Oct
29
2024
What Are Wire Transfer Fees & How Much Are They?

All You Need to Know About Wire Transfer Fees

By | Budgeting & Goals, Family Finances, money | Comments Off on All You Need to Know About Wire Transfer Fees

Wire transfers are a way to quickly and conveniently send and receive money, both domestically and internationally. Maybe you want to securely send some cash as a security deposit to a landlord across town ASAP. Or perhaps you need to pay for a painting you bought at an auction overseas. Either way, a wire transfer may be a good option.

However, there are often wire transfer fees in exchange for their speed and convenience. The cost to send and receive money via wire transfer varies, but international wires are usually costlier than domestic wires.

However, with the right steps, you can reduce or even eliminate the fees you’ll pay using wire transfers.

Key Points

•   Wire transfers provide a fast and secure method for sending money both domestically and internationally, with same-day processing available for many domestic transactions.

•   Fees for wire transfers vary significantly; domestic transfers typically cost between $0 to $35, while international transfers can range from $35 to $50 or more.

•   International wire transfers are generally more expensive than domestic ones due to additional processing steps, currency conversion fees, and the involvement of third-party institutions.

•   To avoid wire transfer fees, consider sending money in the recipient’s local currency, using digital platforms that offer lower fees, or seeking banks that waive such fees.

•   Alternative methods for sending money without high fees include using payment apps, bank transfers (ACH), or cashier’s checks, each with its own processing times and conditions.

What Are Wire Transfer Fees?

A wire transfer is an electronic funds transfer between financial institutions. Wire transfers can be faster than bank transfers, with same-day processing possible for most domestic wires. Wire transfers can occur domestically or internationally, but most banks charge fees both for sending and receiving funds in this way.

In addition to speed, another reason to use wire transfers is when sending money internationally, as a regular bank transfer isn’t possible in this situation. But international wire transfers can have higher wire transfer fees than domestic wires, and there might be more steps involved. For instance, the transaction might have been processed by the foreign country’s system and also possibly involve a currency conversion.

Recommended: ACH vs. Check: What Are the Differences?

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How Much Do Wire Transfer Fees Cost?

As mentioned earlier, how much wire transfer fees cost can vary. Some financial firms waive wire transfer fees in certain situations, and others waive them entirely. When sending and receiving international wires, there can be a fee of $50 or more for each transaction

Typically, you might expect the following fees:

•   For domestic wire transfers, outgoing fees usually range from $0 to $35; incoming fees can range from $0 to $15.

•   For international wire transfers, outgoing fees can often range from $35 to $50; incoming fees are likely to be between $0 and $16.

Wire Fees by Financial Institution

Below is a list of wire transfer fees for large banks in the United States. However, third parties may be involved that charge additional fees, especially for international wires.

Bank Incoming domestic Outgoing Domestic Incoming international Outgoing international
Bank of America $15 $30 $16 $45 or $0 when sent in foreign currency
Capital One Up to $15 Up to $30 Up to $15 $40-$50
Chase $0-$15 $25-$35 $0-$15 $0-$50
Citi Up to $15 Up to $25 Up to $15 Up to $35
Fidelity $0 $0 $0 $0
PNC $15 $25-$30 $15 $40-$45
TD Bank $15 $30 $15 $50/td>
USAA $0 $20 $0 $45
U.S. Bank $20 $30 $25 $50
Wells Fargo $15 $30 $16 $45

Do International Fees Cost More Than Domestic?

On average, international wire transfer fees are higher than domestic ones. But as is often the case, averages don’t tell the whole story. Some financial institutions don’t impose wire transfer fees, even for international transactions.

Still, it’s important to remember that there may be extra fees when dealing with international wire transfers. For instance, there may be a currency conversion fee when sending money between two countries that use different currencies. When sending or receiving money internationally, you’ll need information like an international bank account number (IBAN) or a SWIFT code to move the funds to the right account. Overall, it’s a somewhat more complex transaction than a domestic one.

Why Do Banks Charge Wire Transfer Fees?

Banks charge wire transfer fees because of the work that goes into processing wire transfers. For instance, wire transfers are processed individually as they are received. This differs from automated clearinghouse (ACH) transfers, which are processed in batches.

You also pay a premium for the faster processing speed. Domestic wire transfers can sometimes be completed within a few hours and are usually processed the same day. International wire transfers can be completed within one to two business days.

Another reason banks charge wire transfer fees is their higher transaction limits. Wire transfer limits are usually much higher than bank transfer limits, so they can be worth using if you must send a large amount in a single transaction.

Lastly, the international reach of wire transfers can lead to higher fees. For instance, when large amounts of foreign currency are exchanged, banks charge what is known as a midmarket, or interbank, exchange rate. The bank will often charge a higher markup if that currency must be converted. This results in higher wire transfer fees.

Recommended: How to Earn More Interest on Your Money

Tips to Avoid Wire Transaction Fees

While wire transfer fees are common, they aren’t always a given. Here are some ideas about how to avoid wire transfer fees in some situations:

•   Send money in foreign currency. For outbound international wires, it can be smart to send money in the currency used by the foreign company, if possible. In this scenario, some banks waive wire transaction fees since no currency conversion is necessary.

•   Do it yourself digitally. Some financial institutions allow you to initiate a wire transfer using their website or app, and doing so may reduce the fees or even eliminate them.

