Jan
13
2025

Breaking Down the Different Types of Debit Cards

By | Budgeting & Goals, Family Finances, money | Comments Off on Breaking Down the Different Types of Debit Cards

In today’s cashless society, many electronic financial transactions are done with a debit card. Most debit cards are tied directly to a checking account and withdraw money from it whenever you make a purchase.

However, there are many variations available, such as business debit cards, prepaid debit cards, and HSA debit cards. Understanding the different types of debit cards is important so you can determine which options are right for you and how to use them effectively.

Key Points

•   There are different types of debit cards, including standard, prepaid, business, HSA, EBT, and other specialized options.

•   Standard debit cards are linked to checking accounts, withdrawing funds directly upon purchase.

•   Prepaid debit cards are often available in fixed denominations and can be bought at retail locations; some options are reloadable.

•   Business debit cards linked to business bank accounts help separate personal and professional expenses.

•   Virtual debit cards offer temporary numbers for secure transactions without needing to use a physical card.

Standard Debit Cards

A standard debit card is likely the one that most people are likely familiar with. If you have a checking account with a debit card, your standard debit card will be tied directly to your checking account. When you make a purchase with your debit card, the money is withdrawn from your checking account.

If you attempt to make a purchase with your debit card but don’t have sufficient funds, your purchase may be declined. If you have overdraft protection, the purchase may go through, but you will likely be charged overdraft fees.

Prepaid Debit Cards

Another type of debit card is a prepaid debit card. These prepaid debit cards are often sold in grocery stores, convenience stores, or pharmacies. Prepaid debit cards come in various denominations and often come with a small initial fee that you pay upfront. There are two main types of prepaid debit cards:

Reloadable Prepaid Cards

The first type of prepaid debit card is a reloadable prepaid card. When you buy a reloadable prepaid card, you can usually load it with a specific amount of money at the time of purchase. As you use your reloadable debit card, you can also add additional money to it. You don’t have to worry about overdraft fees when using a reloadable prepaid card, since you are limited to only spending the amount that is available on your card.

Gift Cards

In contrast to reloadable prepaid cards, gift cards are a different debit card variety, one that often comes in a specific preloaded denomination, usually ranging from $10 or $25 to several hundred dollars. Once you purchase the gift card, you cannot add any additional funds to it. You can continue to use the gift card anywhere its network (usually Visa, Mastercard, or American Express) is accepted, but once you have used up the initial funds, the gift card has no value.

Recommended: High-Yield Savings Account Calculator

Teen and Student Debit Cards

There are also debit cards that are targeted to certain demographics and often associated with a specific type of checking account. When you apply for a debit card as part of a teen or student checking account, your debit card will be tied to your account. However, usually anyone who is authorized to make purchases on the account (such as a parent and the child) can use the card.

Business Debit Cards

Another type of specialized debit card is a business debit card, typically associated with a business checking account. Business debit cards can be useful for owners of small businesses, since it helps them keep personal and business transactions separate, as they make purchases for their company, such as buying ad space or paying for supplies.

Recommended: 23 Ways to Make Quick Cash

Virtual Debit Cards

Many banks and other financial institutions support the creation of virtual debit cards. These virtual debit cards are temporary debit card numbers that are tied to your account. So you could leave your physical debit card at home and make purchases while out and about with a virtual debit card stored in your digital wallet. You can also use a virtual debit card to buy goods and services online and in apps.

Using a virtual debit card number can help protect your account from fraud since you don’t have to use your actual account number or debit card numbers when making a transaction.

Rewards Debit Cards

While perhaps not as common as rewards credit cards, there are some debit cards that offer rewards every time you use a debit card online or in a store. While the exact details will vary depending on the bank or debit card program, you might earn cash back, points, or discounts on certain transactions.

EMV Chip Debit Cards

While debit cards traditionally transferred information by way of a magnetic strip on the back of the card, many debit cards today have an EMV chip installed in them. EMV stands for Europay, Mastercard, and Visa — the companies credited with pioneering cards that have encrypted information stored in the chip. These chip debit cards are considered to be a more secure way of transferring personal details.

Contactless Debit Cards

Another way that debit cards transfer information when making a purchase is through wireless technology known as RFID (radio frequency identification). When you tap to pay vs. inserting your card into a reader, you are accessing this contactless technology. Debit cards that support contactless payment are becoming increasingly prevalent as users look for more convenient ways to make purchases.

ATM Cards

When comparing ATM cards vs. debit cards, it’s important to understand the differences between the two. Debit cards allow you full access to your account, including conducting such transactions as making purchases, getting cash back, and withdrawing cash from an ATM.

ATM cards are more limited, only allowing you to complete financial transactions at ATMs. You might withdraw cash, say, or transfer money between bank accounts.

Specialized Debit Cards

While most debit cards are tied to a checking account, there are some specialized debit cards that work in a different way.

Health Savings Account (HSA) Debit Cards

Health savings account (HSA) debit cards are tied directly to a specific health savings account vs. a checking account. If you have a high-deductible health plan, an HSA can offer a tax-advantaged way to set aside money for qualified medical expenses. When you use a debit card that is tied to an HSA, you are responsible for ensuring that it is used correctly on appropriate expenses. Otherwise, you might face taxes and/or penalty fees.

