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Plastic credit cards are easily destroyed by simply cutting them up with a household pair of scissors. But in recent years, some credit card issuers have started issuing metal credit cards. While these have become somewhat of a status symbol, the problem comes in trying to figure out how to dispose of metal credit cards.

It’s good practice to destroy a metal credit card once you’re done using it so that nobody can access your personal information. However, disposing of a metal credit card is not as easy as using a pair of regular household scissors. Thankfully, there are a few options to consider if you want to know how to destroy a metal credit card.

Why Should You Destroy a Metal Credit Card?

The biggest reason to destroy a metal credit card is to make sure that nobody uses your credit card information.

Even though most credit card companies have a $0 fraud liability policy, you don’t want to deal with the hassle of unauthorized purchases. And even if you’ve canceled your credit card or it’s expired, you’ll still want to destroy it, since it has personal information that might be used in different types of identity theft.

Recommended: Does Applying For a Credit Card Hurt Your Credit Score

Factors to Consider Before Destroying a Credit Card

Before destroying a metal credit card, you’ll want to make sure that it makes sense to cancel your account.

If you’re still using a credit card through automatic payments or recurring purchases, make sure to cancel those or move them to other cards. Once you close your account and dispose of your metal credit card, any such purchases will be declined.

Also take into account any potential impacts on your credit score that closing your account may have. Closing an account could increase your credit utilization ratio since you’ll have less available overall credit, and it could also lower the age of your accounts, depending on how long you’ve had your account. Both factors could lead to a dip in your credit score.

Before moving forward with closing your account, you’ll also want to take a look at your rewards to ensure you wouldn’t lose what you’ve already earned. Also remember that you’ll still need to pay off your card’s balance in full. Keep an eye out for any final payments that might roll in after your account is closed.

Recommended: When Are Credit Card Payments Due

Ways to Get Rid of a Metal Credit Card

If you’re confident you want to move forward, here are some options for how to dispose of a metal credit card.

Sending It Back to Your Credit Card Issuer

One of the best ways to dispose of a metal credit card is to return it directly to your credit card issuer. Most credit card issuers will provide you with a postage-paid envelope to return your metal credit card, if you ask. This can be a great (and relatively secure) way to dispose of your metal credit card.

Returning It to a Physical Bank Branch

Another option for returning your metal credit card to your credit card issuer is by bringing it to a physical bank branch. Of course, this is only a viable option if your issuer has physical branches near you. If your card has reached its credit card expiration date and you want to get rid of it, this can be a reasonable option.

Stowing It Away

Another option for disposing of a metal credit card is to simply stow it away somewhere safe in your house. This could be a filing cabinet, sock drawer, or anywhere else in your home. While this isn’t a great long-term solution, since there is some risk, it may work in the short-term.

Destroying It on Your Own

The final option for disposing of a metal credit card that you’re no longer using is destroying it on your own. After all, this is the preferred solution for most non-metal credit cards. And it is still possible with a metal credit card, though it is a bit trickier, as you’ll see in the next section.

Guide to Disposing a Metal Credit Card on Your Own

For those who want to DIY the destruction of their metal card, here’s how you destroy metal credit cards.

Using Tin Snips

If you have a pair of tin snips, that’s probably the easiest way to destroy a metal credit card on your own. Tin snips should make quick work of most metal credit cards. If you don’t have a pair of tin snips yourself, check with friends and family to see if you can borrow a pair.

Using Heavy-Duty Scissors

While most traditional or kitchen scissors will not do much to a metal credit card, if you have a heavy-duty pair of scissors, you may be in luck. Heavy-duty scissors made of stainless steel or titanium may be able to help you destroy and dispose of a metal credit card.

Mangling It With Pliers

If you don’t have heavy-duty scissors or tin snips, another option is to use a regular pair of pliers. While this may not be the most practical way to dispose of a metal credit card, it could be worth a try.

Drilling Holes Into It

If you have a power drill with metal-cutting bits, you might be able to dispose of your metal credit card by drilling holes into it. You’d just need to drill enough holes in your card to remove any of your personal information as well as the EMV chip. Keep in mind that you’ll need a powerful drill with special bits — it’s unlikely that a regular drill will do the job.

Using a Blow Torch

If you have access to a blow torch, and are knowledgeable enough about it to be able to use it safely, you may have luck using it to destroy your metal credit card. Of course, if you have a big enough shop to have a blow torch, you probably also have a pair of tin snips. That will be much easier, but maybe not as fun!

Throwing It in Your Fire Pit

While you may be able to destroy your metal credit card by simply throwing it in your fire pit, this may not be the most environmentally-conscious way to dispose of your metal credit card. Many metal credit cards have different kinds of metals in them that may not be safe to burn.

Avoid These Methods for Discarding a Metal Credit Card

Out of the many ways you can dispose of your metal credit card, here are the methods to steer clear of.

Giving It to Third-Party Services

One of the top credit card rules is that you should not give your personal information out to anyone. This still holds true, even if your credit card account is closed. Your personal information can still be used for identity theft or other nefarious purposes. Either destroy your metal credit card yourself, or deal directly with your credit card issuer.

