Mobile Wallets: How They Work & Their Benefits

Guide to Mobile Wallets: What They Are and How They Work

A mobile wallet can be a great way to pay for things as you go through your day without having to carry an actual, potentially cumbersome, wallet with you. Instead, an app holds digital versions of your credit, debit, loyalty, and ID cards, allowing you easy access when needed.

But you may wonder which of the mobile wallet options are best, how safe these transactions are, and whether it wouldn’t just be better to slip your debit card in your pocket on most days.

Read on to learn more, including:

•   What is a mobile wallet?

•   How does a mobile wallet work?

•   How do you set up a mobile wallet?

•   What are the pros and cons of a mobile wallet?

Key Points

•   Mobile wallets store digital versions of various cards, including credit, debit, loyalty, and ID.

•   Payment information is encrypted, enhancing security and protecting user data.

•   Mobile wallets offer tools to track spending and manage financial activities efficiently.

•   Usage can be limited as not all retailers support mobile wallet payments.

•   Another potential downside is that if your cell phone runs out of battery, you won’t have access to your mobile wallet.

What Is a Mobile Wallet?

A mobile wallet is just what it sounds like: It’s a virtual wallet that lives on your mobile device (aka your cell phone). It can store credit cards and charge cards, as well as debit, loyalty, and store card information. This allows you to quickly and easily pay for goods and services with your smartphone, smartwatch, or another mobile device. No more digging through your bag or backpack for your “real” wallet and fishing out cash or the right piece of plastic.

Mobile wallets (sometimes called digital wallets) can go a step further, too. You can also stash insurance cards, ID, coupons, concert tickets, boarding passes, and hotel key card information in them. Some digital wallets also enable you to send money to friends, as well as receive payments.

You may also be able to use your mobile wallet instead of a physical card at some ATMs for contactless withdrawals.

💡 Quick Tip: Typically, checking accounts don’t earn interest. However, some accounts do, and online banks are more likely than brick-and-mortar banks to offer you the best rates.

How Does a Mobile Wallet Work?

Here’s how a mobile wallet works:

•   You install the app and type in your personal and payment information, which is securely stored. (Unique identifying numbers are used to store your details vs. your actual card or account information.)

•   When you are ready to make a payment with the mobile wallet, a technology called NFC (near-field communication) typically kicks in. This allows the two devices (your mobile wallet and the vendor’s reader) to communicate. Typically, you will wave your device over the merchant’s terminal or tap your device against it.

•   As the two devices communicate, your transaction will likely go through. Funds will transfer, and you will usually be pinged with a confirmation.

Recommended: How to Deposit Cash at an ATM

What Is the Best Mobile Wallet App?

The major mobile wallets are:

•   Apple Pay

•   Google Pay

•   Samsung Pay

These may come already installed on mobile devices. Although they differ in layout, these mobile wallet apps have the same basic function that allows you to pay with a phone tap.

Other ways to make payments on the go include mobile wallets you can download from app stores, including wallets from banks, PayPal, and merchants such as Walmart, and Starbucks.

Deciding which mobile wallet is best will largely depend upon your own personal needs, which options are compatible with your device, how you like to manage your money, and what your financial goals are. A couple of points to keep in mind:

•   When choosing a mobile wallet app, be aware that a mobile wallet offered by your credit card company may only be accepted at certain retailers.

•   Merchant wallets will typically only work in that merchant’s store or online. For instance, the Starbucks wallet will only work at Starbucks. Enjoy that latte, but don’t expect to buy new boots at the mall with it.

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Setting up and Using a Mobile Wallet

Here’s how to set up most of the major mobile wallet apps:

•   You launch the app (it may be pre-installed on your device), take a photo of your card or enter its information (such as your credit card number), and follow the step-by-step instructions.

•   This process is then repeated for all other cards entered. Generally, even if you load up several credit cards into your mobile wallet, only one of them will be your default payment option. That card will be the one that is used to process a purchase. If you want to use a different card, you may need to change the default card before you make the transaction.

•   Beyond credit and debit cards, the app may also walk you through configuring peer-to-peer payments like Apple Cash or Google Pay fund exchanges. You may also be able to link your PayPal account.

•   You may be able to import retail store rewards cards, as well as museum or library memberships cards, event tickets, and airline boarding passes. This may involve scanning a QR code or selecting the “add to wallet” button in an email or a text message from the issuer.

•   When you are ready to pay for purchases using your mobile wallet, you’ll want to make sure the merchant accepts mobile money. These businesses can typically be identified through a contactless payment indicator (usually a sideways Wi-Fi symbol).

•   To pay, open your digital wallet app if necessary, hold the phone near the wireless reader or tap your device against the terminal. This will authorize the payment. Your phone’s screen will typically confirm the transaction.

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

Are Mobile Wallets Safe?

Overall, mobile wallets are considered to be safe. Here’s why:

•   Unlike credit cards, which can be copied by card-skimming devices, the card information you load into a mobile wallet is encrypted. That means that your actual card or account numbers are never shared with the merchant.

•   Unlike credit cards, which can be copied by card-skimming devices, the card information you load into a mobile wallet is encrypted. That means that your actual card or account numbers are never shared with the merchant.

