InvestZ Archives

Feb

2026

A Beginner’s Guide to 401(k) Retirement Plans

By Pam O’Brien | invest, Investing, Terminology | No Comments

Saving for retirement is one of the most important steps you can take to help secure your financial future. Your employer might offer a 401(k) retirement plan — and possibly matching contributions as well. However, if you’ve never signed up for a 401(k), you might be wondering whether you can afford to take a chunk of money out of your paycheck each pay period, especially if you’re just starting out in your career.

What is a 401(k) exactly and how does it work? Read on to learn about this retirement plan, including how to open and contribute to a 401(k) account, plus how it can help you save for retirement.

What Is a 401(k)?

A 401(k) is a retirement savings plan offered by an employer. You sign up for the plan at work, and your contributions to the 401(k), which may be a percentage of your pay or a predetermined amount, are automatically deducted from your paychecks.

You decide how to invest your 401(k) money by choosing from a number of available options, such as stocks, bonds, and mutual funds.

Employers may match what individual employees contribute to a 401(k) up to a certain amount, depending on the employer and the plan.

How Does a 401(k) Work?

The purpose of a 401(k) is to help individuals save for retirement. Once you sign up for the plan, your contributions are automatically deducted from your paychecks at an amount or percentage of your salary selected by you.

There are two main types of 401(k) plans. Your employer may offer both types or just one. The main difference between them has to do with the way the plans are taxed.

Traditional 401(k)

With a traditional 401(k), contributions are taken from your pay before taxes have been deducted. This means your taxable income is lowered for the year and you’ll pay less income tax. However, you’ll pay taxes on your contributions and earnings when you withdraw money from the plan in retirement.

Roth 401(k)

With a Roth 401(k), contributions to the plan are taken after taxes are deducted from your pay. Because your contributions are made with after-tax dollars, you don’t get an upfront tax deduction. The money in your Roth 401(k) grows tax-free and you don’t owe any taxes on the withdrawals you make in retirement — as long as you’ve had the account for at least five years.

Traditional 401(k) vs Roth 401(k)

Here’s a quick comparison of a traditional 401(k) and a Roth 401(k).

	Traditional 401(k)	Roth 401(k)
Taxes on contributions	Contributions are made with pre-tax dollars, which reduces taxable income for the year.	Contributions are made with after-tax dollars. There is no upfront tax deduction.
Taxes on withdrawals	Money withdrawn in retirement is taxed as ordinary income.	Money is withdrawn tax-free in retirement as long as the account is at least five years old.
Rules for withdrawals	Withdrawals taken in retirement are taxed. Withdrawals taken before age 59 ½ may also be subject to a 10% penalty.	Withdrawals in retirement are not taxed. However, withdrawals taken before age 59 ½ or if the account is less than five years old may be subject to a penalty and taxes.

401(k) Contribution Limits

The amount an employee and an employer can contribute annually to a 401(k) is adjusted periodically for inflation. For 2025, the employee 401(k) contribution limit is $23,000. If you’re 50 or older, you can contribute an additional $7,500 as part of a catch-up contribution. Also, in 2025, those aged 60 to 63 can contribute $11,250 instead of $7,500, thanks to SECURE 2.0.

For 2026, the employee 401(k) contribnution limit is $24,500, and for those 50 and up, there is a catch-up of $8,000. And again in 2026, those aged 60 to 63 can contribute a SECURE 2.0 catch-up of $11,250 instead of $8,000.

Under a new law that went into effect on January 1, 2026 as part of SECURE 2.0, individuals aged 50 and older who earned more than $150,000 in FICA wages in 2025 are required to put their 401(k) catch-up contributions into a Roth 401(k) account. With Roths, individuals pay taxes on contributions upfront, but can make qualified withdrawals tax-free in retirement.

The overall limits on yearly contributions from both employer and employee combined are $70,000 for 2025, and $72,000 for 2026. The limit is $77,500, including catch-up contributions for those 50 and up, and $81,250 for SECURE 2.0 in 2025, and for 2026, the limit is $80,000 for those 50 and up, and $83,250 for SECURE 2.0.

How Does Employer Matching Work?

If your employer offers matching contributions, they will likely use a specific formula to determine the match. The match may be a set dollar amount or it can be based on a percentage of an employee’s contribution up to a certain portion of their total salary. For instance, some employers contribute $0.50 for every $1 an employee contributes up to 6% of their salary.

Employees typically need to contribute a certain minimum amount to their 401(k) in order to get the employer match.

401(k) Withdrawal Rules

The rules for withdrawals from traditional and Roth 401(k)s stipulate that an individual must be at least 59 ½ to make qualified withdrawals and avoid paying a penalty. In addition, a Roth 401(k) must have been open for at least five years in order to avoid a penalty.

When you take qualified withdrawals from your 401(k) in retirement, you’ll be taxed or not depending on the type of 401(k) plan you have. With a traditional 401(k), you’ll pay taxes at your ordinary income tax rate on your contributions and earnings that accrued over time.

If you have a Roth 401(k), however, the qualified withdrawals you take in retirement will not be taxed as long as the account has been open for at least five years.

When you make withdrawals, you can do so either in lump-sum payments or in installments, or possibly as an annuity, depending on your company’s plan.

401(k) Early Withdrawal Rules

Withdrawals taken before an individual reaches age 59 ½ or if their Roth IRA has been open for less than five years, are subject to a 10% penalty as well as any taxes they may owe with a traditional IRA. However, an early withdrawal may be exempt from the penalty in certain circumstances, including:

• To buy or build a first home

• To pay for certain higher education expenses

• The account holder becomes disabled

• The account holder passes away and a beneficiary inherits the assets in their account

• To pay for certain medical expenses

Some 401(k) plans also allow for hardship withdrawals, but there are rules and expenses involved with doing so.

