What Are I Bonds? 9 Things to Know Before Investing

What Are I Bonds? 9 Things to Know Before Investing

Series I Savings Bond rates have been rising in recent months. This is good news for investors, as Series I Bonds currently offer highly competitive interest payments with near-zero risk. For Series I Bonds issued from May through October 2022, the yield (composite rate) was 9.60% for six months after the issue date. So, is now a good time to buy I bonds?

Investors looking for a safe investment with a generally higher interest rate may want to have a look at investing in Series I Savings Bonds, commonly known as I Bonds. I Bonds are similar to most bonds in that they are essentially a loan to an entity (in this case the U.S. government), with the promise to return your money with interest. I Bonds are different in that they may offer competitive returns over time, and some tax breaks as well. Here are nine important things to know before you invest in I Bonds.

9 Important Things to Know Before You Invest in I Bonds

1. I Bonds May Offer a Higher Rate, But Not a Fixed Rate

For those looking for stability and low-risk investment returns, I Bonds may be a good option, but they are not traditional fixed-income securities. I Bonds are a type of savings bond offered by the U.S. Treasury and backed by the full faith and credit of the U.S. government. They are unique in that they offer two types of interest payments: a fixed rate and a variable rate, which together provide the bond’s composite rate.

The fixed-rate portion is determined when the bond is purchased, and remains the same for the life of the bond. The variable rate gets adjusted twice a year (i.e., May and November), based on inflation rates. Investors may hold I Bonds for up to 30 years.

As of November 2022 and through April 2023, the current fixed rate on I Bonds is 0.40%. However, the inflation rate is 6.48% — making for a composite rate of 6.89%. (The formula for the composite rate is a little more complicated than just adding the fixed and inflation rates.)

💡 Recommended: Guide to the Consumer Price Index (CPI): The Inflation Indicator

2. Your I Bond Principal Is Guaranteed

Because I Bonds are backed by the U.S. government they have a low risk of default and offer tax-advantaged interest income. Furthermore, the principal is guaranteed. This means (unlike traditional, non-government bonds) that the redemption value will never decrease. This is one of the advantages of savings bonds as a whole. As a result, I Bonds are considered low-risk investments.

3. I Bonds Offer Some Tax Breaks

Tax-efficient investors may want to consider certain I Bond features. Because I Bonds are exempt from municipal or state taxes, this can be a boon for some investors. That said, while federal taxes usually apply, they could be deferred until the bond is ultimately sold, or matures; whichever happens first.

Additionally, I Bond investors may use the interest payments for qualified higher education expenses, and receive a 100% deduction (this is called the education exclusion). Some restrictions apply, including:

•   You must cash out your I Bonds the year that you want to claim the education exclusion.

•   You must use the interest paid to cover qualified higher education expenses for you, your spouse, or your dependent children the same year.

•   You cannot be married, filing separately.

4. I Bonds Are Similar to E Bonds & EE Bonds

Investors who are familiar with the Series E Bond may also find I Bonds appealing. While Series E Bonds are no longer available from the Treasury, they can still be purchased from other investors who currently hold them. Historically, Series E bonds were also known as defense or war bonds.

Series E bonds were replaced by Series EE bonds (aka “Patriot Bonds”) in 1980. Today, like Series I Bonds, investors can buy EE Savings Bonds from TreasuryDirect .

An interesting feature of Series EE Savings Bonds is that, over a 20-year period, these bonds are guaranteed to double in value. And should the interest not be enough to double the value, the U.S. Treasury will top it up, giving the bond an effective interest rate of 3.5%.

While I Bonds don’t offer the same guarantee, because they are basically variable rate bonds, your principal is guaranteed and is likely to see a competitive rate of return since these bonds are designed to keep pace with inflation.

Ready for a Better Banking Experience?

Open a SoFi Checking and Savings Account and start earning up to up to 3.25% APY on your cash!


5. I Bonds Are Easy to Purchase

Investors can purchase I Bonds online through TreasuryDirect in denominations over $25. The maximum amount of I Bonds someone can purchase is $10,000 per calendar year.

In paper format, investors may use their tax refund to purchase up to $5,000 a year.

6. I Bonds Are a Long-Term Investment

In general, the primary risks in buying bonds revolve around redemption. What if you need your money before maturity?

I Bonds are generally a long-term investment. To start with, investors must understand that they have their money locked up for one year. After that, investors who redeem their I Bonds before they’ve held the bond for five years will forfeit the last three months of interest. (You can redeem an I Bond after five years with no penalty.)

As a result, those looking for a shorter-term investment may want to consider investing in treasury bills.

7. Other Investments Might Offer Better Returns

One advantage of investing in stocks, mutual funds, and ETFs is that investors can potentially make a lot more money if the stock or fund does well. Similarly, you could lose money if the investment performs poorly. Since I Bonds are principal protected, you can never lose the initial investment, but it’s possible your money won’t grow as much as it could if you invested in other options, like equities.

Honorable mention: TIPS, or Treasury Inflation-Protected Securities, are also a type of government bond designed to protect investors from inflation. The principal amount of a TIPS bond will increase with inflation, while the interest payments remain fixed. I Bonds are similar to TIPS but offer additional protection against deflation.