•   In the case of theft, it’s not possible for anyone to use a mobile device to make a payment without providing the required security credentials.

These safeguards actually make mobile wallets more secure than carrying physical credit cards and cash, which can easily be compromised.

Pros and Cons of Using Mobile Wallets

Is a mobile wallet right for you? Here are some key pros and cons you may want to consider.

Mobile Wallet Pros

Here are some of the upsides of using a mobile wallet.

•   They’re convenient. If you’re out and about without your wallet or bag, you can still make purchases, as well as use your coupons and rewards cards. You may also be able to get cash at an ATM or check a book out of the library, all from your mobile device. What’s more, they often allow for a contactless payment, meaning they can be extra quick and easy.

•   They’re secure. Mobile wallets provide a layer of security you don’t get with cash or using a debit or credit card. Your payment information is saved in one protected, central location. Card numbers are never stored in the app itself but are instead assigned a unique virtual number. This protects your money even if your smartphone is lost or stolen.

•   They can help you track your spending. A mobile wallet can help you track and better manage your spending. All of your transaction information is stored in the app so it’s easy to see how much you’re spending and where each week. You might even wind up using a credit card more responsibly.

Mobile Wallet Cons

There are also some downsides to mobile wallets to be aware of.

•   They’re not accepted everywhere. There are still some industries where cash is the only currency accepted. Even in businesses that do take credit, not all of them accept mobile wallets. To accept a mobile wallet, businesses need to have payment readers that take NFC payments, and not all of them have these terminals. This can cause a problem if a mobile wallet is all you have on hand.

•   Your phone could die. Cell phones often run out of battery and, if you’re without a charger, that handy mobile wallet will no longer exist. That can put a crimp in your shopping plans or become a major problem if you have important documents such as train passes or concert tickets stored in your mobile wallet.

•   You may end up overspending. The use of mobile wallets can be similar to that of using a credit card. Because cash isn’t physically leaving your hands, spending can feel less real, which can be a cause of overspending. If you have spending issues, a mobile wallet can make it easy to spend mindlessly and swipe or tap too often.

4 Tips for Using Your Mobile Wallet

To keep your mobile wallet safe, keep these tips in mind:

1.    Do your research before downloading payment apps. Look for reliable brands/companies, many positive reviews, and a significant number of downloads. Avoid untested apps; they could be a kind of scam and contain spyware or malware.

2.    Know how to remotely lock and locate your phone in case it gets lost or stolen. Check your phone’s device manager capabilities before you find yourself in an emergency situation.

3.    Always have appropriate locking technology. Carrying around a phone that doesn’t lock means you could be risking loss.

4.    Review your credit and debit card statements. Make sure those purchases are yours. While mobile wallets are secure, problems can occasionally arise, and you want to be alert.

The Takeaway

A mobile wallet is a digital way to store credit, debit, ID, and gift cards so that purchases can be made using a mobile smart device rather than a physical card.

Mobile wallets can help simplify your financial life. They allow users to make in-store payments without having to carry cash or physical credit cards. They’re easy to use and have hefty safeguards.

However, they aren’t universally accepted. It’s worth your while to determine whether the retailers you frequent accept them to help determine if a mobile wallet is a good option for you.

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 many places support mobile wallets?

While there isn’t a precise tally of how many retailers and other businesses support mobile wallets, a recent study found that there are 1.75 billion registered mobile money accounts globally, indicating significant adoption of and acceptance of this technology.

Do mobile wallets support all debit/credit cards?

Each mobile wallet will have its own policies, but most credit and debit cards from major banks are supported by, say, Google Pay and Apple Pay. Small business credit cards may also be added, especially those from established banks. You may find, though, that prepaid cards are not supported.

Will mobile payments replace cash?

According to a 2024 study by the nonprofit Global System for Mobile Communications, the mobile money industry saw a 23% increase in transaction volume worldwide in 2023, up to 85 billion annually. However, cash isn’t going away any time soon. According to the most recent statistics from the Federal Reserve, cash is the third-most-used payment instrument in the U.S.


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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.

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/.

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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How Much Does It Cost to Build a Houseboat?

How Much Does It Cost to Build a Houseboat? Guide to Houseboat Costs

For those of us seeking the appeal of a minimalist life on the water, the cost to build a houseboat will depend as much on how much elbow grease we’re willing to dedicate to the project as it does on the type of materials we decide to use for the job.

A houseboat is a self-propelled vessel with a cabin. There are many styles, giving people wide discretion on how they choose to build their own houseboat.

Let’s break down factors and average costs associated with building a houseboat.

Key Points

•   Building a houseboat costs at least $20,000 and probably closer to $50,000 for a basic 50-foot model, assuming DIY construction.

•   Costs increase significantly with professional labor for electrical and plumbing work.

•   Houseboat kits and plans are available for those preferring a DIY approach.

•   Used houseboats vary widely in price, from a few thousand dollars to over $1 million.

•   Financing options for houseboats include boat loans and personal loans, not traditional mortgages.

Average Cost of Building a Houseboat

How much does it cost to build a houseboat? Just like the cost to build a house, it depends on size, materials, whether it’s a total DIY job, and more.

