customers to get cash on the go.

Or perhaps you bank at an online bank, which doesn’t have brick-and-mortar locations but wants to provide access to cash machines. Their partner network can provide terminals fee-free, a nice perk for the bank’s clients.

4. Taking Out More Than You Need

How else to avoid ATM fees? Consider that ATM fees are typically per transaction, so one easy way to avoid extra charges is to withdraw more cash than you need. This is particularly true when traveling overseas, where surcharges can be significantly higher than domestic ATM fees. The downside is that you may feel uncomfortable keeping a bunch of cash on hand.

The Benefits of Less Frequent Withdrawals

Making less frequent withdrawals can have a few pros:

•   Saves you time thanks to fewer visits to the ATM

•   Costs you less in fees (if they are assessed)

•   Can help with budgeting; taking one larger lump sum may focus you more on your spending vs. grabbing $20 here and there without realizing how much cash you are going through.

Recommended: ATM Withdrawal Limits – What You Need to Know

5. Getting Cash Back

If you need cash and aren’t near one of your bank’s ATMs, you may be able to avoid paying an ATM fee by finding a nearby grocery store, gas station, or large retailer. Many of these retailers offer cash back when you make a purchase using your debit card.

If you go this route, you’ll need to make a purchase (ideally for something you need) and ask for cash back. The cashier will add the amount of cash you want to the purchase price and give it to use as cash, typically without charging any fee.

Where Can You Get Cash Back?

Many retailers allow you to ask for cash back, often with a stated maximum amount. You might be able to get cash when making a purchase at:

•   Gas stations

•   Grocery stores/supermarkets

•   Large retailers, such as Target, Walmart, and Costco.

6. Choosing a Different Bank

Not all banks charge out-of-network ATM fees. If you’re getting hit with fees, especially double fees, you may want to consider switching to an institution that has a larger ATM network, doesn’t charge ATM fees, and/or refunds ATM fees charged by machine providers.

Some banks will reimburse up to a certain amount every month in fees charged by an out-of-network provider. If you suspect you’ll use non-network ATMs frequently, you may want to consider a bank that will refund you.

Some Banks Reimburse ATM Fees

The banking industry is changing, and several players now embrace the idea of reimbursing ATM fees. This puts the customer first. It also addresses the fact that online-only financial institutions are getting more popular; this means there are no bank-owned terminals because there are no brick-and-mortar locations.

Recommended: Cardless Money Withdrawal

7. Using Personal Payment Apps to Pay Your Friends

With peer-to-peer (P2P) payment apps like Venmo, you can often avoid a trip to the ATM entirely. Once you set up an account and link your bank account, it’s easy to move money directly from your account to your friends’ accounts. Your bank may also have its own P2P payment app.

Open a SoFi Checking and Savings Account

ATM fees can be annoying and add up quickly. But, fortunately, this is usually an avoidable expense.

One way to avoid ATM fees is to do some research on where your financial institution’s branded ATMs are located in your area, as well as ATMs that are in their partner networks. Other options include using payment apps or asking for cash back at a retail cash register when it’s available.

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.

FAQ

How do you avoid paying fees at an ATM?

There are several ways to avoid paying ATM fees, For instance, you might only use in-network or partner bank ATMs, carry cash, and/or use credit cards or P2P payment apps.

Is it free to withdraw cash from ATMs?

It should be free to withdraw cash from an ATM provided you use your bank’s or its partner bank’s network. If you use an out-of-network terminal, however, you could pay a fee to both your bank and the machine’s operator.

Why do some ATMs charge you for withdrawing money?

You may be charged a fee if you use an out-of-network ATM. Because you are not a member of the bank providing the terminal, they can assess a charge to handle your transaction. In addition, free-standing ATM machines are a for-profit enterprise, offering the convenience of cash while earning a fee on every transaction.

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.

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.

SOBK0723017

If your budget is tight, you may find yourself juggling when you pay bills, skipping savings plans, and living paycheck to paycheck. However, while it may seem as if that’s just the way it has to be, there are likely some ways to budget and save better during these times in your life.

Maybe you are a recent college grad with educational loans to pay back and you’re looking for a job. Or perhaps you are navigating some major medical or dental bills in addition to your usual living expenses. Or you might simply bring in a lower income or live in an area with a sky-high cost of living.

