Guide to Passbook Accounts
Today, it’s common to check your savings account balance on your smartphone, send money to a friend after they covered the cost of lunch, or snap a picture of a paper check to make a mobile deposit. But before the advent of the internet and smartphones, banking was done in person, and people used pen and paper to keep track of everything.
One of the relics of that time period is the passbook savings account. While most consumers now have a traditional or online savings account, passbook savings accounts are still in use today. And, depending on your financial and personal style, it might be an option that you find useful.
But what is a passbook savings account, how do they work, and why would anyone want to open one? We’ll dive in below.
Get up to $300 when you bank with SoFi.
No account or overdraft fees. No minimum balance.
Up to 4.00% APY on savings balances.
Up to 2-day-early paycheck.
Up to $2M of additional FDIC insurance.
What Is a Passbook Savings Account?
A passbook savings account is a type of savings account that comes with a notebook or ledger (called a passbook) to track your deposits and withdrawals.
Unlike other bank accounts, which may allow you to take out funds at an ATM, transfer money electronically, and check your balance online, a passbook account requires in-person transactions at the bank or credit union, with a physical log of the activity.
Recommended: How Many Bank Accounts Should I Have?
How Do Passbook Savings Accounts Work?
Before computers, consumers had to visit their local bank branch to deposit or withdraw cash from their savings account. Period. They’d bring their physical passbook with them, and the bank teller would update the passbook with information about the transaction and their new balance.
Nowadays, most consumers choose traditional savings accounts or online savings accounts. While they may still be able to visit banks in person, they can also monitor their accounts online, move money electronically, and swing by the ATM to make deposits and withdrawals.
But passbook accounts are still around. While the bank tellers now handle things electronically, consumers are still issued a physical passbook and must visit the branch in person to withdraw and deposit cash.
Why would someone want this kind of account today?
• People might choose passbook accounts because of the added requirement of visiting in person. If they consider themselves bad with money, this process could make it harder to irresponsibly withdraw and spend their money.
• Others might like having more control over — and insight into — their finances.
• Some consumers may appreciate the added layer of security since it would be harder for a criminal to drain the account.
Pros and Cons of Passbook Savings Accounts
Passbook accounts are hard to come by these days, but it’s not impossible to open one. Just as there are pros and cons to online banking, so too are there benefits and downsides to a passbook savings account, such as:
| Pros of Passbook Accounts | Cons of Passbook Accounts |
|---|---|
| Less temptation to spend your savings | Inconvenient to access money |
| Enhanced feeling of control over your account | Potentially low annual percentage yield (APY) compared to online savings accounts, depending on the institution |
| Added layer of security by requiring in-person transactions | Requires safekeeping of physical ledger |
| Ideal for people who aren’t good with computers | Challenges if you relocate to a place without branch access |
Passbook Accounts vs. Savings Accounts
In many ways, passbook accounts and savings accounts are similar, but they also have several notable differences. Let’s break down how they’re alike — and how they’re not.
Similarities
Consider these points:
• Both savings and passbook savings accounts are deposit accounts that are meant for saving, not spending. Over time, you should expect your money to grow unless you withdraw funds for major purchases, like a house down payment.
• That means both types of savings accounts earn interest, though the amount they earn can vary. Some traditional savings accounts may earn as little as 0.01% interest while high-yield online accounts may earn significantly more, such as over 4% as of mid-2023.
Passbook savings accounts generally can’t compete with high-yield online accounts, but you’d need to check with specific banks to know what interest you’d earn.
• Like traditional savings accounts, passbook accounts are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per depositor, per ownership category, per insured institution.
If the account is at a credit union, it would have the same level of insurance, but from the National Credit Union Association or NCUA vs. FDIC.
Differences
While savings accounts and passbook savings accounts have the same purpose — saving money and earning interest — how these accounts work is quite different:
• Access to funds: With a traditional savings account, you can generally access your funds in person or at an ATM. Most accounts now let you manage your money online as well, meaning you can transfer money between accounts with the click of a button. With a passbook savings account, you must visit a branch in person.
• Monitoring your account: Similarly, traditional bank accounts send monthly statements, on paper or online. With most banks nowadays, you can access your account details at any time online via a computer or smartphone.
With a passbook account, however, all the information lives in the physical passbook, and you’ll only update it at the bank when making transactions. Note: Some banks, like First Republic, may now let account holders check information online.
Are Passbook Savings Accounts Still in Use?
Though passbook accounts are uncommon, they’re still in use today. You can open a passbook account at certain local and regional banks. Some examples of financial institutions still offering passbook accounts include:
• Middlesex Savings Bank (Massachusetts)
• Union Bank (Vermont and New Hampshire)
• Cathay Bank (largely California, but other locations in Washington, Texas, Illinois, and New England)
• Naveo Credit Union (Massachusetts)
• Dollar Bank (Northeast Ohio, Western Pennsylvania, and parts of Virginia and Maryland).
