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It’s natural to be curious about what credit score you start with at 18. You might assume you start with the lowest possible score, which is 300 for the standard FICO® and VantageScore models, but that’s not how it works. Instead, your credit score doesn’t exist until you begin generating financial data.

Good credit is vital to financial independence. Establishing credit early on can help you qualify for favorable rates and terms when you need to borrow money for a car or home. Here’s what you need to know about beginning credit scores and how you can build yours.

What Is Your Starting Credit Score?

Essentially, your credit score doesn’t exist until you begin building credit. Before that, if a financial institution requests your credit history, they will find nothing. Only when you use a credit card or pay utility bills will there be something to put on your credit report.

This doesn’t mean you will start with the lowest score possible, though. Neither will you start with a high credit score, since that requires a strong credit history and proof of solid financial habits. But if you get off on the wrong foot by not paying your credit card bill on time, you may start with a lower credit score.

Usually, you need at least one or two revolving accounts that have been active for at least three to six months to begin building credit. Creditors and lenders use various credit scoring models to determine your creditworthiness. Therefore, your number may differ across different platforms. For example, your FICO Score and VantageScore range between 300 and 850, while other models, such as your auto loan score, may go as low as 250 and up to 900.

Recommended: What Is the Difference Between TransUnion and Equifax?

Breakdown of Credit Score Factors

A number of factors affect your credit score. Here are the ones you should know about.

Payment History

A key factor in determining your credit score is whether you pay your bills on time. In fact, when calculating your FICO score, 35% comes from your payment history. Because it plays a significant role in your overall score, paying your bills on time is crucial.

Credit Utilization

Your credit limit is the maximum dollar amount you can charge on a credit card. Credit bureaus determine your credit utilization by dividing your outstanding balance by your total revolving credit limits. This shows credit bureaus how much credit you are using against the total credit you have.

A good rule of thumb is to keep your credit utilization ratio under 30%, both for each credit card and overall. Maintaining a low credit card balance or paying it off monthly will help you maintain a lower credit utilization ratio. This factor accounts for 30% of your overall FICO score.

Length of Credit History

The longevity of your credit history also plays a part in calculating your credit score. Credit bureaus will look at the number of years your accounts have been open. The length of your credit history accounts for 15% of your FICO score.

Recommended: Does Net Worth Include Home Equity?

Credit Mix

Credit is usually broken down into three categories: revolving credit, installment credit, and service credit. With revolving credit, creditors give you a specific credit limit to spend as you wish. You can make the minimum monthly payments or choose to pay off your credit card balance every month. If you make the minimum payment, the remaining balance will carry over to the next month until you pay off the entire balance.

Installment credit is used for auto, mortgage, and other loans. With this type of credit, the creditor establishes a fixed monthly payment you agree to pay back over a set amount of time. Demonstrating that you can handle multiple types of credit can increase your credit score.

Last, service credit is when companies such as home utilities or cell phone providers report your payment history to a credit bureau. On-time payments to these businesses can help build your credit. Your credit mix accounts for 10% of your FICO score.

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New Credit Inquiries

When you apply for new credit, creditors conduct a hard inquiry. This means they assess your creditworthiness by looking at your overall credit history. New credit inquiries and new accounts make up 10% of your score. Triggering a large number of credit inquiries in a short amount of time is considered risky and will negatively impact your credit score.

What Is Insufficient Credit History?

If you don’t have any credit accounts or your credit accounts are not reported to the three major credit bureaus (Experian®, TransUnion®, and Equifax®), you may have an insufficient credit history.

Even if you establish credit but go a long time without using it or cancel your credit cards, your credit information might be removed from your credit file. In this case, you may also have an insufficient credit history.

How to Establish Credit History

Building credit might seem daunting. However, there are a few strategies to begin establishing a credit history from scratch. Here’s how.

Apply for a Secured Credit Card

Secured credit cards require applicants to put down a deposit. This deposit will usually act as your credit limit. You will still have to make monthly payments since the deposit is used as protection or collateral if you default.

A secured card will help you establish credit as long as the creditor reports to one of the three major credit bureaus. A secured credit card can act as a stepping stone to unsecured credit cards and other forms of financing in the future.

Become an Authorized User

To become an authorized user, someone needs to add you to an existing account held in their name. You will receive your own credit card, and the account history will go on your credit report.

Keep in mind, however, that since you’re not solely responsible for payments and the management of the account, this account may have less of an impact on your credit score than if you were the sole owner of the account.