Throwing It Away or Recycling It

You’ll also want to avoid simply throwing your metal credit card away or recycling it. You may be trying to take advantage of “security by obscurity,” hoping that nobody will find it. But because of how a credit card works, it’s easy for anybody that has your card to access your account and your personal information. Don’t take that risk — make sure to destroy your card responsibly.

Recommended: Tips for Using a Credit Card Responsibly

Using a Paper Shredder

While most paper shredders do have the capacity to shred a non-metal credit card, it is unlikely that your typical paper shredder can handle a metal credit card. You are more likely to damage your paper shredder and still have an intact metal credit card.

Using Traditional Scissors

Traditional kitchen scissors will not be able to destroy most metal credit cards. While you’re unlikely to damage your scissors, you’re also quite unlikely to make any progress trying to destroy your metal card with a traditional pair of scissors.

Recommended: Can You Buy Crypto With a Credit Card

The Takeaway

While it may be trickier to destroy a metal credit card than it is to get rid of a plastic credit card, it’s still important to do. You don’t want your personal information floating around for anyone to possibly use. Even if your credit card account is closed, you still run the risk of someone using the card to steal your identity. The easiest way to destroy a metal credit card is securely sending it back to your credit card issuer.

The SoFi Credit Card offers unlimited 2% cash back on all eligible purchases. There are no spending categories or reward caps to worry about.¹

Take advantage of this offer by applying for a SoFi credit card today.

FAQ

What is the safest way to destroy a credit card?

The safest way to destroy a metal credit card is to securely send it back to your credit card issuer. Most credit card issuers will send you a postage-paid envelope that will allow you to send the metal card back to them. Alternatively, you can return it directly back to a physical branch location.

How do I get rid of a metal credit card at home?

One of the easiest ways to get rid of a metal credit card at home is using tin snips. If you have a pair of tin snips, they will make quick work of a metal credit card. Just make sure to be careful with the rough metal edges once you cut it up.

Can you burn a metal credit card?

It is possible to burn a metal credit card, though it may not be the most environmentally-conscious thing to do. Burning a metal credit card may release toxic gasses into the air.

Can I destroy my metal credit card with tin snips?

Yes, destroying a metal credit card with tin snips is one of the easiest ways to dispose of a metal credit card. Of all the different options for destroying a metal credit card at home, tin snips are the tool that is most likely to be found in the homes of most credit card consumers.

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Photo credit: iStock/Katya_Havok

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.

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 .

The SoFi Credit Card 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.

¹See Rewards Details at SoFi.com/card/rewards.

New and existing Checking and Savings members who have not previously enrolled in direct deposit with SoFi are eligible to earn a cash bonus when they set up direct deposits of at least $1,000 over a consecutive 25-day period. Cash bonus will be based on the total amount of direct deposit. The Program will be available through 12/31/23. Full terms at sofi.com/banking. SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC.

SoFi members with direct deposit can earn up to 4.00% annual percentage yield (APY) interest on Savings account balances (including Vaults) and up to 1.20% 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 3/17/2023. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet
¹Members earn 2 rewards points for every dollar spent on purchases. No rewards points will be earned with respect to reversed transactions, returned purchases, or other similar transactions. When you elect to redeem rewards points into your SoFi Checking or Savings account, SoFi Money® account, SoFi Active Invest account, SoFi Credit Card account, or SoFi Personal, Private Student, or Student Loan Refinance, your rewards points will redeem at a rate of 1 cent per every point. For more details please visit the Rewards page. Brokerage and Active investing products offered through SoFi Securities LLC, member FINRA/SIPC. SoFi Securities LLC is an affiliate of SoFi Bank, N.A.

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If you want to avoid dealing with native currency or carrying traveler’s checks or cash when traveling abroad, look no further than an international credit card. Having such a card in your wallet that you can use both at home and abroad can make for smoother trips overseas.

Let’s take a closer look at what an international credit card is, their main features, and how to get an international credit card that’s right for you.

What Is an International Credit Card?

An international credit card is a credit card that you can use outside of the United States to make purchases and at an ATM. The major networks that issue international credit cards include Mastercard, Visa, Discover, and American Express.

However, having an international credit card doesn’t mean you can use it anywhere in the world. The countries where you can use a certain card depends on the network. For instance, Mastercard’s international cards can be used in over 210 countries, whereas Visa’s global network spans over 200 countries to date.

Features of International Credit Cards

Besides the fact that you can use the card overseas, let’s look at some of the other features an international credit card may have:

International Chip and Pin

International credit cards feature an international chip and pin. Chip cards, or EMV cards (which stands for Europay, MasterCard, and Visa), add an extra layer of security to transactions.

With the chip and pin feature of international credit cards, you “dip” your card into the reader, then insert your PIN. This differs from in the U.S., where EMV cards come with chip-and-signature technology, which means you insert your chip, then input your signature. Chip-and-pin is the standard everywhere else and, as such, this is what international credit cards offer.