•   Look for firms that don’t charge wire transfer fees. Some banks and nonbank providers waive wire transfer fees in some cases, or they don’t charge them at all.

•   Open an account with no wire transaction fees. Shop around: Some of the most popular banks offer accounts that let you wire money with no transaction fees.

Alternative Ways to Send and Receive Money

Some methods of sending money may allow you to reduce or eliminate transaction fees. You can do so by using one of the following methods to conduct the transfer:

•   Use a payment app. Payment apps like Venmo, Zelle, and PayPal generally let you send money electronically to friends and relatives without paying a fee. However, sending money to those who are not “friends and family” may incur fees.

•   Send money with a bank transfer. A bank transfer, or ACH transfer, might be preferable if you send money domestically. In 2022, the same-day transfer limit was increased to $1 million, enabling large funds transfers in a single day.

However, note that limits on single transactions might be lower, and there might be ACH fees.

•   Use a cashier’s check. A cashier’s check is an alternative to wire transfers because it can be suitable for large transactions. This type of check draws the funds from the bank’s reserves rather than your account. However, the check must be delivered to you, so this method can take longer than a wire transfer. In addition, there might still be fees involved.

The Takeaway

Wire transfers can be a quick, secure way to send money domestically or internationally. These transfers have several benefits, such as shorter processing times and larger transaction limits than ACH transfers. But wire transfers can also have significant transaction fees, especially when dealing with international transfers.

If you prefer to avoid costly wire transfer fees, look for firms that don’t charge them or offer accounts that don’t charge for wire transfers. You can also consider alternative methods of sending money, like using a payment app or sending a cashier’s check.

If you’re looking for other ways to save on your banking costs, consider opening an online bank account. With SoFi Checking and Savings, for instance, you won’t pay any account fees, and your money will earn a competitive annual percentage yield (APY), both of which can help your cash grow faster. You’ll also spend and save in one convenient place, have a suite of tools (like Vaults and Roundups) that can amp up your savings, and, for qualifying accounts with direct deposit, you can get paycheck access up to two days early.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.00% APY on SoFi Checking and Savings.

FAQ

Do you pay a fee to receive a wire transfer?

It depends, but most banks do charge a fee for income wire transfers. However, the fee for incoming wires is usually considerably less (maybe 50% lower) than the fee for outgoing wires.

Why are wire transfers so expensive?

Wiring money can be expensive for several reasons, such as their shorter processing times and higher transaction limits than bank transfers. Also, international wire transfers have more processing steps, which can increase their cost.

Do all banks charge wire transfer fees?

The majority of banks charge wire transfer fees in at least some situations. Some waive them in certain situations, while nonbank providers are more likely to waive them entirely.

Photo credit: iStock/Ridofranz

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.

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.

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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Oct
29
2024

What Is an ATM Card?

By | Budgeting & Goals, Financial Independence, money | Comments Off on What Is an ATM Card?

An ATM card is a type of bank card that allows you to access your bank account at an automated teller machine (ATM). You can use the card to withdraw cash, check your balance, and perform other banking transactions at ATMs. Unlike a debit card, however, you can’t use an ATM card to make purchases or get cash back in a grocery store.

Here’s a closer look at what ATM cards are, how they work, and how they differ from debit cards.

Key Points

•   An ATM card provides access to bank accounts for transactions such as cash withdrawals and balance inquiries, but cannot be used for purchases like a debit card.

•   Introduced in the late 1960s, ATM cards have largely been replaced by debit cards, which offer additional functionalities, including the ability to make purchases.

•   Using an ATM card allows for convenient banking outside of regular hours and helps limit spending since it can’t be used for purchases.

•   Security measures for ATM cards include keeping the card secure, protecting the PIN, and regularly monitoring account activity for unauthorized transactions.

•   Alternatives to ATM cards include debit cards, credit cards, prepaid cards, and mobile payment apps, each offering varying levels of functionality and convenience.

How ATM Cards Work

ATM cards first came out in the late 1960s as a way to enable account holders to withdraw funds from a checking account at an ATM. While they’ve largely been replaced by debit cards, banks still issue ATM-only cards for some checking and savings accounts.

To use an ATM card, you simply insert your card into an ATM. The machine then reads the magnetic stripe or embedded chip on the card and prompts you to enter your personal identification number (PIN), which verifies your identity as the account holder. Once authenticated, you can perform a number of different transactions, such as withdrawing cash, transferring funds between accounts, and checking your account balance. Some banks also allow you to use an ATM card to deposit cash or checks into an account.

ATM Cards vs Debit Cards

The terms “ATM card” and “debit card” are often used interchangeably, but they are not the same thing. While most debit cards can also be used as ATM cards, ATM cards can’t be used in all the same ways as debit cards.

Along with offering all the functionality of an ATM card, a debit card also allows you to make purchases both in-store and online, just as you would with a credit card. Unlike using a credit card, however, the payment immediately gets deducted from the linked checking account.

While some debit cards allow you to choose “credit” at the payment terminal when you shop, this doesn’t turn it into a credit card. The only difference between selecting “credit” instead of “debit” when making a purchase with a debit card is that there will be a short delay in the processing of the transaction — anywhere from a few hours to three days.

Another difference between debit and ATM cards is that debit cards have the word “Debit” printed on the front.

Because debit cards offer more functionality than ATM cards, these days you will typically receive a debit (not an ATM-only) card when you open a new bank account.

