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Banks make money by charging for the services they provide as well as financial products. Among the ways they profit are by collecting interest on loans and assessing fees for banking services.

By learning more about this topic, you’ll be better able to choose the right financial institution for you and probably hold onto more of your cash.

What Exactly Is a Bank?

In general, a bank is a financial institution licensed to receive deposits and make loans. Some banks also offer financial services, such as safe deposit boxes and currency exchange.

There are several different types of banks. Though they all generally provide similar services, each type has a few unique traits that can make it especially useful for certain types of customers and goals. Here are some of the most common options.

Retail Banks

Traditional banks that serve the general public, such as Wells Fargo, Bank of America, and Chase, are retail banks. Their focus is to help people manage their personal wealth.

Retail banks are generally easily accessible, often having hundreds of branches across the country and they provide the most basic of financial services for regular use.

Commercial or Corporate Banks

These banks specialize in providing financial support and assistance to small and large-scale businesses. Many also have retail divisions as well.

Where a standard retail bank might only be able to provide small personal loans, commercial banks often have the capacity to provide larger and more substantial loans, as well as other services, to help support new and expanding business ventures.

Online Banks

These are institutions that provide financial services just like any other bank, except they do not maintain any actual storefronts. To apply for an account with an online bank, such as Ally, SoFi, or Synchrony, applications must be submitted online and the entire banking experience is primarily conducted remotely via an internet browser or app.

Because online banks generally don’t have the expenses that come with maintaining a storefront, they can often offer higher interest rates and lower fees than many brick-and-mortar banks.

However, because they don’t have storefronts, you typically can’t make cash deposits.

Central Banks

In many countries, banks are regulated by the national government or central bank. In the U.S., the Federal Reserve System is the central bank of the U.S. It consists of 12 Federal Reserve banks that stretch across the country.

These central banks are responsible for implementing monetary policy, maintaining the stability of the financial system, controlling inflation, and providing financial services to banks and credit unions. The Federal Reserve banks are essentially banks for other banks, as well as the government.

Investment Banks

Morgan Stanley and Goldman Sachs are examples of investment banks. These banks specialize in managing some of the largest and most complex types of commercial transactions, such as merger and acquisition activity, initial public offerings, or financing large infrastructure projects like building bridges. Investment bankers often work on deals that involve raising capital and acquisitions.

How Do Banks Make Their Profits?

With the wide variety of financial products and services that banks offer, they create many opportunities for revenue. Those revenue streams generally fall into one of three categories:

Interest

One of the primary sources of income for banks and financial institutions comes from interest collected on the various loans that they offer.

Banks use the money from their clients’ checking and saving accounts to offer loan services. They then charge interest on these loans (based on the credit history of the borrower and the current federal funds rate). Banks then profit from the net interest margin. That’s the difference between the higher interest income charged for their loans and the lower interest paid out to clients on their bank accounts.

Recommended: Savings Account Interest Calculator

Interchange Fees

When people use their bank-issued credit and debit cards at a store, that store typically pays a processing fee, known as an interchange fee.

These fees are paid by the merchant’s bank to the consumer’s bank for processing a card payment. This fee is to help ensure security, payment, fraud protection and a speedy transfer of funds, and is typically a small flat fee plus a percentage of the total purchase.

Interchange fees help explain why some establishments maintain minimum purchase amounts for credit or debit card purchases.

Banking Fees

Banks typically bring in a significant amount of their money by charging customers fees to use their products and services. Banks may charge fees to create and maintain a bank account, as well as to execute a transaction. They may be recurring or one-time only charges.

All banks should be upfront about all of their fees and disclose them somewhere accessible to their customers. You can often find a bank’s fee schedule online or in the documents you received when you opened your savings and/or checking account.

It can be a good idea to learn about the types of fees that your bank charges in order to avoid or minimize fees and also catch any errors. If fees seem unreasonably high, you might also decide to switch to a different bank or financial institution that charges less.

Some of the more common bank fees include:

Service fee: A monthly fee charged for keeping an account open.

Account maintenance fee: A monthly fee charged for managing an account.

