Mar
26
2025

Wire Transfer vs Direct Deposit

By | Financial Topics, Terminology | Comments Off on Wire Transfer vs Direct Deposit

Wire transfers and direct deposit are both methods for moving money, but they have significant differences. Wire transfers are usually done on an individual basis and allow you to send money from your bank account to someone else’s account electronically, either domestically or internationally. Direct deposit, however, is typically used by businesses and organizations, often on a recurring basis, to transfer funds between bank accounts, though these transactions are typically limited to U.S. banks only. These two kinds of financial transactions are also processed differently and can involve dissimilar fees.
Read on to learn more about the differences between a wire transfer vs. direct deposit so you can use the technique that best suits your needs.

Key Points

•   Wire transfers and direct deposits are both methods for moving money, with significant differences in usage and fees.

•   Wire transfers are typically used for one-time payments, both domestically and internationally, and often involve fees.

•   Direct deposits are commonly used for recurring payments, such as wages and government benefits, usually within the U.S., and are often fee-free for recipients.

•   Wire transfers are fast and secure but can be costly and irreversible once sent.

•   Direct deposits offer convenience and possibly early access to wages but require accurate account information and initial set-up time.

What Is a Wire Transfer?

A wire transfer is an electronic transaction that allows money to move from one bank account to another. You initiate the wire transfer through your bank if you’re the person who’s sending money. The bank executes the transfer on your behalf and typically charges you a fee for that service. Some points to be aware of:

•   Wire transfers can be domestic, meaning you’re transferring money from one bank to another in the U.S., or international. For example, you might live and bank in the U.S. but need to send money to relatives living in Spain. A wire transfer would allow you to do that, without having to send cash or put a check in the mail.

•   Banks and credit unions can offer wire transfer services. The timing can vary, with domestic transfers typically being completed within a business day, while international ones can take between one and five days.

•   The fees you pay for a domestic or international wire transfer will depend on which financial institution completes the transfer for you. Some banks also charge a fee to receive a wire transfer into your account. Typically, outgoing wire transfers can cost anywhere from $0 to $50 depending on the transaction’s details.

•   It’s also possible to wire money through nonbank providers, such as Western Union or MoneyGram, if you don’t have a bank account or you need to send cash to someone. Each company has its own fee schedule that determines how much you’ll pay to send or receive money.

How Do Wire Transfers Work?

Wire transfers work by allowing you to send money directly from your bank account to someone else’s. You can use a wire transfer to send money to an individual or to a business.

Each bank has its own wire transfer policies but generally, the process works like this:

•   The sender provides their bank with the required information to initiate a wire transfer, making sure they have enough funds for the transaction.

•   The bank verifies the information and calculates the wire transfer fee, if applicable.

•   The sending bank initiates a transfer action with the recipient bank through a secure messaging network.

•   The recipient bank acknowledges the message and deposits funds equal to the amount of the transfer into the recipient’s account.

Wire transfers can be sent through SWIFT (Society for Worldwide Interbank Financial Telecommunication), the Federal Reserve Wire Network, or the CHIP (Clearing House Interbank Payments) system.

In terms of processing times, domestic transfers are typically completed within one business day, while international wire transfers may take one to five business days. There may also be cutoff times at a given financial institution, which can impact how quickly the funds are transferred and made available.

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What You Need to Send a Wire Transfer

Wiring money is a fairly straightforward process, and it starts with organizing the required information. Here’s what you’ll need to send a wire transfer at a bank.

•   Domestic transfers. You’ll need the recipient’s name, address, their bank account number, and their bank’s routing number. Some banks may request the recipient’s phone number as well.

•   International transfers. You’ll need the recipient’s name, address, and bank account number (IBAN), as well as their bank’s SWIFT code (this may be referred to as a BIC, or bank identification code).

You’ll also need to have sufficient funds in your bank account to cover the amount of the transfer, plus any wire transfer fee the bank charges. Depending on whether the transfer is domestic or international and the type of account you have, the wire transfer fees could range from $0 to $50, as noted above.

If you’re sending money via wire transfer through Western Union, MoneyGram, or another nonbank provider, you’ll typically need the following:

•   Your government-issued photo ID and personal details

•   Funds for the transaction and to cover any fees (you may be able to pay with cash, a credit card or debit card, or via your bank account, depending on the specific transfer and service involved)

•   Recipient’s name, phone number, and address

•   Recipient’s bank name, account number, and routing number

•   SWIFT code for international transfers

One thing to note is that once a wire transfer is sent, it’s very difficult to get the money back or cancel the transaction. So it’s important to double-check all of the information beforehand to make sure you’re sending the right amount of money, to the right person, and the right bank account.

Advantages and Disadvantages of Wire Transfers

Wire transfers can be a good choice for sending money in certain situations. For example, if you need to deliver funds to someone within one business day, a domestic wire transfer could allow you to do that. There are, however, some downsides to consider.

Advantages Disadvantages
Wire transfers are typically quick, with domestic transfers usually processing within one business day. In most cases, you cannot reverse or change a wire transfer once it’s been sent.
Wire transfers can allow you to send large amounts of money without having to write checks.

Your bank may impose limits on the amount of money you can transfer in a single transaction.
A wire transfer can be a secure way to send money domestically or internationally. Scammers may use ploys involving wire transfer requests to defraud consumers.
There is no risk of incurring overdraft or nonsufficient funds fees, as there is with payments by check. Banks can charge fees for domestic and international wire transfers, up to $50 each.

In terms of what’s good about wire transfers, they’re a fast way to send money and they’re more reliable and secure than checks or cash. On the other hand, there are the fees to contend with and the inherent risk of sending the wrong amount or directing funds to the wrong bank account. Additionally, other money transfer services may be just as fast without charging steep fees.

