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Credit references are documents that verify your credit history. They can come in the form of a credit check report, asset documentation, or character references.

A limited or poor credit history can potentially impact your approval when applying for a rental. If you have a spotty payment history, a low credit score, or little to no history, your chances of getting approved may go down. Landlords or property management companies can approve or deny rental applications based on these references.

If this description of a less than stellar reference fits you, don’t fret. There are ways to put your best foot forward with credit references in today’s competitive market.

Definition of a Credit Reference

Credit references paint a picture of your borrowing and payment habits and history. Property managers and landlords use it to help determine whether you’re likely to pay rent on time and in full.

Documents of financial agreements can be used as a credit reference. They come in the form of:

•   Credit reports

•   Character references

•   Asset documentation

•   Credit reference letters

In some cases, letters from personal lenders or documents from a car loan can be used. Be sure to clarify what the landlord needs when applying for an apartment. It’s also helpful to pull together the documents ahead of time, so you can pull together references for multiple apartments at once.


💡 Quick Tip: Online tools make tracking your spending a breeze: You can easily set up budgets, then get instant updates on your progress, spot upcoming bills, analyze your spending habits, and more.

When You Need Credit References

At the end of the day, landlords want to know if you’re able to pay rent. Getting an apartment rental is a business transaction between two strangers. Credit needed for an apartment plays a key role in rental applications.

Why Landlords Want Credit References

A credit reference is proof of your financial history. They detail how much debt you have, how timely your payments are, and your credit score, among other factors.

For instance, if your credit references show that you’ve been able to pay off your debts in full in a timely manner, a landlord will likely approve your rental forms.

Applicants with low credit scores or poor payment histories have lower chances of being approved.

Recommended: Does Net Worth Include Home Equity?

Types of Credit References

As mentioned, credit references come in different forms, like credit reports, character references, or formal letters from bank loan officers.

Credit Report

The most available type is a credit report. Three major credit bureaus provide credit reports: Equifax®, Experian®, and TransUnion®. You can obtain a free credit report every 12 months to check your score and scan for errors. The credit scoring system known as FICO® can be used by all three.

Credit reports contain information like your credit history, current debt, bankruptcies and foreclosures. It can also include the age of your debt and how many credit inquiries you’ve had. Importantly, it’ll also contain your score; credit scores range from 300 to 850.

Landlords will look at this report to determine the financial risk of each applicant. Generally speaking, a credit score of 670 or higher is considered acceptable, though requirements may vary based on the lender or circumstances.

Another factor that can impact your credit score and report is the number of inquiries into your credit history. If there are a lot of inquiries, it may lower your score since it can be perceived that you may be struggling financially. Some rental applications will include a fee for running the credit check.

Bad or no credit may give a landlord pause — but it may be possible to strengthen your case.

Recommended: What is The Difference Between Transunion and Equifax?

Asset Documentation

Asset documentation is proof of income, liquid cash, or investments. It shows landlords that you are financially stable and able to handle unforeseen circumstances, like a job loss.

Your landlord may request a verification letter from your employer, pay stubs, or an offer letter to prove income. You may also have to provide documentation of your savings or investment funds like mutual funds or retirement plans. Reach out to your financial institution or brokerage to provide you with documents of your accounts.

The more assets you have, the stronger your application will be.

Recommended: What Credit Score is Needed to Buy a Car

Character and Credit Reference Letters

Credit reports and asset documentation only tell part of the story. A character or credit reference letter may give context to a spotty part of your credit history. Someone who you’ve had financial transactions with, such as an employer, previous landlord, or business partner, can write a letter confirming your character and values. For example, if you went through hardship, such as a medical illness, but still met your financial obligations, someone such as a prior landlord can vouch for you.

If you have bad credit, for example, an institution can demonstrate if you have taken courses, been given resources such as a debt payoff planner, or worked out a new payment plan to successfully pay off your debt. It demonstrates a commitment to improving personal finance.

Don’t be afraid to ask for a reference letter — many may be willing to write on your behalf. Remember, however, that these types of letters are not as concrete as credit and asset reports. They work better as supporting documentation.

Financier Support Letters

If you have troubled credit history, a financier support letter from a cosigner on a lease can help. These letters are typically for business owners who need to prove they have the capital to meet rent or buy.