Welcome Offer

An international credit card might have a welcome offer, which features an attractive introductory bonus. Typically, with how credit cards work, you’ll need to spend a certain amount on the card within the first few months of opening your account in order to earn the bonus. The amount you’ll need to spend, the time frame in which you’ll need to do it, and the number of bonus rewards points you can earn will vary by card.

Travel Perks

Some international credit cards come with attractive travel perks, such as trip cancellation insurance, rental car insurance, and lost luggage insurance. They might also feature access to exclusive airport lounges around the world.

To qualify for an international credit card with some of these luxury perks, however, you’ll usually need to have a good or even excellent credit score (meaning 670 or above).

Rewards Points

While many credit cards come with the ability to scoop up rewards points, international credit cards might offer a higher rewards rate for travel-related purchases. This might include hotel stays, car rentals, dining out, and booked flights. For example, you might get 5x points on these travel-related purchases, whereas other purchases earn 1x points.

Recommended: When Are Credit Card Payments Due

Credit Card Foreign Transaction Fees

An international credit card might come with a foreign transaction fee, which is a fee that applies when you make a payment with your card in another country. This fee is typically 3% of the total cost of the purchase, and it is charged in U.S. dollars. For example, if your total purchase came to $50, then the foreign transaction fee would be $1.50, for a grand total of $51.50.

If you’re not careful, foreign transaction fees can easily take a bite into your travel budget. Some international cards might not charge foreign transaction fees, which can put money back into your pocket and help you avoid credit card debt that’s hard to get rid of.

Recommended: What is a Charge Card

How to Get an International Credit Card

To get an international credit card, follow these steps:

1.    Do your homework to see which cards are most attractive to you. Which have the best perks, lowest fees, and most enticing rewards?

2.    You’ll also want to see which cards you can qualify for. By checking your credit score, you can better determine which cards you might get approved for.

3.    Apply for a credit card. The process of how to apply for a credit card is similar whether or not it’s an international credit card. You’ll usually need to provide basic personal and financial information, such as your Social Security number and details on your income.

4.    Once your application is submitted, the credit card issuer will do a hard pull of your card to determine your creditworthiness, which helps inform whether your limit will be above or below the average credit card limit. Be aware that a hard pull will likely result in a temporary ding to your credit.

5.    Find out if you’re approved. If you are, you can expect to receive your new card in the mail in seven to 10 business days. Your card will have a unique account number as well as the CVV number on a credit card.

Recommended: What is the Average Credit Card Limit

How to Choose the Best International Credit Card

What’s the best international credit card for you will depend on a handful of factors. Specifically, you’ll want to consider:

•   Where you’ll be traveling. Are you planning on using your card on business trips and frequent certain countries for work? If so, there are certain countries or parts of the world where an international credit card may be more widely accepted. Additionally, different cards may be accepted in different locations.

•   Rates and fees. Look to see what the APR on a credit card will be. If you plan on keeping a balance out of necessity, it’s particularly important that you have a good APR for a credit card. The lower the APR, the less you’ll pay in interest when you carry a balance. Also take a look at any other fees that may apply with the card, such as annual fees, late fees, cash advance fees, and, of course, foreign transaction fees.

•   Perks and rewards. Not all credit cards are equal when it comes to the perks and rewards they offer. It’s easy to be dazzled by attractive travel-related perks, but make sure they’re ones you’ll actually use. Also look at the earn rate for different categories, and see if the categories with the higher earn rates are in line with your spending habits.

Recommended: Tips for Using a Credit Card Responsibly

Pros and Cons of Using an International Credit Card

International credit cards have pros and cons, both of which are important to weigh.

Pros of Using an International Credit Card	Cons of Using an International Credit Card
Less hassle when traveling	Fees
Opportunity to earn rewards	Might not be accepted everywhere
Travel perks	Need to plan ahead to maximize perks

Pros of International Credit Cards

•   Less hassle when traveling: Perhaps the top advantage of using an international credit card is that you won’t need to fuss with native currency or carrying around cash or traveler’s checks. Plus, if something were to go amiss, you have the usual credit card protections in place, which could allow you to dispute a credit card charge or request a credit card chargeback.

•   Opportunity to earn rewards: Many international credit cards allow you to earn rewards for your everyday spending. Plus, some may offer higher rates of rewards for travel-related spending, which could be a big benefit for frequent travelers.

•   Travel perks: As mentioned before, international credit cards can come with a host of travel-related parks. For instance, international credit cards may offer trip cancellation insurance, car rental insurance, and free upgrades on hotels and flight bookings, to name a few.

Cons of International Credit Cards

•   Fees: Some international cards have high annual fees, though these may translate to more attractive perks. You’ll also want to look out for foreign transaction fees, as these can quickly add to your costs when traveling.

•   Might not be accepted everywhere: Not all retailers within a country may accept payments with an international credit card. Some retailers might still only accept the local currency or certain payment methods. Additionally, international credit cards’ networks may not include particular countries.

