Differences Between a Deposit and Withdrawal

Differences Between a Deposit and Withdrawal

If you’re wondering what is the difference between a deposit and a withdrawal, the truth is that they are exact opposites: A deposit is money put into a bank account for safekeeping until you need it. A withdrawal is money that’s taken out of your account. At the most basic level, one of these transactions is about getting money and the other is all about paying, or spending.

But that’s not the full story about deposits vs. withdrawals. You have many choices when it comes to getting money into your account and taking it out. Read on for more about how deposits and withdrawals work, their similarities, and their differences. Once you know the different ways that funds can flow through your accounts, you’ll be that much savvier a financial customer.

What Is a Deposit?

A deposit, from the ancient Latin word deponere, means to “place in the hands of another.” In terms of banking, a deposit means you put your money in the hands of a brick-and-mortar or online bank to safely hold it for you. Deposits add to your funds, which helps your bank accounts pay your bills or stash your cash until you are ready to spend it. This influx of money can happen in a few different ways, which we’ll review in a moment.

How a Deposit Works

A deposit involves adding cash or check(s) to your bank account. You can do this in person at a bricks-and-mortar branch of your bank, at ATMs in your bank’s network or, for checks, by using a bank’s mobile app.

You can also receive a deposit by electronic transfer from one bank account to another account (whether yours or someone else’s). For example, if you are paid by direct deposit, that moves money from your employer directly into your account. Or perhaps you receive a government benefit this way. In addition, you might receive funds via a P2P service, like PayPal or Venmo, and could then move the money into your checking or savings account.

Worth noting: Both bricks-and-mortar and online banks offer many different kinds of deposit accounts. You could consider a high-interest checking or savings account at a traditional or online bank, or, if you don’t need to access the money every day, you may want to look into a money market account or a certificate of deposit (CD).

Whether you are a college student with birthday gift money you want to save or a parent raising a growing family, you can find a place to safely put your money and track it until you need it.

Types of Deposits

There are many ways to put money into your bank account today. A generation or two ago, only cash or a check could do the trick, but now you have many options to top up the funds in your bank. To be specific, here are the ways to make a deposit and give your bank account an infusion of cash:

•   Cash deposit at one of your bank’s ATMs or branches

•   Check deposit at one of your bank’s ATMs or branches

•   Check deposit electronically via your bank’s mobile phone app

•   Payroll direct deposit

•   Electronic funds transfer from a linked savings or checking account or via mobile payment services such as PayPal, Venmo, Cash App, or Zelle

What Is a Withdrawal?

Now, let’s take a look at the other vital aspect of banking: withdrawing, or taking money out of your account. You can do that several ways, including using your debit card at an ATM, requesting the money in person from a bank teller, writing a check, scheduling an electronic bill payment, having the money transferred via a payment app, and wiring the money to someone.

As you may know, some of these methods of withdrawing funds can involve fees. If you use an out-of-network ATM, for instance, you can get hit with a charge. Some companies add a surcharge if you sign up for the convenience of electronic payments vs. writing a and mailing a check.

How a Withdrawal Works

The difference between a withdrawal and deposit is that withdrawals draw, or take, money out of your bank account. You might withdraw cash from your bank account to put in your niece’s Bat Mitzvah card, write a check (or authorize an electronic payment) to pay the electricity bill, or use a P2P service to pay a friend back.

Any funds removed count as a withdrawal. Depending on your bank’s checking account terms, you may have limited or unlimited withdrawals. Often, there are savings account withdrawal limits. In the past, the number was typically six per month, though these restrictions have largely been eased in recent years.

Types of Withdrawals

Let’s take a closer look at how to withdraw or debit funds from your bank account. Know these ways to get money out when you need it.

•   Cash withdrawal at ATM with a bank or prepaid debit card (though there will likely be ATM limits to the amount you may withdraw)

•   Cash withdrawal in person at one of your bank’s branches

•   Checks written from your account

•   Cardless withdrawals of cash using phone app at ATMs in your bank network

•   Bank-issued cashier’s check in person or online

•   Cashing a certificate of deposit (CD) at bank (if this is done before the maturity date, you may owe an early withdrawal fee)

•   Funds transfer from brokerage account

•   Electronic funds transfer from a linked savings or checking account or via mobile payment P2P services such as PayPal, Venmo, Cash App, or Zelle

•   Electronic bill pay (recurring or not)

Similarities and Differences Between Deposits and Withdrawals

Deposits and withdrawals are two of the most common banking terms. Here are the differences and similarities you should know. It comes down to deposit (plus) vs. withdraw (minus). Check this chart for more details.

Differences

Deposits

Withdrawals

Adds to bank account balance
Immediately reflected in bank account balance
Transaction can only be done at in-network ATMS
Cashier’s checks can be managed at your bank branch

How Deposits and Withdrawals Are Similar

Here’s what these two kinds of banking transactions have in common.

•   Both can be done in person at ATM or branch in your bank’s network (except for check withdrawals, which can only be completed in person or online).

•   Both can involve electronic funds transfer from a linked bricks-and-mortar, an online savings or checking account, or via mobile payment services, such as PayPal, Venmo, Cash App, or Zelle.

How Deposits and Withdrawals Are Different

Now, let’s take a look at some of the key ways in which these transactions are different.