Required Minimum Distributions (RMDs)

If you have a traditional 401(K), you’ll be required to start taking money out of your account at age 73. This is known as a required minimum distribution (RMD) and you’ll need to take RMDs annually. Otherwise, you can face fees and penalties.

The amount of your RMD is calculated based on your life expectancy.

Pros and Cons of 401(k)s

A 401(k) plan comes with benefits for employees, but there are some downsides as well. Here are some of the advantages and disadvantages of a 401(k).

Pros

• Contributions you make to a traditional 401(k) plan may reduce your taxable income, and that money will not be taxed until it’s distributed at retirement.

• Contributions you make to a Roth 401(k) may be withdrawn tax-free in retirement.

• Because you can set up automatic deductions from your paycheck, you are more likely to save that money instead of using it for immediate needs.

• Your employer may match your contributions up to a certain amount or percentage.

• The money is yours. If you change jobs or cannot continue to work, you have the ability to either roll over your 401(k) into an IRA or into your next employer’s 401(k) plan.

Cons

• Investment choices in a 401(k) may be limited. Your employer picks the investments you can choose from, and typically the selection is fairly small.

• You typically can’t make qualified withdrawals from a 401(k) before age 59 ½ without being subject to a penalty and taxes.

• You need to take RMDs from a 401(k)starting at age 73. Otherwise you may owe taxes and penalties.

The Takeaway

A 40I(k) plan is an employer-sponsored retirement savings plan that allows employees to contribute money directly from their paychecks. Plus, in many cases employers will match employee contributions up to a certain amount — meaning your retirement savings will grow faster than if you contributed on your own.

If you max out your 401(k) contributions, another option you might consider to help save for retirement is to open an IRA online. Not only is it possible to have both a 401(k) and an IRA at the same time, but having more than one retirement plan may help you save even more money for your golden years.

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.

🛈 While SoFi does not offer 401(k) plans at this time, we do offer a range of Individual Retirement Accounts (IRAs).

FAQ

Are 401(k)s Still Worth It?

It depends on your retirement goals, but a 401(k) can be worth it if it helps you save money for retirement. Contributions to the plan are automatic, which can make it easier to save. Also, your employer may contribute matching funds to your 401(k), and there may be potential tax benefits, depending on the type of 401(k) you have.

What happens to your 401(k) when you leave your job?

If you leave your job, you can roll over your 401(k) into your new employer’s 401(k) plan or another retirement account like an IRA. You can also typically leave your 401(k) with your former employer, but in that case, you can no longer contribute to it.

What happens to your 401(k) when you retire?

When you retire, you can start to withdraw money from your 401(k) without penalty as long as you are at least 59 ½. You will need to take annual required minimum distributions from the plan starting at age 73.

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.

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.

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.

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.

SOIN0124021
CN-Q425-3236452-123
Q126-3525874-049

Feb

2026

Roth 401(k) vs Traditional 401(k): Which Is Best for You?

By AJ Smith | Growing Wealth, invest, Investing, Preparing for Retirement | Comments Off

A traditional 401(k) and a Roth 401(k) are tax-advantaged retirement plans that can help you save for retirement. While both types of accounts follow similar rules — they have the same contribution limits, for example — the impact of a Roth 401(k) vs. traditional 401(k) on your tax situation, now and in the future, may be quite different.

In brief: The contributions you make to a traditional 401(k) are deducted from your gross income, and thus may help lower your tax bill. But you’ll owe taxes on the money you withdraw later for retirement.

Conversely, you contribute after-tax funds to a Roth 401(k) and can typically withdraw the money tax free in retirement — but you don’t get a tax break now.

To help choose between a Roth 401(k) vs. a traditional 401(k) — or whether it might make sense to invest in both, if your employer offers that option — it helps to know what these accounts are all about.

Key Points

• Traditional 401(k) contributions are made with pre-tax dollars, reducing taxable income for the year of contribution.

• Roth 401(k) contributions are made with after-tax dollars, offering tax-free withdrawals in retirement.

• Withdrawals from traditional 401(k)s are taxed as income, whereas Roth 401(k) withdrawals are tax-free if rules are followed.

• Early withdrawals from both accounts may incur taxes and penalties, though Roth contributions can be withdrawn tax-free.

• Starting January 2024, Roth 401(k)s are not subject to required minimum distributions, unlike traditional 401(k)s.

5 Key Differences Between Roth 401(k) vs Traditional 401(k)

Before deciding on a Roth 401(k) or traditional 401(k), it’s important to understand the differences between each account, and to consider the tax benefits of each in light of your own financial plan. The timing of the tax advantages of each type of account is also important to weigh.

1. How Each Account is Funded

• A traditional 401(k) allows individuals to make pre-tax contributions. These contributions are typically made through elective salary deferrals that come directly from an employee’s paycheck and are deducted from their gross income.

• Employees contribute to a Roth 401(k) also generally via elective salary deferrals, but they are using after-tax dollars. So the money the employee contributes to a Roth 401(k) cannot be deducted from their current income.

💡 Quick Tip: Did you know that you must choose the investments in your IRA? Once you open a new IRA account and start saving, you get to decide which mutual funds, ETFs, or other investments you want — it’s totally up to you.

2. Tax Treatment of Contributions

• The contributions to a traditional 401(k) are tax-deductible, which means they can reduce your taxable income now, and they grow tax-deferred (but you’ll owe taxes later).

• By contrast, since you’ve already paid taxes on the money you contribute to a Roth 401(k), the money you contribute isn’t deductible from your gross income, and withdrawals are generally tax free (some exceptions below).

3. Withdrawal Rules

• You can begin taking qualified withdrawals from a traditional 401(k) starting at age 59 ½, and the money you withdraw is taxed at ordinary income rates.

