What is the safest way to transfer money from one bank to another?

While all methods of moving money have security features, wire transfers are generally thought to be one of the safest ways to send money from one bank to another.

How do I transfer money from one bank to another bank manually?

If you are using a banking or P2P app, you typically will need to type in the details of the account you are sending money to, the amount, the date you want the transfer to occur, and then verify that the specifics are correct. If you have cash in hand that you want to deposit in another person’s account and don’t want to use an electronic method, you might consider a third-party service like Western Union.

Is it free to transfer money from one bank to another?

Whether or not it’s free to transfer money from one bank to another depends on the method you select. An online, email, or P2P transfer and writing a check (excluding the postage to mail it) can be free; check details with your particular provider.

MoneyLL Archives | Page 3 of 117

Sep

2024

How to Transfer Money From One Bank to Another

By Austin Kilham | Budgeting & Goals, Financial Independence | No Comments

If you need to transfer money from an account at one bank to an account at another, you have several options, including online bank transfers, mobile payment apps, wire transfers, and writing checks. Which method will work best will depend on how quickly you need to make the transfer, how much money you are moving, and whether or not you’re willing to pay a fee. Here’s what you need to know.

Key Points

• Bank-to-bank transfers, also called external transfers, are a way to move money from an account at one bank to an account at another bank.

• These can be done by online transfers, peer-to-peer services, wire transfers, and checks.

• There may be limits on how many bank transfers you can do and how much you can send in a specific time period.

• Wire transfers are typically fast and allow for higher transfer limits; writing a check is slower but has no to minimal costs.

• The time it takes to complete a bank transfer may vary with each method.

What Is a Bank-to-Bank Transfer?

A bank-to-bank transfer is the movement of money from an account at one bank to an account at a different bank. Also known as an external transfer, this type of transaction can be done in numerous ways, including making an online transfer, using a mobile banking app, making a wire transfer, or writing a check.

You might make a bank-to-bank transfer if your funds are spread out at different banks. For example, maybe you have a checking account at a traditional bank but opened a savings account at an online bank to take advantage of the higher rates. Bank-to-bank transfers can also come into play when you’re sending money to friends and family.

Depending on the method, an external bank transfer can happen immediately, or it may take a few days to process.

Things to Consider Before Transferring Money

There are several different methods for sending money from one bank to another. To find the best option for your needs, you’ll want to consider:

• Transfer speed: Bank transfers can take anywhere from a few seconds to several business days. If time is critical, opt for a faster transfer method, but be aware that this may come with higher costs.

• Transfer fees: While many transfer methods are free, others may come with fees. You’ll generally pay more for wire transfers and expedited transfers.

• Transfer Limits: Some banks and payment apps impose limits on how much you can transfer per day or in any one transaction. Additionally, banks often limit the number of withdrawals you can make from a savings account to six per month; exceeding your bank’s transaction limits could result in a fee.

4 Ways to Send Money From One Bank to Another

Here’s a look at four common ways to transfer money to an account at another bank.

1. Online Bank Transfer

A simple way to move money from an account you own at one bank to an account you have at another financial institution is to make an online bank transfer. To illustrate the process, let’s say you want to transfer money from a checking account at Bank A to a savings account you own at bank B.

• Link the accounts: First, you’ll need to log into your account at Bank A (online or using the app), look for the “transfer” option, then choose “external” transfer. Enter Bank B’s routing number and your account number at that bank.

• Verify the receiving account: After you provide the required information, Bank A will likely want to verify that you have access to the second bank’s account. You might need to enter your username and password for Bank B. Or, Bank A may make a small deposit into Bank B and ask you to confirm the amounts (which can take a day or two).

• Make the transfer: Once the accounts are linked, navigate back to Bank A’s “transfers” section, select the “sending” and “receiving” accounts, then enter the amount to be transferred and the date for the transaction to occur. You can also typically choose whether you want to make a one-time transaction or a recurring transfer (once a month, for example). After you’ve made your choices, you’ll hit “submit.”

Online bank transfers can take up to three business days to complete and are typically free; some banks charge a fee for same- or next-day transfers.

2. Peer-to-Peer Payment App

A convenient way to send a small amount of money to a friend, family member, or small business is to use a peer-to-peer or P2P payment app, such as Cash App, Google Pay, and Venmo. Typically, you need to download the app, create an account, and link your bank account or debit card. You’ll also need the recipient’s cell phone number or, in some cases, email address (note that the recipient also needs an account with the service).

Sending funds via a P2P app is typically instant. However, the funds may land in the recipient’s account within the app. The recipient can then typically transfer those funds to a bank account within one to three business days (for free) or immediately (for a fee).

Payment apps may limit how much you can transfer in one transaction or within a certain time frame. This is to help minimize the risk of a fraudster draining your account.

3. Wire Transfer

A wire transfer can be a good way to make a bank transfer when you need to send a considerable amount of money to someone quickly and/or the recipient is located overseas. Wire transfer generally allows you to send more money than other methods, and funds are usually available within one business day — often within a few hours. Wire transfers aren’t free though. You may pay around $25 for a domestic wire transfer and $45 for an international wire transfer. Wire transfers can be done through banks, credit unions, or providers such as Western Union or Wise.

4. Writing a Check

An old-school way of transferring money from one bank to another is to write a check. You can write a check to yourself (using your name as the payee), then deposit it into an account you own at another bank using mobile deposit. You can also deposit the check at an ATM that accepts deposits or by visiting a branch. If you’re looking to transfer money to someone else’s bank account, you can write a check to that person.

