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Closing costs average 2% to 5% of your mortgage loan principal. So even if you’ve saved for a down payment on a new place, you are likely going to have to dig somewhat deeper to afford to seal the deal. How deep, you ask? For buyers, closing costs can add up to a significant sum.

Whether you are a first-time homebuyer or a seasoned property purchaser, it’s wise to know what to expect, in terms of both money and process, when it’s time to gather at the closing table. Payments will be due from both the buyer and the seller.

Get ready to delve into this important home-buying topic and learn:

•   What are closing costs?

•   How much are closing costs on a house?

•   Who pays closing costs?

•   How much are closing costs for the buyer and the seller?

•   How can you lower closing costs?

What Are Closing Costs?

Closing costs are the fees needed to pay the professionals and businesses involved in securing a new home. These range from fees charged by appraisers, real estate agents, and title companies, to lender and home warranty fees.

Here are some key points to know:

•   When you apply for a mortgage loan, each lender must provide a loan estimate within three business days. This will give you information such as closing costs, interest rate, and monthly payment. Review those closing costs carefully.

•   Your closing costs will depend on the sale price of the home, the fees the chosen lender charges, the type of loan and property, and your credit score.

•   Closing costs are traditionally divided between the buyer and seller, so you won’t necessarily be on the hook for the whole bill. That said, the exact division between buyer and seller will depend on your individual circumstances and can even be a point of negotiation when you make an offer on a house.

How Much Are Closing Costs?

As noted above, average closing costs on a house typically range from 2% to 5% of the mortgage principal. Let’s say you take out a $300,000 mortgage loan to buy a house with an agreed-upon sale price of $350,000. Your closing costs could be between $6,000 and $15,000, or 2% and 5%.

Be aware that a “no closing cost mortgage” often means a higher rate and a lot more interest paid over the life of the loan. The lender will pay for many of the initial closing costs and fees but charge a higher interest rate.

Good news if you are buying a HUD home: HUD will pay some of the closing costs as well as the real estate commission fee usually paid by the seller.

Recommended: First-Time Homebuyer Guide

Calculate Closing Costs

The tool below is a home affordability calculator, and it’s a great way to also see what the potential closing costs and additional monthly costs would be based on how much home you can afford.

Who Pays Closing Costs?

Typically, closing costs are paid by both the buyer and the seller. Each has their own responsibilities to uphold.

Some fees are specific to the purchase and are payable by the buyer. These include title search, prepaid interest on the mortgage loan, and more.

Other costs are the seller’s responsibility: paying the real estate agent and so forth. Read on to learn more about who pays for what when closing on a home sale.

How Much Are Closing Costs for a Buyer?

Typically, the buyer pays the following closing costs:

•   Abstract and recording fees: These fees relate to summarizing the title search (more on that below) and then filing deeds and documentation with the local department of public records. You may find that abstract fees can cost anywhere from $200 to $1,000, and recording fees in the range of $125.

•   Application fee: Your lender may charge you to process your application for a mortgage loan. This could cost up to $500.

•   Appraisal and survey fees: It is easy to be wooed by pristine wood floors and dining room walls covered in vintage wallpaper, but surface good looks will only get you so far. You and your lender want to make sure that your potential new home is actually worth the purchase price. This means paying professionals to delve more deeply and provide a current market value. These home appraisal and survey fees are typically due at closing. This is usually in the $300 to $600 range, but could be considerably higher, depending on the home, its location, and other factors.

•   Attorney costs: Working with a real estate attorney to review and vet documents may be an hourly rate (typically $150 to $500 per hour) or a project fee (such as $750 or $1,500). The specifics will vary depending on the individual professional you use, your location, and how complex your purchase is.

•   Credit reporting, underwriting, and origination fees: The lender may charge anywhere from $10 to $100 per applicant to check their credit score; underwriting fees (often in the $300 to $750 range) may also be added to closing costs. Origination fees can be about 0.5% to 1% of your loan’s value and cover the costs of the lender creating your loan documents.

•   Flood certification fee: The lender may require a flood certification, which states the flood zone status of the property. This could cost anywhere from $170 to $2,000, depending on your state.

•   Home inspection fee: This will likely cost between $187 and $510, but it could go higher. This is paid by the buyer, who is commissioning the work to learn about the home’s condition. In some cases, it may be paid at the time of service rather than at closing.

•   Homeowners insurance: Your lender may require you to take out homeowners insurance. The first payment may be due at closing. The exact amount will depend on your home value and other specifics of your policy.

•   Home warranty: A home warranty is optional and can be purchased to protect against major mechanical problems. A warranty plan may be offered by the seller as part of the deal, or a buyer can purchase one from a private company. Your lender, however, will not require a home warranty.