The cost of building a single-story 50-foot houseboat is at least $20,000 and perhaps closer to $50,000, some sources say. To be clear, that low estimate means doing all the work yourself or with the help of friends.

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Labor costs for professionals like electricians or plumbers will increase your expenses substantially. So understand that you’ll be trading time and know-how for savings.

There are also houseboat kits and plans for sale. Charmingly, some are advertised as DIY pontoon tiny houses.

By contrast, you can choose to purchase a serviceable preowned houseboat that needs some renovations. Used houseboats can go for anywhere from around $20,000 to way over $1 million (or multi-millions) for luxury craft that border on liveaboard yachts. A houseboat in good condition is generally going to cost you around $60,000 to buy used. Shiver me timbers!

Here’s a rough estimate of the cost of building a houseboat vs. buying a used one.

Building From Scratch Cost Preowned Houseboat Cost
$20,000 and up for 50 feet $60,000 and up

Regardless of whether you’re planning to handle the build yourself or you intend to refurbish a used houseboat, you may need financing. How to pay for it? Not with a traditional mortgage. Options include a boat loan and a personal loan.

Homeowners with sufficient home equity may be able to launch their houseboat plans with a home equity line of credit (HELOC), home equity loan, or cash-out refinance.

Recommended: How to Find a Contractor

Factors That Affect the Cost of a Houseboat

Houseboat living has caught on with some retirees, who want to downsize home-wise.

It also could be a choice for minimalists and millennial homebuyers who think outside the box.

Not everyone, of course, will want to be a full-time liveaboard. Some water lovers will be OK with a basic houseboat for cruising and recreation, one that is maybe trailerable. Those are factors that will affect the cost of your preferred houseboat.

Here are factors to consider.

Size

The size of your houseboat will have a major impact on the cost of materials you’ll need. Are you planning to build a single-story or double-decker houseboat? Will this be something that would fit on a standard 50-foot pontoon base, or will you need something more robust to keep it afloat?

Consider the cost of $50,000 to build a basic 50-foot houseboat that will probably end up offering 450-500 square feet of space. That comes out to at least $110 per square foot, assuming you don’t hire anyone to help with construction. Your houseboat project could very well end up costing more than $200 per square foot.

Bear in mind that these figures are a very rough estimate that was calculated across a broad average of houseboats.

Design

The design of your houseboat will have a large effect on your options when it comes to layout, maneuverability, and aesthetics.

Before you begin construction, you’ll need to decide on what type of hull best suits your houseboat. Aluminum pontoons are popular.

Catamaran cruisers are maneuverable and may be cheaper to build, but they often compromise on space. These designs are easily outfitted with motors and may be best suited for owners who intend to take them out occasionally.

Those looking for larger accommodations may prefer a type of house called a floating home, which is actually different from a houseboat. It often has a concrete hull and is meant to stay in one place, permanently attached to utilities. The price, though, will usually be much higher than that of a houseboat.

A few sailors may opt to build a yacht, which offers the ideal combination of maneuverability and living space. You’ll have to have a hefty check at the ready or prepare to borrow a boatload if you’re considering this option.

Materials

The most common materials used to build boats intended for habitation are aluminum and fiberglass, but in some cases steel and wood can be construction materials of choice.

A standard pontoon base can cost between $3,000 and $10,000.

The cost of interior finishes largely depends on your personal tastes. They can be affordable if you’re fine with a no-frills setup but can tack skyward for more luxurious tastes and larger vessels. Stainless steel appliances and granite countertops cost money, regardless of whether they go in a house or a houseboat.

Will you want a staircase and flybridge? Budget accordingly.

Location and Water Depth

The environment you intend to keep your houseboat in will affect how much you’ll have to pay to make it seaworthy.

The price of an inboard motor may start around $8,000 and go up to $25,000. An outboard could start at $1,000 and go up to around $15,000. Depending on how large your vessel is, you may need to pay for a larger motor with more horsepower.

Federal regulations governing recreational craft prohibit the majority of houseboats from sailing in deep ocean waters. However, cruises along the shoreline, or in a lake or river, are acceptable options for capable houseboats.

Weather

Whether you decide to launch or keep your houseboat in freshwater or saltwater and local weather patterns will affect houseboat maintenance.

Saltwater is a tougher environment but has a lower freezing temperature than freshwater, which means that you likely won’t have to worry about ice forming in the water.

By contrast, if your houseboat will primarily be in freshwater, you may have to deal with ice. As water freezes into ice, it expands, which can damage your hull or rudder.

Permits and Regulations

Any recreational vessel must meet federal safety requirements and possibly abide by state regulations.

Average Cost of Living on a Houseboat Year-Round

The average cost of living on a houseboat is $30,000 per year, including a boat or personal loan payment, some sources say. This breaks down to around $2,500 per month. Some frugal houseboat enthusiasts report living on as little as $6,000 per year.

Most of these costs encompass mooring fees, utilities, and insurance, but you’ll also need to budget for repairs and applicable local fees. Some houseboat communities have a homeowners association that allows all residents to distribute community expenses like maintenance of the docks.

Does a houseboat cost less than a home sitting on terra firma? Generally, yes. You can build a houseboat for far less than a comparably sized single-family home. As a future liveaboard, though, you might want to compare moorage and other fees to the costs of maintaining a traditional home.