Recommended: How to Switch Banks
The Takeaway
Passbook savings accounts are less common today with the advent of computers and online banking. While most consumers would prefer electronic access to their account, passbook accounts offer unique perks for people who prefer to bank exclusively in person. It may be a good way for them to manage their money.
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.
FAQ
Do any banks still have passbook accounts?
Some banks still offer passbook accounts. Passbook savings accounts are less common today, as most consumers prefer to manage their money online. That said, some local and regional banks and credit unions in your area may offer passbook savings account options.
What is a disadvantage of a passbook savings account?
A major disadvantage of passbook savings accounts is that you can’t access your money electronically. You have to go to a branch in person to withdraw or deposit funds. You usually can’t even get an account summary online; instead, your physical passbook is the only source of information you have about the account.
What is the interest rate on a passbook savings account?
Interest rates on passbook savings accounts will vary by financial institution, but they’re sometimes competitive with traditional savings accounts. That said, they are often less than high-yield online savings accounts. Remember that you’ll want to choose a bank that is geographically convenient, as you’ll have to visit in person to access your money.
Photo credit: iStock/LaylaBird
SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 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 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“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, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.
As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% 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 members with Qualifying Deposits are not eligible for other SoFi Plus benefits.
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 4.00% 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 12/3/24. 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.
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What Are Excessive Transaction Fees?
Excessive transaction fees are penalties incurred by consumers when they make too many withdrawals from a savings account or money market account in a single month.
These fees were once mandated by federal law (Regulation D), but they became optional for banks to leverage at the start of the pandemic, as its economic impact became apparent. These charges are still optional today; some financial institutions collect them; others don’t.
Since most people want to avoid fees as often as possible, read on to learn how excessive transaction fees work and how much they cost.
What Is an Excessive Withdrawal Fee?
Excessive transaction fees, also called excess transfer fees, withdrawal limit fees, or excessive withdrawal fees, refer to penalties for excessive withdrawals from a savings or money market account. Historically, Regulation D restricted consumers to six “convenient transfers and withdrawals” each month.
Banks and credit unions could start leveraging these fees after as few as three transactions per month, though the regulation specified a savings withdrawal limit of six. If consumers regularly exceeded the regulatory six, financial institutions legally had to take action, like converting from a savings account to a checking account or closing it altogether.
Though Regulation D has changed since the COVID-19 crisis and looks to stay that way indefinitely — meaning convenient withdrawals aren’t capped at six a month — some banks have chosen to maintain the excessive transaction fee.
Get up to $300 when you bank with SoFi.
No account or overdraft fees. No minimum balance.
Up to 4.00% APY on savings balances.
Up to 2-day-early paycheck.
Up to $2M of additional FDIC insurance.
Recommended: What Is the Difference Between a Deposit vs. Withdrawal
Types of Transactions Considered
Not every withdrawal from a savings account counts toward the transaction limit. Below are the types of transactions that could get you to the six-a-month max:
• Electronic funds transfers (EFTs), like when you transfer money from your savings account to checking account (or transfer money from one bank to another)
• Automated Clearing House (ACH) payments, including online bill pay
• Pre-authorized transfers, like overdraft transfers to avoid overdraft fees
• Wire transfers
• Online and phone transfers
• Debit card and check transactions drawing from the savings account.
Notably absent from this list are in-person withdrawals at banks and ATMs. Such withdrawals do not count toward the transaction limit. You can also move funds from savings to checking at an ATM or with a teller in person without it counting toward your limit.
Worth knowing: Some banks may also impose ATM withdrawal limits.
How Much Do Excessive Transaction Fees Cost?
Though Regulation D previously specified a maximum of six convenient withdrawals, it did not specify the amount of the resulting excess transfer fee. Financial institutions were free to set that amount — and still are today, if they continue to charge excessive transaction fees.
Typically, excessive transaction fees cost between $3 and $25 per transaction. Under the current form of Regulation D, financial institutions must disclose the fee amount (if applicable) at account opening; if the bank changes the amount afterward, it must legally notify you at least 30 days before the change.
If you’re not sure what your bank charges, you can typically find this information on the bank’s website or in the fine print of your account documents.
Recommended: What Are Bank Transaction Deposits?
Why Do Banks Charge Excessive Transaction Fees?
Before the Federal Reserve suspended the portion of Regulation D requiring that banks charge excessive transaction fees, the answer was easy: Banks charged excessive transaction fees because they legally had to.