Withdrawal limit fee: Charged when a customer exceeds the maximum number of monthly withdrawals allowed on a savings account.

ATM fee: Charged when withdrawing funds from an ATM terminal outside of your bank’s network.

Card replacement fee: Charged when a lost or stolen debit or credit card is reissued.

Overdraft fee: Applied when a customer’s bank balance falls below zero. Interest can also accrue on the overdrawn amount, as the bank may see this as a short-term loan.

Non-sufficient funds (NSF) fee: Charged when a customer makes a transaction but doesn’t have enough money in their account to cover it. The transaction “returns” or “bounces,” and the bank charges the customer an NSF fee.

International transaction fee: Charged when making a debit card purchase in a foreign currency or withdrawing foreign currency from an ATM.

Cashier’s check fee: A fee for purchasing an official check from your bank.

Stop payment fee: Applied when requesting that a bank stop payment on a pre-written check from your account.

Wire transfer fee: Charged for electronically transferring funds from one bank to another.

Paper statement fee: A fee for providing monthly bank statements in the mail rather than digital statements online.

Credit Unions vs Banks

As for the difference between a credit union vs. a bank, a credit union is a nonprofit, member-owned financial institution. Like a bank, it can make loans and offer checking and savings accounts.

Members purchase shares in the credit union, and that money is pooled together to provide a credit union’s services. Individuals interested in banking with a credit union must fit specific eligibility requirements (sometimes regional, employment-related, or requiring direct relation to an existing member) and apply for membership.

Unlike a bank (which is a for-profit business), a credit union returns its profits to members, which means it may have lower fees and better interest rates on savings accounts and loans than traditional retail banks.

Because they are often smaller entities, however, credit unions tend to provide a limited range of services compared to banks. They may also have fewer locations and ATMs.

Recommended: Passive Income Ideas

The Takeaway

To make a profit and cover their operating expenses, banks typically charge for the services they provide. When a bank lends you money, for example, it charges interest on the loan. When you open a deposit account, such as a checking or savings account, there are typically fees for that as well.

It can be wise to take a second look at the fees outlined in your banking contract in order to get ahead of any surprise charges down the line. And to look for a fee-free bank if you are getting hit with these charges.

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 banks make money?

Banks typically make money by charging interest and collecting fees.

What are three ways that banks make money?

Banks make money by lending money (loans) and charging interest; they charge fees for their services (such as overdraft coverage); and they invest customers’ money to grow it.

What is the main source of income for banks?

Typically, banks make most of their money on the interest margin involved in their business. Specifically, they earn money from the higher interest rate they charge for lending money vs. the lower interest rate they pay to holders of interest bearing accounts.

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.

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

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

SOBNK-Q325-080

Saving spare change and using round-up apps can help you bolster your savings, possibly in a meaningful way. Spare change savings (also known as “micro-saving”) can be a great way to kickstart your savings and also help you start automating your finances.

However, not all spare change apps are created equal. Some charge fees, which can quickly erode your savings. And some invest your savings, which adds an element of risk that may not be ideal if you’re focused on a short-term goal.

Here are some key things you may want to keep in mind when choosing a spare change savings app.

How Does Spare Change Saving Work?

The philosophy behind spare change savings is “little and often.” Every time you spend money, whether it’s on gas, groceries or dining out, an app rounds up that purchase and saves the change for you.

Spare change savings apps typically connect to your credit and/or debit card, take the virtual change from your linked checking account, and put the money into a savings account. For instance, if you buy a sandwich for $5.80, the app will automatically transfer 20 cents from your checking account into a savings account. It’s one way to automate your finances. Little by little, this cash can accumulate and help you reach goals, such as starting an emergency fund.

Some spare change apps put your money into a traditional savings account or a checking and savings account. Others invest your money in small portfolios, based on your risk tolerance and financial situation. There are also spare change apps that use saved funds to pay off debts that you designate, such as credit cards or student loans.

The Benefits of Spare Change Savings

There are a number of potential benefits to spare change savings. Below are some of the reasons you may want to try using one of these apps.

