Jul
16
2025
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Should You Use Your 401(k) as a First-Time Home Buyer?

By | Growing Wealth, Investing, Preparing for Retirement | Comments Off on Should You Use Your 401(k) as a First-Time Home Buyer?

There are two options if you want to use your 401(k) to buy a house and not incur a penalty: a 401(k) loan or a hardship withdrawal. These options come with many rules and restrictions — and given the potential risk to your retirement savings, it’s wise to consider some alternatives.

Among the requirements: If you borrow money from your 401(k) to buy a primary residence, you’d have to pay back that loan with interest. If you take what’s known as a hardship withdrawal for a down payment on your principal residence, you have to meet the strict IRS criteria for “immediate and heavy financial need” for doing so.

You won’t owe tax on a 401(k) loan, but it generally must be repaid within five years. A hardship withdrawal (if you qualify) still requires that you pay income tax on the withdrawal. In addition, every workplace plan is different and may have different rules.

Before you consider using your 401k to buy a home, which could permanently reduce your retirement savings, explore alternatives like withdrawing funds from a traditional or Roth IRA, seeking help from a Down Payment Assistance Program (DAP), or seeing if you qualify for other types of home loans.

Key Points

•   Many 401(k) plans allow employees to withdraw funds, but an early withdrawal, i.e., before age 59 ½ , comes with a 10% penalty (on top of income tax).

•   If your plan allows it, you may avoid the 10% penalty by taking a 401(k) loan or a hardship withdrawal (assuming you meet strict IRS requirements).

•   You don’t have to repay a hardship withdrawal, but you will owe income tax on the amount you withdraw.

•   Taking out a 401(k) loan may be easier than borrowing from a bank, but the loan typically must be repaid within five years, or you could owe tax and a penalty.

•   Before using your 401(k) to help buy a house, consider the serious impact it might have on your retirement savings.

Can You Use a 401(k) to Buy a House?

A 401(k) is generally a type of employer-sponsored retirement plan, which you may be able to manage through the plan sponsor’s website (similar to investing online).

If your employer plan allows it, you can use your 401(k) to help buy a house, and it won’t be seen as an early 401(k) withdrawal with a 10% penalty. Here’s what you need to know.

2 Ways to Use Your 401(k) to Buy a House

There are only two ways you can use a 401(k) to buy a house, penalty free. Note that the following rules generally apply to other employer-sponsored plans as well, like a 403(b) or 457(b). But all retirement plans have different rules, so be sure to check the terms.

•   401(k) loan. If your plan allows you to borrow from your 401(k) to buy a house, you’ll avoid the 10% early withdrawal penalty, and you won’t owe tax on the loan. But you must repay the loan to yourself, plus interest.

•   Hardship withdrawal. If you’re under 59 ½, you may be able to take out a hardship withdrawal without incurring a 10% penalty, but only if you meet specific IRS requirements for “an immediate and heavy financial need.”

There are several conditions that qualify as a hardship, one of them is for the purchase of a primary residence, but not a second home.

You’ll owe income tax on a hardship withdrawal, regardless of the circumstances.

How Much of Your 401(k) Can Be Used for a Home Purchase?

The amount you can take out of a 401(k) depends on the method you use.

•   401(k) loan. You can generally borrow up to 50% of your vested balance, up to $50,000, whichever amount is less. If 50% of your vested balance is less than $10,000, you may be able to borrow up to $10,000.

Note that after you open an IRA, the rules for taking a withdrawal from these individual retirement accounts are different. You cannot take a loan from an IRA, for example. But you may be able to take an early withdrawal for a first-time home purchase, which is discussed below.

•   Hardship withdrawal. The limits on hardship withdrawals can be determined by your specific plan, but these withdrawals are generally limited to the amount needed to cover the financial hardship in question, plus the necessary taxes.

Depending on plan rules, a hardship withdrawal may include your elective contributions (savings) as well as earnings on those deposits. But in some cases you’re not allowed to withdraw earnings.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

How a 401(k) Loan Works

It’s possible to take a loan from an existing 401(k), and in some ways this option may seem easier. Chiefly, borrowing from a 401(k) doesn’t come with the same level of credit scrutiny as taking out a conventional bank loan, and interest rates can be favorable as well.

Your employer generally sets the rules for 401(k) loans, but you typically must pay back the loan, with interest, within five years. If a person leaves their job before the loan is repaid, the balance owed could be deducted from the remainder of their 401(k) funds.

You don’t owe any income tax on a 401(k) loan. But you pay yourself interest to help offset the loss of investment growth, since the funds are no longer invested in the market. (Although having a 401(k) is different than a self-directed brokerage account, because it’s typically tax deferred, you do invest your savings in different investment options.)

You can take out a 401(k) loan for a few different reasons (e.g., qualified educational expenses, medical expenses), depending on your plan’s policies. Those using a loan to purchase a residence may have more than five years to pay back the loan.

How a 401(k) Hardship Withdrawal Works

While it’s possible to withdraw funds from your 401(k) and most other employer-sponsored plans at any time, if you do so before age 59 ½ it’s considered an early withdrawal. And though you’d owe income tax on any 401(k) withdrawal, in the case of an early withdrawal, you’d also face a 10% penalty.

There are some exceptions to the 10% penalty, one of which is for a hardship withdrawal.

In the case of an “immediate and heavy financial need,” the IRS may permit a 401(k) hardship withdrawal under specific circumstances — including for the purchase of a primary residence. Hardship withdrawals do not cover mortgage payments, but using a 401(k) for a down payment may be allowed.

Generally, the allowable amount of the hardship withdrawal is determined by the circumstances, plus applicable taxes.

The IRS has strict rules about qualifying for a hardship withdrawal. If you don’t meet them, the funds you withdraw will be subject to income tax and a 10% early withdrawal penalty. And unlike a 401(k) loan, you can’t repay the amount you withdraw, so you permanently lose that chunk of your nest egg.