Whether you are dealing with a brief budget crunch or some ongoing financial issues, you can take the reins. With the right intel and tactics, you can make the most of your money and stretch further.

Here’s what you can do when money is tight.

Does Budgeting Help When Money Is Tight?

Budgeting can help when your money is tight. By drilling down and seeing just how much money is coming in, what your basic living expenses are, what your discretionary spending looks like, and how your savings are growing, you are better in touch with your money.

You can then move ahead and finetune things to make your money work harder for you. You might see ways to economize or eliminate some expenses or otherwise improve your cash flow.

What follows are 11 strategies that can help when money is tight.

1. Getting Honest With Your Budget

When most of your income already goes to essentials, you may wonder if there is really enough money left over for a spending plan.

But taking a close look at your monthly spending can be especially key when money is tight because the less money available, the more important it is to keep those dollars under control.

To get a full picture of your spending, you may want to actually track your spending (every cash/debit/credit card transaction and every bill you pay) for a month or so.

You can do this by carrying around a notebook or saving all of your receipts. There are also a number of apps that can make the process of tracking your daily spending easy.

Once you have a sense of average monthly spending, it’s a good idea to compare this to what’s coming in. You can look at your bank statements for the past few months to get an idea of how much after-tax income you are taking in on average per month.

Comparing what is coming in vs. going out will help you know exactly where you stand when money is tight can be a critical first step toward easing the strain.

2. Finding Ways to Save

Here’s the next step when you are tight budgeting: Once you have a good sense of your monthly spending, you may want to group expenses into categories, and then list them in order of priority, starting with the essentials and going down to the “nice to haves.”

Once you’ve established which expenses are the most important, you can start looking for places to reduce overspending. Cutbacks may not feel fun, but they can be extremely beneficial when money is tight.

For example, if you are spending a lot on restaurants and take-out, you might consider cooking at home a few more nights a week.

Or, if you tend to be an impulsive buyer of clothing, it might make sense to institute a short-term spending freeze on new clothes or a freeze on spending money at a certain store for a period of time.

If you want to save money on streaming services, you might consider ditching that pricy cable subscription and signing up for your one favorite platform. If you love buying the latest best-sellers, It might be a good time to renew your library card and borrow instead.

You may also find you’re paying for memberships and subscriptions you no longer need or want. These are line items you may be able to scratch from the expense list completely.

3. Negotiating With Service Providers

It can be hard to save money when your budget is tight, but you might try to see if you can reduce some of your monthly “fixed” expenses.

Some of those recurring bills (like cable, internet, cell phone, car) may not actually be set in stone.

It can take little research — and nerve — but you may be able to negotiate for a lower rate from many of your providers, especially if you’re dealing with a company that’s in a competitive market.

Before you call or email a business or provider, it can help to know exactly how much you’re paying for a service, what you’re getting for your money, and how much the competition is charging for the same or similar service.

It’s also a good idea to make sure you are communicating with someone who actually has the power to lower your rate and, if not, ask to speak with someone who does.

You may also want to let providers know that if they can’t do better, you may decide to switch to another company.
Worth noting: You can also try to negotiate medical bills. You may be able to explain your situation and get a reduction.

4. Cutting Back on Bigger Expenses

If you’re tight on money right now, it can also be a good idea to take a look at the big items in your overall budget.

For example, is your car payment too high? If so, perhaps you could lease a less expensive car, or buy a used vehicle to cut monthly payments.

If rent is eating up too much of your income, you might want to look into finding a cheaper place to live that’s still nice, taking in a roommate, or moving in with friends. You might also consider moving nearby to a place where the cost of living is lower.

These options may be the last steps you take as you look for ways to reduce expenses, but they really can help you save a sizable amount of money every month. The lower you keep these costs, the easier it will be to live well within a tight budget.

5. Knocking Down Debt

Having too much debt can make for an especially tight budget, and it can also hurt your chances of achieving financial security down the line.

That’s because when you’re spending a lot of money on interest each month, it can be harder to pay all of your other expenses on time, not to mention grow your savings.