This transfer method is free, except for the cost involved in ordering checks.

Keep in mind, however, that writing a check is not an instant money transfer. It can take a couple business days, and sometimes longer, for a check to clear and be available in the new account.

How to Transfer Money from One Bank to Another at a Glance

Here’s a quick look at how bank-to-bank transfer methods compare.

Transfer Method	Speed	Cost	Best for
Online transfer	1-3 days	Typically, free	Routine transfers between accounts you own
Payment App	Up to 3 days to get money into bank account	Typically, free	Small transfers between individuals
Wire Transfer	Often within a few hours	$25-$45	Large, time-sensitive transfers and international transfers
Personal Check	Typically up to 2 business days	Free besides cost of buying checks	Moving money when other methods aren’t available

Staying Safe

Transferring money from one bank to another by any of the above methods is generally safe and secure. However, there are a few things to keep in mind with each method to ensure that nothing goes awry.

• Online bank transfers: This type of bank transfer uses the Automated Clearing House (ACH) network, which is federally regulated and secure. The main risk with an ACH transfer is having a scammer trick you into sending money or giving them your banking information. If you ever suspect bank fraud, reach out to your bank as quickly as possible.

• Payment apps: Since payment is typically transferred to the recipient’s account in the app almost instantly, there’s no way to cancel a P2P payment once it’s been made. For this reason, it’s critical to only transfer funds to a verified person or business and be sure to use the correct phone number or email address.

• Wire transfer: Speed is a big advantage of wire transfers but it can also be a disadvantage, since you typically can’t cancel a wire transfer once the money lands in the recipient’s account. Be sure you only wire money to someone you know.

• Personal check: There is a small risk of a check being stolen or lost. However, a key advantage of this method of money transfer is that you can cancel checks if they haven’t cleared. To stop a check, contact your bank right away. In some cases, you’ll need to pay a stop-payment fee.

The Takeaway

With the prevalence of digital banking and money transfer apps, sending funds from one bank to another has become significantly quicker and more convenient. Options include online bank transfers, mobile apps, wire transfers, and writing checks. Which one to pick will depend on whether or not you own both accounts, how much you are transferring, how quickly you want the funds moved, and how much (if any) in fees you are willing to pay.

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.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.50% APY on SoFi Checking and Savings.

FAQ

What is the easiest way to transfer money from one bank to another?

Generally, the easiest way to transfer money between banks is by making an online bank transfer or using a peer-to-peer payment platform or app. These options are secure, user-friendly, and often accessible within your banking app, making them ideal for both personal and external transfers.

Can I directly transfer money to someone else’s bank account at a different bank?

Yes, you can directly transfer money to someone else’s bank account at a different bank through a wire transfer, or you could write them a check. Another simple way to send them money is through a peer-to-peer (P2P) payment platform or app. These services are often free, especially for domestic transactions, and are available through most banking apps or as standalone apps.

Can you transfer large amounts of money between banks?

Yes, you can transfer large amounts between banks. If you’re sending a large amount of money to someone else, you may want to use a wire transfer at your bank. You’ll need the recipient’s account and routing numbers, and both you and the recipient will likely incur fees. If you’re moving a large amount of money between accounts you own, you can do this for free by making an online external bank transfer. You can set this up by logging into your account online or via your banking app.

How to transfer money from one bank to another for free?

If you own both accounts, you can transfer money between banks for free by logging into your bank account and setting up an external transfer. Another free option is to use a peer-to-peer (P2P) payment app, which offers fast transfers to recipients who also have an account with the service.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

SoFi members with direct deposit activity can earn 4.50% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. 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 (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.50% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.50% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

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

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

Interest rates are variable and subject to change at any time. These rates are current as of 8/27/2024. There is no minimum balance requirement. Additional information can be found at http://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.

SOBNK-Q324-085

Sep

2024

What Is Neobanking and How Does It Work?

By Timothy Moore | money | Comments Off

Neobanks are online-only financial technology (“fintech”) companies that offer traditional banking services in a digital-first format. Though they are called neobanks, these fintechs are not actually banks. They are able to provide online banking services only by partnering with an established bank. Read on for a closer look at how neobanks work, how they make money, and the pros and cons of using a neobank vs. a traditional or online bank.

What Is a Neobank?

A neobank, also sometimes referred to as a “challenger bank,” is a fintech that offers traditional banking services through a digital platform, usually online and via a mobile app. Neobanks typically do not operate physical locations or branches, meaning they’re a digital-only experience. This lack of physical branches means their overhead is lower — which may allow them to offer higher annual percentage yields (APYs) on bank accounts and charge low (or no) banking fees.

The big caveat with neobanks: They aren’t banks at all. Instead, they offer access to banking services and products that are overseen by true, federally regulated and insured banking institutions.

Recommended: Is Mobile Banking Safe?

How Do Neobanks Work?

Because of their digital-first strategy, neobanks are able to keep costs low and pass those savings on to consumers. Often, neobanks target their services at those who are frustrated with the traditional banking experience — those who may not qualify for a traditional credit card or loan, or who have been burned by a mountain of fees on past checking accounts.

Tech-savvy users are often drawn to the advanced apps and platforms of neobanks in the same way they’ve been drawn to other digital disruptors, like Uber and Lyft in the rideshare space and Airbnb and VRBO in the lodging space.