Pros and Cons of Using a 401(k) to Buy a House

Here are the pros and cons of using a hardship withdrawal or a 401(k) loan, at a glance:

Pros of Using a Hardship Withdrawal
Cons of Using a Hardship Withdrawal
If you qualify, a hardship withdrawal can provide quick access to funds for a home purchase in an emergency, without a penalty. A hardship withdrawal cannot be repaid, so the money you withdraw permanently depletes your nest egg.
A hardship withdrawal isn’t a loan, so it doesn’t have to be repaid. You owe ordinary income tax on the amount of the withdrawal.
If you don’t qualify for a hardship withdrawal, and you’re under 59 ½, it’s considered an early withdrawal and would be subject to income tax and a 10% penalty.
Pros of Using a 401(k) Loan
Cons of Using a 401(k) Loan
When using a 401(k) loan, individuals repay themselves, so they don’t owe interest to a bank or other institution. Because the loan lowers your account balance, your nest egg sees less growth.
You don’t pay a penalty or tax on a 401(k) loan, as long as you repay the loan as required. You must repay the loan with interest, typically within five years, or you’ll owe tax and penalties.
You don’t have to meet any credit requirements, and interest rates on 401(k) loans may be lower than for conventional loans. If a person leaves their job before the loan is repaid, the balance owed could be deducted from the remainder of their 401(k) funds. For those under 59 ½, the amount of the offset would also be considered a distribution and the borrower would likely owe taxes and a 10% penalty.
If you miss payments or default on a 401(k) loan, it will not impact your credit score. In some cases, your plan may not permit you to continue contributing to your 401(k) during the time that you’re repaying the loan — which can dramatically impact your retirement savings over time.

What Are the Rules & Penalties for Using 401(k) Funds to Buy a House?

Here’s a side-by-side look at some key differences between taking out a 401(k) loan versus taking a hardship withdrawal from a 401(k). Bear in mind that all employer-sponsored plans have their own rules, so be sure to understand the terms.

401(k) loans
401(k) withdrawals

•   May or may not be allowed by the 401(k) plan.

•   Relatively easy to obtain, no credit score required, versus conventional loans.

•   Qualified loans are penalty free and tax free, unless the borrower defaults or leaves their job before repaying the loan.

•   You must repay the loan with interest within a specified period. The interest is also considered tax deferred until you retire.

•   If the borrower doesn’t repay the loan on time, the loan is treated as a regular distribution (a.k.a. withdrawal), and subject to taxes and an early withdrawal penalty of 10%.

•   The maximum loan amount is 50% of the vested account balance, or $50,000, whichever is less. (If the vested account balance is less than $10,000, the maximum loan amount is $10,000.)

•   May or may not be allowed by the 401(k) plan.

•   Funds are relatively easy to access, assuming you meet the IRS standards for a hardship withdrawal.

•   If you meet IRS criteria, you may avoid the 10% penalty normally incurred by an early withdrawal.

•   You will owe income tax on the amount of the withdrawal.

•   Withdrawals cannot be repaid, so your account is permanently depleted.

•   With a hardship withdrawal, you can withdraw only enough to cover the immediate expense (e.g., a down payment, not mortgage payments), plus taxes to cover the withdrawal.

What Are the Alternatives to Using a 401(k) to Buy a House?

For some homebuyers, there may be other, more attractive options for securing a down payment instead of taking money out of a 401(k) to buy a house, depending on their situation. Here are a few of the alternatives.

Withdrawing Money From a Traditional or Roth IRA

Using a traditional or a Roth IRA to help buy a first home can be an alternative to borrowing from a 401(k) that might be beneficial for some home buyers, because you may be able to avoid the 10% penalty.

If you’re at least 59 ½, you can take a withdrawal from a traditional or Roth IRA without incurring a penalty. You will owe tax on money from a traditional IRA account, but not from a Roth IRA, as long as you’ve had the account for five years.

If you’re under 59 ½, you could face a 10% early withdrawal penalty. One exception is that a first-time home buyer can borrow up to $10,000 from an IRA without incurring a penalty. But the tax treatment differs according to the type of IRA.

•   Traditional IRA. A withdrawal for a first-time home purchase may be penalty free, but you will owe tax on the amount you withdraw.

•   Roth IRA. Contributions (i.e., deposits) can be withdrawn at any time, tax free. But earnings on contributions can only be withdrawn without a penalty starting at age 59 ½ or older, as long as you’ve held the Roth account for at least five years (a.k.a. the Roth five-year rule).

After the account has been open for five years, Roth IRA account holders who are buying their first home are allowed to withdraw up to $10,000 with no taxes or penalties. The $10,000 is a lifetime limit for a first-time home purchase, for both a traditional and a Roth IRA.

IRA funds can be used to help with the purchase of a first home not only for the account holders themselves, but for their children, parents, or grandchildren.

One important requirement to note is that time is of the essence when using an IRA to purchase a first home: The funds have to be used within 120 days of the withdrawal.

Low- and No-Down-Payment Home Loans

There are certain low- and no-down-payment home loans that homebuyers may qualify for that they can use instead of using a 401(k) for a first time home purchase. This could allow them to secure the down payment for a first home without tapping into their retirement savings.

•   FHA loans are insured by the Federal Housing Administration and allow home buyers to borrow with few requirements. Home buyers with a credit score lower than 580 qualify for a government loan with 10% down, and those with credit scores higher than 580 can get a loan with as little as 3.5% down.

•   Conventional 97 loans are Fannie Mae-backed mortgages that allow a loan-to-value ratio of up to 97% of the cost of the loan. In other words, the home buyer could purchase a house for $400,000 and borrow up to $388,000, leaving only a down payment requirement of 3%, or $12,000, to purchase the house.

•   VA loans are available for U.S. veterans, active duty members, and surviving spouses, and they require no down payment or monthly mortgage insurance payment. They’re provided by private lenders and banks and guaranteed by the United States Department of Veterans Affairs.