• To withdraw contributions + earnings tax free from a Roth 401(k) you must be 59 ½ and have held the account for at least five years (often called the 5-year rule). If you open a Roth 401(k) when you’re 57, you cannot take tax-free withdrawals at 59 ½, as you would with a traditional 401(k). You’d have to wait until five years had passed, and start tax-free withdrawals at age 62.

4. Early Withdrawal Rules

• Early withdrawals from a 401(k) before age 59 ½ are subject to tax and a 10% penalty in most cases, but there are some exceptions where early withdrawals are not penalized, including certain medical expenses; a down payment on a first home; qualified education expenses.

You may also be able to take a hardship withdrawal penalty-free, but you need to meet the criteria, and you would still owe taxes on the money you withdrew.

• Early withdrawals from a Roth 401(k) are more complicated. You can withdraw your contributions at any time, but you’ll owe tax proportional to your earnings, which are taxable when you withdraw before age 59 ½.

For example: If you have $100,000 in a Roth 401(k), including $90,000 in contributions and $10,000 in taxable gains, the gains represent a 10% of the account. Therefore, if you took a $20,000 early withdrawal, you’d owe taxes on 10% to account for the gains, or $2,000.

5. Required Minimum Distribution (RMD) Rules

With a traditional 401(k), individuals must take required minimum distributions starting at age 73, or face potential penalties. While Roth 401(k)s used to have RMDs, as of January 2024, they no longer do. That means you are not required to withdraw RMDs from a Roth 401(k) account.

For a quick side-by-side comparison, here are the key differences of a Roth 401(k) vs. traditional 401(k):

Traditional 401(k)	Roth 401(k)
Funded with pre-tax dollars.	Funded with after-tax dollars.
Contributions are deducted from gross income and may lower your tax bill.	Contributions are not deductible.
All withdrawals taxed as income.	Withdrawals of contributions + earnings are tax free after 59 ½, if you’ve had the account for at least 5 years. (However, matching contributions from an employer made with pre-tax dollars are subject to tax.)
Early withdrawals before age 59 ½ are taxed as income and are typically subject to a 10% penalty, with some exceptions.	Early withdrawals of contributions are not taxed, but earnings may be taxed and subject to a 10% penalty.
Account subject to RMD rules starting at age 73.	No longer subject to RMD rules as of January 2024.

Bear in mind that a traditional 401(k) and Roth 401(k) also share many features in common:

• The annual contribution limits are the same for a 401(k) and a Roth 401(k). For 2025, the total amount you can contribute to these employer-sponsored accounts is $23,500; if you’re 50 and older you can save an additional $7,500 for a total of $31,000. The 2026 limit is capped at $24,500; $32,500 if you’re 50 and older. Those aged 60 to 63 may contribute a total of $34,750 in 2025 and $35,750 in 2026, thanks to SECURE 2.0.

Be aware that under a new law regarding catch-up contributions that went into effect on January 1, 2026, individuals aged 50 and older whose FICA wages exceeded $150,000 in 2025 are required to put their 401(k) catch-up contributions into a Roth 401(k) account. Because of the way Roth accounts work, these individuals will pay taxes on their catch-up contributions upfront, but can make eligible withdrawals tax-free in retirement.

• For both accounts, employers may contribute matching funds up to a certain percentage of an employee’s salary.

• In 2025, total contributions from employer and employee cannot exceed $70,000 ($77,500 for those 50 and up, and $81,250 for those 60 to 63). In 2026, total contributions from employer and employee cannot exceed $72,000 ($80,000 for those 50 and up, and $83,250 for those 60 to 63).

• Employees may take out a loan from either type of account, subject to IRS restrictions and plan rules.

Because there are certain overlaps between the two accounts, as well as many points of contrast, it’s wise to consult with a professional when making a tax-related plan.

How to Choose Between a Roth and a Traditional 401(k)

In some cases it might make sense to contribute to both types of accounts (more on that below), but in other cases you may want to choose either a traditional 401(k) or a Roth 401(k) to maximize the specific advantages of one account over another. Here are some considerations.

When to Pay Taxes

Traditional 401(k) withdrawals are taxed at an individual’s ordinary income tax rate, typically in retirement. As a result these plans can be most tax efficient for those who will have a lower marginal rate after they retire than they did while they were working.

In other words, a traditional 401(k) may help you save on taxes now, if you’re in a higher tax bracket — and then pay lower taxes in retirement, when you’re ideally in a lower tax bracket.

On the other hand, an investor might look into the Roth 401(k) option if they feel that they pay lower taxes now than they will in retirement. In that case, you’d potentially pay lower taxes on your contributions now, and none on your withdrawals in retirement.

Your Age

Often, younger taxpayers may be in a lower tax bracket. If that’s the case, contributing to a Roth 401(k) may make more sense for the same reason above: because you’ll pay a lower rate on your contributions now, but then they’re completely tax free in retirement.

If you’re older, perhaps mid-career, and in a higher tax bracket, a traditional 401(k) might help lower your tax burden now (and if your tax rate is lower when you retire, even better, as you’d pay taxes on withdrawals but at a lower rate).

Where You Live

The tax rates where you live, or where you plan to live when you retire, are also a big factor to consider. Of course your location some years from now, or decades from now, can be difficult to predict (to say the least). But if you expect that you might be living in an area with lower taxes than you are now, e.g. a state with no state taxes, it might make sense to contribute to a traditional 401(k) and take the tax break now, since your withdrawals may be taxed at a lower rate.

The Benefits of Investing in Both a Roth 401(k) and Traditional 401(k)

If an employer offers both a traditional and Roth 401(k) options, employees might have the option of contributing to both, thus taking advantage of the pros of each type of account. In many respects, this could be a wise choice.