Here’s an important distinction to note when thinking about what a neobank is: Just because a bank operates online doesn’t mean it’s a neobank. There are many online banks that are licensed banks and directly offer FDIC insurance on deposit accounts. They typically provide an easy-to-use digital app and a full suite of banking services, and should not be considered neobanks.

But as we’ve pointed out, neobanks are not actually banks. So what does that mean?

• While you can access traditional banking features like checking accounts and high-yield savings accounts through a neobank’s online platform and mobile app, the neobank typically partners with larger traditional banks to offer those services.

• Notably, neobanks do not typically offer a full suite of services, such as loans and investments, that full-fledged banks do.

• Neobanks exist in a regulatory gray area. Many offer FDIC insurance through their partner banks, but the neobanks themselves do not answer to a primary regulator. The Consumer Financial Protection Bureau (CFPB), however, recently announced that it will enact stricter supervision of nonbank fintechs going forward. And in recent years, the CFPB and state regulators have investigated certain neobanks for isolated events.

That said, a neobank must typically comply with its partner bank’s own standards and practices, dictated by federal and state regulation. Thus, indirectly, neobanks may face some regulation.

Pro Tip: While many neobanks offer consumers FDIC insurance through the banks with which they partner, it’s always a good idea to read the fine print before opening a deposit account to make sure it offers insurance. While bank failures are rare, that insurance can provide real peace of mind.

How Do Neobanks Make Money?

While each neobank is unique and likely to have its own varied revenue streams, these challenger banks commonly make money through merchant fees from debit and credit card purchases. Such fees are also called “interchange fees.” Consumers don’t pay these fees; instead, businesses bear the burden.

Neobanks that offer credit cards and/or loans also make money on interest they charge borrowers.

Pros and Cons of Neobanks

Neobanks may make sense for some consumers, but they’re not for everybody. Before opening an account, it’s a good idea to weigh the pros and cons:

Pros	Cons
Lower fees	Less regulated (not chartered with state or federal regulators)
Higher interest rates on deposit accounts	May not offer FDIC insurance
May offer credit card without credit check	May not offer a full suite of banking services (mortgages, auto loans, etc.)
Easy-to-use mobile app (mobile check deposit, peer-to-peer payments, etc.)	Typically no brick-and-mortar branches
24/7 account access — and on the go	Untested in the market (no long history of success to instill confidence in consumers)

Examples of Neobanks

In the last decade-plus, the fintech market has been teeming with myriad newcomers. Here are some examples of popular neobanks, whose names you may recognize:

• Chime

• GoBank

• Aspiration

• Current

Recommended: How to Manage a Checking Account

Neobanks vs Traditional Banks

So how do neobanks compare to traditional banks? The table below breaks down common differences, but remember: Each bank (or neobank) is different and offers varying levels of services, rates, and fees. These are broad generalizations and may not apply to every financial institution.

	Neobanks	Traditional banks
Fees	May offer lower and fewer fees	May charge higher and more fees
Interest on deposits	May have higher interest rates on deposit accounts	May have lower interest rates on deposit accounts
Offerings	Typically offer checking and savings accounts; may offer a credit card	Typically offer multiple checking and savings accounts, as well as credit cards, personal loans, home loans, auto loans, and mortgages; may offer investment and retirement accounts
Mobile app/online banking	Typically have high-rated mobile app and online banking platforms	May lag in app and online quality compared to neobanks
Physical location	Typically do not have physical locations	Typically have physical locations
Insurance	May offer FDIC insurance through a larger bank	Typically carry FDIC insurance (or NCUA insurance for credit unions)
Regulation	May not be regulated	Typically chartered and regulated

What About Online Banks?

The previous table does not capture all the nuances of online banks. The differences between online banking and neobanking were briefly noted above. However, it’s worth taking a closer look at how online banks compare to traditional brick-and-mortar ones. While they may offer the same breadth of products, online banks typically offer better rates and lower fees than traditional banks. Online banks also usually offer leading-edge mobile apps as well as FDIC insurance.

Online banks can afford to pay those higher interest rates and charge lower fees because, unlike traditional banks, they don’t have to pay for physical locations and on-premises staff. They can then pass some of those savings on to their customers.

Wondering if an online bank is right for you? Do your research on the pros and cons of online banking before making your decision.

The Takeaway

Neobanks may be appealing to tech-savvy consumers who want high interest rates on their savings accounts, low fees, and easy-to-use apps. Traditional banks, however, may offer more stability and are formally regulated. The convenience of in-person banking and the full suite of banking services offered by traditional brick-and-mortar banks can also be appealing.

In some ways, online banks offer the best of both worlds — they are licensed as banks and have FDIC insurance directly, but also typically offer higher-than-average APYs, lower (or no) fees, and state-of-the-art banking platforms and apps.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.50% APY on SoFi Checking and Savings.

FAQ

What’s the difference between a traditional bank and a neobank?

Traditional banks usually offer in-person branches, are licensed as banks, and offer FDIC insurance directly. They typically offer a full suite of banking services, including loans. Many neobanks are more narrowly limited to checking and savings accounts delivered digitally only. However, they often offer more competitive interest rates and lower fees.

Are neobanks regulated like regular banks?

Neobanks do not face the same regulation as regular banks simply because they are not charted as banks with federal and state regulators. Instead, neobanks often partner with chartered banks. That said, the Consumer Financial Protection Bureau has announced that it will increasingly supervise and regulate the activity of neobanks.

Is your money FDIC-insured with a neobank?

Some neobanks offer their banking services through chartered financial institutions. Through those institutions, the neobanks may be able to offer FDIC insurance for their accounts and services, but some don’t. It’s therefore a good idea to read the fine print of a neobank before opening an account so you know where you stand.