The federal government created Regulation D to ensure that financial institutions had enough cash reserves available. Though this meant consumer funds were a little less liquid in a savings account or money market account, banks made such accounts appealing to consumers by offering interest on those funds. Consumers who wanted easier access to their money could use a checking account.
Now that the Federal Reserve has eradicated that mandate, some banks choose to continue to charge fees. The reasoning for this decision may vary at each financial institution, though banks generally leverage fees to make a profit (they are a business, after all!).
And remember: The federally imposed transfer limit previously served to ensure banks maintained proper cash reserves; banks still charging this fee may be doing so to discourage excessive withdrawals and thus protect their reserves.
Recommended: Smart Short-Term Financial Goals
Tips to Avoid Excessive Transaction Fees
How can you avoid excessive transaction penalties? Consider these tips to cut out this common bank fee.
• Finding a bank that doesn’t charge excess transfer fees: Some banks do not charge excessive transaction fees.
• Using your checking account: Banks may leverage fees when you make too many savings withdrawals by swiping a debit card, writing a check, or paying bills online. Rather than using your savings account for such transactions, you may benefit from using a checking account, where such fees don’t apply, and making withdrawals from the cleared funds in that account.
• Banking in person or at ATMs: Withdrawals at physical bank branches and ATMs typically don’t count toward your limit. By using these options to take funds out of your savings account (or money market account), you should be able to avoid excessive withdrawal fees. Just keep in mind that there may be ATM withdrawal limits in terms of how much you can take out in a certain time period.
• Making fewer (but bigger) withdrawals: If you’re able to anticipate your needs throughout the month, you may be able to make one or two big electronic funds transfers from savings to checking each month, rather than several smaller ones. Doing so may mean you can avoid excess transfer fees.
• Opting out of overdraft coverage: If your savings account is tied to your overdraft program and you overdraw too many times in one month, you could wind up paying an excessive transfer fee. You can avoid this by opting out of overdraft protection (though it’s crucial that you understand what that means for your checking account if you overdraw). Or you might tap a line of credit (say, by using a credit card) as the source for your overdraft protection instead of your savings account.
• Getting bank alerts: Checking your bank account activity is good for several reasons, including fraud monitoring and low balance alerts (to avoid overdrafts). Opting into banking notifications can also help you keep track of when you’re approaching the monthly withdrawal limit.
The Takeaway
Though federal regulations have changed since the onset of COVID-19, many banks and credit unions still charge excessive transaction fees. To avoid such fees, it’s important to monitor your monthly transactions and find other ways to access your savings. For example, you may be able to avoid excessive transaction fees by using ATMs or making fewer, larger transfers and/or withdrawals. Finding a bank whose policies are flexible and suit your needs is a wise move too.
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.
FAQ
How much are excessive transaction fees?
Excessive transaction fees can typically range from $3 to $25 each, depending on the institution’s policies.
Do all banks charge excessive transaction fees?
Not all banks charge excessive transaction fees. Before signing up for any account, it’s a good idea to read the fine print, including the fee structure. Federal law requires that banks disclose these fees to consumers.
Why do banks charge excessive transaction fees?
Regulation D was initially created to ensure banks could maintain enough cash reserves. Though Regulation D no longer limits convenient withdrawals to six, many banks still charge these fees, potentially to protect their reserves and/or to make a profit.
Photo credit: iStock/MTStock Studio
SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 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 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“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, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.
As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% 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 members with Qualifying Deposits are not eligible for other SoFi Plus benefits.
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 4.00% 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 12/3/24. 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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13 Money-Saving Tips When Buying Furniture
Buying furniture can be a major expense, especially in this era of quickly rising prices. Some shoppers are holding off making purchases: Inflation is pinching consumers across all income levels, and home furnishings sales are falling.
Still, if you don’t have a bundle of cash earmarked for furniture shopping but need to decorate a space (hello, newlyweds, roomies, and downsizers), you can learn how to save money buying furniture and score great finds. Here, learn how to save money on furniture with surprising techniques, including:
• Finding free pieces at the curb
• Lucking out with returned or floor-model items
• Getting the timing right for sales
Get up to $300 when you bank with SoFi.
No account or overdraft fees. No minimum balance.
Up to 4.00% APY on savings balances.
Up to 2-day-early paycheck.
Up to $2M of additional FDIC insurance.
How Much Do People Spend on Furniture a Year?
As of 2021, the average expenditure on furniture per family (or single person household) was about $716 in the United States. In more affluent households, the average annual spend was $1,490 in 2021.
Recommended: 10 Most Common Budgeting Mistakes
What Are Some Costs to Consider With Furniture?
When shopping for furniture, remember that it’s not just the cost of the table or chair you might be buying. You’ll also need to build in these extra expenses:
• Taxes.
