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Closing a checking or savings account at one bank and opening a new one at a different bank won’t affect your credit score because banks don’t check your credit or report your banking activity to the major credit reporting bureaus.

That said, there are some instances where banking activity may influence credit scores indirectly. So let’s take a look at how things play out when you are changing bank accounts and answer the following questions:

•  Is switching banks visible in your credit file?

•  Will changing banks affect your credit score?

•  Can switching banks impact your chances of getting a loan?

Ready? Let’s learn more about this important aspect of your financial life.

Will Switching Banks Be Visible on Your Credit File?

No. Your banking history is not reported to the three consumer credit bureaus (Equifax, TransUnion, and Experian), so switching banks will not be visible on your credit file.

While banks do track and report their customers’ financial activity, they report it to a different agency, which is called ChexSystems. Your ChexSystems report will include your past savings and checking account history, as opposed to your credit history. This may include negative information, such as any unpaid negative balances (from overdrafting), frequent overdraft fees, and bounced checks.

Having negative information on your ChexSystems report won’t impact your credit, but it could make it harder to open a new savings or checking account, since banks will typically pull your ChexSystems report when you apply for a new account.

Your credit reports, by contrast, contain information relating to credit accounts, including any credit cards or loans you have. It will include:

•  Personal information, such as your name, date of birth, and Social Security number

•  Credit accounts, including creditor names, account numbers, balances, and payment history

•  Credit inquiries

•  Public records and collection accounts

The information in your credit reports is used to calculate your credit scores, including your FICO® Scores. Lenders will typically check your credit scores when deciding whether to approve you for a loan or line of credit. Generally, the higher your score, the more likely you are to be approved for credit, and the better the rates and terms will be.

Does Switching Current Accounts Affect Your Credit Score?

Opening a new bank account and closing an old account does not affect your credit rating, as long as the account that’s closed is in good standing and you transfer any autopayments to your new bank account. There could potentially be credit score implications, however, if you’re shuttering the account with a negative balance, you forget to switch your autopay transactions, or you’re closing a credit card with the bank at the same time.

Here’s a closer look at three scenarios in which closing a bank account could indirectly impact your credit.

•  Negative bank account balances: The bank won’t report a negative balance due to an overdraft or unpaid fees to the credit bureaus, However, if your account has been closed because of an unpaid negative balance, it could go into collections. The collection agency could then take action against you, including reporting the delinquent debt to the credit bureaus and suing you for the balance due. Delinquencies, collection accounts, and judgments can all show up on your credit reports and harm your score.

  Missing loan or credit card payments: If you close a checking account that you were using to automatically pay credit accounts (such as your credit card, auto loan, or student loans) and don’t switch those payments to a new account, you could miss a payment. Late or missed credit card or loan payments could be reported to the credit bureaus and have a negative impact on your scores.

•  You close a credit card at the same time: If you have a credit card with the same bank and close both your bank account and credit card account simultaneously, it could negatively impact your credit. Here’s why: Closing a credit card could lower the amount of overall credit you have versus the amount of credit you’re using (your credit utilization ratio), which could impact your credit scores. Also, closing a credit card account you’ve had for a long time may impact the length of your credit history, which is another factor used to calculate credit scores.

Will Switching Banks Affect Your Chances of Getting a Loan?

No. Switching banks should not affect your chances of getting a loan, since it won’t impact your credit scores. Closing an old bank account won’t get reported to the credit bureaus. And when you open a new bank account, the financial institution won’t likely run a credit check. Instead, the bank or credit union will screen your banking history through ChexSystems, which isn’t connected to your credit file.

Applying for a new credit card or loan, on the other hand, could impact your credit. When you apply for a new line of credit, the lender will typically run a hard inquiry or a “hard pull” on your credit file to determine how much risk you pose as a borrower. Hard inquiries show up on your credit report and can have a small negative impact on your scores in the short-term.

Can Your Credit Score Be Affected If You Open Multiple Bank Accounts?

No. Opening multiple bank accounts will not affect your credit scores. When you open a bank account, the financial institution won’t usually run a credit check but will instead screen you through ChexSystems, which is an entirely different reporting agency.

