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You are probably used to tapping and swiping your debit card as you go through your day, whether to grab a salad for lunch or pay for a new bottle of shampoo. Debit cards are welcome at most of the places where you can use a credit card, and that includes online retailers as well. This can be a welcome way for some people to spend when shopping online as it can help with budgeting (you only spend what’s in your bank account) and allow you to avoid those credit card interest charges.

However, paying online by debit card isn’t exactly the same as using a credit card, and it’s important to understand the impact, both positive (avoiding a hefty credit card interest rate) and negative (you may not earn rewards nor have fraud protection).

Here, you’ll learn how to use your debit card safely and wisely when purchasing online.

Can You Use A Debit Card Online?

Generally, if a website accepts a credit card for online purchases, it also will accept a debit card.

You may not see debit cards listed specifically as a payment option on a merchant’s website. But if the front of your debit card has a credit network logo (such as Visa or Mastercard) and the business accepts credit cards from that network, you should be able to use it.

To use a debit card for an online purchase, you’ll want to check “credit card” as the payment method and then enter your debit card’s account number, expiration date, and three-digit security code (CCV) to make the purchase.

Unlike debit purchases you make in-person, you won’t need to provide your PIN when purchasing something online. The reason is that the transaction will be treated as a “credit” transaction, which means that the transaction is pending (meaning waiting to be authorized, cleared, and settled).

The money will be deducted from your checking account around two to four days later.

Before an online debit transaction clears, you may see a difference between your checking account’s “current” balance, which includes only deposits and deductions that have actually cleared, and your “available” balance, which includes authorized transactions that haven’t yet cleared.

What Are Some Pros to Using a Debit Card Online?

There are a few advantages to using a debit card as opposed to a credit card for online purchases that consumers may want to consider. These include:

Reducing Credit Card Debt

Using a debit card to make online purchases may help reduce credit card use (and debt).

When you shop with a credit card vs. a debit card, you’re borrowing money you’ll have to pay back later. If you don’t pay the debt back within a designated period of time, the lender is going to charge interest.

And, if you only pay only the minimum required to carry your balance each month, that debt could grow into a hard-to-get-rid-of burden.

Sign-up bonuses, discounts, unlimited cash-back offers, and travel points can make it tempting to use a credit card for every purchase. But shoppers need to be careful about paying off those purchases on time, or they could end up spending more on interest payments than they receive in rewards.

When you use a debit card, you can’t spend more than you have at the moment. And because there’s no debt, there’s no interest to worry about.

Some Debit Cards Come with Rewards

While rewards and perks for spending are mostly associated with credit cards, many debit cards are now offering rewards programs as well, including cash back, points, or miles every time you swipe your card.

Lower Fees

Debit cards typically don’t have any associated fees unless users spend more than they have in their account and incur an overdraft charge.

By contrast, how credit cards work typically involves fees. Credit cards may come with an annual fee, over-limit fees (if a purchase pushes their account balance over their credit limit), and late-payment fees, in addition to monthly interest on the card’s outstanding balance.

There is also typically no fee for withdrawing cash using your debit card at your bank’s ATM. If you use a credit card to get cash, on the other hand, you may incur a significant cash advance fee. You may also have to pay interest on the advance amount, which often starts accruing the day of the advance, not at the end of the statement period as with regular charges.

Recommended: ATM Withdrawal Limits – What You Need To Know

Is There a Downside to Using a Debit Card Online?

There are some advantages to using a credit card over a debit card. Here are a couple of things to consider when making the choice to use a debit card online.

Using a Debit Card Online Won’t Build Your Credit History

Have you ever heard someone complain that they couldn’t get a loan or credit card because they’ve never borrowed money? They thought they were being financially responsible, but the bank didn’t want to risk lending money to someone who didn’t have a history of making payments on a loan or line of credit.

That catch-22 extends to purchases made with a debit card. Even though your goal may be to stay fiscally responsible by making only debit (i.e., cash) purchases to avoid debt, you’re not helping your FICO® score, which represents how responsible you are with borrowed money.

And even though you may have marked the “credit” payment option when paying online, the money is still coming directly from your account, so it won’t directly impact your score.