Electronic Benefits Transfer (EBT) Cards

Electronic Benefits Transfer (EBT) cards are given to participants of Supplemental Nutrition Assistance Program (SNAP). These EBT cards allow SNAP participants to purchase food and use their benefits in a more convenient fashion. An EBT card is loaded each month with the participant’s benefit amount and can be used at most grocery stores and other food retailers.

Choosing the Right Debit Card

Understanding what debit cards are can help you choose the right debit card for your situation. Most debit cards are tied to your checking account, so choosing the right debit card comes down to choosing the right checking account. How a bank’s debit card works is one factor in whether an account suits your needs. For instance, some people may prefer a contactless debit card over other options but will also want to look into such bank account features as monthly fees (if any) and the size of the ATM network.

In addition, different debit cards can suit particular needs, such as:

•   Allowing you to save for qualified medical expenses if you have an HSA

•   Paying for business expenses

•   Giving a gift card as a present

It’s always wise to comparison-shop a bit and compare what a few different possibilities can offer you.

The Takeaway

A traditional debit card is generally tied to a checking account, and purchases made with a debit card are deducted from your account balance. However, these may operate differently (some are contactless, for example) and offer different perks, such as rewards. There are several other types of debit cards, too. These include prepaid debit cards, EBT cards, and HSA debit cards. Understanding the different types of debit cards available can help you make the right choice for your needs.

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


Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 3.80% APY on SoFi Checking and Savings.

FAQ

What’s the difference between a debit card and a credit card?

The main difference between a debit card and a credit card is how funds for a purchase are financed. With a debit card, the funds are removed within a short period of time (often almost instantly) from your bank account. In contrast, purchases made with a credit card are funded as a line of credit with the credit card company. Each charge is posted to your account, and you then have until your statement date to pay for the purchases. If you don’t pay off the debt in full within the specified period, you are assessed an interest charge for the privilege of being extended this credit.

Can I use my debit card internationally?

Whether you can use your debit card internationally depends on the type of debit card you have as well as the policies of your bank or other financial institution. Many debit cards are issued by a major processing network such as Visa or Mastercard, and in most cases you can use them internationally, wherever those processing networks are accepted. If you’re not sure if you can use your debit card internationally, check with your bank before traveling.

Are prepaid debit cards safer than standard debit cards?

Prepaid debit cards come with many of the same fraud protections as standard debit cards. One thing to be aware of is that in many cases a prepaid debit card should be treated as cash. If you lose or misplace your prepaid card, you may not be able to access or recover the money that was on the card. With a lost or stolen debit card, if you cancel it quickly, you can have some protection against unauthorized usage.

Photo credit: iStock/Lordn

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2025 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

SoFi members with direct deposit activity can earn 3.80% 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 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 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 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 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.

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.

*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.

This content is provided for informational and educational purposes only and should not be construed as financial 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.

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.

SOBNK-Q424-013

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Jan
13
2025

5 Online Banking Myths & Realities

By | Budgeting & Goals, Growing Wealth, money, Terminology, Tools & Calculators | Comments Off on 5 Online Banking Myths & Realities

Online banking offers a convenient way to manage your money. Plus, online banks typically offer attractive perks like competitive rates on savings and no-fee checking accounts. Still, many consumers worry that online banks aren’t as safe, dependable, or customer-friendly as the big traditional players. Are they right to be concerned?

While all types of banks have pros and cons, many fears about online banks are actually based on misinformation. Below, we debunk five common myths about online banks, and uncover some important truths about online vs. traditional banks.

Key Points

•   Like traditional banks, online banks use state-of-the-art security tools like encryption and multi-factor authentication to protect customer accounts.

•   Though online banks lack in-person customer service, you can get help from a human via phone, online chat, and email.

•   Online banks typically offer a wide network of fee-free ATMs, making it easy to access cash when you need it.

•   Deposits at online banks are protected by FDIC insurance up to $250,000 per depositor, per insured bank, for each account ownership category.

•   Online banks typically offer better rates on savings accounts, but may not offer as many products and services compared to traditional banks.

Myth: Online Banking Isn’t Safe

Security is often the largest concern about online banking, and in a world where we’re constantly hearing of data breaches, that’s a valid consideration. But online banks and traditional banks store your data digitally and both are susceptible to data breaches.

That said, both online banks and traditional brick-and-mortar banks go to great lengths to protect your personal and banking information, including the use of encryption software (which blocks your accounts to unauthorized parties) and multi-factoring authentication (which requires you to enter unique personal information in order to access your account). Many online, and some traditional, banks also offer 24/7 account monitoring, instant card freezes, and real-time alerts so you’re aware of any unusual account activity as soon as it happens.

There are also steps you can take on your own to keep your accounts safe (regardless of where you bank). These include choosing a unique user ID and password, not using public wifi when you access your accounts, and avoiding phishing attempts to get your banking information.