The IRS says a boat with cooking, sleeping, and toilet facilities can be a main or second home, so interest paid on a loan for your houseboat could be included in the mortgage interest deduction if you itemize.

The Takeaway

How much does it cost to build a houseboat? The cost could start at $20,000 for a DIY build and depends largely on size and materials. Hiring skilled labor will add to that substantially. An alternative to building a houseboat is buying a used one and making it your own. How to pay for these nautical visions? One way, for qualified homeowners, is a HELOC brokered by SoFi.

SoFi now partners with Spring EQ to offer flexible HELOCs. Our HELOC options allow you to access up to 90% of your home’s value, or $500,000, at competitively lower rates. And the application process is quick and convenient.

Unlock your home’s value with a home equity line of credit brokered by SoFi.

FAQ

How large can a houseboat be?

In most cases, 40 to 50 feet is the average length and 8 to 20 feet the range of width for a houseboat that will be comfortable as a long-term dwelling.

How long does it take to build a houseboat?

A DIY houseboat project could easily take 18 months to complete, but the time frame will depend on whether you’re able to work on the houseboat project full time and whether you enlist any help. Remember to factor in time to obtain necessary permits or inspections for your area.

Where can I get financing to build a houseboat?

You may be able to finance your houseboat build through lenders that focus on marine and RV lending. Other options are a personal loan, a HELOC, a home equity loan, and a cash-out refinance.


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*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

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.

²SoFi Bank, N.A. NMLS #696891 (Member FDIC), offers loans directly or we may assist you in obtaining a loan from SpringEQ, a state licensed lender, NMLS #1464945.
All loan terms, fees, and rates may vary based upon your individual financial and personal circumstances and state.
You should consider and discuss with your loan officer whether a Cash Out Refinance, Home Equity Loan or a Home Equity Line of Credit is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit not originated by SoFi Bank. Terms and conditions will apply. Before you apply, please note that not all products are offered in all states, and all loans are subject to eligibility restrictions and limitations, including requirements related to loan applicant’s credit, income, property, and a minimum loan amount. Lowest rates are reserved for the most creditworthy borrowers. Products, rates, benefits, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria. Information current as of 06/27/24.
In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee.

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What to Do if Your Check is Lost or Stolen from the Mail

Writing checks may not be an everyday occurrence for you, but they are still a reliable form of payment that have a place in most people’s finances. So if you think a check you wrote got lost or was stolen, it’s important to report it to your bank ASAP and request to stop payment on it.

If you suspect there’s criminal activity afoot, you may also want to notify your local police. In addition, it becomes important to monitor your accounts and credit reports for any signs of identity theft.

By acting quickly, you could avoid major stress as well as financial loss.

Key Points

•   Taking immediate action is crucial if a check is lost or stolen; reporting it to the bank and requesting a stop payment can minimize potential financial loss.

•   Gathering detailed information about the missing check, such as account and check numbers, can help expedite the process when contacting the bank.

•   Monitoring bank accounts regularly allows individuals to quickly identify any unauthorized transactions and take necessary action if a check is cashed in error.

•   It is advisable to notify both the sender and local authorities if a check sent to you is lost or stolen, particularly to prevent identity theft.

•   Implementing preventive measures, such as mailing checks securely and tracking transactions, can help reduce the risk of check theft and associated complications.

What if a Check You Sent Never Got Cashed or Deposited?

If you’re concerned because a check you sent hasn’t cleared your online bank account, you may want to start by contacting the recipient (whether it’s a person or business) to make sure they aren’t just sitting on it.

These days, electronic payments are processed so rapidly, we’ve become accustomed to seeing payments show up immediately on online bank statements.

If your paper check is slow to show, it could be that it’s still sitting on someone’s desk or in their wallet.

But what if the check never made it to its destination? It’s possible for checks to get lost in the mail or stolen, so there are steps you should take.

How to Report a Lost or Stolen Check

So if it does seem that a check has gone missing, here’s what to do.

Gather Details about the Check

Before you contact your bank or credit union, you may want to take a few minutes to gather as much information as you can about the check (or checks) that are MIA. This includes:

•   Your account number

•   The check number

•   The routing number

•   The name or names on the bank account

•   The exact name of the payee as you wrote it on the check

•   The check amount.

Contact Your Bank

With that information in hand, you can call your bank, contact it online or in app, or visit your local branch to report the missing check and request a stop payment. Some financial institutions may allow you to do this online. See below for more details on stop payments.

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Monitoring Your Bank Accounts

If the bank didn’t receive the stop payment order in time or if the information you provided was incorrect, it still might process (or pay) the check from your checking account.

So if you don’t already monitor your checking account online, you may want to start. For many people, monitoring your bank account a few times a week works well; daily if you think there’s reason for concern.

If you believe the bank cashed a check in error and you want to dispute it, it can help if you move as quickly as possible in order to avoid liability.

Some banks don’t impose time limits for customers to report fraudulent check cashing. But because stolen paper checks aren’t regulated by federal laws the way stolen debit and credit cards are, policies can vary from one bank to the next.