Your credit scores are based on credit accounts, such as credit cards or loans, rather than bank accounts. Things like how much money you keep in checking and savings or how many bank accounts you have don’t affect your credit rating. What does matter to your score is how good a record you have of borrowing and repaying funds in a timely fashion.

Steps That Can Positively Impact Your Credit

If you’re concerned about your credit, opening and closing bank accounts likely won’t have any effect (positive or negative), since your banking activity isn’t reported to the consumer credit bureaus. However, there are other steps you can take to add positive information to your credit reports and, in turn, help you build your credit. These include:

•  Consistently pay your bills on time. Payment history accounts for 35% of your FICO Score, so it’s a good idea to set up autopay for all of your monthly credit payments so you never miss a due date.

•  Pay down credit card balances. This can help lower your credit utilization rate, or ratio, which measures how much revolving credit you’re using relative to your total credit limits. Credit utilization accounts for up to 30% of your FICO credit score. The lower your credit utilization, generally the better.

•  Keep older credit accounts open. While it’s fine to close unused bank accounts, the same can’t be said of unused credit accounts. Closing a credit card can negatively affect your credit by reducing the amount of revolving credit available to you (instantly increasing your credit utilization rate). It also shortens your credit history, and length of credit history is also factored into your scores.

•  Review your credit reports. Inaccuracies in credit reports are uncommon but may show up from time to time, and depending on the information involved, could negatively affect your credit score. You can get copies of your credit reports free from AnnualCreditReport.com.

The Takeaway

Opening a new checking and/or savings account could be a good move if your current bank no longer meets your needs. And you can take comfort in knowing that closing an old checking or savings account and opening new ones at a different bank won’t impact your credit, since banks don’t run credit checks or report your banking activity to the consumer credit bureaus.

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 switching banks bad for your credit?

No. Switching banks won’t impact your credit, since banks don’t run credit checks or report your activity to the consumer credit bureaus.

Is switching bank accounts a good idea?

Switching bank accounts can be a good idea if it allows you to get a better interest rate on savings (and possibly checking), reduces banking fees, and/or gives you more perks and better access to your money. Before changing banks, it’s helpful to compare features, benefits, rates, and fees to find the right banking option for your needs.

Will getting a new bank account affect my credit score?

No. Opening a new bank account and closing an old one won’t impact your credit. Banks do not report your activity to the consumer credit bureaus. Instead, they report your financial activity (like opening and closing accounts, overdrafts, and bounced checks) to ChexSystems, the banking reporting agency. Your ChexSystems report does not appear in your credit file.

Photo credit: iStock/Passakorn Prothien

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.

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

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

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

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

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

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Fintech refers to companies that use new technologies vs. traditional methods in order to deliver financial services. The name is derived from the words “financial’ and “technology,” and the combination has certainly caught on, with 80% of Americans saying they use some form of technology to manage their money.

Read on to learn more about fintech and how it impacts the role of traditional banking.

What Is Fintech?

As briefly noted above, fintech refers to using technology in money management. There are various kinds of fintech, from services that protect your finances online to apps that transfer money. Typically, these services can make it quicker, easier, and more secure to wrangle your finances.

What Types of Fintech Succeed

The fintech enterprises that usually get the most attention (and the most investment money) are the ones that are specifically designed to be a threat to traditional banks.

The hope is that these startups can bring more flexible and faster service, and make traditional banking a more acceptable and even enjoyable experience. There are also fintech businesses that specialize in tracking spending, rounding up your payments to help you save, and simplify money transfers (think of PayPal, for instance).

Where Is Fintech Concentrated?

North America produces the most fintech startups (thank Silicon Valley), with Asia, particularly China, coming in at a close second. Singapore is another major player in Asia and on the global stage, thanks to tax benefits, government assistance, and access to regional markets.

Fintech As Disruptor

Fintech has been chipping away at the formerly sturdy foundation of traditional banks. Mobile banking innovation, artificial intelligence, and other tech tools are leading the disruption parade for brick-and-mortar banks. Many of these traditional banks are working to adopt new services and expand their offerings to stay competitive.