• Shipping or delivery fees.
• Extra costs for assembly or for getting a piece up the stairs or around the hall corner and into a room.
• Possibly paying to have the old piece you are replacing (a bed or sofa, for example) removed.
• Stain-resistant treatments on upholstered furniture, which generally add to the value and longevity of a sofa, chair, or headboard.
Recommended: Questions You Should Ask Before Making an Impulse Buy
Saving Money on Furniture: 13 Ways
Now, for the details of how to save money buying furniture. Here are some smart secrets to try.
1. Shopping Curb Discards
Many towns have bulky waste pickup days, and savvy people know to cruise curbs around town on those dates. You could find anything from still functional bookcases to an antique side table to patio furniture to a great lamp or two. It’s generally safer to avoid mattresses, box springs and upholstered furniture due to the possibility that bed bugs are lurking.
2. Signing Up at Sites You Love
Many online retailers are eager to get your email address and/or cell phone number as a “subscriber” so they can alert you to sales and special offers. In exchange for this information, they may dangle discount or free shipping codes for your first order. Yes, these messages can clog your inbox, but you can always unsubscribe once you score the furniture deals you want.
3. Buying Directly From the Manufacturer
Another idea for how to save money on furniture: Go straight to the source. For more than 50 years, shoppers have been buying well-made furniture from manufacturers at Hickory Furniture Mart in Hickory, North Carolina. The Mart unites local independent furniture retailers, including custom order showrooms, factory direct outlets, furniture outlets, and dedicated manufacturers’ galleries. Check their website to see the various vendors available.
Recommended: 15 Creative Ways to Save Money
4. Checking Out Furniture In Person Before Clicking Online
Many consumers are confident enough to order items online, but with big purchases like a sofa, it can help to see products up close (and sit on them) first. See if your local department store stocks the sofa you have seen online or other pieces made by that brand, so you can get a feel for the fabric, design, and construction. That could save you the time, effort, and cost of having to return an item.
5. Considering the Upcycling Option
Many things are upcycled now for a more sustainable planet with less of a carbon footprint. That means taking something that could have ended up in the trash and turning it into treasure. Paint a lamp and pop on a new shade, for example, or refinish a worn out table or dresser to refresh its good looks and perhaps pop on some new hardware, too.
6. Planning a Realistic Budget for Your New Home
Are you starting from scratch to furnish a home? Experts say a furnishing budget generally depends on the size of a new residence. You might make a budget based on a percentage of the total cost of your home. Your furniture/decorating budget might range from a low of 10% to a high of 50% of the home’s purchase price, depending on your finances. And certainly, with the shopping hacks listed here, you can whittle that down.
Recommended: Tips for Furnishing a New Home
7. Turning Down Store Credit Cards
Department or furniture store credit cards can often run up staggering interest rates, something you definitely do not want when buying furniture. If at all possible, save enough money to pay for furniture in full and with cash or debit card.
8. Building Your Own Furniture
Could you DIY something, like a bookshelf, wood bench, or Shaker-style dresser? Good old YouTube has videos to teach you.
Recommended: Why Saving Money Is Important
9. Buying Secondhand
Another idea for how to save on furniture: Buy used vs. new. For starters, check Facebook Marketplace or Craigslist for deals. Many people are paring back or moving and want to get rid of things without adding them to a landfill. You can also look for bargains at antique stores, flea markets, garage sales, and thrift shops.
Recommended: Tips for Buying Furniture on a Budget
10. Staying Tuned In to Sales Seasons
To cut costs, know when prices are likely to be lower. Desk chairs and office furniture are often on sale in the fall. Cyber Monday can be a huge opportunity for savings of all kinds. Ask the salesperson when prices will dip to make way for new merchandise on the sales floor.
Recommended: Best Time to Purchase Furniture
11. Creating a Gift Registry
You might be able to get loved ones to help a bit with the cost of furniture; group gifting options on your wishlist items could allow several people to chip in. This is, as you might guess, especially popular for couples starting their lives together. Crate & Barrel, for example, often offers perks, such as free shipping (at a certain spend threshold) and 15% discounts on wedding registry purchases.
12. Finding a Local Auction
Here’s another way to save on furniture: Check out local auctions. You might be able to find old treasures, from sideboards to headboards, that make great statement pieces at an affordable price. Estate sales are also good sources for items like these.
13. Shopping for Returned or Slightly Damaged Items
If you can live with furniture that isn’t brand new and untouched by anyone else, you could score some great deals. On the Pottery Barn website, for instance, search for Open Box Deals, which are returned items that sell at discounted prices. Sometimes it’s just that someone didn’t like the color. In furniture showrooms, inquire about slightly damaged items (perhaps a table has a scratch you barely notice) and also ask about floor models.