8. It’s Hard to Predict an I Bond’s Return Over Time

To maximize your return on investment when purchasing I Bonds, it is essential to understand the differences between the two interest rate components of the bond, and how they can play out over time.

I Bonds offer a fixed interest rate, which remains the same for the life of the bond, and the inflation-protection component, which adjusts with changes in inflation rates twice per year.

As of November 2022, the fixed rate is 0.40%. It will remain that rate for I Bonds bought from November 2022 through April 2023. The current inflation rate, which adjusts twice a year, is 6.48%. The composite rate of return or earnings rate is 6.89% for six months after the issue date.

That means if you bought a $10,000 I Bond this month, you would get roughly $345 in interest for the first six months. After that, your rate would adjust. If inflation goes up, so would the rate of return. If inflation goes down, the bond’s inflation rate would likewise decrease.

While you might hazard a guess that your $10,000 could see a 6.89% return after one year, or $689 on your $10,000 investment, there are no guarantees.

And if you hold onto your I Bond for 10, 20, or 30 years, you would see some years with higher inflation rates and some years with lower inflation rates.

9. You Must Meet Certain Criteria to Buy an I Bond

To be eligible to buy I Bonds you must be:

•   A United States citizen, no matter where you live,

•   A United States resident, or

•   A civilian employee of the United States, no matter where you live.

Also, investors can only purchase I Bonds with U.S. funds. You cannot buy them with foreign currency.

The Takeaway

If you’re looking for a safe and reliable investment option, I Bonds are worth considering. They offer tax breaks and other benefits that can make them a near risk-free choice for your long-term savings goals. That said, because I Bonds come with a composite rate of return, it’s hard to predict how much your money will actually earn over time.

Fortunately, with I Bonds (as with most government bonds), your principal is guaranteed. If you buy a $1,000 I Bond, no matter what happens, you will get your $1,000 back.

If you’re interested in getting that steady rate of return, there are alternatives to government bonds, including the new Checking and Savings all-in-one bank account with SoFi. With SoFi, you can earn a competitive annual percentage yield, and you don’t pay account fees.

Better banking is here with up to 3.25% APY on SoFi Checking and Savings.


Photo credit: iStock/Bilgehan Tuzcu

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2022 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
SoFi members with direct deposit can earn up to 3.25% annual percentage yield (APY) interest on Savings account balances (including Vaults) and up to 2.50% APY on Checking account balances. There is no minimum direct deposit amount required to qualify for these rates. Members without direct deposit will earn 1.20% APY on all account balances in Checking and Savings (including Vaults). Interest rates are variable and subject to change at any time. These rates are current as of 11/3/2022. Additional information can be found at http://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.
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.
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How to Automate Savings

Saving money: It’s a very good thing, but — like eating fewer French fries and getting enough sleep — can be hard advice to put into practice. That’s why learning how to automate savings can be so helpful. It takes the ongoing need for focus and financial discipline off your plate and offers a convenient way to put your money to work for you.

It seems obvious that putting money away to spend later is a wise tactic. Whether it’s pulling together an emergency fund to cover an unexpected financial need, stowing away cash for a splurge like a vacation, or working toward long-term financial goals (like the down payment for a house), saving is a sound endeavor.

And yet many Americans put very little money away. Though the personal saving rate was up dramatically during the pandemic, to 10%, as of June 2022, it plummeted to about 5%. This means that, on average, Americans have been putting away roughly 5 cents of every dollar of income earned. While any saving is better than no saving at all, that is still a low figure that can put financial goals out of reach.

Automating your savings can help change that. It’s a process that can help you save regularly, so your cash grows. Read on to learn:

•   Why automating savings is a good idea

•   How to automate savings in a variety of ways.

Why Automating Savings Makes Sense

When people say one thing and then do another, it’s called the value-action gap or intentional-behavior gap. Psychologists have lots of theories about why this disconnect exists.

When it comes to saving money, lots of things can get in the way: routine bills, an unexpected big night out with friends, a shopping splurge, or simply forgetting to move money into savings.

But by taking some of the human element out of saving money and using an automatic savings technique, it may be possible to overcome some of the obstacles that make it hard for people to save.

Setting up automated savings takes the thought out of saving money, so that instead of having to overcome temptation and make the responsible choice again and again, some of the decision-making around doing so is reduced or eliminated.

Automating savings also reduces the amount of time you have to spend each month on tasks like paying bills and other aspects of routine cash management. Furthermore, it eliminates barriers to saving and reduces the pain of putting away money routinely, which may even help you hit your financial goals faster than doing everything manually each month. After all, procrastination and instant gratification can be powerful forces to overcome — and they can often stand in the way of growing savings.

9 Ways to Automate Savings

How to automate savings? Simply decide which actions to automate and set them up with a lender (if they offer automated services).

Here are some good ways to get started.

1. Setting Up Direct Deposit

A good first step to automating savings is setting up direct deposit for paychecks. This means that on payday, your paycheck goes directly into the bank account. People often plunk their full paycheck into their checking account, but a smart move can be to send some of those funds into a savings vehicle.