•   USDA loans are a type of home buyer assistance program offered by the U.S. Department of Agriculture to buy or possibly build a home in designated rural areas with an up-front guarantee fee and annual fee. Borrowers who qualify for USDA loans require no down payment and receive a fixed interest rate for the lifetime of the loan. Eligibility requirements are based on income, and vary by region.

Other Types of Down Payment Assistance

For home buyers who are ineligible for no-down payment loans, there are a few more alternatives instead of using 401(k) funds:

•   Down Payment Assistance (DAP) programs offer eligible borrowers financial assistance in paying the required down payment and closing costs associated with purchasing a home. They come in the form of grants and second mortgages, are available nationwide, can be interest-free, and sometimes have lower rates than the initial mortgage loan.

•   Certain mortgage lenders provide financial assistance by offering credits to cover all or some of the closing costs and down payment.

•   Gifted money from friends or family members can be used to cover a down payment or closing costs on certain home loans. As the recipient of the gift, you won’t owe taxes on the gift; the giver may have to pay a gift tax if the amount exceeds $19,000 for 2025.

Using Gift Funds for a Down Payment

By and large there are no restrictions on using gift funds — money given to you as a gift, not a loan — for a down payment on a home. The use of gift funds as part of a home buyer’s down payment has become more common, in fact. Nearly 40% of borrowers included some gift money as part of their downpayment, according to a 2023 survey by Zillow.

Gifts are allowed when applying for a conventional mortgage, as well as for Fannie Mae and FHA loans. In some cases, you may be required to provide a gift letter that documents that the money is a gift and not a loan. Again, the recipient generally doesn’t owe federal tax on a monetary gift, but the giver may owe a gift tax, depending on the amount.

How Using a 401(k) for a Home Purchase Affects Retirement Savings

Using your 401(k) money for anything but retirement has a very real down side, which is that it reduces the amount of money in your retirement account, even if that’s temporary, as it is with a 401(k) loan. As a result, you also lose out on any potential growth from your retirement investments.

With a 401(k) loan, you repay the amount of the loan with interest (and if you don’t you’ll owe taxes and penalties). Even so, you’ve depleted your account for a period of time, and, depending on the rules of your particular plan, you could be prohibited from making any contributions while you repay the loan.

The impact of a hardship withdrawal can be even more severe, because you’re not allowed to repay the amount you withdrew. So you lose a chunk of your savings, and you forgo the growth on that amount as well. In addition, some employer-sponsored plans may prohibit you from making contributions after taking a hardship withdrawal.

Impact on Long-Term Investment Growth

In other words, while there’s no 10% tax penalty for taking out a 401(k) loan or a hardship withdrawal, you do face a potential missed opportunity in that the amount you take out of the account is no longer invested in the market.

Thus, you lose out on any potential long-term investment growth — which can significantly cut into your potential retirement savings, when you think of the money you’re not earning, perhaps for many years.

The Takeaway

Generally speaking, a 401(k) can be used to buy a principal residence, either by taking out a 401(k) loan and repaying it with interest, or by making a 401(k) withdrawal (which is subject to income tax and a 10% withdrawal fee for people under age 59 ½).

If you meet the IRS criteria for a hardship withdrawal, though, you may avoid the 10% penalty, if your plan allows this option.

However, using a 401(k) for a home purchase is usually not advisable. Both qualified loans and hardship withdrawals have some potential drawbacks, including owing taxes and a penalty in some cases, and the potential to lose out on market growth on your savings. Fortunately, there are less risky options, as noted above. Making these choices depends on your financial situation and your goals, as well as your stomach for risk — especially where your future security is concerned.

Invest in what matters most to you with SoFi Active Invest. In a self-directed account provided by SoFi Securities, you can trade stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, options, and more — all while paying $0 commission on every trade. Other fees may apply. Whether you want to trade after-hours or manage your portfolio using real-time stock insights and analyst ratings, you can invest your way in SoFi's easy-to-use mobile app.

Invest with as little as $5 with a SoFi Active Investing account.

FAQ

What are the downsides of using a 401(k) to buy a house?

The main drawback of using funds from your 401(k), or any retirement account, is the potential loss of savings and investment earnings on that savings, which could substantially reduce your retirement nest egg.

When can you withdraw from a 401(k) without penalty?

If your plan permits a 401(k) loan, or if you qualify for a hardship withdrawal from your 401(k), you won’t be on the hook for a 10% penalty. But you would have to repay the loan with interest, and you would owe tax on the money taken for a hardship withdrawal.

Can you withdraw money from a 401(k) for a second house?

While it’s technically possible to withdraw money from a 401(k) for a second home, you would owe taxes and a 10% penalty on the amount you withdrew, so it’s not advisable.

How much can you take out of an individual IRA to buy a home?

You can withdraw up to $10,000 from an IRA for the purchase of a first home, but you would owe tax on that money (although you might avoid a 10% penalty).

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest is a trade name used by SoFi Wealth LLC and SoFi Securities LLC offering investment products and services. Robo investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser. Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC.

For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

Disclaimer: The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.

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.

SOIN-Q225-095

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Jul
15
2025
businessman on phone mobile

What Is Payment for Order Flow?

By | invest, Investing | Comments Off on What Is Payment for Order Flow?

When an investor places an order with their brokerage to buy or sell an asset, there’s a certain set of steps that take place behind the scenes to fulfill it. That’s referred to as an order flow, and that involves some payments between market makers and brokerages in order to keep orders moving through the pipeline. With that in mind, payment for order flow (PFOF) involves market makers paying brokers for their clients’ order flow.