Sending a New Payment

The person or business that didn’t receive your check is still going to be looking for that payment (or expecting that gift), so you’ll likely want to send a replacement as soon as possible.

However, you may want to consider using a more secure method for sending the second check. Keep in mind:

•   If the payee is a person or vendor who insists on personal checks, you might want to deliver the payment in person.

•   If you must mail a check, consider using certified mail. The cost is higher than regular mail, but you’ll get a receipt from the U.S. Postal Service when you send it, plus a notification when it’s delivered.

•   Or you could see if the payee will accept an online method of transferring money to another bank account.

Recommended: Emergency Fund Calculator

Issuing a Stop Payment on a Check

If you do indeed wind up issuing a stop payment on a check that is lost in the mail or otherwise missing, here are points to keep in mind:

•   Fees for stopping a check vary from one bank to another but can run around $30. Whether you keep your accounts at an online bank or traditional one, you may find that some financial institutions waive the fee for customers with premium accounts, and some may not charge fees if the missing checks are blank.

•   With a stop payment order, the bank flags the missing check number, and as long as the check hasn’t already been processed, it won’t allow the check to clear.

•   A stop payment typically lasts for six months. According to state law, however, a stop-payment request made by phone (and not in writing) can lapse after 14 days, so you may want to ask your bank if any forms need to be filled out to get the full six-month hold.

•   If the stop payment order ends and you suspect criminal activity, you can renew the order for an additional six months, but you may have to pay another fee.

Recommended: What Is a Routing Number?

Protecting Yourself From Fraud and Identity Theft

There are a few different ways in which checks can be stolen. Someone could possibly remove it from the outgoing mail in your mailbox or the payee’s mailbox. There have also been some cases in which mail has been stolen from a blue U.S. Postal Service mailbox. Or the check might have been stolen from the recipient after they received it.

What can someone do with a stolen check?

•   Once they’ve intercepted your check, thieves might find a way to cash it for the amount written or change it to a larger amount. In some cases, they may use chemicals to alter the name of the payee, or the amount.

•   It may also be possible for a thief to use the information on the check to steal your identity and use that information to open new accounts in your name.

If you believe your check was stolen and you’ve already reported it to your bank, there are a few more steps you may want to take to protect yourself.

Recommended: What Can a Scammer Do With Your Bank Account and Routing Number?

Filing a Police Report

By going to your local police department, you can create a paper trail to show the bank and others you’ve been doing all you can to get to the bottom of your loss and stop any further theft.

Reporting Stolen Mail

If you think you’ve been the victim of mail theft or tampering, you can report it to the U.S. Postal Inspection Service online or call 1-877-876-2455.

Reporting Identity Theft

The Federal Trade Commission (FTC) offers step-by-step advice on what to do if you think your personal information has been compromised, including placing a fraud alert on your credit reports.

Watching Bank Accounts Closely

Keeping an eye on other accounts — including savings accounts and credit card accounts — could help you spot identity theft faster.

If anything looks out of the ordinary, you can check into it immediately and take any necessary actions to report the theft and protect your account.

What If a Check Written to You Is Lost or Stolen?

If a check that was sent to you never arrives and you’re wondering what to do if the check is lost in the mail, follow these steps:

•   Notify the person or business who sent it as soon as possible so they can stop payment before someone else can cash or deposit it.

•   If you believe the check was stolen from your mailbox and could be cashed, it’s also a good idea to report it to the police.

•   If someone cashed and/or altered the check, and you’re worried about identity theft, you may want to report the theft to the FTC.

•   You may also want to ask the issuer to send the replacement funds in a more secure way.

What If Your Checkbook or Multiple Checks Are Missing?

If several checks or your entire checkbook go missing and you suspect they were stolen, it’s wise to spring into action to protect yourself.

•   Quickly report the loss to your bank and also file a report with the police. If you don’t, you could be held responsible for any unauthorized activity.

•   If you know the numbers of the missing checks, you may choose to put a stop payment on each one.

•   Consider putting a freeze on the account or closing it. If you have other transactions that haven’t finished processing, a bank representative can help you decide which are safe to clear.

How Can You Help Prevent Check Theft?

Implementing a few safeguards could help save you from the stress of dealing with a lost or stolen check. These might include:

Guarding Your Checkbook

It’s wise to treat your checkbook as if it were a big stack of cash. If you don’t think you’ll need it, why not leave it in a safe place at home? Or you could tuck one check in your wallet, just in case.

Mailing Checks with Extreme Care

Putting the flag up on your mailbox can be a signal to thieves looking for an opportunity to steal checks. Rather than leave envelopes with checks in your mailbox or in an outgoing mail basket at work, consider taking them to the post office yourself. If you want to be extra-safe, consider sending them by certified mail.

Using Your Check Registry

If you aren’t writing checks very often, it may seem silly to maintain the check register. But the information you keep there can help you keep track of when and where you sent a check. And if a check is stolen, you’ll have the details you need to report it.

Checking Your Transactions Daily

It doesn’t take long to log into your account and check your transactions frequently, even daily. If you have an app, you can often do this quickly with your phone.

If something looks fishy or a check you sent a while ago hasn’t cleared, it’s a good idea to follow up with the payee and/or your bank.

