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If you’re single and earning $45,000 a year, this salary could be considered a decent living. But this largely depends upon where you live, your lifestyle habits, the amount of debt you may have, and where you are in your professional journey.

For instance, earning $45,000 a year can be a good starting off point for someone entering the workforce, such as a recent college grad. Living in a small town or city as a single person with a roommate or two, curbing any unnecessary spending, and sticking to a budget can also make subsisting on $45,000 possible. With some budgeting, you may even be able to put some money toward savings.

Read on to take a closer look at whether $45,000 a year is a good salary for a single person in 2024.

Is $45K a Good Salary?

How well you get by on $45,000 a year largely depends on your spending habits, ability to budget, and specific financial obligations. Higher rates of inflation have made living on $45,000 annually more difficult, though a budget planner app can help you monitor spending and saving.

Perhaps the best way to determine whether $45,000 is a good salary is to break it down by hourly, weekly, and monthly amounts. According to ZipRecruiter, the average hourly rate for someone making $45,000 a year in the U.S. is $18.07. When doing the math, the monthly pretax pay comes to $3,750, and the weekly pretax wages are $937.50. To break that down even further, the daily rate is $187.50.

Average Median Income in the US by State in 2024

According to the Social Security Administration, the average salary in the U.S. is $63,795. The median average salary, which represents the midpoint of salaries in the nation, was $59,540 in 2023, the U.S. Bureau of Labor Statistics reports.

Here’s a summary of the median household income in each state, based on the most recent data available from the U.S. Census Bureau.

Average Cost of Living in the US by State in 2024

The term cost of living refers to the amount of money a person needs to cover their basic needs, such as housing, transportation, groceries, and health care. Let’s take a look at how much residents in each state spend on these necessities, according to data from the U.S. Bureau of Economic Analysis.

Recommended: 25 Highest Paying Jobs in the U.S.

How to Live on $45K a Year

Living on $45,000 a year will most likely require you to keep spending and average monthly expenses in check. It’s also a good idea to consider your housing situation, since that’s often the biggest line item in a budget.

Unless you’re living at home with your family — a common scenario for about one-third of Gen Zers — you’re going to need to make sure you can afford monthly rent. On a $45,000 a year salary, this could be a challenge.

According to RentCafe, the average apartment rental in the U.S. is $1,713 per month, or roughly 45% of a typical pre-tax monthly paycheck. (The general rule of thumb is that housing costs comprise around 30% of your gross income.) If you plan on living in a major city, where rents are typically higher, you could very well end up spending even more of your income on rent.

However, if you don’t have to live in one of those cities to be close to work, or you have a remote job, it may be worth looking into one of the many affordable places to live in the U.S., such as Dayton, OH; Knoxville, TN; Erie, PA; and Hickory, NC. Along with more affordable housing, these towns also offer a lower cost of living, which means a $45,000 annual salary can go further.

How to Budget for a $45K Salary

The reality of living on a salary of $45,000 a year could pose some obstacles. However, taking the time to create a budget and using a tool like a money tracker can help you stretch every dollar and keep your financial goals on track.

One popular method is the 50/30/20 budget. This approach breaks down your salary into three buckets: 50% of your earnings cover basic needs, such as housing, utilities, food, and medical costs; 30% is allotted for your wants, such as travel, dining out, entertainment, and hobbies; and 20% is for savings and paying off debts.

There are many different types of budgeting methods, but the 50/30/20 strategy provides a simple, clear-cut picture of how your earnings should be split up.

Maximizing a $45K Salary

The way to maximize any salary is to live within, or even below, your means. This can be easier said than done, but it’s definitely possible.

While it’s tempting to start big, you may find more long-term success by taking small steps: Eat more meals at home. Shop at a less-expensive grocery store or during sales. Watch your utility use, which can help keep bills at a minimum. Carpool or bike to work.