It can be beneficial for investors to know about the order flow process and payments involved, as it is a variable in how much they ultimately end up paying for trading, if anything. And it’s also been a somewhat controversial practice, despite the fact that it’s become commonplace in today’s market.[1]

Key Points

  • Payment for order flow (PFOF) involves brokerages routing customer orders to market makers for a fee, enabling commission-free trading.
  • PFOF allows brokerages to offer commission-free trading, enhanced liquidity, and potential price improvements to retail investors.
  • Market makers provide liquidity in the options market, executing trades and offering price improvements to retail investors, and PFOF involves brokers routing their trades to specific market makers.
  • PFOF has faced controversy, with critics citing a conflict of interest for brokerages, which may prioritize revenue over the best prices for customers.
  • Regulatory scrutiny has been applied to PFOF, with the DOJ investigating potential market maker profiteering at the expense of retail investors; brokers today must adhere to specific regulatory requirements.[2]

What Is Payment for Order Flow (PFOF)?

Payment for order flow (PFOF) refers to the practice of retail brokerages routing customer orders to market makers, usually for a small fee that’s less than a penny. Market makers, who are required to deliver the “best execution,” carry out the retail orders, profiting off small differences between what shares were bought and sold for. Retail brokerages, in turn, use the rebates they collect to offer customers lower trading fees.

What Are Market Makers?

Market makers — also known as electronic trading firms — are regulated firms that buy and sell shares all day, collecting profits from bid-ask spreads. The market maker can execute trades from their own inventory or in the market. Offering quotes and bidding on both sides of the market helps keep it liquid.

Market makers that execute retail orders are also called wholesalers. The money that market makers collect from PFOF is usually fractions of a cent on each share, but these are reliable profits that can turn into hundreds of millions in revenue a year. In recent years, a number of firms have exited or sold their wholesaling businesses, leaving just a handful of electronic trading firms that handle PFOF.

In addition to profits from stock spreads, the orders from brokerage firms give market makers valuable market data on retail trading flows. When it comes to using institutional or retail investors, market makers also prefer trading with the latter because larger market players like hedge funds can trade many shares at once. This can cause big shifts in prices, hitting market makers with losses.

How Does Payment for Order Flow Work?

Here’s a step-by-step guide to how payment for order flow generally works:

  1. A retail investor puts in a buy or sell order through their brokerage account.
  2. The brokerage firm routes the order to a market maker.
  3. The broker collects a small fee or rebate – the “payment” for sending the “order flow” or PFOF.
  4. The market maker is required to find the “best execution,” which could mean the best price, swiftest trade, or the trade most likely to get the order done.

The rebates allow companies offering brokerage accounts to subsidize low-cost or zero-commission trading for customers. It also frees them to outsource the task of executing millions of customer orders.

Usually the amount in rebates a brokerage receives is tied to the size of the trades. Smaller orders are less likely to have an impact on market prices, motivating market makers to pay more for them. The type of stocks traded can also affect how much they get paid for in rebates, since volatile stocks have wider spreads and market makers profit more from them.

Why Is PFOF Controversial?

While widespread and legal, payment for order flow is controversial. Critics argue it poses a conflict of interest by incentivizing brokerages to boost their revenue rather than ensure good prices for customers. The requirement of best execution by the Securities and Exchange Commission (SEC) doesn’t necessarily mean “best price” since price, speed, and liquidity are among several factors considered when it comes to execution quality.[3]

Defenders of PFOF say that retail investors benefit from the practice through enhanced liquidity, the ability to get trades done. They also point to data that shows customers enjoy better prices than they would have on public stock exchanges. But perhaps the biggest gain for retail investors is the commission-free trading that is now a mainstay in today’s equity markets.

PFOF in the Options Market

Payment for order flow is more prevalent in options trading because of the many different types of contracts. Options give purchasers the right, but not the obligation, to buy or sell an underlying asset. Every stock option has a strike price, the price at which the investor can exercise the contract, and an expiration date, which is the day on which the contract expires.

Market makers play a key role in providing liquidity for the thousands of contracts with varying strike prices and expiration dates.

The options market also tends to be more lucrative for the brokerage firm and market maker. That’s because options contracts trading is more illiquid, potentially resulting in larger spreads for the market maker.

Quick Tip: Options can be a cost-efficient way to place certain trades, because you typically purchase options contracts, not the underlying security. That said, options trading can be risky, and best done by those who are not entirely new to investing.

Criticism of Payment for Order Flow

Payment for order flow was pioneered in the 1980s by Bernie Madoff, who later pleaded guilty to running one of the largest Ponzi schemes in U.S. history.

Critics argue retail investors can get a poor deal from PFOF. Since market makers and brokerages are only required to provide “best execution” and not necessarily the “best possible price,” firms can make trades that are profitable for themselves but not necessarily in the best interest of individual investors.

As such, regulators have proposed reforms to PFOF, and in 2024, the SEC did adopt some amendments that updated required disclosures.[4]

Defenders of Payment For Order Flow

Proponents of payment for order flow argue that both sides — the retail investors and the market makers — win from the arrangement. Here are the ways retail customers can benefit from PFOF, according to its defenders:

  1. No Commissions: In recent years, the price of trading has collapsed and is now zero at some of the biggest online brokerage firms. While competition has been a big part of that shift, PFOF has helped bring about low trading transactions for mom-and-pop investors. For context, online trading commissions were $40 or so per trade in the 1990s.
  2. Liquidity: Particularly in the options market, where there can be thousands of contracts with different strike prices and expiration dates, market makers help provide trading liquidity, ensuring that retail customer orders get executed in a timely manner.
  3. Price Improvement: Brokerages can provide “price improvement,” when customers get a better price than they would on a public stock exchange.
  4. Transparency: SEC Rules 605[5] and 606[6] require brokers to disclose statistics on execution quality for customer orders and general overview of routing practices. Customers are also allowed to request information on which venues their orders were sent to. Starting in 2020, brokers also had to give figures on net payments received each month from market makers.

The Takeaway

Payment for order flow (PFOF) refers to the practice of retail brokerages routing customer orders to market makers, usually for a small fee. Payment for order flow has been controversial, but it’s become a key part of financial markets when it comes to stock and options trading today.