•   A withdrawal leaves you with less money in the bank while a deposit puts more money in the bank. In this way, they are opposites.

•   A withdrawal will immediately be reflected in your account balance, while a deposit may take longer to show up, until the funds clear.

•   Cash deposits generally have to be made at your bank or bank’s branded ATM network locations, while cash withdrawals can be made at any ATM. (But beware, if the ATM is out of your bank’s network, you could be charged an ATM fee by both the ATM owner and your bank.)

•   Check deposits have to be made at your bank or bank’s branded ATM network locations, or via a bank’s mobile phone app.

•   Check withdrawals via cashier’s checks, on the other hand, are likely only available in person at one of your bank’s or credit union branches. Alternatively, you could request one online from your brick-and-mortar or online bank or credit union.

The Takeaway

Now you know the difference between a deposit and a withdraw. They are inverse transactions: While a deposit adds funds to your account and boosts your balance, a withdrawal whisks money away, subtracting an amount from the funds you have on balance. There are many ways to conduct each of these transactions today, largely due to tech offering new options. You can now do your banking in person or use an array of digital tools to send or receive money.

SoFi can make banking much better than basic. Our high-interest bank accounts are convenient to set up and use, and we offer a competitive APY. You can also write checks, set up bill pay, and have access to 55,000+ (fee-free) ATMs worldwide. Oh, and did we mention? No account fees, period.

See how much your money can grow with SoFi.

FAQ

What is a cash withdrawal?

A cash withdrawal involves converting funds you are holding in an account (perhaps an investment plan, a trust, or a pension) into cash that you can then deposit elsewhere or use.

What is a cash deposit?

A cash deposit is money that you add to your bank account. It could come via an electronic transfer, an ATM deposit, or currency that you hand off to a bank teller.

What is the difference between a deposit and a withdrawal?

The difference between a deposit and a withdrawal is that a deposit adds funds to your bank account while a deposit takes funds away.


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.

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Understanding ACH Transfer Limits for Incoming and Outgoing Transactions

Understanding ACH Transfer Limits for Incoming and Outgoing Transactions

When it comes to conducting transactions with your bank account, one of the most popular types is using ACH transfers, but they do come with limits. ACH payments are electronic bank transfers that conveniently process regular payments such as mortgages, utilities, loans, and tax payments. They can also be used for one-time payments as well.

While ACH payments are fast and secure, it’s important to know that financial institutions impose an ACH transfer limit — and each one may operate differently. Knowing your limits will help you plan better when it comes to paying your bills and making other types of transfers. It’ll help to make sure all your transactions go through smoothly and avoid any potential hiccups.

So, here we’ll take a look at:

•   How ACH transfers work

•   Incoming and outgoing ACH transfer limits

•   The “fine print” on ACH transfers, including timing and fees.

Let’s get started!

How ACH Transfers Work

First, let’s define our terms: ACH stands for Automated Clearing House. ACH transfers are an electronic transfer system that allows individuals or businesses to transfer money from one financial institution. This network is one of the main ways to send and receive money. Did you sign up for autopay on your utilities bill? ACH transfers will make it happen. Do you receive your paycheck by direct deposit? Yup, that’s also an ACH transfer. Other types of transactions include direct ACH debits, electronic funds transfers (EFTs), electronic checks (eChecks), and direct payments. Aside from banks, third-party apps, such as PayPal, which allow you to pay friends without cash, also use the ACH network.

ACH transfers can involve money being pulled from an account — such as direct debits — where a third-party can take money out from your account once you’ve given permission. For instance, if you pay your life insurance policy monthly, with ACH payments, the company can debit your account each month. You can also push money, where you manually send money to accounts at different financial institutions such as bank accounts of your friends and family members.

Wondering how long ACH transfers take? In most cases, ACH payments, which are only for U.S. transactions, are usually faster than other types of transactions — if there’s enough money in the account, an ACH incoming transfer is usually cleared within one to several days. A few instances where it could take longer is during holidays or if the network suspects the transaction is potentially fraudulent. Debits are typically processed on a next-day basis. (If you need a super-fast transfer, look into how ACH vs. wire transfers stack up.)

Though there technically isn’t a set number of transactions you can do in a day, there are often ACH limits. Plus, there are also ACH period limits — as in, there may be daily or monthly limits, depending on your financial institution. Let’s move on to taking a closer look at the meaning of ACH limits.

💡 Quick Tip: Make money easy. Enjoy the convenience of managing bills, deposits, and transfers from one online bank account with SoFi.

Incoming ACH Transfer Limits

According to the National Automated Clearing House Association (NACHA), which manages ACH payments, ACH transfer limits can be as high as $1,000,000 per day, up from $100,000 previously. However, this is a recent shift, and your incoming ACH transfer limits may still average around $25,000.

This is important to note because you want to be sure that you can receive the money being sent to you. For instance, if you’re selling a vehicle for a sizable amount, you want to be sure the person purchasing it can successfully transfer the money over to you. If it’s over your limit, your transaction may hit a hitch. By knowing your limits, you can troubleshoot before you wind up in a “Where’s my money?” situation.