Makes Saving Easy and Automatic

One of the biggest advantages of spare change savings is that it’s automatic. You don’t have to remember to bring your change to the bank or transfer money from checking to savings after you get paid in order to save money from your salary. And, unlike the change jar, the money saved is out of sight and out of mind.

If you’re struggling to save money, setting up a spare change savings app can help jumpstart the process and make it relatively pain-free.

Recommended: Emergency Fund Calculator

Allows Your Savings to Earn Interest

Unlike the piggy bank method, a spare change app can put your savings into an account that can earn interest, such as a high-yield savings account, and help your money grow over time.

Can Make Investing Less Intimidating

Some spare change savings apps, known as “micro-investing” apps, will offer users the opportunity to invest their money in stocks, bonds, and/or exchange-traded funds (ETFs). This involves risk, mainly because of market volatility and the lack of insurance for investment products.

Micro-investing apps can make it easier to get started with investing, even if you currently don’t know anything about it. Generally, they’ll recommend a portfolio based on your goals and time horizon, turning your spare change into an investment on a small scale, such as through fractional stock shares or small dollar purchases of other investment products, which can be a good way to experiment.

May Provide Other Ways to Save

Some spare change savings apps partner up with other brands that will kick in a percentage of every purchase you make to your savings account. For example, if an app partners with Macy’s or Apple, every time you make a purchase from one of those retailers, a small percent of the total you spend would get added to your savings account (in addition to the round-up amount taken from your checking account).

Disadvantages of Spare Change Savings

There are some potential downsides to spare change savings apps. Here are a few drawbacks you may want to consider before signing up for one of these apps.

May Charge Fees

Some spare change apps charge monthly (and other) fees for using their services. Before signing up for an app, it’s a good idea to read the fine print and look into what, if any, fees you may be charged and how often.

Even if the fees are small, they could quickly eat into your savings, especially since the dollar amounts you’re putting away are small.

Could Lose Money Through Investing

If you choose to put your spare change savings into investments, there is some risk involved. Depending on market fluctuations, your money could grow. On the other hand, you could potentially lose some or all of your savings.

May Not Be Ideal for Emergency Funds

If you go with an app that invests your savings, you may not be able to access the money immediately, which could be an issue if you’re faced with a financial emergency.

Another potential problem is that if your account is down in value at the time you need to withdraw the money, you would have to take a loss instead of waiting for market conditions to improve. In this scenario, it might be wiser to keep your funds in a traditional or online bank account.

Might Trigger an Overdraft Fee

If your checking account is close to zero after you make a transaction, and then the spare change app rounds-up the transaction and withdraws additional funds, you could end up overdrafting your account. This could result in getting hit with a hefty overdraft fee.

The Takeaway

While each spare change app functions slightly differently, they all revolve around the same basic concept: You save small increments of cash that you likely won’t miss. The money gets put into a savings account. You can then use the money to work toward your savings goals. If the concept appeals to you, you might look for a bank that offers this feature or try a third-party app.

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

Is there an app that saves your spare change?

There are round-up apps that help you save your spare change by rounding up purchases and payments to the next dollar and putting the difference into an account. You might see if your bank offers this feature, or try a third-party app.

Do banks take spare change?

Most banks will accept spare change, but it’s wise to check in advance to make sure and to see if there are any conditions. For example, the coins might have to be prerolled and/or you might have to hold an account at the institution.

Is investing spare change a good idea?

Investing spare change can be a good idea, but investing carries risk. It is possible to lose money as well as grow your cash, so be sure you are comfortable with that potential.

About the author

Kylie Ora Lobell

Kylie Ora Lobell is a personal finance writer who covers topics such as credit cards, loans, investing, and budgeting. She has worked for major brands such as Mastercard and Visa. Read full bio.

Photo credit: iStock/Nattakorn Maneerat

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.

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

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

SOBNK-Q325-087

Most people hit financial challenges at some point. Perhaps it’s a bout of overspending, the feeling that you can’t get out from under your credit card debt, or the fact that you can’t balance your budget.

Facing these kinds of situations doesn’t mean that financial security can’t be yours, nor that your money goals are unattainable. Rather, it means that you may need to focus on your finances, reprioritize, and adopt some new habits to get on track.

