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An unrealized gain or loss is the change in market value of an asset from its purchase price, before it is sold.

At some point in your financial life, you’ll likely want to sign over a check to someone else instead of depositing it or cashing it. For example, you might want to endorse a check you received and give it to your landlord as part of your rent payment.

To sign a check over to someone else isn’t hard, but you do need to follow the right protocol. Here’s a quick guide on how to sign over checks to someone else, plus some factors to consider before accepting a check that has been endorsed to you.

5 Steps to Signing Over a Check

Generally, when someone writes you a check, you (the payee of the check) are the only person who can cash it or deposit it into your bank account.

But can you sign a check over to someone else? Yes. These five steps detail how to sign a check over to someone else (you may hear a check that’s been signed over referred to as a “third-party check,” incidentally).

1. Make Sure the Check is Still Good

Before you begin the process of signing over a check, it’s a good idea to take a look at the date it was written by the payer, especially if the check has been lying around for a while.

How long are checks good for? Generally, checks are good for six months. After that, the bank may refuse to accept it.

It’s worth noting that this is true for both business and personal checks.

If the bank does accept a check older than six months, the check could potentially bounce if the issuer no longer has the funds in their account.

2. Get the Okay From the Recipient

Before endorsing a check to a third party, whether that’s a person, a business, or a landlord, it can be wise to first reach out to that third party and confirm that they are open to accepting this form of payment.

When moving through the signing over process, it’s important that you and the recipient both agree to the transfer.

3. Verify the Bank Will Allow the Signed Over Check

Banks often have different rules and requirements when it comes to accepting third-party checks.

To help ensure the process will go smoothly, it can be a good idea to call the recipient’s bank and ask about their policies before you endorse the check.

That way, you can avoid adding extra signatures and names to the back of the check (which can create confusion and delays if you later need to cash or deposit it somewhere else).

You may also want to find out what kind of identification the recipient will need to bring to the bank or if there is anything special they should do or know before going to the bank.

4. Endorse the Check Correctly

The next step in how to sign a check over is to endorse or sign it. Checks that typically come in your checkbook have an area on the back that reads “Endorse Check Here.”

On the line just below that, you will want to sign your name in pen, writing it just as it appears on the front of the check.

Underneath your signature, you’ll then want to write, “Pay to the order of [Recipient’s name].”

It’s a good idea to clearly write out the recipient’s name as it appears on their driver’s license or other photo identification they will use at the bank when depositing the check.

Checks often say “do not write, stamp or sign below this line” beneath the endorsement area. You’ll want to try to avoid running into this area. If you do, the bank may refuse the check.

Recommended: How to Write a Check to Yourself

5. Transfer the Check

Once you’ve endorsed the check, you will have a “third party check” that you can give to the person you signed it over to so that they can cash or deposit the check into their bank account.

While it may not be essential, you may also want to consider accompanying the recipient to their bank with your own photo identification to ensure it’s a seamless transaction and in case the bank teller has any questions.

If you decide you will be going to the bank together, you may want to hold off signing over the check until you get there. That way, you can endorse the check right in front of the teller after showing your ID.

Can You Deposit Someone Else’s Check in Your Account?

Depending on your bank, you may or may not be able to deposit or cash a check that has been signed over to you.

As mentioned above, some banks might not want to accept an endorsed-to-you check because there’s a chance it could be a fraudulent check. Many check-cashing places won’t accept this form of a check either.

That’s why it’s a good idea to check with your bank before accepting a third-party check as a form of payment.

In addition, you may want to keep the following considerations in mind before accepting a signed-over check as opposed to one written directly to you.

•  They can be less convenient. Unlike a regular check, you typically can’t deposit a third-party check at an ATM or upload it via your bank’s mobile deposit app. Getting the check cashed or deposited generally requires a trip to the bank.

•  It could be a scam. There are lots of fake check scams out there (see below for more details).

•  It could potentially bounce. Even if you know and trust the person who is signing the check over to you, there may still be a bit of risk involved. That’s because you can’t be certain the original person who wrote the check has the funds to cover it. If they don’t, it will be a case of the check bouncing, and you won’t get the money.

Alternatives to Signing a Check Over to Someone

Perhaps you discover that your bank won’t take a third-party check. Or what if the person you wanted to sign a check over to says “no thanks”? Now what? Try these options instead.

Use a Money Transfer App

If you wanted to sign a check over to someone because you are trying to pay them, you could instead deposit the check and use a money transfer app, such as PayPal, Venmo, or Cash App.

Open a Bank Account

If the reason you want to sign over a check is that you don’t have a place to deposit it, you could open a free checking account. Or, if you have had issues with your banking in the past (such as too many overdrafts or an account being closed by your bank), you might look into what is known as a second chance checking account. These can have some restrictions but allow you access and may eventually be transitioned to a standard checking account.