Being Cautious When Writing Checks

It’s a good idea to be careful when filling in the front of your checks. This includes making sure your signature is clear and consistent, not putting your Social Security number on a check, and only writing your phone number or driver’s license number on a check if a merchant known to you requests it.

The less information you provide, the harder it will be for someone to impersonate you and attempt to cash your check.

Paying with Checks Only When Necessary

Many transactions can be completed online these days, so you may want to consider that route whenever it’s a choice.

You can also set up automatic payments so you don’t have to write checks for recurring expenses.

And if you have to send money to friends or family, you may want to try switching to P2P transfers. You may want to keep in mind that, depending on the money transfer service or app you use, both parties may need to have access to the app or set up an account to exchange money. Also be aware of any fees assessed as you move funds around this way.

The Takeaway

When you write a check and it gets lost or stolen, it’s a good idea to act quickly to protect your finances. This may involve putting a stop payment on the check and possibly contacting authorities if you believe a crime was committed or that identity theft may be the goal. There is typically a fee charged for a stop payment, but it can be worthwhile to protect yourself. After a check is stolen, you run the risk of identity theft, so it’s wise to monitor your accounts and your credit reports closely.

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 cancel a check after it’s been cashed?

Once a check has been cashed, you cannot stop payment or cancel it. If you believe there’s fraudulent activity related to the check, contact your financial institution as quickly as possible and possibly other authorities.

How long before a check is considered lost?

Checks are typically good for six months, meaning that someone could hold onto one for that long and still cash it. However, if you were expecting a check to arrive via mail in, say, a week and you have waited twice as long, you might wonder what to do if a check is lost in the mail. Consider issuing a stop payment and then having payment made again, possibly by another method.

Can someone steal your bank info from a check?

If someone gets one of your checks, they have access to both your bank account number and bank routing number. With those two sets of digits, they can potentially commit fraud, such as printing fake checks that are drawn against your account or setting up ACH (automated clearing house) withdrawals from your account.

How do thieves cash stolen checks?

One common method that thieves use is working with household chemicals to erase the ink on a check they have stolen. They can then write in a new payee’s name and amount and cash the check. Typically, they might cash the altered check at an ATM or a currency exchange.


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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.

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/.
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.


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


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

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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What Is a Split-Level House? Is It Right for You?

What Is a Split-Level House? Should You Consider Owning One?

As you’re starting your home-buying journey, you may come across a style referred to as a split-level house. Popular in the 1950s through the 1970s, split-level homes appear to be making a comeback.

What is a split-level house? Keep reading for the answer and whether it’s the right style for you.

Key Points

•   Split-level houses feature staggered floor levels connected by half-flights of stairs.

•   Advantages include affordability, privacy, and efficient use of space on a smaller lot.

•   Disadvantages involve frequent stair use for those living in the home, potential resale challenges, and limitations to remodeling.

•   Split-level homes differ from raised ranch houses. They have more levels that are connected by half-flights of stairs.

•   When considering a split-level home, weigh the benefits of privacy and space against the necessity to climb stairs and challenges that may come when it’s time to sell.

Characteristics of a Split-Level House

Often seen as a starter home, a split-level house differs from other traditional homes due to its layout. A cousin of the ranch home, also a popular midcentury style, this type of house commonly has two or three levels that are connected by half-flights of stairs.

The most prominent designs feature the living room, kitchen, and dining room on the main level. A half-stairway may lead up to the bedrooms, and a second half-stairway leads down to a den, basement, and sometimes garage. The garage may be at grade level, with the bedrooms above it.

A split-level home with three floors can be referred to as a trilevel home, though this style can also have a fourth or fifth floor. A split-level home may have a low-pitched roof, a large picture window, overhanging eaves, and an asymmetrical facade.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

Questions? Call (888)-541-0398.


Recommended: Do You Qualify as a First-Time Homebuyer?

Pros and Cons of a Split-Level House

Consider the following advantages and drawbacks of a split-level home.

Pros

•   May be more affordable: Split-level homes are generally more outdated — or just feel that way — so you could find these homes at a bargain. (Try this mortgage calculator to get a feel for the numbers.)

•   Nostalgia is in: Sometimes it’s hip to be square. Young buyers may be drawn to the old-school feel of a split-level house.

•   Ability to qualify for home financing: If you can find a home at an affordable price, it might be easier to qualify for a mortgage.

•   More privacy: Split-level homes tend to offer more privacy because of the staggered levels. Upstairs or down, you might be able to set up a quiet home office.

•   May feel bigger: Split-level homes offer more square footage than many ranch-style homes, and they keep the rooms you use most frequently together.

Cons

•   Those stairs: People who aren’t very mobile or are afraid of climbing stairs as they get older may not be the best fit for split-level homes. Homeowners will need to use the stairs frequently, although they’re half-flights.

•   Could be hard to sell: When homebuyers are looking at the different types of houses, they may view split-level homes as awkward-looking or dated, so it could be hard to sell if you’re ready to move.

•   Remodeling can be challenging: The layout isn’t conducive to making any dramatic changes. Each level is meant to have a distinct purpose.