What Is a Direct Deposit?

Direct deposit allows you to receive money into your bank account electronically, without needing to deposit a paper check or cash. Funds move from the sender’s account to your account on a scheduled date. To delve in a little more deeply:

•   Direct deposit can be a convenient way to receive funds in the U.S. There’s no need to wait for a check and then deposit or cash it.

•   Depending on where you bank and the kind of account you have, you may be able to get paid up to two days early with direct deposit payments.

•   This method is often used for recurring payments, such as wages.

•   You can set up direct deposit to receive your paychecks, tax refunds, or payments of government benefits if you receive them.

•   Direct deposit can also be used to send payments for court-ordered child support. Parents who are required to pay support through a wage withholding plan may opt to have that money withdrawn from their paychecks automatically. Those funds can then be routed to the recipient parent’s bank account via direct deposit.

It’s worth noting that direct deposit is a very popular technique for getting paid. In fact, more than 95% of Americans are paid this way.

Also, there are some exceptions to the U.S.-only rule. For instance, if you are eligible to receive Social Security payments but live outside the U.S., you may be able to receive your benefits via direct deposit to an American financial institution or one overseas that has an international direct deposit agreement with the U.S.

How Does Direct Deposit Work?

Direct deposits are a form of ACH (or Automated Clearing House) payment. The ACH is a network that links banks in order to allow for the transfers of funds. An ACH transfer is one kind of electronic funds transfer, or EFT. In terms of the difference between ACH vs. EFT, the former refers to a specific category of payment methods, while the latter includes a broader range of electronic payments.

That’s important to understand when discussing how direct deposit works. Here’s what the process involves:

•   On a scheduled day, the sender forwards a direct deposit request to the Automated Clearing House.

•   The ACH processes the transaction and forwards the appropriate amount of funds to the recipient’s bank.

•   The recipient bank verifies the details of the direct deposit and credits the recipient’s bank account with the money.

•   The deposit amount is then deducted from the sender’s bank account.

There’s typically no fee to enroll in direct deposit as the recipient, though senders may pay a fee to the bank. That can include a set-up fee as well as a fee for each direct deposit transaction.

The average time for direct deposit to be completed and clear your bank account can vary based on where you bank. You may be able to get paid early (up to two days before “payday,” typically). However, the bank’s funds availability policy will determine when you can access the money in your account.

One additional note: Although direct deposit is typically initiated by businesses and government agencies using ACH transfers, individuals may be able to send a version of direct deposit via an app (either your bank’s or a third-party app) to transfer funds to, say, a friend or family member’s account.

What You Need to Send a Direct Deposit

If you would like to receive direct deposits of your paychecks, you’ll likely need to fill out a direct deposit form with some personal and banking details. These may include:

•   Your name and Social Security number

•   Bank account number and routing number where the money should be sent

•   Account type (checking or savings)

•   Possibly a voided check and/or deposit slip

•   Details on whether you want the full paycheck sent to checking or perhaps some of it deposited into a savings account.

You’ll usually sign and date the form; then, your employer’s payroll department will typically handle the processing of these materials. Keep in mind that it may take one to two pay cycles for the direct deposit to take effect, as well as the fact that direct deposit is usually only for use within the U.S.

If you want to send money to someone via direct deposit as an employer, you’ll have to coordinate with your payroll processor to initiate a program. You’ll need to provide your employees with a direct deposit form and get their personal and bank account information, as noted above, in order to start direct deposit payments.

Advantages and Disadvantages of Direct Deposit

Just like wire transfers, direct deposit can have some pros and cons. It’s important to consider both if you have the option to enroll in direct deposit to receive your paychecks, tax refunds, government benefits, child support, or other payments.

Advantages Disadvantages
No need to visit a bank branch to deposit payments to your bank account. Tech snafus could result in delays in receiving direct deposit payments.
Potentially get paid up to two days early when you enroll in direct deposit of your paychecks. Initial set-up can take time to process, and you may still need to get paid via paper check in the meantime.
Direct deposit is typically free for employees. Changing banks means updating direct deposit information, which can slow down payments temporarily.
You can split direct deposit payments into multiple accounts to make paying bills or saving easier.
Direct deposit payments of certain government benefits may be protected from being seized by creditors.

Direct deposit can be a convenient and cost-effective way to get paid. As with wire transfers, it’s important to make sure your account information is accurate and up-to-date. Sending a direct deposit to a closed account or to the wrong bank account could create financial headaches that may take time and effort to untangle.

Why You Might Use a Wire Transfer Over a Direct Deposit

There are some situations where it might make sense to choose a wire transfer in place of a direct deposit payment. For example, you might choose a wire transfer if you:

•   Need to make a one-time payment to another person or business

•   Want to send a large amount of money securely, without having to write a check or purchase an official check from the bank

•   Are making a time-sensitive payment and don’t mind paying a fee to be able to do so

•   Want to send money to another person or business internationally

•   Have sufficient funds in your account to cover the payment and fees

The most important thing to consider may be the fees you’ll pay. Again, the cost of sending or receiving a wire transfer can vary by bank. Also, you might find yourself in a situation in which the recipient of the wire transfer has to pay a fee to receive it and wants you to cover that cost. Being aware of fees upfront can help you decide if a wire transfer is the best option.

