SoFi

It can take between mere minutes and 30 days to be approved for a credit card, and then up to two weeks for it to arrive in the mail. If you want to shorten the timeline and get access to credit ASAP, there are moves that can help you out.

Read on for tips on expediting the process and best practices for using your new card once you get it.

How Long Does It Take to Get a Credit Card Approval?

Usually, many creditors have an instant approval process if you apply for a credit card online. If you meet the issuer’s approval criteria, you may qualify right away. However, if your requirements are on the borderline, the creditor may have someone review your application by hand, which can take a week or so to complete. This is also the case if you submit your application over the phone or through the mail.

Additionally, even if you meet the requirements, approval could take longer due to security protections. If your credit is frozen, for example, a creditor won’t be able to gather all of your credit information. Therefore, you’ll have to remove the freeze before moving forward with the approval process.

Recommended: Why Credit Cards Get Declined: Reasons and Solutions

How Long Does It Take to Receive Your Card?

Once approved, it can take anywhere between five business days and two calendar weeks to receive your credit card in the mail. Some creditors may allow you to speed up the process free of charge. Others may charge a fee to do so.

If your card is lost or stolen en route or once it arrives, it may take anywhere from three to 14 business days for a new one to get sent out. Like with a new credit card, your creditor might be willing to expedite the process for free or if you pay a service fee.

Meanwhile, what if you’re in the situation of having a credit card that’s nearing its credit card expiration date? You can expect to get a replacement card anywhere from one to two months before it expires. If you haven’t received a new card and your card is about to expire, you should contact your credit issuer.

Recommended: How to Get a Credit Card for the First Time

Getting Your Credit Card Faster

If you’re not satisfied with the standard timeframe for how long it takes for a credit card to arrive, there are ways you can expedite the process.

Preapproval

Creditors often send preapproved credit card offers to consumers who meet their approval criteria. If you don’t receive a preapproval offer in the mail, you also can typically apply online through the creditor’s website. You’ll need to answer a few questions and provide some personal information, and then the creditor will offer preapproval if you qualify.

Credit card companies run soft credit inquiries to determine your qualification status, which will not impact your credit. Preapproval isn’t the final approval, but it still can indicate that you have a good chance of getting approved.

If you choose to move forward after preapproval, you must submit a formal application. At this point, the credit card company will do a hard inquiry, which can temporarily impact your credit.

Instant Approval

Similar to a preapproval, credit card issuers offer instant approvals. With an instance approval, the creditor will run a preliminary check on your credit to see if you meet their approval requirements. If you have a higher credit score, it’s more likely you will qualify instantly.

Credit card companies usually look at your creditworthiness (your history of on-time payments, credit cards usage, etc.), your income, and whether you’re old enough to get a credit card. You’ll be instantly approved for a card if you meet the approval requirements.

Expedited Shipping

Another solution if you’re wondering how fast you can get a credit card is to request expedited shipping. While some companies offer expedited shipping free of charge, others may charge a fee to get your card faster. Again, check with the credit card company to make sure you understand their rules and guidelines around expedited shipping.

Applying for an Instant Use Card

Some credit card companies and retailers offer instant use credit cards. This means that you may apply and be able to use your credit card immediately after approval. You don’t need the credit card in hand to do so.

For example, if you apply for a retail credit card in the store, they may let you use it right there and then. Or, if you apply for an Apple card, you can typically add it to a digital wallet like Google Pay or Apple Wallet for instant use.

You can usually use instant credit cards for your online shopping transactions. However, some co-branded cards may have restrictions on where you can make purchases. Otherwise, these cards are similar to what a credit card is typically.

What to Do If the Card Does Not Arrive Within the Expected Timeframe

If you never received your credit card, call your credit card company right away. You may be able to go to a bank branch to resolve the issue if you applied for a credit card through your local bank.

Credit card companies may allow you to request a temporary credit card until your permanent credit card arrives.

Using Your New Credit Card

Now that you have your new credit card in hand, it’s smart to make sure you know the best practices for using it and fully understand how credit cards work. While using it irresponsibly could impact your credit score and overall financial situation, responsible credit use can help you boost your credit score and leverage perks.

Here are some tips for getting the most out of your credit card:

•   Make timely payments. Your payment history is one factor that credit bureaus use to determine your credit score. Making late payments may ding your credit and cost you a late payment fee. Setting up automatic payments is one of the easiest ways to ensure you make timely monthly payments and avoid penalties.