Post-COVID, fintech investment boomed considerably, as people sought remote ways to manage and move their money. In the last year or so, however, KPMG data shows considerable slowing of investment as many technologies have become established as basic services.

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

Is Fintech Going to Overtake Traditional Banks?

Gartner, a global research and advisory firm, has said that banking as a service (BaaS) will hit mainstream adoption within the next year or two, as banking is transformed by digital technology.

Traditional banks face a risk of failure if they continue to maintain 20th-century business and operating models, but many are adapting and incorporating new technologies.

Banks have been closing branches as people can perform more functions online or via mobile apps. In one recent year, almost 3,000 branches closed nationally. This pace may continue as financial management becomes more digitized.

How Traditional Banks Work

Next in considering fintech vs. banks, take a closer look at traditional banks. These financial institutions usually focus on their business priorities and client services, rather than how to streamline, digitize, and accelerate their business. For retail banks, they may offer checking and savings accounts, home loans, and other services that help in day-to-day money management.

In pursuing these functions, banks are regulated by national or central banks. This can promote a feeling of security, knowing there are guidelines that banks must follow. Fintechs, however, may not be subject to review and regulation in this way.

Also, banks are typically insured by either the Federal Deposit Insurance Corporation (FDIC), and credit unions are covered by the National Credit Union Administration, or NCUA. This can give customers the knowledge that, in the very rare occurrence of a financial institution failing, they are covered for $250,000 per account holder, per account ownership category, per insured institution.

Also, traditional banks provide personalized service. You can go to a branch and discuss your needs or concerns with a customer service rep. You can have that human contact that can be hard to find with some fintech companies.

One last point: Banks typically have a smaller reach than fintech. For instance, a mobile security app could be in a majority of mobile devices across the country. But you might actually keep your money with a local bank that only has a couple of branches.

Fintechs vs Banks

Here’s a little more detail on how fintech vs. banks compare.

Similarities

Both banks and fintech can play a role in the typical person’s financial life. They may allow people to securely store, spend, and save money. They can service to enable transactions, whether paying a friend back for your share of dinner or securing a car loan.

They also each work to meet a consumer need and make finances easier to manage and help customers grow their wealth.

Both traditional banks and fintech can play a key role in both personal banking and the overall economy.

Differences

That said, there are considerable differences. Banks typically hold and lend money, while fintech may simply accelerate a process, make it more convenient, or otherwise enhance its accessibility.

Banks tend to have financial regulations in place, while fintech often does not.

Another point of difference between banks and fintech: Banks traditionally have brick-and-mortar locations and in-person support. For that reason, they may have more limited reach or only operate in a given region.

Not all fintechs offer in-person support, and you may find varying degrees of support by phone, email, and chat. They may, however, have a broader reach since they aren’t limited by location.

Here’s how this information looks in chart form:

3 of the Latest Fintech Trends

Here are some of the latest trends in fintech:

1. Digital-Only Banks

Influenced by mobile banking, banks with no brick-and-mortar branches are increasing in popularity and acceptance. This year, almost 400 million people are projected to use their services. These banks can be as regulated, insured, and secure as traditional banks, but they often allow for easier, on-the-go mobile management. Because they don’t have branches and the subsequent expenses related to those, they can often pass the savings on to their clients with higher interest rates on accounts, for example.

2. Artificial intelligence (AI)

AI tech can automate data analysis, saving time, money and drudgery. It’s also used to create chatbots to assist in customer service and robo-advisors to help with investing. AI can also help detect fraud by monitoring patterns of customer behavior.

3. Biometric Technologies

Biometric technologies can provide ways to authenticate and protect financial and other digital transactions. Facial recognition is one option; voiceprints and fingerprints may also be used. This kind of technology can make logging into an app or conducting a transaction easier, faster, and more secure. It can help fight bank fraud.

💡 Quick Tip: Want a new checking account that offers more access to your money? With 55,000+ ATMs in the Allpoint network, you can get cash when and where you choose.

Fintech Rising In Developing Countries

In the developing world, not everybody has access to a bank account or a traditional banking system. Fintech banking alternatives can deliver solutions. For example, parts of Africa lack traditional banking infrastructure. For this reason, according to the World Economic Forum, Africa is the world leader in mobile and digital banking.