Why You Might Use a Direct Deposit Over a Wire Transfer

Direct deposits can be useful in a number of situations. You might choose to enroll in direct deposit if you:

•   Want to get paid without having to deposit a paper check and waiting for it to clear

•   Prefer to access your pay up to two days early, thanks to your bank’s policies

•   Receive government benefits that you may be able to protect from creditor actions

•   Would like to be able to split your paychecks, government benefits, or tax refunds across multiple checking and savings accounts

•   Receive child support payments and would like them to be delivered to you without having to interact with the other parent

•   Prefer to avoid the fees associated with wire transfers

Whether you choose a direct deposit vs. wire transfer can ultimately depend on the situation. If you need to send money, you can do that with a wire transfer. If you want to receive money, you could do so using wire transfers or (in the case of paychecks and certain other payments) direct deposit. Direct deposit is often a convenient way to receive recurring payments from a business or government agency.

The Takeaway

Wire transfers and direct deposit are both convenient ways to move funds. Typically, a wire transfer is a one-off way to quickly and securely send funds, domestically and internationally, though fees are often involved. Direct deposit, on the other hand, is usually used by businesses and government agencies to send money (such as paychecks or tax refunds) within the U.S., with the recipient not having to pay any fees.

SoFi currently offers incoming and limited outgoing domestic wire transfers, and our Checking and Savings accounts can offer a great place to receive direct deposits. Qualifying deposits may even be available up to two days early.

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


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FAQ

Can you send direct deposits with a mobile app?

It’s possible to send direct payments to friends and family via a mobile app. Person-to-person payment apps allow you to forward funds from your bank account to someone else’s; your bank’s app may also have this capability. Depending on the particular transaction, there may be little or no fees involved.

Can you send direct deposits internationally?

It is possible to send direct deposit payments internationally in some situations. For instance, if you live abroad and receive Social Security benefits, you might receive them at a bank which has an international direct deposit agreement with the U.S.

Can you send wire transfers with a mobile app?

You can send wire transfers with your bank’s mobile app if the app is equipped with this feature. You’d need to provide the same information as you would if you were completing a wire transfer in person and make sure that the account you’re sending the money from has sufficient funds to cover the transfer and the fee.

Is there a fee with sending direct deposits?

If you’re sending direct deposit as an employer to one or more employees, your bank may charge a fee for that. If you’re receiving direct deposit of paychecks, tax refunds, or government benefits, there’s usually no fee for that. If you’re sending a direct payment to someone else, the app you’re using might charge a fee.

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SoFi members with Eligible Direct Deposit activity can earn 3.80% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. 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 during a 30-day Evaluation Period (as defined below).

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 3.80% APY, we encourage you to check your APY Details page the day after your Eligible Direct Deposit arrives. If your APY is not showing as 3.80%, 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 3.80% APY from the date you contact SoFi for the rest of the current 30-day Evaluation Period. You will also be eligible for 3.80% APY 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, 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 members with Eligible Direct Deposit are eligible for other SoFi Plus benefits.

As an alternative to Direct Deposit, SoFi members with Qualifying Deposits can earn 3.80% 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 Eligible 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 an Eligible Direct Deposit or receipt of $5,000 in Qualifying Deposits to your account, you will begin earning 3.80% 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 Eligible 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 Eligible 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 Eligible 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 Eligible Direct Deposit or Qualifying Deposits until SoFi Bank recognizes Eligible Direct Deposit activity or receives $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Eligible Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Eligible Direct Deposit.

Separately, SoFi members who enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days can also earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. For additional details, see the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.

Members without either Eligible Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, or who do not enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days, will earn 1.00% 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 1/24/25. There is no minimum balance requirement. Additional information can be found at http://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.

About the author

Rebecca Lake

Rebecca Lake

Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.


photocredits: iStock/sayu_k
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Mar
25
2025

What Is FICO Score vs. Credit Karma Score?

By | Financial Topics, Terminology | Comments Off on What Is FICO Score vs. Credit Karma Score?

Understanding the differences between a FICO® Score and a Credit Karma Score is essential for managing your credit health. Both scores provide insight into your creditworthiness, but they are calculated using different models and data sources.

The FICO Score, developed by the Fair Isaac Corporation, is the most widely used credit scoring model by lenders, while Credit Karma relies on the VantageScore® model, which is based on data from TransUnion® and Equifax®. Knowing how each score is calculated and used can help you make informed financial decisions, whether you’re applying for a loan or simply monitoring your credit health.

Keep reading to learn more on FICO Score vs Credit Karma score, including how each model works, the differences between FICO Score and Credit Karma score, how credit scores are calculated, and more.

Key Points

•   A FICO Score is a credit score that assesses a consumer’s creditworthiness based on factors like payment history, credit utilization, length of credit history, new credit, and credit mix.

•   A Credit Karma score is a credit score provided by Credit Karma, typically based on the VantageScore model, which evaluates a consumer’s creditworthiness using data from TransUnion and Equifax.

•   Lenders primarily use FICO Scores for loan approvals, while Credit Karma’s VantageScore is more for credit monitoring and personal finance management.

•   Both FICO and VantageScore range from 300 to 850, but their scoring criteria and weighting for factors like payment history and credit utilization differ.

•   Credit Karma updates scores more frequently, providing users with instant insights, while FICO Scores are typically updated when lenders request them during loan applications.

What Is a Credit Report?

A credit report is a statement that has information about your current and past history of paying loans and other types of credit. People have more than one credit report, as there are several different companies that collect and maintain credit information about consumers.

Three of the largest credit reporting agencies are Equifax, Experian®, and TransUnion, and many consumers have credit reports from all three of these credit reporting agencies. Typically, credit scores are calculated using the information on these credit reports, and you can build credit by improving the information on your credit report.

Check your credit score for free. Sign up and get $10.*

and get $10 in rewards points on us.

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How Credit Karma Score Works

Credit Karma uses the VantageScore model, which evaluates factors like payment history, credit utilization, length of credit history, types of credit accounts, and recent inquiries to generate a credit score. Unlike the FICO Score, which is used by 90% of lenders, the VantageScore is primarily for educational purposes, helping consumers track their credit health and understand financial habits.