Less Fraud Protection

You may have heard that it isn’t as safe to use a debit card online because federal laws don’t offer the same consumer protections that credit cards get.

It’s true that there is a difference.

Credit card use is covered by the Fair Credit Billing Act which provides a set procedure for settling “billing errors,” including unauthorized charges. If someone uses your stolen credit card account number to make online purchases, you generally aren’t responsible for those charges and can dispute those charges.

Debit card use is protected by the Electronic Fund Transfer Act , which also gives consumers the right to challenge fraudulent debit card charges. Your liability depends on how quickly you report the problem, though, so you need to act relatively fast to get that federal protection.

If someone makes unauthorized charges with your debit card number and you didn’t lose your card, you aren’t liable for those transactions as long as you report the charges within 60 days of receiving your statement.

You also could have zero liability if your card was lost or stolen and you report it before any unauthorized charges occur. If you report the lost or stolen card after it’s been used, the amount you owe will be determined by how quickly you report the loss. Within two days, your liability will be $50; within 60 days, $500.

However, if you wait more than 60 calendar days after you receive your statement to make a report, and the thief goes on a shopping spree, you could lose all the money in any account linked to your debit card.

Some debit card issuers now offer “zero liability” protections that go beyond what federal laws provide. If your debit card is backed by Visa or Mastercard, for example, you may find you have the same protections they offer their credit card users. (You may want to check with your financial institution to verify this coverage.)

Less Purchase Protection

Many credit cards offer purchase or damage protection, which means that if the item you buy is damaged or stolen within a specified period of time, you can get your money refunded. Credit cards may also offer extended warranties on electronic purchases, as well as travel perks, such as rental car insurance.

Debit cards are less likely to offer these perks.

How to Use Your Debit Card Safely Online

To protect your identity while shopping online with your debit card, you may want to follow these simple precautions.

•   Looking for the lock. When making purchases with your debit card online, it’s a good idea to make sure you’re shopping with a reputable company and on a secure website, especially when it’s time to enter your card number. A good safeguard is to look for the locked padlock icon in your browser. It can also be a good habit to log out of a site as soon as you finish shopping.

•   Monitoring your statements. It can be wise to regularly check your checking account and scan for any debit charges you don’t recognize. That’s because the faster you report a problem, the less trouble you should have recovering from any fraudulent activity.

•   Using a secured network at home. You may want to avoid shopping or paying bills when you’re using public WiFi. Even secured public networks have some risk. And you never know who might be watching over your shoulder when you enter a password or other personal information.

•   Keeping your card, and your account number, to yourself. Giving your card or account number to a friend or family member could lead to trouble down the road, including charges you didn’t expect. And, it may be difficult to recover any lost funds because the usage may not be considered unauthorized. If you want to allow someone you trust to use your account on a regular basis, consider adding them officially as an authorized user.

The Takeaway

Debit cards can be used online for most purchases and can be a great way to manage your spending.

Debit cards generally don’t come with the annual fee and other fees found with some credit cards. Plus, they don’t allow you to rack up debt because you aren’t offered a credit limit that’s higher than your checking account balance.

However, credit cards often come with more perks and purchase protections than debit cards. And, responsible use of a credit card can be a good way to build your credit score.

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.

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

SoFi members with direct deposit activity can earn 4.60% 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.

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.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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 .

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Many people these days want to put their money where their beliefs are and shop more ethically. That might mean supporting brands and retailers that do less harm environmentally or are actively promoting a healthier planet. It could mean having transparency about the fairness of their labor practices or the charitable efforts their company undertakes. Just how popular is ethical shopping? In a 2023 report, consumer insights platform TalkWalker and Khoros found that 82% of consumers want companies to put people and the planet before profits.

Finding out which businesses are doing the right thing and which aren’t, however, isn’t always easy. Plus, many people may worry that ethical consumerism just isn’t affordable.

Here’s help and reassurance. Read on for guidance on how to be a more conscious consumer, as well as how it may even save you some cash.

What Ethical Shopping Really Means

The term “ethical shopping” essentially boils down to people becoming more aware of the goods they are buying.

What’s “ethical” is subjective to each person, but finding out how each product is made, if the company supports fair labor and other socially responsible practices, and if the product is environmentally-friendly is a great place to start.