Try a Check-Cashing Business

If you received a check but don’t have an account to deposit it into and you need to get funds to someone, you could try a check-cashing business. However, while this can be a convenient option, the fees can be quite high.

Recommended: What Is an Electronic Check (E-Check)?

Do All Banks Accept Third-Party Checks?

Not all banks accept checks signed over to someone else. That is why it can be a smart move to find out if the bank in question allows this before you try to go this route. You or the person to whom you signed over a check could wind up discovering that the check is not accepted for deposit once you arrive at the bank. Or it could be rejected if mobile or ATM deposit is used.

Also, if the bank does accept these checks and you are going the in-person route to deposit it, you may want to ask what sort of identification may be required. You may need some additional ID in order for the check to be cashed or deposited.

Watch Out for Check Cashing Scams

Third-party checks may be used as a ploy in fraudulent transactions, so be wary. You could become a victim of one if someone you don’t know offers to sign over a check to you (often for a large amount) as payment or in exchange for cash. For instance, if you were selling a used mobile phone for $400 and a person offers to sign over a check for $500 to you and tells you to keep the excess, that’s a major red flag.

That’s why it can be wise to only accept an endorsed check from a person you know and trust or verify the check before depositing.

Opening a Checking Account With SoFi

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

FAQ

How can you cash a check that is not in your name?

If you want to cash a check that is not in your name, you could have the person to whom the check is made out endorse the check to you. Then, make sure that your bank will accept it. Another option is to request a new check from the payor if it was mistakenly made out to the wrong name. Or contact your bank for guidance.

Can you mobile deposit a check signed over to you?

It is likely that you can mobile deposit a check that has been signed over to you, but it can be wise to double-check your financial institution’s policies to be sure.

Can someone deposit a check for you without your signature?

Generally, banks require a signature on the back to deposit a check. If someone is depositing a check for you, it will likely need to say “For deposit only” and have your signature to be accepted.

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 11/12/25. 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.
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/.

¹SoFi Bank is a member FDIC and does not provide more than $250,000 of FDIC insurance per depositor per legal category of account ownership, as described in the FDIC’s regulations. Any additional FDIC insurance is provided by the SoFi Insured Deposit Program. Deposits may be insured up to $3M through participation in the program. See full terms at SoFi.com/banking/fdic/sidpterms. See list of participating banks at SoFi.com/banking/fdic/participatingbanks.

^Early access to direct deposit funds is based on the timing in which we receive notice of impending payment from the Federal Reserve, which is typically up to two days before the scheduled payment date, but may vary.

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.

*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.

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

SOBNK-Q325-050

An emergency savings fund is a lump sum of cash set aside to cover any unanticipated expenses or financial emergencies that may come your way.

Besides offering peace of mind, an emergency fund can help save you from having to rely on high-interest debt options. These include credit cards or unsecured loans which can snowball. Not having rainy-day savings can also threaten to undermine your future security if you wind up tapping into retirement funds to get by.

What Is an Emergency Fund?

An emergency fund is essentially a savings fund earmarked for emergency expenses—aka unplanned expenses or financial emergencies. A major home repair, like a leaking roof, is an example of an unplanned expense that needs to be dealt with right away. Losing a job is an example of a financial emergency that can cause a lot of stress if you don’t have an emergency fund to dip into to pay for necessities and bills.

If someone doesn’t have an emergency fund and experiences financial difficulties, they may turn to high-interest debt. For instance, they may use credit cards or personal loans to cover expenses, which can lead to struggling to pay down the debt that’s left in its wake.

You may be wondering just how much to keep in an emergency fund. Financial experts often recommend having at least three to six months’ worth of basic living expenses set aside in an emergency fund. That can be a lofty goal considering that one recent study showed that about half of all Americans would struggle to come up with $400 in an emergency scenario. And in SoFi’s April 2024 Banking Survey of 500 U.S. adults, 45% of respondents said they have less than $500 set aside in an emergency fund. It’s wise not to be caught short and to prioritize saving an emergency fund.

Source: SoFi’s 2024 Banking Survey

Why Do You Need an Emergency Fund?

With all of the bills that a person typically has to pay, you may wonder, “Why should creating an emergency fund be a top priority?” Here’s why: An emergency fund can be a kind of self-funded insurance policy. Instead of paying an insurance company to back you up if something goes wrong, you’re paying yourself by setting aside these funds for the future. Building this cushion into your budget can be a vital step in better money management.

How you invest emergency funds is of course up to you, but keeping the money in a high-yield savings account typically gives you the liquidity you need while earning some interest.

Having this kind of financial safety net comes with a range of benefits. Below are some of the key perks of having an ample emergency fund.