Other ways to make a $45,000 salary work better for you include building an emergency fund to cover at least three to six months’ worth of expenses, and ramping up your contributions to your employer-sponsored 401(k) retirement plan.

Quality of Life with a $45K Salary

Depending on their cost of living and debt, a single person can have a nice quality of life with a $45,000 salary. But you may need to put in some work to find an affordable place to live, choose a car with a reasonable monthly payment, and opt for low-cost entertainment such as meeting a friend for a casual meal, happy hour, or movie.

Keep in mind that staying healthy lends itself to a better overall quality of life. If your job offers you health benefits, take advantage of them by keeping up with covered wellness exams and preventive health screenings. Your health insurance may even offer behavioral health services, such as therapy, at no added cost.

You can eat nutritiously on a budget without too much trouble. Look for deals on fruits and vegetables at small vegetable stands. Buying the store brand instead of a name brand product can also save you money.

Is $45,000 a Year Considered Rich?

Unfortunately, no. While there’s not an official classification as to what it means to be considered rich, it’s often thought to include the top 1% to 5% of earners — which means a half million dollars a year. In order to be considered in the top 20% of earners in the U.S., you’d need to earn a six-figure salary — or more than $100,000 a year.

Recommended: How to Calculate Your Net Worth

Is $45K a Year Considered Middle Class?

No, it is not. According to the Pew Research Center, households with an income between $47,189 and $141,568 are considered middle class. A $45,000 annual salary falls below that definition.

Example Jobs that Make About $45,000 a Year Salary

Whether you’re looking for entry-level work or jobs for introverts, there are plenty of positions that pay $45,000 a year. Here are some examples, per the U.S. Bureau of Labor Statistics:

•   Bookkeeper: $47,440

•   Dental Assistant: $46,540

•   Fitness Trainer or Instructor: $46,480

•   Administrative Assistant and Secretary: $46,010

•   Bill and Account Collector: $44,250

The Takeaway

Making $45,000 a year if you’re single can be tough, especially if you’re living in an expensive area. However, there are several ways to make it easier, including establishing and sticking to a budget, having one or more roommates, and curtailing extraneous spending.

The good news is, depending on where you are in your professional journey, a $45,000 salary can be a good starting point. In time, your salary may very well increase, whether because of a raise, promotion, or moving to a new, higher-paying job.

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

Can I live comfortably making $45K a year?

While it depends on what you consider comfortable, this yearly salary can cover your basic needs without requiring you to sacrifice too much. You may even have some money left over for fun and savings, if you’re able to stay within or below your means.

What can I afford with a $45K salary?

A $45,000 a year salary should be enough to rent an apartment in an area where the cost of living is below average and where your salary is in sync with the median salary of that city or town. And provided you’re not driving a luxury vehicle with all the bells and whistles, you can also swing a car payment.

How much is $45K a year hourly?

The average hourly rate for someone making $45,000 a year in the U.S. is around $18.07. However, hourly wages can be as high as $24.28 and as low as $10.10.

How much is $45K a year monthly?

The monthly take-home pay before taxes comes to $3,750, which translates into a weekly paycheck of $937.50.

How much is $45K a year daily?

When broken down by a day rate, a $45,000 a year salary comes to $187.50 a day. Keep in mind this is before taxes.

Photo credit: iStock/Marco VDM

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.

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.

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

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

SORL-Q224-1882002-V1

A salary of $160,000 is excellent for a single young professional, considering that it’s well over the national average of $63,795. However, the cost of living varies significantly among states, so where you decide to live will determine your quality of life and how much you can afford in terms of housing and lifestyle.

Here’s a comparison of the cost of living among states and how far a salary of $160,000 might go in meeting housing and daily expenses.

Is $160,000 a Good Salary?

A six-figure salary of $160,000 is certainly impressive for a single person in 2024 or anyone early in their professional career. It is well over double the national average wage of $63,795, reported by the Social Security Administration.