Reducing debt may seem like a tall mountain to climb when money is tight, but choosing the right debt reduction strategy may be able to help you chip away and slowly improve your financial situation.

•  Since credit card debt typically costs the most in interest, you might consider tackling these debts first, and then move on to the debt with the next-highest interest rate, and so on.

•  Another approach is to pay the minimum toward all your accounts, and then pay any extra you can afford toward the debt with the smallest balance. When that debt is wiped out, you can move on to the next smallest balance, and so on.

•  If you can qualify for a lower interest rate, another option might be to take out a personal loan that consolidates all those high-interest debts into one more manageable payment.

6. Starting an Emergency Fund

It might sound crazy, if not impossible, to put cash into savings when money is tight.

But here’s why you may want to make putting a little bit away into an emergency fund each month a priority: If you’re living on a tight budget, just one unexpected expense—like your car breaking down or a visit to an urgent care clinic—could put you over the financial edge.

If you start putting just a small amount aside each month into an emergency fund, it won’t be long before you have a decent financial cushion that could prevent you from having to run up high interest credit debt the next time something unexpected rolls around.

Good places to start–and grow–your emergency fund include: a high-interest savings account, a checking and savings account, or an online savings account.

These options typically offer higher interest than a standard savings account, but keep the money liquid so you can access it if and when you need it.

7. Spending Only Cash for Everyday Expenses

There’s something about plastic that can make it feel like you are not really spending money.

While it might not be practical to pay your rent or utility bills in cash, switching to cash (and leaving the credit cards at home) for other expenses can be a great idea when money is tight.

The reason is that paying with cash places a harder limit on your spending and helps you become more aware of your choices. When you can literally see your dollars going somewhere, you may find yourself becoming much more intentional in the way you spend it. This can be a very good thing when money is tight.

Groceries and entertainment can be great categories for going cash-only. Cash can also be a good option for clothing and the (occasional) restaurant meal.

Another benefit of cash is that it’s more difficult to get into debt since you can’t spend cash you don’t have.

8. Starting a Side Gig

Once you’ve done some basic budgeting, it may be clear that additional income could help ease things while money is tight.

Sometimes all it takes is some extra time and energy to earn some extra cash, whether it’s selling things you no longer want or need (and decluttering at the same time), taking on a low-cost side hustle, or using your talents to pick up some freelance work.

Some ideas for generating extra income include:

•  Selling things on eBay, Craigslist, or Facebook Marketplace

•  Having a garage sale

•  Creating an Etsy store and selling homemade goods

•  Driving for a rideshare or food delivery service

•  Giving music lessons

•  Renting out a room on Airbnb

•  Walking dogs

•  Cleaning houses

•  Babysitting

•  Handling social media for small businesses

•  Selling writing, photography, or videography services to clients.

9. Traveling for Less

Just because you are on a tight budget, that doesn’t mean you don’t get to travel. But you’ll want to spend some time looking for deals and perhaps using points or miles to whittle the cost down. Racking up and using travel rewards can help you get more for your money.

Also, consider the kind of trip you take. Sure, it would be nice to work your way across Europe or Asia, but you can have a wonderful and more affordable vacation by sticking closer to home or visiting America’s National Parks. Camping is almost always a bargain, and exploring a historic town or beach that’s just a few hours’ drive from your home helps you avoid costly airfare.

10. Saving on Insurance

Insurance is important to have, but you can often save via two tactics:

•  Conduct an online search to see what rates are available for coverage that matches what you already have.

•  Look into bundling your insurance if you don’t already. That typically means getting both your home and auto coverage from one provider for a tidy savings.

•  See if you can lower your premium by paying once annually vs. monthly.

11. Using a Budgeting App

There are many different budgeting techniques available that can help you manage your money. Typically, budgets help you identify your income and expenses, track your spending, and fine-tune your cash flow so you are able to pay all your bills, have some fun spending, and also save.

If you like using pencil and paper or a journal, go for it. But you will also find lots of digital tools to try, whether you are the kind to adopt a line-item budget or prefer a different method.

For instance, there are dashboards that help you see where your money goes. There are round-up apps that round up purchases to the next whole dollar and put the extra bit of money in savings for you. What’s more, your bank may already offer these kinds of tools for free. Take a look; consider changing banks if they aren’t available; or download (and potentially pay) for what you need online.