By providing free access to credit scores and reports, Credit Karma allows users to monitor changes, detect potential identity theft, and receive personalized recommendations for credit products. The platform updates scores regularly and offers insights on how different financial actions, such as paying off debt or opening new accounts, can impact credit standing.

Recommended: Differences Between VantageScore and FICO Credit Scores

How FICO Works

The FICO Score is a widely used credit scoring model that evaluates a consumer’s creditworthiness based on five key factors:

•   Payment history (35%)

•   Amounts owed (30%)

•   Length of credit history (15%)

•   New credit inquiries (10%)

•   Credit mix (10%)

FICO Scores are considered highly reliable because they focus on a borrower’s financial behavior over time. Higher scores indicate responsible credit management and lower credit risk, which can help secure better loan terms and interest rates.

Differences Between Credit Karma Score vs. FICO Score

The FICO Score and Credit Karma score differ primarily in the scoring model and data sources they use:

1.    Scoring Model: FICO Scores are calculated using proprietary algorithms developed by the Fair Isaac Corporation. Credit Karma, on the other hand, provides scores based on the VantageScore model, which was created by the three major credit bureaus (Equifax, Experian, and TransUnion).

2.    Credit Bureau Data: FICO Scores can be derived from any of the three credit bureaus’ data, depending on what the lender requests. Credit Karma primarily pulls data from Equifax and TransUnion, which may lead to differences in reported scores.

3.    Usage by Lenders: FICO Scores are the standard used by most lenders when making credit decisions, while VantageScore, which Credit Karma uses, is more common for educational and consumer monitoring purposes.

4.    Score Range: Both models have credit score ranges from 300 to 850, but their algorithms weigh factors like payment history, credit utilization, and new credit inquiries differently, leading to potential score discrepancies.

5.    Frequency of Updates: Credit Karma updates scores more frequently, often providing users with weekly updates, while FICO Scores are updated when requested by a lender or when information on your credit report changes.

How Credit Scores Are Calculated

Each company that creates a credit score has their own proprietary formula for what factors affect your credit score. This is the reason that credit scores from different companies vary. However, most companies use similar types of information. We already discussed what makes up the FICO Score; here is how VantageScore compares:

•   Payment history (40%)

•   Depth of credit (21%)

•   Credit utilization (20%)

•   Balances (11%)

•   Recent credit (5%)

•   Available credit (3%)

As you can see, payment history is weighted more heavily with VantageScore than FICO, and new or recent credit is weighted less. All of these factors will cause your credit score to differ by a few points between companies.

How to Check Your Credit Score and Credit Report

To check your credit score and credit report, you can visit websites like AnnualCreditReport.com, which provides free access to reports from the three major credit bureaus once a year. Additionally, many credit card companies and financial apps offer free access to your credit score and updates.

How to Access Your FICO Score and Credit Karma Score

If you want to know your FICO score, here are five ways to check it:

•   Check with your bank or credit card issuer: Many financial institutions offer free FICO Score access to customers.

•   Visit the official FICO website: Purchase your score directly from myFICO.com.

•   Use credit monitoring services: Paid credit monitoring services like Experian CreditWorks offer regular access to your FICO Score, along with credit report updates and alerts for suspicious activity.

•   Check with credit counseling agencies: Some nonprofit agencies offer free credit score reviews.
Request a credit report: While not always included, some reports might show your FICO Score.

Here’s how you can specifically access your Credit Karma score:

•   Visit the website or download the app: Go to the official Credit Karma website or download the mobile app from the App Store or Google Play.

•   Create an account: Provide personal information such as your name, address, Social Security number, and email to set up an account.

•   Verify your identity: Answer security questions related to your credit history to confirm your identity.

•   Access your credit score: Once verified, you can view your credit score and credit report for free, updated regularly.

•   Monitor your credit health: Use Credit Karma’s tools to track changes, receive alerts for unusual activity, and get personalized tips to build your credit score.

Recommended: Free Credit Score Monitoring with SoFi

The Takeaway

Understanding the differences between FICO Score and Credit Karma score is helpful for managing your credit effectively. While both provide insights into your credit health, FICO Scores are widely used by lenders, whereas Credit Karma offers free access to VantageScores. Monitoring both is never a bad idea, as they can help you stay informed and improve your financial standing.

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.

See exactly how your money comes and goes at a glance.

FAQ

Is Credit Karma or FICO Score more accurate?

FICO Scores are considered more accurate for lending decisions because they are the standard used by most lenders. Credit Karma provides VantageScores, which can differ from FICO Scores due to different scoring models and criteria. While helpful for monitoring credit, Credit Karma scores may not reflect what lenders see.

Is my FICO Score the same as my credit score?

Your FICO Score is just one credit score, but it is one of the most popular credit scores used by lenders. When many people refer to their credit score, they are often referring to their FICO score.

Which credit score is most accurate?

There isn’t a consensus on which credit score is the most accurate — each company that produces a credit score believes their own proprietary formula is the best. What’s most important is likely to be the credit score model that is used by the lender that you are using (FICO is the most popular one), since that is the one that will affect your lending decision. The good news is that typically the different credit scores will be within a few points of each other.

What is a good FICO Score to buy a house?

A good FICO Score to buy a house typically falls within the range of 620 to 740, depending on the loan type. Conventional loans often require a minimum of 620, while FHA loans may accept lower scores. Higher scores can secure better interest rates and loan terms.

How do I build my FICO Score?

You can work on building your FICO score in a number of different ways, including regularly paying your bills, loans, and other debt obligations each and every month. Another way to build your FICO and other credit scores is by lowering your credit utilization.