•   Need to plan ahead to maximize perks: While international credit cards might come with some nice travel benefits and perks, it can take a bit of work and planning to make the most of them. For instance, if you want to rake in the bonus offer, you’ll need to plan for some big-ticket purchases to put on your card within the first few months of opening it. Or, if a card features a travel credit that expires each year, the clock is ticking to use that benefit. This all could incentivize you to overspend, leaving you in a scenario where it’s hard to pay off more than the credit card minimum payment.

Recommended: Does Applying For a Credit Card Hurt Your Credit Score

The Takeaway

Having an international credit card in tow while traveling overseas can eliminate the hassle of dealing with foreign currency or carrying cash. When looking for a good that suits your needs, it’s important to weigh the perks against the downsides, particularly the fees involved.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQs

Can I use my credit card internationally?

Yes, with an international credit card, you’ll be able to use your card outside of the U.S. Exactly which countries you can use your card in will depend on the network. For instance, MasterCard’s global network includes more than 210 countries, while Visa’s network includes over 200. International cards are also available in the Discover and Amex networks, but with a more limited number of countries.

Should I withdraw cash with my international credit card?

While withdrawing cash from an international credit card is an option, note that doing so often comes at a cost. On top of the foreign transaction fee, which hovers at around 3%, there’s also a fee that applies to cash advances. Plus, cash advances tend to have a higher APR, and interest will start accruing immediately, as there’s no grace period on cash advances.

How can I find out which countries accept a given card?

Check the credit card network’s international use network to determine which countries you can use your card in. You can find this on the credit card network’s website.

Do I have to pay fees annually for an international credit card?

Some international credit cards do have an annual fee. Do your homework ahead of time to see what the annual fee is, and if the perks will offset the costs. Other costs you want to check include foreign transaction fees, cash withdrawal fees, and late fees.

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Photo credit: iStock/Drazen_

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.

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 .

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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A variable-rate certificate of deposit (CD) is a financial product that locks up your money for a set period of time (or term) and has a fluctuating interest rate. This varying rate of return is what sets it apart from traditional CDs, which pay a fixed rate, so you know exactly how much money your money will earn.

When interest rates are high, a variable-rate CD can help pump up your returns, but the opposite holds true, too. Depending on your financial goals, style, and comfort level, a variable-rate CD may be a good option for you.

Let’s take a closer look. We’ll dig into:

•   What a variable-rate CD is

•   What to know if you are considering investing in one

•   Pros and cons of a variable-rate CD

What Is a Variable-Rate Certificate of Deposit?

Let’s start by answering the question, “What is a variable-rate CD?” A variable-rate certificate of deposit, or CD, is a financial product that you can purchase from a banking institution, broker, or credit union. All types of CDs are a savings account that have fixed investing terms. That means they hold your money for a certain amount of time, be it six months or several years.

You pick a term that suits you best. During that time, your money earns interest, but you are not supposed to withdraw any funds or you are likely to be assessed a penalty fee. When the term ends, your CD is said to have matured, and you may withdraw the funds plus interest or roll them over into a new CD. Usually the total amount of interest is also received at the end of the investment term.

Traditional CDs pay a consistent rate of interest that you are informed of at the start of the term. In the case of variable-rate CDs, however, the interest rate fluctuates throughout the term. This means, you, the investor can potentially earn more on your deposit when interest rates go up. As you might guess, the opposite is also true: You could earn less if interest rates go down. Several market factors influence interest rates. These include the prime rate, treasury bills, a market index, and the consumer price index (CPI); we’ll go into those more in a moment.

One last note: Yes, CDs are insured. Certificates of deposit are time deposits protected by the Federal Deposit Insurance Corporation (FDIC). If the bank holding the CD were to fail, you’d be insured up to $250,000.

Recommended: How Can I Invest in CDs?

Special Considerations of a Variable-Rate CD

The info above gives you an overview of how variable-rate certificates of deposit work. Beyond those broad strokes, there are a few key things to consider when looking into investing in variable-rate CDs. This type of CD is generally most profitable if purchased when interest rates are low, because it’s more likely that the interest rate will increase during the investment term. For this reason, there is a higher demand for these CDs when interest rates are low.

About those interest rates: There are four main factors that influence them. These are:

•   Consumer Price Index (CPI): The federal government uses the Consumer Price Index to calculate changes in the amount that consumers pay for certain products and services. Whatever the current CPI is can affect how interest rates fluctuate.

•   Market Index Levels: Another factor that affects interest rates is the performance of investment portfolios, such as major market indices. Some indices that are often analyzed include the S&P 500, the Dow Jones Industrial Average, and the Nasdaq Composite Index.

•   Prime Rate: The prime rate is the interest rate that banks charge customers who have the highest credit ratings. These customers are the least likely to default on loans, so they get the best interest rates.

•   Treasury Bill Yields: The U.S. Treasury sells Treasury bonds in order to raise money, and they also pay interest on those bonds. The interest rate associated with Treasury bonds depends on the amount and time period of the bond.