•   Mortgage points: Each mortgage point you choose to buy costs 1% of your mortgage amount and typically lowers your mortgage rate by 0.25% per point. That point money you are paying upfront is due at closing. All the mortgage fees will be spelled out in the mortgage note at the closing.

•   Prepaid interest: Some interest on your mortgage is probably going to accrue between your closing date and when the first payment is due on your loan. That will vary with your principal and interest rate, but will be due at closing.

•   Private mortgage insurance: Often lenders require PMI if you make a down payment that is less than 20% of the purchase price. Putting less money down can make a buyer look less reliable when it comes to repaying debt in the eyes of lenders. They require this premium to protect themselves. This is usually a fee that you pay monthly, but the first year’s premium can also be paid at the time of closing. Expect a full year to cost between .5% and 2% of the original loan amount. Expect to pay between $3o and $70 a month for every $100,000 you are borrowing.

•   Title search and title insurance fees: When a title search is done to see if there are any other claims on the property in question, the buyer typically pays the fee, which is usually in the $75 to $200 range. The lender often requires title insurance as a protection. This is likely a one-time fee that costs between 0.1% and 2% of the sale price. If your house costs $400,000, the title insurance could be between $4,000 and $8,000.

As you see, some of these fees will vary greatly depending on your specific situation, but they do add up. You’ll want to be sure to estimate how much closing costs are for a buyer and then budget for them before you head to your closing.

Recommended: How Long Does It Take to Close on a House

How Much Are Closing Costs for a Seller?

You may also wonder what closing costs are if you are selling your home. Here are some of the fees you are likely liable for at closing:

•   Real estate agent commission: Typically, the seller pays the agent a percentage of the sale price of the home at closing, often out of the proceeds from the sale. The commission is likely to be in the 3% to 6% range, and may be equally split between the buyer’s and seller’s agents.

•   Homeowners association fees: If the home being sold is in a location with a homeowners association (HOA), any unpaid fees must be taken care of by the seller at closing. The actual cost will depend upon the home being sold and the HOA’s charges.

•   Property taxes: The seller must keep these fees current at closing and not leave the buyer with any unpaid charges. These charges will vary depending on the property and location.

•   Title fees: The seller will probably pay for the costs associated with transferring the title for the property.

It’s important for sellers to anticipate these costs in order to know just how much they will walk away with after selling a home.

How to Reduce Closing Costs

Closing costs can certainly add up. Here are some ways to potentially lower your costs.

•   Shop around. Compare lenders not just on the basis of interest rates but also the fees they charge. Not every mortgage lender will charge, say, an application, rate lock, loan processing, and underwriting fee. See where you can get a competitive rate and avoid excess fees.

•   Schedule your closing for the end of the month. This can lower your prepaid interest charges.

•   Seek help from your seller. You might be able to get the seller to pay some of your closing costs if they are motivated to push the deal through. For instance, if the property has sat for a while, they might be open to covering some fees to nudge the sale along.

•   Transfer some costs into your mortgage payments. You may be able to roll some costs into the mortgage loan. But beware: You’ll be raising your principal and interest payments, and might even get stuck with a higher interest rate. Proceed with caution.

Other Costs of Buying a Home

In addition to your down payment and closing costs, you also need to make sure that you can afford the full monthly costs of your new home. That means figuring out not only your monthly mortgage payment but all the ancillary costs that go along with it.

Understanding and preparing for these costs can help ensure that you are in sound financial shape for your first few years of homeownership:

Principal and interest. Your principal and interest payment is the amount that you are paying on your home loan. This can be estimated by plugging your sales price, down payment, and interest rate into a mortgage calculator. This number is likely to be the biggest monthly expense of homeownership.

Insurance. Your homeowners insurance cost should be factored into your monthly ownership expenses. Your insurance agent can provide you with details on what this policy will cover.

Property taxes. Property tax rates vary throughout the country. The rates are typically set by the local taxing authorities and may include county and city taxes. It’s important to factor in these costs as you think about your ongoing home-related expenses.

Private mortgage insurance. As mentioned, PMI may be required with a down payment of less than 20%. PMI is usually required until you have at least 20% equity in your home based on your original loan terms.

Homeowners association fees. If you live in a condo or planned community, you may also be responsible for a monthly homeowners association fee for upkeep in the common areas in your community.

Of course, these are just some of the things to budget for after buying a home. Your needs will depend on whether you are moving a long distance, whether you have owned a home before, and other factors. It’s a lot to think about, but it’s an exciting time.

The Takeaway

Before buyers can close the door to their new home behind them and exhale, they must be able to afford their down payment, qualify for a mortgage loan, and pay the closing costs — usually 2% to 5% of the loan amount. A home loan hunter may want to compare estimated closing costs in addition to rates when choosing a lender. It can be a smart way to keep expenses 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.