How do I clean up my FICO Score?

One of the first things you can do to clean up your FICO score is to regularly review your credit reports. You can get a free copy of your credit reports each year from each of the major credit bureaus. Make sure that there is no incorrect or out-of-date information on your credit report. If there is, make sure to dispute it with the credit bureau. You can then work to pay off your debts, lower your utilization, and make on-time payments. Over time, this will likely clean up and build your FICO score.

photo credit: iStock/Thx4Stock
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.

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Mar
25
2025

What Are IRA and Roth IRA Fees?

By | invest, Investing, Preparing for Retirement | Comments Off on What Are IRA and Roth IRA Fees?

When opening an Individual Retirement Account (IRA), it’s important to consider any fees that might be involved. Typical IRA fees may include annual maintenance fees and account closure fees. You may also pay a fee to roll funds over to an IRA or close your account and transfer funds elsewhere.

Factoring in fees matters when deciding where to open an IRA. The more you pay in fees, the less of your investment dollars you get to keep. Understanding the various IRA fees you might encounter can make it easier to choose the right option for your retirement savings.

Key Points

•   IRAs, including traditional and Roth, may incur fees such as maintenance (custodial) fees, and account closure fees.

•   A good IRA maintenance fee is ideally below 1% annually, with some brokerages waiving fees entirely.

•   IRA fees can be charged one-time, monthly, yearly, or per transaction, affecting overall investment returns.

•   Roth IRAs are funded with after-tax dollars, offering tax-free qualified distributions, while traditional IRAs typically use pre-tax dollars with taxable distributions.

•   Comparing fee schedules of different brokerages is crucial to minimize costs and maximize retirement savings.

Fees IRAs Can Charge

Brokerages and banks that offer retirement accounts can charge a variety of IRA fees and some are more fee-friendly than others. Some of the most common fees you might encounter with an IRA can include:

•   Account maintenance fees. Some brokerages charge IRA maintenance (or custodial) fees simply for having an account. You may pay a flat fee or a percentage of the assets in your account on a monthly or yearly basis. It doesn’t matter what type of account you have, as there’s typically no real difference between traditional IRA and Roth IRA maintenance fees.

•   Account closure fees. If you open an IRA at one brokerage, then decide to close it, you may pay a fee to terminate your account.

It’s difficult to determine how much an investor might pay in IRA fees on average, as every brokerage follows a different fee schedule. For example, you might pay a small account maintenance fee at one brokerage, while another charges no maintenance fee at all.

As for fees for opening a Roth IRA or traditional IRA, many financial institutions don’t charge this fee. If they do, account setup fees may be in the neighborhood of $25 to $50. Additionally, it could cost $100 or more to close your account and move it elsewhere.

Get a 1% IRA match on rollovers and contributions.

Double down on your retirement goals with a 1% match on every dollar you roll over and contribute to a SoFi IRA.1

1Terms and conditions apply. Roll over a minimum of $20K to receive the 1% match offer. Matches on contributions are made up to the annual limits.

How Are IRA Fees Charged?

Traditional IRA fees and Roth IRA fees are set by the financial institution that’s offering the account. Typically, there are fours ways fees can be assessed:

•   One-time

•   Monthly

•   Yearly

If you’re worried about losing money in an IRA, it’s important to know when fees can apply and how much you’ll pay. You may be focused on making sure your investments do well to avoid losses, but fees can easily leech away your earnings little by little if you’re not paying attention.

Reviewing a brokerage’s fee schedule before opening an IRA can give you a better idea of what you might pay in terms of upfront fees and ongoing costs. You can also review the prospectus for each mutual fund or ETF you plan to invest in to see how much you might pay for the expense ratio. The expense ratio is set by the mutual fund company, not the brokerage.

The Takeaway

Opening an IRA can get you closer to your retirement savings goals, while allowing you to enjoy some tax benefits along the way. When deciding where to open an IRA, it’s important to zero in on the fees as that can affect your overall account growth long-term.

If you’re ready to get started with retirement planning, it’s easy to open an IRA with SoFi. You can get your account up and running in minutes online, and choose between automated or DIY investing to help you reach your goals.

Ready to invest for your retirement? It’s easy to get started when you open a traditional or Roth IRA with SoFi. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

Help build your nest egg with a SoFi IRA.

FAQ

What is a good IRA maintenance fee?

A good IRA maintenance fee is no fee at all, as some brokerages waive annual and monthly account maintenance fees.

How are fees paid in an IRA?

Some IRA providers charge account maintenance fees that you may pay one time, monthly, or annually. Check with the financial institution offering the account.

Are IRA fees higher than 401(k) fees?

A 401(k) can charge its own fees and whether they’re higher or lower than IRA fees largely depends on who manages the plan. Fees for a 401(k) may outpace IRA fees in some instances.

About the author

Rebecca Lake

Rebecca Lake

Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.


Photo credit: iStock/supersizer

SoFi Invest®

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.
For a full listing of the fees associated with Sofi Invest please view our fee schedule.

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.


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.

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Mar
25
2025

What Is a Required Minimum Distribution (RMD) for IRAs

By | invest, Investing, Preparing for Retirement | Comments Off on What Is a Required Minimum Distribution (RMD) for IRAs

Individual retirement accounts (IRAs) are retirement savings accounts that offer certain tax-advantages. Some types of IRAs, including traditional and inherited Roth IRAs, are subject to required minimum distribution (RMD) rules.

What is an RMD on an IRA? In simple terms, it’s a withdrawal you make from an RMD every year once you reach a certain age. RMDs are a way for the IRS to ensure that retirement savers meet their tax obligations. Failing to take distributions when you’re supposed to could result in a tax penalty, so it’s important to know when you must take an RMD on an IRA.