Myth: You Can’t Get Help From a Human

Many consumers like being able to walk into a physical location and speak to a real human when they need assistance. And that’s simply something online banks can’t offer. By nature, there are no brick-and-mortar locations; all customer service is virtual. But that doesn’t mean mobile banking doesn’t come with good customer service.

Online banks typically offer phone-based customer service, where you can easily speak with a live customer service representative when there’s an issue or you simply want someone to walk you through setting up bill pay or making an online transfer. In addition, many offer 24/7 customer service via live online chat (with a human not a bot on the other end), as well as help via email. A lack of physical locations doesn’t necessarily equate with a lack of good customer service.

Recommended: How to Deposit a Check

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Myth: It’s Hard to Access Money From an Online Bank

It’s true you can’t visit a bank branch and withdraw money at a teller window. But online banks typically partner with wide ATM networks to offer customers a convenient and free way to withdraw cash from their accounts. Some online banks will also reimburse for out-of-network ATM charges, though you may be capped to a certain max per month.

You can also access money in an online account by transferring it to an account at a different bank or using the bank’s bill pay function. If you have an online checking account, you can use your debit card for purchases and may be able to order checks. Some online banks also offer a peer-to-peer (P2P) payment service, so you can send money to friends and family directly from your bank account.

Myth: Online Banks Aren’t Insured

Like traditional banks, online banks are typically insured by the Federal Deposit Insurance Corporation (FDIC). This means your deposits are protected up to $250,000 (per depositor, per insured bank, per account ownership category) if the bank were to go out of business. Co-owners of joint accounts are each insured up to $250,000 for the total they have in joint accounts at an insured bank.

If you opt for an online credit union instead of an online bank, your money won’t be insured by the FDIC but it will still be protected. Credit unions are covered by the National Credit Union Association (NCUA), which offers similar insurance.

Before opening an account at an online (or brick-and-mortar) bank, it’s always a good idea to make sure it’s insured. You can do this by using the FDIC’s “Bank Find” tool or the NCUA’s Credit Union Locator tool.

Myth: The Big National Banks Offer Better Rates

You might assume big banks offer the best deals due to their size and scale. But it’s more likely to be the opposite: Online banks typically beat out the major national banks when it comes to annual percentage yields (APYs) on savings accounts, with some offering 9x the national average.

How do they do it? Online-only banks generally have lower overhead costs and can pass that savings to their customers in the form of higher-than-average yields. Many of these banks also offer better rates as a way to compete with the bigger players for customers.

In addition to better rates, online banks also tend to charge fewer and lower bank fees compared to the big traditional banks. Many online accounts don’t charge monthly service fees, for example, and some don’t charge overdraft fees, either.

Understanding Digital Banking Features and Limitations

Online banks offer several advantages over traditional banks, which often include higher APYs on checking and savings accounts and lower (or no) fees. They also tend to outshine traditional banks when it comes to technical innovation, offering state-of-the art banking platforms and apps.

That said, digital banking does have its limitations. Here are some downsides to consider:

  No branches: Since they lack physical locations, online banks aren’t able to provide customers a way to interact face-to-face with a teller or other bank representative. They also can’t offer services that require a physical location, such as getting a cashier’s check or renting a safe deposit box.

  Cash can be harder to deposit: It’s not always as straightforward to deposit cash into an online bank account. You may need, for example, to deposit cash at a participating retailer for a small fee rather than at an ATM or use another option, such as depositing your cash into a traditional bank account and transferring it to your online bank account.

  Fewer financial services: Unlike large traditional banks, online banks sometimes aren’t a one-stop shop. Some only specialize in a few types of accounts. While others offer a range of products and services, including credit cards and loans, they generally don’t have as many products and services as the biggest brick-and-mortar banks provide.

Recommended: Pros and Cons of Online Banking

🛈 SoFi only offers ATM withdrawals at this time. For members looking to deposit cash into their SoFi Checking & Savings account, you can follow these instructions.

The Takeaway

Online banks work very similarly to traditional banks. They just lack physical locations to conduct in-person services. They typically offer the same kinds of checking and savings accounts that you may find at brick-and-mortar banks. And since online banks don’t need to maintain and staff physical locations, they can often offer higher interest rates on both checking and savings. While some people are concerned about the safety and security of online banks, you can feel confident that online financial institutions are just as secure as brick-and-mortar options.

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


Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 3.80% APY on SoFi Checking and Savings.

FAQ

Is online banking safer than traditional banking?

Online banking and traditional banking are considered equally safe. Both online and traditional banks generally use robust security measures like encryption, multi-factor authentication, and fraud monitoring to protect customer accounts. In addition, both types of banks are usually insured by the Federal Deposit Insurance Corporation (FDIC), which means your funds will be covered (up to the insured limits) even if the bank were to go out of business.

Can I do everything online that I can do in a physical bank?

You can do nearly everything online that you can do in a physical bank. This includes opening an account, making transfers, paying bills, depositing checks, and managing your account. Many banks also offer one-on-one customer service via phone or online chat. However, certain services like obtaining cashier’s checks, notary services, or large cash withdrawals generally require visiting a physical bank.

How does online banking affect my privacy?