Money has a lot of power, so if people choose ethically-sourced and ethically-produced products more often, more companies may want to jump aboard the ethical and sustainable shopping train.

Since ethical consumerism is all about where our money goes, investing in companies that you believe are doing good in the world can also play an important part in consuming ethically.

Recommended: What Is Socially Responsible Investing?

Issues You May Want to Consider

Many companies — particularly clothing producers — have been called out for their outsize impact on the environment. According to the United Nations (UN), the fashion industry is considered to be the second most polluting industry in the world.

Indeed, clothing production is responsible for more carbon emissions than all international flights and maritime shipping combined, points out the U.N. The garment industry is also one of the top consumers of water in the world: It takes nearly 2,000 gallons of water to make a typical pair of jeans.

💡 Quick Tip: Typically, checking accounts don’t earn interest. However, some accounts do, and online banks are more likely than brick-and-mortar banks to offer you the best rates.

But thinking about ethical shopping can also go deeper than figuring out how a product is produced.

It may also be important to you to consider who is making that product and how that worker is being treated. Are the workers at the factories working in safe conditions? Are they being paid fairly? Seeking out companies with fair labor practices, including fair pay and benefits, can be important to many consumers.

You may also want to consider how well a company treats its suppliers. For example, does your favorite coffee shop pay its farmers a fair amount for their beans?

For some consumers, how a company treats animals is also an important consideration.

Ethical Shopping Made Easier

Once you know what to look for, you can research your favorite brands to learn how they measure up on ethics and sustainability.

You can find out a fair amount about what your favorite companies stand for by going to their websites and digging in their About Us, FAQ, and Info pages to judge for yourself. Generally, the more detail they provide, the better.

Do you see a step-by-step explanation of their supply chain? Do they proudly say that employees have paid sick leave? Or, even better, do they have any ethical certifications (more on that below)?

There are also a number of groups and organizations that are dedicated to making social and environmental data available to consumers who are interested in ethical shopping.

In other words, they’ve done the vetting for you. Here are a couple to check out.

Better World Shopper

This public research project rates over 2,000 companies based on their track records on human rights, the environment, animal protection, community involvement, and social justice.

The Ethical Fashion Directory

Produced by the organization Dressmember, this database can help you find clothing you can not feel good about but also fits your budget. You use the search bar to sort through the list of ethical brands by price and category.

💡Quick Tip: If you’re creating a budget, try the 50/30/20 budget rule. Allocate 50% of your after-tax income to the “needs” of life, like living expenses and debt. Spend 30% on wants, and then save the remaining 20% toward saving for your long-term goals.

Understanding Labels and Certifications

To become a more ethical shopper, it helps to understand which terms are meaningful and which terms aren’t worth much.

Companies are increasingly using the word “sustainable” to describe their products or the process of making them. However, that term can mean just about anything the retailer wants it to, since the word’s use is not regulated with any oversight (unlike the word “organic,” which comes with more stringent guidelines for use).

“Natural” can be confusing, too. Many natural fibers tend to have a lower carbon footprint than synthetic fibers because they do not use as many chemicals during the production process.

But just because something is “natural” doesn’t mean it’s more eco-friendly. Remember the aforementioned jeans? Those were likely made, at least in part, of cotton, which takes up a lot more water to produce than other fabrics.

Fortunately, there are labels, or certifications, that do carry weight. You may want to keep an eye out for the common ones below.

•  B-Corp. B Lab’s B-Corporation certification signifies a company’s commitment to upholding high human rights and environmental standards, and is based on a rigorous assessment.

•  GOTS Organic. A textile product carrying the Global Organic Textile Standard (GOTS) label must contain a minimum of 70% certified organic fiber. Organic fibers are grown without the use of synthetic pesticides, insecticides, or herbicides and GMOs (Genetic Modified Organisms). Organic agriculture is a production process that sustains the health of ecosystems, soils and people.

•  Made in the USA. To use this label all, or virtually all, of the product has to be made in America. Products produced in the U.S. must comply with U.S. laws for workplace safety, pollution, and health. Also, the carbon footprint of these products is likely to be lower because they don’t have to be shipped from overseas.