Preventing You From Going into Debt

Yes, there may be other ways to quickly access cash to cover the cost of an emergency, such as credit cards, unsecured loans, home equity lines of credit, or pulling from other sayings, like retirement funds.

Preventing debt is one of the most important reasons to have an emergency fund.

But these options typically come with high interest fees or penalties. Though there are many reasons for having an emergency fund, preventing debt is among the most important and enticing.

Providing Peace of Mind

Here’s another reason why it is important to have an emergency fund: Living without a safety net and simply hoping to get by can cause you to stress. Thoughts about what would happen if you got hit with a large, unanticipated expense could keep you up at night.

Being prepared with an emergency fund, on the other hand, can give you a sense of confidence that you can tackle any of life’s unexpected events without experiencing financial hardship.

Providing Finances During Unemployment

Applying for unemployment benefits, if you are entitled to them, can help you afford some of your daily expenses. Unfortunately, these payments are generally not enough to cover your entire cost of living.

If you have an emergency fund, you can tap into it to cover the cost of everyday expenses — like utility bills, groceries, and insurance payments — while you’re unemployed.

Starting an emergency fund also gives you the freedom to leave a job you dislike, without having to secure a new job first. Sometimes this can be the best move if you are stuck in a toxic situation.

Making Better Financial Decisions

Having extra cash set aside in an emergency fund helps keep that money out of sight and out of mind. Having money out of your immediate reach can make you less likely to spend it on a whim, no matter how much you’d like to.

Also by having a separate emergency account, you’ll know exactly how much you have — and how much you may still need to save. This can be preferable to keeping a cash cushion in your checking account and hoping it will be enough. In fact, 77% of the SoFi survey respondents who have a savings account said they used it specifically for emergencies.

Recommended: Guide to Practicing Financial Self-Care

Emergency Fund Statistics

Curious about how much other people have in their emergency funds? Or what percentage of Americans actually have a rainy-day account? Here are some recent research numbers to know:

•   About 75% of people report having emergency savings.

•   46% have enough money to cover three months’ worth of expenses.

•   Just 19% of people in SoFi’s report said they have between $1,000 and $5,000 in emergency savings.

•   24% of people overall have no emergency savings at all.

•   37% of Americans said they couldn’t cover a $400 emergency expense, according to Empower data.

•   59% of U.S. survey respondents said they couldn’t cover a $1,000 emergency bill.

How Do You Build an Emergency Fund?

One of the basic steps of how to start a financial plan is saving for emergencies. Stashing money aside for a rainy day is a vital part of financial health.

The good news is that starting an emergency fund doesn’t have to be complicated. These tips can help you get your emergency fund off to a good start.

•   Set your savings target. The first step in building an emergency fund is deciding how much to save. The easiest way to do that is to add up your monthly expenses, then multiply that by the number of months you’d like to save (typically, at least three to six months). If the amount seems overwhelming, you can start smaller and aim to save $1,000 first, then build up your emergency fund from there.

•   Decide where to keep it. The next step is deciding where to hold your emergency savings. Opening a bank account online could be a good fit, since you can earn a competitive APY (annual percentage yield) on balances while maintaining convenient access to your money. You could also choose to open a traditional bank account and use its online banking features. Forty-eight percent of people say they use online banking daily, according to SoFi’s data.

•   Automate contributions. Once you set up an online bank account for your emergency fund, you can schedule automatic transfers from checking. This way, you can easily grow your emergency fund without having to worry about accidentally spending down that money.

One of the most frequently asked emergency fund questions is whether a savings account is really the best place to keep your savings. After all, you could put the money into a certificate of deposit (CD) account instead or invest it in the market. But there are issues with those options.

A CD is a time deposit, meaning you agree to leave your savings in the account for a set maturity period. If you need to withdraw money from a CD in an emergency before maturity, your bank may charge you an early withdrawal penalty.

So, should emergency funds be invested instead? Not so fast. Investing your emergency fund money in the stock market could help you to earn a higher rate of return compared to a savings account. But you’re also taking more risk with that money, since a downturn could reduce your investment’s value. Proceed with caution before taking this step.

How Long Does It Take to Grow an Emergency Fund?

Emergency funds don’t necessarily come together overnight. Saving after-tax dollars to equal six months’ worth of typical living expenses can take some work and time. Here’s an example to consider: If your monthly costs are $3,000, you would want to have between $9,000 and $18,000 set aside for an emergency, such as being laid-off.

•   If your goal is $9,000 and you can set aside $200 per month, that would take you 45 months, or almost four years, to accumulate the funds.

•   If you can put aside $300 a month, you’d hit your goal in 30 months, or two and a half years.