Make On-Time Payments

As noted above, your payment history counts as 35% of your score. Missing a payment can hurt your credit score and stay on your credit report for up to seven years. You can establish autopay to ensure you never miss a payment. However, you’ll still want to check your account monthly to ensure you weren’t overcharged.

Keep Your Credit Balances Low

Once you get a credit card, resist the temptation to run up the balance. The amount of credit you’re using plays a role in your score. It’s best to keep your balances low and use under 30% of your total credit card limit.

How to Monitor Your Credit Score

An important component of building credit is monitoring your progress. Monitoring your credit can motivate you to keep building your score. It can also help you spot problems quickly, such as missed payments. Finally, keeping tabs on your credit will let you see how specific actions impact your score so you can better understand how credit scoring works.

The Takeaway

The credit history you start with at 18 is a blank slate. Your credit score doesn’t exist until you start building credit. To begin your credit-building journey, consider opening a secured credit card or asking a family member to add you as an authorized user on their account.

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

FAQ

Is a credit score of 720 good?

Yes, a 720 credit score is considered good. However, increasing your score by 20 points will make it a very good score and help you receive more favorable interest rates and terms.

Does credit build before 18?

It’s possible to build credit before age 18 if you’re an authorized user on an adult’s account or you have a secured credit card. However, many financial products, such as loans and credit cards, require you to be 18 or older to apply. Being an authorized user can be your first opportunity to establish credit history.

How can I quickly build my credit score?

Always making payments on time can go the furthest to helping you improve credit. Since your credit utilization ratio also significantly impacts your credit score, paying off your credit card balances and increasing your limits can help you build your credit score promptly.

About the author

Ashley Kilroy

Ashley Kilroy is a seasoned personal finance writer with 15 years of experience simplifying complex concepts for individuals seeking financial security. Her expertise has shined through in well-known publications like Rolling Stone, Forbes, SmartAsset, and Money Talks News. Read full bio.

Photo credit: iStock/FG Trade

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

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.

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

SORL-Q226-047

When it comes to changing bank accounts, inertia often sets in. But is it wise to sit tight with your current banking situation?

Big banks may count on you to do so. They know that once you start a relationship with them, it can be hard to change. Maybe you’ve signed up for direct deposit or you’ve had your account since college. You may like that there’s a brick-and-mortar branch near you and are reluctant to switch to online banking. Or maybe you have an online bank and figure they’re all about the same.

Whatever the case, now may be the time to rethink your banking relationship. Rising interest rates have encouraged some banks to offer more attractive rates as well as plenty of features and services with low or no fees.

Take a look at these five reasons why you may benefit from switching banks.

Smart Reasons to Switch to a New Bank

1. Higher Rates

The Federal Reserve (aka the Fed) raised the federal funds rate, a key borrowing benchmark, 11 times between March 2022 and July 2023. In response, some, but not all, banks have increased the annual percentage yield (APY) they pay on their savings and checking accounts. While the national average savings account rate is only 0.3% APY as of June 15, 2026, some online banks are offering rates higher than 4.00% APY. An increase like that can add up over time and boost your savings.

It’s important to remember that your bank won’t automatically raise rates in line with the Fed. Some banks find that an increase doesn’t fit with their business plan. Or they may figure they won’t lose many customers if they don’t offer an increase.

Thanks to lower overhead costs, online bank accounts tend to offer higher rates than bank accounts offered by traditional banks. It makes sense to check what APY you’re currently earning on your bank account and see how that compares with other banks. That’s a tip for both checking accounts and savings accounts. There’s no reason not to earn top dollar.

Recommended: All About Interest Rates and How They Work

2. Low or No Fees

You may also want to make sure that any extra interest you’re earning isn’t eaten up by fees. In fact, avoiding the usual fees can be a good reason to switch banks. Minimum balance fees, maintenance fees, paper statement fees, savings withdrawal fees, out-of-network ATM fees, and overdraft/non-sufficient funds (NSF) fees can add up over time and take a chunk of your savings.

In some cases, the fees you pay will depend on the way you bank. People who have a high monthly balance or who link their checking and savings accounts may never incur fees. Or, if your bank offers a wide network of ATMs in your area, out-of-network ATM fees will hardly ever apply. That said, many institutions, particularly online banks, offer no-fee banking with competitive APYs so you can avoid paying any account fees at all. This can be a wise move if you are being charged costly banking fees.