Industry observers have said that for retail investors weighing the trade-off between low trading costs versus good prices, it may come down to the size of their trades. For smaller trades, the benefits of saving money on commissions may surpass any gains from price improvement. For investors trading hundreds or thousands of shares at a time, getting better prices may be a bigger priority.

Invest in what matters most to you with SoFi Active Invest. In a self-directed account provided by SoFi Securities, you can trade stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, options, and more — all while paying $0 commission on every trade. Other fees may apply. Whether you want to trade after-hours or manage your portfolio using real-time stock insights and analyst ratings, you can invest your way in SoFi's easy-to-use mobile app.

Opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.¹

FAQ

What is payment for order flow (PFOF)?

Payment for order flow, or PFOF, refers to the practice of retail brokers routing their customers’ orders to specific market makers in exchange for a fee.

Why is PFOF controversial?

The crux of the criticism surrounding PFOF involves brokers putting their own financial interests ahead of their clients. Specifically, brokers may be more concerned with generating PFOF-related fees than ensuring their clients receive the best order flow treatment possible.

What are common defenses of PFOF?

Defenders of PFOF say that retail investors benefit from the practice through enhanced liquidity, the ability to get trades done, and low-cost or commission-free trading.

Article Sources
  1. Congress.gov. Payment for Order Flow: The SEC Proposes Reforms.
  2. Congress.gov. Payment for Order Flow (PFOF) and Broker-Dealer Regulation.
  3. FINRA. 5310. Best Execution and Interpositioning.
  4. SEC. SEC Adopts Amendments to Enhance Disclosure of Order Execution Information.
  5. SEC. Disclosure of Order Execution Information.
  6. SEC. 17 CFR Parts 240 and 242.

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest is a trade name used by SoFi Wealth LLC and SoFi Securities LLC offering investment products and services. Robo investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser. Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC.

For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.

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.

Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Before an investor begins trading options they should familiarize themselves with the Characteristics and Risks of Standardized Options . Tax considerations with options transactions are unique, investors should consult with their tax advisor to understand the impact to their taxes.


¹Probability of Member receiving $1,000 is a probability of 0.026%; If you don’t make a selection in 45 days, you’ll no longer qualify for the promo. Customer must fund their account with a minimum of $50.00 to qualify. Probability percentage is subject to decrease. See full terms and conditions.

SOIN-Q225-035

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Jul
15
2025
How to Buy Homeowners Insurance in 2022

How to Buy Homeowners Insurance in 2025

By | Insurance | Comments Off on How to Buy Homeowners Insurance in 2025

Buying homeowners insurance involves a few simple steps that ensure you’re purchasing a policy tailored to your needs. By investing a little time, you’ll be rewarded with coverage that protects your home and your belongings at the right price. This holds true whether you’re buying a house and insurance for the first time or shopping around for a better rate.

Insurance can be tricky, and many policies have a flurry of exceptions when it comes to what’s covered and what isn’t. Having an insurance policy with certain kinds of exceptions can wind up costing you hundreds of dollars for coverage that might fall short when it’s needed.

Fortunately, you can avoid that scenario. Here, we’ll walk you through how to buy homeowners insurance as well as offer some tips on how to find the best rate on your policy this year.

Key Points

•   Determine appropriate coverage for personal property, dwelling, liability, and additional living expenses.

•   Create a detailed inventory of belongings to estimate personal property coverage.

•   Verify home details to ensure accurate policy pricing and prevent claim issues.

•   Consider additional coverage for excluded events like floods and earthquakes.

•   Set deductible and premium payment options, and finalize policy start date.

5 Steps to Shopping for Homeowners Insurance

When shopping for homeowners insurance, it’s a good idea to compare similar policies. You want to be sure you’re reviewing what different insurers charge for policies with almost identical coverage.

You’ll also want to shop around to get the best deal you can. Policies from the same company can vary widely by geography, property type, and even between two different zip codes.

It’s also a smart move to compare some intangibles, such as a company’s reputation for customer service and claims satisfaction. They can have a big impact when it comes time to file a claim.

Now, let’s walk through the steps of how to shop for homeowners insurance.

See How Much You Could Save on Home Insurance.

You could save an average of $1,342 per year* when you switch insurance providers. See competitive rates from different insurers.

Results will vary and some may not see savings. Average savings of $1,342 per year for customers who switched multiple policies and saved with Experian from May 1,2024 through April 30, 2025. Savings based on customers’ self-reported prior premiums.

Step 1: Decide How Much Coverage You Need

When deciding how much homeowners insurance coverage you need, you’ll want to make sure that you have enough coverage to replace your most important belongings; rebuild your house in the event it’s destroyed; and cover any liability for injuries that might occur on your property. Your policy will be there in case a fire, storm, or crime causes a loss.

In industry terms, homeowners insurance coverage for the aforementioned events is typically broken into four categories:

•   Personal property coverage: Insures against losses to personal property — including furniture, clothing and electronics — in the event of a covered incident.

•   Dwelling coverage: Covers the repair or replacement of your property and any attached structures, like a garage, fence, or any sheds.

•   Liability coverage: Protects against any medical or legal expenses that you may be liable for as a result of injuries that occurred on your property.

•   Additional living expense coverage (ALE or Loss of use coverage): Pays for temporary housing and related costs in the event you’re displaced from your home due to a covered loss.

Each of the coverages listed above are subject to their own insurance limits. These are calculated based on both the insurers’ proprietary formulas and the amount coverage you choose to purchase. Here’s a closer look at each kind of coverage and how much you might want to buy.

Personal Property Coverage

Just as the name suggests, personal property coverage covers the cost of any personal property that you would need replaced in the event of a covered loss. This can include all the contents of your home, including furniture, electronics, kitchenware, and jewelry.

Generally, you’ll want enough personal property coverage to cover the cost of replacing all of your important belongings. To help you calculate how much this might cost, create a written inventory of all your major belongings and their cost. This allows you to better estimate how much personal property coverage you need and gives your insurer a reference point for how much insurance you might need. You might even consider doing a video inventory to keep track of your property.