•  Fair Trade. When you see a product with the Fair Trade Certified seal , you can be confident it was made according to rigorous social, environmental, and economic standards. Also the farmers, workers, and fisherman behind the product earn additional money from your purchase to help uplift their communities.

Think Globally, Shop Locally

One simple way to shop more ethically is to shop locally. You can often find unique and interesting products by shopping with local, independent retailers.

People can also make a big difference by spending their dollars at mom-and-pop shops around them. For one reason, independent businesses are more likely to have localized supply chains. So shopping at one local store could potentially help bolster not just that store but also more of the local economy.

Local shopping also helps reduce carbon emissions, since a consumer may end up driving less. And if a shopper buys food grown near them, the product will not need to be shipped via air or sea, meaning its carbon footprint will be lower. As a bonus, buying local produce could also mean it’s fresher too, potentially making for tastier (and more ethical) meals.

Although local goods may be slightly more expensive, businesses may offer coupons to entice consumers to buy from them.

Consider Buying Second Hand

It’s nice to think about buying a shiny new thing, but before you pull the trigger, you may want to consider, does this need to be purchased new?

•  Buying second-hand can be more economical, as well as more environmentally-conscious. Yes, it keeps older items from ending up in landfills, and, unlike buying a brand new product, no new item needs to be produced to directly replace it.

  If you’re thinking about buying a new bike, for example, you might get just as much pleasure from getting a gently used bike through an online second-hand marketplace.

  The same holds for clothing. Gently-used garments are one of the greenest clothing choices you can make because they require no additional resources to produce and they reduce the amount of textile waste going into landfills.

•  Plus you can often score some great finds at thrift stores, garage sales, and online marketplaces where people sell their unwanted stuff. Another option is to organize a clothing swap with a group of friends.

•  Second-hand pieces typically cost less than new clothes bought on sale. In addition, they may feel much more unique, as fewer people around town will likely be sporting the same exact item.

Do You Really Need the Product at All?

Ethical shopping also means thinking about if you really need to shop at all.

Sometimes it’s okay to just say “no” to buying the latest and greatest. Sure, there’s a new phone on the market that’s cool, but do you really need it?

Becoming an ethical shopper means asking yourself this question a lot. It’s easy to give in to society’s pressure to buy new and buy often, but part of becoming a more conscious consumer is to start thinking in a different way.

One way to nip unnecessary buying in the bud is to employ the 30-day purchase rule. If a person finds an item they like but doesn’t need immediately, they agree to walk away for 30 days.

If, after the waiting period, they feel they still really want the product and can afford it, they can then choose to go back and buy it. However, the odds are fairly good that a little bit of time and space will prove that a nonessential item is just that.

Tracking Spending Can Help

One way to become a more conscious and ethical shopper is to start tracking your spending as part of whatever budget method you choose.

Looking over your checking account and credit card statements each month can help people see exactly where they are spending their money (and where they may want to cut back), while also pointing out vendors and shops they may no longer want to patronize (such as an out of the way mega-grocery store).

💡 Quick Tip: If you’re faced with debt and wondering which kind to pay off first, it can be smart to prioritize high-interest debt first. For many people, this means their credit card debt; rates have recently been climbing into the double-digit range, so try to eliminate that ASAP.

The Takeaway

Whether it’s clothing, food, or tech, many of the products we love to buy are associated with unethical practices, from human rights abuses to environmental harm.

Ethical shopping is about supporting companies that put in the work to make things better for people, as well as the planet. It’s also about choosing not to buy from brands that violate your code of ethics. While the process may seem intimidating, it’s easy to start buying more ethically with the right tools and information, plus a little research time. It may help you shave down your spending too.

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.

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

SoFi members with direct deposit activity can earn 4.60% 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.

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.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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It’s estimated that close to $100 million in scholarships go unclaimed each year and $2 billion in student grants go unclaimed. Typically, the money is not awarded due to lack of applicants. This is good news for students — as those that are willing to put in the time to search for scholarships and grants should be able to find at least a few to help pay their way through college.

The beauty of scholarships and grants is that you almost never need to pay them back. Who doesn’t love gifts? But acquiring them will take at least a little effort.

Where Do You Find Unclaimed Scholarships?