FAQ

How can I estimate closing costs?

Typically, closing costs will cost between 2% and 5% of your home loan’s amount.

When do I pay closing costs?

Your closing costs are typically paid at your closing. That is when you take ownership of the property and when your home mortgage officially begins.

*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.

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

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If you’re working hard at your job and being reasonable with your spending, you may still find it’s hard to make ends meet and hit your savings goals.

One question to ask yourself is whether you’re making enough money. Can you really afford to keep plugging along at your current salary? Here, you’ll learn some helpful ways to tell if you should be making more money and, if you should, how to get there.

10 Red Flags That Signal That Your Income Is Too Low

Do you frequently ask yourself whether you should be making more money — or feel as if you’re not making money work for you? If so, it’s possible you aren’t making enough or managing it optimally. Here are some signs that you need to be earning more in order to thrive financially.

1. Not Being Able to Pay Your Bills

As long as you aren’t renting a luxurious penthouse or leasing a fancy car you truly can’t afford, you should be making enough to pay your basic bills. Yes, it can be difficult to save money with a low income. But if you’re working full-time to cover things like rent, car payment, health care, and utilities, without any shot at saving for your future, that’s a sign you need to earn more money.

2. Using Your Credit Card for All Expenses

There’s nothing wrong with using a credit card to pay for expenses if you can afford to pay your credit card bill off in full when your monthly statement arrives. That’s a great way to earn cash back and credit card rewards.

A problem arises if you need to use a credit card in order to cover expenses because you don’t earn enough to buy essentials, like food and personal care items.

3. Not Being Able to Have an Emergency Fund

Having an emergency fund can help you be prepared for the unexpected, such as a major medical or dental bill or getting laid off. Ideally, you would have three to six months’ worth of basic living expenses covered by the money in an emergency fund. If you’re living paycheck to paycheck, however, and can’t even start building a fund with perhaps $25 per pay period, you likely need to earn more.

4. Paying Only the Minimum on Debts

As mentioned, turning to a credit card to cover essential purchases can be a sign of not making enough money. This can lead to high-interest credit card debt, which can be hard to pay down without making extra payments.

If you can’t afford to make extra payments on a credit card or other form of debt, increasing your income can make it possible to minimize how much you owe and those interest payments.

5. Not Being Able to Cut Anything Else

If you take a cold, hard look at your budget and realize you can’t cut any more expenses because you are only paying for essentials, then that’s a sign you need an income increase. Living on such a tight budget isn’t sustainable long-term, and there should ideally be room in a budget for some small fun purchases, too.

Recommended: 7 Different Types of Budgeting Methods

6. Not Being Able to Build Savings

Even if you are motivated to save money, if you’re not able to save for retirement or other long-term goals, it could be a sign that you’re not earning enough.

7. Making the Same Wage Despite Company Growing

If your company is growing and flourishing, in part because of contributions made by you and other workers, you may deserve to earn more than you’re currently making.

8. Not Being Able to Reach Financial Goals

If you are earning enough money and sticking to a budget, then in theory you should be able to make slow but steady progress toward your financial goals. Failing to do so could mean you’re coming up short on salary.

9. Consistently Struggling to Make Ends Meet at the Beginning of the Month

Many people start to run out of spending money at the end of the month. That’s because they’ve paid all their bills and are waiting for the next cash infusion from their paycheck. If, however, you are consistently struggling to make ends meet at the beginning of the month, when payday has arrived, this indicates you aren’t making enough to pay your essential bills.

10. Worrying About Money Consistently

Everyone deserves a good night’s rest, not lying awake worrying about how to pay the bills. If you are consistently worrying about money and trying to figure out how to tackle financial anxiety and stress, that can be a major sign you aren’t earning enough money.

Tips for Negotiating a Higher Wage With Your Employer

If you feel you need and merit more money, it can be wise to have a conversation about a raise. These tips can help.

•   Research salary data. Before an employee asks for a raise, they need to get an idea of how much workers in similar roles at other companies earn. Luckily, there are tons of online resources where workers share their job titles and salaries. It can also help to look at the salaries listed on current job postings similar to your position.

•   Make a list of accomplishments. Workers should approach the boss with the facts about how good they are at their jobs and why they deserve to earn more. Make a list that specifies some of your major contributions and use that to back up your ask for higher pay.

•   Have an alternate ask. Sometimes a company truly can’t afford to give a good employee a raise. In that case, is there something they can do to make your life easier? Can they make it possible to work remotely and save on commuting? Can they give you more PTO or a flexible schedule to help cut down on daycare costs?