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No account or overdraft fees. No minimum balance.

Up to 4.00% APY on savings balances.

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Benefits of Using an ATM Card

Here’s a look at some of the advantages of ATM cards.

•   Convenience: ATM cards allow you to access your funds at an ATM rather than through a teller. As a result, you don’t have to stand in line at the bank, and you can manage your account at any time (not only during the bank’s business hours).

•   No spending temptation: Since ATM cards cannot be used for purchases, they can help you avoid impulse spending and better manage your finances.

•   No fees (when used correctly). As long as you use your ATM card at in-network ATMs, you can avoid getting hit with any ATM fees.

Drawbacks of Using an ATM Card

•   You can still overdraft: If you opt into overdraft services, you may be able to withdraw more money that you have in your account. The bank may view this as a loan and charge transfer fees and interest.

•   Limited functionality: ATM cards can only be used to manage your account at an ATM. You can’t use this type of card for purchases, making it less convenient than a debit card.

•   Withdrawal limits: Some ATM cards come with relatively low daily withdrawal limits, which can be a challenge at moments when you want access to higher amounts of cash.

Keeping ATM Cards Secure

Your ATM card allows you to get your hands on your money, so you don’t want it (or your PIN) to fall into the wrong hands. Some safeguards to keep in mind:

•   Keep your ATM card securely stored. No one should have access to the card but you, so be sure to keep it in a safe place, just like you would cash, checks, or credit cards. If your card gets lost or stolen, it’s important to immediately notify your bank.

•   Protect your PIN. Try to avoid writing your pin down, especially on or near your ATM card. Also be careful to never give any information about your PIN (or ATM card) over the phone. For example, if you get a call from someone claiming to be from your bank or the police asking to verify your PIN, don’t offer the information. Hang up and call your bank directly.

•   Monitor your account. Another type of bank fraud, called ATM skimming, can occur where criminals put a hidden electronic device on an ATM card reader that gets information from a bank card whenever a customer uses the machine. Though rare, it’s wise to regularly check your bank statements and account activity to ensure there aren’t any unauthorized withdrawals from your bank account. If you notice anything suspicious, contact your bank immediately.

Recommended: Bank Scams and How to Avoid Them

Alternatives to ATM Cards

ATM cards are a valuable money management tool but they’re not the only option. Here are some alternatives to ATM cards to consider.

•   Debit cards: A debit card allows you to make ATM withdrawals like ATM cards do, but can also be used to make purchases wherever debit cards are accepted.

•   Credit cards: These cards allow you to borrow funds up to a certain limit for purchases, with the added benefit of building credit history. However, they require responsible use to avoid debt.

•   Prepaid Cards: Prepaid cards work like debit cards but are not linked to a bank account. You load funds onto the card and can use it for purchases and ATM withdrawals.

•   Mobile payment apps: Apps like PayPal, Venmo, and Apple Pay allow you to make transactions and manage money electronically without needing a physical card.

The Takeaway

An ATM card allows you to utilize an ATM and perform basic account management functions without talking to — or waiting for — a teller. They can be an ideal tool for those who primarily need cash and basic banking services. However, ATM cards offer limited functionality compared to debit and credit cards, which can be a drawback in an increasingly digital economy.

When deciding whether to use an ATM card, you’ll want to consider your financial habits, needs, and the level of convenience you’re looking for. Exploring alternatives such as debit cards, credit cards, and mobile payment apps can help you find the best solution for managing your finances effectively.

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 4.00% APY on SoFi Checking and Savings.

FAQ

Do I need a PIN for my ATM card?

Yes, you need a personal identification number (PIN) to use your ATM card. You’ll set your PIN when you receive your card. You’ll then need to enter it any time you access your account at an ATM, whether you’re withdrawing cash or simply checking your balance. This creates an added layer of protection to prevent unauthorized access to your funds.

Can I use my ATM card like a credit card?

No, you cannot use an ATM or debit card like a credit card. A true ATM card can only be used to manage your account at an ATM. A debit card functions like an ATM card but also allows purchases. When you make purchases with a debit card, however, the money is directly debited from your checking account. By contrast, a credit card allows you to borrow funds up to a limit and repay them later, typically with interest.

What if my ATM card is lost or stolen?

If your ATM or debit card is lost or stolen, you’ll want to immediately report the loss to your bank in order to prevent unauthorized transactions. Your bank will freeze or cancel the card and issue a replacement, usually with a new card number and PIN. After that, you’ll want to monitor your account closely for any suspicious activity. If the lost card was a debit card, you’ll also need to update any automatic payments linked to that card with the new card information to ensure continuity.

Photo credit: iStock/Milan Markovic

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.

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.

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.

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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Oct
29
2024
What Is a Savings Bond?

Savings Bonds Defined And Explained

By | Budgeting & Goals, Growing Wealth, money | Comments Off on Savings Bonds Defined And Explained

The definition of a U.S. Savings Bond is an investment in the federal government that helps to increase your money. By purchasing a savings bond, you are essentially lending money to the government which you will get back in the future, when the bond matures, with interest. Because these financial products are backed by the federal government, they are considered to be extremely low-risk. And, in certain situations, there can be tax advantages.

Key Points

•   U.S. Savings Bonds are low-risk investments that involve lending money to the government, with returns of both principal and interest upon maturity.

•   Two main types of savings bonds, Series EE and Series I, offer different interest structures, with Series I bonds providing inflation protection.