Mobile phone companies often allow customers to transfer cash-convertible phone credits to each other, too. These phone credits act as a digital medium of exchange — the payment structure and its support fintech is the mobile phone network itself.

Traditional Banks Are Seeing The Future and Feeling The Pain

Traditional financial services are paying close attention. Consumers, especially younger ones, are expecting more technology and personalization when it comes to their financial services. A growing group of entrepreneurs and startups are answering the call.

Many traditional financial institutions are adopting digital and mobile tools to serve their customers’ needs and make the user experience more nimble. This collaboration between traditional banks and fintech could help banks stay relevant.

How Traditional Banks Are Responding

Most traditional banks got with the program at least on a basic level. They know to offer mobile apps, electronic online bill payment, and other digital services. They’re also experimenting with fintech such as voice adaption to pay bills and to make transfers. The challenge remains in keeping these programs safe, fresh, and user-friendly when fintech innovation is happening at such a swift pace.

At least for now, banks may retain the advantage of recognizable brands and large customer bases, particularly older clients who have grown up doing business with human tellers in brick-and-mortar locations.

What they still haven’t completely mastered are faster transaction times, lower costs and a better customer experience. Also, younger generations have grown up using tools like online-only banks, Venmo, and the like, so it may be hard to convince them to bank with a brick-and-mortar institution.

The Need for The Best of Both Fintech and Traditional Banks

As you may have thought, a collaboration between traditional and online banks and fintech services could promise consumers the best of both worlds. Just as you can shop online or stop into a brick-and-mortar store, you may want to do your daily money management via an app but stop into a branch to meet with a loan officer to discuss the different types of mortgages when you are shopping for a home.

The prospect of having the best of both worlds, and having these two types of businesses work to solve customer pain points and enhance their wealth, is an exciting one.

Traditional Banks Are Keeping More of Your Money

While traditional banks continue to attempt to adjust to the digital age, they’re likely not giving customers a break financially. Typically, they pay less in interest when you keep your money with them than, say, online-only banks, or have more requirements (such as loftier minimum deposits and balances) to earn higher rates. Typically, banks make more money when they pay lower interest rates vs. the competition.

An example: Currently, traditional savings account interest rates are averaging 0.47% in March 2024, according to the FDIC. Online banks, however, may pay between 4.00% and 5.36% or even higher.

SoFi Checking and Savings

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 is the difference between a bank and a fintech?

Traditional banks are highly regulated, have brick-and-mortar locations with in-person customer service, and may be limited in their range. They usually offer ways for consumers to save, spend, and borrow. Fintechs can be digital or mobile services, and may focus on just one aspect of finances, such as securing apps.

Why is fintech better than traditional banks?

If a fintech is an online-only bank, it may be more convenient to use and offer higher interest rates on deposits, since it doesn’t have to spend money on brick-and-mortar locations.

Is fintech the future of banking?

Fintech is contributing to the future of banking, but traditional banking, with its regulations and customer service, will likely still have a place in many people’s financial lives in the future.

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.

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For millennia, humans have used precious metals such as silver as a way to barter and exchange value. And even in today’s modern economy, many people believe that there is room for investing in silver and other precious metals as a way to diversify their overall portfolio.

Investing in silver can come in many different ways, from buying stocks or mutual funds focused on precious metals to holding the actual silver metal yourself. Depending on how you are investing in silver, it can be considered a valuable hedge against inflation and one way to diversify your overall investment portfolio.

Why Is Silver Considered Valuable?

Silver is a type of alternative investment, in that it’s different from a conventional stock or other type of security. And similar to how those types of securities or investments hold value, silver does as well.

At its most basic, silver is valuable for the same reason that anything is considered “valuable” — because we as a society have decided that it is valuable. Silver has been used for making coins and jewelry since the early days of history, which is one reason that silver is considered valuable. Silver is also quite conductive, which means that it has uses in industry as well.

Silver has many of the same qualities as gold, which is why many investors have similarly looked for different ways to invest in precious metals.