For a lessee, a guarantor would write a letter with context on how they can support your rent if needed. This can be helpful if you have an adverse credit history. For business owners, the letters would be obtained from financial institutions or financial partners backing a business lease or purchase.

Credit Reference Examples

If a landlord requests written credit reference letters, have a list of people in mind who can type up a quick letter. You could also ask them to type up a generic letter that you can use across multiple applications, or you might offer to supply a draft of the letter for them to edit as they see fit. Sometimes a property management company or landlord will have their own template, so be sure to clarify which format is acceptable.

A credit reference letter can be brief. But it must include key details such as:

•   Reference full name and contact information

•   Length of relationship

•   Payment history

Additional details may be requested depending on what your landlord requests. Below is a sample template:

   Dear [Landlord Name]:

   I have known Ben as a tenant for three years. He paid rent ahead of time, was quiet, respectful, and took care of our property. Also, he ended his lease in search of a bigger space. He got his deposit returned in full, so he’s highly recommended as a tenant.

If you do not have a history of renting, you can ask a financial institution to vouch for you. Here’s an example letter:

   [ABC Bank] lent $30,000 to Tina Jones in 2014. She made her payments on time and paid off the loan ahead of schedule in 2017.

If you’re still short a reference, try an employer to vouch for your stability at your current job:

   Tim has been an employee of ACB Company for 3 years and has been promoted once. Her current salary is $92,000. She’s responsible and puts our clients’ interests first. She will make a great tenant.

How to Secure a Credit or Character Reference Letter

Before you send a mass email to all your contacts, confirm with your landlord what details are needed. If there’s a template letter to use, so much the better. Once details are confirmed, reach out to your contacts. Be sure to provide them with all the information they need to include in the letter.

There’s no formal process to request a letter from financial institutions. You can go in person to speak to a banker who can provide you a letter or you can contact your bank and ask how to obtain one.

How to Improve the Chances of Getting a Reference Letter

Asking with plenty of time vs. saying you need a letter tomorrow is obviously a good move. Also consider authorizing your institution to release personal information while you are actively applying for rentals. Not doing so could cause delays as the letter goes through the chain of command.

The Takeaway

Landlords want to see that you earn income and honor your debts. Credit references are formal documents that support your profile as a reliable tenant. They come in the form of records from credit bureaus and character reference letters from employers, among others.

If budgeting is not your strong suit and you want to build your financial profile, a money tracker app can help.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

FAQ

What do I put as a credit reference?

That depends. Ask your landlord what documents he or she requires for a reference. It can mean a credit report, bank statements, character reference — or all three.

Who counts as a credit reference?

A credit reference can be someone with whom you have a tenant-landlord or business relationship. It can be a representative at a bank who can give a formal written letter of loans or accounts you have with them. Or, if you have limited or no credit history, a reference can be a current or former employer who can highlight your reliability.

Why do I need a credit reference?

Most property management agencies or landlords require credit references in order to approve a tenant application. This gives them an idea of your financial history and whether you’ll pay rent on time.

Photo credit: iStock/damircudic

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

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 .

SORL-Q224-1911245-V1

There’s nothing quite as indulgent as sitting back on your couch, remote control in hand, knowing that your favorite restaurant meal is about to show up at your doorstep. But food delivery can also, unfortunately, lead to racking up credit card debt.

One solution is to use a checking account to pay for food delivery services. Although not every platform allows you to pay directly from your bank account, there are often payment options that still let you tap the funds in your checking account. Learn more about the details below.

What Is Food Delivery?

Third-party food delivery services have revolutionized at-home dining. Gone are the days where pizza was the only option for ordering in. These days, you can get just about any meal your heart desires, all with the tap of a finger.

Third-party delivery platforms connect hungry diners with nearly endless restaurant options. The meals are typically delivered by gig-economy workers who earn income via these apps.

Some of the most popular food delivery services include:

•   Grubhub

•   Uber Eats

•   Postmates

•   DoorDash

There may be other food delivery services available in your area, including restaurants that still deliver directly. However, those options may or may not allow you to use your checking account as payment.

Using Checking Accounts for Payment

Not every food delivery service allows you to link directly to your banking details. You may have to do a bit of research to find a single food delivery that accepts a checking account. That said, most offer the opportunity to pay through a third-party service like PayPal, which in turn makes bank account payment possible.