However, the cost of living across the country varies greatly, so a salary of $160,000 will buy you a lot more in Tennessee and Wyoming than it will in, say, Massachusetts or D.C. Regardless of where you decide to live, tools like a money tracker can help you manage your finances and monitor your credit score.

Recommended: What Is a Good Entry-Level Salary?

Average Median Income in the US by State in 2024

Salaries for any occupation vary by state. This is largely a reflection of how expensive it is to live in a certain area. If housing prices or property taxes are high in an area, companies will often pay higher salaries to attract employees in that state.

The table below shows the annual median income by state as of May 2023. Data are from the U.S. Census Bureau. The highest median incomes are found in Maryland, New Jersey, and Massachusetts. The lowest median incomes are found in Mississippi, West Virginia, and Arkansas.

Average Cost of Living in the US by State in 2024

The cost of living in your geographic area has a direct effect on your quality of life. The cost-of-living index is one measure of the cost of basic expenses and everyday necessities, such as food, housing, health care, and education. As a result, the cost of living index can be used as an indicator of how far your salary will go.

According to the most recent Consumer Expenditure Survey from the U.S. Bureau of Labor Statistics (BLS), American households’ average monthly expenses total $6,081. Broken down by percentage, approximately 33% of income is spent on housing, 17% on transportation, 8% on health care, and 13% on food and groceries. The remainder is spent on miscellaneous items.

The table below shows how much a typical resident in each state spends on basic necessities. Data are from the U.S. Bureau of Economic Analysis. As you can see, Massachusetts and New Hampshire have the highest cost of living, while Nebraska and Mississippi have the lowest cost of living.

How to Live on $160,000 a Year

As stated before, $160,000 is an excellent salary if you are single, regardless of what your local cost of living is. On the other hand, it might not be so great if you have a family to support and live in, say, New York or California.

Learning how to live on $160,000 a year will require budgeting. Budgeting requires allocating a portion of your income to necessary expenses like housing costs, utilities, transportation, and groceries. After that, can estimate how much discretionary income you have left over for expenses like entertainment.

Once you have a relatively accurate estimate of your expenses, you can plug them into a spreadsheet or a budget planner app and create your budget.

Recommended: Average Income by Age

How to Budget for a $160K Salary

Let’s look at an example budget for a salary of $160,000. Our fictional single professional has no kids and lives in Colorado.

We deducted $958 per paycheck for 401(k) contributions, which is the maximum the IRS allows for 2024 at $23,000 per year. Their take-home pay is $3,352 per paycheck, or $6,704 monthly.

Here is an example of how they might budget their monthly income:

Maximizing a $160K Salary

A budget will help you to determine how far a salary of $160,000 will go, but it will also help you to use your money effectively. You can either save more or spend more on what you want.

Spending more on things like entertainment or food won’t maximize your salary, but investing wisely can. By saving and investing, you can allow what income you have left over after paying necessary expenses to potentially grow.

First, however, pay off your debts and save for an emergency fund. If you have high interest debt, you will be paying more in interest than you can earn in a savings account. A personal loan can help you consolidate credit card debt and lower the interest you pay as you pay down your debt.

An emergency fund is necessary in case you have unexpected expenses. If you have six months of expenses saved, that will spare you from having to take out a loan to pay for them.

Not all debt is bad, so it’s fine to use a credit card as long as you make regular payments and pay off the balance each month. That way, you can build a good credit score so that you will qualify for better loan terms when you need to borrow money in the future.

Quality of Life with a $160,000 Salary

Quality of life is a personal thing. Some people would consider living in a smaller property or apartment in a city within walking distance to eateries and shops a good quality of life. However, another person might consider living in a bigger house in a quiet neighborhood a better quality of life.

Consider what type of lifestyle makes you happy and then plan a budget that can make that a reality. You will likely have to make compromises — for example, living in a smaller house if you want to live in or around a large city or spending more on transportation if you want to live in a larger house farther from the city.