Outgoing ACH Transfer Limits

Depending on your financial institution, your outgoing ACH transfer limit may be much lower than what NACHA imposes. Understanding the ACH outgoing transfer limit is important because you want to ensure your transactions go smoothly. If you have multiple transactions set up regularly to send money, you’ll want them all to go through and not run the risk of payments being held up and late fees accruing.

Get up to $300 when you bank with SoFi.

Open a SoFi Checking and Savings Account with direct deposit and get up to a $300 cash bonus. Plus, get up to 4.60% APY on your cash!


ACH Transfer Limits at Top U.S. Banks

The following ACH transfer limits and its associated fees are from the six biggest traditional banks, plus SoFi.

Name of Bank

ACH Transfer Limit

Fees

Bank of AmericaVaries, but typically $3,000 daily
$6,000 monthly
$3 for standard
$10 for next-day
Capital One$10,000 daily
$25,000 monthly
None
U.S. BankVaries, but typically $2,500 dailyVaries, $0 to $3
CitibankInbound, up to
$100,000 daily and monthly
Outbound, up to
$25,000 daily
$50,000 monthly
None
Wells FargoVaries, but typically $5,000 dailyVaries
ChaseVaries, but typically $10,00 per transaction, $25,000 dailyNone
SoFiUp to $100,000 dailyNone

As you can see above, a few of the banks have varying daily and monthly ACH transfer limits. Some of these depend on the type of account you have and your relationship with the bank. For instance, those who have more premium accounts (such as ones that require higher balance minimum requirements) may have higher ACH transfer limits, though it’s not always the case. Also, business accounts may have different and/or higher limits than personal bank accounts. ACH transfers can be conducted with both bricks-and-mortar and secure online bank accounts.

ACH Transfer Penalties

While ACH transfers are a convenient way to conduct bank transactions, there are some limitations you need to be aware of.

Cutoff Times

ACH transfers can be conducted on a same-day or somewhat slower basis. For same-day, transfers must be submitted by 4:45 pm ET. In general, though, ACH transfers will take a bit longer, and it’s worth taking into account the day of the week. If you submit a transfer at 5:03 pm on a Friday, it may not get moving until the following Monday, which could count as a late payment.

All this to say: If you’re making a transfer and want it to arrive as soon as possible, it’s best to initiate the transfer earlier in the day. And keep these timing issues in mind if you are tracking an ACH payment, whether incoming or outgoing.

Insufficient Funds Penalty Fee

Many financial institutions won’t charge you for an ACH transfer, but they may charge you a fee if you don’t have enough money in your account. This penalty is typically called the insufficient funds fee, and the amount varies from bank to bank.

No International Transfers

In most cases, ACH transfers aren’t available to send money to another account internationally. If you want to send money overseas from your bank, you’ll have to do so via a wire transfer. You’ll likely be charged a fee for the service.

The Takeaway

ACH transfers are an important part of modern banking, whisking funds from account to account. This process enables direct deposit, automatic bill-pay, P2P platforms, and more. However, these transactions may come with dollar and timing limits, as well as fees. Each financial institution will have different rules and guidelines as to how you can conduct ACH transfers. Knowing these ground rules is important, especially if you have a lot of daily transactions or simply want to send a large sum of money to someone. This is one of those situations in which reading the fine print on your account agreement or checking in with customer support can save you time, money, and headaches.

Here’s another way to simplify your banking life: Sign up for SoFi’s linked accounts. When you open Checking and Savings with direct deposit, you’ll enjoy a host of benefits, from zero account fees to a competitive APY. Plus, we’re a digital bank, so you can expect transactions to be fast, secure, and easily done on the go.

See how much better banking can be with SoFi.

FAQ

Which bank has the highest ACH transfer limit?

As of press time, SoFi and Citi have the highest ACH transfer limits. However, these higher limits may only be available for those who have certain types of bank accounts or have been a long-time customer with these financial institutions.

Are ACH transfers reported to the IRS?

The IRS doesn’t count ACH transfers as cash, so they are not reported.

What is the maximum amount you can transfer from bank to bank?

The maximum amount you’ll be able to transfer between banks will depend on various factors, such as how much you have in your account, ACH transfer limits for your financial institution, and how much the receiving bank is allowed to receive. NACHA recently raised the maximum possible to $1,000,000, but again, that will not be available to every banking customer.

Which bank is good for ACH?

All financial institutions should be able to initiate and receive ACH transactions. The differences involve limits, processing time, and possible fees. It’s worth checking at specific banks to understand their guidelines if you plan on using ACH transfers.


Photo credit: iStock/AleksandarNakic

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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Understanding ACH Fees: Comparing ACH Cost to Other Payment Methods

Understanding ACH Fees: Comparing ACH Cost to Other Payment Methods

ACH payments, otherwise known as ACH transactions or transfers, are one way to transfer your money or pay electronically. It’s been a real game-changer: The process eliminates the need for cash, paper checks, and credit card networks.

But, as with most banking transactions, it can feature its own range of costs, whether you are using it to pay your bills or to conduct business. While the costs of ACH are competitive with other payment methods, they can vary. The amount you end up paying for your ACH transaction will depend on multiple factors. For example, the way you use the ACH network and the size of your payments can both factor into pricing.

Since each person’s financial needs are different, we’ll take a look here at how ACH pricing works and how it stacks up against other payment methods. You’ll learn:

•   What an ACH transfer is

•   What typical fees are for ACH transactions

•   How ACH fees compare to other payment methods.