The Takeaway
With the right shopping skills in your toolkit, you can save money on buying furniture. By employing smart strategies, such as scouring estate sales and thrift shops, buying returned items, and negotiating on the sales floor, you can save a bundle on great-looking as you furnish your home.
3 Money Tips
- If you’re saving for a short-term goal — whether it’s a vacation, a wedding, or the down payment on a house — consider opening a high-yield savings account. The higher APY that you’ll earn will help your money grow faster, but the funds stay liquid, so they are easy to access when you reach your goal.
- 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% towards saving for your long-term goals.
- When you overdraft your checking account, you’ll likely pay a non-sufficient fund fee of, say, $35. Look into linking a savings account to your checking account as a backup to avoid that, or shop around for a bank that doesn’t charge you for overdrafting.
FAQ
Is it better to buy used or new furniture?
This is not a question of better or worse. Some shoppers prefer snagging deals on used furniture and enjoy hunting for pieces such as a vintage oak dresser at a thrift shop. Others want new pieces, either because they prefer the style or they like the idea of owning something that has no wear. It’s a matter of personal taste, though buying used pieces, in addition to costing less, may help keep pieces out of landfill and sync with eco values.
What should I look out for when purchasing furniture?
Search for styles, colors, and lines you love, as well as comfort and function. A desk won’t help you out if it doesn’t have the drawer space you need, and a sofa is a fail if it’s not comfy and solidly made. Also look for solid wood, not composites or laminates, if you want a long-lasting quality piece. Some pieces (such as an upholstered chair) may come with warranties against wear and tear and stains.
Where can I purchase used furniture?
As more people strive for sustainability and resist tossing away furniture, options abound for finding used pieces. Check thrift shops, donation centers, secondhand stores, estate sales, garage sales, Craigslist, and Facebook Marketplace.
Photo credit: iStock/Vanit Janthra
SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 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 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“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, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.
As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% 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 members with Qualifying Deposits are not eligible for other SoFi Plus benefits.
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 4.00% 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 12/3/24. 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.
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Guide to Budget Billing
When your home energy usage peaks in the summer and winter, you could be surprised by a higher energy bill — and might have to scramble to cover the cost. Signing up for budget billing with your utility providers can eliminate these unexpected cost surges and make it easier for you to plan your monthly expenses.
But what exactly does budget billing mean, and is it right for everyone? Here, you’ll learn:
• What is budget billing?
• How does budget billing work on a monthly basis?
• What are the pros and cons of budget billing?
• Does budget billing save you money?
• Can you start budget billing on your own, without the utility provider’s help?
What Is Budget Billing?
Budget billing is an alternative, optional payment program for utilities like gas and electric. By opting into budget billing, you will pay the same predictable amount each billing cycle, regardless of how much or how little energy you actually used.
With budget billing, you can avoid the roller coaster-like highs and lows of utility billing — where costs skyrocket during sweltering summers and frigid winters. For many, this makes building a monthly budget much easier.
To opt into budget billing, call your utility provider or check out the website for information about what is available.
Get up to $300 when you bank with SoFi.
No account or overdraft fees. No minimum balance.
Up to 4.00% APY on savings balances.
Up to 2-day-early paycheck.
Up to $2M of additional FDIC insurance.
Recommended: How to Organize Your Bills
How Does Budget Billing Work?
Energy prices and usage fluctuate throughout the year. This can make it difficult to anticipate what your gas and electric bills will be each month. Depending on where you live and how harsh the seasons are, you might be in for a surprise on a few bills each year.
Budget billing eliminates those bill fluctuations. Instead, your utility provider analyzes past energy usage for your residence (usually over the prior 12 or 24 months) to estimate an annual total. The company then divides that total into 12 identical payments for the upcoming year.
Of course, it’s unlikely that your energy consumption will be exactly the same as it was the previous year. And with increased inflation and unpredictable weather events, the price of electricity and natural gas could increase over time. To account for this, your utility provider will track your actual energy usage throughout the year and calculate what you would owe (sometimes called a “true-up amount”).
• If you overpaid for the year, the provider will issue you a credit on an upcoming bill.
• If you underpaid for the year, you’ll have to pay the outstanding balance.
Either way, the utility provider will use this year’s worth of data to calculate a new monthly payment for the year ahead.
Note: While annual plans are common for budget billing, some providers may also offer a quarterly (three-month) plan.
Recommended: Automating Your Finances
Does Budget Billing Save You Money?
Budget billing does not save money on utility bills. Instead, it just makes your monthly payments more predictable. Some months, you will likely pay less than what you actually owe. In others, you could be paying more than what you would owe.