Now that you have a little more insight onto the factors that determine a CD’s variable rate, let’s look at the big picture. It’s worth noting that, during times of high inflation, CDs may not be your best option. If inflation surges, even a variable-rate CD may not be able to keep pace. At the end of your term, you may find that your investment has lost ground versus inflation.

Another factor to consider before you lock in on a variable-rate CD is the fee for early withdrawals. Some variable-rate CDs have higher fees than others. If there’s a good chance you may end up withdrawing funds early, before a CD’s maturity date, you should check those penalties and make sure they aren’t too steep.

Recommended: How Can I Buy a Bond?

Pros of a Variable-Rate CD

All CDs are known to be very safe investments since they are federally insured up to $250,000. In addition to that security, there are several benefits to investing in variable-rate CDs. Let’s take a closer look:

High Yield on Investments

Variable-rate CDs are secure, insured accounts that can provide a higher rate of return than other types of savings accounts. For instance, when you buy a fixed-rate CD, you might miss out on the opportunity to earn a higher interest rate if the market ticks upward. Variable-rate CDs, however, can respond to market conditions. If you buy a variable-rate CD when interest rates are low, you can potentially earn more as rates increase.

Profitable When Interest Rates Are Low

When interest rates are low, demand for variable-rate CDs increases, as does the profit potential. That’s because it is more likely that interest rates will increase after you purchase one. The interest rate can tick upwards and earn you more money on your money.

Lower Withdrawal Fee

Generally, variable-rate CDs come with lower penalties on early withdrawals than other types of CDs.

Cons of a Variable-Rate CD

While there are several reasons variable-rate CDs make good investments, they do come with a few downsides to consider before you invest.

Low Interest Rates

Although a variable-rate CD provides the opportunity to snag higher interest rates, it also creates a significant risk of earning a lower rate if market rates go down. If you buy a variable-rate CD when interest rates are low with the hopes that they will increase, there is no guarantee that this will happen. This means they will continue to earn a low interest rate for some or all of the duration of the CD term. In this case, you’re stuck! You may have lost out on the possibility of earning a higher return elsewhere.

Paying Extra for “Bump-Up” Feature

Although interest rates can increase or decrease with most variable-rate CDs, there are some kinds that have a “bump-up” feature. This allows for a one-time rate boost (or possibly a few rate hikes) during the CD’s term, but you may well have to pay extra for this “bump-up.” This is because the initial interest rates is typically lower than it would be on a fixed-rate CD.

Inflation Can Outpace Your Rate and Wipe Away Profit

There is a chance that inflation will increase during the term of a variable-rate CD. If this happens, inflation could end up being higher than the interest rate you’re earning. Let’s spell out what that means: Your earnings would be canceled out.

Variable-Rate CD: Real World Example

All this talk of varying interest rates can be hard to get a handle on without a concrete example. So let’s consider a CD that has a three-year term and a guaranteed repayment of the principal deposit. The starting rate is based on the prime rate, which is 4% at press time. During the term of the investment, let’s suppose that the prime rate drops from 4% down to 2%. To determine the amount of interest you’d receive, you’d take the difference between the initial prime rate and the final prime rate, which is 2%. So at the end of the term the investor would receive their initial deposit plus 2% interest. That’s half what it was when you started. Obviously, you, the CD account owner, would be happier if the reverse were true, which it could be!

What Happens if I Redeem a CD Before It Matures?

Most CDs have fees for early withdrawal; these typically involve losing interest that’s been earned, and occasionally a bit of the principal. (Generally speaking, you don’t receive earned interest until a CD matures). However, some variable-rate CDs do offer early withdrawals with no penalties for fees. These CDs usually have a lower interest rate, so you are paying for this flexibility.

The Takeaway

If you’re looking for safe, reliable, and flexible financial securities, you may want to consider adding variable-rate CDs to your portfolio. CDs provide choices in terms of how long money is invested and can provide strong returns. But, that said, they do come with some risks. It’s important to understand the factors that affect interest rates when considering buying variable-rate CDs. Time things right, and you could earn a healthy return on your investment. But if rates don’t head in a positive direction, you may not even be able to keep up with inflation.

CDs aren’t the only game in town for earning interest. Come take a look at the turbocharged APY you can earn when you open SoFi’s online banking platform with direct deposit. And these accounts have no overdraft or account fees to gnaw away at your money, either. They’re a great way to help your money grow.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall. Enjoy up to 4.60% APY on SoFi Checking and Savings.

FAQ

Are variable-rate CDs issued by the government?

Variable-rate CDs are not issued by the government, but the FDIC insures them up to $250,000. They are issued by FDIC-insured financial institutions.

What determines the rate on a variable-rate CD?

Several factors affect the interest rate of variable-rate CDs. These include the prime rate, market indices, treasury bills, and the consumer price index.

Do CDs have fixed interest rates?

Many CDs have fixed interest rates, but variable-rate CDs have interest rates that fluctuate throughout their term.

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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.

Photo credit: iStock/Vladimir Sukhachev
SOBK0322029

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Gap years appear to be soaring in popularity lately. One survey found that the number of students taking a gap year between high school and college rose from 3% in 2018 to 20% in the 2020-2021 school year. Granted, the COVID-19 crisis surely played a role in that, but the idea of taking a break before, during, or after college is one that many students can relate to.