•   Keep your balance low. Another factor that credit bureaus use to calculate your credit score is your credit utilization ratio. This is the percentage of your credit available you’re using at any given time. Aim to keep your credit utilization ratio below 30% (ideally at or under 10%) to avoid any impacts to your credit score.

•   Pay more than the minimum monthly payment. Only making the minimum monthly payment on your credit card may cause you to carry a balance into the next month, in which case you’ll incur interest. If you continue this cycle, it can make it hard to repay your total outstanding balance due to interest adding up. This is why it’s important to pay off your balance in full when you can.

•   Only use your card when it’s within your budget. Using your credit card for purchases like gas and groceries can help you build credit (as long as you can pay it off). However, using it for large items or impulse buys may lead you to rack up a lot of debt, which could be hard to dig out of. When using your card, make sure it’s within your budget to pay off your purchases.

The Takeaway

Getting a credit card can be a great way to build credit and earn rewards on purchases. Approval can take minutes or up to 30 days, and it can take anywhere from five to 14 days to receive your card. If you need to make a large purchase immediately, you may be able to request expedited shipping when you’re approved for a credit card, so you receive it sooner. You might alternatively apply for an instant use credit card, which could enable you to make charges to the credit card right away.

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 many days does it typically take to get a credit card?

The application and approval process can take minutes or up to a month: It can take anywhere from five business days to two calendar weeks to receive your card. If you apply through the mail or over the phone, it can take longer for your card to arrive.

Can I use my credit card before it arrives?

If you get approved for an instant use card, you can usually use it immediately. However, some restrictions may apply depending on the card you choose.

What is the earliest I can get a credit card?

Some companies offer expedited shipping, which can help you get your credit card within two business days. Keep in mind that you may have to pay a fee for expedited shipping depending on the card issuer.

Why was my credit card delayed?

If you’re on the borderline for meeting approval requirements, such as for income or credit score, it can take longer to receive a decision on your credit card application and thus to receive the card. It can also take longer to get your credit card if you mailed in your application as opposed to filling it out online.

---

About the author

---

Photo credit: iStock/everydayplus

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.

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

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.

SOCC0224019

Read more

Gap insurance is additional coverage drivers can purchase to pay off their auto loan after their primary coverage pays out for a totaled or stolen vehicle. Gap insurance is beneficial when a car’s depreciated value isn’t as high as the loan balance.

Gap coverage can be helpful and cost effective, but it isn’t always worth it. We’ll discuss how gap insurance works, pros and cons, and what it doesn’t cover.

What Is Gap Insurance?

Not everyone is familiar with gap insurance, since this car insurance term is only relevant to buyers of brand-new cars. It refers to coverage from an insurance agency or car dealership that will pay your outstanding loan or lease balance when your car is totaled or stolen and you owe more than the car’s value.

Your insurance policy or lender might describe gap insurance as loan/lease gap coverage. Gap coverage is accessible only to the original owner of a new car or the leaseholder of a new vehicle. Although it is not required, many car owners who conduct personal insurance planning believe it’s worth the minimal extra cost.

Recommended: How to Save on Car Maintenance Costs

Who Needs Gap Coverage?

A new vehicle will depreciate 40% in five years on average. Some cars depreciate more than others, with luxury vehicles and SUVs taking the biggest hit. As a result, during your first five years of car ownership, your car’s value can plummet while your loan balance remains well above your vehicle’s worth.

How much car insurance you need is often based on your comfort level and financial situation. Gap insurance, however, is particularly advantageous if you make a minimal down payment, since your loan amount will be higher. A car loan can take five years or more to pay off. The timeframe of the loan increases the chances of losing the car to an accident or theft, leaving you with an insurance payout based on massive depreciation.

Leasing a car presents a similar problem. Your insurance will cover only the car’s depreciated value. In case of loss, gap insurance can cover any additional amount you owe on the lease. Some lenders may require that drivers purchase gap insurance to obtain financing.

How Does Gap Insurance Work?

How car insurance works isn’t always intuitive. Let’s say you buy a new car for $35,000. You pay $5,000 down and take out a loan for the remaining $30,000. A few years later your car is stolen, and you file an insurance claim. Your car is worth $20,000, but you still owe $25,000 on the car loan. After your policy’s $500 deductible, your insurance pays out $19,500.

At this point, you still owe your lender $5,500 for the auto loan. This is where gap insurance comes in. The policy pays your lender the remaining amount due, and the debt is gone.