•   If you can stash $500 a month, you’d have $9,000 saved in one and a half years.

A terrific way to grow your emergency fund is to set up automatic transfers from your checking account into your rainy-day savings. That way, you won’t see the money sitting in your checking and feel as if it’s available to be spent.

Recommended: Online Emergency Fund Calculator

How Can You Grow It Faster?

You’ve just seen how gradually saving can build a cash cushion should an emergency hit. Here are some ways to save even faster:

•   Put a windfall into your emergency fund. This could be a tax refund, a bonus at work, or gift money from a relative perhaps.

•   Sell items you don’t need or use. If you have gently used clothing, electronics, jewelry, or furniture, you might sell it on a local site, such a Facebook group or Craigslist, or, if small in size, on eBay or Etsy.

•   Start a side hustle. One of the benefits of a side hustle is bringing in extra cash; it can also be a fun way to explore new directions, build your skills, and fill free time.

These techniques can help you ramp up your savings even faster and be prepared for an emergency that much sooner.

Prioritizing Your Emergency Fund When You Have Other Financial Obligations

Most of us have competing financial goals: paying down student debt or a credit card balance; accumulating enough money for a down payment on a house; saving for college for kids; and socking away money for retirement. In many cases, you’ll see variability in financial goals by age, but there are often several needs vying for your dollars at any given time.

Here’s advice on how to allocate funds:

•   Definitely start or continue saving towards your emergency fund. Even if you can only spare $25 per month right now, do it! It will get you on the road to hitting your goal and earning you compound interest. Otherwise, if an emergency were to strike, you’ll likely have to resort to credit cards or tapping any retirement savings, which probably involves a penalty.

•   Continue to pay down high-interest debt, like credit card debt. You want to get this kind of debt out of your life, given the interest rates can currently top 20%. You might explore balance transfer offers that let you pay no or very low interest for a period of time (say, 18 months) which can help you pay down your debt. Just make sure you understand the fees that are typically involved.

•   Steadily stick to your schedule for low-interest debt, which typically includes student loans and mortgages.

•   Fund your retirement savings as much as you can. As with an emergency fund, even a small amount will be worthwhile, especially with the benefit of compound interest. Make sure to contribute enough to take advantage of the company match if your employer offers that as part of a 401(k) plan; that is akin to free money.

The Takeaway

An emergency fund is an important financial goal. Once you’ve accrued at least three to six months’ worth of basic living expenses, you can feel more secure if a major unexpected expense pops up or job loss happens. It can be wise to store emergency funds in a high-yield savings account to deliver both liquidity and interest.

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

FAQ

What is the purpose of an emergency fund?

An emergency fund is a financial safety net. It’s money set aside that you can use if you are hit with a big, urgent, unexpected bill (like a medical expense or car repair) or endure a loss of income. In these situations, an emergency fund can help you avoid using your credit cards and taking on high-interest debt or hurting your credit score by paying bills late. How to invest an emergency fund is up to you, but a high-interest savings account is one good, liquid option.

Can I use an emergency fund for a non-emergency expense?

Technically, you can use an emergency fund for a non-emergency expense. After all, it’s your money. But it’s not wise to do so and defeats the whole purpose of saving this cash. If you use your emergency funds to pay for a vacation or new clothes, then if a true emergency arises, you won’t be prepared.

How difficult is it to rebuild an emergency fund?

It can be difficult to rebuild an emergency fund, just as it was to accumulate the money in the first place. But even if it takes years to achieve your goal, it is worth it. Putting away money gradually for an emergency is an important step towards being financially fit.

More from the emergency fund series:

<

How to Build an Emergency Fund

Emergency Fund Calculator

Where to Keep an Emergency Fund

When to Use Your Emergency Fund

Should You Ever Invest Your Emergency Fund?

>

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 11/12/25. 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.

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.

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

SOBNK-Q325-116

Crypto staking is a way to use crypto holdings to generate rewards while helping to validate transactions. While “staking” may be a relatively new addition to the financial lexicon, it’s important for those interested in crypto to understand what it is, how it works, and what cryptocurrencies it can be used to obtain.

Crypto staking may feel like it’s a step beyond simply learning how to buy cryptocurrencies or how a crypto exchange works, but learning about cryptocurrency staking can broaden your knowledge of the crypto ecosystem, making you more informed about your options.

What Is Crypto Staking?

Crypto staking is the process of “locking up” crypto holdings on a blockchain network in order to try and obtain rewards. There may be time limits or requirements depending on the specific blockchain network, and rewards can vary significantly, but are typically a percentage of the coins staked.