You don’t have to be a 4.0 student or a star athlete to receive scholarships. In fact, the average high school student is eligible for 50-100 different types of scholarships each year. But, scholarships aren’t just going to come to you. You have to be the one to put in the work to find scholarships you qualify for and apply for them.

One of the best ways to find scholarships you are eligible for is through a scholarship search. Scholarship searches are offered by a variety of companies and allow you to filter the scholarships based on your specific qualifications, including your state, area of study, background, ethnicity, and more. Scholarship searches are one of the quickest ways to find quality scholarships throughout the country.

Other ways to find unclaimed scholarships include asking your specific college or university what they offer, using the library’s recommendation section, reaching out to businesses in your field of study, speaking to your high school counselor, and asking religious organizations if they offer scholarships.

Regardless of which methods you use to find scholarships nobody applies for, the reality is they are out there waiting for students to apply for and claim them.

Recommended: Search Grants and Scholarships by State

Two Types of Aid to Lay Claim To

Financial aid can be need-based or merit-based.

Need-Based Aid

Federal need-based aid is determined by the Student Aid Index, or SAI (formerly called the Expected Family Contribution, or EFC) as calculated by the Free Application for Federal Student Aid (FAFSA®).

The Pell Grant, the Department of Education’s biggest grant program, is geared toward students who demonstrate significant financial need, but the total cost of attendance at a particular college also plays a role. The maximum Pell Grant amount for the 2023-2024 academic year is $7,395.

Any student who could use college financial aid has nothing to lose by filling out the FAFSA. And even if you are not eligible for federal aid, realize that most states and schools use FAFSA information to award nonfederal aid, too.

One way to find nonfederal financial aid is to fill out the CSS Profile, which determines eligibility for institutional awards and grants. The CSS Profile awards billions in nonfederal aid to college students each year and can be a great way to find unclaimed scholarships.

Recommended: How to Complete the FAFSA

Merit Aid

Merit scholarships are not based on financial need and are awarded by colleges, employers, individuals, businesses, nonprofits, states, religious groups, and professional and social organizations to academic or athletic achievers, as most of us are aware, but merit aid also may be determined by community involvement, level of dedication to a field of study, race, gender, teacher recommendations, and other criteria.

So who is the biggest source of “free money?” Colleges, according to a recent College Board Trends in Student Aid Report. The U.S. Department of Education awards $46 billion annually in scholarships, and thanks to competition to attract students, nearly every college and university in the country offers merit-based aid in some form.

To find unclaimed scholarships, you could start by thinking about all the ways you have, well, merit — making lists of opportunities and eligibility criteria, and pursuing only the scholarships you’re best qualified for.

Why Would Any Scholarships Go Unclaimed?

So is it true there are obscure scholarships left unclaimed? There is no database that can give precise answers, but it makes sense that when specific parameters exist around a particular scholarship, fewer students will qualify.

For example, scholarships exist for North Korean refugees who are permanently living in the United States. Applicants must have been born in North Korea or the child of someone born in North Korea.

Let’s say you don’t fit those parameters. Other unusual opportunities include the following:

•   If you dazzle your friends with your ability to make prom outfits using only duct tape, then you could win a $10,000 Stuck at Prom scholarship. Seriously.

•   Or maybe you have the best plan ever to survive the zombie apocalypse. If so, you could apply for the Zombie Apocalypse Scholarship offered by Unigo ($2,000).

•   If you live in the Phoenix area and you’re a tall graduating senior, you could be interviewed and measured for the chance to gain all of $250 through the CATS Tall Club program.

While you may not qualify for any of the above-mentioned scholarships, these are just examples of how many are actually out there. You may be surprised at what you find (and what you do actually qualify for!) when conducting your search.

Keeping an Eye Out for Scholarship Scams

Plenty of scholarship and grant money for college is out there waiting to be claimed. Unfortunately, though, there are also financial aid scams, including scholarships that aren’t legitimate. The Department of Education offers tips to protect yourself, including:

•   Know that you don’t need to pay to find scholarships or any other form of financial aid.

•   Check information about scholarship offers at a public library and/or online.

•   Talk to the financial aid department at your college of choice to verify legitimacy.