How Gap Insurance Works After a Car Is Totaled

In another example, an accident totals your car. A vehicle is “totaled” when needed repairs cost more than the vehicle is worth. Your insurance company provides a payout for the car’s current value.

As in the case of theft, your insurance will send a payout minus the deductible (learn about the types of deductibles in insurance). But you’re still on the hook for the remainder of your car loan. Gap coverage relieves you of that responsibility, potentially saving you thousands.

Recommended: How Much Does Insurance Go Up After An Accident?

Pros and Cons of Gap Insurance

Gap insurance offers a number of benefits:

•   Coverage to satisfy your auto loan in full in the event of theft or totaling the vehicle.

•   Inexpensive pricing when purchased from most insurance companies.

•   Protects you if you can only afford a small down payment on a new vehicle.

•   Especially helpful with cars that rapidly depreciate.

However, gap insurance also has several drawbacks:

•   Unusable if you don’t total your vehicle or lose it to theft.

•   Increases your insurance premium.

•   Less helpful if you put down a significant amount on your purchase, shrinking your loan amount.

•   Doesn’t make as much sense if you rarely drive.

How to Choose the Right Gap Insurance

Most car dealerships sell gap insurance, but you’ll pay far less if your car insurance company adds gap coverage to your policy. Your gap insurance and comprehensive coverage usually will come from the same company. You can’t split the policies between two companies.

Before purchasing comprehensive coverage for a new vehicle, ask the insurance company if it provides gap insurance. Some companies, like Geico and Farmers, don’t offer it.

Gap coverage from an insurance company costs about $60 annually. At a car dealership, you can pay up to $600 for a similar policy. Although you can add that cost to your auto loan, you’ll increase the interest you’ll pay. Plus, you may not have the option to cancel your gap insurance later if you don’t need it.

The company you choose and the level of coverage you need will affect the price of your gap insurance.

When to Cancel Your Gap Coverage

Once you pay off your auto loan, there’s no reason to keep your gap coverage, as you won’t owe your lender anything if you total your car. However, if you’re still midway through paying off your loan, canceling gap coverage might still make sense.

For example, we’ll assume you have $5,000 remaining on your loan. You look up your car’s estimated value on Kelley Blue Book and discover that your car is worth about $4,500. It may make sense to drop your gap insurance and risk the minor $500 financial hit if the car is totaled or stolen.

Selling or exchanging your car is another reason to cancel your gap insurance. It’s wise to make sure your insurance covers your car until the day you sell it. Otherwise, an accident could cost you thousands.

If you do cancel your gap coverage, you may qualify for a partial refund. For instance, when you pay off your loan early and the gap coverage was included in the loan, you can possibly request a refund of any prepaid premiums.

What Gap Insurance Doesn’t Cover

Gap insurance can be a tremendous help in certain situations, but there are expenses that the policy won’t cover:

•   Your comprehensive policy deductible

•   Down payment for a vehicle

•   Extended warranties

•   Late payments and related fees on your auto loan or lease

•   Security deposits

•   Lease penalties

•   Carry-over amounts from prior loans or leases

•   Credit insurance charges for your auto loan

How to Save Money on Gap Insurance

​​Gap insurance policies are usually affordable when purchased from a traditional or online insurance company. But you can offset the extra cost by following these steps:

•   Shop around. Remember, your comprehensive, collision, and gap coverage usually come from the same company, but not all insurance companies offer gap coverage. Ask about gap coverage availability and pricing before picking a policy.

•   Look into discounts. You may be eligible for reduced rates if your projected mileage is low or you have a safe driving record. Learn more about how to lower your car insurance.

•   Sign up for voluntary tracking. Your insurance company may offer a lower rate if you allow them to install a tracking device in your car. You’ll have extra incentive to drive sensibly if you’re saving money.

•   Pay annually or biannually. Monthly payments for auto insurance often cost slightly more. If you can cover the annual bill up front, you’ll reduce the total amount paid.

Is It Worth Getting Gap Coverage?

Because gap coverage is typically inexpensive, it’s often worth purchasing for a new vehicle. For a few dollars a month, it can save you potentially thousands in the event of a bad accident or theft. Plus, if you’re new to the road, purchasing gap coverage is one of the crucial insurance tips for first time drivers.

However, the lower your loan balance, the less valuable gap coverage becomes. Over the years, the gap between your loan balance and car’s value can close, and gap coverage will be of little value.

