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Many people find that monitoring their checking account once or twice a week is a good cadence, but there’s no frequency that’s right or wrong. It’s a personal decision: Your checking account is likely to be the hub of your financial life, and so you may want to peek at your balance often or see what transactions have been conducted. At a minimum, it is recommended that individuals check their account monthly.

Here, learn more about this important financial topic, including:

•   How often should you typically monitor your checking account?

•   How often should you balance your checking account?

•   What are the benefits of monitoring your bank accounts?

•   How do you monitor your accounts?

How Often Should You Check Your Bank Statement and Bank Account?

There is no exact science when it comes to how often you should monitor your checking account. How often you should check your bank account is a very personal decision.

At the very bare minimum, it can be important to check it at least once per month to look for signs of fraud and fees that were charged to the account, as well as to see how your money is being spent. Doing so can be an important part of better money management.

However, for most people, once per month is not enough. One benchmark study found that 36% of Americans check their bank account every day, while 30% check it once a week.

Should You Check Your Bank Account Every Day?

There are many reasons why you might want to monitor your bank activity as often as once per day. Doing so can help you take control of your finances in such situations as:

•   You have a tight budget and worry about your balance slipping too low when you pay bills.

•   You are a freelancer and want to see if a paycheck you deposited has cleared.

•   Your debit card is lost, and you’re worried it fell into the wrong hands and someone is swiping away with it.

•   If there was a data breach of some kind? While usually the answer to “Are checking accounts safe?” can be yes, there can be issues. It may be a wise move to check your balance every day if you think you’ve been phished, scammed, or hacked. In this case, watching your account like a hawk in this situation can help you detect bank account fraud and report it.

However, for others, the answer to “How often should you check your bank account?” will be less frequent, perhaps weekly.

What Should You Monitor When You Have a Bank Account?

When you have a bank account, it’s wise to regularly check the following:

•   Your balance. Is it getting lower than you’d like?

•   Account alerts. Is anything flagged as needing your attention?

•   Transaction history. Are there any unauthorized or erroneous charges?

•   Fees and charges. Are you aware of what charges you may be incurring?

•   Spending trends. Has your occasional sushi lunch has become an almost daily debit card expense?

💡 Quick Tip: Make money easy. Enjoy the convenience of managing bills, deposits, and transfers from one online bank account with SoFi.

The Benefits: Why You Should Monitor Your Checking Account

Whether you decide that the right cadence for checking your bank account is daily, weekly, or another frequency, here are some of the rewards of keeping tabs on your checking.

Spot Hidden Fees

By regularly checking your bank account, you can keep an eye on fees you may be paying. Some financial institutions are notorious for charging hidden and/or excessive fees.

You might be surprised to see such charges as monthly account fees, ATM charges, overdraft and NSF fees, and more. You might want to dispute charges that you feel should not have been assessed.

Or, if you see that these fees are eating away at your cash, you might want to switch to a new bank.

Monitor for Fraud or Scams

Unfortunately, hackers and scams are part of life. Even with protective measures in place, it is possible for your account to be compromised. By checking your account regularly, you can keep an eye on any suspicious activity, such as an automatic withdrawal you don’t recognize or a debit card charge that isn’t yours.

The sooner you spot such issues, the faster you can deal with them. This can help you be liable for no or lower losses.

•   You are only responsible for up to $50 if you notify your bank within two business days of unauthorized charges with your debit card.

•   That figure rises to $500 if you notify your bank after two days but before 60 days after the bank statement showing the unauthorized transactions was issued.

•   If you take longer than 60 days to notify your bank, you could be liable for the full amount drawn on your account.

Stay on Track with Your Budget

Here’s why tracking your expenses and balancing your checking account can be important: These actions can help you follow your budget. For instance, if you’ve created a line-item budget and have been successfully sticking to it, you may still encounter an unexpected expense, such as a big dental bill or pricey car repair.

By knowing where your bank balance stands, you can determine if you can afford to pay that bill from checking or whether this counts as a good reason for when to use your emergency fund.

How to Monitor Your Accounts

Thankfully, banks generally offer a variety of ways to keep tabs when managing your checking account.