What Is an ACH Transfer?

First things first: ACH stands for Automated Clearing House, the network that powers these electronic transactions. It’s a hub that includes around 10,000 financial institutions and can support payment processing, such as direct payments, electronic checks (eChecks), electronic funds transfers (EFTs), direct debits, and direct deposits. When considering payment apps, like PayPal and Venmo, know that ACH powers those as well.

ACH transfers work similarly to other payment methods. Take your monthly internet bill, for example. If you signed up for autopay, you had to provide some personal information like your checking account details. You also needed to agree to a scheduled payment. After the sign-up, your internet provider requests funds from your bank to pay for the cost. From there, your bank processes the ACH transaction as long as you have enough funds. (It’s worth mentioning that ACH payments are quite secure but there is fraud out there. ACH Positive Pay offers one way to protect yourself if you are concerned about scammers.)

ACH transfers require an initial setup. Following that, you can make bank-to-bank payments using the ACH network. These payments generally fall into two categories: ACH credit and ACH debit. Either way, you may wonder how long an ACH transfer takes. They usually clear within a few business days and for a relatively low cost.

Recommended: How Does a P2P Money Transfer Work?

Typical ACH Payment Fees

Now that you understand the basics of how money moves around in an ACH transaction, let’s consider the costs. As a consumer, you may not pay for ACH processing, though some providers may try to pass along a service charge. In some cases, using ACH may even earn you a discount. For instance, if you automate a home loan payment for a certain date every month, you might be rewarded.

However, as a business, you will likely have to spend a bit to conduct ACH business. According to the Association for Financial Professionals (AFP), the median ACH transfer cost is $0.26 and $0.50. This means that ACH payments are one of the more affordable options for businesses, although prices may vary depending on the provider you choose to process your payments. That provider is usually known as a third-party payment processor (TPPP).

Here are some standard ACH fees you should be on the lookout for if you accept these payments.

Account Fee

The ACH account fee covers a broad array of costs. It essentially pays for the services needed to manage a payment processing account. These include recording a monthly statement, compliance costs, system maintenance, and transaction monitoring. Generally, your service provider or processor will collect this fee.

ACH Processing Fees

The ACH processing fee covers the expense to send an ACH payment to the recipient’s bank account after going through the Automated Clearing House network. ACH processing fees break up into three categories: debit, credit, and discount, which we’ll now look at individually.

Debit Fee

The debit fee pays for a customer to make an ACH debit payment to a business. As mentioned above, this ACH debit fee typically costs between $0.20 and $1.50. The charge depends on the risk of the transaction and the type of business.

Credit Fee

ACH credits come into play when a business makes a payment to a third party, vendor, or employee. It’s similar to a debit fee in terms of cost, meaning between $0.20 to $1.50, and it pays for the transaction to be sent through the ACH network.

Higher-risk businesses (which may cluster in certain fields, from financial and travel services, to auctions and tobacco-based businesses) may face an additional charge as well. This can bring the fee to around 0.5% to 1.5% of the payment. In part, this reflects the fact that ACH credit payments tend to be worth a higher dollar amount than ACH debit transactions. As a result, an ACH credit payment is a greater risk for the merchant services provider.

Discount Fee

The name “discount fee” may be misleading for people just learning about ACH charges. It has no connection to discounted prices. Instead, it’s a fee that applies to certain high-risk ACH transactions based on a percentage. With it, payment processors can increase the cost of the service and lessen the risk of the payment.

Other ACH Fees

We’ve just shared the run-down on the standard costs you may be charged for payment processing with an automated clearing house. But there are other fees you should know about with ACHs. Because when it comes to paying for financial services, no surprises is often the best policy.

Setup Fee

In some cases, your payment processor may charge you for setup. This one-time fee can be waived sometimes, though; it’s worth inquiring. You’re most likely to be able to avoid the fee if ACH processing comes as an add-on service to another arrangement you’ve made. Alternatively, you can reduce costs by working with a business that does not collect this setup charge.

Monthly Fee

Those who use ACH may also face a unique monthly fee along with processing charges. However, some may be able to pay both fees wrapped into the monthly fee. Usually, this fee costs anywhere from $5 to $30.

Monthly Minimum Fee

This may sound like the monthly fee we just described above, but there may indeed be a monthly minimum fee as well. This is a minimum processing charge that could be assessed in addition to your regular monthly charge. Or it might replace that monthly fee.

Batch Fee

ACH files can contain one or more groupings, called batches. Batches contain one or multiple transactions, and they are sorted based on certain clusters of data. When your ACH transfers are batched in this way, you are charged a batch fee. It’s assessed per each batch processed and is typically under a dollar per batch.

ACH Return Fee

Returning an ACH transfer is possible. However, it usually comes with an ACH return fee that costs between $2 to $5 per transaction.

ACH Chargeback Fee

Customers use chargebacks to dispute what they believe are erroneous payments. This process comes with a chargeback fee, and it’s typically higher than fees for ACH returns. The ACH chargeback fee tends to cost between $5 and $25.

High Ticket Surcharge

The original intention for ACH fees was to apply them to low-ticket (that is, not too pricey) purchases. As a result, there’s an additional charge added for high-ticket transactions. You’ll find that payment processors likely charge a surcharge on purchases over $5,000.