Whether you fund a dedicated savings account or investment fund, this process will ensure a regular, ongoing flow of money to help you build a nest egg. If your employer doesn’t have a way for you to divide your automatic deposit, there’s a simple workaround: Have your paycheck go into your checking account and then have a sum automatically transferred to savings on the next day.

2. Earmarking Money for Each Goal

There are a lot of things people can choose to do with their money — and accordingly, most people have more than one savings goal, from accumulating cash for a vacation, a new car, or the down payment on a home.

If all of your money goes into a single savings account, it can be difficult to determine how effectively they are tracking for each individual goal. What’s more, keeping just one account for all savings can introduce needless bookkeeping complexities and even fees, if monthly transactions exceed the number the bank allows for free.

Whether it’s funding an emergency money reserve, saving for a honeymoon, or growing a down payment for a house, you’ll gain financial clarity by setting up separate savings accounts for each goal and then making regular automated deposits into each.

How much should go into each savings account? That depends on your goals and the immediacy of each. If you’re saving for a vacation a year from now, figure out the price tag for your trip, divide by 12, and that’s how much to stash away each month.

Recommended: 25 Items That Are Worth Saving For

3. Choosing a High-Interest Account

Saving can be hard work. But without the right savings account, those hard-earned dollars may not go as far as they potentially could. Instead of putting money in just any account, look for a high-interest savings account to increase the returns of your automated savings.

There are different ways to earn more interest on your money. Some lenders may reward automatic savers, helping them to reach their goals faster. For example, a recurring automated deposit of $100 may earn interest at a lower starting rate, but increasing that deposit to $500 each month may trigger a higher rate. Or look for an online bank which, since they don’t have to pay for brick-and-mortar locations and in-person staff, typically pay higher rates than traditional banks.

Ready for a Better Banking Experience?

Open a SoFi Checking and Savings Account and start earning 1% APY on your cash!


4. Taking Advantage of Employer Programs

For those who have savings for retirement among their financial goals, employers can be a great savings partner. Those with a 401(k) may want to arrange automatic paycheck deductions, so the contribution comes out of your pay before it even lands in their bank account.

Some companies will also match 401(k) contributions up to a certain level each year. Aim to earmark at least enough to get that match; otherwise, it’s akin to leaving money on the table. It’s an easy way to increase retirement savings.

Recommended: 15 Creative Ways to Save Money

5. Paying Bills Automatically

The late fees associated with missing a bill payment needlessly take a bite out of savings. So if you’re trying to save money, ensuring that all payments go out on time is an easy way to reduce losses that can derail a savings plan.

Being organized with your bills is important, but you don’t need a great memory to stay on top of rent, car, and utility payments — these can usually be done automatically. Simply identify which bills can be automated (it makes sense to automate predictable billings that don’t fluctuate each month), set them up in the payment system, and rest assured they’ll be paid by the due date as long as adequate funds are available.

For credit card bills, it’s good to ensure that spending habits don’t exceed the amount flowing into the account from paychecks and other sources. Even if everything is automated, if you make a big purchase one month, it’s wise to check in advance of the payment date that there are sufficient funds to cover the automatic payment.
Setting up a calendar alert each month several days before the credit card payment date is a good reminder to make sure there’s enough money to cover the amount owed, particularly if your credit card spending habits are irregular.

6. Monitoring Financial Insights

Setting — and sticking to — a budget is an important part of successful financial management. But it can be a lot of work to monitor spending in each category and to stay on the right side of all targets.

Here’s where technology can definitely give you a boost. Instead of crunching the numbers week after week and month after month, apps and other digital tools can improve the ease of fulfilling this important, but arguably boring, mathematical task.

Your bank may well offer an automated tool or dashboard that shows in real-time your spending and saving. This means you can pay attention to account balances and itemized spending category breakdowns. That super clear picture of where money is actually going may also reveal potential opportunities to cut back.

Some banks also allow account holders to set up personal financial goals — such as monthly savings targets — and then automatically track their transactions against these objectives. These can be helpful when you are trying to maximize your savings and achieve a sense of financial security.

7. Increasing Deposits Over Time

While learning how to automate savings can take the headache out of managing finances, it’s wise to revisit the amounts periodically. Cash flows change from time to time, and there may be new opportunities to save.

For example, you may get a raise or pay off a car loan, or your lifestyle habits may change — and this could free up more money for savings.

Even if nothing of note has changed, some individuals may find that they have more room to contribute to savings than they estimated at the outset. Even increasing automated savings by 1% per paycheck can help savings grow faster.

Setting a periodic automatic calendar reminder to closely review finances may help to identify opportunities to increase savings. When it’s time to do so, delete old recurring transfers and set up new ongoing automated deposits at the new desired amount.

8. Use a Cash-Back Card

If you have a cash-back credit card, you may typically use that 1% to 5% back on purchases to…purchase more. Instead, direct your cash-back rewards into a savings account. Whether you get $10, $100, or more in cash back per month, it will help your savings account grow.

9. Funnel Your Windfalls Wisely

If you typically get a tax refund or a bonus at work, send that money into savings (or at least some of it) versus checking. Sure, it’s fun to get an infusion of cash and go shopping or dining out, but you can hit those financial goals more quickly if you send the money straight to savings, where it can earn compound interest and grow.