Bear in mind that not all items are covered under your home insurance policy. For example, any vehicles damaged while housed in your garage should be covered under your auto insurance. Additionally, rare and high-value items, like art, fine jewelry, and antiques, may be subject to value caps under your policy and may require separate/supplemental insurance policies for full coverage.

Recommended: Should I Sell My House Now or Wait?

Dwelling Coverage

Dwelling coverage covers the cost to repair or rebuild the building on your property, in addition to any attached structures, like garages, balconies, or fences. When you think about the dollar amount here, you probably want to be prepared for the worst-case scenario of totally rebuilding your home. Though rare, this kind of catastrophic incident can happen.

Liability Coverage

Liability coverage helps shield you from lawsuits in the event you’re found liable for any accidents that occur on your property. These can range from slips and falls to any damage caused by falling trees from your property.

Generally, the more assets you have, the more liability insurance you’ll want to purchase. However, liability coverage will only pay out to a set dollar limit as listed on your policy, with you responsible for any balance. If you’re looking for added liability coverage, you may want to look into a personal umbrella policy.

Additional Living Expense Coverage

Additional living expense coverage, or loss of use coverage, pays for reasonable housing and living costs if you’re displaced for an extended period due to a covered event. Imagine that a storm sent a tree branch crashing through your roof and your bedrooms became uninhabitable. That’s the kind of situation that would lead you to move out and tap what’s sometimes called ALE coverage.

Typically, your loss of use coverage will encompass a fixed percentage of your dwelling coverage. Larger families may wish to opt for more coverage if your weekly living expenses are particularly burdensome.

Learn the Difference Between ACV, RCV, and GRC Coverage

Once you have some ballpark numbers in mind for the amount of coverage you need, you also need to decide what kind of coverage you want in terms of potential payout. There are three terms to know — ACV, RCV, and GRC — and these will impact how claim amounts are determined as well as your premiums.

•   Actual Cash Value (ACV): Typically the cheapest option, ACV calculates your home and property’s value based on its current market value minus depreciation. Depreciation occurs naturally over time. Let’s say you had a 10-year-old refrigerator that had cost $1,000 when you bought it. After 10 years, its “cash value” might be, say, $100, so that is what ACV would reimburse you if it were destroyed during a covered event. This would not enable you to go out and buy a similar unit.

•   Replacement Cost Value (RCV): This policy is more expensive. In the event of loss, it insures your home for the cost it takes to rebuild it like new and replace the items in it at their full cost. Unlike actual cash value, RCV does not factor in depreciation.

•   Guaranteed Replacement Cost (GRC): The most expensive policy of the bunch, this policy insures your home and property for its replacement cost value plus a certain percentage over that amount, which can help protect against inflation.

Step 2: Verify Details About Your Home

Before an insurer can give you a quote, you’ll need to provide them with details about you and your home so they can accurately price your home insurance policy.

Keep in mind that insurance agents will take steps to verify the accuracy of this information, so be sure to answer to the best of your ability. Here are some of the most commonly requested details:

•   Property size and foundation

•   Roof type, material, and age

•   Age of structure and building materials

•   Age and type of electrical, plumbing, and heating system

•   Presence of any adjacent structures, pools, fences, etc.

•   Presence and number of pets

•   Intended use of property (rental, secondary, or primary home)

You can ask your real estate agent to forward you this information or obtain it from publicly available sources. Often, many of these details can be found in your home inspection and appraisal reports. Remember to disclose any improvements or renovations that have been made over time.

Step 3: Consider Whether You Need Added Coverage

A typical homeowners policy goes a long way towards protecting you from damage to or loss of your home and property. But it doesn’t cover everything. Acquaint yourself with these details and decide if you want additional coverage.

According to FEMA, a common myth among many Americans is that homeowners insurance covers flooding. However, in most cases, it does not.

In fact, here’s a list of common events that are often not covered under most home insurance:

•   Floods

•   Earthquakes

•   Sinkholes

•   Water and sewer backup

It’s important to review your insurance policy for any exceptions or issues not mentioned that you may want covered. You may be able to purchase additional insurance coverage for the above-mentioned issues as part of a separate policy, or what’s known as an endorsement, on your existing home insurance policy.

Also remember that personal property coverage often has a reimbursement cap on valuable items, which may limit the recoverable amount on certain rare or valuable goods. If you inherited valuable artwork or saved like crazy to afford a luxury watch, you may want to purchase additional endorsements for these.

Recommended: What Does Homeowners Insurance Cover?

Step 4: Take Advantage of Any Discounts Your Insurer Offers

Before finalizing your policy, check with the insurer about any discounts they offer and how many you might qualify for.

These can take them form of bundling discounts, which reward you for purchasing other policies (e.g. auto and life) through the same insurer; retention discounts which reward you for staying with a single insurer for an extended period of time; and even safety discounts, which reduce your premiums based on various improvements that you make to your home (e.g. adding a security system).

Each insurer has its own batch of discounts that you may be eligible for. Make sure to check with each potential policy provider to confirm that you’re getting the best deal possible.

Recommended: How Much Is Homeowners Insurance?

Step 5: Finalize Your Policy and Figure Out Your Payments

Now that you’ve selected the coverage you want, at the price you want, it’s time to put the finishing touches on your homeowners insurance policy.

First, you’ll want to set your insurance policy deductible, which is the amount you agree to be personally responsible for before the insurance company pays out on any claims. This is similar to a copay on a health insurance plan and is charged on a per-claim basis.

Generally, higher deductibles lead to lower insurance premiums, because they transfer some of the financial burden of paying for claims from the insurer to you.

While you will end up paying more out of pocket when you need to file a claim, this can be a smart financial decision for newer homes and low-risk areas. Of course, this option will only make sense for you though if you are confident you can cover that deductible in an emergency.

Second, you’ll need to decide how you wish to pay your insurance premiums. Policies are typically written on an annual basis and can be paid on a monthly or quarterly basis, or even in one lump sum. Some insurers offer added discounts if you decide to pay the entire amount upfront.