Cryptocurrencies are built with blockchain technology, in which crypto transactions are verified, and the resulting data is stored on the blockchain. Depending on the types of cryptocurrency you’re working with and its supporting technologies, these validation processes may involve staking, using a “proof-of-stake” consensus mechanism, or mining, using a “proof-of-work” consensus mechanism. Each of these processes help crypto networks achieve consensus, or confirmation that all of the transaction data adds up to what it should.

Staking vs Mining: What’s the Difference?

Staking crypto generates rewards and helps a crypto network validate information on the blockchain, using the cryptocurrency stakers locked up on the network. Crypto mining has the same goal, but the consensus needed to verify transactions is achieved in a different way.^[2]

Effectively, mining involves using computing power to solve mathematical problems and equations to open up new blocks on a blockchain, for which miners are then rewarded. Mining requires significantly more computing power and resources, but effectively, both staking and mining are trying to achieve the same ends of validating information and producing new “blocks.”

The Role of Proof of Stake (PoS)

Achieving consensus and validating information on a blockchain requires participants. That’s what staking is: individuals who actively hold onto, or lock up their crypto holdings in their crypto wallet, may participate in these networks’ consensus-taking processes. Stakers are, in essence, approving and verifying transactions on the blockchain.

For doing so, the networks reward those individuals. The specific rewards will depend on the network.

It may be helpful to think of crypto staking as similar to depositing cash in a savings account. The depositor earns interest on their money while it’s in the bank, as a reward from the bank, who uses the money for other purposes (lending, etc.). Staking coins is, from that perspective, similar to earning interest. Although cryptocurrency holdings could potentially lose value as the market ebbs and flows, too.

How Does Crypto Staking Work?

Crypto staking is typically a passive activity, unless you actively run a blockchain validator node. When someone stakes their holdings (typically by locking them in a wallet through a crypto staking platform), the network can use those holdings to forge new blocks on the blockchain.

The more crypto you’re staking, the better the odds are that your holdings will be selected to validate information and new blocks, and a lot of that depends on the specific blockchain network you’re staking on.

Essentially, during a transaction, information is “written” into the new block, and the staker’s holdings are used to validate it. Since coins already have “baked in” data from the blockchain, they can be used as validators. Then, for allowing those holdings to be used as validators, the network rewards the staker.

How to Start Crypto Staking

To start crypto staking, a person needs to decide where and what they want to stake. Here are four simple steps to get started.

1. Choosing a Proof-of-Stake Cryptocurrency

To begin staking cryptocurrency independently, a user would have to decide which coin they want to stake and buy their cryptocurrency of choice.

Ethereum (ETH), for example, requires a minimum of 32 ETH (worth about $123,000 at the time of writing) for users to begin staking.^[3]

2. Choosing a Staking Platform

You may be able to stake crypto through an exchange network, through a staking service, or directly through the cryptocurrency itself.

3. Choosing Your Wallet and Hardware

Typically, after choosing a platform, you would then download a crypto wallet in which to store your coins for staking. That may mean going directly to the specific crypto’s main website and downloading its corresponding wallet.

To stake crypto, users need a constant, uninterrupted internet connection. A standard dedicated desktop computer will likely do the job, although a Raspberry Pi might save on electrical costs.

4. Begin Staking

Once the hardware has been selected and the crypto wallet software downloaded, a user can begin staking cryptocurrency.

For those holding the appropriate crypto in an exchange-hosted crypto wallet, the exchange typically handles all the staking on the backend.

Depending on the specific crypto, wallet, or exchange network, that may be all the action a person needs to take. But it’s a good idea to double-check to see if additional steps need to be taken.

What Are the Different Ways to Stake Crypto?

There are also a few different ways to stake crypto.

Staking on an Exchange

Perhaps one of the simplest ways to stake crypto is to do so through your given exchange. Many crypto exchanges give people the option to stake, and in those cases, depending on the exchange, they may simply need to select the option to stake, lock up their holdings, and let the rewards generate.

Delegated Staking and Staking Pools

Aside from an exchange, stakers may be able to delegate their crypto holdings to pools, which will allow them to generate rewards, too. This can’t be done for every cryptocurrency, but for those that do have delegated staking and pooling built into their networks, it can be a way to stake directly to a validator or delegate.

Running Your Own Validator Node

If you’re really feeling up for it and want to get more deeply involved on a specific blockchain network, you could look at running your own validator node, also referred to as solo staking. Note, however, that doing so likely requires some significant background knowledge, and there’s the potential of making mistakes. It could also require some hardware that could cost hundreds or thousands of dollars.

The Pros and Cons of Crypto Staking

There are some pros and cons to staking crypto.