Obtaining an education involves a lot of hard work. From long days in the classroom to late-night study sessions, the rigors of academia can take their toll. And it can carry a hefty price tag. It’s understandable that someone might want to take a gap year before they start college or after they finish college to regroup before they begin working.

There are a lot of benefits associated with taking a gap year, but getting ready for a year off requires quite a lot of financial planning to make this choice sustainable. Keep reading to learn:

•   What is a gap year and what are its benefits?

•   What are the typical expenses during a gap year?

•   How can you save for a gap year?

What Is a Gap Year?

Before diving into how much to save for a gap year, it’s helpful to understand exactly what a gap year is. There’s no one clear cut definition of a gap year, and everyone can choose how to spend theirs differently. That said, essentially a gap year involves taking a year off from school or work to travel, do an internship, take on a temporary job, volunteer, develop a skill, or do a combination of those activities. Some students design their own program; others sign up with an organization that, say, leads them on travel or volunteer projects.

More often than not, people take a gap year between when they graduate high school and start college, but it is possible to take a gap year during college or after graduation but before starting a job or going to graduate school.

A gap year can give someone the time they need to discover what they want their next move to be, to rest, to learn about an area of interest, or to simply get out of their comfort zone.

What Are the Benefits of Taking a Gap Year?

Some parents may look down on the idea of a gap year, fearing that their child won’t get “back on track” with their studies or post-grad life. But there are many benefits associated with taking a gap year.

•   Time to rest and recharge. After many years of academic pressure, some students need a year off to recover from burnout before they start their next big endeavor.

•   Room for discovery. Students who aren’t sure what path they want to take next may find that taking a gap year gives them the opportunity to discover or deepen their interests and formulate next steps.

•   Can explore passions. If a person knows they’re interested in a certain industry or job role, they can spend some time interning, pursuing a fellowship, or researching that career path before they pursue a degree toward that job.

•   Develops independence. A gap year can provide the opportunities young adults need to become more self-sufficient. That could mean traveling solo or taking on a job in a new town, not to mention getting better with money management.

Is a Gap Year Beneficial Financially?

If you’re contemplating taking a gap year, it’s natural to wonder how much to save to make it a reality. You may also be curious if this year could be a boost or a bust for your finances. In truth, a gap year can be beneficial financially and in other cases it can be financially damaging — it just depends on how the person chooses to spend that year. For instance, if you are working at a local business while living at home, you might really plump up your bank account. If, on the other hand, you go on a gap-year guided tour of another continent, that could cost $10,000, $20,000, or more.

There is some concern that gap years can hurt someone’s overall lifetime earnings. By pushing off entering the working world with a college degree in hand by a year, they can lose a year’s earnings as well as a year’s progress towards a higher paying job.

That being said, someone may spend their gap year interning, working as a fellow, or finding other ways to earn income or boost their resume. They may find their efforts propel them forward financially or at least help them break even. On the other hand, if a person spends the year traveling and relaxing, their finances might take a major hit if they don’t plan and budget appropriately.

Typical Expenses to Prepare for During a Gap Year

Parents may not be able to (or eager to) fund a child’s gap year, so a student can benefit from preparing to pay some or all of their expenses. Saving in advance or working part-time during the gap year can help make it a reality. (Planning for a gap year can actually be a great way to get your finances in order and learn how to budget.)

Here are some of the expenses to consider:

•   Rent and utilities or other housing (say, youth hostels if you are traveling)

•   Transportation

•   Travel costs

•   Food

•   Entertainment (movies, concerts)

•   Clothing

•   Personal-care products

•   Health insurance

•   Medical costs

•   Car insurance

•   Cell phone/data plan; internet access

•   Student loan payments, if applicable

•   Credit card debt payments

•   Gym membership/fitness costs

Financial Tips to Save for a Gap Year

Now let’s take a look at how to save for a gap year. The very act of planning a gap year can be a great exercise in money management for college students; it will definitely give you a new perspective on saving and spending.

Budgeting While Planning a Gap Year

Budgeting for a gap year takes quite a bit of forethought and planning regarding your personal finances. It’s a good idea to plan for a gap year a full 365 days in advance to make it easier to build up a savings fund. It can be helpful to put your cash into either a savings account, money market account, or CD to gain interest and help your funds grow.

You might want to determine how much you need to save over the next year, divide that amount by 12, and then add that amount into your budget so you can set the money aside each month. This can be a great time to familiarize yourself with different budgeting techniques (like the envelope system or the 50/30/20 budget rule) and see which one suits you best.

Getting a Job or Internship

Getting a part-time job or a paid internship while in school can make it easier to save for a gap year. Your school may have an online board where you can scan for opportunities. You might also consider a side-hustle, whether that means selling photographs you took while hiking or doing a weekend shift at a local coffee shop.