3. Better Online and Mobile Banking

When it comes to managing a bank account, today’s consumers generally want it to be fast and simple. Many have gotten accustomed to 24/7 banking. It used to be that online banks offered the most advanced digital services. To compete, many brick-and-mortar banks have improved their websites and mobile apps. But whether it’s an online or traditional bank, not all portals are the best they can be.

When looking for a new bank account, you’ll want to make sure the bank you’re considering offers a secure, easy-to-use, state-of-the-art platform. Can you pay bills, scan mobile deposits, check your real-time balance, change your password, report possible fraud, and complete other functions at any time and almost anywhere you have a secure connection? Is there a chat or phone function available to get help if you need it? If possible, talk to other customers to see if they’ve experienced any glitches or compromised security.

If you’re lacking the convenience of online and mobile banking, you may want to rethink where you bank for these reasons. There are many pros to online and mobile banking, and you should be enjoying them.

4. More Banking Features

Many banks offer lots of extras when you open a new account or agree to maintain a certain minimum deposit. Waiving fees is common. So is a monthly reimbursement for out-of-network ATM fees. Some banks may offer a limited amount of no-fee overdraft protection coverage.

Connected checking and savings accounts with combined interest, discounts on personal loans from the same institution, and budgeting tools included in the banking app may also be available. In addition, many banks offer incentives for setting up direct deposit and early pay options that offer faster access to your paycheck.

Once you’ve created a list of banks with favorable APYs, it’s a good idea to compare the various features each bank offers to help determine which is the best fit for your needs.

5. Sign-Up Incentives

While switching banks isn’t necessarily complicated, it’s probably not a good idea to do so solely because of a temporary sign-up promotion. If the fees are high or if the bank lacks other features you need, the bonus or other incentive likely isn’t worth the trouble.

That said, if you’re shopping for a new bank, whether it’s a small or a large bank, and all other things are equal, it might make sense to take advantage of a special bank promotion. Who wouldn’t want some extra cash or a higher interest rate?

Recommended: 8 Ways to Make Your Money Work for You

Meet the new SoFi Plus!

Get access to higher APY, credit card cash back rewards, discounts, and more.

The Takeaway

The process of switching banks does entail some time and paperwork. So it’s easy to understand why consumers often avoid this task. But additional banking features, low or no fees, and a higher interest rate are some of the reasons why making the switch can make sense. Choosing a bank that’s a better fit can help improve your overall financial picture.

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

FAQ

How do I know if it’s time to switch bank accounts?

Look at the rates you’re currently earning, and compare them to other banks, both traditional and online, in your area. You may find better rates, reduced fees, and more features with a competing bank.

Will I pay more in fees with a new bank account?

It depends. Many banks, both online and traditional, offer reduced or no fees for their customers. Check rates and fees online or contact banks you’re considering to learn more about their fee schedule.

Is it worth switching bank accounts to access mobile banking?

Mobile banking has many advantages, primarily flexibility and convenience. If these aspects of banking are important to you, look into banks that offer a full-featured mobile app that’s easy to use.

Photo credit: iStock/NicolasMcComber

SOBNK-Q226-188

The definition of a U.S. Savings Bond is an investment in the federal government that helps to increase your money. By purchasing a savings bond, you are essentially lending money to the government which you will get back in the future, when the bond matures, with interest. Because these financial products are backed by the federal government, they are considered to be low-risk. And, in certain situations, there can be tax advantages.

What Are Savings Bonds?

A savings bond is basically a loan made to the U.S. government, in exchange for which the government agrees to repay the loan at a later time, along with interest that is earned over the life of the bond.

There are two types of savings bonds available through the U.S. Treasury: the Series EE savings bond and the Series I savings bond. The Series EE bond offers a fixed-interest rate, while the Series I bond offers a combination of a fixed rate and a variable inflation rate. Both bonds are low-risk and provide interest for up to 30 years, though you may withdraw funds without penalty as long as the bond has been held for at least five years.

Investors may also invest in state or local municipal bonds that fund public projects and may be available in different term lengths.

How Do Savings Bonds Work?

Savings bonds are issued by the U.S. Treasury. You can buy one for yourself, or for someone else, even if that person is under age 18. (That’s why, when you clean out your closets, you may find a U.S. Savings Bond that was a birthday present from Grandma a long time ago.)