•   You can use your bank’s website or app to click your way to your account details.

•   Another digital option is to use a third-party app or website, where account holders can connect all of their accounts and see a comprehensive display of their money.

•   Some financial institutions will offer banking alerts for checking accounts. For instance, if your bank account is low or goes into overdraft or there’s suspected fraud, you might receive a text message, email, and/or push notification as an alert. This can help you keep in touch with where your account stands.

•   You can often check your balance at an ATM.

•   If you bank with a traditional vs. online bank, you can go into a branch in person. You could ask a teller for help viewing your balance.

•   Banks may also offer services via phone, where customers can call in and request their balance.

When to Get in Touch With the Bank

When your monitor your bank account, you may encounter a few key times when it’s important to get in touch with your bank:

•   If you see a fraudulent charge on your account, contact the bank as soon as possible. Many banks offer 24/7 customer assistance so customers can get in touch any time of day.

•   If you are charged fees for an overdraft or a bounced check, contact your bank. You might be able to get those fees reversed. A bank may only do this in the first or second instance or take a part of the fee off, but it’s better than nothing.

•   Another reason to call a bank is to see if there are any promotions available. Customers might be able to open a new high-yield checking account, receive a bonus, or lower their monthly fees. Banks may be willing to give customers perks so that they can retain their business.

Recommended: What Does a Pending Transaction Mean?

The Takeaway

Regularly checking your bank accounts is a vital part of keeping your finances on track. The exact frequency with which you look at your accounts is a personal decision, but what’s important is that you stay on top of your checking account.

Consider setting a calendar alert or reminder if you are having trouble remembering to review your accounts. Many people find that checking their account daily or once or twice a week is the right cadence.

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

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall. Enjoy up to 4.60% APY on SoFi Checking and Savings.

FAQ

Does it hurt to have too many checking accounts?

There may be times when you’d want to open up more than one checking account to keep, say, your income from your full-time job and your side hustle separate or to cover different kinds of expenses. However, you will likely need to keep an eye on all of your accounts and could potentially have to pay account fees and meet balance requirements for each.

What should you monitor when you have a checking account?

It can be important to monitor your checking account for a low balance or overdraft, for errors, for hidden fees, and for unauthorized transactions and other signs of fraudulent activity.

Do banks look at your checking account?

Banks may look at your accounts for a variety of reasons such as monitoring for fraud, gathering information on what services customers might need, and determining credit eligibility (say, if you have applied for a home loan).

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SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

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

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

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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

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This article is not intended to be legal advice. Please consult an attorney for advice.

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A salary reduction contribution plan allows employees to reduce their taxable income by investing for retirement. With this type of plan, an employee’s salary isn’t really reduced; rather the employer deducts a percentage of their salary and deposits the funds in a retirement savings plan where the money can grow tax deferred.

Common employer-sponsored retirement plans include 401(k)s, 403(b)s, and SIMPLE IRAs. Employee contributions — also called elective deferral contributions — are typically made with pre-tax money, effectively reducing the participant’s taxable income and often lowering their tax bill. Some plans feature an after-tax Roth contribution option, too.

You may already be contributing to a salary reduction contribution plan, although your company may not call it that. These plans can be a valuable way to boost your retirement savings, and offer you a tax break. Here’s what you need to know.

Salary Reduction Contribution Plans Explained

A salary reduction contribution plan helps workers save and invest for retirement through their employer via several types of retirement accounts. Money is typically deposited in a retirement account such as a 401(k), 403(b), or SIMPLE IRA on a pre-tax basis through recurring deferrals (aka contributions) on behalf of the employee.

Employees typically select the percentage they wish to deposit, e.g. 3%, 10%, or more. That percentage is deducted from an employee’s paycheck automatically, and deposited in their retirement account. Sometimes a specific dollar amount is established as the salary reduction contribution amount.