Here, you’ll learn about five of the most common money challenges, as well as some smart solutions that can help you take control of your finances.

1. Monthly Spending Exceeds Income

Many people struggle with the fact that their monthly outflow (or spending) outpaces their monthly inflow (or take-home income). The imbalance can cause you to rely on credit cards, and make it nearly impossible to save for the future, or even for a rainy day.

To help get your cash flow into balance, you may want to set up a basic budget. While a budget may sound restrictive, it can actually simplify your finances and make it easier to make everyday spending decisions.

A good way to start is to go through the last few months of financial statements and receipts, then tally up your average monthly income (after taxes) and average monthly spending. You may also want to break down expenses by categories, and then group categories into necessary and unnecessary spending.

It can also be helpful to actually ​track your spending for a month, taking note of every latte and lunch out (or by using an app that tracks expenses). Although you may think you know where your money is going, when people tally up all their purchases for a month, they are often surprised to notice that their spending doesn’t always match up with what they thought their priorities were.

Once you see where your money is really going each month, you can then look at your budget critically and search for areas where you can cut back. For example, you might decide you’ll eat out less often, pack your lunch a few days a week, save on a streaming service you rarely watch (buh-bye), or find a cheaper cell phone provider.

You may also want to think about ways you may be able to grow your income, such as negotiating a higher salary, looking for a new (higher-paying) job, or taking on a low-cost side hustle.

2. Not Having a Financial Cushion

Life can be unpredictable, and unforeseen events, like a loss of income, car breakdown, or visit to the ER, can quickly put you into a hole if you don’t have any emergency savings at your disposal.

Ideally, an emergency fund will have enough cash to cover at least three- to six months’ worth of living expenses, but even a reserve of $1,000 can save you from having to rely on credit cards or take out a personal loan to handle an unexpected expense.

To start building a buffer, you may want to consider dedicating part of your monthly budget to emergency savings. It can be a good idea to keep this fund in an account that earns more interest than a standard savings account, but still allows you easy access to your money, such as a high-yield savings account (typically offered by online banks), money market account, online savings account, or a checking and savings account.

Even contributions of $50 a month can add up quickly, creating a cushion that can come in handy when a rainy day hits.

3. Carrying a Credit Card Balance Every Month

Credit cards can be both a useful financial tool and an incredibly slippery slope. High-interest rates make the price of the charged items significantly more expensive. And, depending on credit makes it more likely that you’ll spend more than you earn.

As you re-evaluate your budget and work to reduce expenses, you may also want to find a way to pay more than the minimum on your credit card balances. If you have multiple cards, you might try the avalanche method of paying off debt. This involves paying the minimum on all your balances, but putting extra towards the balance with the highest interest rate. Once that’s paid off, you put your extra money towards the debt with the next highest balance, and so on.

Another approach is the snowball method. Here, you pay the minimum on all your debts, but put extra money towards the smallest balance. Once, that’s paid off, you put your extra money towards the next-highest balance, and so on.

Alternatively, you may want to consider consolidating your credit card debt by paying off all your balances with a personal loan. You would then only have one balance to keep up with, ideally with a lower interest rate.

4. Being Weighed Down by Student Loan Debt

Having a large amount of student debt can demand payments that limit your ability to buy a home or increase your savings. While it can be tempting to put off payment and keep more money in your checking account, that only results in paying more interest over time.

Instead, you may want to consider paying more each month in order to get out from under student debt faster. Whether it’s paying $20 or $100 more each month, every bit over the minimum payment helps to make a dent in your debt.

You may also want to put any lump sum of cash you receive, such as a tax refund or bonus, towards your student loan debt. When you make extra payments, however, it’s a good idea to make sure that you select the option for the funds to be applied toward your loan principal (otherwise it may go towards interest).