Basically, these savings bonds function the same way that other types of bonds work. You buy a savings bond for face value, or the principal, and the bond will then pay interest over a specific period of time.

•   You can buy savings bonds electronically from the U.S. Treasury’s website, TreasuryDirect.gov. For the most part, it’s not possible to buy paper bonds anymore but should you run across one, you can still redeem them. (See below). Unlike many other types of bonds, such as some high-yield bonds, you can’t sell savings bonds or hold them in brokerage accounts.

How Much Are Your Savings Bonds Worth?

If you have a savings bond that has been tucked away for a while and you are wondering what it’s worth, here are your options:

•   If it’s a paper bond, log onto the Treasury Department’s website and use the calculator there to find out the value.

•   If it’s an electronic bond, you will need to create (if you don’t already have one) and log onto your TreasuryDirect account.

Savings Bonds Interest Payments

For U.S. Savings Bonds, interest is earned monthly. The interest is compounded semiannually. This means that every six months, the government will apply the bond’s interest rate to grow the principal. That new, larger principal then earns interest for the next six months, when the interest is again added to the principal, and so on.

3 Different Types of Savings Bonds

There are two types of U.S. Savings Bonds available for purchase — Series EE and Series I savings bonds. Here are the differences between the two.

1. Series EE Bonds

Introduced in 1980, Series EE Bonds earn interest plus a guaranteed return of double their value when held for 20 years. These bonds continue to pay interest for 30 years.

Series EE Bonds issued after May 2005 earn a fixed rate. The current Series EE interest rate for bonds issued as of May 1, 2026, is 2.40%.

2. Series I Bonds

Series I Bonds pay a combination of two rates. The first is the original fixed interest rate. The second is an inflation-adjusted interest rate, which is calculated twice a year using the Consumer Price Index for All Urban Consumers (CPI-U). This adjusted rate is designed to protect bond buyers from inflation eating into the value of the investment.

When you redeem a Series I Bond, you get back the face value plus the accumulated interest. You know the fixed rate when you buy the bond. But the inflation-adjusted rate will vary depending on the CPI-U during times of adjustment.

The current composite rate for Series I Savings Bonds issued as of May 1, 2026, is 4.26%.

3. Municipal Bonds

Municipal bonds are a somewhat different savings vehicle than Series I and Series EE Bonds. Municipal Bonds are issued by a state, municipality, or county to fund capital expenditures. By offering these bonds, projects such as highway or school construction can be funded.

These bonds (sometimes called “munis”) are exempt from federal taxes and may also be exempt from local taxes if you reside in the state where the bond is issued. The market price of bonds will vary with the market, and they typically require a larger investment of, say, $5,000. Municipal bonds are available in different terms, ranging from relatively short (about one to five years) to longer (the typical 30-year length).

How To Buy Bonds

You can buy Series EE and I Savings Bonds directly through the United States Treasury Department online account system called TreasuryDirect, as noted above. This is a little bit different than the way you might buy other types of bonds. You can open an account at TreasuryDirect just as you would a checking or savings account at your local bank.

You can buy an EE or I Savings Bond in any amount ranging from a $25 minimum in penny increments. So, if the spirit moves you, go ahead and buy a bond for $49.99. The flexible increments allow investors to dollar cost average and make other types of calculated purchases.

That said, there are annual maximums on how much you may purchase in savings bonds. The electronic bond maximum is $10,000 per calendar year for each type.

The Pros and Cons of Investing in Savings Bonds

Here’s a look at the possible benefits and downsides of investing in savings bonds. This could help you decide if buying these bonds is the right path for you, or if you might prefer to otherwise invest your money or stash it in a high-yield bank account.

Here’s a summary of the pros and cons of investing in savings bonds:

The Pros of Investing in Savings Bonds

Here are some of the upsides of investing in savings bonds.

•   Low risk: U.S. Savings Bonds are one of the lower-risk investments you could make. You are guaranteed to get back the entire amount you invested, known as principal. You will also receive interest if you keep the bonds until maturity.

•   Tax advantages: Savings bond holders don’t pay state or local taxes on interest at any time. You don’t have to pay federal income tax on the interest until you cash in the bond.

•   Education exception: Eligible taxpayers may qualify for a tax break when they use U.S. Savings Bonds to pay for qualified education expenses.

•   No fees: Unlike just about every other type of security, you won’t pay a fee, markup or commission when you buy savings bonds. They’re sold at face value, directly from the Treasury, so what you pay for is what you get. If you buy a $50 bond, for example, you’ll pay $50.