Also, before students begin a search, they may want to be aware of “scholarships” that are actually sweepstakes because their information may be sold to third parties.

The Takeaway

Finding unclaimed scholarships and grants is the ideal way to fund college because this money does not need to be repaid. To cover all the expenses of college, however, many students will then need to take out federal and/or private student loans.

Although private student loans do not carry the benefits and protections of federal student loans, they can fill gaps when you’ve considered all of your federal grant and loan options, but your expenses still exceed your means.

SoFi offers private student loans with competitive rates, flexible repayment options, and no fees. Loans do not need to be repaid while in school, and SoFi offers a six month grace period after graduation.

See if you prequalify for a private student loan with SoFi.

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SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

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.

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

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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Filing for bankruptcy is a tactic often used to erase large amounts of debt, but nondischargeable debts can prevent that clean slate.

Certain kinds of debt, including child support, student loans, and some tax bills, typically survive a bankruptcy filing.

Some 403,000 Americans filed for bankruptcy in the 12-month period ending March 31, 2023. For one reason or another they found themselves in debt situations complex enough to seek bankruptcy as a means of relief.

Though on the surface bankruptcy may appear to produce an opportunity for a fresh start, nondischargeable debts prevent it from being a true end-all solution.

What Does Nondischargeable Debt Include?

Nondischargeable debts can include home mortgages, certain taxes, child support, and student loans, and can vary based on the chapter of bankruptcy filed.

A debt may also be considered nondischargeable if a creditor formally objects to a discharge in court and wins.

When a debt is discharged through bankruptcy, the debtor is relieved of any legal obligation to pay it back, and the creditor is prevented from taking any further action to collect that debt. This includes contacting the debtor or filing a lawsuit.

Personal loans, credit card debt, and medical bills are types of debt generally considered dischargeable.

Nondischargeable debt, on the other hand, does not dissolve in a bankruptcy filing. The debtor remains liable for payment even after the filing is complete. These are types of debt that Congress has deemed unforgivable due to public policy.


💡 Quick Tip: A low-interest personal loan from SoFi can help you consolidate your debts, lower your monthly payments, and get you out of debt sooner.

Types of Nondischargeable Debt

Nineteen categories of nondischargeable debt apply for Chapters 7, 11, and 12 of the Bankruptcy Code. (A more limited list of exceptions applies to cases under Chapter 13.)

Except in unique circumstances, if a debt falls under one of these categories, it is not considered dischargeable.

1. Debt incurred from U.S. taxes or a customs duty.

2. Debt for money, property, or services obtained fraudulently or under false pretenses.

3. Any debt excluded from bankruptcy filing paperwork (unless the missing creditor received prior notice and had ample time to respond to the filing).

4. Debt acquired due to fraud, larceny, or embezzlement while working as a fiduciary.

5. Debt contracted for a domestic support obligation, including child support and alimony.

6. Debt from intentionally harming another person or their property.

7. Tax debt as a result of a fine, penalty or forfeiture that is, at minimum, 3 years old.

8. Student loan debt (unless not discharging the debt would impose an “undue hardship”).

9. Debt incurred due to the death or injury of someone caused by the debtor while operating a vehicle, vessel, or aircraft while intoxicated.

10. Any debts that were or could have been listed in a prior bankruptcy filing, and the debtor waived or was denied a discharge.

11. Debt obtained by committing fraud or misappropriating funds while acting as a fiduciary at a bank or credit union.

12. Debt incurred for the malicious or reckless failure of a debtor to fulfill any commitment to a federal depository.

13. Debts for any orders of restitution.

14. Debt incurred by penalty in relation to U.S. taxes.

15. Any debt to a spouse, former spouse, or child that is incurred through a separation or divorce.

16. Debts incurred due to condominium ownership or homeowners association fees.

17. Legal fees imposed on a prisoner by a court for costs and expenses related to a filing.

18. Debts owed to a pension, profit-sharing, stock bonus, or another retirement plan, as well as any loans taken from an individual retirement annuity.

19. Debt obtained for violating federal or state securities laws, common law, or deceit and manipulation in connection with the purchase or sale of any security.

Recommended: Understanding Bankruptcy: Is it Ever the Right Option?