The Takeaway

Anyone purchasing or leasing a brand-new car will likely find gap coverage worthwhile, especially if you paid a low down payment. New vehicles depreciate rapidly in the first few years of ownership, potentially leaving the owner with a loan balance that’s higher than the vehicle is worth after an accident or theft. Yet auto insurance pays out only the vehicle’s market value. With an average monthly cost of a few dollars, gap coverage can save drivers thousands. You can cancel gap coverage when you no longer need it.

When you’re ready to shop for auto insurance, SoFi can help. Our online auto insurance comparison tool lets you see quotes from a network of top insurance providers within minutes, saving you time and hassle.

SoFi brings you real rates, with no bait and switch.

FAQ

Does gap insurance give you money?

Gap insurance pays off your car loan after your main coverage pays you the actual value of your totaled or stolen vehicle. That’s important because depreciation can result in a loan balance that’s higher than the vehicle’s value.

Do you need car gap insurance if you have full coverage?

Full auto coverage will pay out your car’s actual market value. However, since your loan balance may be higher than your car’s value, especially in your first few years of ownership, gap insurance is extremely useful in addition to full coverage.

How long does it take to get a gap insurance refund?

After canceling gap coverage, your insurance company will send you a prorated refund in four to six weeks.

---

About the author

---

Photo credit: iStock/ollo

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

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

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

SOPRO-Q324-003

Read more

This content may include information about products, features, and/or services that SoFi does not provide and is intended to be educational in nature.

Do you pay all of your bills and then feel as if the amount of money you have left over for your financial goals is a big zero? Unfortunately, many Americans live paycheck to paycheck (78% of us according to a 2023 “Getting Paid In America” survey conducted by PayrollOrg) and economic trends such as inflation can strain even the most financially stable households.

It’s a frustrating feeling not to have cash to put towards longer-term goals like, say, buying a house or retirement. While every person’s financial circumstances differ, your budget should allow room for important goals, such as building an investment account or padding out an emergency fund.

The question is, how much extra money should you have after paying your bills? The answer will depend on your income, expenses, and financial goals. Here’s a closer look.

What Is a Good Amount of Money to Have After Paying Bills?

Everyone’s financial circumstances are different, so it’s hard to pinpoint a good amount of leftover money after bills. For example, you might have a medical bill weighing down your otherwise healthy budget. Or you could have limited income as a student or retiree.

In most cases, it’s vital to prioritize spending on your needs and stay motivated when paying off debt. You’ll also want to start stashing away cash for other goals.

With this perspective in mind, the 50/30/20 rule represents a good way to allocate money. The numbers act as a guide: 50% of your take-home income pays for necessary expenses like food, housing, and debts. Unnecessary expenses, like entertainment or dining out, are considered wants, not needs, and they account for the next 30%. Finally, 20% of your income goes toward investments and savings (as well as debt payments beyond the minimum).

Based on this framework, it’s recommended to have at least 20% of your income left after paying all of your essential and nonessential expenses, which will allow you to save for both short- and long-term goals.

Tips for Managing Your Bills

Sometimes, though, putting aside 20% of your paycheck can be a real challenge. Here are some strategies that can help you pay your bills — and still have some money leftover to put towards your goals.

Getting to the Root Cause

If you often scramble to make it to payday, there’s likely a problem lurking in how your income and expenses are aligning. Fortunately, dozens of apps and banking tools are available to help you see where each dollar goes every month. Of course, you could also keep paper receipts and bill statements the old-fashioned way. Either way, keeping tabs on your cash flow can show you if you’re spending too much at restaurants or if you should up your income through a new job or a low-cost side hustle.

💡 Quick Tip: Want a simple way to save more everyday? When you turn on Roundups, all of your debit card purchases are automatically rounded up to the next dollar and deposited into your < a href = "https://www.sofi.com/banking/savings-account /" > online savings account.

Organizing Your Bills

Most of us have monthly obligations. One thing that can help you get on top of those living expenses is to take some time to organize your bills. For example, you might make a master list of all of your monthly bills, listing the amounts and when payment is due. It’s also a good idea to set up automatic bill payment — this ensures everything gets paid on time and helps you avoid late fees and interest. Just be sure you have enough funds in your checking account to cover these debits so you don’t wind up overdrafting your account (and triggering bank fees).

What Are the Bills That Are Necessary to Pay?