The Takeaway

Automating your savings can help ease your path to reaching your financial goals, from saving for a wedding to nurturing a retirement nest egg. This process is quick and convenient, and doesn’t require you to remember regular money transfers nor break out the calculator to see where you stand financially.

Automating your finances can be extra simple when you open an online banking account like SoFi Checking and Savings. You can spend and save in one place, and, if you sign up with direct deposit, you’ll earn a terrific up to 3.25% APY and pay no fees, which can help your money grow even faster.

Bank smarter with SoFi.


Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2022 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
SoFi members with direct deposit can earn up to 3.25% annual percentage yield (APY) interest on Savings account balances (including Vaults) and up to 2.50% APY on Checking account balances. There is no minimum direct deposit amount required to qualify for these rates. Members without direct deposit will earn 1.20% APY on all account balances in Checking and Savings (including Vaults). Interest rates are variable and subject to change at any time. These rates are current as of 11/3/2022. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet
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Guide to Chartered Banks

Guide to Chartered Banks

If you’ve heard the expression “chartered bank” and wondered what exactly that means and whether it’s different from any other bank you might drive past, here’s your answer. A chartered bank is a bank whose operations and services are governed by a charter issued at the state or federal level.

A charter is a legal document that essentially tells the bank what it can and can’t do. Chartered banks can be commercial banks but they can also operate as savings banks, savings and loan associations, online-only banks, or credit unions.

So what does it mean if a bank is chartered, in terms of how you can use them to manage your money?

Chartered banks can accept deposits and make loans, just like other banks. There are, however, a few characteristics that make chartered banks unique.

Read on to explore those features and more, including:

•   What is a chartered bank?

•   What is a state-chartered bank?

•   How do chartered banks vs. online banks compare?

•   How do chartered banks vs. commercial banks compare?

What Is a Chartered Bank?

A chartered bank is any bank that’s authorized to accept deposits or lend money according to the terms of a legally recognized charter. Chartered banks are subject to oversight from the government agency that issues their charters.

Like other banks, chartered banks can offer different types of financial accounts, including:

•   Checking accounts

•   Savings accounts

•   Money market accounts

•   Certificate of deposit accounts

•   Specialty accounts, such as custodial accounts or bank accounts for college students

Chartered banks can also offer various types of loans, including personal loans, auto loans, lines of credit, and mortgages.

A chartered bank may have a physical footprint with brick-and-mortar branches and ATMs. Or it may operate online-only. Both traditional and online chartered banks can allow customers to access their money via online banking, mobile banking, or phone banking.

How Does a Chartered Bank Work?

Chartered banks work by accepting deposits and making loans. When you deposit money into a savings account at a chartered bank, for instance, the bank may pay you interest on those funds. Meanwhile, the bank uses your deposits and those of other customers to make loans, charging borrowers interest in the process. That’s largely how banks make profit.

A chartered bank can also generate revenue by charging its customers fees. If you’ve ever paid an overdraft fee, for example, you’re aware of how much a single fee can add up to. How much you pay in fees to a chartered bank can depend on whether you’re dealing with a brick-and-mortar or online bank. Since online banks tend to have lower overhead costs, they can pass the savings on to their customers in the form of higher rates on deposits and lower fees.

Banks must apply for a charter; they’re not granted automatically. Each state sets its own requirements for state-chartered banks. The Office of the Comptroller of the Currency (OCC) regulates federally-chartered banks. Regardless of whether the bank is chartered by the state or federal government, the bank must insure deposits through Federal Deposit Insurance Corporation (FDIC) coverage. The bank must also apply for approval to join the Federal Reserve System if it wishes to do so.

Chartered banks may or may not be part of the SWIFT banking system. SWIFT, short for Society for Worldwide Interbank Financial Telecommunication, is an electronic messaging system that’s used to send financial transactions around the world. A chartered bank can, however, still process wire transfers and other electronic transactions even if they’re not part of SWIFT.

What Is a State Chartered Bank?

You may wonder what it means if a bank is chartered by the state vs. the federal government. Here’s a closer look.

A state-chartered bank is a bank that receives its charter from the state. As such, it’s subject to regulation by the chartering agency in that state. Again, the requirements to obtain a charter and the rules the bank is expected to follow once they secure a charter will depend on the state.

In California, for example, the process to become a chartered bank is similar to the process for establishing a commercial bank. Before a bank can apply for a charter, it has to complete a feasibility study, receive approval to proceed from the local government, and receive voter approval. The application itself is just a simple, two-page form.

State-chartered banks that are part of the Federal Reserve System are regulated by the Fed. Any state-chartered bank that isn’t part of the Federal Reserve System is regulated by the FDIC instead. The FDIC regulates approximately 5,000 state-chartered banks and savings associations.

What Is a Federally Chartered Bank?

Next, here’s a look at what a federally chartered bank is. It’s a bank that receives its charter from the federal government. The Office of the Comptroller of the Currency is responsible for regulating nationally-chartered banks and savings associations. The OCC is an independent branch of the Treasury Department.

Federally chartered banks are authorized to operate on a national scale. A federally chartered bank can be a traditional financial institution or an online banking platform.

Ready for a Better Banking Experience?

Open a SoFi Checking and Savings Account and start earning up to up to 3.25% APY on your cash!