•   Purchasing savings bonds can be done online through TreasuryDirect, with limits on annual purchases set at $10,000 for each series.

•   Investing in savings bonds has pros, such as tax advantages and no fees, but also cons, including low returns and penalties for early redemption.

•   Savings bonds have a maturity period of 30 years, but can be cashed in penalty-free after five years, depending on certain conditions.

Savings Bond Definition

First, to answer the basic question, “What is a savings bond?”: Basically, it is a loan issued by the U.S. Treasury and made to the U.S. government. Purchase a savings bond, and you are loaning that money to the government. At the end of the bond’s 30-year term, you receive your initial investment plus the compounded interest.

You may withdraw funds before then, as long as the bond has been held for at least five years.

💡 Quick Tip: Help your money earn more money! Opening a bank account online often gets you higher-than-average rates.

How Do Savings Bonds Work?

Savings bonds are issued by the U.S. Treasury. You can buy one for yourself, or for someone else, even if that person is under age 18. (That’s why, when you clean out your closets, you may find a U.S. Savings Bond that was a birthday present from Grandma a long time ago.)

You buy a savings bond for face value, or the principal, and the bond will then pay interest over a specific period of time. Basically, these savings bonds function the same way that other types of bonds work.

•   You can buy savings bonds electronically from the U.S. Treasury’s website, TreasuryDirect.gov . For the most part, it’s not possible to buy paper bonds anymore but should you run across one, you can still redeem them. (See below). Unlike many other types of bonds, like some high-yield bonds, you can’t sell savings bonds or hold them in brokerage accounts.

How Much Are Your Savings Bonds Worth?

If you have a savings bond that has been tucked away for a while and you are wondering what it’s worth, here are your options:

•   If it’s a paper bond, log onto the Treasury Department’s website and use the calculator there to find out the value.

•   If it’s an electronic bond, you will need to create (if you don’t already have one) and log onto your TreasuryDirect account.

Savings Bonds Interest Payments

For U.S. Savings Bonds, interest is earned monthly. The interest is compounded semiannually. This means that every six months, the government will apply the bond’s interest rate to grow the principal. That new, larger principal then earns interest for the next six months, when the interest is again added to the principal, and so on.

3 Different Types of Savings Bonds

There are two types of U.S. Savings Bonds available for purchase — Series EE and Series I savings bonds. Here are the differences between the two.

1. Series EE Bonds

Introduced in 1980, Series EE Bonds earn interest plus a guaranteed return of double their value when held for 20 years. These bonds continue to pay interest for 30 years.

Series EE Bonds issued after May 2005 earn a fixed rate. The current Series EE interest rate for bonds issued as of May 1, 2024 is 2.70%.

2. Series I Bonds

Series I Bonds pay a combination of two rates. The first is the original fixed interest rate. The second is an inflation-adjusted interest rate, which is calculated twice a year using the consumer price index for urban consumers (CPI-U). This adjusted rate is designed to protect bond buyers from inflation eating into the value of the investment.

When you redeem a Series I Bond, you get back the face value plus the accumulated interest. You know the fixed rate when you buy the bond. But the inflation-adjusted rate will vary depending on the CPI-U during times of adjustment.

The current composite rate for Series I Savings Bonds issued as of May 1, 2024 is 4.28%.

3. Municipal Bonds

Municipal bonds are a somewhat different savings vehicle than Series I and Series EE Bonds. Municipal Bonds are issued by a state, municipality, or country to fund capital expenditures. By offering these bonds, projects like highway or school construction can be funded.

These bonds (sometimes called “munis”) are exempt from federal taxes and the majority of local taxes. The market price of bonds will vary with the market, and they typically require a larger investment of, say, $5,000. Municipal bonds are available in different terms, ranging from relatively short (about two to five years) to longer (the typical 30-year length).

How To Buy Bonds

You can buy Series EE and I Savings Bonds directly through the United States Treasury Department online account system called TreasuryDirect, as noted above. This is a little bit different than the way you might buy other types of bonds. You can open an account at TreasuryDirect just as you would a checking or savings account at your local bank.

You can buy either an EE or I Savings Bond in any amount ranging from a $25 minimum in penny increments per year. So, if the spirit moves you, go ahead and buy a bond for $49.99. The flexible increments allow investors to dollar cost average and make other types of calculated purchases.

That said, there are annual maximums on how much you may purchase in savings bonds. The electronic bond maximum is $10,000 for each type. You can buy up to $5,000 in paper Series I Bonds using a tax refund you are eligible for. Paper EE Series bonds are no longer issued.

If you are due a refund and you want to buy I Bonds, be sure to file IRS form 8888 when you file your federal tax return. On that form you’ll specify how much of your refund you want to use to buy paper Series I bonds, keeping in mind the minimum purchase amount for a paper bond is $50. The IRS will then process your return and send you the bond that you indicate you want to buy.

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The Pros & Cons of Investing in Savings Bonds

Here’s a look at the possible benefits and downsides of investing in savings bonds. This will help you decide if buying these bonds is the right path for you, or if you might prefer to otherwise invest your money or stash it in a high-yield bank account.

The Pros of Investing in Savings Bonds

Here are some of the upsides of investing in savings bonds:

•   Low risk. U.S. Savings Bonds are one of the lower risk investments you could make. You are guaranteed to get back the entire amount you invested, known as principal. You will also receive interest if you keep the bonds until maturity.