Expedited Processing Fee

You may need expedited processing for an ACH transfer. Depending on the payment processor, this service can come with an additional charge.

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Comparing ACH Fees to Other Payment Methods

When it comes to electronic transactions, you may find that different techniques can sound quite similar. However, processes vary, and so too can fees. Here’s what you need to know about the fees associated with other payment methods.

ACH vs Wire Transfer

Wire transfers are transactions between two financial institutions where each is responsible for verification. In a wire transfer, a bank sends money from one account into another. This process can take little or virtually no time when it occurs within the same bank. However, if the money must transfer between distant or international banks, it can take a bit longer, but it is often viewed as one of the quickest ways to make a payment.

While this can be a fast method, it’s also costly, often averaging between $20 to $35 when sending money and $10 to $20 when you receive funds in this way. As a result, wire transfers may be best for one-time, large payments.

ACH vs Paper Checks

Paper checks are the traditional route for payment processing and may work well if you don’t want to electronically transfer money between banks. But the overall cost can vary depending on the business’s size, where the checking account is located, and timing.

It’s not unheard of for banks or financial institutions to offer free checking accounts to small businesses. They may even throw in checks at no additional cost. These two selling points, along with low monthly fees, can make paper checks an incredibly cheap financial method.

However, experiences vary. The financial institution may offer a free checking account, but only if the business maintains a certain minimum balance. Not only that, but monthly fees and the time spent filling out or processing checks can be costly. According to NACHA, sending money via a check results in a cost of about $1.22 per transaction.

ACH vs Credit Card and Debit Cards

Credit cards are a standard payment method, particularly for businesses collecting online payments. All the cardholder has to do is use their card to purchase the business’ goods or services. When they do, the credit card network verifies that the payer can indeed afford to do so. This is why credit card transactions are considered “guaranteed funds” payments. ACH doesn’t do this vetting during processing, which means transactions can be rejected. Thus, they may result in a penalty fee. Debit cards are another convenient way to pay. A person swipes or taps their card to pay, and funds are automatically deducted from their account.

ACH processing is relatively slow compared to credit card processing. But ACH pricing is lower than credit card and debit fees, which usually charge between 2.6% and 3.5% of the transaction amount, plus an additional 10- to 30-cent fee per transaction.

Recommended: What is a Credit Card and How Does it Work?

ACH vs Online Invoice with Pay Link

Let’s say you include an easy, clickable payment link in an online invoice that you’ve sent to your customers. In terms of processing, this is likely to cost between 2.9% and 3.5% of the transaction’s total, and you may also pay a 15- to 30-cent fee for each transaction.

ACH vs PayPal

Now, let’s consider how processing via PayPal stacks up. In the U.S., PayPal fees range from 2.7% to 2.9%, depending on whether the transaction was in-store or online, and then there’s a 30-cent fee per transaction. International transactions will be assessed an additional 1.5% of the amount. If you use a QR code with your PayPal transactions, you can lower the cost somewhat.

ACH vs Apple Pay Fees

Apple doesn’t assess a fee from merchants to accept and use Apple Pay for payments, but that doesn’t mean you’re getting a freebie. You will have to pay your processing partner at the standard rates for credit- and debit-card transactions.

The Takeaway

Businesses and individuals alike rely on ACH transfers to process transactions. And there’s a reason for it: These digital payments are quick, convenient, and accessible. ACH transfers also have the benefit of being a lower-cost option compared to methods like wiring funds and some other common techniques. Finding the right way to pay bills and collect payments is a personal decision, with many variables. Money matters, of course, but there may be other benefits to consider as well.

When it comes to your personal banking, finding the right partner is equally important. That’s why we’d like you to consider SoFi, because we think we help our members bank smarter. When you sign up for our high yield bank account with direct deposit, you won’t pay any account fees, so you’ll keep more of your money. And you’ll earn more interest, thanks to our competitive APY.

Ready to bank better? See the difference SoFi can make.

FAQ

Do ACH payments have fees?

Yes, ACH payments come with fees. However, these are generally the lowest fees versus any other payment processing option.

Why do banks charge ACH fees?

Banks charge ACH fees to cover the processing service and potential costs, like penalty fees.

How do you avoid ACH fees?

Since ACH fees vary, the best way to avoid them is through research. Reading terms ahead of time can help you find whether a provider is the right option for you. In general, accessing ACH through a third-party can drastically increase the number of fees.

Do US banks charge for ACH transfers?

As a customer, ACH transfers are typically free, and your bank doesn’t collect a fee. As a business conducting ACH transactions, however, you might be charged a fee for an occasional ACH transaction. It’s more likely, however, that if you are completing these transactions regularly that you will work with and pay a third-party payment processing company rather than your bank.

What is ACH on my bank statement?

ACH stands for Automated Clearing House. It is a network used to transfer funds between bank accounts around the United States. When you see it on your bank statement, you know that payment was made electronically through the ACH network.


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

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

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

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

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

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


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

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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Guide to Student Loan Interest Rates for the 2022 School Year

Once a year, usually in June, the government announces interest rates for federal student loans that will be first disbursed after July 1. Whether you’re a freshman or, say, a junior, these rates apply to the loans you get for the academic year that starts in the fall.