•   Subterranean space may not be valued: Thanks to the basement, a split-level home may not appraise as high as a one-level home.

Recommended: Understanding Mortgage Basics

Difference Between a Split-Level House and a Raised Ranch

Although some people use the term split-level to describe a raised ranch style, a true raised ranch has two levels, while a split-level home has three or more.

A raised ranch house is basically a ranch house that sits atop a basement or a first floor that contains a finished room and a garage. The story underneath the main floor of the home is meant to provide additional living space.

The building materials may be different: In most cases the basement or first floor is made of brick, with the upper level using aluminum or wood siding. There may also be more decorative details such as nonfunctional shutters.

Finding a Split-Level House

You’ll find split-level homes all across the U.S., often in suburban areas outside of cities. They are very common in the Midwest.

Since these types of homes have basements, you’ll need to live in an area where that’s typical. Some parts of the country near the ocean or large bodies or water have poor soil types and won’t usually have homes with basements.

You might find a, well, staggering deal on a split-level home in one of the 50 most popular suburbs in the U.S.

Who Should Get a Split-Level House?

Those who are the best fit for a split-level house are buyers who are willing to climb stairs daily, families that value privacy, and those who see the value of maximum living space on a smaller lot.

Some people will find a one-level house, condo, or townhouse more their style. This home loan help center can be of use if you’re shopping for a home and a mortgage.

The Takeaway

If you value privacy and space and don’t mind stairs and a boomer aura, a split-level house could be just the ticket. Split-level homes can be a good value.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

SoFi Mortgages: simple, smart, and so affordable.

FAQ

Are split-level homes hard to resell?

Split-level homes may not be for all homebuyers, though that doesn’t necessarily mean you can’t sell this kind of home. The key to encouraging buyers to make an offer is to shine a positive light on the home. That could mean staging it, adding curb appeal, and making upgrades as small as paint and new fixtures.

Can you build up on a split-level house?

Yes. You may be able to add a level to the top, or put an addition on the side or back.

Are split-level houses expensive to build?

Because the home can be built on a smaller lot, it may be more affordable than other designs. The cost to build any home depends on the locale, materials, size, and contractor. If you’re considering building your own, shop multiple builders to see what you can get.

Can you get a loan to build a split-level house?

You may be able to get a construction loan to build a split-level house. It’s typically harder to get a construction loan than a mortgage, and construction loan rates tend to be higher than conventional mortgage rates.

Why are split-level homes cheaper?

Split-level homes tend to cost less than other types of comparable homes because of when they were built. Many homebuyers find the style unfashionable.

What are the disadvantages of split-level houses?

The main disadvantage of split-level homes is that they require homeowners to walk up and down stairs often to access different areas of the home. While it may not be a dealbreaker to some, those who are less mobile or are afraid of how they’ll age in the home may not find split-levels a good fit.

Are split-level homes a good investment?

Maybe. An investor who updates a split-level home while keeping some of its retro charm is likely to find takers.


Photo credit: iStock/davelogan

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Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.


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SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.



*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.


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

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

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401(k) Catch-Up Contributions: What Are They & How Do They Work?

401(k) Catch-Up Contributions: What Are They & How Do They Work?

Retirement savers age 50 and older get to put extra tax-advantaged money into their 401(k) accounts beyond the standard annual contribution limits. Those additional savings are known as “catch-up contributions.”

If you have a 401(k) at work, taking advantage of catch-up contributions is key to making the most of your plan, especially as retirement approaches. Here’s a closer look at how 401(k) catch-up limits work.

Key Points

•   Individuals aged 50 and older can contribute additional funds to their 401(k) accounts through catch-up contributions.

•   The annual catch-up contribution limit for individuals 50 and up is $7,500 for both 2024 and 2025, allowing eligible participants to save a total of $30,500 in 2024 and $31,000 in 2025. In 2025, those aged 60 to 63 may contribute an additional $11,250 (instead of $7,500), for a total of $34,750.

•   Catch-up contributions can be made to various retirement accounts, including 401(k) plans, 403(b) plans, and IRAs, providing flexibility in retirement savings.

•   Utilizing catch-up contributions effectively can help older savers offset previous under-saving and better prepare for retirement expenses.

What Is 401(k) Catch-Up?

A 401(k) is a type of defined contribution plan. This means the amount you can withdraw in retirement depends on how much you contribute during your working years, along with any employer matching contributions you may receive, as well as how those funds grow over time.

There are limits on how much employees can contribute to their 401(k) plan each year as well as limits on the total amount that employers can contribute. The regular employee contribution limit is $23,000 for 2024 and $23,500 for 2025. This is the maximum amount you can defer from your paychecks into your plan — unless you’re eligible to make catch-up contributions.

Under Internal Revenue Code Section 414(v), a catch-up contribution is defined as a contribution in excess of the annual elective salary deferral limit. For 2024 and 2025, the 401(k) catch-up contribution limit is $7,500. In 2025, those aged 60 to 63 may contribute an additional $11,250 (instead of $7,500) to their 401(k) plan.

That means if you’re eligible to make these contributions, you would need to put a total of $30,500 in your 401(k) in 2024 to max out the account and $31,000 in 2025 ($34,750 for those aged 60 to 63). That doesn’t include anything your employer matches.