Photo credit: iStock/Prostock-Studio

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

*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.

SoFi members with direct deposit activity can earn 4.50% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. 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 (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.50% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.50% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

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

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

Interest rates are variable and subject to change at any time. These rates are current as of 8/27/2024. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.

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

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

SOBNK-Q324-067

Sep

2024

14 Reasons Why It’s So Hard to Save Money Today

By Anna Davies | Budgeting & Goals, Family Finances, money | Comments Off

There are many factors that make it hard to save money today, from the high price of groceries to the high interest rates on credit cards. Inflation. If you’re feeling a pinch, you’re not alone. It’s difficult to afford daily expenses and to save for financial goals, like having an emergency fund.

When it comes to covering a $400 unexpected expense, 37% of adults said they would have to borrow, sell something or not be able to cover the expense, according to a 2023 survey from the Federal Reserve. And emergencies can be more expensive than that $400 figure.

Beyond emergency funds, saving for other goals, like the down payment on a house or one’s retirement, are also feeling as if they are hard to achieve. These are worthwhile goals that build wealth. But how do you begin saving when everything is so expensive?

Read on to learn 14 reasons why you’re likely having trouble saving money, plus tips for how to start stashing away more cash.

Key Points

• High inflation and rising costs for essentials groceries make saving more challenging.

• Many adults struggle to cover unexpected expenses without resorting to credit.

• Debt, especially from high-interest credit cards, significantly hinders the ability to save.

• Lack of budgeting contributes to poor financial management and savings shortfalls.

• Social pressures and lifestyle inflation can lead to increased spending, further impeding savings efforts.

Challenges of Saving Money in Today’s Economy

Here are some of the most common reasons why you may find it hard to save money.

1. Not Focusing on Paying Down Debt

Having debt is one of the reasons many people have difficulty saving money. The urge to pay it off vs. save is strong. That’s especially true if you’re carrying revolving debt, like debt from credit cards. Interest rates on these types of accounts can change, which may mean that you’re owing even more money in interest than you may have thought. Right now, the range of interest rates on credit cards is around 13% to 27%.

American household debt hit a record high of $17.69 trillion in early 2024, according to the Federal Reserve. This debt includes student loan debt, credit card debt, mortgage debt, and personal loan debt. Some of this debt can be low-interest, like many mortgages, which also help a person build equity.

The kind of debt that typically prevents a person from saving is high-interest credit card debt. Paying that down by consolidating debt with a low- or no-interest card or by taking out a lower-interest personal loan can be good solutions.

2. Budgeting is a Non-Factor

Budgeting can sound intimidating, but assigning a dollar to all aspects of your cash flow can ensure that you don’t lose track of money. Recently, the average household earned $74,580 before taxes, according to U.S. Census data. Of that money, necessary expenditures — housing, food, health insurance — ate up the majority of the money, leaving little in free cash flow.

This “free cash flow” isn’t free, of course. It’s money to be put toward paying down debt, building an emergency fund, as well as paying for extras, like vacations and nights out. Knowing exactly how much you have and tracking your spending can help you put some money into savings. Try one of the popular budgets, like the envelope system or the 50/30/20 rule (which has you put 50% of after-tax money toward needs, 30% toward wants, and 20% toward saving), to take control of your cash.

3. Trying to Impress Friends With Money

Maybe friends invite you to a pricier-than-expected restaurant and you go along, only to split the painfully expensive check. That’s an example of FOMO (Fear of Missing Out) spending, which is an update on “Keeping up with the Joneses). Or perhaps you get a bonus and blow it on a status wristwatch to feel as if you fit in with your big-spender pals.

If you feel like you’re always spending money with friends, consider ways to potentially minimize that outflow of cash. Hikes, potlucks, and checking out local events can all be ways to cut down on these costs. They are relatively easy ways to save money. Or you might go back to that budget you created (see #1) and make sure you stick to it when it comes to splurge-y spending.

4. Not Earning Enough Money

It’s important that the money you earn be able to cover all your expenses. And sometimes, when your expenses increase unexpectedly, your paycheck doesn’t stretch as far as you need. Making and sticking to a budget can help you understand how much you’re spending each month, and can clue you into increases.

For example, say your rent renews 10% above what you were paying last year or your auto insurance increases. That money needs to come from somewhere. You might consider the benefits of a side hustle. Maybe you can sell the jewelry you make on Etsy, get a weekend job at a nearby cafe, or drive a ride-share from time to time.

5. Not Having an Emergency Fund

Saving for emergencies is important for many reasons, one of which is to have an emergency fund. An emergency fund is what it sounds like: Cash that can cover an emergency, which can be anything from a blown tire to a trip to the vet to covering expenses if you were unexpectedly let go from your job. Having an emergency fund relatively liquid and easy to access in a high-yield savings account (rather than in investments) means you can tap into it relatively quickly if you were to need it.

Most financial experts advise having three to six months’ worth of basic living expenses in an emergency fund. Set up regular transfers from your checking account to fund that; even $25 a week or a month is a start. Consider putting a windfall, like a tax refund, there as well.

6. Shopping Too Much

Shopping too much doesn’t mean always filling your online cart or always having packages at the doorstep. It could just mean that you’re not being strategic about how much you’re paying. For example, buying groceries every day at a nearby gourmet grocery could be much more expensive over time than doing a weekly or bi-weekly shopping trip to a warehouse club.