Divvying up contributions between both types of accounts allows for greater flexibility in tax planning down the road. Upon retirement, an individual can choose whether to withdraw money from their tax-free 401(k) account or the traditional, taxable 401(k) account each year, to help manage their taxable income.

It is important to note that the $23,000 contribution limit ($30,500 for those 50 and older) for 2024 is a total limit on both accounts.

So, for instance, you might choose to save $13,500 in a traditional 401(k) and $9,500 in a Roth 401(k) for the year. You are not permitted to save $23,000 in each account.

What’s the Best Split Between Roth and Traditional 401(k)?

The best split between a Roth 401(k) and a traditional 401(k) depends on your individual financial situation and what might work best for you from a tax perspective. You may want to do an even split of the $23,500 limit you can contribute in 2025 or the $24,500 you can contribute in 2026. Or, if you’re in a higher tax bracket now than you expect to be in retirement, you might decide that it makes more sense for you to put more into your traditional 401(k) to help lower your taxable income now. But if you expect to be in a higher income tax bracket in retirement, you may want to put more into your Roth 401(k).

Consider all the possibilities and implications before you decide. You may also want to consult a tax professional.

The Takeaway

Employer-sponsored Roth and traditional 401(k) plans offer investors many options when it comes to their financial goals. Because a traditional 401(k) can help lower your tax bill now, and a Roth 401(k) generally offers a tax-free income stream later — it’s important for investors to consider the tax advantages of both, the timing of those tax benefits, and whether these accounts have to be mutually exclusive or if it might benefit you to have both.

When it comes to retirement plans, investors don’t necessarily have to decide between a Roth or traditional 401(k). Some might choose one of these investment accounts, while others might find a combination of plans suits their goals. After all, it can be difficult to predict your financial circumstances with complete accuracy — especially when it comes to tax planning — so you may decide to hedge your bets and contribute to both types of accounts, if your employer offers that option.

Another step to consider is a 401(k) rollover, where you move funds from an old 401(k) into an IRA. When you do a 401(k) rollover it can help you manage your retirement funds.

Prepare for your retirement with an individual retirement account (IRA). It’s easy to get started when you open a traditional or Roth IRA with SoFi. Whether you prefer a hands-on self-directed IRA through SoFi Securities or an automated robo IRA with SoFi Wealth, you can build a portfolio to help support your long-term goals while gaining access to tax-advantaged savings strategies.

Easily manage your retirement savings with a SoFi IRA.

FAQ

Is it better to contribute to 401(k) or Roth 401(k)?

Whether it’s better to contribute to a traditional 401(k) or Roth 401(k) depends on your particular financial situation. In general, if you expect to be in a lower tax bracket in retirement, a traditional 401(k) may make more sense for you since you’ll be able to deduct your contributions when you make them, which can lower your taxable income, and then pay taxes on the money in retirement, when you’re in a lower income tax bracket.

But if you’re in a lower tax bracket now than you think you will be later, a Roth 401(k) might be the preferred option for you because you’ll generally withdraw the money tax-free in retirement.

Can I max out both 401(k) and Roth 401(k)?

No, you cannot max out both accounts. Per IRS rules, the annual 401(k) limits apply across all your 401(k) accounts combined. So for 2025, you can contribute a combined amount up to $23,500 ($31,000 if you’re 50 or older, or $34,750 if you’re 60 to 63), to your Roth 401(k) and your traditional 401(k) accounts. For 2026, you can contribute $24,500 ($32,500 if you’re 50 or older, or $35,750 if you’re 60 to 63) to both 401(k) accounts.

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

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

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.

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

Feb

2026

A credit card reader with a receipt that’s just been printed out and a total amount showing on the screen of $12.76

How to Dispute a Credit Card Charge: All You Need to Know

By Jacqueline DeMarco | Credit, Family Finances, money | Comments Off

Table of Contents

Disputing Credit Card Charges
When To Dispute a Credit Card Charge
When You Should Not Dispute a Credit Card Charge
How to Dispute a Credit Card Charge
FAQ

If you’re unhappy with a recent purchase or you believe an unauthorized charge was applied to your credit card, you can dispute credit card charges by filing a claim with your card issuer.

Whether you willingly made the purchase or someone stole your credit card information, you may still be protected under the law so that you don’t necessarily have to pay.

Read on to find out when you can dispute a credit card charge, and instructions for how to do so.

Key Points

• In a credit card dispute, a consumer can request that a card issuer remove fraudulent or incorrect purchases from their account.

• The Fair Credit Billing Act protects consumers by granting the legal right to dispute charges and request investigations into billing issues or fraudulent activity.

• Valid dispute reasons include unauthorized charges from theft, billing errors, undelivered goods or services, and unsatisfactory purchases exceeding $50 within specific geographic limits.

• Cardholders must attempt good faith resolution with merchants before disputing goods and service issues, then submit a dispute with supporting documentation.

• Consumers generally have 60 days to file billing disputes, while issuers must acknowledge disputes within 30 days and resolve issues within 90 days. Disputes related to fraud have no time limit.

Disputing Credit Card Charges

When you dispute a credit card charge, you request that the credit card issuer remove a specific purchase made with your credit card that is fraudulent or incorrect. You can typically call the issuer to make a dispute or do so on the issuer’s website or app.

A cardholder can’t make a dispute if they simply don’t like the item they purchased or service they received. However, they can dispute a credit card charge if the merchant is acting dishonestly, such as if they don’t deliver an item the consumer ordered or don’t properly reimburse a return. A cardholder also can dispute credit card charges when certain billing issues are made or if they believe there was a fraudulent charge.

The Fair Credit Billing Act (FCBA) gives consumers the right to dispute a charge and to request an investigation into the issue. Thanks to the FCBA, consumers are also entitled to a quick response from their credit card issuer and to have their credit score protected during the course of the dispute investigation, which is critical given how credit cards work.