•   Tax advantages. Savings bond holders don’t pay state or local taxes on interest at any time. You don’t have to pay federal income tax on the interest until you cash in the bond.

•   Education exception. Eligible taxpayers may qualify for a tax break when they use U.S. Savings Bonds to pay for qualified education expenses.

•   No fees. Unlike just about every other type of security, you won’t pay a fee, markup or commission when you buy savings bonds. They’re sold at face value, directly from the Treasury, so what you pay for is what you get. If you buy a $50 bond, for example, you’ll pay $50.

•   Great gift. Unlike most securities, people under age 18 may hold U.S. Savings bonds in their own names. That’s what makes them a popular birthday and graduation gift.

•   Patriotic gesture. Buying a U.S. Savings Bond helps support the U.S. government. That’s something that was important and appealed to investors when these savings bonds were first introduced in 1935.

The Cons of Investing in Savings Bonds

Next, consider these potential downsides of investing in savings bonds:

•   Low return. The biggest disadvantage of savings bonds is their low rate of return, as noted above. A low risk investment like this often pays low returns. You may find you can invest your money elsewhere for a higher return with only slightly higher risk.

•   Purchase limit. For U.S. Savings Bonds, there’s a purchase limit per year of $10,000 in bonds for each series (meaning you can invest a total of $20,000 per year), plus a $5,000 limit for paper I bonds via tax refunds. For some individuals, this might not align with their investing goals.

•   Tax liability. It’s likely you’ll have to pay federal income tax when you cash in your savings bond, unless you’ve used the proceeds for higher education payments.

•   Penalty for early withdrawal. If you cash in your savings bond before five years have elapsed, you will have to pay the previous three months of interest as a fee. You are typically not allowed to cash in a bond before the one-year mark.

Here, a summary of the pros and cons of investing in savings bonds:

Pros of Savings Bonds

Cons of Savings Bonds

•   Low risk

•   Education exception

•   Possible tax advantages

•   No fees

•   Great gift

•   Patriotic gesture

•   Low returns

•   Purchase limit

•   Possible tax liability

•   Penalty for early withdrawal

When Do Savings Bonds Mature?

You may wonder how long it takes for a savings bond to mature. The EE and I savings bonds earn interest for 30 years, until they reach their maturity date.

Recommended: Bonds or CDs: Which Is Smarter for Your Money?

How to Cash in Savings Bonds

You’ll also need to know how and when to redeem a savings bond. These bonds earn interest for 30 years, but you can cash them in penalty-free after five years.

•   If you have a paper bond, you can cash it in at your bank or credit union. Bring the bond and your ID. Or go to the Treasury’s TreasuryDirect site for details on how to cash it in.

•   For electronic bonds, log into your TreasuryDirect account, click on “confirm redemption,” and follow the instructions to deposit the amount to a linked checking or savings account. You will likely get the money within a few business days.

•   If you inherited or found an old U.S. Savings Bond, you may be able to redeem savings bonds through the TreasuryDirect portal or via Treasury Retail Securities Services.

Early Redemption of Bonds

If you cash in a U.S. Savings Bond after one year but before five years, you’ll pay a penalty that is the equivalent of the previous three months of interest. Keep in mind that for EE bonds, if you cash in before holding for 20 years, you lose the opportunity to receive the doubled value of the bond that accrues after 20 years.

The History of US Savings Bonds

America’s savings bond program began under President Franklin Delano Roosevelt in 1935, during the Great Depression, with what were known as “baby bonds.” This started the tradition of citizens participating in government financing.

The Series E Saving Bond contributed billions of dollars to financing the World War II effort, and in the post-war years, they became a popular savings vehicle. The fact that they are guaranteed by the U.S. government generally makes them a safe place to stash cash and earn interest.

The Takeaway

U.S. Savings Bonds can be one of the safest ways to invest for the future and show your patriotism. While the interest rates are typically low, for some investors, knowing that the money is being securely held for a couple of decades can really enhance their peace of mind.

Another way to help increase your peace of mind and financial well-being is finding the right banking partner for your deposit product needs.

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 4.00% APY on SoFi Checking and Savings.

FAQ

What is a $50 savings bond worth?

The value of a $50 savings bond will depend on how long it has been held. You can log onto the TreasuryDirect site and use the calculator there to find out the value. As an example, a $50 Series I bond issued in 2000 would be worth more than $211 today.

How long does it take for a $50 savings bond to mature?

The full maturation date of U.S. savings bonds is 30 years.

What is a savings bond?

A savings bond is a secure way of investing in the U.S. government and earning interest. Basically, when you buy a U.S. Savings Bond, you are loaning the government money, which, upon maturity, they pay back with interest.

Photo credit: iStock/AlexSecret

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.

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.

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.

4.00% APY
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.

*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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29
2024
What to Know About Removing a Hold on a Bank Account

What to Know About Removing a Hold on a Bank Account

By | Budgeting & Goals, Financial Independence, money | Comments Off on What to Know About Removing a Hold on a Bank Account

After making a deposit to a bank account, in many cases, not all of the money is immediately available for use. This temporary delay in the availability of funds is called a “hold.” Typically, a deposit hold will only last one to two business days. Sometimes, however, deposited funds may be held for as long as seven business days. This might be the case if your account is new, the deposit is for a high amount, or the bank has a reason to suspect a check will not clear. Hold times are governed by federal law. In addition, each financial institution has its own policies on hold times.