Making lists, tracking items over time, and making sure you get the best price by using coupons and cash back offers are all ways that can help you save money and even have fun while doing so.

7. Inflation in Housing, Education and More

Sky-high housing prices. Rising tuition costs. And interest rates that are increasing. Inflation can make everything more expensive. This can make it challenging to figure out how much to save, especially if you’re saving for a house or putting aside money for tuition. Inflation can also make smaller things, like grocery runs, more expensive too. Overall, rising prices can make it feel difficult to save money, let alone keep your checking account where you want it to be.

Take a deep breath and remind yourself of the cyclical nature of the economy. America has had recessions, a Great Depression, and plenty of inflation before. Persevere and be money motivated: Do your best to control spending and save, if possible, 10% of your take-home earnings towards your future goals.

8. Paying for Items We Don’t Use

How much stuff do you own? Probably way more than you regularly use. And it’s not only physical stuff. Unused digital subscriptions and wasted food…all of it adds up to spending money on things we don’t need.

One quick way to get that money back: Go through your last month of bank account payments and note any money you spent on subscriptions. Chances are, there are at least one or two you either don’t use or use so rarely you can let them go without missing them. For instance, check out how many streaming channels you are paying for. It could save you hundreds of dollars a year if you lose one or two.

9. Saving Money is Not Our Priority

If you wait until the end of the month to put aside whatever you have left, chances are there’s no money left. That’s why prioritizing saving is so important. Learning to save can be a skill, and employing smart strategies can help you make sure that you keep that skill strong.

For example, you can automatically transfer money from your paycheck into savings, so you don’t see it sitting there and aren’t tempted to spend it. Budgeting apps can also be helpful to curb spending so you have more money to save.

10. Cost of Living is Rising

We’ve touched on inflation hitting the large things we’re saving for, and the small things we buy every day. Inflation is notable across so many spending categories: The World Economic Forum found that food prices increased worldwide by nearly 10% from January to April 2022 — the largest 12-month rise since 1982. This past year, they rose just 1%, but rising less swiftly of course is very different from seeing costs move lower.

There are various ways to manage this. One way to get a quick cash infusion is to sell things you have but no longer need or use. This might be gently used clothing, a laptop that’s sitting unused, or that mountain bike that is gathering dust. You can try a garage sale, Nextdoor, Craigslist, or local Facebook groups, or (if it’s something small) eBay or Etsy.

11. Spending Too Money On Social Activities

All too often, hanging out comes with a price tag. After dinner, or a show, or drinks you’ve depleted your bank account. Setting up a budget for socializing can help you spend money wisely. You might check out the restaurant in your neighborhood you’ve been dying to try when they have a reasonably priced prix fixe menu; that way, you’d still have space to save. Thinking of cheap activities and researching free things going on in your community (music, fairs, and more) can help you go out without the steep price tag.

12. Lifestyle Creep

If you’re not familiar with the expression, lifestyle creep is when increased income leads to increased spending. As your pay goes up, you may feel justified in moving up to a rental home with more amenities. You may be more likely to go to more expensive hotels when traveling and join pricey gyms. Lifestyle creep can make it tough to pay down debt, boost savings, and build wealth.

Upgrading your leisure habits when you make more money isn’t a bad thing — but it can be something to be conscious of, especially if you feel like you aren’t saving enough. This may be a good moment to pick and choose your perks. If you are moving to a more expensive apartment, say, maybe you skip that quick vacation you were thinking of taking. Or you could come up with fun ways to save money, like monthly challenges. For instance, don’t buy any fancy lattes for a month and put the money in savings. You may be surprised by how much you save.

13. Not Thinking Ahead

One big reason it’s so hard to save money is that we are so rooted in the present. It’s a real challenge to imagine our toddler needing college tuition money or ourselves being old enough to retire. It can be easier just to put those thoughts to one side for a while.

But when that happens, the opportunity for compound interest is lost. For instance, if Person A were to save $1,000 a month from age 25 to 65, accruing 6% interest, they would have more than $2+ million in the bank at age 65. If Person B saved the same $1,000 a month from age 35 onward until they turned 65, they would have about $1,000,000, or half as much!

By budgeting, planning ahead, and saving, you can have financial discipline and enjoy these kinds of results. It’s important to remind yourself to take care of tomorrow as well as today.

14. Spending Money is Easy

Whether you’re out and about or scrolling through your phone, opportunities to spend money are everywhere. You see a delicious poke bowl while running errands, or you’re looking at your friend’s baby on Instagram, and there are those vitamins everyone is talking about. Ka-ching.

It’s definitely a challenge to grow your money mindset and be able to ignore all of these temptations and focus on longer-term financial goals. Namely, saving for “out of sight, out of mind” future needs. Here’s where your budget can once again be helpful. By having a small stash of cash for fun, on-the-fly expenditures, you can treat yourself (something we all need now and then) without blowing your budget. You will likely be a more mindful and careful consumer if you know, say, that you have $25 this week for a reward.

The Takeaway

Yes, it can be hard to save money due to rising costs, high interest rates, FOMO, lifestyle creep, and other forces. But if you focus on saving money, you’ll find more and more ways to maximize the money you do have. One of the ways to do so is to look for a banking partner with low (or no) fees and high interest rates.

Take a look at what SoFi offers.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.50% APY on SoFi Checking and Savings.

FAQ

What are the challenges of saving money?