Chartered Bank Oversight

Now that you know what is a chartered bank and what isn’t, here’s a bit more about how chartered banks are regulated. They are typically subject to oversight from the agency that issued their charter. Generally speaking, this oversight is designed to ensure the smooth operation of the bank itself while protecting consumer interests. Some of the things chartering agencies do include:

•   Visiting the bank to conduct on-site examinations

•   Monitoring the bank’s compliance with banking laws

•   Issuing regulations to cover banking operations

•   Taking enforcement actions when a bank violates a regulation or rule

•   Ensuring that the bank is financially sound and is conducting ethical banking practices.

In extreme cases, the chartering agency may revoke the bank’s charter or close a bank if it fails. In the case of FDIC member banks, the FDIC steps in to cover deposits for customers. The current FDIC coverage limit is $250,000 per depositor, per account ownership type, per financial institution.

Chartered vs Online Banks

A bank can be chartered and have branches, or it can be chartered and operate online. In terms of what’s different between chartered banks that have physical branches and those that operate online, here are a few things to know:

•   Online banks tend to offer higher rates to savers.

•   Online banks may also charge fewer fees, since they have lower overhead costs.

•   Brick-and-mortar chartered banks may offer a wider selection of banking products and services.

•   Traditional chartered banks can offer in-person banking, while online banks may limit you to accessing your account online or via a mobile banking app.

Whether it makes sense to choose a traditional chartered bank vs. an online bank can depend on your preferences and needs. If you want to get the best rates on savings and don’t mind branchless banking, then you might choose an online bank. On the other hand, if you like being able to pop into a branch from time to time, you might prefer a brick-and-mortar chartered bank.

Recommended: Online vs. Traditional Banking: What’s Your Best Option?

Chartered vs Commercial Banks

A commercial bank is a financial institution that engages in banking services, including accepting deposits and making loans. In that sense, it sounds similar to a chartered bank. In fact, a commercial bank can be a chartered bank, though not all commercial banks are.

Examples of chartered commercial banks include:

•   National banks that are chartered by the OCC

•   Non-member banks that are state-chartered but not part of the Federal Reserve System

•   State member banks that are state-chartered and part of the Federal Reserve System.

When comparing a chartered vs. commercial bank, the main difference is the charter. A chartered bank is required to have either a state or national charter; a commercial bank may be chartered, but it isn’t required to be in order to operate.

Should I Do Business With a Chartered Bank?

Whether you opt to do business with a chartered bank is a matter of personal preference. Opening accounts with a chartered bank could give you some peace of mind since you know the bank is subject to regulation. And in the rare event that the bank fails, the FDIC can step in and restore your deposits to you.

When comparing chartered banks, consider things like:

•   Account types offered

•   Account fees

•   Interest rates for deposit accounts

•   Interest rates for loans if you plan to borrow

•   Minimum deposit requirements

•   Access and convenience

•   Customer support availability

Security is another factor to weigh. The safety of mobile banking, for instance, might concern you if you’re used to managing your accounts at a branch or ATM. The good news is that online banks, chartered or not, have increasingly stepped up security efforts to protect customer accounts.

Keep in mind that you’re not limited to just one bank either. You may choose to open a checking account at a traditional chartered bank, for instance, and a high-yield savings account at an online bank. If you’re wondering, “Should I have a lot of bank accounts?” it can be helpful to have checking and savings at a minimum. You can use checking to hold the money you plan to spend now, and savings for the money you want to grow. Or you might prefer a simple hybrid approach that gives you the best of both worlds in one place.

Recommended: How to Open a New Bank Account

The Takeaway

Whether you open your accounts at a chartered bank or not, it’s important to find a financial institution that matches your needs. If you’ve only ever done business with traditional banks, you may want to consider the merits of using an online bank.

SoFi holds a national banking charter. When you open an online bank account with us, you get the convenience of spending and saving in one convenient place. What’s more, if you sign up with direct deposit, you’ll earn an ultra competitive APY and pay no fees, which can help your money grow faster. Qualifying accounts can even get paycheck access up to two days early.

Better banking is here with up to 3.25% APY on SoFi Checking and Savings.

FAQ

Are all banks federally chartered?

No, not all banks are federally chartered. Some banks hold a state charter instead.

What is a non-chartered bank?

A non-chartered bank is a bank that does not have a federal or state charter. Neobanks are an example of a bank that has no charter, though technically, they do not meet the strict definition of a bank.

What is the difference between a state and federally chartered bank?

State-chartered banks receive their charters from state agencies. They’re subject to regulation by the FDIC or the Federal Reserve if they’re part of the Federal Reserve System. Federally-chartered banks receive their charters from the federal government and are regulated by the OCC, or Office of the Comptroller of Currency.


Photo credit: iStock/ultramarine5

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2022 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
SoFi members with direct deposit can earn up to 3.25% annual percentage yield (APY) interest on Savings account balances (including Vaults) and up to 2.50% APY on Checking account balances. There is no minimum direct deposit amount required to qualify for these rates. Members without direct deposit will earn 1.20% APY on all account balances in Checking and Savings (including Vaults). Interest rates are variable and subject to change at any time. These rates are current as of 11/3/2022. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
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12 Ways a College Athlete Can Make Money

12 Ways a College Athlete Can Make Money

Student athletes typically have extra busy schedules along with the usual college expenses. Between classes, course work, practices, and games or competitions, finding the time for a job to make some money can be tough.