Is $160,000 a Year Considered Middle Class?

Middle class is defined as households with a salary that’s two-thirds to twice the national median income. By that definition, middle class is income that’s between $47,189 and $141,568. So a salary of $160,000 would be considered upper class. That said, it depends on where you live, whether you have dependents, and how much debt you have.

Is $160,000 a Year Considered Rich?

There’s no single definition for what constitutes “rich.” However, you may be considered wealthy if you are in the top 1% of income for your age. For example, a 25-year-old earning $160,000 is in a much better economic position than a 45-year-old.

Some people consider their net worth to be a better indicator of their class than salary. If you’re interested in calculating your net worth, use a net worth calculator.

Example Jobs that Make About $160,000 a Year

While they may not be the highest-paying jobs in your state, the following roles pay around $160,000 per year, according to the BLS:

•   Computer and Information Research Scientist: $157,160

•   Physicist: $158,270

•   Public Relations Manager: $159,420

•   Marketing Manager: $161,040

•   Podiatrist: $162,520

The Takeaway

While $160,000 is well above the national average and may seem like a high salary, it might not seem so generous if you live in a state like Massachusetts, where the cost of living is high. Salaries tend to reflect the cost of living in an area. They tend to be lower in states where the cost of living is lower, like Mississippi and Nebraska.

To accurately assess what quality of life you will have with your salary wherever you live, research the cost of housing, food, and transportation in your area. You can make the most of your salary, whether it be $160,000 or less, by paying down your debt and setting a budget.

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

Can I live comfortably making $160,000 a year?

There is no doubt that if you are single, you can live comfortably on $160,000 a year. How comfortable you will be, however, depends on where you choose to live and how much debt you have. Living in an area with a lower cost of living will mean you have more cash to spend on luxury items. Also, if you live in an area with a low cost of living, you will use less of your income on expenses like housing, utilities, and food, and will have more money to spend on entertainment or investing.

What can I afford with a $160,000 salary?

Hypothetically speaking, with a salary of $160,000, you could purchase a home for around $600,000 if you don’t have too much debt. That would leave you enough money to pay for both necessary and discretionary expenses.

How much is $160,000 a year hourly?

According to Zippia.com, a salary of $160,000 is $80 an hour. This assumes that the person works 2,000 hours in a year for an average of 40 hours per week, with two weeks of vacation.

How much is $160,000 a year monthly?

A salary of $160,000 is $13,333.33 a month. Note that if you are paid biweekly, some months will include two paychecks while other months will include three paychecks, so your total monthly pay will vary throughout the year.

How much is $160,000 a year daily?

A salary of $160,000 works out to $615.38 per day, assuming an eight-hour day.

Photo credit: iStock/Lyndon Stratford

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.

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

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.

SORL-Q224-1906629-V1

Rising prices and inflation are driving worries that money doesn’t go as far as it used to. But rest assured that $120,000 is considered a good salary, especially if you’re single and have no dependents. And by developing sound money habits now, you can help make the most of your income, no matter what it is.

Here’s a closer look at an annual salary of $120,000.

Is $120K a Good Salary?

A salary of $120,000 is nearly double the national average salary in the U.S. of $63,795, per the latest data available from the Social Security Administration. But how comfortably you’re able to live on that money depends on a number of factors, including how much debt you have, your family size, and how much your lifestyle costs in the area where you live.

A money tracker can help you with budgeting, monitoring spending, and keeping tabs of your credit score.

Average Median Income in the US by State in 2024

The average pay for a worker in the U.S. varies by state, though no state comes close to $120,000. For reference, here’s a chart of the median household income in each state, according to the U.S. Census Bureau.

Related: Highest Paying Jobs by State

Average Cost of Living in the US by State in 2024

The average cost of living in the U.S. will affect how you feel about your $120,000 salary. And, like salary, it varies by state. Here’s a look at what a typical resident in each state spends on basic necessities, such as housing, food, and transportation.