An increased cost of living, lack of a budget, and other factors can make it hard to save. Add in temptations to spend, social pressure, and the fact that a purchase can momentarily lift your spirits, and you have plenty of reasons why saving can be challenging. The good news: A few behavioral tweaks (such as finding a budget you can really follow) can help you save money and make the most of every dollar.

Do millionaires struggle to save money?

Yes. Studies and surveys have found that even high earners live paycheck to paycheck. Fortunately, there are always ways to save, regardless of the size of your bank account. The same rules of budgeting, setting up automatic transfers into savings, and being a smart consumer can help anyone.

How do you stay motivated when it’s so hard to save money?

Motivation varies. Some people find it motivating to see their credit card balance go down, other people like to see their retirement account balance grow, and still others like to mix it up and give themselves a different saving challenge each month. The trick is finding a strategy that works for you.

Photo credit: iStock/sorrapong
SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

SoFi members with direct deposit activity can earn 4.50% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. 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 (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.50% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.50% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

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

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

Interest rates are variable and subject to change at any time. These rates are current as of 8/27/2024. There is no minimum balance requirement. Additional information can be found at http://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.

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.

SOBNK-Q324-021

Sep

2024

How to Stop or Reverse ACH Payments: All You Need to Know

By Ashley Kilroy | Budgeting & Goals, Financial Independence, money | Comments Off

Sometimes, no matter how careful you are with your bank account, you may want to cancel an online payment. Fortunately, it’s often possible to do so. Even if you previously sent out a recurring automatic payment, you can typically hit the brakes on an upcoming transaction.

Many of us have learned to rely on ACH payments, which can be used for a business’s payroll, tax payments, bill payments, account transfers, and more. You may well pay many of your monthly bills — from your utilities to your streaming service subscriptions — in this way. As a result, it’s a good idea to understand how ACH works and how to stop or reverse a payment when necessary.

What Are ACH Payments?

ACH payments are a method of money transfer between banks made through the ACH or Automated Clearing House network. NACHA (the National Automated Clearing House Association) governs these transactions, which can be an alternative to other payment options, like credit cards.

With ACH, the funds come directly from a bank account. This makes payments seamless and convenient; no paper checks or postage stamps required. ACH payments are also available to both consumers and businesses alike as long as they have a U.S. bank account.

One downside of ACH transfers, though, is that they can take longer than options like a wire transfer. When you compare a wire transfer vs. an ACH payment, wired funds can transfer within a day. In terms of how long an ACH payment takes, it may be several days. However, ACH has the upper hand in terms of cost: They are generally less expensive than other payment processing methods and often free.

ACH payments can break down into two categories: ACH credit and ACH debit.

An ACH credit is like a virtual check. The payer tells the ACH network to transfer their account funds to the payee’s account. In contrast, ACH debit (the more popular version of ACH transfer) involves a recipient pulling funds from the payer’s account. (For instance, this kind of payment occurs when you authorize your car loan to be automatically debited on a certain day of each month.) Merchants often prefer this kind of automatic debiting as it reduces the possibility of late or failed payments.

Can ACH Payments Be Canceled or Returned?

So, let’s say you just moved and forgot to cancel your gym membership at your old location. You realize that a payment is about to be sent out. Or maybe you set up a one-time payment to a vendor but notice (oops!) that you typo’d the amount? Now what? Can you stop or reverse an ACH payment from a checking account?

Typically, yes. This is partially possible due to the time frame of ACH transfers. ACH transfers can take multiple days to settle, and, as a result, you have more time to stop or reverse your transaction.

Rules vary by bank, but you may be able to cancel an ACH transfer over the phone, or you may need to fill out a stop payment form online or at a branch. Either way, time is of the essence. If the payment has already cleared, you’ll need to request a reversal, which is a more complicated process.

Recommended: Average Savings by Age

How to Reverse ACH Payments

Let’s look at reversing an ACH payment in a little more detail. Occasionally, an ACH transfer may involve a mistake. It’s easy to type in the wrong dollar amount or otherwise err when it comes to making payments without cash in hand. If you act quickly, you may be able to stop the payment by contacting your bank. But if the payment has already cleared your bank account, you’ll need to request a reversal.

The process for how to reverse an ACT payment will vary by bank, but here’s a look at what’s typically involved.

ACH Reversal Requirements

NACHA, the organization that oversees ACH payments, has specific qualifications that determine if an entry is erroneous. If these details are satisfied, you are then allowed to reverse your payment without an issue. To qualify, an entry must meet one of the following conditions:

• Be a duplicate of a previously initiated entry

• Transferred on the wrong date

• Include a mistake in the sender or recipient’s account number

• Transferred the incorrect amount

These scenarios cover many of the situations that would lead you to cancel or reverse a payment.

How to Stop an ACH Payment

If you want to stop a transaction, it’s actually to your benefit that ACH payments take several days to settle. This means you have some time to halt an ACH transaction if you need to. However, every bank operates differently and may have its own rules on how to stop an ACH payment. For example, you may find that your bank can cancel an ACH payment online or over the phone. But other institutions may need you to submit a physical form canceling the transaction. Check with the institution that holds your account to find out how to proceed.

You can also cancel your recurring ACH debit payments. You need to do this within three business days before the funds are due. Typically, the process involves contacting the entity expecting your payment and letting them know that you are revoking access to your bank account. Next, you’ll need to contact your own bank to let them know you are no longer allowing automated payments to this payee. You may be able to do this over the phone or you may need to fill out and submit a stop ACH payment form.