How Will Nondischargeable Debt Affect Me?

Nondischargeable debt is just like any other debt in the sense that it must be paid off on time to avoid negative consequences.

If a debt is left unpaid for too long, the creditor may sell the debt to a collection agency, which then may result in any number of the following repercussions:

•   Significantly lowering a credit score

•   Flagging a borrower as “high risk” to future lenders

•   Decreasing the odds of approval for future credit offerings

•   Increasing high-interest rate offers with less favorable terms

•   Adding negative remarks to your credit history

•   Activating a lien against a property or asset

•   Prompting creditors to pursue legal action

•   Enacting wage or asset garnishment

💡 Quick Tip: With low interest rates compared to credit cards, a personal loan for credit card consolidation can substantially lower your payments.

How Can I Resolve Nondischargeable Debts?

Making plans to resolve any outstanding debts as soon as possible is key to managing a credit history and salvaging future credit opportunities. Here are a few strategies to consider for paying off debts.

Stop Using Credit

The first step toward debt resolution is to stop collecting it.

The average American consumer has 3.84 credit cards, and the average balance is $5,910 in 2022, according to data from Experian.

Making a point not to purchase anything that can’t be bought with cash outright can help curb unnecessary expenses. This includes larger purchases that may require financing. Leaving credit cards at home and removing their information from online payment systems can also help remove the temptation of using them.

Create a Budget

According to a 2022 Debt.com survey, 85% of Americans said making a budget helped them get out of or stay out of debt.

A monthly plan including income and expenses can help reveal where extra money might be coming in and where you can cut back on unnecessary spending. A plan will provide a holistic view of spending habits, allowing for larger decisions to be made about how to change habits in order to fit new, debt-focused priorities.

Cutting back on expenses and carefully tracking spending can help reveal extra dollars and cents needed to pay down debts.

Start a Part-Time Job

When paying down debt is a top priority, taking on another job or picking up additional hours at your current one can be extremely helpful.

An extra check here and there can provide funds to make additional payments on debts, helping to dissolve them more quickly. Consider options such as working weekends at a local coffee shop, picking up a temporary gig in food delivery, or freelancing for additional income.

Recommended: 19 Jobs That Pay Daily

Consolidate Debt

Applying for a personal loan is a strategy for managing several debts simultaneously. Though it may seem counterintuitive to take on another loan, a personal loan can be used to pay off multiple existing lines of credit, such as credit cards, and consolidate them into one loan with a single monthly payment and, possibly, a lower interest rate.

In addition to comparing rates, it’s important to make sure you understand how a new loan could benefit you in the long run. For instance, if your monthly payment is lower because the loan term is longer, it might not be a good strategy, because it means you may be making more interest payments and therefore paying more over the life of the loan.

However, a debt consolidation loan could help streamline payments and ease the anxiety that comes with being responsible for managing numerous lines of credit.

The Takeaway

Nondischargeable debts require more than bankruptcy to be resolved, and without proper management, they could worsen your current financial situation. Like any other debt, nondischargeable debt must be paid off on time in order to avoid negative repercussions. Creating a plan to handle outstanding debts as soon as possible is a smart choice.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

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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.

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

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

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Reasons for paying off your mortgage early include eliminating monthly mortgage payments, saving money in interest, reducing financial stress, and more. But, just because you can pay your mortgage off early doesn’t necessarily mean you should.

Should You Consider an Early Mortgage Payoff?

It can be tempting to rush to pay off your home loan when you have the ability to, especially if you’ve struggled with debt management. And why wouldn’t you want to pay off your mortgage? Getting rid of debt could potentially increase cash flow.

When it comes to your mortgage loan, paying it off early depends on your unique financial situation and goals — there is no one right answer.

Reasons Not to Pay Your Mortgage Off Early

While it may seem like there are no reasons not to pay off your mortgage early, that is actually not the case. Here are a few reasons why it may not be a good idea to pay off your mortgage loan early:

You Have a Competitive Interest Rate

Unless you’ve reached all of your financial goals, it may not make the most sense to pay off your mortgage early when you have a competitive interest rate.

For example, if you are saving to send your child to college or you’re trying to rebuild your emergency fund after a home repair, those might take priority.