The Benefits of Staking

Here are a few of the potential benefits of staking:

•   Less energy-intensive. PoS networks use less energy than PoW platforms. Each mining machine requires a constant supply of electricity and consumes much more power than a regular computer. But it’s possible to run validator nodes on an average computer, eating up fewer resources, to power your staking activity

•   Easier to earn rewards. Crypto staking and mining rewards can be very different. Almost anyone can stake a small amount of crypto on a crypto exchange and earn some kind of yield. To become a miner, however, often requires a much bigger commitment. First, you’d need to acquire the proper computer, which can be costly; then you’d need to learn to use it, which can be time-consuming.

•   No special equipment required. Anyone can become a validator using a regular computer, assuming they have enough money and can keep the node running constantly. By contrast, mining requires specialized hardware.

The Risks of Staking

Conversely, there are some risks of staking that individuals should know about.

•   Different security measures. PoS is relatively new compared to PoW. It’s not necessarily unsafe, but it’s also not inherently more secure than PoW, either. There are different security measures in place, and a lot of that depends on the specific network as well.

•   Potential for takeover. Crypto blockchain networks may be controlled by those who hold the majority (or 51%) of tokens. While attacking a PoW network would involve acquiring large amounts of computing power, in many cases, attacking a PoS network could only require funding (again, depending on the specific network). Smaller blockchain networks are generally more vulnerable to a PoS “51% attack,” where attackers may try to manipulate transactions to their own advantage. However, PoS networks may also provide some inherent protection against these attacks. For example, attackers attempting such an attack risk losing the entire amount that’s staked.

•   Increased centralization. The creator(s) of blockchain technology intended for blockchains to be decentralized. But in some cases, PoS networks can wind up becoming more centralized because becoming a validator can be more expensive than becoming a miner. Ethereum (ETH), for example, plans to change from PoW to PoS. To become an ETH validator would require 32 ETH (or around $123,000 as of summer 2025). Many centralized exchanges have chosen to become validators of PoS coins to share staking rewards with their customers.

How to Choose the Best Coins for Staking in 2025

Just a few years ago, the entire concept of proof-of-stake consensus was still relatively new, and options for staking coins were few and far between. But a growing number of projects are utilizing PoS and some exchanges are making it easier than ever for users to passively earn crypto by staking their coins.

With that in mind, the list of potential cryptos to stake, and the ones offering the highest potential yields, is always changing. But here are some of the cryptos out there that may be worth checking out.

•   Ethereum (ETH): Ethereum (ETH) is one of the most popular cryptocurrencies on the market — although it is not exactly a cryptocurrency itself. Staking Ethereum on your own will require a minimum of 32 ETH. Rewards vary, too.

•   EOS (EOS): EOS is similar to Ethereum in that it’s used to support decentralized blockchain systems and projects. EOS tokens are native to the EOS blockchain, and like other cryptos, can be staked to earn rewards.

•   Tezos (XTZ): Like EOS and Ethereum, Tezos (XTZ) is an open-source blockchain network with its own native currency, with a symbol of XTZ. And it, too, can be staked on certain platforms and networks.

•   Polkadot (DOT): Polkadot is a newer cryptocurrency, created in August 2020. Polkadot is both a cryptocurrency and a protocol designed to support “parachains,” which allow different blockchains created by different developers to share information securely.

•   Avalanche (AVAX): Avalanche was created in 2020, and is one of the highest yield-producing cryptos out there for staking.

It’s important to research your options to understand whether staking a certain cryptocurrency would be right for you. Also be aware, as mentioned earlier, that SoFi does not currently offer staking services. While members will soon be able to buy, sell, and hold certain cryptocurrencies, such as Ethereum, other cryptocurrencies listed above may not be offered.

Factors to Consider

As with any financial transaction, it’s always important to consider the potential risks of crypto staking. As outlined, there are multiple risks to weigh, and when it comes to staking specifically, you’ll want to think about the potential staking rewards you could earn versus how your holdings could otherwise be used to generate returns.

There can be numerous things to take into account, but when it comes to staking, consider the reliability of a given crypto network, volatility, security, and opportunity costs.

Is Crypto Staking Worth It?

Anyone can earn crypto by staking cryptocurrency. But unless someone is sitting on a huge stash of proof-of-stake coins, they’re not likely to get rich from staking.

Staking rewards, as mentioned above, are in some ways similar to earning interest on funds held in a savings account. Both are a form of passive income (with the possible exception of solo staking). They don’t require a user to do anything other than holding the right assets in the right place for a given length of time. The longer a user stakes their coins, the greater potential for generating bigger rewards.

But unlike savings accounts, there are a few variables particular to proof-of-stake coins that influence how much of a staking reward users are likely to receive. Users would do well to research these factors and more when searching for the most profitable staking coins:

•   Potential reward size

•   The size of the staking pool

•   The size of holdings locked, or required to stake

Additionally, the fiat currency value of the coin being staked must also be taken into account. Assuming this value remains steady or rises, staking could potentially be profitable. But if the price of the coin falls, profits could diminish quickly.