How to Update Direct Deposit Details

A quick look at the other side of the coin: Let’s say you are receiving funds by direct deposit (perhaps your paycheck or government payments), and realize you need to update your details. If you have changed bank accounts — maybe you found a high-yield online savings account you can’t resist — you’ll need to let the entity that is paying you know your new info. For benefits like Social Security payments, you may be able to do this online. To update your direct deposit information with your employer, contact your company’s HR department to find out what the process is.

The Takeaway

The ACH network is a valuable payment processor that consumers and businesses in the U.S. rely on. However, situations can arise that may trigger you to want to stop or reverse a payment, such as if you had entered details incorrectly. Fortunately, it’s possible to stop ACH payments from your checking account or reverse an ACH payment. You can then notify the others impacted and get your banking transactions back on the right track again.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.50% APY on SoFi Checking and Savings.

FAQ

How long will it take to reverse an ACH payment?

It generally takes two business days to reverse an ACH payment. However, some cases can take longer if the transaction is disputed.

Can you amend an ACH transfer?

Yes, you can typically amend or cancel an ACH transfer by contacting your bank. If the transaction hasn’t been initiated yet, you may be able to stop it from happening. If the transfer has already cleared, you’ll need to work with your bank to reverse the ACH transaction.

How do I stop ACH payments on my checking account?

If you want to stop an ACH payment, you’ll need to contact your bank at least three days before the ACH transfer’s date. This may involve an ACH payment stop request submitted in writing. A small fee may be involved in halting the payment.

Photo credit: iStock/insta_photos

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

*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.

SoFi members with direct deposit activity can earn 4.50% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. 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 (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.50% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.50% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

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

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

Interest rates are variable and subject to change at any time. These rates are current as of 8/27/2024. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.

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

SOBNK-Q324-063

Sep

2024

11 Benefits of Being an Entrepreneur

By Ashley Kilroy | Financial Independence, Life & Career, money | Comments Off

Entrepreneurship is booming in America. According to the U.S. Census Bureau, a record 5.5 million new business applications were filed in 2023. While entrepreneurship is often portrayed as being exhaustingly hard, its many upsides are clearly enticing more and more people to dive in.

What are the benefits of being an entrepreneur? They can range from setting your own hours to having unlimited earning potential to realizing a personal dream. Some people nurture an idea for an innovative product or service for years and then set to work bringing it to life. Others are on a mission to help their community or a specific segment of the population.

Still others set out with the simple goal of making a lot more money than their current 9-to-5 gig pays.

Whatever your motivation, the benefits of becoming an entrepreneur can have a major positive effect on your life. Here, we’ll take a closer look at the perks of starting your own venture. They just may motivate you to take this next giant step in your career and charter your own path.

Read on to learn:

• What is an entrepreneur?

• How does entrepreneurship work?

• What are the benefits of being an entrepreneur?

What Is an Entrepreneur?

An entrepreneur is a person who starts their own business to bring their dreams to life. Whether they envision opening a better coffee bar or developing a fitness app, they invest time and capital in their business ideas and work diligently to make them successful. Entrepreneurs often partner with other investors, employ workers, and take risks as they seek success.

Typically, an entrepreneur is an inherent problem-solver with a can’t stop, won’t stop attitude. In addition, many are brimming with confidence and conviction that their idea is a terrific one. They refuse to stay discouraged and just see the word ‘no’ as a temporary setback at worst.

The U.S. is full of success stories of entrepreneurs, whether that means the likes of Microsoft’s Bill Gates, Amazon’s Jeff Bezos, or any of the folks who win on Shark Tank. Many of these experienced numerous failures and pressure to give up from family, friends, and potential investors but persevered.

While the wealthiest entrepreneurs are popular symbols of accomplishment and can make it look easy, the truth is that most entrepreneurs have spent countless hours and tremendous sweat equity behind the scenes to become successful.

How Does Entrepreneurship Work?

Entrepreneurship is the opposite of 9-5 jobs. Instead of punching a clock or working on a project for a company, you depend on your own efforts to bring in some type of income. The grind can be brutal, especially at first when you probably aren’t making money.

However, entrepreneurship means more than wanting to work for yourself. To live as an entrepreneur, you need an idea for a business, service, or product to focus your efforts. For example, you might see an opportunity to succeed with a superior product or be the first to serve a niche market. Ideally, you’ll start earning money to put in your bank account for savings or to invest back in the business.

As an entrepreneur, you bet on yourself, which means you invest as much of your time and money into your business aspirations as possible. You might leave your job to pursue your dream or put in hours before or after your day job to get your business going. Either way, successful entrepreneurs often reach a point where they grow their company enough that they must dedicate all their time to it, hire others to take on some of the workload, or partner with investors.

In addition, some entrepreneurs even create social change through their business efforts.

Benefits of Being an Entrepreneur

Now that you understand how entrepreneurship works, here are some pros of being an entrepreneur.

1. Ability to Work from Anywhere

One of the key benefits of becoming an entrepreneur is you typically have the ability to work from home or anywhere else you may be. Since you can run many types of business online, you often only need a laptop and internet access to work as an entrepreneur. A work-from-home budget can be an economical way to launch your venture. So, whether you prefer your living room, a coffee shop, or a beach (as some digital nomads do), you have the freedom to set up shop wherever you like without necessarily paying rent for a workspace.

2. Having a Flexible Schedule

In addition to working from anywhere, you choose when you’ll work as an entrepreneur. As a result, you make your own hours,which may give you room for family time, exercise, or errands during the day.