As of May 2024, neither Grubhub nor DoorDash had an option to input your checking account details. Both do allow you to use a debit card, however, which works almost exactly like a checking account payment. Grubhub also offers PayPal, Venmo, and Amazon Pay linking, among others, while DoorDash links with PayPal, Venmo, and Apple Pay.

Postmates and Uber Eats both give users the option to input their bank account information, which means you can pay directly with your checking account.

Linking Bank Account to Delivery App

For the apps that do allow you to use a bank account, linking the account is usually fairly straightforward. Both Uber Eats and Postmates use a third-party platform called Link to securely connect your bank account to your food delivery app account using your regular login credentials. The data transferred is encrypted, and you can disconnect linked accounts at any time.

Some delivery services may allow you to manually link your bank account using details like the routing number and account number. In that case, you should always be sure you’re only providing your details to certified and secure parties. If you’re using a lesser-known food delivery app, do some research ahead of time to ensure it’s legit before you enter your banking details.

Recommended: Checking Account vs. Debit Card: What’s the Difference?

Benefits of Checking Account Payments

Why pay for your next plate of Pad Thai or other food delivery with your checking account? Consider the following benefits.

No Credit Card Fees for Merchants

While this one may not benefit you directly, you may be saving a small business some money. That can feel like something of a good deed. Although food delivery services have helped connect more restaurants to more at-home diners, they do usually charge the restaurant a commission fee, which can eat into already-slim profit margins.

Credit cards, too, often charge merchants a fee that can be as high as 3.5% per transaction. In short, by using your checking account, you may be offering more direct support to your favorite restaurants.

Easier to Budget Food Spending

Sometimes, the money we put on a credit card feels less than real, which is one reason it can be so easy to spiral into credit card debt. But when money is coming directly out of your checking account, it’s often a bit more tangible. Over time, using your checking account can therefore make it easier to track how much you’re really spending on food delivery each month — and stick to a budget for how much you should be spending.

May Qualify for Cash Back/Rewards

In some cases, delivery apps or your bank may offer cash back or rewards for payments made with a checking account (or debit card). Check with your bank, and review offers from the delivery apps you use for further details.

Recommended: Checking vs. Savings Accounts

Potential Risks and Drawbacks

Although there are many upsides to using a checking account to pay for your food delivery, there are some drawbacks to consider, too.

Overdraft Fees from Erroneous Charges

When you’re drawing directly from your bank account — as opposed to putting money on a credit card — you’re at more risk of overdrafting (spending more than you have in your account). Doing so can rack up pricy overdraft fees, and it’s possible even if you’re careful. Occasionally, for instance, a transaction goes through more than once, which is an error that can be easier to rectify with a credit card.

Less Fraud Protection vs Credit Cards

One good thing about credit cards: They often come with robust fraud protection and easy ways to dispute charges. In fact, many credit card issuers will actually stop a charge they feel is suspicious and prevent it from going through until they get confirmation from you that it’s legitimate. Checking account payments don’t generally have this technology, so that’s something to consider when you’re linking your account to a food delivery service.

Difficulty Disputing or Reversing Charges

As mentioned, no matter the reason for an erroneous or fraudulent charge, it can be more difficult to reverse it when it’s basically cash (as opposed to credit). You can check directly with your bank account to learn about their process for such reversals.

Tips for Safe Checking Account Use

If you are going to use your checking account to pay for your food deliveries (or anything else), follow these tips to help ensure you do so safely.

Monitor Transactions Closely

Regardless of whether you’re using it for food delivery payments, regularly checking your bank account is always a good idea. That way, you’ll see any fraudulent transactions and start the process of rectifying them quickly. Plus, you’ll simply know how much money you have at your disposal.

Adjust Spending Limits/Alerts

Some bank accounts offer built-in spending limits, or they alert you when your account gets below a certain dollar threshold. It can be easy to overdo it with food deliveries, so if you’re going to link your checking account, consider adjusting those limits and alerts accordingly.

Consider Using a Prepaid Card

If you’re trying to keep yourself to a specific budget but don’t want to link your checking account to your food delivery app — or use a credit card that you could easily rack up sky high — consider using a prepaid card instead. That way, you know exactly how much you will spend on food delivery (since amounts in excess of the prepaid limit won’t go through). What’s more, you won’t take on any of the risks associated with linking your bank account.