Another option you may want to consider is refinancing your student loans. This means trading in your current loan(s) for one brand new loan through a private lender. The goal with refinancing is to get a lower interest rate while also having the ability to change your loan term (such as cutting the timeline in half). This can be a good option if you have good credit and are currently paying a high interest rate on your student loans. Just be aware that refinancing federal student loans can mean you are not eligible for forgiveness, so think carefully about your decision. In addition, extending your loan term can mean that while your monthly payments are lower, you pay more interest over the life of the loan.

Recommended: 6 Strategies to Pay Off Student Loans Quickly

5. Not Saving Enough for Retirement

Retirement saving can be critical if you want to have financial freedom in your future. And even if retirement seems like a long way off, it can be much easier to amass a comfortable nest egg when you start saving and investing early.

Thanks to the magic of compounding interest (when the interest you earn also earns interest), even putting a little bit of money into a retirement fund each month can help you build wealth over time.

If you aren’t maximizing contributions to a 401k, you may want to consider putting as much tax-deferred money as possible into these accounts. If your employer offers matching funds, it can be a good idea to take full advantage of this perk (which is essentially free money).

If you don’t have access to a 401k or you are able to put any additional money aside to secure your retirement, you may want to consider opening an IRA (keeping in mind that there are annual limits to retirement contributions).

Taking advantage of these savings vehicles can lower your tax burden this year and earn interest for your golden years.

The Takeaway

Many of us have to deal with financial challenges at one time or another during our lives, such as living paycheck to paycheck or accumulating too much debt. Resolving these issues can involve tracking your expenses for a month and setting up a monthly budget. Or you may need to set up a manageable debt repayment plan to regain control of your finances. One simple step that may help you optimize your finances is to find the right banking partner.

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 are the main financial challenges?

Common financial challenges include poor budgeting, not having an emergency fund, overspending, racking up credit card debt, living paycheck to paycheck, and not saving for long-term money goals.

What is financial stress?

Financial stress can be defined as difficulty meeting one’s financial commitments and the anxiety that triggers. Money worries are often based on feeling as if one doesn’t have enough money and/or having too much debt.

What are significant financial difficulties?

Significant financial difficulties can be defined as being unable to make necessary payments using one’s disposable income or possibly any other source.

Photo credit: iStock/iamnoonmai

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.

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

SOBNK-Q325-083

When you deposit money into your bank account, you can’t necessarily use the money right away. Your financial institution may put a hold on a portion of your funds as they process the transaction and make sure it clears.

Whether or not all your cash is available can depend on a variety of factors, such as the form of the deposit; the amount of money involved; and when and where the deposit was made. Your money might be ready to use almost immediately, or it could take a few days or even longer. The timing can depend on both federal regulations and a bank or credit union’s internal guidelines for processing deposits. Here’s what you need to know.

Why Do Banks Put a Hold on Deposits?

Banks hold deposits to protect themselves, as well as their customers, from losing money. If a check you deposit bounces or some other complication arises, the bank will have an opportunity to fix the problem before you have the opportunity to spend the funds.

While a delay in being able to access your own money may seem like a nuisance, holds can actually help protect you from fraud and fees.

If your bank allows you to spend funds from a check that later bounces, you would have to repay the bank the amount that they gave you, and likely also get hit with a hefty overdraft fee. This is the case regardless of who is at fault.

How Long Can a Bank Hold a Deposit?

The amount of time it takes for funds to become available can depend on a number of factors, including how long you’ve held your account, your financial history, the type of deposit (e.g., cash, check, direct deposit), and the amount of the deposit.

•   Generally, a bank or credit union has until at least the next business day (a business day is a weekday that is not a holiday) to make most deposits (or a portion thereof) available.

•   Electronic deposits are typically available on the same day. So, one way to make sure your paycheck is available to you quickly is to sign up for direct deposit into your checking account.

•   Cash deposits may clear immediately or the next business day.

•   The longest a bank can hold funds is usually five business days for money deposited at an ATM of a different bank.

•   While each bank or credit union has its own rules as to when it will let you access the money you deposit, federal law establishes the maximum length of time a bank or credit union can make you wait.

The amount of money deposited can also matter, with the current guideline specifying that the first $275 of a check must be made available according to schedule.

Here are the rules set by the Federal Reserve for making funds available the next day or longer.