Key Points

•   Required minimum distributions (RMDs) are mandatory withdrawals from IRAs that account owners must start taking at age 73, as per IRS rules.

•   RMDs apply to traditional IRAs, SEP IRAs, SIMPLE IRAs, 401(k)s, and other defined contribution plans.

•   The RMD amount account holders need to withdraw is calculated using the IRS Uniform Lifetime or life expectancy tables.

•   Failing to take RMDs can result in a 25% excise tax, reduced to 10% if corrected within two years.

•   RMDs are taxed as ordinary income, and qualified charitable distributions (QCDs) can be used to reduce tax liability.

Required Minimum Distribution (RMD) Definition

A required minimum distribution is an amount you need to withdraw from an IRA account each year once you turn 73. (In 2023 the SECURE 2.0 Act increased the age that individuals had to start taking RMDs to age 73 for those who reach 72 in 2023 or later.) You can take out more than the minimum amount with an RMD, but you must withdraw at least the minimum to avoid an IRS tax penalty.

The minimum amount you need to withdraw when taking an RMD is based on specific IRS calculations (see more about that below).

Special Considerations for RMDs

RMD rules apply to multiple types of retirement accounts. You’re subject to RMDs if you have any of the following:

•   Traditional IRA

•   SEP IRA

•   SIMPLE IRA

•   401(k) plan

•   403(b) plan

•   457(b) plan

•   Profit-sharing plan

•   Other defined contribution plans

•   Inherited IRAs

You must calculate RMDs for each account separately.

Failing to take RMD distributions from IRAs or other eligible investment accounts on time can be costly. The SECURE 2.0 Act allows the IRS to assess a 25% excise tax on the amount you failed to withdraw. That penalty might drop to 10% if the RMD is properly corrected within two years.

Why Do You Have to Take an RMD?

The IRS imposes RMD rules on IRAs and other retirement accounts to prevent savers from deferring taxes on earnings indefinitely. Here’s how it works.

When you contribute to a traditional IRA, SEP IRA, SIMPLE IRA, 401(k), or a simple retirement plan, you fund your account with pre-tax dollars (meaning you haven’t yet paid tax on that money). In exchange, you may be able to deduct some or all of the contributions you make.

Your account grows tax-deferred, and when you make qualified withdrawals in retirement, you pay ordinary income tax on earnings. If you were to leave the money in your IRA untouched, the IRS couldn’t collect tax on earnings, hence the need for RMDs.

Roth IRAs generally don’t have RMDs. When you make contributions to a Roth account you use after-tax dollars — in other words, you’ve already paid taxes on that money. So you don’t have to pay taxes again when you make qualified withdrawals in retirement. However, if you inherit a Roth IRA, you will be required to take RMDs.

Get a 1% IRA match on rollovers and contributions.

Double down on your retirement goals with a 1% match on every dollar you roll over and contribute to a SoFi IRA.1

1Terms and conditions apply. Roll over a minimum of $20K to receive the 1% match offer. Matches on contributions are made up to the annual limits.

RMDs for Roth and Traditional IRAs

When you open an IRA, you will typically choose between a Roth IRA or traditional IRA. There are differences between them when it comes to RMDs. Traditional IRAs are always subject to RMD rules. If you contribute to a traditional IRA, whether you max out the annual contribution limit or not, you can expect to take RMDs from your account later. RMD rules also apply when you inherit a traditional IRA.

Are there RMDs on Roth IRA accounts? No, if you’re making original contributions to a Roth IRA that you own. But you will need to take RMDs if you inherit a Roth IRA from someone else.

The IRS determines when you must take distributions from an inherited Roth IRA. The timing depends on whether the person you inherited a Roth IRA from was your spouse and whether they died before 2020 or in 2020 or later.

If you inherit an IRA from a spouse who passed away before 2020, you may:

•   Keep the account as your own, taking RMDs based on your life expectancy, or follow the 5-year rule, meaning you generally fully withdraw the account balance by the end of the 5th year following the year of death of the account holder

OR

•   Roll over the account to your own IRA

If you inherit an IRA from a spouse who passed away in 2020 or later, you may:

•   Keep the account as your own, taking RMDs based on your life expectancy, delay beginning distributions until the spouse would have turned 72, or follow the 10-year rule, generally fully withdrawing the account balance by the end of the 10th year following the year of death of the account owner

OR

•   Roll over the account to your own IRA

If you inherit an IRA from someone who is not your spouse and who passed away before 2020, you may:

•   Take distributions based on your own life expectancy beginning the end of the year following the year of death

OR

•   Follow the 5-year rule

If you inherited an IRA from someone who is not your spouse and who passed away in 2020 or later and you are a designated beneficiary, you may:

•   Follow the 10-year rule

IRA withdrawal rules for inherited IRAs can be tricky so if you know that someone has named you as their IRA beneficiary, you may find it helpful to discuss potential tax implications with a financial advisor.

How To Calculate RMDs on an IRA

To calculate RMDs on an IRA, you divide the balance of your account on December 31 of the prior year by the appropriate life expectancy factor set by the IRS. The IRS publishes life expectancy tables for RMDs in Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs). You choose the life expectancy table that applies to your situation.

IRA Required Minimum Distribution Table Example

The IRS uses the Uniform Lifetime Table to determine RMDs for people who are:

•   Unmarried account owners

•   Married IRA owners whose spouses aren’t more than 10 years younger

•   Married IRA owners whose spouses are not the sole beneficiaries of their account

Here’s how RMD distributions break down.