Alternatives To Checking Payments

As mentioned above, if the delivery service you’re using doesn’t allow you to link your bank account directly, you will likely be able to link a digital payment platform like PayPal, Cash App, or Venmo, which can facilitate direct-from-bank transfers. And most apps will allow you to input a debit card in place of a credit card.

Of course, if you go the old-school way and order directly from a restaurant, you may still be able to pay with plain old cash.

The Takeaway

Ordering food delivery is a favorite convenience of the digital age, and you can enjoy it without using your credit card. It is often possible to link to a checking account or a debit card, which pulls money directly from your checking account, to pay for the food you’ve ordered. Or you might use a digital payment service, and link that to your checking account.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible 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

Can I earn rewards with checking account payments?

It’s rare to find cash back rewards or other incentives linked to payments that come directly from a checking account. However, many debit cards do offer rewards. Using this kind of card is almost exactly like paying directly from your bank account. Check with the financial institution about any rewards available.

What if a delivery never arrives?

If your meal is marked “delivered” but you don’t find it, you should be able to get help from the food delivery service itself. Most apps offer a way to contact their customer support team right from the interface.

Do all food delivery apps accept checking?

Unfortunately, not all food delivery apps allow you to directly link your checking account. However, virtually all of them allow you to use a debit card instead of a credit card, which works almost exactly the same way. In addition, many of the apps allow you to link a third-party platform like Venmo or Cash App, which can facilitate bank account payments.

Photo credit: iStock/FG Trade

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. 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.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible 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 (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, 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 Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details 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.

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.

SOBK-Q224-1883088-V1

Are you toying with the idea of opening a Christmas Club account? It may sound like a retro idea, but a Christmas Club (or Holiday Club account) is simply a short-term savings fund that can help you plan for and manage the annual spending blizzard. The strategy can be smart, since during the most recent season, consumers spent a whopping $964 billion, according to the National Retail Foundation.

Pacing yourself to save in advance of the holiday crush is great, but there can be pros and cons of a Christmas Club account. Learn the details here.

What Is a Christmas Club Account?

Christmas Club accounts started in 1909 at a Pennsylvania bank and are designed to help you save money for holiday expenses. They typically do not earn high interest but can help you pull back your purse strings when December comes along and avoid debt.

After making regular, scheduled contributions to the Christmas account, the money is withdrawn, typically in October, November, or December, depending on your bank’s rules. Christmas Club funds are transferred to your regular checking account with the bank or withdrawn in a check to cover your holiday expenses, be they toys, trimmings, or latke parties.

Saving in increments can be easier on your budget than scrambling for cash when Yuletide, Hanukkah, and Kwanzaa come around. It can also spare you from putting all those charges on your credit cards and having a high balance due.

💡 Quick Tip: Don’t think too hard about your money. Automate your budgeting, saving, and spending with SoFi’s seamless and secure mobile banking app.

How a Christmas Club Account Works

When you sign up for a Christmas Club account, you start with a deposit. Rules and regulations vary by bank. Some require a minimum to start; others don’t. Some have no minimum balance requirement in person at a branch but need a $25 minimum for setting up a Holiday Club account online.

You decide the amount you want to contribute regularly. For instance, you might opt for $25 or $100 swept from your checking account into your Christmas account every week or every payday.

Historically, banks have charged fees for withdrawing money before the club account matures. That encourages consumers to leave their money there until holiday shopping time. Just be aware that if an emergency comes up, like a broken water heater, and you take the money out, you will get hit with a fee.

Reasons to Use a Christmas Club Account

There are several benefits to Christmas Club accounts that can make them a helpful financial tool. Here are some of the reasons why people open them:

•   To save for a predictable spend above and beyond your year-round monthly budget. Many of us try to celebrate the holidays on a budget. But the gifting/decorating/entertaining spree can still hit every winter. A club account plumps up a money cushion to help you avoid credit card debt.

•   To afford holiday travel. Most of us need extra dough, whether to rent a car to visit family or fly the kids home from college. To score the lowest airfare, car rental, and lodging costs, brush up on smart tips for finding travel deals. (If short-term savings won’t cover your trip, shop for the best travel loans with lower APRs, no compounding interest, and no fees.) Stashing funds in a club account, of course, is a viable solution.