Recommended: Good Paying Jobs Without a College Degree

The Takeaway

If you are working hard and watching your spending but are living paycheck to paycheck and are unable to save, you may not be earning enough money. Asking for a raise, with documentation of why you are worth it, is one path forward. Or you might decide to change jobs or career paths or even move somewhere more affordable.

It can also be a smart move to ensure the funds already in your bank account are working hard for you.

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

FAQ

How do I know if I’m being underpaid?

Do salary research online to see what workers in similar roles and industries are earning. You can likely find this information everywhere from the Bureau of Labor Statistics to job search sites.

How much money must I earn to feel it is enough?

Having “enough” money depends on your unique perspective. That being said, you need to be able to comfortably pay your bills and cover essential expenses without having to worry that you’re running out of money each month. Also, being able to save for long-term goals (such as a down payment on a house or retirement) is also important.

How can I save if I don’t make enough money?

It can be hard to save money if you don’t earn much more income than you require to get by. Consumers can always scrutinize their budget to see where they can cut back spending in order to save more. Too many streaming services? Or pricey lunches? Try starting there.

About the author

Jacqueline DeMarco

Jacqueline DeMarco is a freelance writer who specializes in financial topics. Her first job out of college was in the financial industry, and it was there she gained a passion for helping others understand tricky financial topics. Read full bio.

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

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

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

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

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

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
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Both certificates of deposit (CDs) and money market accounts (MMAs) are types of savings accounts that tend to earn higher interest rates than traditional savings accounts. But there are some key differences between them.

An MMA allows you to withdraw money as needed (and even comes with checks or a debit card), though you may be limited to a certain number of transactions per month. With a CD, on the other hand, your money is locked up for a set period of time. In exchange for leaving your money untouched, however, CDs generally pay higher rates than MMAs.

Whether you should choose a CD or MMA will depend on your financial needs and goals. To help you make the right choice, here’s a closer look at how these two savings options compare.

Main Differences Between Money Market Accounts and CDs

Here’s a quick snapshot of the differences between money market accounts and CDs.

Money Market Accounts

A money market account (MMA) is a type of savings account offered by banks and credit unions that provides some of the conveniences of a checking account. Like a typical savings account, you earn interest on your deposits, often at a higher rate than what you could earn in a traditional savings account. In addition, these accounts typically come with checks and/or a debit card, making it easier to access your funds.

Money market accounts may come with withdrawal limits (such as six or nine per month), however, so they aren’t designed to be used as a replacement for a checking account. MMAs also often require you to keep a certain minimum balance in order to avoid fees or earn the advertised annual percentage yield (APY).

The money you deposit in an MMA is insured up to $250,000 by the Federal Deposit Insurance Corporation (FDIC), if held at an FDIC-insured bank, or by the National Credit Union Administration (NCUA), if held at an insured credit union. That means you can’t lose your money (up to certain limits) even if the bank were to go bankrupt or shut its doors.

Pros of Money Market Accounts

Here’s a look at some advantages of opening a money market account.

•   Higher interest rate: Typically, money market accounts have higher interest rates than traditional savings accounts.

•   Security: Because of the FDIC and NCUA insurance, the funds in a money market account are typically insured against loss.

•   Funds are liquid: You can withdraw your money when you need to (though you may be limited to a certain number of transactions per month).

•   Ease of access: It’s possible to access the funds in a money market account by withdrawing cash at an ATM, doing an electronic transfer, using a debit card, and/or writing checks.

Cons of Money Market Accounts

MMAs also have some disadvantages. Here are some to keep in mind.

•   Better rates may be available elsewhere: You may be able to find a high-yield savings account at an online bank that offers a higher APY than an MMA at a traditional bank (with potentially fewer restrictions and/or fees).

•   Minimum balance requirements: Banks often require a minimum deposit to open an MMA, as well as a minimum amount you must keep in the account in order to earn the top APY and/or or avoid a monthly maintenance fee.

•   Variable interest rate: APYs on MMAs are based on market interest rates at a given time. It’s difficult to predict how the market will perform and if this interest rate will rise or fall.

•   Limited growth potential: If you’re looking for long-term growth, you can potentially make more by investing your money in the market.

Certificates of Deposits (CDs)

A certificate of deposit (CD) is a type of savings account that offers fixed interest rate that is generally higher than a traditional savings account. A CD also comes with a fixed-term length and a fixed maturity date. This means you need to leave the funds in a CD untouched for a set term, which can range anywhere from a few months to several years. Generally, the longer the CD’s term, the higher the APY, but this is not always the case.

CDs don’t charge monthly fees, but will typically have an early withdrawal penalty, and you usually can’t add any additional funds after the initial deposit.