Information that is stored digitally (by an online or traditional bank) could potentially have an impact on your privacy, as online information is susceptible to cyber attacks. However, reputable banks use strong encryption and cybersecurity practices to protect customer data. There are also steps you can take on your own to protect your accounts. These include choosing a unique user ID and password, not using public wifi when accessing your accounts, and logging out of your account after every session.

Photo credits: iStock/AleksandarNakic

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2025 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

SoFi members with direct deposit activity can earn 3.80% 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 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 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 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 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.

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.

*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.

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Checking & Savings Fee Sheet for details at sofi.com/legal/banking-fees/.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Third Party Trademarks: Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

SOBNK-Q424-011

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Jan
13
2025

How to Budget on a Fixed Income

By | Budgeting & Goals, money, Money & Life | Comments Off on How to Budget on a Fixed Income

Budgeting on a fixed income can involve carefully reviewing your income and expenses and managing spending to stretch your dollars.

Typically, older adults are the ones living on a fixed income, meaning they receive Social Security payments and/or a pension or rely on retirement savings. They generally receive the same amount each month, though payments may fluctuate slightly due to benefit adjustments or other changes. If you’re living on a fixed income, budgeting can help you avoid overspending and prepare for unexpected expenses. Here are smart strategies to consider.

Key Points

•   Budgeting on a fixed income can involve tracking income and expenses to better understand finances.

•   A detailed budget should include all essential and discretionary expenses, utilizing methods like the 50/30/20 rule.

•   Cost-cutting measures, such as downsizing or limiting discretionary spending, can improve financial stability.

•   Building an emergency fund can provide a cushion for unexpected expenses and enhance financial security when living on a fixed income.

•   Exploring additional income sources, like part-time work, can supplement fixed incomes effectively.

Understanding Fixed Income Budgeting

Living on a fixed income means you know exactly how much money you’re bringing in each month. While your income may be predictable, expenses can be unexpected. You might need, say, a roof repair or want to help with a grandchild’s summer camp costs one year. That’s why a budget for seniors on fixed income can be so important.

Creating a budget will give you a comprehensive understanding of the money you have coming in and going out of your checking account. You can track your spending, set aside money for emergencies, and monitor your monthly bills.

You might also identify areas where you can cut back to cover an unforeseen expense or keep up with inflation.

Assessing Your Financial Situation

Making a budget allows you to assess your financial situation. Along with tracking your income, you’ll want to make a record of all your expenses.

This component of your budget might include:

•  Housing costs (rent or mortgage)

•  Utilities

•  House, car, and health insurance

•  Medical costs

•  Transportation

•  Groceries and dining out

•  Debt payments

•  Subscriptions and services

•  Clothing

•  Travel

•  Savings

•  Gifts and charitable donations

Some of these expenses may fall into the essential category (housing, food, and health insurance, for example), while others may be considered discretionary (such as clothing and travel). If you’ve found yourself financially overextended, consider whether there are any areas where you could cut back.

You might also explore specific types of budgeting methods, such as the 50/30/20 approach to budgeting. This strategy involves allocating 50% of your after-tax income to needs, 30% to wants, and the remaining 20% to savings or additional debt payments.

To help you with this budgeting technique or another one, you could use a spreadsheet, work with an online calculator, download a budgeting app, or create your own budget planner to track your expenses.

Recommended: 50/30/20 Budget Calculator

Creating a Detailed Income Statement

An important step in this budgeting process is delving into your monthly income. Your sources of fixed income could include:

•  Social Security benefits (you may sometimes hear this referred to as OASDI, or Old-Age, Survivors, and Disability Insurance payments)

•  Supplemental Security Income

•  Pension benefits

•  Withdrawals from a 401(k) or 403(b) account

•  Withdrawals from a traditional or Roth IRA

•  Withdrawals from brokerage or other investment accounts

•  Interest and/or dividends from assets

•  Passive income from a rental property or another source

In addition, you may have some earnings from work you do, such as a seasonal or part-time job. Factor that in, too.

Take note of how your income might change, as well. A couple of points to consider:

•  Government benefits like Social Security, for example, undergo an annual cost-of-living adjustment. Also, if you are claiming Social Security benefits but are younger than full retirement age, you might also receive a lower benefit if you’re earning income above the yearly limit (in 2024, it was set at $22,320).

•  If you’re withdrawing money from investment accounts, the amount may fluctuate depending on the performance of the stock market. Although these changes are unpredictable, they’re worth tracking and recording in your budget plan so you can respond as needed.

One of the most common budgeting mistakes is not adjusting the cost of your expenses, so make sure to update your budget as you go. Rent, health insurance premiums, food costs, and more can shift, and it can be important to stay attuned to that.

Cutting Costs and Saving Money

About 40% of older Americans receive income solely from Social Security in retirement, and the average benefit is currently $1,784 per month. This amount can be challenging to live off of, especially when costs are rising due to inflation.

If you’re looking to reduce your spending, here are a few steps you can take:

•  Downsize your home: About half of seniors move into smaller homes after they retire. Downsizing could significantly decrease your housing costs and utility bills.