While these policies are in place for the bank’s protection as well as your own, it can be frustrating when you can’t spend your own money, which may lead you to wonder how to remove a hold on a bank account.

Key Points

•   A balance hold on a bank account temporarily restricts access to deposited funds, typically lasting one to seven business days depending on various factors.

•   Financial institutions implement holds to protect themselves from potential losses and to investigate suspected fraud, ensuring that checks clear before funds are accessible.

•   It is possible to manage a hold by reviewing the bank’s policies, contacting the bank directly, or simply waiting for the hold to expire.

•   To prevent holds, individuals can utilize direct deposit, request certified checks for large deposits, and make in-person deposits rather than relying on ATMs or mobile apps.

•   Holds are governed by federal regulations, with specific timeframes established for the availability of funds based on the type and amount of deposit made.

What Is a Hold on a Bank Account?

When a financial institution puts restrictions on an account holder’s ability to withdraw or otherwise use their funds, this is what’s called a “hold.” A hold on a deposit into your checking account typically lasts a relatively short amount of time, perhaps a day or two.

Financial institutions use the information in Federal Regulation CC to create their own holds policies. These policies usually provide information on the timing of funds availability based on the type of deposit being made, when it was made during a business day, and the amount of the deposit.

Why Banks Place Holds on Money

Overall, a bank uses a hold to protect the institution from possible loss if the funds don’t clear from the institution where the money is being drawn. Basically, the bank wants to ensure that a check is legitimate and that it won’t bounce.

Financial institutions may also place holds if they suspect fraud and are investigating. This can in turn protect the account holder.

How Long Holds Last

The length of a hold depends on a number of factors, with deposits potentially clearing on the same day or in up to seven days.

When it comes to a check deposit, the Federal Reserve requires that the first $225 must be made available to the account holder on the next business day (which doesn’t include weekends or bank holidays). Typically, a bank will make the balance of the check available by the second business day. However, there are some occasions where hold times can be as long as seven business days. This can happen if the check amount exceeds $5,525 or your account has been open for less than 30 days. Other reasons your deposited funds may be on hold for an extended period of time include:

•   An older check

•   A check that’s being redeposited

•   Deposits where an involved party has a history of overdrafts

•   Instances where there’s suspicion of fraud

Meanwhile, official checks like cashier’s checks, certified checks and government checks should clear on the day of deposit.

How to Remove a Hold on a Bank Account

As for how to manage or remove a legal hold on bank account deposits, you do have a few options, including reviewing your bank’s policy or contacting your bank. You could also simply wait it out. Here’s more on each of your possible options.

Wait It Out

If you’re not in a hurry to spend or transfer the funds being held, you can simply wait until the hold is taken off, given holds usually only last a matter of days. Keep in mind, however, that those days are business days — if there’s a bank holiday or a weekend coming up, your wait is bound to be longer.

Review Your Bank Policy

A notice of funds availability must be included on pre-printed deposit slips, but Regulation CC notes that it only needs to state that deposits may not immediately be available for withdrawal. So if you’d like to learn more specific information about the length of holds, you can often find your bank’s policies online or by contacting them. This information is also typically provided to you when you first open your account.

Armed with this information, you may be better able to plead your case with the bank to lift the hold — especially if you find out the hold is outside the norms.

Contact Your Bank

If deposited funds are being held for a longer period than you expected, it’s a good idea to call, email or stop by a branch of your bank to ask about specifics of its hold policy. You can ask your bank to provide an explanation for the hold or sometimes even to release the hold. Keep in mind, however, that it can be difficult to get a bank to remove a hold. And since all banks have them, you can’t switch banks to avoid them either.

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

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How to Prevent Holds

Rather than worry about how to remove a hold on a bank account, it might be helpful to take proactive steps to prevent a hold in the first place. Read on for some suggestions for reducing or eliminating hold lengths in a variety of situations.

For Paychecks

If your employer offers it, sign up for direct deposit. This means that your paycheck will be electronically transferred through the Automated Clearing House (ACH), and these deposits usually clear more quickly — often becoming available the next business day. Plus, many financial institutions make paychecks that are electronically deposited immediately available.

For Large Deposits

If you know that you’re owed a large sum of money, ask for it to be paid by certified check, cashier’s check, or a form of government check (such as a money order purchased at the United States Post Office). These types of official checks typically clear quickly, usually by the next day. As another option, you could ask for the funds to be wire transferred.

For Deposits in Person

Making your deposits in person is a good way to prevent delays in funds availability. Doing so through an ATM or through an app, on the other hand, can result in longer holds.

Recommended: Can You Deposit Cash at an ATM?

For Deposits Into a Separate Account

This strategy doesn’t help to remove a hold on bank account funds, but it can help to prevent an overdraft due to a hold: Deposit funds that may come with a longer hold into an account that you don’t use regularly to pay expenses, such as your savings account. (Note that when funds are being held, you can’t transfer money to another bank from that deposit until it’s cleared.)

When Using Your Debit Card

When you use your debit card to make a purchase or a reservation, the merchant may place a temporary hold on some of the funds in your checking account. This is done as a safeguard to make sure you’ll have sufficient funds to cover the full payment. This can come up when you’re filling up at a gas station or reserving a hotel room or rental car. If you foresee the hold being an issue, consider paying with a method other than your debit card (such as a credit card) or transfer additional funds into your checking account to act as a buffer. It can also be helpful in this scenario if you’ve linked bank accounts.