CDs are offered by banks and credit unions: at credit unions, they are often referred to as share certificates. Like regular savings accounts, CDs are typically insured by the FDIC or NCUA, so you get your money back (up to $250,000) in the unlikely event that the bank or credit union were to go out of business.

Pros of CDs

Here’s a look at some of the advantages that come with depositing money into a CD.

•   Potentially higher rates: CDs tend to offer higher APYs than regular savings accounts and money market accounts.

•   Guaranteed rate of return: Because CDs typically have fixed rates for fixed terms, you know up front how much interest you will earn.

•   Security: Like other types of savings accounts, CDs are insured by either the FDIC or NCUA.

•   Convenience: It’s fairly easy to open a CD, since most banks and credit unions offer them.

Cons of CDs

There are also some disadvantages of CDs that you’ll want to bear in mind.

•   Relatively low returns: While CDs tend to earn more than a regular savings account, investing in stocks and bonds can be a better option if you’re looking to maximize your returns over the long term (though, unlike CDs, returns are not guaranteed).

•   Rates won’t go up: Because CDs come with fixed interest rates, the APY won’t go up even if market rates rise during the term of your CD (unless you open a bump-up CD).

•   No liquidity: Unlike other types of savings accounts, you can’t withdraw funds as needed. To benefit from a CD, you must wait until the CD term ends before you access your cash.

•   Withdrawal penalties: If you end up needing the money before the CD matures, you will likely incur an early withdrawal penalty.

When Should I Consider a Money Market Account or CD Over the Other?

MMAs and CDs have different requirements and benefits, and which one will serve you best will depend on your needs and preferences.

Choosing a Money Market Account Over a CD

A money market account may be a better choice than a CD if:

•   You want the option to add and withdraw money regularly. You can save money over time with a money market account. You can also withdraw the money at any time, though you may be subject to some restrictions.

•   You’re building an emergency fund. A money market account can be a good place to stash your emergency fund. You can likely maintain the minimum balance requirement and can benefit from the extra interest. Should you need the money, however, you can get it right away.

•   You’re saving for a large purchase. If you’re saving for a big ticket item like a car, a money market account will allow you to write a check from the account when you’ve reached your goal and it comes time to use those funds.

Choosing a CD Over a Money Market Account

A CD may be a better fit than a money market account if:

•   You have a longer-term savings goal. If you don’t need to use the money for a year or two, you may benefit from the higher returns offered by CD.

•   You want to make sure you don’t touch the money. If you’re setting aside money for a specific future expense, like a wedding or vacation, a CD helps insure you won’t impulsively spend it on something else.

•   You want some growth without risk. Unlike money invested in the market, the money you put into a CD is insured (up to certain limits) and the rate of return is guaranteed.

Recommended: How to Save Money: 33 Easy Ways

The Takeaway

Both money market accounts and CDs offer safe ways to earn more interest on your savings than you could in a traditional savings account. While money market accounts offer more flexibility and liquidity than CDs, CDs tend to offer higher APYs.

If you won’t need the money for a set period of time (say, six months to three years), and can find a good rate on a CD, you might be better off going with a CD over an MMA. If you may need to tap the funds at some point (but you’re not sure when), an MMA allows you to earn a higher-than-average interest rate while keeping the money liquid, with the added benefit of offering checks or a debit card.

Before choosing any type of savings account, however, it generally pays to shop around and compare current APYs. You may find another savings vehicle, such as a high-yield savings account, that offers the returns you want with minimal requirement, restrictions, or fees.

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

FAQ

Are CDs or money markets better?

If you don’t need to access your funds for a while, a CD could be a better fit. CDs tend to offer higher interest rates than money market accounts, and the interest rate is fixed which makes the return predictable. Conversely, if you might need to draw on the funds in the near-term, an MMA may be a better route.

What are the tax implications of money market accounts vs. CDs?

With both certificates of deposit (CDs) and money market accounts (MMAs), the interest you earn is considered taxable income. You will receive a Form 1099-INT from your bank at the end of the year, which you must report on your tax return.

The Interest from CDs is typically taxed in the year it is earned, even if you don’t withdraw it until the CD matures. This means you might owe taxes on interest even if you haven’t received it yet. Interest on MMAs, however, is usually credited monthly and taxed in the year it is credited.

What are other options besides money market accounts and CDs?

Money market accounts and certificates of deposit (CDs) offer a low-risk way to earn a solid interest rate on your money. But they aren’t your only option. Here are some alternatives:

•   High-yield savings accounts. These accounts offer higher interest rates than traditional savings accounts and provide easy access to your funds with no fixed terms.

•   Treasury Securities. U.S. Treasury bills, notes, and bonds are government-backed securities that can offer competitive returns. They vary in term length and interest rate and are considered very safe investments.