•  Reevaluate your transportation needs: If you’re spending a lot on car payments and insurance, consider whether you can switch to a less expensive vehicle or swap your car for public transportation.

•  Limit discretionary spending: Shopping, travel, eating out, and streaming services can add up. Review your discretionary expenses to see if you can limit your spending or cut out some costs entirely.

•  Seek out senior discounts: From groceries to movies to museums, find out if you can save with a senior discount. You may be pleasantly surprised to find that some discounts begin well before age 65.

•  Look for assistance programs: If you’re facing financial hardship, you might qualify for assistance. The government may help cover medical costs via Medicaid, for instance, while patient assistance programs can help out with prescription medications. The Supplemental Nutrition Assistance Program (SNAP) program offers assistance for groceries. This BenefitsCheckUp tool from the National Council on Aging can help you find other programs that offer assistance and benefits.

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Building an Emergency Fund

After years of saving for retirement, you might think your savings days are behind you. However, having an emergency fund can be a crucial lifeline if you run into a big surprise expense, especially when you’re living on a fixed income.

Consider setting up a high-yield savings account and automating the deposit of a portion of your income into it each month. With a high-yield bank account, your savings will be accessible when you need to withdraw them and earn a competitive interest rate when you don’t.

Planning for the Future

Although you may be living on a fixed income, it’s wise to keep an eye on how your financial needs can shift. Those who are retired or semi-retired may want to consider the following:

•  Long-term financial planning: The specific amount of income you receive could rise or fall in the years ahead. Consider how adjustments to your cost of living might impact your Social Security benefits, for example, or how much longer you plan to work if you have a part-time job.

•  Healthcare considerations: If your expenses increase due to healthcare needs or other factors, consider whether you can take larger withdrawals from your retirement account or set up another income source. Investors may look into rebalancing their portfolios to ride out a volatile stock market.

•  Estate planning basics: Estate planning may also be top of mind as you get important documents in order and consider how your assets will be handled in future years. All of this planning can become complex, so you might consider working with a financial advisor.

The Takeaway

Budgeting on a fixed income can help you stabilize your finances and achieve peace of mind. By tracking your income and expenses, you’ll have a clear understanding of the money you have coming in and going out each month. You might also identify areas where you can cut costs, as well as monitor your progress toward building an emergency fund, paying off debt, or reaching another financial goal.

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


Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 3.80% APY on SoFi Checking and Savings.

FAQ

How can I save money on a fixed income?

Learning how to make a budget can help you save money when living on a fixed income. You can use your budget to identify your recurring expenses and cut any non-essentials you find. You might also consider downsizing your home, swapping out your car for a less expensive vehicle or public transportation, and seeking out senior discounts and deals.

What if my fixed income doesn’t cover all my expenses?

If your fixed income doesn’t cover all your expenses, you can try reducing your spending, increasing your income, or both. You might also explore assistance programs from the federal government, your state, or a local organization.

Are there government assistance programs for fixed income individuals?

There are government assistance programs for fixed income individuals on both the federal and state level. The Supplemental Security Income program provides payments to disabled, blind, or elderly individuals, for example, while the Low Income Home Energy Assistance Program (LIHEAP) can help low-income individuals pay for heating and cooling their homes. The SNAP program offers grocery assistance to low-income individuals.

Photo credit: iStock/Ridofranz

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2025 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

SoFi members with direct deposit activity can earn 3.80% 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 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 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 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 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.

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.

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

SoFi 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.

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.

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.

This content is provided for informational and educational purposes only and should not be construed as financial 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.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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Jan
13
2025

Should I Open a Backup Bank Account?

By | Budgeting & Goals, Financial Topics, Life & Career | Comments Off on Should I Open a Backup Bank Account?

A backup bank account is a secondary account that can be used for a variety of purposes, such as added security and better financial organization. Opening a secondary account can also be a great way to tap additional banking perks, like a sign-up bonus or a higher interest rate, being offered by a different institution.

That said, it’s not always a matter of “the more, the merrier.” Multiple bank accounts can make it harder to keep track of your income and expenses and result in unwanted bank fees. Read on to understand the pros and cons of having a backup bank account so you can decide what’s best for you.

Key Points

•   A backup bank account is typically a checking or savings account that is secondary to an account holder’s primary account.

•   Backup accounts can assist in organizing finances, establishing emergency funds, and accessing perks from different banks.

•   Managing multiple accounts can be overwhelming and may complicate financial management or result in added fees.

•   Other potential drawbacks of backup accounts include spreading finances thin and increasing security concerns.

•   It’s important to consider whether backup accounts will enhance your financial wellness and, if so, to choose the option with the benefits you need most.

Understanding the Concept of a Backup Bank Account

A backup bank account is an account that is typically secondary to your main bank account. It could be held at a different institution or the same one where you already have an account. You might use a backup account to hold your emergency funds, manage secondary income, or combine the benefits of online banks (like higher interest rates) with those of a traditional bank (such as easy cash deposits).

Benefits of Having a Backup Bank Account

Opening a backup bank account offers a number of advantages. Here are some to consider.