Having a predictable line-item budget may make it easier for you to handle other monthly expenses or keep you from needing to dip into your emergency fund to cover an especially high energy bill.
Advantages of Budget Billing
So what are the pros of budget billing? For many families, budget billing can add some stability to their finances. Here’s how it may help you out:
Easier Budget Management
Not knowing how much you’ll owe your utility providers each month can make it tough to build a budget. With predictable bills, you’ll know how much money to set aside each month for utilities. You’ll also know how much is left for other expenses, as well as for savings and retirement contributions, debt repayments, and investments.
Less Financial Stress
If seeing an unusually high total on an email statement or paper bill can send you into a panic, you may appreciate the stability afforded by budget billing. Budget billing won’t save you money, but when you know what to expect each month, you might rest a little easier.
Reducing Late Payment Penalties
If you receive a high energy bill that you can’t afford to pay, you may have to take on unwanted credit card debt with a high interest rate, dip into emergency savings, or even just pay the bill late. The latter could result in late payment penalties.
With budget billing, you won’t have to worry about a spike in your monthly energy bills. This may help you avoid late payments altogether.
Drawbacks of Budget Billing
As helpful as budget billing can be for some families, there are also some cons to consider:
Potential Fees
Some utility providers charge a fee to enroll in budget billing. On top of the startup fee, the provider may charge ongoing fees for the service. If that’s the case, budget billing will actually cost you more money than a traditional billing program. It’s a good idea to ask about fees before signing up for any new program.
Recommended: Can You Change the Due Date of Your Bills?
Chance You Could Underpay
At the end of the program — usually a year after it kicks off — the gas or electric company will calculate what you actually owed for the year, based on your energy consumption. If you overpaid, you’ll get a credit on a future bill (nice!).
But if you didn’t pay enough each month, you’ll owe whatever remains. If it’s a sizable amount, you may have to rely on a credit card to cover other expenses or take money out of savings to pay off the bill. Many people enroll in budget billing to avoid such surprises to begin with, so this can be counter-productive.
Complacency
When you’re on a budget billing plan, you might get used to a low electric bill in the summer and be tempted to blast the AC. Similarly in the winter, it could be tempting to get all toasty by cranking up the heat. You won’t feel the financial repercussions of those decisions until much later, when your provider calculates your true-up amount and determines that you owe more money.
If you don’t think you can be responsible with energy consumption without the threat of a high bill looming over you each month, budget billing may not be the right fit for you.
Recommended: How to Pay Bills with a Credit Card
What Happens If You Are Billed Incorrectly?
Mistakes can happen. When you opt in to budget billing, it’s a good idea to read the agreement and understand how your monthly total is calculated. You want to be sure you understand how bill pay works. Even if you have your bill set to autopay, you may want to review your statement each month to ensure it’s what you expected. If it’s not, you can call your utility provider to discuss.
Recommended: Pros and Cons of Automatic Bill Payment
Can You Make Your Own Budget Billing System?
You don’t have to opt into a utility provider’s system to take advantage of budget billing. In fact, you can make your own budget billing system if you’re willing to do some math.
Just analyze what you spent on utilities over the previous 12 months to figure out an average monthly total. Use this amount when building your monthly budget.
If your first bill comes in and is less than your monthly budgeted amount, pay the bill and hang on to the leftover funds. Stash them somewhere safe, where you won’t spend them. When your bill is eventually higher than what you’ve budgeted, you can dip into that leftover money to cover the difference.
By handling budget billing yourself, you can avoid any potential fees the utility provider might have charged you. Plus, you can store leftover budgeted funds in a high-interest savings account. While this approach requires discipline, it can be well worth the effort.
Alternatives to Budget Billing
Budget billing may not be for everyone. Some alternatives include:
• Traditional bill programs: You’ll pay what you owe each month, but that means some bills might be high in the summer and winter. In other months, you may enjoy lower-than-average bill totals.
• DIY budget billing: If you don’t mind doing some math to figure out an average monthly payment, you may be able to do budget billing without the fees and hassle of going through a provider. You’ll still pay what you owe each month, but by planning ahead and setting money aside in savings, you can make a more predictable budget.
• Low Income Home Energy Assistance Program (LIHEAP): Depending on your income level, you may qualify for government assistance with your home energy bills. Qualifying for the program does not guarantee assistance; roughly 20% of households that qualify actually receive help through LIHEAP.
Recommended: What to Do If You’re Bad With Money
The Takeaway
Budget billing allows utility customers to pay a set amount each month for electricity and gas, based on past usage patterns. You won’t save any money with budget billing, but it can make monthly budgeting more predictable. Before enrolling in a budget billing program, it’s a good idea to review the pros and cons and understand how it can affect your finances each year.