How to Live on a $120K Salary

Chances are, $120,000 can easily cover an individual’s basic expenses with some money left over for entertainment and saving. But if you live in a pricey area or are trying to pay down debt, you may need to be more mindful about how you’re managing your money. The following tips can help.

Live below your means

You‘ve heard it before, but the most important part of living well at your salary is to make sure your expenses are less than your salary. Try to find housing and transportation that fits within your budget, use a budget to plan for expenses, and manage lifestyle creep as much as you can.

Have a contingency fund

Be sure you’re planning for the unexpected. Building an emergency fund can go a long way toward preserving your finances when tough times come.

Make a plan for your money

Making a budget — yes, even on a $120,000 annual salary — can help you use your money more effectively and make progress toward financial goals.

How to Budget for a $120K Salary

There are a number of budgeting methods you may want to try.

•   50/30/20 method: With a 50/30/20 budget, 50% of your money should go toward needs (housing, transportation, food, etc.); 30% to wants (spending money, self-care, eating out, and vacations); and 20% to savings and debt payments.

•   Zero-based budgeting: In this type of budgeting, you give a job to every dollar you earn so that your income minus your expenses ends at zero.

•   Envelope method: You specify how much money is allotted to a specific category; say, $300 for gas for the month. You can spend the designated funds until they’re gone. If you’re really disciplined, you won’t spend in that category again until the next month, when the money in the envelope is refreshed.

Of course, the best budget is the one you will follow. A budget planner app can help you stay on track and reach your goals.

Maximizing a $120K Salary

Making the most of a $120,000 salary depends on what your financial goals are and your stage of life. Do you want to:

•   Save more money?

•   Grow your net worth?

•   Provide for a family?

•   Enjoy eating out and/or nightlife?

•   Afford a nice car and house?

To maximize a $120,000 salary, invest in the areas of your life that are important to you. Make a plan to spend money according to your values and be more frugal in the areas that are not as important to you.

Quality of Life with a $120K Salary

According to the World Health Organization, quality of life is about a person’s perception of their culture and value systems in relation to their goals, concerns, expectations, or standards. Translation: Your quality of life on a $120,000 salary may depend, in large part, on your perception of how good it is. If you’re able to feel optimistic with the amount of money you have, you’ll likely have a good quality of life.

Is $120,000 a Year Considered Rich?

Yes, $120,000 is a six-figure salary — and a good one for a single person — but is it enough to qualify you as “rich”? The truth is, rich is a relative term. Living well depends on how satisfied you are with your lifestyle and how much you’re able to save for a future self.

Recommended: How to Calculate Your Net Worth and Wealth

Is $120K a Year Considered Middle Class?

Middle class is determined by incomes that range from two-thirds to double the median income. It is also adjusted for family size. In the U.S., the median income is $74,580, which puts the range for the middle class between $49,745 and $149,160.

However, when adjusting for family size, a $120,000 salary for a single person puts you squarely in the upper class in every metro area in the United States.

Example Jobs that Make About $120,000 a Year Salary

According to data from the U.S. Bureau of Labor Statistics (BLS), there are a number of occupations whose salaries sit at or above $120,000 — some which could be a good fit for introverts.

Some examples include:

•   Software Developer: $132,270

•   Physician Assistant: $130,020

•   Nurse Practitioner: $126,260

•   Information Security Analyst: $120,360

•   Actuary: $120,000

Recommended: What Is a Good Entry-Level Salary?

The Takeaway

Is $120,000 a good salary for a single person? Generally speaking, yes. It’s more than what a typical American worker earns and, depending on where you live, can provide you with a comfortable life. But even with a six-figure salary, you may want to consider ways to maximize your money. Sound financial habits like building up an emergency fund, saving for short- and long-term goals, and creating a budget are all good places to start.

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

Can I live comfortably making 120k a year?