Cutting Unnecessary Expenses

Remember that reference above, saying it was a good idea to budget for a gap year? Now it’s time to up the ante. You can take a cold, hard look at your budget to see where you can cut your spending (hello, subscription services and those pricey daily smoothies). The money you save can be put towards your gap year fund.

Selling Items You No Longer Use

From clothes to workout equipment to electronics, most of us have things we simply no longer use. If you’re trying to fund a gap year, you can cut the clutter and make some extra cash by selling this stuff. You might offer items up online (eBay and the like) or organize a yard or stoop sale.

Reduce Credit Card Spending

Credit card debt has a way of snowballing and getting very expensive. With credit card interest rates around 17%, owing money on your plastic can be a dangerous thing. Aim to only use your credit card for purchases you can afford to pay off right away. That way, you can use any cash-back and travel-point bonuses to help fund your gap year without carrying a balance. It’s wise to focus on managing your money in a way that doesn’t require relying on a credit card.

Consolidate Credit Card Debt

The above strategy may not be possible if you’ve already racked up a good deal of credit card debt and are feeling as if you are in financial trouble. (Yes, this can happen quickly, even if you’re a student who’s only had a card for a short time.) You may find that consolidating multiple sources of credit card debt can help you get a lower interest rate (which saves money) and streamline your debt, making it easier to pay off.

For instance, you might find a balance-transfer card that offers breathing room thanks to an introductory, interest-free period. Or perhaps you would do better with a credit card consolidation loan that lets you pay off the debt and then pay back the funds at a lower interest rate. If you need guidance, consider talking with a debt counselor at the non-profit NFCC (National Foundation for Credit Counseling).

Cook at Home

Eating out will almost always cost more than eating at home. To save extra cash, get comfortable in the kitchen and build your meal-prep repertoire. In addition, you might start making your own lunch; those popular salad bars can be a budget-breaker if you go often.

Recycle, Reuse, Rewear

One way to save big is to be planet-friendly. Did you know the average American spends $100 per year on bottled water? Buy yourself an insulated reusable water bottle in a color or design you love, and use it.

Also consider that each of us typically spends almost $2,000 on clothes per year. Commit to wearing what you own or perhaps shopping second-hand (there are plenty of cool things to be found at thrift and vintage stores) to whittle that expense way down.

Think Carefully About Big Purchases

If you’re planning for a gap year, you may want to slow your roll when it comes to making big purchases. Upgrading to the latest mobile phone or buying a premium mattress as you enter adult life may seem enticing right now. However, if you delay gratification, you may be closer to making your gap year dreams a reality. Better money management can sometimes mean knowing how to say “no” to things you think you have to have.

The Takeaway

A gap year can be a great way to intern, explore, volunteer, destress, and more. But it typically isn’t free. If you want to enjoy this kind of experience, you likely need to save more and spend less. Yes, this can help your gap year become a reality, but it has another bonus: It teaches you money management skills that can last a lifetime.

On the topic of money management, the right bank can make wrangling your finances so much easier and more efficient. For example, when you open an online bank account with SoFi, it’s super convenient and your money can grow faster. Set up direct deposit with our Checking and Savings, and you’ll earn a competitive APY. Plus, you won’t pay any account fees. That can help boost your savings for your gap year and beyond.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall. Enjoy up to 4.60% APY on SoFi Checking and Savings.

FAQ

How much money is needed for a gap year?

How much money you need for a gap year depends on your goals. For instance, if you want to travel the world during that year, you will require a lot more money than if you plan to live at home and intern in an industry you’re interested in.

Can taking a gap year help you save money?

Usually a gap year doesn’t help students save money, other than the fact that no tuition will be due that year. The exception would be if you live with your parents during your gap year and work during that time.

How can a gap year hurt?

A gap year can hurt someone’s lifetime earning potential. By delaying entering the working world for a year, the individual misses out on a year’s salary and career growth that can lead to a higher salary down the road. However, a gap year could also be a positive: It could involve an internship or connections that eventually lead to a dream job.

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Photo credit: iStock/ijeab

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

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

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

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

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

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

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

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

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

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

SOBK0622004

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Overdraft and non-sufficient funds (NSF) fees have a lot in common. Both fees are triggered when there’s not enough money in an account to cover a transaction, and both can be avoided with practice.

But the reason behind each fee is slightly different. Read on to learn about the difference between overdraft and NSF fees, and the best ways to avoid them altogether.

What Are Overdraft Fees?

When a bank account balance is negative (meaning transactions exceed deposits), the account holder is often charged an overdraft fee. The transaction goes through, but the account holder owes the bank the cost of the transaction to bring the account back to zero, as well as the overdraft fee set by the bank.

Typically, overdraft fees will continue with each transaction until an account’s balance is out of the red. That means if an account holder is unaware of the overdraft and goes on using the card without making a deposit, they could be hit with a fee for each charge, no matter how small.

The average overdraft fee is $25, which can add up quickly when someone isn’t paying attention to their checking account balance.

How Do Overdraft Fees Work?

Overdraft policies vary from bank to bank, but typically they kick in when a debit card or checking account transaction exceeds the amount held in a bank account.