Worth noting: Since the “office” never closes, some entrepreneurs are known to toil 16-hour days (or longer) to realize their aspirations. For this reason, setting your own hours can be a double-edged sword that may lead to overwork and burnout for some. Proceed with your eyes wide open, and remember that work-life balance can be valuable.

3. Ability to Make Key Decisions

As an entrepreneur and business owner, the buck stops with you, which is another empowering benefit of being an entrepreneur. You’ll decide how the business runs, the product or service to focus on, and the target market you’re trying to reach. You pick your team, your partners, and your company culture as the business grows.

4. Growth in Leadership

A successful business requires an able leader. In all likelihood, entrepreneurship will give you opportunities to develop as a business owner and manager. You can learn new skills and expand your knowledge.

As a result, as you continue your professional journey, you’ll get the chance to become an effective boss, operations manager, and business development wrangler. All of which are pros of being an entrepreneur.

5. Ability to Give Back to Your Community

Success as an entrepreneur usually means growing your business to the point where you hire employees. As a result, your efforts may contribute to creating wealth and economic opportunities in your community, helping others support their families and accomplish their dreams. Additionally, successful business owners and entrepreneurs can invest in other companies and donate to charity, benefiting those around them. There’s one more way this can be an upside of entrepreneurship Your business mission may be one that uplifts others. Perhaps you’re developing a healthier snack food, for instance, or an app that helps people reduce their stress levels.

6. Choosing Who to Work With

As an entrepreneur, you might start your business slowly (a benefit of side hustles) or go in full tilt right from the start. Regardless of how you get going, you’ll determine who your partners and colleagues are, which can make for a very agreeable work life. Whether you occasionally speak with consultants, hire workers, or bring investors on board, you decide who gets involved with your business. Your independence as an entrepreneur allows you to intentionally create a work culture that fits your preferences. It’s empowering to have the ability to say “no” to working with someone who doesn’t fit your vision.

7. Being an Entrepreneur is Rewarding

One of the many benefits of becoming an entrepreneur is seeing success unfold, thereby proving the validity of your ideas and the impact they can have. Whether you develop a shampoo that people love or a service that helps disadvantaged students, knowing that your endeavor is finding an audience can be hugely rewarding.

In terms of finances, turning a profit on your business can be life-changing. Once you run payroll and address your business costs and responsibilities, the money you’ve earned can go into your bank account.

Whether you want to put money earned back into the business for more growth or use it to get a new car, seeing money roll in from your business can be incredibly satisfying. Instead of having a set salary, you’ll see how your very own efforts can drive your income and net worth.

8. Being Able to See the Fruits of Your Labor

Success as an entrepreneur is multifaceted and fulfilling: You could obtain financial freedom, see your business grow through meeting customers’ needs, mentor employees, and launch related (or unrelated) ventures. That feeling of having created something that clicks with an audience and builds a following is uniquely satisfying and can definitely boost your sense of pride and self-esteem.

9. Creating a Positive Impact

Entrepreneurship goes beyond making an appealing product and profitable business. Your leadership can inspire others to pursue their dreams. Additionally, your company can create economic ripple effects, allowing others to achieve financial success and benefiting your city and beyond.

10. Income Is Decided by You

As an entrepreneur, you manage the money (at least during the start-up period). As your business evolves, you might get to decide whether you want to create jobs with better pay or scale your business quickly. You’ll also allocate funds and determine your own paycheck.

It’s a balancing act that you will be in charge of. For example, you might be less concerned with becoming a millionaire than you are with retaining quality employees for the long haul through robust compensation.

11. Networking Opportunities

Most successful entrepreneurs keep strong connections with others who are also starting their own ventures. For instance, you can learn from those who already had to rent workspace, run payroll, or deal with licensing arrangements. In the future, you might be the one tapped by a newly minted self-starter for that very same kind of information.

You’ll grow professionally through peer, mentor, and mentee relationships. No one knows it all, and tapping your network can be an effective way to solve business problems and find the right people to hire or consult.

The Takeaway

There are a myriad of benefits of being an entrepreneur, such as deciding your own schedule, boosting your earning power, and having the opportunity to impact people around you. However, successful entrepreneurship requires tenacity, willingness to learn from failure, and comfort with risk.

The beauty is that anyone can become an entrepreneur. Whether you start your business as a side hustle or leave your job to take the plunge, you have the power to create your own opportunity. You’ll get the chance to make important decisions, such as determining the location of your business, deciding how many employees to hire, and choosing the right bank account for your earnings. Being an entrepreneur can help you grow professionally, personally, and financially.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.50% APY on SoFi Checking and Savings.

FAQ

What are the drawbacks of being an entrepreneur?

The drawbacks of being an entrepreneur include not having a guaranteed wage or salary, possibly investing more hours into your business than you would at most jobs, and the real risk that your endeavor may fail. As a result, you might put all your time and money into a business venture only to end up with nothing to show for it.

Can anyone become an entrepreneur?

Anyone can become an entrepreneur; no specific certification or education is necessary. However, in some cases, business experience, a college degree, and professional training programs can increase your chances of being a successful entrepreneur.

How long does it take to become an entrepreneur?

One of the pros of being an entrepreneur is that it’s possible to become one quickly if you have a business idea plus sufficient available hours and capital to start your venture. However, finding success as an entrepreneur usually takes years of hard work.

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SoFi members with direct deposit activity can earn 4.50% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. 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 (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.50% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.50% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

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

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

Interest rates are variable and subject to change at any time. These rates are current as of 8/27/2024. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.

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Benefits of Being an Entrepreneur

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