•   Bond Funds. These mutual funds invest in a diversified portfolio of bonds, offering potentially higher returns than money market accounts and CDs, though they come with higher risk.

About the author

Jacqueline DeMarco

Jacqueline DeMarco is a freelance writer who specializes in financial topics. Her first job out of college was in the financial industry, and it was there she gained a passion for helping others understand tricky financial topics. Read full bio.

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

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.

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Typically, you only need to keep credit card statements for 60 days, unless they are tax-related. It can be wise to keep copies in the short-term so you can scan the charges and wrangle your budget.

Keep reading for more insight if you’re wondering how long you should keep credit card statements. Different situations may require differ guidelines on the timing.

Why Should You Keep Your Credit Card Statements?

Aside from sharing your credit card statement balance or current balance, your credit card statements contain some pretty helpful information that can come in handy down the road — especially come tax season. If payments are made by credit card, it’s possible to review old statements to look up business expenses (perhaps Ubers taken for work purposes) or other write-offs like mortgage, student loan, or tuition payments that you put on your card.

It can also be helpful to keep credit card statements in case so you can review them for errors or signs of fraud. It’s easy to overlook mistakes when quickly reading a credit card statement while sorting the mail. It can be valuable to take the time to look more closely.

Online vs Hard Copy Statements

If you want to avoid holding onto a lot of paperwork, you also have the option to access online statements for your credit card. Credit card issuers may store this information for a while — though they won’t necessarily hold onto old statements forever.

The length of time your records are stored will vary by financial institution. Some credit card issuers only provide the past 12 months of statements, while others hold onto them for up to seven years. In many cases, five years is a common timeline.

If an old statement isn’t appearing online, the account holder may be able to call their credit card issuer and request a copy of an older statement. Still, there’s no guarantee that this will work; you might not be able to get what you’re searching for. It can also cost money to get a copy of an older statement if it is accessible.

Factors That Determine How Long to Keep Credit Card Statements

Like the rules around keeping financial documents in general, how long to keep credit card statements depends on each consumer’s unique needs. That being said, a good rule of thumb is to keep them at least 60 days, to have time to scan them for signs of erroneous charges or fraud and to reconcile your budget.

If you use your credit card for purchases that might be tax-deductible, then it can be wise to at least hold onto them until it’s time to prepare taxes for the year. (Again, you may not have to keep hard copies since you may be able to download statements from your credit card issuer’s website or app.)

If you do use your credit card statements to help prepare your taxes, you should hold onto them for at least seven years just in case the IRS (Internal Revenue Service) comes knocking with any questions.

How Long Should You Keep Your Credit Card Statements?

It’s worth noting though that consumers may have different needs than business owners when it comes to holding onto old credit card statements. Here’s a closer look.

For Consumers

How long consumers should keep credit card statements depends on how someone uses their statements. In general, it’s wise to keep your credit card statements for 60 days due to credit card rules. Under the Fair Credit Billing Act (FCBA), credit card issuers must receive written notice of any errors within 60 days of them sending the consumer the statement containing the error.

However, it might be smart to keep your statements for longer in the following scenarios:

•   If you use your statements to make deductions on your taxes: In this case, it’s wise to keep statements for seven years. That way, if you’re ever audited by the IRS, you’ll have those statements handy as supporting documentation for deductions.

•   If you decide to dispute charges: If you’re disputing charges on your credit card, it’s best to hold onto the statement in question for 90 days, as that’s how long the dispute process can take.

•   If you want to track your spending: Those looking to learn more about their spending habits and create a better budget may find that holding onto a year’s worth of statements is helpful. That way, they can sit down on January 1 and get a clear picture of how you spent your money in the last year and where you can cut back. This can help with using a credit card responsibly.

•   If you have an extended warranty: It’s also helpful to hold onto statements that contain purchases that came with extended warranties. For example, if you buy a TV with a three-year warranty, the credit card issuer may offer an extended one-year warranty as a cardholder benefit. Keep that statement at the ready as a proof of purchase in case that extended warranty is needed.

For Business Owners

Similar to consumers, business owners can benefit from holding onto credit card statements for at least a year in order to track business expenses. If referenced for tax purposes, it’s wise to keep credit card statements stored away for seven years to help resolve any future tax issues that may arise.

When You Should Keep Credit Card Statements Longer

As mentioned earlier, if you are going to use your credit card statements to help you prove deductions on your taxes, you’ll want to keep your own copies of your credit card statements (whether you save them on paper or digitally) for seven years. This is generally the longest you might need to keep statements for.

Recommended: What is the Average Credit Card Limit

Different Ways to Store Statements

Because credit card statements contain sensitive personal and financial information, it’s important to keep them safe. Here are a couple ways to store them:

•   In a password-protected file on your computer: If you download a digital copy of your statement, you can store them in a password-protected file on your computer.