Increased Financial Security

If you keep a sizable amount of cash on deposit in the bank, you might open a backup account to boost your insurance coverage. The Federal Deposit Insurance Corporation (FDIC) and National Credit Union Administration (NCUA) cover up to $250,000 per depositor, per insured institution, in the rare event of a bank or credit union failure. One way to insure more than $250,000 in deposits, is to open accounts at more than one institution.

Having a second account can also serve as a back-up should your primary account become temporarily inaccessible due to technical glitches, identity theft, or fraud. This separation can limit the impact of any problems or security breaches and enable you to continue your banking activities without any disruption.

Access Additional Perks

A backup account allows you to enjoy extra perks and services that may not be available with your primary account. For example, some banks offer higher interest rates, sign-up bonuses, cash-back rewards, or fee-free options for specific account types. By strategically choosing a backup bank that offers additional benefits, you can potentially boost your earnings or reduce your banking costs.

Emergency Fund Access

Having a backup bank account can be a good way to protect yourself financially in emergency situations. Financial advisors often recommend having an emergency fund equal to three to six months’ worth of basic living expenses. If you try to stash that away in your primary savings account, you may find that the money has a way of getting spent instead of sitting there for a rainy day.

Instead, you might want to open a secondary savings account earmarked specifically for building your emergency fund, then set up small recurring transfers from your checking account. This can be a relatively simple and painless way to build up your cash reserves. Then if you get hit with a major home or car repair, or an unexpected medical bill, your secondary account can save the day.

Easier Money and Budget Management

Having multiple bank accounts can also make it easier to manage your finances. For example, you might open a second checking account to separate earnings from a sideline or freelance business. This can help with budgeting, accounting, and tax preparation. Or, you might use one checking account for essential expenses (like rent, utilities, and groceries) and another for discretionary (a.k.a., “fun”) spending. This setup provides a clear breakdown of your budget, making it easier to track spending and avoid overspending in specific categories.

Similarly, having multiple savings accounts can help you reach your savings goals. You might have one savings account earmarked for a downpayment for a home and another for your next vacation. Having this type of separation can make it simpler to see how you are progressing towards your short-term goals.

For some couples, it can be helpful to have a joint account to pay for shared living expenses, along with secondary individual accounts that offer each partner a degree of financial independence and privacy.

Recommended: How to Open a Bank Account for Someone Else

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Potential Drawbacks to Consider

There are also some potential downsides to backup bank accounts. Keep the following in mind as you consider if additional accounts are right for you.

Account Confusion

Ever notice how the more streaming platforms you have, the harder it can be to keep track of which shows you’re watching where? In a similar vein, more bank accounts can mean more things to get jumbled: account numbers, passwords, balances, fees, and more.

You might forget which account you’re using for autopay, for example, and wind up overdrafting. Or, you might accidentally send your payment for a house-sitting gig to your primary checking account instead of the secondary one. In other words, having multiple accounts can require additional organizational moves to stay on top of your money.

Spreading Finances Thin

Another potential con to having different types of bank accounts is that it can divide up your wealth in ways that may not serve you well. For example, some bank accounts require a minimum balance to avoid monthly fees. If your funds are split between multiple accounts, it could be harder to meet that minimum.

In addition, some financial institutions offer savings accounts with tiered interest rates; these accounts pay different rates of interest depending on the amount of funds held in the account, and the rate increases with the size of the account. If you transfer some of your funds on deposit into a backup account elsewhere, you might lose out on the APY you were counting on.

Recommended: APY Calculator

Security Concerns

While financial institutions work hard to achieve top-notch security, bank fraud does occasionally happen. The more accounts you have, generally the greater the risk of phishing scams or data breaches, as each account/institution represents a potential security vulnerability. Having multiple accounts also means keeping track of multiple login details; if these are not securely managed, it increases the risk of unauthorized access.

To secure your accounts from hackers, you’ll want to use strong, unique passwords and enable two-factor authentication on all accounts. Also be sure you never share your account details with people you don’t know or click on links in potentially fraudulent emails or texts. Regularly monitoring your accounts for suspicious activity can also help you catch and respond to security concerns promptly.

How To Choose the Right Backup Bank Account

If you do opt for a backup bank account, you’ll want to consider what will best suit your needs. Some factors worth mulling over:

•   Account fees: You’ll want to look for accounts with low or no fees, especially if you plan to use the account infrequently. Many online banks offer fee-free accounts, which can be a great option for a backup account.

•   Interest rates: If you’re opening a backup savings account, consider one with a high-interest rate to maximize savings. Some online savings accounts offer competitive rates that can make a significant difference in long-term savings growth.

•   Accessibility: Evaluate how easy it is to access your funds in the backup account. Consider whether the bank offers convenient options like online banking, a mobile app, or ATMs in your area. For emergency funds, quick and easy access is essential.

•   Perks and rewards: Compare perks like sign-up bonuses, cash-back rewards, or other incentives when choosing a backup bank. Some banks offer attractive benefits that can add value to your account and make opening a second account more worthwhile.

•   Account types: Consider what type of account would best suit your needs. If your backup account is for budgeting, a checking account may be most appropriate. For emergency funds, a high-yield savings account is often a better fit.