Silver vs Gold

Silver and gold have both been used as currency and jewelry since nearly the beginning of human civilization. They are both considered valuable precious metals and useful for portfolio diversification and as an inflation hedge. Deciding whether to invest in gold or invest in silver is in some ways a personal choice, and many investors decide to invest in both.

💡 Quick Tip: While investing directly in alternative assets often requires high minimum amounts, investing in alts through a mutual fund or ETF generally involves a low minimum requirement, making them accessible to retail investors.

What Are the Advantages of Investing in Silver?

One of the biggest advantages of investing in silver is that it can help diversify your portfolio. The rate of return for silver and other precious metals is not always correlated with that of other investments, which means that it can be a useful form of portfolio diversification. Silver is also cheaper than gold on a per-ounce basis.

Many investors also consider investing in precious metals to be an inflation hedge – it’s commonly believed that precious metals like silver or gold hold their value more efficiently or for a longer-term than cash or other assets.

If you invest in actual physical silver, another advantage is that it is a hard asset — it cannot be hacked or erased. Silver and other precious metals are one of the few investments that you can actually hold in your hand. Unlike other investments, your holdings in silver can also be as private as you want them to be.

What Are the Potential Drawbacks?

One drawback of investing in silver is that its price is considered fairly volatile. That doesn’t make it a great investment if you are only holding for the short-term. Prices for precious metals can fluctuate wildly over the short-term, and even over the long-term, may not provide investors with the type of appreciation they may have seen if they had invested in other assets.

Further, if you hold physical silver, you do run the risk of having it stolen. Unlike digital assets, physical silver may not be recoverable if it is lost or stolen. As such, if you are buying physical silver coins or bars, you will need to find a safe and secure way to store them.

💡 Quick Tip: Look for an online brokerage with low trading commissions as well as no account minimum. Higher fees can cut into investment returns over time.

Is Silver an Inflation Hedge?

As noted, investing in precious metals is often considered an inflation hedge.

Inflation is a natural phenomenon that gradually increases the cost of many goods and services. Silver has many uses – it can be used to mint coins, for instance, and be used as an actual currency, or be incorporated into other products. For that reason, it may hold its value more effectively than cash or other assets.

But there’s no guarantee that silver will always be an effective inflation hedge, and it’s important to remember that it’s a volatile asset.

How Can I Invest in Silver?

There are a number of different ways to invest in silver, depending on what you’re looking for in your portfolio. One popular way to invest in silver is by buying physical bars or coins of silver. Another possible way to invest in silver is by investing in the stocks of silver mining companies.

Silver Funds

It may also be possible to invest in silver using various types of funds, such as exchange traded funds (ETFs) that own silver or silver mining companies. There may also be options for investors to invest in mutual funds with concentrations in the silver industry or market, too – doing a bit of research to see what your options are in relation to silver investments is likely to yield results.

The Takeaway

Investing in silver offers investors a way to add an alternative asset to their portfolio, which can help them diversify, and hedge against inflation. There are many ways to invest in silver — including investing in silver mining companies, silver ETFs or owning physical silver like coins or silver bullion.

But investing in silver has its risks, and investing in precious metals typically means investors are okay with adding a relatively volatile asset to their portfolios. As always, if you have questions, it may be a good idea to speak with a financial professional.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

FAQ

Does owning silver diversify your portfolio?

Depending on the composition of your investment portfolio, owning silver can diversify your portfolio. Silver and other precious metals are often considered an inflation hedge, meaning that their price generally holds its value, regardless of the inflation rate. The rate of return on investing in silver and other precious metals is also not often correlated with returns of other types of investments, like the stock market or real estate.

Will the price of silver always go up?

Like all investments, there is no guarantee that the price of silver will always go up. The price of silver can fluctuate wildly, which means that depending on when you buy and/or sell, you may lose money. Before investing in silver, make sure you understand the risks and drawbacks of silver investing.

What are some alternative metals to silver?

Probably the most popular alternative precious metal to silver is gold. Like silver, gold has been used in currency and jewelry for most of the length of human civilization. Other options for investing in precious metals if you’d rather not own gold or silver are platinum or titanium.

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