•   To build up funds for other planned annual costs. Just because they are called Christmas Club accounts doesn’t mean they have to be used for holiday spending. Puzzling over how to save on spring break expenses or how to pay for your child’s summer sleepaway camp? In those cases, a club account can be golden.

Where Can You Find a Christmas Club Account?

Christmas Club accounts are most often available at smaller community banks and credit unions vs. banks with a national presence. You can open one in person at a branch or online at your bank’s website. (Search under savings accounts.) Often, the same banks that set up payroll direct deposit plans also offer short-term club accounts.

Christmas Club accounts are offered at credit unions all across America, from the Fidelity Bank and Trust in Iowa to the Pasadena Federal Credit Union in California, and in too many places in between to count.

Pros of a Christmas Club Account

If you’re trying to decide if a Christmas Club account is right for you, it’s worthwhile to consider the advantages of these accounts.

Simplifies the Process of Saving for the Holidays

Framing your holiday budget ahead of time can cut stress. Pacing yourself to save over months may be even better. If it helps, you can give these targeted accounts nicknames to keep your eye on the goal; say, “Christmas in Vermont” to “Kids’ Lego Fund.”

Alternative to Putting Holiday Purchases on Credit Card

Using Christmas cash can help you avoid overspending with credit cards. Once you turn to plastic, things can get out of control. You start hunting online for a scooter a child has her heart set on and then see an ad for the brown suede boots you’ve been wanting…ka-ching. Interest rates on credit cards are quite high, and you can be left with debt that takes a long time to pay off.

Recommended: How Does a Credit Limit Work?

Cons of a Christmas Club Account

It’s not all a winter wonderland; Christmas Club accounts can have downsides. Here are a few to consider.

Most Banks Have Saving Limits

Most Christmas Club accounts have a maximum dollar amount you can save. Some banks allow up to $5,000, but this number will vary. The cap might be less than what you’d like to save. If need be, consider opening a second Christmas club if the bank allows it or open an additional one at another bank, too.

Potential Fees for Early Withdrawal

If you need to get the money out before the set withdrawal date, you will most likely incur early withdrawal fees. These can vary. Find out what they are when you open your account.

Alternatives to Christmas Club Accounts

If you want to save money for the holidays but aren’t sure a Christmas Club account is right for you, consider these options.

•   Certificate of Deposit. A certificate of deposit (or CD) generally offers a higher interest rate than a savings account but comes with a term. The bank holds your money for anywhere from months to years, and you collect the interest when the CD matures at the end of the term. Since a CD will lock up your money for a specific amount of time (typically between six months and 18 months, but shorter and longer terms are available), you may need to plan this right to have funds available for holiday expenses.

•   Money Market Account. A money market account is an interest-bearing account that is federally insured and has competitive interest rates. It generally requires a higher opening deposit.

•   High-yield Savings Account. These high-yield bank accounts earn significantly more interest than standard savings; you may find the best rates at online banks. However, the accessibility of these funds can be a downside. We all know how tempting it can be to transfer money from savings to checking when an unexpected household expense or special occasion comes up.

•   Travel account. Like Christmas accounts, these savings accounts likely won’t pay great interest, but they help you save for your goal. You can pick where to keep travel fund savings, and then use the money to hop on a plane when the holidays roll around.

The Takeaway

Christmas Clubs (or Holiday Club accounts) can spur you on to save regularly for the winter holiday spend. Planning ahead reduces stress. What’s more, setting a savings goal can help you keep your eye on the limit and avoid credit card overspending. But beware of fees for early withdrawals and caps on total amount saved. In some cases, you might be better off with another savings vehicle, like a CD or money market account.

Another option is to stash cash in a high-yield account and earn more interest there.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible 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 banks still do Christmas Club accounts?

Yes, community banks, smaller banks, and credit unions still offer Christmas Club accounts. Ask at your branch or search the bank’s website.

Are Christmas Club accounts worth it?

Christmas Club accounts generally have low interest rates. However, they can be worthwhile if they help you put money away regularly and thereby avoid a holiday spending blowout using credit cards.

Is there interest on Christmas Club accounts?

Yes, most accounts offer interest. The rates, though, tend to be lower than the interest rates for regular savings accounts, money market accounts, and certificates of deposit (CDs).