3 Money Tips
1. Typically, checking accounts don’t earn interest. However, some accounts will pay you a bit and help your money grow. Online banks are more likely than brick-and-mortar banks to offer you the best rates.
2. An emergency fund or rainy day fund is an important financial safety net. Aim to have at least three to six months’ worth of basic living expenses saved in case you get a major unexpected bill or lose income.
3. 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.
FAQ
Do all utility companies offer budget billing?
Not every utility company offers budget billing. Your state may have a network of regulated electric and gas providers that are required to offer this program, but unregulated suppliers may not offer budget billing.
Am I better off budget billing or not?
Budget billing can be helpful if you like a predictable utility bill each month. Knowing what you’ll spend may make it easier to budget for other expenses. However, budget billing does have its drawbacks, especially if the utility provider charges a fee for the service.
Can I budget bill for other areas of my budget besides utilities?
Outside of utilities, most recurring monthly bills are predictable — rent or mortgage, internet, phone, student loan payments, etc. But if you like the predictability offered by budget billing for utilities, you might benefit from creating your own budget billing program for other unpredictable monthly totals, like groceries and fuel for your car. To do so, just calculate your expenses from the last year and divide by 12 to determine your average monthly total. You may want to account for inflation when estimating expenses like food and gas.
Photo credit: iStock/Milan_Jovic
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.
SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 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 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“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, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.
As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% 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 members with Qualifying Deposits are not eligible for other SoFi Plus benefits.
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 4.00% 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 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.
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.
SOBK0822019
10 Benefits of Direct Deposit
Not all methods of getting paid are the same. Taking a paper check to the bank can be time-consuming, not to mention you also have to wait a few days for it to clear before withdrawing funds. Direct deposit is a popular option that simplifies the process of getting paid.
With direct deposit, you can schedule payments to be added to your bank account automatically. Depending on where you maintain a checking and savings account, it may be possible to get paid up to two days early with direct deposit. Plus there’s no running to a bank branch or ATM to deposit an old-school paper check.
Understanding the benefits of direct deposit can help you decide if it’s worth taking advantage of this banking feature. Read on to get the full story, including:
• What is direct deposit?
• What are the benefits of direct deposit?
• Are there any disadvantages to direct deposit?
• How can you set up direct deposit?
What Is Direct Deposit?
What is a direct deposit? In simple terms, direct deposit is a service that allows money to be deposited directly into bank accounts, without requiring a paper check. You may be eligible to set up direct deposit of paychecks and other payments, including:
• Federal and state tax refunds
• Government benefits, such as Social Security payments
• Court-ordered child support payments (when garnished from the payer’s wages)
• Travel and expense reimbursements from your employer
• Pension plan benefit payments
• Annuity payments
• Dividend payments from stocks or other investments
You may not have access to direct deposit if your employer doesn’t offer it or if you don’t receive any of the other types of payments listed above. It’s also possible to miss out on the benefits of direct deposit if you don’t have a bank account and rely on alternative banking products and services, such as prepaid debit cards, to pay bills and cover expenses.
Get up to $300 when you bank with SoFi.
No account or overdraft fees. No minimum balance.
Up to 4.00% APY on savings balances.
Up to 2-day-early paycheck.
Up to $2M of additional FDIC insurance.
Recommended: Do Bank Transactions Process Through the Holidays?
10 Direct Deposit Benefits to Know
The main advantages of direct deposit center on convenience and flexibility. If you’re not enrolled in direct deposit yet, here are some of the main benefits you may be missing out on.
1. Get Paid Early
One of the main benefits of direct deposit is the ability to collect your paychecks early. Direct deposits may hit your account one to two business days ahead of your regular pay date. In terms of how long you’ll have to wait for the payment to clear, the average time for direct deposit varies. Some banks can make funds available the same day they’re deposited.
2. Skip the Branch
In addition to getting an early paycheck, direct deposit allows you to avoid the time and energy of visiting a bank to deposit a paper check. Going to a bank to deposit checks can be inconvenient if you’re trying to squeeze it in on your lunch break or scrambling to get to a branch before it closes at the end of the work day.
3. Easy Setup
Enrolling in direct deposit is usually as simple as filling out a form and passing it along to the appropriate payer, which may be your employer or a government agency. You’ll need to provide your personal information as well as your bank account information.
You may only need to have your bank account number and routing number to set up direct deposit. In some cases, you might be asked for a voided check to verify your account details.
What is a voided check for direct deposit? It’s simply a blank check that has “VOID” written across the front. You won’t sign this check or make it out to anyone. It’s only used as physical evidence of your bank account information.