The upshot for the worker is that they can delay paying taxes on the amount of the salary reduction for many years, until they withdraw money from the account during retirement. Like a traditional 401(k) or 403(b), these accounts can be tax deferred; Roth options are considered after tax (because you deposit after-tax funds, but pay no tax on withdrawals). Retirement contributions may offer decades of compounded investment returns without taxation. Essentially, retirement contributions through an employer’s plan means saving money from your salary.

There are also SIMPLE IRA salary reduction agreements sometimes offered by small businesses with 100 or fewer employees: “SIMPLE” is short for “Savings Incentive Match Plan for Employees.”

A Salary Reduction Simplified Employee Pension Plan (SARSEP), on the other hand, is a simplified employee pension plan established before 1997.

💡 Quick Tip: The advantage of opening a Roth IRA and a tax-deferred account like a 401(k) or traditional IRA is that by the time you retire, you’ll have tax-free income from your Roth, and taxable income from the tax-deferred account. This can help with tax planning.

How Salary Reduction Contribution Plans Work

Salary reduction contribution plans are established between a worker and their employer. The two parties agree to have a set percentage or a dollar amount taken from the employee’s salary and deposited into a tax-advantaged retirement plan. That money can then be invested in stock or bond mutual funds, or other investments offered by the plan.

With pre-tax contributions, the employee has a reduced paycheck but gets current-year tax savings. With after-tax contributions, as in a Roth account, taxes are paid today while the account can potentially grow tax-free through retirement; withdrawals from a Roth account are tax free.

Example of a Salary Reduction Contribution Plan

Here’s an example of how a salary reduction contribution plan agreement might work:

Let’s say an employee at a university has a $100,000 salary and wishes to save 10% of their pay in a pre-tax retirement account. The school has a 403(b) plan in place. The worker contacts their Human Resources department to ask about submitting a salary reduction agreement form. On the form, the worker chooses an amount of their salary to defer into the 403(b) plan (10%).

Typically they also select investments from a lineup of mutual funds or exchange-traded funds (ETFs).

Come payday, the employee’s paycheck will look different. If the usual biweekly gross earnings amount is $3,846 ($100,000 salary divided by 26 pay periods, per year), then $384.60, or 10% of earnings, is deducted from the employee’s paycheck and deposited into the 403(b) and invested, assuming the employee has selected their desired investment options.

Depending on other deductions, the employee’s new taxable income might be $3,461.40. The contribution effectively reduced the worker’s salary, potentially lowering their tax bill at the end of the year.

If the worker is in the 22% marginal income tax bracket, the $10,000 annual deferral amounts to an annual federal income tax savings of $2,200 per year.

Bear in mind that withdrawals from the 403(b) plan are taxable with pre-tax salary reductions. We’ll look at salary reduction plan withdrawal rules later.

Pros & Cons of Salary Reduction Contribution Plans

Although your employer may offer a salary reduction contribution plan like a 401(k) or SIMPLE IRA salary reduction agreement for retirement, it’s not required to participate. Before deciding whether you want to join your organization’s plan, here are some advantages and disadvantages to consider.

Pros

A salary reduction contribution offers employees the chance to reduce their current-year taxable income. A lower salary defers taxation on the money you save, until retirement. For young workers, that could mean decades of compounding returns without having to pay taxes along the way.

For those who have the option of choosing a Roth account, taxes are paid in the current year, but withdrawals are tax free (as long as certain criteria are met). Also, contributions to a Roth 401(k) or Roth 403(b) plan can grow tax-free through retirement.

What’s more, the employer might offer their own contribution such as a matching contribution. Typically, an employer might match employees’ contributions up to a certain amount: e.g. they’ll match 50 cents for every dollar an employee saves, up to 6% of their salary.

Another upside is that lowering one’s salary through automated savings can help an individual live on less money and avoid spending beyond their means — which may help establish long-term savings habits. Thus, contributing to a salary reduction plan can be a step toward creating a financial plan.

Cons

Like many aspects of personal finance, salary reduction contributions can be a balancing act between meeting your obligations today and providing for your future self.

Saving for the future can mean forgoing some pleasure in the present, similar to the concept of delayed gratification. Maybe you decide to postpone a vacation or purchase of a new car in exchange for a more robust retirement account balance.