Photo credit: iStock/NoSystem images
SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. 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.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible 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 (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, 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 Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details 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.

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.

SOBK-Q224-1931340-V1

International Bank Account Numbers (IBANs) are standardized numbers that play a key role in overseas banking. They identify bank accounts so that international financial transfers can be completed quickly and accurately.

Here, you’ll learn more about IBANs, how they work, and how they differ from other banking numbers.

What Is an International Bank Account Number (IBAN)?

An International Bank Account Number, or IBAN, is a one-of-a-kind identifier that banks use to refer to a specific bank account in any of 80+ countries around the world. In turn, banks use that info to quickly move money between accounts in different countries.

While IBANs are useful in sending and receiving funds, they aren’t used for withdrawing funds or for transferring ownership of accounts.

How Does an IBAN Work?

An IBAN is a standardized numbering system that includes up to 34 alphanumeric characters to identify accounts for transactions. While the length of an IBAN varies by country, the sequence remains the same to ensure proper routing:

•   Country code (two letters)

•   Check digits (two digits); this validates the routing numbers and accounts. It is sometimes referred to as a control code.

•   Basic Bank Account Number (BBAN); this is an alphanumeric sequence that’s up to 28 characters long and represents a country-specific bank account number (which could represent different types of bank accounts, such as checking or savings).

While the format is standardized around the globe, the length of the code varies depending on the country.
It’s worthwhile to note that when using an IBAN to send or receive payments, there might be a processing fee or commission on the transfer.

IBANs are very much a part of the daily financial flow today. You may not have had international transactions in mind when you took the time to open a bank account, but they are becoming quite common. For instance, you might do business with a vendor overseas or shop online from a company based on another continent.

IBAN Example

Here is an invented example of an IBAN:

•   GB 28 2021 6126 1431 9576 17

This would be for a UK bank. It begins with GB for “Great Britain” and has 22 characters.

Here are other examples:

Albania: AL 35 2021 1109 0000 0000 01234567
Denmark: DK 95 2000 0123 4567 89
Spain: ES 7921 0008 1361 01234 56789

Recommended: All You Need to Know About Wire Transfer Fees

IBAN vs. SWIFT Code

Both IBANs and SWIFT codes (aka Society of Worldwide Interbank Financial Telecommunications) are globally recognized and accepted banking transfer identifiers. They play a part in making sure a transfer goes through successfully, and they help keep international finance running smoothly.

They are not, however, the same set of digits. The main difference between an IBAN and a SWIFT code lies in what they identify. Whereas a SWIFT code identifies the financial institution, the IBAN points to a specific bank account. Both work in tandem to help a transaction proceed.

To provide a bit more detail, here are a few other key differences between IBANs and SWIFT codes:

•   While an IBAN works more to identify a bank, branch, and bank account numbers, SWIFT identifies a particular bank during a transaction.

•   SWIFT Codes are issued by the Society of Worldwide Interbank Financial Telecommunications, which is a member-owned cooperative. The SWIFT banking system is a messaging network that enables financial institutions around the world to talk to one another securely. IBANs, on the other hand, are issued directly by the financial institutions.

•   Whereas IBANs are alphanumeric codes that are up to 34 digits, SWIFT codes include alphanumeric code that’s either 8 or 11 characters.

Do All Countries Use IBANs?

While more than 80 countries use IBANS, not every nation does. IBANs are generally used in the majority of banks in the Eurozone and other European countries. Parts of the Middle East, the Caribbean, and North Africa also use IBANs.

Some countries, such as Austria, Croatia, France, and the Netherlands make IBANs mandatory. Other countries don’t require the use of IBANs, but it is recommended. These include Albania, Brazil, Costa Rica, and the Virgin Islands.

Lastly, there are countries that don’t use IBANs. China, New Zealand, Canada, and the U.S. fall into this camp.

Recommended: What You Need to Know About Foreign Currency Bank Accounts

When Is an IBAN Number Required?

An IBAN number is typically required for international banking transactions. It allows for the accurate transfer of funds between accounts in different countries.

If, say, you need to make a payment to a business in South America or you have bought an item at an auction in Europe, you would likely need the recipient’s IBAN to complete the transaction. With that information, the money could be moved from your checking account to the payee’s account.

How Do I Find an IBAN?