The Takeaway

Financial institutions create hold policies for funds deposited into bank accounts under the guidance of the Federal Reserve. Holds generally are placed for two reasons: to ensure that funds are cleared and to protect the account holder when fraud is suspected. How long a hold lasts depends on a variety of factors, including the type of deposit, when the deposit was made, the age of the account, and a bank’s specific policies.

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 4.00% APY on SoFi Checking and Savings.

FAQ

Why is the bank holding my deposit?

In general, financial institutions place holds for two main reasons: First, they want to make sure that a deposit will clear as a way to protect themselves and, second, sometimes they’ll place a hold on funds because they suspect fraud and are taking actions to protect the account holder.

What can I do if my deposit is placed on hold?

You can check your bank’s hold policies (usually given to you when the account was opened and/or available on the bank’s website) to see if you can wait it out. Or, you can contact the financial institution for more information about your situation and to request for the hold to be lifted.

How long do I have to wait before my deposit is released?

In general, the first $225 of a non-cash deposit must be made available on the next business day. The next $226 to $5,524 must be available in two business days, and amounts over $5,525 must typically be made available on the seventh business day. There are exceptions in either direction though, and keep in mind that these estimated time frames only apply to weekdays, not weekends or bank holidays.

How long can a bank put your account on hold?

A bank deposit hold can last anywhere from one to seven business days. In general, however, holds last for less than five days. The exact length of a hold will depend on a number of factors, including the type of deposit, the age of your account, and the bank’s policies.

Why is my bank account on hold?

A specific deposit may be on hold due to the bank enforcing its holds policy to ensure that the deposit clears, or there is concern about fraud. If the entire account is frozen, contact your financial institution for specifics. Note that if you have concerns about identity theft or other forms of fraudulent activity on your bank accounts, you can consider a credit freeze or credit lock to protect yourself while the situation is being resolved.

Photo credit: iStock/RyanJLane

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.

*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

SoFi 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.

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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29
2024
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Navigating Needs vs Wants: Your Guide to Smart Budgeting

By | Budgeting & Goals | No Comments

Budgets typically require you to categorize your expenses by “needs” versus “wants.” While that sounds straightforward enough, it’s not always easy to do. There may be times when you want something so badly (say, a leather jacket or trendy sneakers), it feels like a need. Or, you might dismiss a real need, like taking a week off work, as a want by not fully grasping its importance to your mental health.

Distinguishing between wants and needs, however, is key to your financial well-being — it provides the framework for a budget, allows you to make the most of the money you have, and can help you reach your future goals.

Read on to learn the real difference between needs versus wants, and how to fit both into your budget.

Key Points

•   Differentiating between needs and wants is essential for effective budgeting, as it helps manage essential living expenses while allowing for enjoyable purchases.

•   Needs typically include essential items for survival and functionality, such as food, housing, transportation, and healthcare, while wants enhance quality of life.

•   The distinction between needs and wants can be subjective, as individual circumstances may influence whether an expense is categorized as essential or indulgent.

•   Implementing a budgeting method like the 50/30/20 rule helps allocate finances into needs, wants, and savings, promoting better financial management.

•   Regularly reviewing and adjusting budgets ensures they remain relevant to changing financial situations and goals, fostering long-term financial health.

Understanding Needs and Wants

Both wants and needs are psychological factors that drive your spending behavior. Understanding the difference between wants and needs is key for setting up a budget that allows you to meet your basic needs, enjoy your life, and still work towards your future goals.

When it comes to budgeting, needs are usually defined as your essential living expenses, things necessary for your health, and expenses that are required for you to do your job.

Wants, on the other hand, are generally defined as desires for things that go beyond the basic necessities. They can range from small indulgences like a fancy coffee or a new hardcover to luxurious items like a premium car or designer clothes.

To stay on top of your budget and avoid overspending, it’s important to distinguish between needs and wants. However, you may find that these terms are more fluid than they appear at first. While working through your list of expenses, it may seem like items can fit into both categories, making the process somewhat confusing. It can help to dive deeper into what exactly constitutes a need versus a want.

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Identifying Your Needs

Strictly defined, a need is something that is necessary to live and function. By this definition, a need includes food, clothing, shelter, and medical care.

In budgeting, however, the category gets broader. There are things that you could technically survive without, but which you need in order to operate as a functional, productive member of society — and to keep that job that’s getting you the paycheck you need to buy food and keep a roof over your head.

For example, if you work in a position that requires you to show up at a specific time and place, transportation is going to be a need, not a want. Since insurance offers financial protection, and in some cases is legally required, you can count insurance as a need.

Needs tend to be recurring expenses that, generally, eat up a large chunk of your paycheck.

Examples of Needs

Here are some common budget items that typically count as needs:

•   Rent or mortgage payment

•   Utilities (e.g., gas, electricity, water)

•   Food

•   Transportation

•   Insurance

•   Necessary clothing

•   Healthcare

Recognizing Your Wants

Wants are basically everything that’s not a need. They are expenses that help you live more comfortably and enhance your quality of life.

Wants are the things you buy for fun or leisure. You could live without them, but you enjoy your life more when you have them. For instance, food is a need, but daily lunches out are likely more of a want. Outerwear is definitely essential to protect you from the elements, but if you have two other coats in your closet, that jacket you’re eyeing is probably a want.