You also could possibly earn more by investing your money as opposed to paying off your loan. If that’s the case, it doesn’t make sense to pay off your mortgage early unless you’re wanting the peace of mind that comes with no mortgage debt. Investment decisions should be based on specific financial needs, goals, and risk appetite.

You Would Have Nothing Left in Savings

If you only have enough in the bank to cover your mortgage, it is not advisable to pay it off. Having an emergency fund is necessary and may take priority over having no mortgage payment.

You Might Face a Prepayment Penalty

Make sure to review your mortgage terms closely. Some lenders charge an early payoff penalty, usually a percentage of the principal balance at the time of payoff.

You Might Miss Out on the Mortgage Tax Deduction

For many people who itemize, having a mortgage helps push their itemized deductions higher than the standard deduction. It’s worth discussing the mortgage tax deduction with your accountant or other tax professional before you resolve to pay your mortgage off early.

You Have Other High-interest Debt

If you have other high-interest debt, such as credit card debt, personal loans, or student loans, it may make sense to pay those off in full prior to paying your mortgage off early. Home loans typically have the lowest interest rates of other forms of debt and are considered “good debt” by lenders. It only makes sense to pay off your mortgage early if you have no other debts in your name.

When an Early Payoff May Make Sense

On the flip side, there are some situations when paying off a mortgage early might make more sense than waiting. Reasons to pay off your mortgage early may include:

You’ve Met All of Your Financial Goals

If your emergency savings account is right where you feel it needs to be and you’re diligently contributing to your retirement accounts, there may be no reason not to pay off your mortgage early.

Another idea, however, is to purchase an investment property instead of paying off your mortgage early. This can create a monthly cash flow in addition to the value of the property (hopefully) appreciating over the years.

You’re Interested in Being 100% Debt-Free

Sometimes, just the idea of having loan payments can be mentally taxing, even if you’re in a good place financially. Money is not just about numbers for many; it’s also about emotions.

If paying off your mortgage loan early relieves anxiety because it’s helping you become debt-free, then that might be something to consider.

Of course, reflecting on why you want to become debt-free is important when thinking about paying your mortgage off. If, for example, it’s because you’re approaching retirement and will no longer be getting a steady paycheck, it might make sense to pay off your mortgage.

Recommended: How to Pay Off a 30-Year Mortgage in 15 Years

Ways to Pay Off a Mortgage Early or Faster

If you’ve decided it makes sense for your financial situation to pay off your mortgage early, here’s how you can do it:

Lump sum. The easiest way to pay off your mortgage early is by making one lump-sum payment to your mortgage lender. Contact your lender prior to making the payment so you can make sure you’re paying exactly what you owe, including any possible prepayment fees.

Extra payments. You could potentially pay more toward your mortgage principal each month if you got a raise at work or you’ve trimmed some fat in your budget.

If you make extra payments toward your mortgage, it could lead to paying off the loan faster than if you were just to make the set payment each month. Make sure to contact your lender prior to making extra payments, though, so you know the extra amount is being applied toward the principal amount only, not the principal and interest.

Refinancing. Another option for paying off your mortgage early is refinancing. Refinancing your mortgage means replacing your current mortgage with a new one, ideally with a better rate and term.

If you shorten your loan term from 30 years to 15 years, for example, it may increase your monthly payments but in turn allow you to pay your mortgage off faster. Home loans with shorter terms often come with lower interest rates, too, so more of your monthly payments will be applied to the loan’s principal balance.

The Takeaway

Should you pay off your mortgage early? Maybe. If your retirement fund is fully-funded, you have no other high-interest debts, and you’re interested in becoming 100% debt-free, it may make sense to pay off your mortgage early. However, if you do not have a fully funded retirement and emergency savings account or you could make more money by investing rather than paying off your mortgage debt, it could be best to hold off on paying your mortgage off early.

One way to save on interest and possibly pay off your mortgage early is by refinancing. Refinancing can allow you to lower your interest rate and shorten your loan term, if desired.

SoFi offers competitive mortgage refinance rates and flexible loan terms. Checking your rate takes just a few minutes and will not impact your credit score.*

Interested in refinancing your mortgage? Apply with SoFi today.

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*Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

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Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

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.

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

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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