•   Great gift: Unlike most securities, people under age 18 may hold U.S. Savings bonds in their own names. That’s what makes them a popular birthday and graduation gift.

•   Patriotic gesture: Buying a U.S. Savings Bond helps support the U.S. government. That’s something that was important and appealed to investors when these savings bonds were first introduced in 1935.

The Cons of Investing in Savings Bonds

Next, consider the potential downsides of investing in savings bonds.

•   Low return: The biggest disadvantage of savings bonds is their low rate of return, as noted above. A low risk investment like this often pays low returns. You may find you can invest your money elsewhere for a higher return with only slightly higher risk.

•   Purchase limit: For U.S. Savings Bonds, there’s a purchase limit per year of $10,000 in bonds for each series (meaning you can invest a total of $20,000 per year). For some individuals, this might not align with their investing goals.

•   Tax liability: It’s likely you’ll have to pay federal income tax when you cash in your savings bond, unless you’ve used the proceeds for higher education payments.

•   Penalty for early withdrawal: If you cash in your savings bond before five years have elapsed, you will lose the previous three months of interest as a penalty. You are typically not allowed to cash in a bond before the one-year mark.

When Do Savings Bonds Mature?

You may wonder how long it takes for a savings bond to mature. The EE and I savings bonds earn interest for 30 years, until they reach their maturity date.

Recommended: Bonds or CDs: Which Is Smarter for Your Money?

How to Cash in Savings Bonds

You’ll also need to know how and when to redeem a savings bond. These bonds earn interest for 30 years, but you can cash them in penalty-free after five years.

•   If you have a paper bond, you can cash it in at your bank or credit union. Bring the bond and your ID. Or go to the Treasury’s TreasuryDirect site for details on how to cash it in.

•   For electronic bonds, log into your TreasuryDirect account, click on “confirm redemption,” and follow the instructions to deposit the amount to a linked checking or savings account. You will likely get the money within a few business days.

•   If you inherited or found an old U.S. Savings Bond, you may be able to redeem savings bonds through the TreasuryDirect portal or via Treasury Retail Securities Services.

Early Redemption of Bonds

If you cash in a U.S. Savings Bond after one year but before five years, you’ll pay a penalty that is the equivalent of the previous three months of interest. Keep in mind that for EE bonds, if you cash in before holding them for 20 years, you lose the opportunity to receive the doubled value of the bond that accrues after 20 years.

The History of US Savings Bonds

America’s savings bond program began under President Franklin Delano Roosevelt in 1935, during the Great Depression, with what were known as “baby bonds.” This started the tradition of citizens participating in government financing.

The Series E Saving Bond contributed billions of dollars to financing the World War II effort, and in the post-war years, they became a popular savings vehicle. The fact that they are guaranteed by the U.S. government generally makes them a safe place to stash cash and earn interest.

The Takeaway

U.S. Savings Bonds can be one of the safest ways to invest for the future and show your patriotism. While the interest rates are typically low, for some investors, knowing that the money is being securely held for a couple of decades can really enhance their sense of financial security.

Another way to help boost your financial well-being is to find the right banking partner for your deposit product needs.

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

FAQ

What is a $50 savings bond worth?

The value of a $50 savings bond will depend on how long it has been held. You can log onto the TreasuryDirect site and use the calculator there to find out the value. As an example, a $50 Series I bond issued in January 2000 would be worth more than $241 today.

How long does it take for a $50 savings bond to mature?

The full maturation date of U.S. savings bonds is 30 years. You can cash EE and I bonds after one year, but if you cash them before five years, you lose three months of interest as a penalty.

What is a savings bond?

A savings bond is a secure way of investing in the U.S. government and earning interest. When you buy a U.S. Savings Bond, you are loaning the government money, which, upon maturity, they pay back with interest.

Photo credit: iStock/AlexSecret

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2026 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 5/28/26. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

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

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

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

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
We do not charge any account, service, or maintenance fees for SoFi Checking and Savings. We do charge transaction fees for outgoing wire transfers, Instant Transfers, and global remittance transfers. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/.
^Early access to direct deposit funds is based on the timing in which we receive notice of impending payment from the Federal Reserve, which is typically up to two days before the scheduled payment date, but may vary.

*Awards or rankings from Forbes are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.