When To Dispute a Credit Card Charge

There are a few different times when a person can dispute a credit card charge, including the examples below.

Fraudulent Charges

You can dispute a credit card charge that was the result of theft, such as if you became a victim of a credit card skimmer or due to unauthorized use.

Before you report a fraudulent charge, make sure it was not a charge made by another authorized user on the card, such as your child, or that you didn’t let someone else borrow and use your card. Also keep in mind that merchants may use another name or address for billing.

If the charge does appear to be fraudulent after review, report it immediately. (There is no time limit to reporting a charge related to fraud, but you’ll likely want to report it right away.) By law, you can’t be held liable for more than $50 in fraudulent charges, and many credit card issuers have a $0 liability policy. This would mean you wouldn’t have to worry about the charge at all, let alone any interest that may have accrued based on the APR on a credit card.

Billing Errors

Billing errors can also sometimes occur and are a good reason to dispute a charge on your credit card.

For example, if the credit card issuer sends a bill to the wrong address, which interferes with the cardholder paying their bill on time, the cardholder can dispute any credit card interest or late fees that have accrued.

A credit card bill can also have numerical errors if the charges were incorrectly totaled. Any bill with the wrong date or amount included on it can also count as a billing error, such as if you pay taxes with a credit card but the total reflected in your statement is different than what you actually paid.

Bad or Unrendered Services

Even if someone agreed to pay for a purchase, it is possible to dispute a credit card charge for goods or services that were not delivered or that were unsatisfactory. This can include if someone doesn’t receive an item they purchased through a merchant that accepts credit card payments or if they didn’t receive a refund after making a return.

Per the FCBA, to take advantage of this protection, you must first make a good faith effort to resolve the issue with the merchant. Additionally, the purchase must be for more than $50, and it must be made either within your home state or within 100 miles of your billing address.

When You Should Not Dispute a Credit Card Charge

There are instances when making a dispute isn’t the right action to take. Here’s when disputing a credit card charge may not be the right step.

If a Friend or Relative Made a Purchase

For a credit charge to be considered “unauthorized use,” the purchase must be made by someone who doesn’t have a right to use the credit card.

Unauthorized use can happen if someone steals a credit card (whether it’s the physical card or the credit card information, like the CVV number on a credit card), or if they find one that doesn’t belong to them and then use it.

On the other hand, if someone gives a friend or family member official permission to use their credit card, but they use it for a purchase the cardholder didn’t approve, this is still considered authorized use.

If this happens, the cardholder could decide to contact their credit card company and remove the other person as an authorized user on the account. In the meantime, however, the cardholder would remain responsible for any charges the individual made when they were an authorized user on the card.

You Did Not Inform the Merchant Concerning the Issue First

If you have a complaint regarding the quality of goods and services you received, you must first contact the merchant about the issue before making a dispute. Credit card companies may want to see proof that you’ve tried to work with the merchant before you turned to them, though this will vary by issuer. Make notes about your conversation with the merchant in case you need them.

Recommended: When Are Credit Card Payments Due?

How to Dispute a Credit Card Charge

The process for how to dispute a credit card charge depends on the credit card issuer as well as the reason for the dispute. Just as issuers have their own process for how to apply for a credit card, they also have their own process for filing a dispute. That being said, here is the general process for each type of credit card dispute:

• Billing error disputes: The billing error dispute process is regulated by the FCBA. To dispute a credit card charge related to a billing error, contact the credit card issuer’s billing inquiries department (and make sure to keep track of this; say, by saving a copy of the email). You should use the sample letter for disputing charges provided by the Federal Trade Commission (FTC) to do this. In your letter, detail the reason for the dispute and include any supporting documentation.

• Fraudulent charge disputes: If a dispute is related to fraudulent charges, the cardholder can contact the credit card company immediately. The company may request proof of a police report or other documentation that proves their credit card was either lost or stolen.

• Bad service or unrendered services disputes: When it comes to service issues, it’s best to start with the merchant. If the merchant won’t refund the purchase, the cardholder can request a credit card chargeback online or in the credit card issuer’s app, over the phone, or by mail. They should include any supporting documentation that backs up their claim and shows their attempts to work with the merchant directly first.

You are not required to pay for the disputed charge while the issue is still being resolved, though you’ll still want to make the credit card minimum payment to avoid late fees or other penalties.

Generally, consumers have 60 days to file a request to dispute a credit card charge. (However, as noted earlier, there is no time limit for reporting a charge related to fraud.) After filing a dispute with the credit card issuer, the issuer has 30 days to send a letter acknowledging the dispute, and they must settle the issue within 90 days of receiving the letter.

The Takeaway

If a consumer believes that a billing error occurred, their card was used fraudulently, or they received bad service or services were never delivered, they have a right to dispute the charge with their credit card issuer. Following the proper process for the type of charge being disputed may help protect them from fraud or inaccurate information on their credit report.

Looking for a new credit card? Consider credit card options that can make your money work for you. See if you're prequalified for a SoFi Credit Card.

Enjoy unlimited cash back rewards with fewer restrictions.

FAQ

How long do you have to dispute credit card charges?

In the case of a billing error or unsatisfactory charges, you must make a dispute within 60 days of receiving your statement. There are no limits on how soon you must dispute a charge related to fraud.

What happens if you dispute a charge on your credit card?

It depends on the charge being disputed. The credit card issuer must investigate the transaction and resolve the investigation surrounding the dispute within 90 days of receiving it.

Does a dispute affect credit score?

Filing a dispute doesn’t necessarily impact a credit score. However, if the dispute is regarding an inaccurate late payment or other negative event, having the issue resolved after a dispute might help build the account holder’s credit.