•   In a safe: If you want to hold onto hard copies, keep them in a locked, fireproof safe to protect them from both theft and damage.

Different Ways to Dispose of Statements

Once you are ready to dispose of your credit card statements, it’s important to destroy the documents so no one can find them and glean information from them. Here are your options to get rid of your old credit card statements:

•   Shredding or cutting them up: Shredding old documents is ideal, but if you don’t have a shredder, you can cut the statement up into very small pieces using scissors. Then, throw away the various pieces into different garbage cans.

•   Deleting all files: For digital copies, simply delete the files fully from your computer — including any backup copies — once you no longer need them.

Managing Online Statements: What to Know

When it comes to online statements, you can easily save those digitally if you don’t like storing paper documents or if you’ve opted to receive paperless statements. All the cardholder has to do is download their statements and keep them stored in their digital files, ideally with password protection.

Recommended: What is a Charge Card

The Takeaway

How long you should keep your credit card statements depends on your unique needs, but 60 days is a good rule of thumb. If you have extended warranties through your credit card issuer, you may keep statements for the length of their warranty in case you need a reference. Or, if you use the statements to help with your tax deductions, it can be a good idea to hold onto them for up to seven years in case any questions arise.

Further, holding onto your credit card statements can help you easily see your spending habits and how well your credit card is serving you.

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

FAQ

How can I get old credit card statements?

If you didn’t save your old credit card statements, you can look for them in your online account or can call your credit card issuer to request them. A charge may be involved for this service.

Do you need to keep credit card receipts?

Often, a credit card statement will give you a record of the information you need without needing to keep receipts.

How long should you keep credit card statements with tax-related expenses?

If you use your credit card statements to help figure out tax deductions, you should keep old credit card statements for up to seven years. That way, if the IRS has questions about any deductions, you can have the documentation to back them up.

How can you keep digital credit card statements safely?

If you download a digital copy of your statement, it’s best to store them in a password-protected file on their computer. Once you no longer need the statements, fully delete the files from your computer.

About the author

Jacqueline DeMarco

Jacqueline DeMarco is a freelance writer who specializes in financial topics. Her first job out of college was in the financial industry, and it was there she gained a passion for helping others understand tricky financial topics. Read full bio.

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.

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

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We all feel the effects of inflation: Groceries cost more, childcare seems to be a luxury service. But that’s subjective. To nail down the real-world impact of inflation, economists like to compare rising prices to salaries, which are more static. This is where the wage inflation calculator comes in. The tool illustrates how much buying power your earnings currently have compared to past years.

We’ll take a closer look at how wage inflation calculators work and what they can tell us about making a living in the U.S. in 2024. We’ll also examine what inflation is and how much wages have grown compared to home prices, gold, and other metrics.

What Goes Behind an Hourly Wage Inflation Calculator

A wage inflation calculator may go by other names, such as an inflation wage calculator, hourly wage inflation calculator, minimum wage inflation calculator, or a wage adjusted for inflation calculator. But they’re all the same. You can see an example at https://www.bls.gov/data/inflation_calculator.htm.

The calculator is one way to represent inflation, which is the change in price of goods and services. It tells you how much buying power a dollar amount has on a certain date compared to another date — usually today or a year-over-year equivalent. For example, someone may enter their hourly wage on Jan. 1, 2010, and then compare how much that same wage bought them on Jan. 1, 2024.

Recommended: What Credit Score is Needed to Buy a Car

Historical Inflation Rates, Compared

The table below shows the annual rate of inflation from 1920 to present. See the next section for more information on how to read the table.

How to Read Our Historical Inflation Rate Table

To understand the table shared above, first you need to know what CPI means. The Consumer Price Index comes from the U.S. Bureau of Labor Statistics (BLS), which began collecting family expenditure data in 1917. The annual average CPI-U in the second column represents Urban CPI data. The annual percent change between each year’s CPI represents the rate of inflation.

How to Calculate Hourly Wage Adjusted for Inflation

Using a wage inflation calculator is an easy way to see how our income’s buying power changes with inflation. Just enter the starting year of your choice, your hourly wage, and then the current year.

Let’s say someone was making $25 per hour in 2018 and wants to know what the equivalent hourly rate is in 2024. In this case, making $25 per hour in August 2018 is equivalent to making $31.21 in August 2024. Assuming the individual makes the same money today, this shows that the buying power of their hourly wage has decreased over the years.

If you’re negotiating a raise, you could argue that $31.21 is the minimum you should be making to keep up with the cost of living.

What Is Inflation and How Does It Work?