Fortunately, there are many ways for college athletes to make money — through coaching, training gigs, remote work options, and more. With a little creativity, it’s possible to earn some cash doing what an athlete does best: playing to your strengths.

Here, you’ll learn more about how college athletes can make money while working on their degree.

Rising Cost of College

There’s no doubt that college is a big-ticket item: In the 2021-2022 school year, the average cost of tuition and fees at a public college was around $10,740 for in-state residents, and $27,560 for out-of-state residents. For private college, the average cost was $38,070.

Between 1980 and 2020, the average cost of an undergraduate degree went up by 169%.

Even if you’ve been awarded a scholarship, student athletes still need money for everyday expenses and all those protein bars. If you’re wondering how to make ends meet, read on for answers to the question, “How can you make money as a college athlete?”

12 Smart Ways to Make Money as a Student Athlete

If you need to balance athletics and academics, there are an array of part-time job opportunities well-suited for the student athlete.

Here are 12 ways you can bank on your abilities, while adding to your college bank account.

1. Working for the Athletics Department

Landing a job in your school’s athletics department can be a convenient way to earn money while figuring out how to get involved at college and meet other students. Many college athletic departments can provide part-time gigs — in the office or the locker room.

Try asking your coach or athletic director about money-making opportunities. Athletic departments often need the support and, since they’ll be helping out a student athlete, the arrangement can be a real win-win.

2. Training Younger Athletes

Your athletic talents can help nurture the next generation. You could earn an hourly wage working in an after-school sports program for kids — either directly at a school, with a private league/program, or with an organization such as the YMCA.

Parents are often looking for role models to coach and train their children. Some college athletes offer their expertise in a private one-on-one or small group setting for an hourly rate — between $20 to $25 per kid.

Your coach or athletic director may have insight on opportunities for working with children. Bonus: Running around with those energetic kids can help keep you in shape.

Recommended: 15 Low-Cost Side Hustles

3. Personal Training

Still curious about how a college athlete can earn money? Think about all those hours spent training, whether your sport is baseball or gymnastics. You can parlay your workout know-how into income. As a personal trainer, you could make around $20 bucks an hour working with a client, and schedule sessions around your availability.

However, some clients (definitely gyms) may require you to have a personal trainer certificate from an accredited program, which could take time and money.

4. Managing Social Media

In addition to hours in the weight room, college athletes, like most young people, have spent a lot of time on social media. Why not turn those hours of screen time into cash?

Some small businesses don’t have a social media presence. You could check with your campus pizza joint, a local fitness center, or your team’s favorite coffee bar and see if they might hire you to set up or maintain their social media accounts. You could arrange for an hourly rate or flat monthly fee.

Recommended: Finding Jobs That Pay Off Student Loans

5. Vlogging

Some student athletes start their own YouTube vlog relating their experiences or testing sports equipment. As it grows, you can eventually monetize it by using income-producing programs such as Google Adsense.

The flexibility of vlogging is great for a busy college athlete’s schedule, but it might take awhile for you to learn how to get paid for social media and start bringing in income.

Quick Money Tip:When you overdraft your checking account, you’ll likely pay a non-sufficient fund fee of, say, $35. Look into linking a savings account to your checking account as a backup to avoid that, or shop around for a zero fee bank account that doesn’t charge you for overdrafting.

6. Writing Sports Articles

You can make some extra dough by writing about your experiences as a college athlete — personal stories or articles about your triumphs and challenges or an insider’s scoop on the big match.

Check with local newspapers or online sports publications for submission requirements and pay scale.

7. Working Seasonal Jobs

Many college athletes may have more hours for a job during the off-season. If the bulk of your athletic commitments are in the spring, you might consider an easy way to make money in the winter, whether shoveling driveways or ski detailing in a sporting goods store.

A primarily winter season could free up time for an athletic summer job, such as being a lifeguard or a counselor at a sports camp.

8. Selling Old Sports Gear

Student athletes can clean out their closets and earn extra money by selling their gently used sports equipment, apparel, and footwear. Online marketplaces such as SidelineSwap and Geartrade deal specifically in used sports products. Or you can always list your items on Ebay, Facebook Marketplace, and/or Craigslist.

9. Selling Sports Cards

Like many college athletes, you may have spent your childhood collecting trading cards of your sports heroes. Now your hobby could really pay off. There are many websites and antique stores waiting to buy individual cards or your whole collection.

Only one problem: Some of your sports cards may have high sentimental value. You may not be able to part with them!

Recommended: 39 Passive Income Ideas to Build Wealth in 2022

10. Starting an Online Business

Being your own boss is a great way to ensure a flexible schedule for a college athlete. Tap your entrepreneurial streak. The possibilities are endless — editing services, translation services, online T-shirt sales with a unique logo for your team — and you can hire your teammates to help out.

Recommended: 11 Benefits of Having a Side Hustle

11. Modeling

Here’s how else student athletes can make money: Most are physically fit, making them good candidates for modeling work. You could submit photos to a local talent/modeling agency and mention your athletic skills as a plus. A photoshoot for a print ad or an on-camera commercial can yield good money for a few hours of work.