What happens if a credit card dispute is denied?

After an investigation, the credit card issuer can choose to approve or deny a dispute. If the filer disagrees with the result of their investigation, they can appeal the decision by writing to the creditor within 10 days of receiving the explanation for why the dispute was denied.

Can you dispute a charge after 90 days?

Generally, consumers only have 60 days to dispute a credit card charge after receiving their bill. In most cases, the only exception to this timeline is fraud, which has an unlimited window for reporting. However, if someone realizes a charge is inaccurate after 60 days, it’s worth contacting their credit card issuer to find out about their options.

Photo credit: iStock/Just_Super

SoFi Credit Cards are 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.

This article is not intended to be legal advice. Please consult an attorney for advice.

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

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

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.

SOCC-Q126-029

Feb

2026

Buying a house with no money down is a dream for this joyful couple shaking hands with their real estate agent.

How to Buy a House With No Money Down

By Alene Laney | Family Finances, Home Ownership, mortgage | Comments Off

Even in a hot real estate market, it’s possible to learn how to buy a house with no money down. Zero-down home loans aren’t available everywhere and to every borrower, but if you do qualify and can find an area with a zero-down mortgage, homeownership could be much more attainable.

Here’s exactly what you need to know about how to buy a house with no money down.

Table of Contents

Can You Buy a House With No Money Down?
How to Buy a House With No Money
FAQ

Key Points
• It’s possible to buy a home with no money down using certain mortgage programs, but eligibility depends on your situation and location.
• VA and USDA loans offer zero-down payment options — VA for eligible service members and USDA for qualifying rural properties.
• Down payment assistance programs from local or state agencies can help first-time and low- to moderate-income buyers cover upfront costs.
• A down payment gift from a family member can be used toward buying a home if properly documented.
• It’s important to compare lenders and understand loan terms and fees, since zero-down mortgages can come with higher rates, mortgage insurance, or stricter requirements.

Can You Buy a House With No Money Down?

It is possible to buy a house with no money down in certain situations. Some government-backed loans, such as VA and USDA mortgages, offer 0% down options for eligible borrowers. Buyers may also use down payment assistance programs or seller concessions, though credit, income, and eligibility requirements still apply.

Recommended: First-Time Homebuyer Programs and Loans

How to Buy a House With No Money

There are a few avenues you can take to get a mortgage loan and buy a home with no money down, including:

• Buy a home with a VA or USDA loan. These loans, from the U.S. Department of Veterans Affairs and the U.S. Department of Agriculture, do not require a down payment.

• Receive assistance for your down payment or closing costs from a state or local program or a family member.

• Receive a lender credit.

• Ask for a seller concession.

Note: SoFi does not offer USDA loans at this time. However, SoFi does offer FHA, VA, and conventional loan options.

USDA Loan

A USDA loan requires no money down and is intended for buyers in rural areas. There are two ways the U.S. Department of Agriculture loans money:

• Single-family housing direct loans

• Single-family housing guaranteed program

The direct loans are issued by the USDA and come with a 33-year term for low- and very-low-income households. (Very-low-income applicants may stretch the repayment term to 38 years.) The guaranteed program is run through approved lenders with a 30-year fixed rate for low- to moderate-income households.

VA Loan

A VA loan guaranteed by the U.S. Department of Veterans Affairs is a zero down payment mortgage with low interest rates for qualified veterans, active-duty service members, certain reservists and National Guard members, and surviving spouses. Most borrowers pay a one-time funding fee, which can be rolled into the loan. Lenders can be more flexible with credit scores, mortgage amounts, and debt-to-income ratios.

Down Payment and Closing Cost Assistance Programs

Many city and state agencies offer different mortgage types and down payment assistance to buyers, especially low- to moderate-income homebuyers, first-time homebuyers, veterans, and people buying in federally targeted areas.

The terms vary. Sometimes the assistance for a down payment is in the form of a second mortgage that is repaid over time. Other terms include deferred payments that are only due if the property is sold, loans that are forgivable if the property is occupied by an owner for a specified amount of time, and even grants.

HUD, the U.S. Department of Housing and Urban Development, steers homebuyers to city, state, and nonprofit programs that offer down payment assistance.

Down Payment Gift From a Family Member

A down payment gift from a family member can also help you buy a house with no money down. The main thing to remember about a down payment gift from a family member is that the money must be properly documented with a gift letter. Your lender will likely provide a template to make sure you have all the crucial elements included.

Lender Credits

Lender credits are what you get when you agree to pay a higher interest rate in return for some money that the lender contributes toward your closing costs. The more lender credits you receive, the higher your rate will be. With some lenders, you can cover your closing costs entirely with lender credits. This is a common practice when refinancing a loan.

Seller Concessions

One strategy real estate agents have used is to ask for a credit from the seller, to be contributed toward the buyer’s closing costs. Making an offer above asking price in tandem with the seller concessions makes this option more palatable for sellers in a competitive housing market.

Recommended: Home Loan Help Center

The Takeaway

Buying a house with no money down takes some research, but could be well worth your time. With a VA or USDA loan, down payment assistance, gift money, or lender credits, it is possible to obtain a no money down mortgage. Qualifying first-time buyers can also still catch a break with a conventional mortgage loan — some lenders will let you put just 3% down.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

SoFi Mortgages: simple, smart, and so affordable.

FAQ

Can cash gifts be used as a down payment?

Yes, but certain rules must be followed for the gift to be documented by the lender, usually in the form of a gift letter.

Are there any homebuyer grants?

Sometimes, but they’re usually reserved for first-time buyers, veterans, or people buying homes in federally targeted areas. You might start a search for assistance with your state housing finance agency or HUD and then look for city and county programs.

What are down payment assistance programs?