Federal student loan interest rates are determined differently than private student loan interest rates. Here’s what you should know about federal and private student loan interest rates in 2022 and 2023.

Federal Student Loan Interest Rates for 2022

As just noted, interest rates on federal student loans for the upcoming academic year are set by the government. By federal law, they’re based on the 10-year Treasury note auction in May. The rates set for the 2022 to 2023 school year are for loans first disbursed from July 1, 2022 to June 30, 2023.

For the 2023-2024 school year, the interest rate on Direct Subsidized or Unsubsidized loans for undergraduates is 5.50%, the rate on Direct Unsubsidized loans for graduate and professional students is 7.05%, and the rate on Direct PLUS loans for graduate students, professional students, and parents is 8.05%. The interest rates on federal student loans are fixed and are set annually by Congress.

How Federal Student Loan Interest Rates Work

Interest rates on federal student loans are fixed for the life of the loan. That means that if you borrowed a Direct Subsidized Loan for the 2020 – 2021 school year, and your interest rate was 2.75%, that interest rate is locked in at 2.75% for the life of that loan.

But, if you borrowed another Direct Subsidized Loan to pay for the 2021 – 2022 school year, your new loan will be disbursed with the 3.73% interest rate offered during that school year.

Since 2006, interest rates on federal student loans have fluctuated from anywhere between 2.75 to 8.50%, depending on the type of loan.

Difference Between Federal and Private Student Loan Interest Rates

Unlike federal student loans, interest rates for private student loans are set based on economic factors and underwriting unique to each lender that issues them. Lenders typically take into account a borrower’s credit history, earning potential, and other personal financial factors.

If you borrowed a private student loan, you may have applied with a cosigner to secure a more competitive interest rate. That’s likely because most college students don’t have much credit history or employment history, so interest rates on private student loans can be higher than those on federal student loans without a well-qualified cosigner.

While federal student loans have a fixed-interest rate, private student loans can have either a fixed or variable interest rate. Borrowing a variable rate loan means that the interest rate can change periodically.

How Private Student Loan Interest Rates Work

The frequency of changes in the interest rate will depend on the terms of the loan and on market factors; typically, private lenders adjust the interest on variable-rate loans monthly, quarterly, or annually. Interest rates on private student loans are typically tied to the London Interbank Offered Rate (LIBOR) or the 10-year Treasury yield.

So as the LIBOR changes, for example, interest rates on variable-rate student loans can change as well. Typically, lenders will add a margin to the LIBOR, which is determined based on credit score (and, the credit score of your co-signer if applicable).

Generally, the LIBOR tracks the federal funds rate closely. In June 2020, the Federal Reserve announced that it plans to keep the federal funds rate close to zero, likely through 2022.

This means that, so long as the federal funds rate remains low, the interest rates on private student loans are not likely to increase during that time period. However, it’s important to pay attention to interest rates, especially for borrowers with private student loans with a variable-interest rate, since these changes could cause fluctuations to the interest rate of the loan.

And given that LIBOR is scheduled to be discontinued around the end of 2021 , rates could change in other ways as new indices are chosen by lenders.

Lowering the Interest Rate on a Private Variable-Rate Loan

If you have a private variable-rate loan and are worried about interest-rate volatility, there are options available to protect against an interest-rate hike. One option is switching to a fixed-rate loan via student loan refinancing.

When you refinance your student loans, you take out a new loan (typically with a new lender).

The new loan effectively pays off your existing loans, and gives you a new loan with new terms, including a new interest rate. Private lenders, like SoFi, review personal financial factors like your credit and employment history, among other factors, to determine a new interest rate.

If you qualify to refinance, you’re then able to choose between a fixed or variable rate loan, so if you’re worried about rising interest rates in the future, you may have a chance to qualify to lock in a new (hopefully lower) fixed interest rate.

Monthly Payments and Private Loans

You should also have the opportunity to set a new repayment plan, either extending or shortening the term of the loan. If you extend your student loan repayment term, you’ll likely have lower monthly payments, but will pay more in interest over the life of the loan.

Shortening your repayment plan typically has the opposite effect. You may owe more each month, but will most likely spend less on interest over the life of the loan.

To get a general idea of how much refinancing your student loans could impact your repayment, take a look at SoFi’s student loan refinance calculator, where you can compare your current loan to current SoFi refinance student loan rates.

Refinancing Federal Student Loans

Federal student loans can be refinanced, too. Typically, a student wouldn’t do this while still in school, since the government is paying the interest on certain federal loans during this time. Also, federal student loan interest rates are generally lower than rates for private loans disbursed in the same time period.

It should be noted, however, that refinancing a federal student loan with a private lender means you’ll no longer be eligible for federal programs and protections like income-driven repayment, forbearance, or Public Service Loan Forgiveness (PSLF).

The Takeaway

Interest rates for federal student loans reset every year in June for the upcoming school year. For the 2022 school year, rates are up roughly 1% compared to the previous year, which saw the lowest rates in years.

If you refinance your student loans with SoFi, there are no origination fees or prepayment penalties. The application process can be completed online, and you can find out if you prequalify for a loan, and at what interest rate, in just a few minutes.

Ready to take control of your student loans in 2022 and beyond? See how refinancing with SoFi can help.




SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.


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.

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

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SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.


SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

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What Is a Certificate Program? A Student's Guide in 2022

Student’s Guide to Certificate Programs

College is not a fit for everyone. But there are options.

Certificate programs are a way to get the skills and expertise you need without a college diploma. They’re also for professionals looking to advance their skills and knowledge in their field or switch careers. They are offered online and in person–typically through higher education institutions or professional associations.

What Is a Certificate Program?

Certificate programs are courses or vocational training provided by colleges or professional associations that last less than two years. The two most common certificate types are undergraduate and graduate.

Undergraduate certificate programs prepare you for immediate placement in trade, technical, and vocational careers. Trade schools prepare you for jobs such as welders, electricians, and cosmetologists. Vocational schools focus on in-demand jobs that can be trained in two or fewer years, such as working as a paralegal or a dental hygienist.

Technical schools teach skills for one trade and typically involve an apprenticeship. Programs include HVAC, auto repair, and some nursing certifications.

“Certifications” are the outcome of certain certificate programs to prove successful mastery of the program. Exams are officiated by state or authorized organizations and formal licenses, diplomas, and certificates are awarded on completion. Certified Public Accountant (CPA) and Project Management Professional (PMP) certifications are a couple of examples.

Graduate certificates are career training programs for bachelor’s degree holders to expand a student’s expertise without earning a degree. For instance, a marketing professional can enroll in a social media marketing course, a niche area of marketing, to broaden their skillset. Some pursue graduate certificate programs in order to advance their careers, like in promotions, for instance.

Certificate Programs vs College Degrees

Certificate programs and college degrees differ in curriculum, program length, cost, and program outcome.

Colleges require a general education curriculum besides vocational curriculum. In contrast, certificates teach only the skills for a trade or subject. No academic courses, such as humanities, are included in the training.

Certificate programs are shorter. College degrees are a minimum of two to four years for full time students. Certifications can sometimes be four weeks, but are three to four months on average for one-off courses. Training programs for certifications are usually one to two years.

A college education has a substantial price tag. The average college tuition in 2022 costs $35,331 per student per year, according to the Education Data Initiative, compared to a certificate programs that can range in price from $1,000 to $5,000 (though some may be more expensive). Certificate programs may have a few credits per program, in contrast to a bachelor’s program which may vary from 120 to 130 credits or more.

Finally, program outcomes differ. Certificates train students for a specific skill and immediate placement in careers with those skills. College programs provide an extensive and expansive education that can provide opportunities in multiple disciplines within a field. For instance, someone who earns a bachelor’s in economics can enter finance analytics, business consulting, and various disciplines in financial-related fields.

How Long Are Certificate Programs?

Certificate programs can range from a few weeks to two years. San Diego University’s paralegal program can take four to eight months to complete in-person, for example. A cosmetology program at Fullerton College in California requires 1600 hours at a student’s own pace — so the program length depends on you and the field you are planning on studying.

Types of Certificate Programs

The two most common types of certification programs are undergrad and graduate. They follow compulsory education, and outside of a degree, provide education needed for specific fields such as business, administration, and healthcare.

Undergrad

Undergrad programs build technical skills and subject mastery via career training programs or one-off courses. Enrollees usually must have a high school diploma for certain courses. They can often be completed in one academic year or less.

Some programs, such as cosmetology, award a license at the end of the program. Ensure your program is formally accredited by the state or professional organization and will prepare you for required license exams.

Graduate

Graduate courses enhance a college degree. Students test and earn a certificate to satisfy course completion without earning a degree. Some courses require prior knowledge of a topic. For example, students employed in computer engineering can earn a certificate in a new computer language.

They are offered by universities and colleges and programs are credit-based. Some programs’ credits can be transferred to other colleges.

Online Certificate Programs

Certificate programs online offer multiple advantages.

They’re convenient. A student has the world’s universities at their fingertips. The online universe is a library of extensive certificate programs, and prestigious courses are accessible to everyday learners. For example, eCornell has a large library of graduate courses. Also, MOOCs (massive open online courses) offer free and paid programs from universities, non profits, and for-profit companies. For example, Microsoft and IBM offer Excel courses on Coursera, a MOOC, for working professionals.

Online courses also offer flexibility. Asynchronous courses, those that don’t have a specific meeting time, allow students to take a course at their own pace. You can access pre-recorded content anytime and follow class discussion on comment boards. On the other hand, synchronous online programs are a little more restricted to a schedule. They work like in-person courses where students attend live online lectures and engage in online class activities.

Finally, online courses are usually inexpensive. Cutting the commute, certain campus fees, and meals, can result in cheaper overall prices than in-person learning.

Not all certificate programs offer online learning, however. Hands-on vocations such as landscaping, plumbing, or electrical engineering often require apprenticeships to demonstrate material understanding and to meet minimum requirements.

Is a Certificate Program Right for You?

Certificate programs might be a good fit for someone who wants to try a trade career. They are an affordable way to test out vocations without incurring student debt. And, college credits from some courses can be put towards a formal college degree, if you decide to pursue a bachelor’s.

If you want to learn a new skill for work, graduate certificate courses are one alternative to a masters or professional degree. For instance, some companies will pay employees to get a Project Manager Professional (PMP) certificate to better skill their employees and improve workforce productivity.