When the transaction goes through, the bank has a few choices:

•   If the account holder has opted for a tool like overdraft protection, they may be shielded from overdraft fees up to a certain amount

•   If the account is in good standing, or if the account holder has never over drafted before, the bank may choose to waive overdraft fees in this instance

•   If the account holder has a history of over drafting, or is relatively new, the bank may choose to charge the overdraft fee

When You Could Get Hit With an Overdraft Fee

It’s not just debit card purchases that can set off an overdraft fee. If the account holder doesn’t have enough cash in their checking account, any of the following transactions could lead to an overdraft fee:

•   ATM withdrawals

•   Checks

•   Autopay bill payments or withdrawals

•   Transfers between bank accounts

As mentioned above, once an account holder overdraws, the bank may continue to charge subsequent overdraft fees on the account until the balance is restored through a deposit.

Recommended: How to Avoid Overdraft Fees

What Are NSF Fees?

On the surface, it’s hard to tell the difference between overdraft and NSF fees. Both fees occur when an account doesn’t have enough cash to cover a transaction.

However, an NSF fee is charged when an account doesn’t have enough money to cover a transaction and the transaction is canceled or rejected.

The average NSF fee is $30, but some banks charge as much as $40.

How Do NSF Fees Work?

An account holder might trigger an NSF fee instead of an overdraft fee if they:

•   Opt out of or never signed up for overdraft protection

•   Already exceeded the bank or credit union’s overdraft protection limit

•   Write a check that’s more than the balance of the account

When You Could Get Hit With an NSF Fee

NSF fee policies vary by banking institution, but an account holder is more likely to be charged in the following situations:

•   Check writing. When someone writes a check for more than the account’s balance, the check “bounces,” and the transaction won’t go through. The account holder will be charged an NSF fee by their bank, and they may be charged an additional fee by the bank or entity that tried to cash the check.

•   ACH payments. An ACH payment, or Automated Clearing House Network payment, can be an easy way to transfer money or pay someone, but if the transferring bank doesn’t cover ACH payments, the transaction could be canceled and the NSF fee charged.

What Are the Differences Between Overdraft and NSF Fees?

NSF and overdraft fees are commonly lumped together as general bank fees, but they are not the same. Here’s the difference between overdraft and NSF fees:

NSF Fee vs. Overdraft Fee

	NSF Fee	Overdraft Fee
Average Fee	$30	$24.94
Transaction goes through?	No	Yes
Charged repeatedly until corrected?	No	Yes
Can it be avoided through overdraft protection?	No	Yes

Tips for Avoiding Overdraft and NSF Fees

Overdraft and NSF fees are frustrating for many people because they fall into the category of bank fees you should avoid — and you can easily do so with a few simple practices.

1. Setting Up Email and Text Alerts

Many banks and credit unions offer email and text alerts that account holders can set up to notify them of low balances. For example, an account holder could set up an alert when their checking account balance falls below a certain amount.

With enough notice, account holders have time to transfer money into the account to cover upcoming charges or auto-debits.

2. Utilizing Direct Deposit

Setting up direct deposit with an employer means paychecks go directly to a bank account on payday. It’s a nearly immediate payment, opposed to waiting for a check by mail then depositing it at the bank. This could save someone from overdraft fees, especially if paychecks and major bills occur at regular intervals.

3. Having a Savings Cushion to Prevent Overdraft

Keeping a healthy cushion in a checking account can prevent it from dropping dangerously low. While it’s not best practice to keep tons of extra cash in a checking account (as these accounts often have low or no interest), keeping a few hundred extra in the account could keep someone from overdrafts when they need to make a transfer or forget about a check they wrote.

4. Checking Finances Regularly

While automation can help, nothing beats a regular check-in. Consider reviewing account balances at least once a week. It’ll help keep those numbers in mind when a large transaction or purchase comes up.

Recommended: Is Overdraft Protection Worth It?

5. Utilizing a Budgeting App

Keeping a budget is an important part of financial wellness. Not only does it involve knowing the balance of bank accounts, but it can also prevent people from over- or unnecessary spending that sends an account into overdraft. Some budgeting apps come with alerts to notify users when account balances are low.

Banking With SoFi

It’s easier to avoid overdraft fees at some banks than others. SoFi’s online bank account offers no-fee overdraft coverage and faster direct deposit, making it simple to help avoid unnecessary charges.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall. Enjoy up to 4.60% APY on SoFi Checking and Savings.

FAQ

What is the difference between overdraft and non-sufficient funds fees?

The difference between overdraft and NSF fees is the success or failure of the transactions. Overdrafting will allow the debit to clear. With an NSF, sometimes called a bounced check, the transaction does not go through.

Is an overdraft fee or an NSF fee more expensive?

Both overdraft and NSF fees hover around $30 to $35, on average.

How can you avoid overdraft and NSF fees?

You can avoid overdraft and NSF fees by keeping a close eye on bank account balances and choosing a bank that offers overdraft protection or forgiveness.

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Photo credit: iStock/Ivan Pantic

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.

SOBK0622002

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