• Cash deposited to your bank account in person or to an in-network ATM.

• The first $275 of a check deposited in person or at an in-network ATM.

• Electronic payments, like a domestic wire transfer

• U.S. Treasury checks deposited in person or at an in-network ATM.

• U.S. Postal Service money orders deposited in person to one of your employees and into an account held by a payee of the check.

• Federal Reserve Bank and Federal Home Loan Bank checks deposited in person.

• State or local government checks deposited in person.

• Cashier’s, certified, or teller’s checks deposited in person.

• Checks drawn on an account held by the same institution as your account, deposited in person or at an in-network ATM.

For cash, USPS money orders, Federal Reserve Bank and Federal Home Loan Bank checks, state or local government checks, and cashier’s, certified, and teller’s checks that are deposited to out-of-network ATMs, the funds must be made available by the second business day. Deposits made by cash, non-USPS money order, or check at out-of-network ATMs must be made available by the fifth business day.

You may want to keep in mind that the hold times listed above are the maximum allowed. It’s possible that your funds will be available sooner.

You can typically find specifics about your bank’s funds availability policy in the account agreement you received when you opened your account, or you can ask the bank for a copy of their holding policies.

Understanding Cut-Off Times

When you deposit a check to your checking account, you may think you did it “today.” However, you may have missed the cut-off for starting the deposit process on that calendar day.

If you make a deposit after the cut-off time, your financial institution can treat your deposit as if it was made on the next business day. If the deposit was made late in the day on a Friday, it could actually take three or more days for the money to show up in your account.

By law, a bank or credit union’s cut-off time for receiving deposits is generally no earlier than 2 pm at physical locations and no earlier than noon at an ATM or elsewhere. Sometimes banks have later deposit times for mobile deposits (made via the bank’s phone app), such as 5 pm.

Deposits That May Take Longer to Become Available

There are certain circumstances under which banks are allowed to hold deposited funds for longer than the times listed above.

When these exceptions apply, there isn’t always a clearly defined limit to the amount of time the bank can hold funds. The bank can generally hold funds for a “reasonable” amount of time.

Exceptions to standard holding times include:

Large Deposits

If a customer deposits more than $6,725, the bank will typically need to make the first $275 of the funds available on the next business day, then a total of $6,725 the business day after that, but they are allowed to put a longer hold on the remaining amount.

Redeposited Checks

If a check bounces and then is redeposited, banks may hold the funds for longer than one business day. (You may want to be cautious about accepting future checks from a person or business that has already bounced a check.)

Recommended: How to Deposit a Check

Accounts That Have Been Repeatedly Overdrawn

If a customer has a history of overdrawing their account, the bank may go beyond charging overdraft fees and also hold funds for more time before making them available for use.

Repeatedly overdrawn means that the account has had a negative balance on at least six business days within the past six months, or the account was $6,725 overdrawn more than twice within the past six months. (One note: If you are in this situation, you may want to consider the pros and cons of overdraft protection.)

Reasonable Doubt

If a customer deposits a check that seems suspicious, the bank may hold funds for a longer period of time. A check may seem suspicious if it’s postdated or it’s more than 60 days old. (Typically, how long a check is good for is about six months, but it may cause concern after two months has passed.)

New Bank Accounts

If you recently opened a bank account and your account is less than 30 days old, you may experience hold times of up to nine days. Official checks and electronic payments, however, may be partially available the next day.

Emergency Conditions

If there is a communications outage, a natural disaster, or another circumstance that impedes normal bank functions, banks can hold funds until they are able to provide the funds.

The Takeaway

When you deposit a check, you naturally expect the money to show up in your bank account. Banks generally make funds available on the business day after you make a deposit, but there are exceptions that keep funds on hold for several days. Knowing the federal and your financial institution’s policies about holding times can help ensure that you’re able to pay your bills on time, have access to cash when you need it, and don’t get hit with overdraft fees.

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

FAQ

What is the $275 availability rule?

This rule states that the first $275 of a given day’s deposit must be made available on the next business day.

How long can a bank hold onto a large check?