12. Cashing in on Endorsements

In 2021, college athletes earned the legal right to profit off of their names, images, and likeness (NIL). While some student athletes have raked in five- to six-figure endorsement deals, the majority of the 460,000 college athletes across the country earned smaller payouts or free products from local businesses.

While the ruling may be controversial, for some, it’s an easy way to benefit from your years of hard work and dedication to your sport.

The Takeaway

Student athletes can leverage their years of training and discipline into finding a part-time job. You can channel your sports knowledge and work ethic into coaching, personal training, vlogging, writing sports articles, or launching an online business.

With a little research and hard work, you can find an income source that is financially rewarding and won’t put your studies or athletic performance in the penalty box.

Better banking is here with up to 3.25% APY on SoFi Checking and Savings.

FAQ

Is it legal for student athletes to make money?

Student athletes are allowed to hold on-campus and off-campus jobs.

How many hours are student athletes able to work?

The NCAA dictates that student athletes are limited to participate in school athletic activities for a maximum of four hours a day, or 20 hours a week. Depending on a student’s course load, that leaves a few hours a day for a part-time job.

Do student athletes get paid?

Student athletes don’t receive salaries from colleges. However, they are allowed to benefit from monetizing their name, image, and likeness, and benefit from commercial endorsements.


Photo credit: iStock/GCShutter

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SoFi members with direct deposit can earn up to 3.25% annual percentage yield (APY) interest on Savings account balances (including Vaults) and up to 2.50% APY on Checking account balances. There is no minimum direct deposit amount required to qualify for these rates. Members without direct deposit will earn 1.20% APY on all account balances in Checking and Savings (including Vaults). Interest rates are variable and subject to change at any time. These rates are current as of 11/3/2022. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet
SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2022 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
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What Is Neobanking and How Does It Work?

What Is Neobanking and How Does It Work?

Neobanks are online-only financial technology (“fintech”) companies that offer traditional banking services in a digital-first format. Though they are called neobanks, these fintechs are not banks at all. Instead, they offer bank-like financial products, often designed for lower-income consumers and borrowers with a spotty credit history.

But how do neobanks work, and how do they make money? We’ll examine these and other topics — like the pros and cons of neobanks — below.

What Is a Neobank?

A neobank, also called a “challenger bank,” is a fintech that offers traditional banking services through a digital platform, usually online and via a mobile app. Neobanks typically do not operate physical locations or branches, meaning they’re a digital-only experience. This lack of physical branches means their overhead is lower — which may allow them to offer higher APYs on bank accounts and lower fees for consumers.

The big caveat with neobanks: They aren’t banks at all. Instead, they offer access to banking services and products that are overseen by true, federally regulated and insured banking institutions.

Recommended: Is Mobile Banking Safe?

How Do Neobanks Work?

Because of their digital-first strategy, neobanks are able to keep costs low and pass those savings on to consumers. Often, neobanks target their services at those who are frustrated with the traditional banking experience — those who may not qualify for a traditional credit card or loan or who have been burned by a mountain of fees on past checking accounts.

Tech-savvy users are often drawn to the advanced apps and platforms of neobanks in the same way they’ve been drawn to other digital disruptors, like Uber and Lyft in the rideshare space and Airbnb and VRBO in the lodging space.

Here’s an important distinction to note when thinking about what a neobank is: Just because a bank operates online doesn’t mean it’s a neobank. There are online-only banks that are fully regulated and directly offer FDIC insurance on deposit accounts. They provide an easy-to-use digital app and a full suite of banking services, and should not be considered neobanks.

But as we’ve pointed out, neobanks are not actually banks. So what does that mean?

•   While you can access traditional banking features like checking accounts, high-yield online savings accounts, and credit cards through a neobank’s mobile app, the neobank typically partners with larger traditional banks to offer those services.

•   Notably, neobanks do not typically offer a full suite of services, such as loans and investments, that full-fledged banks do.

•   Neobanks exist in a regulatory gray area. Many offer FDIC insurance through their partner banks, but the neobanks themselves do not answer to a primary regulator. The Consumer Financial Protection Bureau (CFPB), however, recently announced that it will enact stricter supervision of nonbank fintechs going forward. And in recent years, the CFPB and state regulators have investigated certain neobanks for isolated events.

   That said, a neobank must typically comply with its partner bank’s own standards and practices, dictated by federal and state regulation. Thus, indirectly, neobanks may face some regulation.

Pro Tip: While many neobanks offer consumers FDIC insurance through the banks with which they partner, it’s always a good idea to read the fine print before opening a deposit account to make sure it offers insurance. While bank failures are rare, that insurance can provide real peace of mind.

Recommended: Money Management and Setting Your Financial Goals

How Do Neobanks Make Money?

While each neobank is unique and likely to have its own varied revenue streams, these challenger banks commonly make money through merchant fees from card purchases. Such fees are also called “interchange fees.” Consumers don’t pay these fees; instead, businesses bear the burden.

As long as consumers regularly make transactions with their neobank debit or credit card, it can pay off big time for fintechs. Why? Smaller fintechs can charge merchants interchange fees seven times higher than larger banks that have more than $10 billion in assets.