Employees should also weigh the likelihood of needing money in the event of an emergency. Taking early withdrawals or borrowing from your 401(k) account can be costly, or may come with penalties, versus having extra cash in a checking or savings account. In most cases if you take out a loan from an employer-sponsored plan, you would have to repay the loan in full if you left your job.

💡 Quick Tip: Did you know that opening a brokerage account typically doesn’t come with any setup costs? Often, the only requirement to open a brokerage account — aside from providing personal details — is making an initial deposit.

Salary Reduction Contribution Limits

Annual salary reduction contribution limits can change each year. The Internal Revenue Service (IRS) determines the yearly maximum contribution amount. For 2024, the most a worker can contribute to a 401(k) or 403(b) is $23,000. For those age 50 and older, an additional $7,500 contribution is permitted.

In 2023, a worker can contribute up to $22,500 to a 401(k) or 403(b), and those 50 and older can contribute an additional $7,500 in catch-up contributions.

A SIMPLE IRA salary reduction agreement has different limits. For 2024, a SIMPLE IRA’s annual maximum contribution is $16,000 with a catch-up contribution of up to $3,500 for those age 50 and older. For 2023, the annual maximum SIMPLE IRA contribution limit is $15,500 and $3,500 for those 50 and up.

Salary Reduction Contribution Plan Withdrawal Rules

There are many rules regarding salary reduction contribution plan withdrawals.

At a high level, when an employee withdraws money from a tax-deferred retirement account, they will owe income tax on the money. If you withdraw money before age 59 ½, a 10% early-withdrawal tax might be applied.

There can be some exceptions to these rules, but it’s best to consult with a professional.

Should you withdraw money when you leave your employer? While taking a lump sum is possible under those circumstances, it may not be your best choice: You’d owe taxes on the full amount, and you’d risk spending money that’s meant to support you when you’re older.

The standard rule of thumb is that individuals who are leaving one employer should consider rolling over their retirement account to an IRA, or their new employer’s plan. In that case there are no penalties or taxes owed, and the money is once again secured for the future.

The Takeaway

Salary reduction contribution plans can help workers save money for retirement on a pre-tax or after-tax basis. Steadily putting money to work for your future is a major step toward building a solid long-term financial plan. And in many cases you will reap a tax advantage in the present — or in the future.

That said, there are important pros and cons to weigh when deciding whether you should contribute via a salary reduction plan. You may have another strategy. But if you don’t, you might want to consider opting into your employer’s plan for the benefits it can provide.

An important point to know: Even when you join a salary reduction plan, you can still open up an IRA to boost your savings. And if you leave your job, you can roll over your salary reduction retirement account to an IRA without paying taxes or penalties.

Ready to invest for your retirement? It’s easy to get started when you open a traditional or Roth IRA with SoFi. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

Easily manage your retirement savings with a SoFi IRA.

FAQ

Does a 401(k) reduce salary?

Not really. Contributions toward a traditional 401(k) retirement plan are a tax-deductible form of savings that effectively reduce an individual’s taxable income. In that regard, making retirement contributions on a pre-tax basis can reduce someone’s salary (but you still have the money in your retirement account).

Also, some plans allow for after-tax contributions which also reduce the size of your paycheck, but are not tax deductible.

What does employee salary reduction mean?

Employee salary reduction means that money is automatically deducted from an employee’s paycheck and contributed to a retirement plan. Money moves into a plan such as a 401(k), 403(b), or a SIMPLE IRA. The account is in the employee’s name, and they decide how to invest the funds.

What is the difference between SEP and SARSEP?

A SEP is known as a Simplified Employee Pension Plan. A SEP plan allows employers to contribute to traditional IRAs (called SEP IRAs) for their employees. The IRS states that a business of any size, even self-employed, can establish a SEP. These plans are common in the small business world.

A SARSEP, on the other hand, is a simplified employee pension plan established before 1997. A SARSEP includes a salary reduction arrangement. The employee can choose to have the employer contribute a portion of their salary to an IRA or annuity. Per the IRS, a SARSEP may not be established after 1996.

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

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

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