Down payment assistance programs help homebuyers afford down payments and sometimes closing costs as well. This is done in the form of grants and loans, and can vary by location.

What credit score do I need to buy a house with no money down?

For a zero down mortgage backed by the USDA or VA, lenders are advised to look at a borrower’s situation case by case. Approved USDA loan lenders usually require a minimum credit score of 640, though the department itself doesn’t have a credit score requirement.

Most VA loan lenders will want to see a credit score above 620, but again, the VA does not have a minimum credit score. Applicants may qualify with a score below 620 when debt, income, and the ability to shoulder future mortgage payments are given a close look.

Down payment assistance programs often require a minimum credit score of 620.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

SoFi Loan Products
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 requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
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.
Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

SOHL-Q126-082

Feb

2026

Graphic image of a credit card with a life preserver around it.

Protecting Your Credit Card From Hackers

By Walecia Konrad | Credit, Financial Independence, money | Comments Off

Table of Contents

What It Means for a Credit Card To Be Hacked
Ways Credit Cards Can Be Hacked
Protecting Your Physical Card
Protecting Your Credit Card Account Information
Steps to Take When Your Credit Card is Compromised
Credit Card Security and Fraud Protection
FAQ

Protecting yourself against credit card hackers — criminals that engage in credit card fraud and identity theft — is a vital part of using your credit card responsibly. Understanding how credit card hacking works and the many ways thieves can gain access to your personal financial information can help you protect both your physical credit card and your digital credit card account information.

Read on to learn how to protect your credit card from hackers, as well as what to do if your credit card is hacked.

Key Points

• Protecting a credit card from hacking includes blacking out the security code, leaving the signature area blank, and using RFID-blocking wallets to prevent information from being scanned or stolen.

• Keeping a card safe while shopping online involves using trusted merchants, avoiding public WiFi networks for transactions, and verifying website authenticity to prevent fraudulent data collection.

• Regular credit account monitoring combined with awareness of phishing scams helps detect unauthorized activity quickly, rather than waiting for monthly statement notifications.

• Strong password practices for a credit card account include using mixed-case letters, numbers, and symbols;changing passwords frequently; and enabling two-factor authentication.

• If fraud is detected, placing fraud alerts with the credit bureaus can prevent unauthorized access to your account information.

What It Means for a Credit Card To Be Hacked

A credit card hack occurs anytime your credit card or credit card account number falls into the wrong hands. That information is then used fraudulently to make purchases and/or to engage in identity theft.

Credit card theft can entail everything from stealing your wallet to hacking into large databases holding hundreds of thousands of credit card numbers.

Ways Credit Cards Can Be Hacked

Thieves use a variety of ways to get their hands on your credit card information. The biggest money scams in the U.S. are now done digitally through email, text messages, or fake websites. But there are still plenty of old-fashioned scammers who use snail mail, phone calls, and in-person ruses.

Here are some of the most common forms of both types of fraud:

• Lost or stolen wallet containing credit cards. An old but still common trick for credit card thieves is to steal the physical card, then use it and the information it contains to make fraudulent purchases. In addition, if other personal information is included in your stolen wallet, such as your address and even your Social Security number, thieves can use your identifying information to set up other fraudulent credit accounts in your name .

• Phishing. Another common credit card hacking method is for a thief to attempt to get ahold of your credit card information through a phone call, text message, or email in which they impersonate a legitimate institution. For instance, a phishing email that appears as if it’s from your banking institution may entice you to click a link that takes you to a page where you’re then asked to enter your account information.

• Dumpster diving. Criminals search through trash to find discarded statements, receipts, and other documents that contain your credit card number and identifying information such as your name and address. They then use that information to make fraudulent purchases or engage in identity theft.

• Data breaches. Professional hackers can break into large retail, bank, financial, healthcare, social media, and other websites and steal reams of personal information that often include credit card and other personal financial information from thousands of users. The usual aim is to resell that data on the dark web. From there, criminal buyers use the data to commit credit card fraud and identity theft. If your data is on file at a breached site, you’re at risk.

• Credit card skimmers. Thieves also can use gadgets that can extract your credit card information when you swipe it to pay for a purchase or to withdraw money from an ATM. These most commonly are found at gas stations or on outside ATMs, though they’re becoming less common with the introduction of chip technology.

• Inside jobs. Unscrupulous wait staff, store clerks, health-care billing workers, and others with access to credit card data may take a photo or otherwise copy your card information and use it to make fraudulent purchases. On a larger scale, sometimes these workers are part of a criminal ring that helps access financial data from thousands of individuals that’s then sold on the dark web.

• Public Wi-Fi networks. Your credit card also may be vulnerable to a credit card hack if you use a public internet connection. If someone is monitoring the network and you enter any sensitive information, such as your account information, a thief may be able to swipe it.

Protecting Your Physical Card

Although digital credit card theft is more common than ever, plenty of old-fashioned thieves are still out there and would like to get their hands on your physical card. So, it makes sense to stay diligent. Taking these steps can help:

• Don’t reveal your physical card. Avoid giving your physical card to anyone, and never post photos on social media with your credit card showing.

• Black out the security code on the back of your card. Instead, you can file it in your password manager or another safe place. If your card is stolen, it’s harder for thieves to use the account information for online purchases if they don’t have your security code.

• Don’t sign your card. You can limit fraudulent in-person purchases if your stolen card is unsigned. You can write “See ID” in the blank area, then show your ID to store clerks in lieu of a signature. When a thief is asked for ID, they won’t be able to provide it, potentially preventing the transaction from going through.

• Use a protective sleeve or wallet. These radio frequency identification (RFID)-blocking layers can prevent your card from being scanned and stolen by a technical device like a card reader.