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

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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

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-Q226-128

You live in a fast-paced world and are accustomed to immediate gratification. Just as you can get groceries delivered in minutes and order a new movie online with a few clicks, so too may you expect your bank deposits to be available immediately.

But it doesn’t always work that way when it comes to finances. Some things do require a wait, even though it may seem like they should happen instantaneously. When money is put into a bank account, it can take a while for the deposited funds to appear and become available. Here’s a simple breakdown of how long it takes for funds to clear.

What Are Cleared Funds?

Depositing money into a bank account doesn’t always make those funds appear immediately. It can take time for the funds to clear and become available to use. This is because banks and credit unions may place a temporary hold on the deposit. When this happens, the account holder can see their “total balance” on their account and their “available balance.” The latter is the amount of the total balance minus any pending deposits. The available balance is, as the name indicates, what is available for use.

Why Banks Put a Hold on Deposits

One reason why banks don’t immediately declare deposits to be cleared funds is to help avoid issues that can arise when a deposit bounces. Having a brief waiting period helps protect customers from bank fraud and from paying unnecessary fees. If a bank were to allow a customer to spend funds from a check that ends up bouncing, the customer would then need to repay the bank the amount they deposited and probably pay an overdraft fee (even if the customer wasn’t at fault).

Some holds take longer than others. The federal government regulates the max amount of time a banking institution can hold onto the funds before they make them available to the account holder.

Banks and credit unions also have their own policies regarding how long it will take for funds to become available after a deposit, which can be shorter than federal regulations. It can be helpful to review your bank’s policies for holding deposits so you can get a better idea of when cleared funds will become available. That way, you won’t accidentally overdraw your account.

How Do Cleared Funds Work?

Cleared funds appear in a bank account, such as a checking account, after the holding period ends. Usually, this holding period lasts until the next business day, but it can take longer. Weekends and holidays can slow this process down. The type of deposit made can also affect the timeline.

Here’s a specific example: If you deposit a check via an ATM that is not part of your bank’s network, you will probably have to wait a while to access the money. It may take up to five days before that check becomes available cash in your account.

Compare that to the case of electronic deposits made via the Automated Clearing House (ACH). The funds can actually clear and become available as soon as the same day. Having a paycheck deposited via direct deposit can help you access your money a lot faster than if you’d deposited a check at an ATM.

Breakdown of Times of Cleared Funds

All banks and credit unions have their own timeline they follow surrounding cleared funds. In addition, the federal government sets a maximum limit for how long these financial institutions can make consumers wait to access their deposits.

Here’s a quick breakdown of the federally allowed wait times for different types of transactions, from wiring money to depositing checks.

*Deposited in person

It’s worth noting that these are the maximum hold times allowed. In many cases, these deposits happen much quicker. Again, it’s worth reviewing the bank’s funds availability policy. This will be listed in the account agreement given to you, the account holder, when you opened an account. You can also ask the bank for a copy of their holding policies or look online for them.

When Can You Withdraw Cleared Funds?

Deposits often clear in segments. That is, a portion of the funds will become available in your checking account before the whole amount deposited is ready for use. In most cases, the bank has to allow the customer to access $275 from the deposit at the start of the next business day. You could either withdraw cash or write a check for that amount. Usually, the rest of the deposit is available on the second business day, unless something occurs to trigger a delay.

Cleared Funds vs Available Funds

The terms “cleared funds” and “available funds” both refer to funds that are available for immediate withdrawal or use. It’s important to keep in mind that simply depositing a check doesn’t mean you can use the money right away.

•   Regarding a deposit, the $275 that must be made available by the next business day is known as your cleared or available funds. So on the next day, you can go ahead and use that amount.

•   However, the rest of your deposit may not yet be available. If you try to draw against it, you are risking overdraft and charges. The full amount of the deposit may take up to a few more days to become ready for use.

Reasons Why Deposits May Be Delayed Until They Become Cleared Funds

There are a few different reasons why deposits can be delayed on their path to becoming cleared funds.

Deposits Over $6,000

When it comes to large deposits (excluding cash or electronic payments), the bank is typically required to make the first $6,450 of the deposit available by the second business day and the remainder available on the seventh business day or sooner.

Recommended: Where to Cash a Check Without Paying a Fee

Brand-New Customer Accounts

Newer customer accounts (less than 30 days old) can experience deposit delays up to nine days. However, with official checks and electronic payments, partial funds can be available the next day. (If you are in this situation and in a rush to make a payment, you can look into other ways to send money to another’s bank account, such as peer-to-peer (P2P) apps. These can draw upon other available funds.)