Saving Money With SoFi

If money is feeling tight right now, you may be able to regain a sense of control by taking a deep breath, sitting down, and digging into how your income, spending, and saving all line up. Then you can take steps to reduce unnecessary spending, negotiate to lower monthly bills, chip away at expensive debt, and even start building a financial cushion.

Looking for a simple way to manage your spending and saving while money is tight? Consider opening an online bank 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.

FAQ

What does a tight budget mean?

A tight budget is one without much margin for error; you might also think of it as living paycheck to paycheck. It may be hard to save or to afford discretionary expenses, and an emergency (a major medical bill or the loss of a job) could prove difficult to manage.

How do you run a tight budget?

If you have a tight budget, it’s important to track your income, spending, and saving carefully. Then, you can look for ways to better manage your money, such as cutting spending, negotiating bills, using apps, and starting a side hustle.

How do you fight money anxiety?

There are various ways to lower your money stress, including when you are tight on money. You might start slowly building up your emergency fund so you feel more prepared for uncertain times. You can investigate ways to rein in spending and/or bring in more income so your money isn’t so tight. If you are carrying considerable debt, you might refinance, take out a personal loan to pay it off and then possibly have a lower interest rate, or work with a nonprofit debt counselor for solutions.

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.

SOBK0723029

Banking today has a lot of one-click convenience, and you may hear the terms EFT and ACH used interchangeably. There is, however, a key difference between these two acronyms: ACH is one kind of EFT.

To understand this better, first know your definitions. Automated Clearing House (ACH) is a national network linking U.S. financial institutions. This electronic system allows them to debit money from one account and then credit it to another. ACH payments are one variety of EFT, or electronic funds transfer. The term EFT includes additional methods of moving money electronically, such as wire transfers.

So all ACH transactions are considered EFT, but not all EFTs are ACH.

Keep reading to learn more including:

•   Which payments are considered ACH?

•   What are some other EFT payment methods?

•   How do EFT vs. ACH vs. wire transfers compare?

ACH Transfers

ACH stands for Automated Clearing House, a network governed by Nacha (National Automated Clearing House Association). The first ACH association appeared in 1972 in California; by 1974, multiple regional networks joined together to form Nacha, which has since overseen the ACH network nationally.

But what is ACH? Put simply, ACH is a type of electronic fund transfer (EFT) that allows individuals, corporations, and even the government to electronically move money from one bank account to another. It can be thought of as a hub that keeps funds flowing.

ACH payments work domestically; that is, among banks and credit unions within the United States. You may be able to send money via international ACH transfers, but other countries will have their own networks and governing bodies. Some countries do not have an equivalent network at all.

Funds first go to the Automated Clearing House, which then reviews the payments and releases them in batches throughout the day. For this reason, ACH transfers are not immediate. How long ACH transfers take can vary: Traditional ACH transfers can take one to two business days, but in recent years, Nacha has enabled same-day transfers for eligible transactions.

How Do ACH Transfers Work?

ACH transfers work thanks to a data file that includes information about a prospective payment. The file goes to the payor’s bank to the clearing house and then on to the payee’s bank, with details on the transaction. The funds get moved into the intended location, and the process is completed, transferring money from one account to another.

How Is ACH Used?

Consumers and businesses can use ACH for a variety of purposes. For example, employers often use the ACH network for direct deposit. This enables them to deposit paychecks directly into employees’ bank accounts. When an entity, like an employer or the government, initiates the ACH process to send funds, this is classified as an ACH credit.

Individuals can provide bank account information to businesses, such as mortgage lenders and utility companies, to enable ACH debit transactions as part of their electronic banking. This means those companies are able to directly debit funds from the individual account using ACH as a form of electronic bill payment. Businesses and individuals may utilize ACH debit for autopay (recurring payments) or for one-time payments.

Even peer-to-peer (P2P) payment methods like PayPal and Venmo can utilize the Automated Clearing House network for electronic transfers. (When such services offer instant payments, they may charge a fee and use your credit card instead, so proceed carefully in these situations.)

Typically, the employer or merchant enabling ACH payments is the one to pay ACH fees.

Recommended: ACH Payments vs. a Check

What Is EFT?