Living comfortably on $120K a year depends on various factors, such as where you live, how much debt you have, your family size, and how you live. Many singles will find $120K enough to live on in many areas of the country, but may need to be more mindful about their spending if they live in pricier areas like Los Angeles or New York City.

What can I afford with a $120K salary?

If you’re looking to buy a home with a $120K salary, your best bet is to talk to a lender and run some numbers. In addition to your income, your level of debt, down payment amount, loan type, and interest rate can all impact how much house you can afford. For a rough estimate, a 120K salary would give you $10,000 of gross income each month, which would mean you’re looking at a mortgage payment between $2,500 and $3,600 if you have no other debt. With interest rates at 7.00%, that translates to a mortgage of around $415,000.

How much is $120K a year hourly?

A $120K salary comes out to approximately $57.69 per hour.

How much is 120K a year monthly?

A salary of $120,000 per year works out to roughly $7,706 per month, after federal income taxes are taken out.

How much is $120K a year daily?

If you earn $120,000 per year, you would be paid around $462 per day.

Photo credit: iStock/Delmaine Donson

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.

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.

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

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

SORL-Q224-1838737-V1

A share draft account or simply a share draft is a checking account that’s held at a credit union. Share draft accounts are similar to checking accounts offered by banks in terms of how you can use them.

There are, however, a few differences that set them apart. Whether a share draft account or a checking account is right for you can depend on your preferences for managing your money. If you’re thinking of opening a share draft at your local credit union, it helps to know more about how they work.

What Is a Share Draft Account?

The term “share draft account” is how credit unions refer to what banks call checking accounts. This terminology reflects in part how credit unions work.

When you join a credit union, you become a member of it. You, along with the other members, have an ownership share in the credit union. That’s a key distinction between a credit union vs. bank. Share draft is used to describe checking accounts belonging to credit union members.

You’ll also see the word “share” used with other types of accounts offered at credit unions. For example, a share account is the credit union equivalent of a bank savings account. These accounts can earn interest so you can grow your money over time.

Share certificates, meanwhile, are the credit union version of certificate of deposit (CD) accounts. You deposit money into a share certificate, which then earns interest until the certificate matures. At maturity, you can withdraw the initial deposit and interest earned or roll it into a new share certificate.

How Do Share Draft Accounts Work?

Share draft accounts work by allowing you to deposit money that you can then spend or withdraw later. Each time you deposit money, you’re essentially buying shares in the credit union that holds your account.

Generally, with a share draft account you can:

•   Pay bills online

•   Withdraw cash at ATMs (though there may be ATM withdrawal limits)

•   Make purchases online or in person using a linked debit card

•   Manage accounts via online and mobile banking

•   Add funds through direct deposit and/or remote deposit capture

•   Write checks

•   Link your debit card to mobile wallet apps

•   Send money to friends and family through Zelle or another mobile payment app

•   Send and receive ACH transfers or wire transfers

There may be various fees associated with these accounts, including monthly maintenance fees or overdraft fees. You may also pay ATM fees, depending on where you withdraw cash. Some share draft accounts pay dividends to credit union members as they’re declared quarterly, biannually, or annually.

Opening a share draft account is a bit different from opening a bank account. You first need to qualify for membership in a credit union.

The qualification requirements can vary by credit union. In terms of how much money to open an account, initial deposit requirements are usually on the lower side. It might be, say, $5 to $25 in many cases.

Credit unions can impose daily, weekly, and monthly limits on debit card transactions and ATM withdrawals. There may also be limits on check writing. Customer service availability can depend on the credit union.

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Pros of Share Draft Accounts

There’s a lot to like about share draft accounts and credit unions in general. Here are some of the main advantages of share draft accounts:

•   Initial deposit requirements are often low

•   Minimum balance requirements may be low or nonexistent

•   Some share draft accounts can earn dividends

•   Banking fees may be lower

•   Benefits and features tend to be similar to bank checking accounts

•   Credit unions can offer numerous ways to access share draft accounts, including online and mobile banking, ATMs, and branches.

