About 95% of Americans have a bank account, and many people have both a checking and a savings account. Sometimes, though, there may be advantages to what is considered a hybrid account, offering the best of both worlds (or at least some of the benefits of each).
For instance, you might have the ease of access that you get with a checking account: Hello, debit card! And you might also earn a higher interest rate, the way you might with some savings accounts vs. checking.
Financial institutions may offer different versions of hybrid accounts. Read on to learn about some of the most common features so you can decide if a hybrid bank account is right for you.
Defining the Hybrid Account
There are a variety of bank accounts available to consumers. And the type of accounts people are drawn to will depend on their financial goals, situation, and how they choose to organize their finances.
A hybrid account can merge the features of both checking and savings accounts. Here’s a bit more about hybrid accounts:
• A hybrid account is one that combines the perks of a checking account with features of an interest-bearing savings account. Instead of linking your checking and savings account, they’re basically functioning as one cohesive account.
• A hybrid account allows access to your money on a day-to-day basis, like a checking account would. That can mean that you may get a debit card to use with it.
• On the flip side, it allows your money to grow the way it might in a savings account.
Of course, every financial institution is different, and each might have a different approach to crafting a hybrid bank account. But the main gist of a hybrid account is that it’s a bank account that bears some resemblance to a day-to-day checking account and a long-term savings account.
Different Types of Accounts
To understand what can make a hybrid account a useful tool, it’s helpful to first understand the features and pros and cons related to traditional checking and savings accounts and then compare.
Checking accounts usually allow you to deposit money, write checks, or use a debit card to pay for goods and services. There are typically no withdrawal limits, and you can often link a checking account to other accounts and credit cards. It might be the account you use to pay recurring bills each month, like a car loan or student loan payment.
Banks may pay you interest on the money that sits in your checking account. However, regular checking account interest rates are typically low, with an average rate of 0.06%.
These rates don’t always catch up with the national inflation rate, which is currently about 3.7%. That means your money is actually depreciating in value while it sits in the account. In the long term, this may not make checking accounts a particularly good place to park a lot of cash.
Checking accounts may also charge fees for the services they offer, such as monthly maintenance fees.
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Savings accounts are another type of deposit account that you can open with your financial institution of choice. They usually earn some interest, with the current standard savings account earning about 0.46%.
However, high-yield savings accounts are an alternative to traditional accounts; they may sometimes offer interest rates of 4% or more. Higher-interest savings accounts can help you beat inflation so your money doesn’t lose value by growing at a slower rate than inflation. You may find these accounts offered at online banks vs. traditional ones.
Savings accounts are generally appealing because they are a separate place to store money you don’t necessarily want to use on day-to-day expenses. For example, it could be a good place to keep your emergency fund or even to save for a vacation or a move across the country.
However, there are some downsides to savings accounts, too. A few to note, which may or may not apply to only the high-interest variety:
• They sometimes don’t allow consumers to use them for direct payments.
• There may be restrictions on the number of savings account transactions you initiate every month.
• There may be restrictions such as a balance cap that sets a limit on the amount of money on which you can earn a high rate.
• There could be a minimum opening deposit and ongoing balance requirements to earn the higher interest rate. Or, if you fail to meet the amount, you might be assessed a minimum balance fee, which could offset the extra interest you’re earning.
If you’re considering this as an option, you may want to look closely at the fine print when choosing your savings account.
Hybrid Accounts: the Details
Hybrid bank accounts will often take benefits from checking and savings accounts and combine them into one account. A hybrid account may allow you to use checks or a debit card for day-to-day transactions, while still offering the interest rates typically associated with a savings account. Hybrid bank accounts are often more likely to be offered by online vs. traditional banks.
Traditional brick-and-mortar banks must pay for their storefront locations, the people who staff them, and ATMs. They may do so by charging more and/or higher fees and paying lower interest rates, while online banks can often afford to drop fees and pay higher rates.
You may hear the term money market account (or MMA) used by some financial institutions when describing their hybrid accounts. Keep in mind that this is different from a money market fund, which is a type of investment.
Introducing SoFi Checking and Savings
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.
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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 http://www.sofi.com/legal/banking-rate-sheet..
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