•   Bank reputation: Research the bank’s reputation and customer service quality. Reading customer reviews can give you insights into the bank’s reliability, responsiveness, and online banking experience.

The Takeaway

Backup bank accounts have several upsides: They can help you organize your finances and reach your goals; they may help grow your money; and they can enhance your financial security. However, there are also some potential disadvantages to contend with, such as the risk of confusion among your accounts, spreading your money too thin, and possibly increasing some safety risks. By considering these pros and cons, you can decide if a backup bank account is the right next step for you.

Whether you are considering opening a primary or backup account, take a look at all that 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.


Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 3.80% APY on SoFi Checking and Savings.

FAQ

What are the main reasons to open a backup bank account?

One common reason for opening a backup bank account is added financial security. Should your primary account become inaccessible due to technical issues or fraud, you’ll still have access to funds. A backup account can also help you better organize your finances. For example, you might open a second checking account to separate your personal and business finances, or a backup savings account to keep your emergency funds separate from other savings. This structure can help you keep track of spending and savings more effectively.

Can having multiple accounts affect my credit score?

Banks typically don’t report your banking activity to the credit bureaus, so having multiple bank accounts won’t directly impact your credit score. However, if any of your accounts are linked to overdraft protection (a form of credit) and you miss payments on those accounts, it could impact your score. Your bank could send your overdue payment to a collections agency, and the collections agency would report your unpaid debt to the credit bureaus. To avoid potential issues, you’ll want to avoid overdrafts and properly manage any credit-linked accounts to protect your credit rating.

What features should I look for in a backup bank account?

Which features to look for in a backup bank account will depend on your particular needs and wants. Perhaps a sign-up bonus is attractive to one person, while another wants to go with the account that offers the lowest fees or highest interest rates. Some people might choose to have their primary account at an online bank and use a traditional bank for their backup one, or vice versa.

Photo credit: iStock/SDI Productions

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2025 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

SoFi members with direct deposit activity can earn 3.80% 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 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 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 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 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.

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.

*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.

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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Jan
13
2025

How To Save Money and Lower Your Cell Phone Bill

By | Budgeting & Goals, Financial Topics | Comments Off on How To Save Money and Lower Your Cell Phone Bill

In 2024, the average U.S. monthly cell phone bill dropped from $156 in 2023 to $141, according to J.D. Power. While a price decrease is a good thing, that is still a significant outlay for many.

Fortunately, with over 100 mobile carriers available in America, competition for customers can be stiff. Some companies have started offering more plans and deals that can help customers cut costs, encouraging customers to stick around longer and attracting new ones, too. Plus, there are other ways to economize on your cell phone bill.

Since mobile phones can be indispensable, consider the following ways you might lower your bill.

Key Points

•   To lower a cell phone bill, analyze current data usage to determine if a less expensive plan suffices.

•   It’s possible to negotiate with providers for better rates by expressing willingness to switch carriers.

•   Consider smaller carriers for potentially lower rates and suitable plans.

•   By connecting to wifi, data use and charges can be minimized.

•   Other ways to lower a cell phone bill include opting into autopay to receive discounts from some carriers or investigating friends and family plans.

Analyzing Your Current Cell Phone Usage

The average U.S. mobile service user consumed about 19 GB of data monthly in 2023, and this number keeps growing, according to Ericsson’s Mobility Report. In fact, by 2029, estimates reveal that U.S. mobile users will likely use about 59 GB per month.

Even though many mobile providers offer unlimited data, you may be among those who are wasting money if you’ve opted for that kind of plan. It can be a wise move to check your data usage since some consumers can meet their data needs with 5 GB or less per month. If you fall into that category, you might save money by avoiding a pricey unlimited plan.

Note: In your phone’s data settings, you’ll often find figures in megabytes (MB) and gigabytes (GB). A megabyte is 1 million bytes, and a gigabyte is about 1,000 megabytes in binary terms or 1,024 megabytes in computing terms.

•   iPhone users can check mobile data by going to: Settings > Cellular > Cellular data

   A list of your apps (whether they are social media, shopping, or news platforms or budgeting apps) will pop up, showing how much data each app is using.

•   Android users can look at their mobile data by going to: Settings > Network & Internet > Internet > Settings

   At the top of the screen, you will see how much data you’re using. At this point, you may also want to set up data alerts to notify you when you’ve reached your data limit for the month.

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Comparing Plans and Carriers

Pricing and coverage can vary with each mobile provider. That’s why it’s always a good idea to shop around and compare your options. This way, you can find a plan that fits your needs and works with your budget.

But remember, as much as you want to plump up your checking account, price isn’t the only factor worth considering. Here are a few other things to think about when looking for the best plan:

•   Coverage: One of the main reasons people have cell phones is to stay connected anytime, anywhere (or as close to that as possible). If the coverage isn’t good, you might miss calls or be unable to contact someone in an emergency. Check the company’s coverage map to make sure they offer strong service where you live.

•   Perks: Some cell phone providers offer extra benefits, like additional hotspot data, discounts on streaming services, or free international calling.