If IBANs are available in both the country you live in and in the recipient’s country, you can obtain an IBAN by reaching out to your bank or checking on your bank statement. The person you’d like to send or receive money from will also need to to get their IBAN by contacting their bank or looking at their bank statement.

If you live in the U.S. and need an IBAN to complete an international transaction, the payee will typically share their banking details for the transfer of funds, including their IBAN.

Worth noting: The IBAN website also has a handy tool to calculate your IBAN code based on your country, bank code, and account number.

The Takeaway

While the U.S. doesn’t use the IBAN (International Bank Account Number) system, when you are sending funds overseas, you’ll need the other party’s IBAN. This number contains vital information that will help the money get to the intended account in another country safely and quickly. In this way, IBANs play an important role in keeping international financial transactions flowing.

FAQ

What is the IBAN number for the USA?

The U.S. does not identify bank accounts by IBANs. Instead, we use routing numbers and account numbers.

Is an IBAN the same as an account number?

An account number is specific to the individual and identifies their account, while an IBAN layers in more information. It’s an alphanumeric sequence that contains such information as an account number, along with a bank code, bank branch code, and location code.

How many digits are in an IBAN?

IBANs vary in length depending on the particular country. They can include up to 34 alphanumeric characters.

Which countries don’t use an IBAN?

Among the countries that don’t use IBANs are the U.S., Canada, China, and New Zealand. Additionally, there are some countries that suggest using IBANs, but don’t make it mandatory.

Photo credit: iStock/tolgart

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible 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 (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, 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 Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details 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.

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.

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.

SOBK-Q224-1920445-V1

A certificate of deposit (CD) can be a good option to consider as a savings vehicle for a child. With a CD, you can deposit money for a specific term, such as a few months to a few years, and earn a fixed rate of interest.

CDs are relatively safe investments; they are federally insured for up to $250,000, and can offer minimal but steady growth for a period of years.

An adult can open a custodial account for a child who will assume management of the CD account when they reach adulthood. However, there are some pros and cons you should know before opening a CD, including how CDs compare to other investment vehicles for your child.

Understanding Certificate of Deposits

A certificate of deposit is considered a type of savings account. The account holder deposits the funds and agrees not to withdraw the money for a specific period of time, in effect, loaning the money to the bank. The bank pays the CD holder interest based on the total amount deposited and the maturity date of the CD (the term).

You can open a CD at a bank or a credit union; this can be done in person or online. Most CDs are federally insured up to $250,000.

If the account holder decides to withdraw the funds before the end of the term, they are typically charged an early withdrawal penalty, often forfeiting a portion of the interest. For example, if you deposit $1,000 in a two-year CD, and you want to withdraw the funds after one year, you would only be entitled to the amount of interest earned up until that point, minus any fees or penalties.

CDs are generally considered a conservative investment, but the interest earned on a CD tends to be less than some other investments because CDs are lower-risk investments. When opening a CD account for a child, it’s important to consider whether the peace of mind and a lower return is what you’re after, or whether you’d like an investment that potentially offers more growth, but also possibly more risk.

Can a Child Have a Certificate of Deposit?

A CD for kids can be a solid start to an investment plan for your child. It’s also a way to help explain the dynamics of saving to them and what it means to earn interest on a principal deposit.

That said, minors cannot legally open CDs. An adult must acquire a CD for the child and then transfer it to them when the child reaches adulthood.

One thing to keep in mind about a CD for kids is that funds held in CDs and other savings accounts can affect a child’s eligibility for future financial aid. This is an important consideration, which could affect how much a family might pay for college tuition.

Who Would Own the CD?

A minor cannot apply for a CD, but they do own it. That means that the account cannot be given to anyone else.

An adult, usually a parent or legal guardian, can open a custodial account for a minor under the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers to Minors Act, which is an extension of the UGMA. A custodial account allows one person to deposit funds into an account for another. The account can be transferred to the child once they reach adulthood. The age of adulthood is not federally mandated. However, in most states, it is age 18.

How to Give a Certificate of Deposit to a Minor

Here’s how to set up a CD for a minor child, and transfer the account to them when they reach adulthood.

Select the Bank Where You Want to Purchase the CD

Explore bank account options and decide which bank or credit union you want to hold the CD for your minor child. Compare interest rates based on the amount you intend to deposit and the term for the CD. Also, look at any penalties and fees the bank might charge.