The following bills are essential for the average American household:

•   Rent or mortgage for housing

•   Food and toiletries

•   Utilities such as gas, water, and electricity, as well as WiFi

•   Transportation expenses, such as a car, vehicle upkeep, or bus pass

•   Minimum debt payments on student loans or credit cards

•   Premiums for health coverage, car insurance, and renters/homeowners insurance

Identifying these bills as top priority and knowing how much of your paycheck they account for can help you budget better. It can help you answer the question “How much extra money should I have after bills?” and hopefully tweak your spending to make sure you can save.

💡 Quick Tip: Bank fees eat away at your hard-earned money. To protect your cash, open a checking account with no account fees online — and earn up to 0.50% APY, too.

Which Bills Are Expenses That Can Potentially Be Canceled?

Cutting back on luxuries and treats can be painful, but there’s no feeling quite as rewarding as ending the month with your bills paid and a substantial deposit to your retirement account with money to spare. If you need to make room in your budget, consider canceling the following expenses:

•   Cable television or streaming subscriptions you rarely watch

•   Smartphone upgrades and high data plans

•   Gym or workout memberships

•   Shopping memberships

•   Digital cloud services

•   Overly expensive gifts for holidays and birthdays

•   Dining out and takeout

•   Cigarettes, vapes, and alcohol

•   Items that you can buy used instead of new, such as clothing, books, and more

Budgeting All Expenses

One of the best ways to ensure that you can cover your bills and still have money leftover is to set up a simple budget. A budget will act as a spending and saving plan to help you stay on track.

To do this, you’ll need to comb through your bank and credit card statements from the last several months and list all of your monthly expenses, including both necessary and unnecessary spending. Next, you’ll want to tally up your average monthly income. Once you see how your cash inflows and outflows line up, you may find that you need to make some adjustments in your spending.

Getting Another Job or Side Hustle

If you reduce your bills to a minimum but still experience financial challenges, picking up a side hustle can help you make ends meet. Whether you find a part-time job with an employer or work independently for a company like a ride-sharing or food delivery app, an extra 10 to 15 hours weekly can make a substantial difference in your budget. On the other hand, if your day job meets all your expenses, a second job can help you beef up your retirement account or pay for an expensive hobby.

Tracking Your Spending

Coffees and checkout impulse purchases at the grocery store can stealthily ding your budget. Luckily, there are more apps and tools than ever for tracking every expense. You can ditch pens, paper, and envelopes for a spending tracker on your phone or an Excel budget spreadsheet. Your bank might provide a free financial management app to help as well. Use these tools to help maximize how much money you should have leftover after bills.

Being Frugal for a Temporary Time

If you have lingering debts or want to save up a specific amount of money, being thrifty for several months can propel you into financial wellness. For example, you could make grocery shopping lists based on the coupons you clip each week. Or, if online shopping is your Achilles’ heel, you may want to unsubscribe from sales email lists for a while.

Some people enjoy monthly spending challenges. One month, you might say you are not going to spend any money on movies or music and put the savings towards your emergency fund. The next month, you might order takeout only twice and deposit the money you saved versus your usual habits into your travel fund.

Downsizing Your Possessions

Just as some monthly payments are unnecessary, you may have toys, gadgets, unused appliances, and more lying around that you don’t use regularly. You can pad your wallet by selling your stuff through Facebook Marketplace, eBay, or ThredUp. If selling online doesn’t appeal to you, a garage sale could be an option. These moves can help you have more money after bills.

Why Money Management Is Important

Life gets expensive, and making the most of your hard-earned dollars is crucial. Here are some principles to consider:

•   Failing to manage your money could cost you hundreds or thousands of dollars annually. Solid financial management can transform your spending habits, quality of life, and retirement income.

•   Money management can help you become more financially disciplined, which can be a key characteristic of successful people. The fortitude you build from sticking to a budget can help increase your overall stability in life.

•   Budgeting can help you achieve your future goals. For example, managing your money is vital for saving for your child’s education, affording a down payment for a house, or creating an emergency fund.

•   Actively managing your money can help you make more intelligent financial decisions. For example, you might have two main goals — building an emergency fund and repaying debts. However, you might only have enough income for one of the two. You can analyze your finances to understand whether it’s wiser to save or pay off debt.

•   Having your finances under control can reduce stress. Constantly worrying about money can present mental and physical health challenges. Getting a grip on your money is an excellent way to improve your life circumstances and create a bright future for you and your family.