Finally, you’ll need to set the date on which your policy takes effect. Generally, this should be the same day you take possession of the property if you’re buying a new home. If you’re switching insurance providers, it should coincide with the end date of the previous policy, without any lapse in coverage.

The Takeaway

Buying the right homeowners insurance ensures that your home is protected if disaster ever strikes. That said, shopping for a policy can feel overwhelming at first since there are a lot of new terms to be learned, figures to calculate, and decisions to be made.

As you gather the information and quotes you need to make your choice, you’ll be rewarded with a policy that suits your needs, is priced just right, and can give you peace of mind.

Recommended: Homeowners Insurance Resources: A Comprehensive Guide to Homeowners Insurance

If you’re a new homebuyer, SoFi Protect can help you look into your insurance options. SoFi and Lemonade offer homeowners insurance that requires no brokers and no paperwork. Secure the coverage that works best for you and your home.

Find affordable homeowners insurance options with SoFi Protect.

Photo credit: iStock/JLco – Julia Amaral

Auto Insurance: Must have a valid driver’s license. Not available in all states.
Home and Renters Insurance: Insurance not available in all states.
Experian is a registered trademark of Experian.
SoFi Insurance Agency, LLC. (“”SoFi””) is compensated by Experian for each customer who purchases a policy through the SoFi-Experian partnership.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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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2025
Different Types of Banking Accounts, Explained

Understanding the Different Types of Bank Accounts

By | Budgeting & Goals, money | Comments Off on Understanding the Different Types of Bank Accounts

Bank accounts are essential tools for managing your money and achieving financial goals. Whether you’re looking to streamline everyday transactions, save for future expenses, or build wealth over time, there’s a type of bank account designed for each purpose.

In fact, most Americans rely on these financial tools regularly. According to SoFi’s April 2024 Banking Survey of 500 U.S. adults, 88% of respondents reported having a checking account, while 71% said they had a savings account. These numbers reflect how foundational these accounts are to everyday life.

Understanding the differences among account types can help you choose the right combination for your needs. Below, we explore seven common types of bank accounts, their features and benefits, and how they can fit into your financial plan.

Key Points

•   Checking accounts provide quick access to funds for everyday spending and transactions.

•   Savings accounts allow you to store money for emergencies and short-term goals while earning interest.

•   Certificates of deposit offer fixed interest rates and guaranteed returns but lock up funds for a set period of time.

•   Money market accounts combine higher interest rates with checking account features.

•   Brokerage accounts allow for diverse investments with potential for growth but also come with market risk.

7 Types of Bank Accounts Explained

Choosing the right mix of bank accounts can make it easier to manage your money and bring you closer to your goals. Here’s a rundown of the different types of bank accounts, how they differ, and how each can support your financial journey.

1. Checking Account

A checking account is often the hub of your financial life, where your income flows in and your day-to-day spending flows out.

Key features:

•   Opening a checking account is typically quick and easy, and these accounts are widely available through traditional banks, credit unions, and online banks.

•   Checking accounts typically come with a debit card and checks for convenient spending.

•   Checking accounts are typically insured by the Federal Deposit Insurance Corporate (FDIC) or National Credit Union Administration (NCUA) for up to $250,000 per account holder, per ownership category (such as single accounts, joint accounts, or trust accounts), per insured institution.

•   Some checking accounts charge monthly fees, but offer ways to waive them, such as maintaining a certain minimum balance or setting up direct deposit.

Because checking accounts usually pay little or no interest, they geneally work best for short-term storage and daily use, rather than long-term saving.

2. Savings Account

Savings accounts are designed to help you set aside money for future use while earning interest.

Key features:

•   Savings accounts generally earn more interest than checking accounts, especially high-yield savings accounts found at online banks. In SoFi’s survey, 23% of respondents said they have a high-yield savings account.

•   Savings accounts are typically FDIC- or NCUA-insured.

•   Savings accounts are ideal for short-term money goals or emergency funds, rather than day-to-day spending.

How People Use Their Savings Accounts

Purpose

% of Respondents

Emergency savings77%
Specific goals (e.g., vacation)52%
To earn interest48%

Source: SoFi’s April 2024 Banking Survey

•   Savings accounts usually don’t come with checks or debit cards, making the funds less accessible than money stored in a checking account.

•   While the federal regulation that limited withdrawals from savings accounts to six per month was suspended in 2020, some banks still have savings account withdrawal limits, and will assess fees if customers exceed those limits.

•   Some savings accounts require a minimum balance and will charge a monthly maintenance fee if your balance goes below that threshold.

A savings account can be a good place to build your emergency fund and/or save for a short-term goal, such as a vacation, a new car down payment, or a home renovation.

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*Earn up to 4.00% Annual Percentage Yield (APY) on SoFi Savings with a 0.70% APY Boost (added to the 3.30% APY as of 12/23/25) for up to 6 months. Open a new SoFi Checking and Savings account and pay the $10 SoFi Plus subscription every 30 days OR receive eligible direct deposits OR qualifying deposits of $5,000 every 31 days by 3/30/26. Rates variable, subject to change. Terms apply here. SoFi Bank, N.A. Member FDIC.

3. Checking and Savings Account

Some financial institutions, especially online banks, offer hybrid checking and savings accounts that combine characteristics of both types of accounts.

Key features:

•   Checking and savings accounts at online banks typically offer higher annual percentage yields (APYs) compared to traditional savings accounts.

•   These accounts allow convenient access to funds — you can spend through debit cards, checks, and mobile payments, similar to a traditional checking account.

•   Online banks often have fewer and/or lower fees compared to traditional banks.

•   Checking and savings accounts are typically FDIC- or NCUA-insured.

•   These accounts often come with conveniences like automatic savings tools and budgeting insights that can make it easier to track spending and saving.

Having checking and savings features combined within one account can help simplify managing your finances and make it easier to monitor your overall financial picture.