Inflation represents changes in prices of services and goods throughout the economy. The way the government measures inflation is by comparing the current cost of goods and services to prices in previous years.

Inflation weakens the purchasing power of the dollar, as consumers have to pay more for things than they did in previous months and years. Inflation can also deflate the value of cash held in savings accounts.

What Is Actual Inflation?

Actual inflation is a term used to refer to what the current rate of inflation really is versus what consumers perceive the current rate to be, or their “inflation expectations.” Consumer expectations influence actual inflation.

Hyperinflation

Hyperinflation is a term used when rapid inflation occurs. This is when prices rise uncontrollably over a period of time. Hyperinflation is extreme — 50% a month or more — and fortunately rare.

The U.S. has never experienced hyperinflation, and no one believes it’s on the horizon. The most recent example of hyperinflation is Venezuela, where inflation reached 65,000% in 2018.

Deflation

Deflation is the opposite of inflation, when prices of goods and services go down. The U.S. experienced deflation of 7% (or -7% inflation) during the first few years of the Great Depression.

Recommended: What Is Stagflation?

How Is Inflation Calculated?

The formula for measuring inflation is:

•   Percent Inflation Rate = (Final CPI Index Value/Initial CPI Value) x 100

How Is Wage Adjusted for Inflation Calculated?

It’s complicated. The easiest way to calculate a wage adjusted for inflation is to use an online wage inflation calculator.

How Inflation Impacts You

There’s some confusion surrounding whether inflation is good or bad. Some inflation is normal, and shows that the economy is growing. But for consumers it feels like a bad thing. It can be especially worrisome for borrowers with variable-rate-interest debt like student loan debt.

Economists can measure the impact of inflation on consumers in a number of ways. You’ve probably seen articles discussing college tuition vs. inflation, which show how American incomes have not kept up rising education costs. Other metrics tell similar stories.

Let’s look at a few different metrics that reveal how consumers may feel the impact of inflation.

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How Your Wage Is Doing Relative to the Housing Market

Inflation can sneak up on consumers when prices at grocery stores rise slightly. But they really feel it when making a large purchase, such as buying a home. People who have saved for many years to buy a house find that their income and savings are no longer enough to reach their home buying goals.

That’s because median home prices have far outstripped median wages: Nationwide home prices have grown 129% since 1960, while household income increased only 39%. This may have been great news for our parents and grandparents, who saw their real estate investments soar. But for today’s first-time homebuyers, it’s a disaster.

Also, mortgage interest rates can rise during periods of inflation.

Recommended: Should I Sell My House Now or Wait?

How Your Wage Is Doing Relative to Gold

Because gold tends to hold its value, it makes a good unit of measurement for economists. By converting wages to gold, we can get a better sense of how wages have held up, or not, over the years.

In 1965, the minimum wage was equal to 71 ounces of gold annually. Given the price of gold in 2024, that’s equal to a salary of $179,491.55. Compare that to the current federal minimum wage of $7.25 per hour, or $15,080 annually.

How Your Wage Is Doing Relative to CPI

Remember, CPI represents consumer prices. Inflation impacts prices of essential goods and services such as groceries, gas, and childcare. This means that salaries and savings don’t extend as far as they used to. This is why many people push for raising the minimum wage during periods of inflation.

If you’re looking to take control of your money during inflation, a money tracker app can help you gain valuable insight into your financial life.

The Takeaway

Inflation, and the rising prices that come with it, means your income doesn’t buy as much as it used to. Using a wage inflation calculator is one way for consumers to get a more objective idea of how much buying power their hourly wage has during periods of inflation. Of course, inflation doesn’t affect all prices equally. That’s why economists use different metrics to measure inflation’s impact, such as the Consumer Price Index (CPI), the housing market, and gold.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

FAQ

How do you calculate wages adjusted for inflation?

Using a wage inflation calculator can make it easier to get insight into how much buying power an hourly wage has in the current economy. With a wage adjusted for inflation calculator, it’s easier to understand what someone’s income is currently worth compared to prior years.

How much is $15 an hour in 2000?

According to the CPI Inflation Calculator from the U.S. Bureau of Labor Statistics, $15 an hour in August 2000 is equivalent to $27.33 of buying power in August 2024.

What is the inflation rate for 2024?

The current inflation rate for 2024 is 2.5%. This is based on the 12 months ending August 2024.

How do you calculate real hourly wage from CPI?

Wage inflation calculators take the current CPI and past CPI into account to help consumers calculate their real hourly wage.

About the author

Jacqueline DeMarco

Jacqueline DeMarco is a freelance writer who specializes in financial topics. Her first job out of college was in the financial industry, and it was there she gained a passion for helping others understand tricky financial topics. Read full bio.

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

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

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