List Yourself as the Custodian and the Child as the Owner

Fill out the form online or in person stating that you will be the custodian and the minor will be the owner of the CD. You will be asked to provide identifying information such as your Social Security number and the child’s Social Security number.

Deposit the Money in the CD

Deposit the desired amount into the CD account, taking into consideration how different amounts and terms might affect the interest rate paid.

Discuss What to Do With the Funds

Opening a CD account for a child presents a “teachable moment,” in that the minor child, who is the owner of the CD, needs to think through what the money can be used for once the CD reaches maturity. When the CD matures, you can cash it out, or renew the CD. If the child is of legal age at that point, the account is transferred to the child. You may have to contact the bank to remove your name from the account.

Recommended: What Are No Penalty CDs?

Are CDs a Good Choice to Help My Child Save?

CDs are among the lower-risk investment options, and a good way to help a child save.

That said, CDs are also low-yield investments. If you are saving for your child’s education, funding a 529 college savings plan might offer more growth potential over time, if that’s your goal.

For longer-term savings, opening a Roth IRA may also be a good choice for parents hoping to provide financial security for their child.

Tax Implications of CDs for Kids

There are tax considerations to opening a CD for kids. Taxes are typically due on earnings when the CD matures, but a child will likely be in a lower tax bracket than an adult, so at least some of the earnings could be taxed at a lower rate.

The IRS taxes kids’ unearned income, such as interest, dividends, and capital gains, in tiers. In 2024, for a child with no earned income, up to $1,300 in unearned income is not taxed. The next $1,300 is taxed at the child’s tax rate. Any amount over $2,600 is taxed at the parent’s rate. So that is something to keep in mind.

The custodian of a CD should also be aware that they can give up to $18,000 in 2024 to a child without owing gift taxes.

Financial Aid Implications of CD Earnings

There are some implications of CD earnings regarding financial aid. If a child is applying to college and has savings in a UGMA, those assets will need to be disclosed on the Free Application for Federal Student Aid (FAFSA). It may be that the student will have to pay more of their college costs than if their money had been put in a 529 college savings account.

Is a CD a good investment for a child? That depends on the length of time between the opening of the CD account, and when the child reaches the age of majority. If the child is a teenager, a CD will provide a guaranteed amount of money, and there is no risk of loss if the market drops.

However, CDs don’t earn a lot of interest, and a growth-oriented investment might earn more and grow faster if the child is younger.

Finally, as noted above, if you are saving for the child’s education, you may want to explore a 529 college savings account, instead of or in addition to a CD for a child.

Where Can I Find a CD for a Child?

Most banks and credit unions offer CDs, and they allow custodians to open accounts for a child. Online banks can also be convenient. Many offer competitive interest rates and lower fees. Be sure to compare the interest rates and APY of each bank and make sure to understand the penalties that will apply if you withdraw the funds early.

The Takeaway

There are many ways to help your child save. Which one is the best depends on the ultimate use of the funds. CDs are lower-risk, they are federally insured up to $250,000, and they may offer higher interest rates than regular savings accounts. However, other options to consider are a 529 college savings account and a Roth IRA.

CDs are easy to open; most banks and credit unions offer these products. They earn interest on the amount invested as long as the funds are not withdrawn before the CD’s term. If the custodian does withdraw funds before the maturity date, the bank will charge a penalty.

Most online banks also offer CDs, and an adult can open a custodial account online for a child. The child is named as the owner of the account, and they will assume management of the account when they reach adulthood according to state laws.

FAQ

What is the best way to save money for a child?

The best way to save money for a child depends on your goals. Some options include a savings account or a custodial CD, a 529 college savings account, or a Roth IRA. Explore the options to determine which is best for your situation.

Can you buy a CD as a gift?

Yes. Under the Uniform Gifts to Minors Act (UGMA) and the Uniform Transfers to Minors Act (UTMA) an adult can gift a CD to a child.

Can I open a CD for my child?

Yes. Opening a CD account for a child is easy using a custodial account. The child will be named as the owner and you as the custodian. The owner (the child) will assume full legal ownership of the CD when they reach adulthood. The account cannot be given to anyone else but the named holder.

Photo credit: iStock/Hispanolistic

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

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

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. 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.

3.30% APY
Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible 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 (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, 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 Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
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.

*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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