When you deposit a large check, the first $275 is typically available the next business day. The rest of it, up to a total value of $6,725, is usually accessible within two business days, and the remainder potentially held for several more days as the bank verifies the check’s validity.

How long does it take for a $30,000 check to clear?

It will typically take about two to five days for a $30,000 check to clear.

Photo credit: iStock/solidcolours

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.

SOBNK-Q325-084

Understanding your personal finances is the first step in taking control of your money and making it work harder for you. One valuable tool for determining your financial status involves using personal finance ratios, such as your debt-to-income figure or how your take-home pay gets divided up. These are akin to formulas that show the relationship between numbers and how your cash is tracking.

Calculating and considering these figures can help you manage your money better as well as achieve your short- and long-term goals. To help you put these important ratios to use, this guide shares eight formulas to help you optimize your money.

Emergency Fund Ratio

An emergency fund is the cash you keep on hand to pay for unexpected expenses, such as a job loss, a large medical bill, or a roof repair.

This fund acts as a safety net so you don’t have to go into debt or raid your long-term savings accounts to take care of the situation.

Formula: Monthly Expenses X 6 = Emergency Fund Ratio

To calculate your target emergency fund, you’ll want to add up your essential monthly expenses, or the minimum amount of money you need to live for one month. That includes your mortgage or rent, insurance, utilities, and groceries.

One common rule of thumb is to then multiply this by three months (as a bare minimum); while others may aim for six months or more (say, if you are part of a single-income family). This gives you a good number to shoot for keeping in your emergency fund. You can use an online emergency fund calculator to help you do the math.

Liquid Net Worth Ratio

This liquid net worth formula is essentially an extension of your emergency fund. If you were to need funds as a result of an unplanned event or emergency, this metric looks at how many months of expenses would be covered by your liquid assets — funds that can be easily and quickly converted into cash.

Formula: Liquid Assets/Monthly Expenses = Liquidity Ratio

Liquid assets include your checking and savings accounts, as well as cash-like equivalents. For this number, you do not want to include other assets that are not liquid, such as your home, car, or tax-advantaged retirement savings accounts.

Monthly expenses include essential expenses that you accounted for above to determine your emergency fund ratio.

A common goal: maintaining a liquidity ratio of between three and six months.

Personal Cash Flow Ratio

Cash flow is a term often associated with companies. But this can also be a simple yet powerful personal finance ratio because it tells you how much is flowing in vs. flowing out of your accounts each month.

Knowing how much cash flow you have is useful because it tells you exactly how much money you have available to pay down debt or save or invest for your future.

Formula: Monthly (After-Tax) Income – Monthly Expenses = Personal Cash Flow Ratio

To calculate this, you’ll want to add up all of your average monthly take-home income, including your paycheck, any side hustles, and income from any investments or savings accounts that are available to you for spending.

Next, you can look at credit card and bank statements, as well as receipts, for the past several months to come up with the average amount you are spending each month. This includes necessities like mortgage or rent and utilities, and also discretionary spending such as eating out and entertainment.

You can then subtract your spending number from your income number and you’ll have your net cash flow. If that number isn’t where you want it to be, you can use these calculations as a starting point to make adjustments.

Generally, the higher your cash flow, the better off you are.

Housing-to-Income Ratio

This ratio is vital to helping you understand how much you can afford to spend on your home, whether you buy or rent. It is also an important metric that mortgage lenders use when they decide whether or not to approve your loan.

Formula: Monthly Housing Costs/Gross Monthly Income = Housing Ratio

It’s important to use total housing costs when you calculate this ratio. This includes: your monthly mortgage payments (or rent payments), property taxes, insurance, and utilities.

You can then compare that total cost to your gross monthly income (income before taxes are deducted). Financial experts often recommend keeping this number to 30% or less. In some areas with high cost of living, closer to 40% can be common.

The lower this number, the more affordable your housing costs are and the more income you have for other financial goals.

Debt-to-Income Ratio

The debt-to-income ratio is often used to determine a company’s ability to pay its debts. It works for individuals as well. It tells you what percentage of your income is being used to repay debts.