The Takeaway

So, how much money should you have after paying bills?

Your financial situation will help determine the right amount of leftover money after bills. If you’re struggling to find leftover money at the end of the month, organizing your bills, setting up a budget, cutting back on nonessential spending, and picking up some extra income can help ensure you have money left after covering all of your bills. You can then use these funds to grow your savings, achieve your goals, and build wealth over time.

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

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

FAQ

How do I avoid living paycheck to paycheck?

You can avoid living paycheck to paycheck by tracking your spending, following a budget, and cutting back on unnecessary expenses such as entertainment and dining out.

How do I get a second job when I do not have the time?

You might find a second job that fits into your off-hours, like walking dogs when you have free time on the weekend. Also if you can find a gig that pays well enough, you may be able to reduce how much you’ll have to work. It’s a good idea to map out a schedule to help divide work from leisure and maintain a healthy work-life balance.

Is the 50/30/20 budget the only good rule of thumb?

The 50/30/20 budget rule can be a helpful guideline. It states that you should spend up to 50% of your after-tax income on needs; 30% on wants; and 20% on saving and debt payments beyond the minimum. However, it’s fine to play with the percentages. If you live in an area with a high cost of living, for example, you may be better off with a 70/20/10 budget. The idea is that you include saving as part of your monthly spending plan.

---

About the author

---

Photo credit: iStock/RichVintage

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

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

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

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

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

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

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

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/.
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-Q424-028

Read more

A dead cat bounce refers to an unexpected price jump that occurs after a long, slow decline — and typically just before another price drop. In other words, the price jump isn’t “live” and typically doesn’t last.

The danger can be that the apparent rebound might create a false sense of value, momentum, or optimism. That said, some investors may be able to take advantage of a dead cat bounce to create a short position. Unfortunately, it’s usually hard to identify a dead cat bounce until after the fact.

Nonetheless, investors may want to know some of the signs of this price pattern, as it can help them gauge certain market movements.

What Is a Dead Cat Bounce?

The phrase “dead cat bounce” comes from a saying among traders that even a dead cat will bounce if it’s dropped from a height that’s high enough.

Thus, when a security or market experiences a steady decline and then appears to bounce back — only to decline again — it’s often dubbed a dead cat bounce.

What can be puzzling for investors is that the bounce, or “recovery”, doesn’t have a rhyme or reason; it’s merely part of a short-term market variation, perhaps driven by market sentiment or other economic factors.

Knowing the Specifics

If you’re learning how to invest in stocks or invest online, bear in mind that a dead cat bounce is not used to describe the ups and downs of a typical trading day — it refers to a longer-term drop, rebound, and continued drop. The term wouldn’t apply to a security that’s continuing to grow in value. The spike must be brief, before the price continues to fall.

It’s also important to point out that this financial phenomenon can pertain to individual securities such as stocks or bonds, to stock trading as a whole, or to a market.

Why It Helps to Identify This Pattern

Even for experienced traders or short-term investors using sophisticated technical analysis, it can be difficult to identify a dead cat bounce. Sometimes a rally is actually a rally; sometimes a drop indicates a bottom.

The point of trying to distinguish whether the rise in price will continue or reverse is because it can influence your strategy. If you have a short position, and you anticipate that a rally in stock price will end in a reversal, you may want to hold steady.

But if you think the rally will continue, you may want to exit a short position.

Example of a Dead Cat Bounce

To illustrate a dead cat bounce, let’s suppose company ABC trades for $70 on June 5, then drops in value to $50 per share over the next four months. Between Oct. 7 and Oct. 14, the price suddenly rises to $65 per share — but then starts to rapidly decline again on Oct. 15. Finally, ABC’s stock price settles at $30 per share on Oct. 16.

This pattern is how a dead cat bounce might appear in a real-life trading situation. The security quickly paused the decline for a swift revival, but the price recovery was temporary before it started falling again and eventually steadied at an even lower price.

Recommended: How to Invest in Stocks

Historical Dead Cat Bounce Pattern

There are countless examples of the dead cat bounce pattern in stocks and other securities, as well as whole markets. One of the most recent affected the entire stock market during the COVID-19 pandemic.

The U.S. stock market lost about 12% during one week in February 2020, and appeared to revive the following week with a 2% gain. But it turned out to be a false recovery, and the market dipped back down again until later in the summer.

What Causes a Dead Cat Bounce?