4. Get Paid Anywhere
If you’re used to picking up paper checks from your employer, direct deposit eliminates the need for that in-person presence. That means you can still get paid if you’re on vacation, out sick, or traveling for work on payday. The money goes straight to your bank account, so you don’t have to worry about delays if you need to schedule bill payments or cover expenses.
5. No Risk for Stolen or Lost Checks
Getting a paper paycheck can be problematic if you misplace it or, worse still, someone steals it. In either case, you’d have to ask your employer to cancel the original check and issue a new one. That could result in a delay in getting paid. With direct deposit, you don’t have to worry about losing a check or having it stolen since there’s no piece of paper changing hands.
6. Control Where Your Money Goes
One nice benefit of direct deposit is that you can decide where to send the money. For example, if you’d like to save $100 out of every paycheck, you can ask your employer to send that amount to your savings account via direct deposit and put the rest in your checking account. That’s an easy way to pay yourself first and build savings automatically.
7. No Check Cashing Fees
Check cashing fees can take a bite out of any payments you receive. If you’re tired of paying steep fees for check cashing services, that could be a great reason to open a bank account and set up direct deposit. You can get paid without having to go through a third-party company or hand over part of your earnings in fees.
8. Avoid Bank Fees
Some banks charge a monthly maintenance fee for checking and savings accounts. They may waive that fee when you set up qualifying direct deposits. If you’d like to reduce what you pay in fees without switching to another bank, enrolling in direct deposit could be a simple way to cut costs and save money.
9. Simplify Multiple Deposits
As mentioned, you can use direct deposit to receive many different types of payments. If you have income from multiple sources, then managing multiple paper checks could be a headache. Having those funds added to your account through direct deposit can streamline the way you track incoming payments.
10. Easier Budgeting
Direct deposit can also take the stress out of budgeting. If you know when your payments will be deposited and when you can expect them to clear, that can eliminate the guesswork of timing bill payments. You can plan out your budget by paycheck or by the month, using your direct deposit schedule as a guide.
Are There Any Disadvantages to Direct Deposit?
If there’s a disadvantage or downside to direct deposit it’s that not everyone is eligible to enroll. If your employer insists on paper checks, then you may not be able to take advantage of the benefits of direct deposit. You can, however, still use direct deposit to receive other types of payments.
One other thing to keep in mind is that it may take a few pay cycles to get your direct deposit going. So if you enroll on the first of the month, for example, you may not see any direct deposits until the first of the following month. That means you’ll still need to deposit paper checks at the bank in the meantime.
Another possible issue is, as mentioned above, if you don’t have a conventional bank account, you won’t be able to sign up for the service.
Also, some people may prefer to get a paper check, with the pay stub attached, so they can immediately review earnings and deductions rather than look up that info online. There may be some people as well who don’t feel comfortable sharing their banking information with an employer or other business. For them, direct deposit may not be a good fit.
How to Enroll in Direct Deposit
The process for enrolling in direct deposit can vary, based on where you’re trying to set up the payments. Generally, you’ll need to fill out a direct deposit form in person or online and tell the payer where you want the money to go.
The payer will verify your bank account information and personal information to get the direct deposit process started. You can also specify whether you want your payments to be split across multiple accounts. Keep in mind that you may be asked for a voided check or deposit slip to complete the process.
The Takeaway
Enrolling in direct deposit can make your financial life easier since it means spending less time on banking, getting faster access to your funds, and being able to be paid, wherever you may be. If you’re not enrolled in direct deposit yet, it may be worth asking your employer about whether it’s an option.
You might also consider opening a new Checking and Savings account to receive direct deposit payments. With SoFi, qualifying accounts can get paycheck access up to two days early. You’ll also enjoy other perks, like no account fees and a competitive APY on balances. Plus, our Checking and Savings account lets you spend and save in one convenient place.
FAQ
Does direct deposit work on holidays?
Typically, banks do not process transactions on holidays. However, if you’re enrolled in direct deposit, your employer may schedule your payment to arrive a day before the holiday so there are no delays in receiving your pay.
What happens if my direct deposit goes to the wrong account?
If you’re sending a direct deposit to a closed account, then the bank may reject the transaction and return the payment to the payer. If you’re depositing money into an account that’s open but it’s the wrong account, you’ll have to contact the bank to ask about possible solutions. You may be able to withdraw money or transfer it to the proper account if both accounts belong to you. However, if you accidentally deposit money into the wrong account then the bank may leave it to the account owner to return it to you.
How long can a bank hold direct deposit?
Banks can vary in how long they hold direct deposits before releasing the funds to you. Depending on the bank, the holding period may be anywhere from one to seven business days.
Photo credit: iStock/skynesher
SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 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 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“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, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.
As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% 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 members with Qualifying Deposits are not eligible for other SoFi Plus benefits.
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 4.00% 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 12/3/24. 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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