•   Discounts: You might qualify for special discounts if you’re a veteran, teacher, or work at a certain company. Be sure to ask the provider what discounts might be available to you.

•   Customer service: It’s also important to choose a carrier with efficient and reliable customer service. If you have an issue with your phone, the last thing you want is to be stuck on hold for hours. Check verified customer service reviews, as some companies may not provide great support.

Negotiating With Your Current Provider

As the saying goes, it never hurts to ask: If you’re happy with your current provider, you can try asking for a lower price or any new discounts you might qualify for. That can be a quick and simple way to cut costs.

Another option is to mention that you’re considering switching to another company, whether you have received offers for lower pricing or found deals for less when searching online. This often leads to being connected with someone who can help you negotiate a better deal. Whether you’ve been a long-time customer or are thinking about switching, mobile carriers may offer discounts, free upgrades, or special rates to keep you.

Exploring Alternative Cell Phone Services

While AT&T, Verizon, and T-Mobile are among the big names in the U.S., there are plenty of other mobile providers available that may better suit your needs and budget. Here are some alternatives:

•   Boost Mobile

•   Consumer Cellular

•   Cricket Wireless

•   Google Fi Wireless

•   Mint Mobile

•   RedPocket Mobile

•   Spectrum Mobile

•   Straight Talk

•   Ting Mobile

•   US Mobile

•   Visible by Verizon

Recommended: How to Get Caught Up on Late Payments

Tips for Reducing Data Usage and Costs

To help you lower your cell phone bill, here are several tips to avoid data overages and extra costs.

Connect to a Trusted Wifi Network

Instead of using up your mobile data, try connecting to local wifi. This can help lower internet charges on your phone bill and often provides a faster, smoother experience. Just make sure you’re joining a trusted network — unsecured ones can put your personal information at risk from hackers.

Note: Be especially careful using public networks for financial transactions. Whether you do traditional or online banking, you don’t want to be conducting transactions across anything but a secured and trustworthy network.

Set Up Autopay

Some carriers may offer discounts when you set up autopay, since it automates the process and can require less work all around. You link your debit card or bank account to your cell phone bill’s payment portal. Each month, your payment is automatically processed by the due date, so you don’t have to lift a finger and can avoid late payments as well.

Switch Off Auto Cloud Backups and Syncing

Cloud backups and syncing services like Google Photos, Dropbox, and iCloud can help keep the files on your phone and other devices up to date. But these services can use up a big chunk of your data if you’re not careful. To avoid this, go into the settings on your phone and adjust them as needed so your device only backs up or syncs when you’re connected to wifi.

Share a Plan

Another plan for saving money: With a family or group plan, you can essentially split the cost of your cell phone bill with others. Whether it’s family or friends, you can share data, messages, and talk time. You can even add someone who’s a roommate or coworker to your plan. Check with your provider to see what group plans they offer.

Hold Off on an Upgrade

It may feel like every few months phone manufacturers come out with the latest and greatest versions of your phone. While it’s tempting to snap up a device with all the newest bells and whistles, waiting to upgrade can save you a lot of money. For example, upgrading every year might cost you $1,000, when your current phone is working just fine.

If you are ready to upgrade, be sure to bring your old phone with you. Many carriers offer trade-in deals where they refurbish your phone and give you credit toward a new one.

Make Sure Your Address Is Up-To-Date

If you move (or are planning on moving in the near future), make sure your phone provider has your correct address listed when you head to your new place. Here’s why: Your mobile provider typically uses your address to figure out the taxes and fees you owe. If you don’t update it, you might end up paying more on your next phone bill. (There is, of course, a possibility that your taxes and fees might go up when you move.)

The Takeaway

If you’re looking to lower your cell phone bill, there are several tactics to try. Among other moves, you might compare carrier and plan options, minimize your data usage, and/or negotiate with your carrier to bring down costs.

Then, if you need a place to stash any money you’ve saved, see 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.


Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 3.80% APY on SoFi Checking and Savings.

FAQ

Can I lower my bill without changing carriers?

Yes, it can be possible to lower your bill without switching providers. One way to do so is to call your mobile carrier and let them know you’re thinking about switching. They may offer you a better rate to keep you as a loyal customer. Another option is to check your plan. If you’re paying for more data or other features that you don’t need, downgrading your plan could help you save some money.

How often should I review my cell phone plan?

The Federal Communications Commission recommends reviewing your mobile phone bill each month. This way, you can spot any suspicious activity. Plus, it’s a good time to see if your data usage matches up well with the plan you are paying for. If not, it might be time to call your service provider to adjust your plan accordingly or switch to a new carrier.

Are family plans always cheaper than individual plans?

Family plans may or may not be the cheapest option when compared to individual plans. While some carriers offer discounts for adding more lines to your plan, there could be other charges involved that make the cost higher per person than an individual plan. It can be a smart move to compare the costs of each plan and see if a family plan is truly a better deal.

Photo credit: iStock/Jacob Wackerhausen

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2025 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

SoFi members with direct deposit activity can earn 3.80% 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 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 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 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 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.

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.

*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.

Third Party Trademarks: Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

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