The Takeaway

Staking is a way to use your crypto holdings or coins to earn additional rewards. It can be helpful to think of it as along the lines of funds generating interest in a savings account over time.

Essentially, coin holders allow their crypto to be used as a part of the blockchain validation process, and are rewarded by the network for the use of their assets. While there are risks to be aware of, such as the value of the cryptocurrency itself falling, staking may open up another potential avenue for generating returns.

Soon, SoFi members will be able to buy, sell, and hold cryptocurrencies, such as Bitcoin, Ethereum, and more, and manage them all seamlessly alongside their other finances. This, however, is just the first of an expanding list of crypto services SoFi aims to provide, giving members more control and more ways to manage their money.

FAQ

How much can you earn from crypto staking?

How much you could potentially earn from crypto staking depends on the specific crypto and given return rates associated with it. Rewards can range wildly.

Is staking crypto safe?

Staking crypto comes with risk, including the risk that the cryptocurrency loses value while it’s locked, but some staking set ups may be riskier than others. As always, do some research to try and get a sense of how risky staking a specific crypto could be, as there can be some significant risks associated with certain assets.

Can you lose money by staking crypto?

It is possible to lose money by staking crypto since holdings are locked up and values can change, or there may be penalties and vulnerabilities on a given platform or within a specific blockchain network.

What is the difference between crypto staking and lending?

Staking involves earning rewards (typically in the form of cryptocurrency) by locking up your crypto holdings with a blockchain network to help it validate transactions. Lending involves lending cryptocurrency holdings to a borrower in order to earn interest. Note that crypto lending can come with the risk of the borrower not returning the borrowed holdings.

Do you have to pay taxes on staking rewards?

Yes, staking rewards are considered taxable if you liquidate them and trigger a taxable event. In that case, capital gains taxes could be owed.

About the author

Samuel Becker

Sam Becker is a freelance writer and journalist based near New York City. He is a native of the Pacific Northwest, and a graduate of Washington State University, and his work has appeared in and on Fortune, CNBC, Time, and more. Read full bio.

Photo credit: iStock/FreshSplash

SOCRYP-Q325-046

In finance, the term spread refers to the difference between two related financial metrics: often a stock price or the differential between bond yields.

While its meaning can vary depending on the asset, understanding spreads is crucial for investors aiming to optimize their strategies. For example, the bid-ask spread of a stock — the gap between the highest price a buyer is willing to pay and the lowest price a seller is willing to accept — is a key indicator of liquidity and supply-demand dynamics for that stock.

For bonds, the spread captures differences in yields between bonds of varying maturity lengths or quality. Meanwhile, in more complex areas like options trading, spreads can involve differences in strike prices or expiration dates, helping traders form sophisticated strategies.

What Is Spread in Finance?

A good way to visualize spread may be to think of buying a home. As a home buyer, you may have a set price that you’re willing to pay for a property.

When you find a home and check the listing price, you see that the seller has it priced $10,000 above your budget. In terms of spread, the maximum amount you’re willing to offer for the home represents the bid price, while the seller’s listing price represents the ask.

When talking specifically about a stock spread, it is the difference between the bid and ask price. The bid price is the highest price a buyer will pay to purchase one or more shares of a specific stock. The ask price is the lowest price at which a seller will agree to sell shares of that stock.

A wide bid-ask spread may indicate less liquidity and higher costs for a particular stock; a narrow bid-ask spread may indicate more liquidity and lower transaction fees.

The spread between bond yields can highlight the difference between the yields for bonds of different qualities (e.g., Treasurys vs. corporate bonds) or maturities.

Thus, the spread can have a material impact on trading decisions.

What Does Spread Mean?

Spread can have a variety of applications and meanings in the financial world, whether for trading stocks or other types of assets.

•   Bonds. As mentioned earlier, bond spread typically refers to differences in yield. But if you’re trading futures, the spread can measure the gap between buy and sell positions for a particular commodity.

•   Options. With options trading, it can refer to differences in strike prices when placing call or put options.

•   Forex. Spread can also be used in foreign currency markets or forex (foreign exchange market) trades to represent the difference between the broker’s selling price for a currency, and the price at which they’re willing to buy the currency.

•   Lending. With lending, spread is tied to a difference in interest rates. Specifically, it means the difference between a benchmark rate, such as the prime rate, and the rate that’s actually charged to a borrower. So for example, if you’re getting a mortgage there might be a 2% spread, meaning your rate is 2% higher than the benchmark rate.