Programs are a great way to kick-start a career change. Some popular certificate programs for career changes include business analysis, law, human resources, and accounting. They are offered by professional organizations such as the American Institute of Certified Public Accountants for accounting.

Program Type

Certificate Programs

Certification Programs

College Degrees

What do you gain? Add skills with specific courses for your current job Fast-track into trade careers or career advancement Gain career opportunities not limited to trade vocations
How long do you study? Programs last a few weeks to a few months Programs last a few months and up to two years Programs for full time students last two to four years
How many credits are programs? 15-30 credits, though requirements may vary 4-30 credits, requirements may vary 60 for associates, 120-130 for bachelor’s, and 30-60 credits for graduate programs
This program is good for… Kick-starting a career change; adding skills to your existing job Starting a new career (usually in trade vocations); advancing careers into management Starting a new career or changing a career

Benefits

Certificates can propel students directly into the workforce with on-demand skills. According to a Georgetown University study, “about 94% of certificates…are awarded in career-oriented fields.”

Future success in earnings depends on the trade field you choose. For instance, the median earnings for a dental hygienist was 77,090 per year in 2020 according to the Bureau of Labor Statistics (BLS). In comparison, the median wage for cosmetologists was $27,380 in 2020 according to the BLS.

Certificates can also complement a college degree or help a professional acquire skills to advance upward within a field. A marketing professional can expand his or her skillset with an InDesign certificate — often a skill needed for content marketers. And it pays to learn. A total of 87% of Coursera students reported promotions, raises, and career changes.

Certificate programs also can save time and money. Programs are fewer credits and are shorter in length, so cost substantially less than a degree.

Drawbacks

Certificates alone can increase income value modestly — and the gains can be diminished in a rapidly evolving workplace. Some studies even show negative returns for certificate holders without a college degree, according to the non-profit New America.

One BLS report shows bachelor’s degree holders earn median weekly earnings of $1,248, while “some college, no degree” earners make $833 per week on average.

Furthermore, more vocations require a college degree. According to BLS, a bachelor’s degree is required for 169 occupations while an associate’s degree or a postsecondary nondegree award is required for only 100 occupations.

While certificate programs equip you with skills to land an entry level job after a short time, it may not pay off in the long run.

What to Look For in a Certificate Program

Evaluate programs by accreditation. Quality courses are accredited by the U.S. Department of Education or the Council for Higher Education Accreditation. They might also be verified by certifying bodies within that industry, such as HRCI for Professional Human Resources certification.

Determine flexibility. Some learners might benefit more from in-person courses — while an online course can give busy learners an opportunity to gain valuable expertise and skills. Furthermore, an asynchronous program can provide further flexibility for students who have unpredictable schedules.

Look out for for-profit institutions. For-profits are often synonymous with poor training for exorbitant costs. In short, it can be a scam. The College Scorecard is a government tool that can tell you whether your school is for-profit. On your school’s page, you will see its designation such as “Private For Profit.”

What Certificate Programs Are in Demand in 2022?

There’s no shortage of demand for certificate programs. The National Center for Education Statistics, says the number of certificates awarded increased by 22% 2018–19 compared to 2009–10.

According to the BLS’s latest Occupational Outlook Handbook — hairdressers, hair stylists, and cosmetologists; medical assistants, and audio and video technicians each have a projection of 50,000 or more new openings deemed faster than the average — of which programs will be available.

For graduate programs, Coursera’s top 10 courses include UX Design, project management, Python Programming, and English as a Second Language. MOOC edX, founded by Harvard and MIT, top 12 courses include Intro to Computer Science, Data Science, and Basic Spanish.

High Paying Certificate Programs

The highest paying programs are in IT. Earners can make six figures or more with a Certified in Risk and Information Systems Control (CRISC) certificate, for example.

How to Pay for Certificate Programs

When deciding how to pay for certificate programs, it’s important to explore all your options. Some options might include savings, student loans, or other forms of financial aid. Some universities offer financial aid assistance for certification programs. St. Johns University in New York offers aid if students fill out a FAFSA® and apply.

Employers offer tuition assistance. Companies can offer up to $5,250 towards employee’s tuition. Some companies provide even more to employees. Verizon offers up to $8,000 per employee, for example.

You can request a payment plan. eCornell offers a monthly “Pay as You Go” plan for students unable to pay in full.

And it doesn’t hurt to ask for available discounts. Military active and veteran members may be eligible for discounts.

Finally, certificate programs that cost $10,000 or more can be covered by a private student loan.

The Takeaway

Certificate programs can start, enhance, or change careers for learners. Undergraduate programs prepare students for immediate placement in a specific trade without a college degree. Both undergraduate and graduate programs enhance careers or offer training to change careers without earning a college degree.

Certificate programs are less expensive and shorter in duration than college degrees. College financial aid and employers can pay for certificate programs to gain valuable employees — but sometimes the bill can run up to $10,000 out of pocket.

SoFi can help cover the difference with a private student loan, that offers competitive interest rates for qualifying borrowers, flexible repayment plans, and no hidden fees.

Find out what rate you qualify for in just a few minutes.


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SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. SoFi Bank, N.A. and its lending products are not endorsed by or directly affiliated with any college or university unless otherwise disclosed.


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

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