Electronic fund transfers (EFTs) refer to a much broader range of electronic payments. ACH is a type of EFT, but EFT can also include payments like wire transfers, debit card payments, credit card payments, local bank transfers, instant P2P payments, and even ATM transfers. Electronic fund transfers can be domestic or international in scope.

The Consumer Finance Protection Bureau refers to electronic fund transfers as “any transfer of funds that is initiated through an electronic terminal, telephone, computer, or magnetic tape.”

Note: Another common term in finance is ETF (exchange-traded fund). The acronyms are similar, so it’s important to recognize that an ETF is an investment security, not a payment method.

How Do EFT Payments Work?

EFT payments may use the ACH network, or they may not. An example of a transaction that doesn’t use ACH is tapping or swiping your debit card to make a payment. It’s an instantaneous transfer of funds, without banking information being exchanged. The money is moved from your account to the store’s without any verification other than your PIN.

Types of EFT Payments

EFT payment is a broad category, including common transfers like ACH and wire transfers. Here is just a short list of payment methods that can be classified as EFT:

•   ACH transfers

•   Wire transfers

•   Peer-to-peer payments (often done through ACH)

•   Debit card transactions (in person or online)

•   Credit card transactions (in person or online)

•   ATM transfers

•   E-checks

•   Telephone orders

Do EFT Payments Have Fees?

Typically, a merchant will pay a small percentage of a transaction’s amount for the privilege of using an EFT method. In some situations, you, the consumer, may be assessed a fee for using these methods. For instance, some merchants may add a surcharge for credit card vs. cash or debit card payments. Or if you pay by phone, there may be a surcharge. You should be alerted to these add-on costs, however, in advance, so you can decide if you want to proceed or not.

What Is the Difference Between ACH and EFT?

We’ve established that the key difference between ACH and EFT is that an ACH is a type of EFT. This table further breaks down the distinction:

ACH vs EFT vs Wire Transfers

When banking, you’re likely to hear about different ways to move money, including ACH, EFT, and wire transfers. Here’s a closer look: ACH is a type of EFT, but another common type of EFT is a wire transfer, which can be used to send money to someone’s bank account.

Wires can be both domestic and international and often have a fee for both the sender and the receiver, depending on the banks or transfer service agencies (like Western Union) involved. Wire transfers allow you to make an electronic payment “by wire,” such as through SWIFT, the Clearing House Interbank Payments System, or the Federal Reserve Wire Network. Wire transfers can take up to two days to fully process; international ones might take longer.

Should You Use Electronic Transfers?

Electronic transfers are common in modern banking. It is likely that you already utilize some form of electronic transfer, whether you receive a direct deposit from your employer like 96% of American workers, have your utility bills on autopay, pay for groceries with a debit card, or use peer-to-peer transfer apps to split the dinner bill or pay a friend for concert tickets. When you buy a house, the mortgage company may even ask you to wire funds in time for the closing.

The Takeaway

Automated clearing house (ACH) transfers are a type of electronic funds transfer (EFT), which allows for the direct debiting and crediting of funds from one bank account to another. Common examples of ACH include direct deposit from an employer into your bank account or an automatic bill payment debited from your account.

ACH is only one type of EFT, however; other types include wire transfers and debit and credit card payments, among others. These kinds of payments are commonly used today to keep funds flowing quickly and securely and play an important role in your banking life.

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.

FAQ

Is EFT the same as direct deposit?

EFT stands for electronic funds transfer. Direct deposit is one example of EFT.

Is ACH a wire transfer?

While ACH and wire transfers are similar transactions, they operate on different timelines and according to different rules. Wire transfers (especially domestic ones) can occur almost immediately, while ACH transactions can take a couple or a few business days.

What is the difference between ACH and autopay?

ACH is a method for electronically transferring funds between accounts. Autopay involves your setting up recurring payments of bills with a vendor. It typically uses the ACH network to complete those transactions.

Is ACH the same as direct deposit?

Direct deposit is one kind of ACH payment, but other kinds of ACH transactions are possible as well.

What is the best EFT payment method?

The best EFT method will depend upon various factors, such as timing and the technology you can most easily access or are most comfortable using.

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

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

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

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

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

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

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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