Age

 Distribution Period (Years)

 Age

 Distribution Period (Years)
72 27.4 97 7.8
73 26.5 98 7.3
74 25.5 99 6.8
75 24.6 100 6.4
76 23.7 101 6.0
77 22.9 102 5.6
78 22.0 103 5.2
79 21.1 104 4.9
80 20.2 105 4.6
81 19.4 106 4.3
82 18.5 107 4.1
83 17.7 108 3.9
84 16.8 109 3.7
85 16.0 110 3.5
86 15.2 111 3.4
87 14.4 112 3.3
88 13.7 113 3.1
89 12.9 114 3.0
90 12.2 115 2.9
91 11.5 116 2.8
92 10.8 117 2.7
93 10.1 118 2.5
94 9.5 119 2.3
95 8.9 120 and over 2.0
96 8.4

Source: IRS Uniform Lifetime Table

And here’s an example of how you might use this table to calculate RMDs on an IRA.

Assume that you’re 75 years old and have $1 million in your IRA as of last December 31. You find your distribution period on the chart, which is 24.6, then divide your IRA balance by that number.

$1 million/24.6 = $40,650 RMD

You’ll need to recalculate your RMDs each year, based on the new balance in your IRA and your life expectancy factor. You can use an online calculator to figure out RMD on an IRA annually.

Withdrawing Required Minimum Distribution From an IRA

There are two deadlines to know when making RMDs from an IRA: when distributions must begin and when you must complete distributions for the year. The SECURE 2.0 Act introduced some changes to the timing of RMD withdrawals from an IRA.

When Do RMDs Start?

Beginning in 2023, the minimum age at which you must begin taking RMDs rose to 73 (that’s the same age you must begin taking RMDs for 401(k)s, in case you are wondering). The deadline for the very first RMD you’re required to make when you turn 73, is April 1 of the following year. So, if you turned 73 in 2025, then your first RMD would be due no later than April 1, 2026.

Once you make your first RMD, all other RMDs after that are due by December 31 each year. So, using the example above, if you make your first RMD on April 1, 2026, then you’d need to make your second RMD by December 31 of that same year to avoid a tax penalty. Just keep in mind that taking two RMDs in one year could increase your tax burden for the year.

Qualified Charitable Distributions (QCDs)

Qualified charitable distributions (QCDs) are amounts you contribute to an eligible charity from your IRA. QCDs are tax-free and count toward your annual RMD amount, and you can contribute up to $100,000 per year. Using your IRA to make QCDs can lower the amount of tax you have to pay while supporting a worthy cause.

For a distribution to count as a QCD, it must be made directly from your IRA to an eligible charity. You can’t withdraw funds from your IRA to your bank account and then use the money to write a check to your favorite charity.

Note that QCDs are not tax-deductible on Schedule A, the way that other charitable donations are.

How RMDs Are Taxed

RMDs are taxed as ordinary income, assuming that all of the contributions you made were tax-deductible. If you have a traditional IRA, your RMDs would be taxed according to whichever bracket you fall into at the time the withdrawals are made.

With an inherited Roth IRA, withdrawals of original contributions are tax-free. Most withdrawals of earnings from an inherited Roth IRA are also tax-free unless the account is less than five years old at the time of the distribution.

The Takeaway

The IRS requires you to take RMDs on certain types of IRAs, including traditional IRAs and inherited Roth IRAs. Knowing at what age you’re required to take money from an IRA and your deadline for withdrawing it can help you plan ahead and avoid a potentially steep tax penalty.

In general, coming up with a financial plan for your future can help you work toward your retirement goals. You can consider different options for saving and investing, including IRAs, 401(k)s, or other types of savings or investment vehicles, to help determine the best fit for your money.

Ready to invest for your retirement? It’s easy to get started when you open a traditional or Roth IRA with SoFi. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

Invest with as little as $5 with a SoFi Active Investing account.

FAQ

What happens if you don’t take RMDs from an IRA?

Failing to take an RMD from an IRA on time can result in a tax penalty. The current penalty is generally a 25% excise tax, assessed against the amount you were required to withdraw.

Do you have to take your IRA RMD if you are still working?

You do have to take RMDs from an IRA even if you’re still working. It’s worth noting that the IRS does typically allow you to defer RMDs from a 401(k) while you’re working — however, that rule doesn’t extend to IRAs.

Are you required to use IRA RMD money for specific purposes?

You can use RMDs money in any way that you like. Some common uses for IRA RMDs include medical expenses, home repairs, and day-to-day costs. You can also use IRA RMDs to make qualified charitable donations (QCD), which could minimize some of the tax you might owe. QCDs must be made directly from your IRA to the charity.

About the author

Rebecca Lake

Rebecca Lake

Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.


Photo credit: iStock/FG Trade

SoFi Invest®

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.
For a full listing of the fees associated with Sofi Invest please view our fee schedule.

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.


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.


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

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Mar
25
2025
How Many Companies IPO Per Year? 2021 Trends

How Many Companies IPO Per Year? 2023 Trends

By | Growing Wealth, invest, Investing | Comments Off on How Many Companies IPO Per Year? 2023 Trends

An initial public offering, or IPO, represents the first time a company makes its shares available for trade on a public stock exchange. The number of IPOs per year varies, depending on market conditions and the ease with which companies can raise capital via other methods.

Private companies can use IPOs to raise capital and fuel future growth, and hundreds of companies go public most years, presenting an opportunity for interested investors.

IPO statistics can offer some perspective on how frequently companies decide to go public and which sectors tend to see the most significant launches.

Number of IPOs by Year

A look at IPO history shows that the number of initial public offerings fluctuates significantly by year and decade. Since 2000, there have been some 6,013 IPOs. Here’s a look at IPO filings by year for that time frame:

Year

 Number of IPOs
2000 397
2001 141
2002 183
2003 148
2004 314
2005 286
2006 220
2007 268
2008 62
2009 79
2010 190
2011 171
2012 157
2013 251
2014 304
2015 206
2016 133
2017 217
2018 255
2019 232
2020 480
2021 1,035
2022 181
2023* 79

*As of June 30, 2023.