Postdated or Fraudulent Checks

If a bank has reason to suspect a deposit is suspicious (such as if a check appears to be fraudulent), then it may hold the funds for longer than normal. A couple of examples of what might cause this kind of hold:

•   A check is postdated, meaning it’s been filled out to show a date that is in the future.

•   A check is more than six months old.

The Takeaway

Cleared funds are the funds that become available once a deposit to a bank account clears. That means the money is ready for use. The timeline for funds clearing depends on several factors, such as where, when, and how the deposit was made and how large the amount is. Some funds may clear right away, while others can take a few days. However, federal laws are in place regarding how long a bank can wait to clear funds. By understanding this process, you can likely manage your financial life a little better and avoid situations that involve overdrafts or bounced checks.

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

FAQ

What is the difference between a cleared balance and an available balance?

A cleared balance (or cleared funds) and an available balance are the same thing. They both refer to the amount of money in your account that is available for immediate withdrawal or use.

How long does it take to get money cleared?

Some deposits clear as soon as the same day, but most generally clear the next business day. In some cases, though, a deposit can take as long as nine days to clear. Check with your bank to learn their timelines.

Can you reverse a cleared check?

Once a check has cleared, there is little that can be done to reverse the transaction. If, however, a cleared check found is to be fraudulent, it may be possible for a bank to intervene.

About the author

Jacqueline DeMarco

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

Photo credit: iStock/RgStudio

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As a teenager, you may think you don’t have enough money to worry about coming up with or sticking to any kind of budget. But you don’t need a lot of money to benefit from budgeting. In fact, coming up with a plan for how to spend your money (which is what budgeting is) can be particularly helpful for teens who don’t have much in the way of income or savings.

While creating a teen budget might sound intimidating or complicated, it simply involves looking at what you have coming in and going out, setting aside some money for future goals (say, getting a new phone), and also allocating funds for having fun right now.

Whether all you have is your allowance and the money you made from odd jobs or whether you earn steady income from a part-time job, here’s how to do more with the money you have.

How to Build a Budget for Teens

Learning how to budget as a teen helps set the foundation for financial success later in life. It includes tracking income and expenses, setting savings goals, and making wise spending decisions. Read below to see how it’s broken down.

1. Determine How Much You Earn

The first step in creating a budget is figuring out your income. As a teenager, your income might come from various sources, such as a part-time job, an allowance from your parents, or occasional gigs like babysitting or mowing lawns. If you have a checking account, all of your deposits represent your income.

List all of your regular income sources and calculate the total amount you receive each month. If your income fluctuates, you can estimate a monthly average. Alternatively, you might find it easier to break up your budget on a weekly cycle. If you have a job for which you’re paid every two weeks, just divide that amount in half.

This step will give you a clear picture of how much money you have to work with.

2. Figure Out How Much You Usually Spend

So where does all your money go? To find out, come up with a list of spending categories and roughly estimate how much you spend weekly or monthly on each.

If you typically make purchases using a debit card or payment app, you can see your spending by looking at your transactions in the past month. If you normally spend cash, however, you may need to track your spending for a few weeks or a month. You can do this by keeping every receipt and jotting down your spending at the end of each day.

Next, you’ll want to categorize your spending into different areas, such as food, clothing, transportation, entertainment, etc. This exercise will help you understand your spending habits and identify where you might be overspending.

3. Divide Spending Into “Needs” and “Wants”

Once you have a clear idea of your spending, it’s time to split your spending categories into “needs” vs. “wants.”

Needs are required or necessary spending, such as your cell phone bill, car insurance, gas money, and any other expenses that your parents have asked you to be responsible for. Wants are nonessential items like eating out, video games, and trendy clothes.

By dividing your expenses into these two categories, you can prioritize your spending. This can help ensure that your needs are met before you start spending money on your wants.

4. Set Some Money Goals

Saving money is a crucial part of budgeting. Whether you want to save for a new pair of sneakers, a car, or college, having a goal in mind can motivate you to save consistently.

It’s helpful to set specific, achievable savings goals. For example, if you want to save $300 to make a purchase in six months, you’ll need to save $50 each month. Having clear goals helps you stay focused and disciplined. When you plan your monthly or weekly budget, you can make sure to set aside money for your short-term and long-term goals, whatever they may be.