Neobanks are relatively new, and many are still in the startup phase. As such, promising fintechs often receive millions of dollars in venture capitalist funding to get off the ground. Which players will be around for the long haul remains to be seen.

Recommended: How Are Financial Institutions Governed?

Ready for a Better Banking Experience?

Open a SoFi Checking and Savings Account and start earning up to up to 3.25% APY on your cash!


Pros and Cons of Neobanks

Neobanks may make sense for some consumers, but they’re not for everybody. Before opening an account, it’s a good idea to weigh the pros and cons:

Pros

Cons

Lower fees Less regulated (not chartered with state or federal regulators)
Higher interest rates on deposit accounts May not offer FDIC insurance
May offer credit card without credit check May not offer a full suite of banking services (mortgages, auto loans, etc.)
Easy-to-use mobile app (mobile check deposit, peer-to-peer payments, etc.) Typically no brick-and-mortar branches
24/7 account access — and on the go Untested in the market (no long history of success to instill confidence in consumers)

Recommended: How to Keep Your Online Bank Account Safe

Examples of Neobanks

In the last decade-plus, the fintech market has been teeming with myriad newcomers. Here are six examples of popular neobanks, whose names you may recognize:

•   Varo Bank

•   Chime

•   GoBank

•   Aspiration

•   Current

•   Daylight

Recommended: How to Manage a Checking Account

Neobanks vs Traditional Banks

So how do neobanks compare to traditional banks? The table below breaks down common differences, but remember: Each bank (or neobank) is different and offers varying levels of services, rates, and fees. These are broad generalizations and may not apply to every financial institution.

Neobanks

Traditional banks

Fees May offer lower and fewer fees May charge higher and more fees
Interest on deposits May have higher interest rates on deposit accounts May have lower interest rates on deposit accounts
Offerings Typically offer checking and savings accounts; may offer a credit card Typically offer multiple checking vs. savings accounts and credit cards, as well as personal loans, home loans, auto loans, and mortgages; may offer investment and retirement accounts
Mobile app/online banking Typically have high-rated mobile app and online banking platforms May lag in app and online quality compared to neobanks (especially true for traditional, brick-and-mortar banks)
Physical location Typically do not have physical locations Typically have physical locations
Insurance May offer FDIC insurance through a larger bank Typically carry FDIC insurance (or NCUA insurance for credit unions)
Regulation May not be regulated Typically chartered and regulated

What About Online Banks?

The previous table does not capture all the nuances of online banks. The differences between online banking and neobanking were briefly noted above. However, it’s worth taking a closer look at how online banks compare to traditional brick-and-mortar ones. While they may offer the same breadth of products, online banks typically offer better rates and lower fees than traditional banks. Online banks also usually offer leading-edge mobile apps as well as FDIC insurance.

Online banks can afford to pay those higher interest rates and charge lower fees because, compared to traditional banks, they don’t have to pay for physical locations and on-premises staff. They can then pass some of those savings on to their customers.

Wondering if an online bank is right for you? Do your research on the pros and cons of online banking before making your decision.

Recommended: Online Banking vs. Traditional Banking

The Takeaway

Neobanks may be appealing to tech-savvy consumers who want high interest rates, low fees, and easy-to-use apps. Traditional banks, however, may offer more stability and confidence — and are formally regulated. The convenience of in-person banking and the full suite of banking services offered by traditional banks can also be appealing.

Online banks like SoFi can offer the best of both worlds. For example, when you open an online bank account with us, you have the security of knowing we’re FDIC-insured and the convenience of an easy-to-use mobile app, plus a Checking and Savings account that lets you spend and save in one place. What’s more, when you sign up with direct deposit, you’ll earn a hyper competitive APY, and pay no fees.

Better banking is here with up to 3.25% APY on SoFi Checking and Savings.

FAQ

What’s the difference between a traditional bank and a neobank?

Traditional banks usually offer in-person branches, are federally regulated, and offer FDIC insurance directly. They typically offer a full suite of banking services, including loans. Many neobanks are more narrowly limited to checking and savings accounts delivered digitally only, but they often offer more competitive interest rates and lower fees.

Are neobanks regulated like regular banks?

Neobanks do not face the same regulation as regular banks simply because they are not charted as banks with federal and state regulators. Instead, neobanks often partner with chartered banks. That said, the Consumer Financial Protection Bureau has announced that it will increasingly supervise and regulate the activity of neobanks.

Is your money FDIC-insured with a neobank?

Some neobanks offer their banking services through chartered financial institutions. Through those institutions, the neobanks may be able to offer FDIC insurance for their accounts and services, but some don’t. It’s therefore a good idea to read the fine print of a neobank before opening an account so you know where you stand.


Photo credit: iStock/Prostock-Studio

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.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2022 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
SoFi members with direct deposit can earn up to 3.25% annual percentage yield (APY) interest on Savings account balances (including Vaults) and up to 2.50% APY on Checking account balances. There is no minimum direct deposit amount required to qualify for these rates. Members without direct deposit will earn 1.20% APY on all account balances in Checking and Savings (including Vaults). Interest rates are variable and subject to change at any time. These rates are current as of 11/3/2022. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet
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