Formula: Monthly Debt Payments/Monthly Gross Income = Debt-to-Income Ratio

To calculate your debt payments, you’ll want to include credit card, student loan, and other consumer debt, as well as your mortgage payments. Your gross income is how much you earn each month before any deductions or taxes are taken out.

The common wisdom is to keep your debt at or below 36% of your gross income, but the lower your debt-to-income ratio, the financially healthier you likely will be.

Many people are surprised when they calculate this number to find just how much of their income is being whisked out of their checking account to repay debt, often at high interest rates. This ratio can help you rethink that situation.

Net Worth Ratio

Personal net worth is a measurement of an individuals’ total wealth. Your net worth ratio gives a little bit broader perspective than your debt-to-income ratio because it takes your total assets into account.

It is calculated as the total value of all your assets minus the total value of all your liabilities.

Formula: Total assets – Total Liabilities = Net Worth Ratio

To find this ratio, you’ll want to add up the current market values of all of your assets including your home, stock and bond holdings, checking and savings accounts, and any other financial accounts.

Next you’ll want to calculate your total liabilities. This includes any debt such as mortgages, credit card balances, car loans, personal loans and 401(k) loans.

You can then subtract your liabilities from your assets. The resulting number is, hopefully, positive, and the higher that positive number, the better for your financial health.

This is a snapshot of your net worth at this moment. You may want to calculate this metric periodically, perhaps quarterly or annually, to track your wealth. Ideally, you should see increases over time.

Savings Ratio

Since saving for the future is such a key part of personal finances, it makes sense there would be a personal finance ratio to help you gauge how you’re doing.

Your savings rate is expressed as what percent of your gross income you are putting away for the future, including retirement and other shorter-term financial goals.

Formula: Savings/Gross Income = Savings Ratio

To calculate this, you’ll want to add up your annual savings in any retirement accounts, including employer-sponsored retirement plans such as 401(k)s, traditional and Roth IRAs, and taxable accounts earmarked for retirement. Do not include your emergency fund or college savings accounts.

Compare that savings to your annual gross income (your earnings before taxes and deductions are taken out).

Generally speaking, you want to aim for a saving rate of 10% to 20%. Younger people may want to aim for a 10% savings ratio, and then gradually increase their savings rate as their income increases.

50/30/20 Budget Ratio

The 50/30/20 formula can help you manage your budget no matter what your income. It proves a simple guideline as to how to apportion your income so you can afford to pay your bills, have some fun, and also put money into savings.

Formula: 50% Essential Spending + 30% Discretionary Spending + 20% Savings = Budget Ratio

Essential needs are the largest allocation at 50% of monthly take-home income. These are bills you must pay including mortgage or rent, utilities, health insurance, minimum debt payments, and groceries. Housing will likely take up a big chunk of this category.

With this formula, you’ll want to keep discretionary spending at no more than 30% of your monthly take-home income. These are most likely the things you do for fun, like dining out, travel, clothing beyond what you need for work, and entertainment.

Saving for future financial goals accounts for the remaining 20% of monthly take-home income. This includes retirement savings, saving for a house, tuition savings, saving to repay debt beyond minimum amounts, etc.

Recommended: 50/30/20 Budget Calculator

The Takeaway

Personal finance ratios can give you a clear snapshot of your financial health in a variety of areas and help you make better decisions about money management and future planning. Once you’ve done some of these calculations, you may discover that you want to make some changes, such as watching your spending more closely and/or putting more money into savings each month. Having the right banking partner can help you optimize your money.

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 50/30/20 ratio in finance?

The 50/30/20 budget rule says to allocate your take-home pay as 50% to necessities, 30% to discretionary (or “fun”) spending, and 20% to savings and additional debt repayment.

What is the 70/20/10 ratio for money?

With the 70/20/10 budget guideline, you put 70% of your after-tax income to needs and wants, 20% to savings and investments, and 10% to debt repayment or charitable donations.

What are the 5 basics of personal finance?

To effectively manage your money and meet your financial goals, many experts advise that you focus on these five basics: budgeting, saving, understanding credit, managing debt, and investing.

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.

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

SOBNK-Q325-082