If you don’t have a savings account, now may be a good time to open one. Even if you open an account with a very small amount, your balance will grow as you add funds over time and earn compound interest (which is when the interest you earn on your balance also earns interest). Many banks and credit unions offer teen savings accounts that are designed to help young people earn a competitive yield on their money while avoiding maintenance fees and minimum balance requirements.

5. Make Your Teen Budget

Now that you have a clear understanding of your income, expenses, and savings goals, you can create your budget. You can do this using a budgeting app, a pen and paper, or simply the Notes app on your phone.

Start by putting your income at the top. Next, list your fixed expenses (needs), variable expenses (wants), and savings goals and what you will spend on each.

Once you have a list of all your spending categories, it’s time to figure out how much money to allocate to each one. You’ll want to make sure that your total expenses and savings do not exceed your income. If they do, you’ll need to adjust your spending habits by cutting down on spending in the “wants” categories or finding ways to increase your income.

6. Start Using Your Budget

Creating a budget is only the first step — sticking to it is where the real challenge lies. It helps if you start tracking your spending. You can do this by collecting receipts and writing down what you spend at the end of each day. Or, if you use a debit card or payment app, you can just look at your bank account or app transaction history to see how much you’re spending in a given day or week.

Recording your expenses daily or weekly can help you stay within your budget and prevent you from overspending. If you’re not able to meet your savings goals, you may need to make some adjustments to your spending.

7. Revisit Your Budget

Your financial situation and priorities can change, so it’s important to reevaluate your budget regularly. You may want to review your income and expenses at least once every few months to ensure your budget still aligns with your goals.

If you find there are certain areas where you are consistently overspending or underspending, you can adjust your budget accordingly. If you no longer ride the bus or have a new source of income, for example, you may be able to spend more on “wants” or put more toward saving (aka future wants).

Regularly updating your budget helps you stay in control of your finances and work toward your goals.

Recommended: 50/30/20 Budget Rule: What It Is and Tips on Using It

Why Getting Started Young Is Important

Budgeting is a key financial literacy skill, and starting to budget as a teenager can set you up for lifelong financial success. Here are some reasons why it’s crucial to develop good money habits early on.

•   Builds discipline: Learning to manage money requires discipline and a sense of responsibility. These traits are beneficial not just for financial management but for all aspects of life.

•   Prepares you for future financial independence: The skills you develop now will help you manage larger sums of money in the future. Whether it’s paying for college, buying a car, or renting an apartment, budgeting will always be essential.

•   Helps you achieve long-term goals: Starting early allows you to develop a habit of saving, which can help you achieve long-term financial goals such as buying a house or starting a business.

•   Builds an appreciation for money: When you budget, you become more aware of the value of money and the effort it takes to earn it. This awareness can lead to more mindful spending and better financial decisions.

The Takeaway

Budgeting for teens might sound intimidating or even pointless if you don’t have much money to work with. But following the simple steps listed above can help you take control of your finances and build better money habits.

By determining your income, tracking your expenses, setting savings goals, and regularly reevaluating your budget, you may be able to make your money go farther and be well on your way to financial success.

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

FAQ

What should I spend money on at 15?

At 15, you’ll want to focus on spending money wisely, balancing things you need to spend money on, things you want to spend money on, and saving up for things you want to buy or do in the future. Common teen expenses include:

•   Transportation (bus/train fare, gas)

•   School supplies

•   Extracurricular/sports supplies or equipment

•   Clothing

•   Takeout

•   Entertainment

•   Saving for a car

•   Saving for college

What is a good budget for kids?

A good budget for kids is one that’s simple and easy to manage, ensuring a balance between spending, saving, and sharing/giving. Here’s one framework to consider:

•   Income: Allowance, gifts, and earnings from small jobs

•   Expenses: Essentials (school supplies, clothing), savings, and spending on fun things

•   Breakdown: 50% for essentials, 20% for savings, 20% for fun, and 10% for giving/charity

This budget helps teach kids to manage money wisely, save for future needs, and understand the importance of generosity.

What is the savings rule for kids?

You can apply the general guideline for adults — which is to save around 20% of your income/paycheck — to kids. Whether a child/teen earns money through an allowance, doing chores, or a part-time job, they can start putting 20% of their weekly income toward saving. This gives them money for the unexpected, as well as things they want to buy or do in the future, while helping them build a great habit that can serve them well throughout their lives.

Photo credit: iStock/SDI Productions

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