• Report lost or stolen cards immediately. If your card is compromised, make sure to alert your credit card issuer immediately. They will then close your card and issue a new one immediately. You may also want to do this if you’ve been notified that you’ve been part of a data breach.

Protecting Your Credit Card Account Information

In addition to your physical card, you need to protect your credit card data as well. Big credit card data hacks can mean your personal financial details and credit card account information are vulnerable. But there are steps you can take to protect yourself:

• Only use reputable shopping sites. Often, fraudulent sites are set up as a ruse to collect credit card information. When you shop online, always buy from trusted merchants.

• Avoid using your credit card when you’re on public WiFi. It can be easy for criminals to pick up your data when you’re using public internet networks. As such, you’ll want to avoid entering any personal or sensitive information while you’re using these networks, even if you’re on your own personal device.

• Check your account frequently. Don’t just wait for your statement to arrive in your email every month. Get in the habit of regularly monitoring your credit card activity online, especially if your credit card keeps getting hacked. If you find a suspicious charge, report it immediately.

• Be wary of phishing scams. You may get an authentic-looking email, text, or phone call asking for your credit card information. This may be a completely cold call or a data thief looking to fill in information they may not have for you, such as your expiration date or CVV (card verification value) security code. Never give your information to anyone asking for it. Banks, credit card companies, retailers, and other reputable places only take your information if you contact them.

• Use smart passwords. Use strong passwords that include lowercase and capital letters, numbers, and symbols. Change your passwords frequently and remember that if it’s easy for you to remember, it’s probably easy for a thief to figure out. Password manager software can help you generate and keep track of strong passwords.

• Sign up for two-factor authentication. With two-factor authentication, a one-time code is texted or voiced to your phone when you log into certain types of accounts, including financial accounts. This helps to ensure the account holder is actually the one logging on. Other types of secure authentication, such as face ID, are used by some organizations.

Steps to Take When Your Credit Card is Compromised

If you think you were a victim of credit card fraud and/or identity theft, it’s important to act fast. The Fair Credit Billing Act (FCBA) limits your financial responsibility for credit card fraud to $50, so you won’t be on the hook for more than that in the case of bogus credit card charges that have led you to request a credit card refund. Even better, many major credit card issuers offer zero-dollar liability protection.

Under most state laws, you typically have limited liability if the thieves go on to use your personal information to commit other types of financial fraud. But again, it’s vital to report the identity theft immediately. Acting fast will also help minimize the onerous work involved in untangling identity theft.

Here’s what to do if what to do if your credit card is hacked, or you see suspicious charges on your statement or other signs of fraudulent activity:

Contact Your Credit Card Company

As soon as you spot anything, call your credit card company. Tell them you think your card and card information is vulnerable and request a new card with a new account number. Most credit card issuers will comply right away. However, you may be without a credit card for a bit while you wait for the new one to arrive.

Sign Up for Fraud Alerts

If you’ve received a letter or other notification that your personal data may have been compromised, you can place a fraud alert at one of the three credit bureaus — Equifax®, Experian®, and TransUnion® — that may be monitoring your account and that credit bureau is required to notify the others. This stops unauthorized individuals from accessing your account information for a year, at which point you can request for it to be renewed.

Freeze Your Credit

A stronger step than setting up a fraud alert is to freeze your credit. When you ask for a freeze, the three top credit reporting agencies will make sure no one can ask for your credit report without your approval. (You’ll need to contact all three of the credit bureaus to place a freeze.) The downside: A freeze can make it more cumbersome for you to legitimately apply for new credit.

File a Police Report

If you’re a victim of credit card fraud, you may need to file a police report. You might need that documentation as you move through different steps to report identity theft and other fraud as you try to recoup your losses. Your credit card issuer can help you determine if a police report is necessary.

Before filing a police report, file a report with the Federal Trade Commission on its website. Then, when you file the police report, include a copy of your FTC report for evidence of the identity theft.

Recommended: When Are Credit Card Payments Due?

Credit Card Security and Fraud Protection

There are a number of steps that credit card companies can take to increase credit card security and curb credit card hacks. For instance, some credit cards have two-factor authentication to protect access to your account.

Credit card companies can also offer the option to freeze your card immediately. You often can do so through their website or via their app if you notice suspicious charges or other activity.

And, as mentioned previously, some credit card issuers offer a zero-liability policy. As long as you report unauthorized or erroneous card transactions no later than, say, 60 days after the first statement on which the problem occurred, the card issuer won’t hold you liable for any fraudulent charges.

The Takeaway

Credit card hacks can be costly, onerous, and time-consuming. But there are steps you can take to avoid hacks by protecting both your physical card and your online credit card information.

Looking for a new credit card? Consider credit card options that can make your money work for you. See if you're prequalified for a SoFi Credit Card.

Enjoy unlimited cash back rewards with fewer restrictions.

FAQ

How can I protect my credit card from being hacked?

You can fight credit card hacking by being mindful of phishing scams, shopping online with caution, keeping your physical card and your digital card information safe, and checking your account regularly for any suspicious charges. Make sure to report any suspicious activity as soon as possible and to use credit freezes and fraud alerts when necessary.

Can a hacker steal my credit card information?

Yes. Credit card hacks include directly stealing your physical card or credit card information and making fraudulent purchases directly with your account. Thieves may also use your stolen personal information to set up a new fraudulent account in your name. Additionally, credit card hacks can happen when thieves steal financial information from databases at large retailers, financial institutions, and other businesses.

Can hackers use a credit card without a CVV?

Yes, although it can be more difficult for hackers to use a credit card without a CVV. The CVV(card verification value) number is often requested in transactions that don’t occur in-person as an additional layer of security to ensure that the person actually has the physical card. However, the CVV is not always required for all transactions or by all merchants.

Photo credit: iStock/Talaj

SOCC-Q126-038