Alternatively, you can open both a checking and a savings account at the same financial institution or at two different banks, then link the accounts for easy transfers. Having multiple bank accounts can help you manage both daily transactions and short- to mid-term savings effectively. In SoFi’s survey:

•   31% of respondents said they had two checking or savings accounts

•   20% had three accounts or more

•   37% had just one checking or savings account

4. Certificate of Deposit

A certificate of deposit (CD) is a type of savings account that locks in your money for a set period of time in exchange for a fixed interest rate.

Key features:

•   Term length typically ranges from a few months to several years or longer. Longer terms tend to come with higher interest rates, although this isn’t always the case.

•   CDs typically have a minimum deposit, often starting at $500 and up.

•   Withdrawing funds early typically results in penalties, unless it’s a no-penalty CD. No-penalty CDs generally offer lower interest rates than traditional CDs.

•   CDs are usually FDIC- or NCUA-insured.

CDs can work well if you’re saving for specific, near-term goals. For example, If you’re saving for a down payment on a house or a car purchase within the next few years, a CD with a matching term can help you reach that goal with guaranteed earnings.

5. Money Market Account

A money market account (MMA) is a type of savings account that offers some of the conveniences of a checking account.

Key features:

•   MMAs typically offer better interest rates than traditional savings accounts.

•   MMAs usually come with a debit card and checks, making it easy to access your funds.

•   Like other types of savings accounts, MMAs may be subject to monthly withdrawal limits, and you may get hit with fees if you exceed those limits.

•   Many MMAs require a minimum balance to open the account and/or to earn the advertised rate.

•   Some MMAs charge monthly maintenance fees, though you may be able to waive them by maintaining a certain minimum balance or setting up direct deposits.

•   MMAs are usually FDIC- or NCUA-insured.

An MMA can be a good option for those who want interest and some level of liquidity, yet don’t require frequent access to their funds.

6. Brokerage Accounts

A brokerage account is a type of investment account that allows you to buy and sell investments like stocks, bonds, exchange-traded funds (EFTs), and mutual funds.

Key features:

•   Brokerage accounts provide access to a wide range of investment options, allowing for diversification based on your financial goals and risk tolerance.

•   Unlike retirement accounts, which often have rules about contributions and withdrawals, you can typically contribute as much as you want to a brokerage account and withdraw funds whenever you need them without penalty.

•   While there is potential for growth in a brokerage account, it also involves market risk. The value of your investments can fluctuate, and you could potentially lose some or all of your invested principal.

•   Fees vary; full-service brokerages may charge higher fees for personal support, while DIY or automated platforms offer lower-cost options.

The flexibility of accessing your money without penalties makes a brokerage account worth considering for medium- to long-term financial goals, like a down payment on a home, a car purchase, or a wedding.

7. Retirement Accounts

Retirement accounts, such as individual retirement accounts (IRAs) and 401(k)s, are designed to help individuals save for retirement in a tax-advantaged way.

Key features:

•   The primary draw of retirement accounts is their tax benefits. Depending on the specific type of account, these benefits can include tax-deferred growth or tax-free withdrawals.

•   There are limits on how much you can contribute to retirement accounts that are set annually by the IRS and can vary depending on the type of plan and your age.

•   401(k) plans are offered by many employers, sometimes with matching contributions, which is effectively free money toward retirement.

•   IRAs (traditional or ROTH) are available to eligible individuals and may offer tax deductions or tax-free growth depending on the type.

•   Contributions are typically locked in until retirement age, early withdrawals may result in penalties and taxes.

Retirement planning involves a number of factors, including:

•   Age and desired retirement date

•   Contribution limits

•   Expected return

•   Risk tolerance

Consulting with a financial advisor can help determine the best retirement account for your situation.

Finding Accounts That Work for You

Different types of bank accounts serve different roles in a well-rounded financial strategy. It’s common — and often wise — to maintain a combination of accounts to support everyday spending, short-term savings, and long-term investing.

For example you might choose to have:

•   A checking account for bills and everyday spending

•   A savings or money market account for an emergency fund

•   A brokerage account for investing and building wealth

•   A retirement account for long-term financial security

When selecting where to open these accounts, consider factors like interest rates, fees, accessibility, customer service, and mobile tools.

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The Takeaway

Understanding the main types of bank accounts can help you create a strong foundation for your financial future. Checking accounts are designed for everyday money management, while savings accounts are primarily for storing money for short-term goals while earning interest. Accounts like CDs, brokerage accounts, and retirement plans can support longer-term strategies.

By choosing the right combination of accounts and using them strategically, you can simplify money management, earn more on your deposits, and move confidently towards your financial goals.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.


Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy 3.30% APY on SoFi Checking and Savings with eligible direct deposit.

FAQ

What are the most common types of bank accounts?

The most common types of bank accounts include checking accounts, savings accounts, money market accounts, and certificates of deposit (CDs). Checking accounts are ideal for daily transactions like paying bills or making purchases. Savings accounts earn interest and are a good place to store funds for emergencies and short-term goals. Money market accounts combine features of checking and savings, often with higher interest rates. CDs lock in your money for a fixed term with a guaranteed return. Each serves different financial needs and goals.

What are the two most common types of bank accounts?

Two of the most common types of bank accounts are checking and savings. A checking account is designed for frequent use, offering easy access to your money through debit cards, checks, and online banking. A savings account, on the other hand, is intended for storing money and earning interest over time. It can help you build an emergency fund or save for specific goals while keeping your money accessible but separate from daily spending.

What is the best kind of bank account to open?

The best kind of bank account to open depends on your financial goals. If you need easy access to your money for daily expenses, a checking account can be ideal. For saving money and earning interest, a savings account can be a good choice. If you want higher interest rates and can meet balance requirements, consider a money market account. For longer-term savings with a fixed return, a certificate of deposit (CD) can be a smart option. Many people benefit from having both checking and savings accounts.

Photo credit: iStock/hemul75

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. 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.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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.

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

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