Bid-Ask Price and Stocks Spread

Whether you buy stocks online or through a traditional broker, it’s important to understand how the bid-ask price spread works and how it can affect your investment outcomes. Since spread can help investors gauge supply and demand for a particular stock, investors can use that information to make informed decisions about trades and increase the odds of getting the best possible price.

Normally, a stock’s ask price is higher than the bid price. How far apart the ask price and bid price are can give you a sense of how the market views a particular security’s worth.

If the bid price and ask price are fairly close together, that suggests that buyers and sellers are more or less in agreement on what a stock is worth. On the other hand, if there’s a wider spread between the bid and ask price, that might signal that buyers and sellers don’t necessarily agree on a stock’s value.

What Influences Stock Spreads?

There are different factors that can affect a stock’s spread, including:

•   Supply and demand. Spread can be impacted by the total number of outstanding shares of a particular stock and the amount of interest investors show in that stock.

•   Liquidity. Generally, liquidity is a measure of how easily a stock or any other security can be bought and sold or converted to cash. The more liquid an investment is, the closer the bid and ask price may be, since it can be easier to gauge an asset’s worth.

•   Trading volume. Trading volume means how many shares of a stock or security are traded on a given day. As with liquidity, the more trading volume a security has, the closer together the bid and ask price are likely to be.

•   Volatility. Measuring volatility is a way of gauging price changes and how rapidly a stock’s price moves up or down. When there are wider swings in a stock’s price, i.e., more volatility, the bid-ask price spread can also be wider.

Why Pay Attention to a Stock’s Spread?

Learning to pay attention to a stock’s spread can be helpful for investors in that they may be able to use what they glean from the spread to make better decisions related to their portfolios.

In other words, when you understand how spread works for stocks, you can use that to invest strategically and manage the potential for risk. This means different things whether you are planning to buy, sell, or hold a stock. If you’re selling stocks, that means getting the best bid price; when you’re buying, it means paying the best ask price.

Essentially, the goal is the same as with any other investing strategy: to buy low and sell high.

Difference Between a Tight Spread and a Wide Spread

A tight spread could be a signal to investors that buyers and sellers are more or less in agreement that a stock is valued correctly. A wide spread, on the other hand, may signal that there isn’t necessarily a consensus on what the stock’s value should be.

Executing Stock Trades Using Spread

If you’re using the bid-ask spread to trade stocks, there are different types of stock orders you might place. Those include:

•   Market orders. This is an order to buy or sell a security that’s executed immediately.

•   Limit orders. This is an order to buy or sell a security at a certain price or better.

•   Stop orders. A stop order, also called a stop-loss order, is an order to buy or sell a security once it hits a certain price. This is called the stop price and once that price is reached, the order is executed.

•   Buy stop orders. Buy stop orders are used to execute buy orders only when the market reaches a certain stop price.

•   Sell stop orders. A sell stop order is the opposite of a buy stop order. Sell stop orders are executed when the stop price falls below the current market price of a security.

Stop orders can help with limiting losses in your investment portfolio if you’re trading based on bid-ask price spreads. Knowing how to coordinate various types of orders together with stock spreads can help with getting the best possible price as you make trades.

Other Types of Spreads

Apart from the bid-ask spread pertaining to stocks, there are other types of spreads, too.

Options spreads, for instance, involve buying multiple options contracts with the same underlying asset, but different strike prices or expiration dates.

Under the options spread umbrella are several types of spreads as well. Box spreads are one example, and they are a type of arbitrage options trading strategy in which traders use some tricks of the trade to reduce their risk as much as possible.

There’s also the debit spread, which is an options trading strategy in which a trader buys and sells an option at the same time — it’s a high-level strategy, and one that may not be suited to investors who are mostly investing in stocks or bonds.

Note, too, that there is something called a credit spread (similar to a debit spread, but its inverse) and that there are some differences traders will need to learn about before deciding to utilize a credit spread vs. debit spread as a part of their strategy. Again, options trading requires a whole new level of market knowledge and know-how, and may not be for all investors.

The Takeaway

Spread is an important term in finance because it captures the difference between two related metrics for a given security. When it comes to equities, spread is the difference between the bid price and ask price of a given stock. Being able to assess what a spread might mean can help inform individual trading decisions.

As you learn more about stocks, including what is spread and how it works, you can use that knowledge to create a portfolio that reflects your financial needs and goals.

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

FAQ

How do you read a stock spread?

A stock spread is the difference between the bid and ask price, calculated by subtracting the bid from the ask price and typically expressed as a percentage.

What influences stock spreads?

Stock spreads are influenced by factors such as supply and demand, liquidity, trading volume, and volatility.

What’s the difference between a tight and wide spread?

A tight spread suggests buyers and sellers generally agree on a stock’s value, while a wide spread may indicate a lack of consensus.

About the author

Rebecca Lake

Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.