A dead cat bounce is often the result of investors believing the market or security in question has hit its low point and they try to buy in to ride the turnaround. It can also occur as a result of investors closing out short positions.

Since these trends aren’t driven by technical factors, that’s why the bounce is typically short-lived — usually lasting a couple of days, or maybe a couple of months.

4 Signs of a Dead Cat Bounce

Although a dead cat bounce is typically not reflective of a stock’s intrinsic value, the dramatic price increase may tempt investors to jump on an investment opportunity before it makes sense to do so.

The following typical sequence of events may help an investor correctly identify a dead cat bounce as it might occur with a specific stock.

1. There is a gap down.

Typically the stock opens lower than the previous close, usually a significant amount like 5% (or perhaps 3% if the stock isn’t prone to volatility).

2. The security’s price steadily declines.

In a true dead-cat-bounce scenario, that initial gap down will be followed by a sustained decline.

3. The price sees a monetary gain for a short time.

At some point during the price drop, there will be a turnaround as the price appears to bounce back, close to its previous high.

4. A security’s price begins to regress again.

The rally is short, however, and the stock completes its dead cat bounce pattern with a final decline in price.

Dead Cat Bounce vs. Other Patterns

How do you know whether the pattern you’re seeing is really a classic dead cat bounce versus other types of movements? Here are some clues.

Dead Cat Bounce or Rally?

One way to assess a dead cat bounce with a particular stock is to consider whether the now-rising stock is still as weak as it was when its price was falling. If there’s no market indicator as to why the stock is rebounding, you might suspect a dead cat bounce.

Dead Cat Bounce or Lowest Price?

Since investors are looking for opportunities to profit, they try to find investment opportunities that allow them to buy low and sell high.

Therefore, when assessing investment opportunities, a successful investor might try to recognize emerging companies, and buy shares of a stock while the price is low, and before other investors get wind of a potential opportunity.

Since companies go through business cycles where stock prices fluctuate, pinpointing the lowest price point might be hard. There’s no way to know if a dead cat bounce is really happening until the prices have resumed their descent.

Dead Cat Bounce or Bear Market Bottom?

Investors may also confuse a dead cat bounce for the actual bottom of a bear market. It’s not uncommon for stocks to significantly rebound after the bear market hits bottom.

History shows that the S&P 500 often sees substantial gains within the first few months of hitting bottom after a bear market. But these rallies have been sustained, and thus are not a dead cat bounce.

Investing Strategies to Avoid a Dead Cat Bounce

For investors who want a more hands-on investing approach — meaning active investing vs. passive — it’s generally better to use investing fundamentals to evaluate a security instead of attempting to time the market (and risk mistaking a dead cat bounce for an opportunity).

Investors who are just starting may want to consider building a portfolio of a dozen or so securities. Picking a few stocks allows investors to monitor performance while giving their portfolio a little diversification. This means the investor distributes their money across several different types of securities instead of investing all of their money in one security, which in turn can help to minimize risk.

Active investors could also consider selecting stocks across varying sectors to give their portfolio even more diversification instead of sticking to one niche.

Investors with restricted funds might consider investing in just a few stocks while offsetting risk by investing in mutual funds or exchange-traded funds (ETFs).

For investors who would prefer not to execute an active investing strategy alone, they can speak with a professional manager. Working with a professional manager may help the investors better navigate the intricacies of various market cycles.

Limitations in Identifying a Dead Cat Bounce

As noted several times here, a dead cat bounce can’t really be identified with 100% certainty until after the fact. While some traders may believe they can predict a dead cat bounce by using certain fundamental or technical analysis tools, it’s impossible to do so every single time.

If there were a way to accurately predict market movements or different patterns, people would always try to time the market. But there are no crystal balls in investing, as they say.

The Takeaway

With 20-20 hindsight, investors and analysts can clearly see that an individual security or market has experienced a steady drop in value, a brief rebound, and then a further drop — a phenomenon known as a dead cat bounce.

Unfortunately, though, it can be too hard for most investors to distinguish between a dead cat bounce and a bona fide rally, or the bottom of a given market or security’s price. Still, knowing what to look for may help investors make more informed choices, especially when it comes to making a choice around keeping or closing out a short position.

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

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

---

About the author

---

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

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

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

Exchange Traded Funds (ETFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or by emailing customer service at [email protected]. Please read the prospectus carefully prior to investing.

Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.

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

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

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


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

SOIN-Q424-022

Read more