Wants are not inherently bad or a poor use of your money. Often, they can help you accomplish important goals like meeting people and socializing with friends, having fun, or staying healthy. Along with needs, they deserve an important place in your budget.

Examples of Wants

Here are some examples of expenses you might classify as wants in your budget:

•   Entertainment

•   Dining out

•   Travel

•   High-end clothing

•   Fancy cars

•   Fitness classes/gym memberships

•   TV or music streaming accounts

•   The latest smartphone

•   Coffeehouse drinks

•   Hobby-related expenses

Where the Line Between Needs vs Wants Gets Blurry

Sussing out your financial needs versus your wants might sound like a simple task. But this seemingly black-or-white issue can actually get surprisingly gray, depending on your situation.

One source of confusion is that wants and needs won’t be the same for everyone. For example, two people may both need a car for work. However, one might need a luxury car to drive around important clients, while the other just needs a car that will get them to and from work. In the second case, a basic car will suffice.

Another complicating factor is that some expenses contain both wants and needs. Your grocery bill, for example, is a need because you need to eat. However, some items on the list, like expensive cheeses, soda, and ice cream represents wants rather than needs.

The Wants vs Needs Test

To determine if something you want to purchase is a want or a need, consider:
Does this fulfill a basic need? (Basic needs typically include food, water, security, and necessary clothing.)

•   Is this essential to living a healthy life?

•   Will not having this in your life cause you any sort of harm?

•   Will this make you happier or healthier in the long term?

•   Is it necessary for you to do your job?

Another good way to differentiate wants from needs is to let some time pass before you make a decision about a purchase. Generally, the desire to purchase a need will grow stronger over time, while the desire for a want will wane with passing time.

Another distinguishing characterisitc betweens needs and wants is that needs rarely change over time, whereas wants are often trends that will fade. If you’re trying to rein in unnecessary spending, it pays to think consider whether a purchase will make you happy, healthy, or otherwise fulfilled for a long time, or if it’s just something you want because it’s currently popular.

While there’s something to be said for retail therapy, you don’t want to fall into the trap of buying things because they make you feel better in the moment (especially if it means running up credit card debt). These purchases tend to get forgotten relatively quickly, sometimes in a just a few days or weeks. If on the other hand, a purchase will likely service it’s purpose for at least two years, you can feel better about spending the money.

Practical Strategies for Budgeting

To account for both needs and wants in your budget, you might consider the 50/30/20 budget framework.

This approach divides your net income into three basic categories, spending 50% on needs, 30% on wants, and 20% on savings and paying off debt (beyond the minimum payment). Just keep in mind that those percentages may not be realistic for everyone. If you live in an area with steep housing costs, for example, you may need to spend more than 50% on needs and take some away from the wants and/or savings categories.

Recommended: See how your money is categorized using the 50/30/20 rule calculator.

To see how your spending currently measures up, go through your monthly expenses, create a master list of things you spend your money on, and then create a list of needs and wants. You’ll want to place insurance and a basic phone plan under needs, but a subscription to a streaming service or a premium cable package will more than likely fall under wants.

The next step is to tally up what you’re spending in each category and see how the totals compare to your monthly take-home income. If you find your current spending is out of line with your chosen breakdown (such as 50/30/20), you’ll want to make some adjustments.

You might start by moving things around. Some of the items you’ve indicated as needs may actually be wants, or vice versa.

Next, you’ll want to look for places to cut back. While you may think your needs costs are fixed, it may be possible to shop around for a better price on certain monthly essentials, like insurance or a phone plan. Or, maybe you don’t need to drive to work but could spend less by taking public transporation or carpooling with a coworker.

Typically, however, it’s easiest to find places to cut back in the wants category. For example, you might decide to get take-out less often and cook more nights a week, brown bag your lunch, get rid of streaming services you rarely watch, and/or jog outside instead of going to a gym.

Any savings you uncover can then go towards your savings and debt repayment category. This can help you to get out from under high-interest debt faster (which will free up even more money for saving) and allow you to work towards goals like building an emergency fund, going on a vacation, buying a home, and funding your retirement.

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Reviewing and Adjusting Your Budget

Once you’ve rejiggered your spending and created a basic 50/30/20 (or similar) budget, it’s important to track your spending to make sure you’re sticking to your budget and spending an appropriate amount on needs versus wants.

One easy way to do this is to put a budgeting app on your phone (many are free for the basic service). Budgeting apps typically connect with your financial accounts (including bank accounts and credit cards), track spending, and categorize expenses so you can see exactly where your money is going each month.

Once you start tracking your spending, you may find that your original budget breakdown isn’t realistic and you’ll need to make some adjustments to your budget. For example, maybe it isn’t feasible to save 20% of your take-home pay right now. You might start with 5% or 10% and increase the percentage as your income grows.

It’s also a good idea to check in on your budget every six to 12 months. Your needs, wants, and goals will change over time. The key to creating a sustainable budget is to treat it as a living document and periodically evaluate it and adjust it as necessary to ensure that it meets your current financial goals.

The Takeaway

Some things you need — a place to live, electricity in your home, gas in your car to get to work — and some things you just want, like tickets to a concert or a membership to a gym. The key to smart budgeting is making room for both needs and wants, as well as saving. A balanced budget can help you live well right now, while also getting you closer to your short- and long-term financial goals.

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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.

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

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