The number of IPOs in any given year tend to follow movements in the economic cycle. In 2008, for example, there were just 62 IPOs as the economy and stock market were in the midst of a historic downturn. IPO activity didn’t pick up the pace again until 2010, once the Great Recession had ended.


💡 Quick Tip: Access to IPO shares before they trade on public exchanges has usually been available only to large institutional investors. That’s changing now, and some brokerages offer pre-listing IPO investing to qualified investors.

Previous Year IPOs

Companies were more likely to go public in the 1980s and 1990s than in recent years. Between 1980 and 2000, an average of 311 firms went public each year.

IPO activity spiked in the mid-90s as entrepreneurs sought to join the growing dot-com bubble.

Meanwhile, an average of 187 firms went public annually between 2001 and 2011. In recent years, larger, more established companies are more likely to go public than smaller private firms.

However, a record number of companies — 1,035 — went public in 2021. Some analysts point to loose monetary policy and a booming stock market as reasons so many companies went public during the year.

Additionally, one of the factors driving IPOs during 2020 and 2021 was an increase in IPOs for special-purpose acquisition corporations (SPACs). SPACs are essentially holding companies that go public with the sole purpose of acquiring another company.

Recommended: What Is an IPO Pop?

Overview of IPOs in 2022 – 2023

Following the boom in IPOs in 2021, the number of companies that went public during 2022 and 2023 dramatically decreased, due to several factors, including tight monetary policy to combat inflation, and a dramatic decline in the stock market.

As of June 30, 2023, there have been only 79 U.S. market IPOs so far — a 37% drop compared with the number of IPOs in 2022 by this time. There were 125 IPOs by June 30, 2022.

Of the 79 that debuted this year, about 46.8% — 37 companies — showed negative returns as of June 30, 2023, and 42 showed positive returns (bearing in mind that 11 companies IPO’d in June, and their prices may fluctuate in the coming quarters).

That said, the IPO proceeds in Q1 of 2022 similar to Q1 of 2023: $2.5 billion and $2.4 billion respectively. But company valuations were higher in 2022, and the 24 IPOs in Q1 generated almost as much in proceeds that year as the 33 IPOs in Q1 of 2023.

Evaluating the performance of stocks after a company goes public can give you an idea of how successful IPOs tend to be overall. However, it’s important to remember that it’s impossible to predict whether a stock will boom or bust in the months and years after it starts trading.

IPO stocks are considered highly volatile, high-risk investments, and while some companies may present an opportunity for growth, there are no guarantees. Like investing in any other type of stock, it’s essential for investors to do their due diligence.


💡 Quick Tip: Look for an online brokerage with low trading commissions as well as no account minimum. Higher fees can cut into investment returns over time.

The Takeaway

Looking at IPO statistics and IPOs by year can help you track trends and understand just how often companies go public, and why some years have more IPOs than others.

While the low interest rates and rising stock market of 2021 helped create a record year for 1,035 new companies, the climate now has changed: rates are higher, there’s more market volatility, and the slowing number of IPOs reflects that.

If you’re interested in adding IPOs to your portfolio, it’s also important to know which sectors tend to have the most and least IPO activity.

Whether you’re curious about exploring IPOs, or interested in traditional stocks and exchange-traded funds (ETFs), you can get started by opening an account on the SoFi Invest® brokerage platform. On SoFi Invest, eligible SoFi members have the opportunity to trade IPO shares, and there are no account minimums for those with an Active Investing account. As with any investment, it's wise to consider your overall portfolio goals in order to assess whether IPO investing is right for you, given the risks of volatility and loss.

Invest with as little as $5 with a SoFi Active Investing account.

About the author

Rebecca Lake

Rebecca Lake

Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.


Photo credit: iStock/Inside Creative House

SoFi Invest®

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.
For a full listing of the fees associated with Sofi Invest please view our fee schedule.

Investing in an Initial Public Offering (IPO) involves substantial risk, including the risk of loss. Further, there are a variety of risk factors to consider when investing in an IPO, including but not limited to, unproven management, significant debt, and lack of operating history. For a comprehensive discussion of these risks please refer to SoFi Securities’ IPO Risk Disclosure Statement. IPOs offered through SoFi Securities are not a recommendation and investors should carefully read the offering prospectus to determine whether an offering is consistent with their investment objectives, risk tolerance, and financial situation.

New offerings generally have high demand and there are a limited number of shares available for distribution to participants. Many customers may not be allocated shares and share allocations may be significantly smaller than the shares requested in the customer’s initial offer (Indication of Interest). For SoFi’s allocation procedures please refer to IPO Allocation Procedures.

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

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Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or other eligible status, be residing in the U.S., and meet SoFi's underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates reserved for the most creditworthy borrowers. If approved, your actual rate will be within the range of rates at the time of application and will depend on a variety of factors, including term of loan, evaluation of your creditworthiness, income, and other factors. If SoFi is unable to offer you a loan but matches you for a loan with a participating bank, then your rate may be outside the range of rates listed above. Rates and Terms are subject to change at any time without notice. SoFi Personal Loans can be used for any lawful personal, family, or household purposes and may not be used for post-secondary education expenses. Minimum loan amount is $5,000. The average of SoFi Personal Loans funded in 2023 was around $33K. Information current as of 2/26/24. SoFi Personal Loans originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org). See SoFi.com/legal for state-specific license details. See SoFi.com/eligibility for details and state restrictions.

✝ To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

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