There’s one more advantage to opening a share draft account. If you’re a member of a shared branch credit union, you can access your money through a wider network of branches. Shared branch banking means that even if your accounts are held at, for example, Credit Union A, you could access them at Credit Union B, which is convenient if you’re traveling.

Cons of Share Draft Accounts

Share draft accounts may not be right for everyone. Before opening one, here are a few potential drawbacks to keep in mind:

•   Membership in a credit union is required to open a share draft account

•   Branch access may be limited if your credit union isn’t part of a shared branch network

•   There may be limits on withdrawals or debit card transactions

•   Dividend rates may be low.

Qualifying for membership in a credit union might be the biggest hurdle to joining one for some people. Credit unions can base membership on things like military affiliation, where you work or attend school, or religious affiliation. The good news is that there are some credit unions that have less stringent requirements and offer membership to a wider range of people. It can be worthwhile to shop around.

How Does a Share Draft Differ From a Traditional Bank Account?

Share draft accounts are similar to checking accounts offered at traditional banks, but they aren’t identical. Here are some of the most important differences between share draft vs.checking accounts.

Fees

Banks are known for often charging plenty of fees for checking accounts. Fees are a big part of how banks make a profit. Credit unions, on the other hand, are not-for-profit financial institutions. That means they generally charge their members fewer fees and can pay higher interest rates on deposit accounts than traditional banks.

Deposit Insurance

Deposits at banks and credit unions can both be insured against institutional failure. Whether your coverage comes through the FDIC vs. NCUA depends on where you keep your accounts. Credit unions are likely insured by NCUA, or the National Credit Union Administration.

•   The Federal Deposit Insurance Corporation (FDIC) insures deposits for up to $250,000 per depositor, per account ownership category, per insured financial institution. You may qualify for more deposit insurance if you have accounts in different ownership categories that meet FDIC requirements. This insurance reassures you that your checking account is safe.

•   The National Credit Union Administration insures deposits at member credit unions up to $250,000 per depositor, per insured credit union. Member deposits held in jointly-owned accounts are insured up to $250,000 as well.

Features and Benefits

Credit unions and banks can offer a different range of features and benefits for draft accounts and checking accounts, respectively. There can be a significant difference between what is a premium checking account at a bank and what constitutes a premium share draft account at a credit union, for example. Comparing what’s included with share draft and checking accounts can help you decide which one is better for your needs.

The Takeaway

Deciding to open a checking account or a share draft account can help you get a better handle on your money. Both share draft accounts and checking accounts make it easy to deposit funds, pay bills, withdraw cash, or make purchases as needed. Share draft accounts are held at credit unions, and they may have lower fees and minimum deposit and balance requirements. That said, they may lack accessibility vs., some banks.

If you’d like to manage your money at an online bank, consider what SoFi offers.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

What is the difference between regular share and share draft?

A share account is a savings account held at a credit union. Share accounts can earn interest in the form of dividends. Share draft accounts, however, are similar to a checking account and allow you to make draft withdrawals by writing checks, making purchases with a debit card, or withdrawing cash at ATMs.

What is the difference between a share draft and a checking account?

The difference between a share draft and a checking account is where they’re held. Share draft accounts are offered at credit unions; checking accounts are offered at banks. Share draft accounts can be NCUA-insured while checking accounts at banks have FDIC deposit insurance coverage.

Is a checking account better than a share draft?

A checking account may be preferable to a share draft account if you’d rather keep your money at a bank rather than a credit union. On the other hand, you might lean toward a share draft if you’d rather take advantage of perks that only a credit union may offer. Looking at your money management habits and preferences can help you decide whether a checking account or share draft is the better fit.

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SoFi members with direct deposit activity can earn 4.20% 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 4.20% 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 4.20% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/31/2024. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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