Congress authorized catch-up contributions for retirement plans as part of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). The legislation aimed to help older savers “catch up” and avoid falling short of their retirement goals, so they can better cover typical retirement expenses and enjoy their golden years.

Originally created as a temporary measure, catch-up contributions became a permanent feature of 401(k) and other retirement plans following the passage of the Pension Protection Act in 2006.

Who Is Eligible for 401(k) Catch-Up?

To make catch-up contributions to a 401(k), you must be age 50 or older and enrolled in a plan that allows catch-up contributions, such as a 401(k).

The clock starts ticking the year you turn 50. So even if you don’t turn 50 until December 31, you could still make 401(k) catch-up contributions for that year, assuming your plan follows a standard calendar year.

Making Catch-Up Contributions

If you know that you’re eligible to make 401(k) catch-up contributions, the next step is coordinating those contributions. This is something with which your plan administrator, benefits coordinator, or human resources director can help.

Assuming you’ve maxed out your 401(k) regular contribution limit, you’d have to decide how much more you want to add for catch-up contributions and adjust your elective salary deferrals accordingly. Remember, the regular deadline for making 401(k) contributions each year is December 31.

It’s possible to make catch-up contributions whether you have a traditional 401(k) or a Roth 401(k), as long as your plan allows them. The main difference between these types of plans is tax treatment.

•   You fund a traditional 401(k) with pre-tax dollars, including anything you save through catch-up contributions. That means you’ll pay ordinary income tax on earnings when you withdraw money in retirement.

•   With a Roth 401(k), regular contributions and catch-up contributions use after-tax dollars. This allows you to withdraw earnings tax-free in retirement, which is a valuable benefit if you anticipate being in a higher tax bracket when you retire.

You can also make catch-up contributions to a solo 401(k), a type of 401(k) used by sole proprietorships or business owners who only employ their spouse. This type of plan observes the same annual contribution limits and catch-up contribution limits as employer-sponsored 401(k) plans. You can choose whether your solo 401(k) follows traditional 401(k) rules or Roth 401(k) rules for tax purposes.

401(k) Catch-Up Contribution Limits

Those aged 50 and older can make catch-up contributions not only to their 401(k) accounts, but also to other types of retirement accounts, including 403(b) plans, 457 plans, SIMPLE IRAs, and traditional or Roth IRAs.

The IRS determines how much to allow for elective salary deferrals, catch-up contributions, and aggregate employer and employee contributions to retirement accounts, periodically adjusting those amounts for inflation. Here’s how the IRS retirement plan contribution limits for 2025 add up:

Retirement Plan Contribution Limits in 2025

Annual Contribution Catch Up Contribution Total Contribution for 50 and older
Traditional, Roth and solo 401(k) plans; 403(b) and 457 plans $23,500

$7,500 (ages 50-59, 64+)

$11,250 (ages 60-63)

$31,000 (ages 50-59, 64+)

$34,750 (ages 60-63)

Defined Contribution Maximum, including employer contributions $70,000

$7,500 (ages 50-59, 64+)

$11,250 (ages 60-63)

$77,500 (ages 50-59, 64+)

$81,250 (ages 60-63)

SIMPLE IRA $16,500

$3,500 (ages 50-59, 64+)

$5,250 (ages 60-63)

$20,000 (ages 50-59, 64+)

$21,750 (ages 60-63)

Traditional and Roth IRA $7,000 $1,000 $8,000

These amounts only include what you contribute to your plan or, in the case of the defined contribution maximum, what your employer contributes as a match. Any earnings realized from your plan investments don’t count toward your annual or catch-up contribution limits.

Also keep in mind that employer contributions may be subject to your company’s vesting schedule, meaning you don’t own them until you’ve reached certain employment milestones.

Tax Benefits of Making Catch-Up Contributions

Catch-up contributions to 401(k) retirement savings allow you to save more money in a tax-advantaged way. The additional money you can set aside to “catch up” on your 401(k) progress enables you to save on taxes now, as you won’t pay taxes on the amount you contribute until you withdraw it in retirement. These savings can add up if you’re currently in a high tax bracket, offsetting some of the work of saving extra.

The amount you contribute will also grow tax-deferred, and making catch-up contributions can result in a sizable difference in the size of your 401(k) by the time you retire. Let’s say you start maxing out your 401(k) plus catch-up contributions as soon as you turn 50, continuing that until you retire at age 65. That would be 15 years of thousands of extra dollars saved annually.

Those extra savings, thanks to catch-up contributions, could easily cross into six figures of added retirement savings and help compensate for any earlier lags in saving, such as if you were far off from hitting the suggested 401(k) amount by 30.

Roth 401(k) Catch-Up Contributions

The maximum amount you can contribute to a Roth 401(k) is the same as it is for a traditional 401(k): $23,000 and, if you’re 50 or older, $7,500 in catch-up contributions, as of 2024. For 2025, it is $23,500 and, if you’re 50 or older, $7,500 in catch-up contributions ($11,250 in catch-up contributions if you’re 60 to 63). This means that if you’re age 50 and up, you are able to contribute a total of $30,500 to your Roth 401(k) in 2024 and $31,000 in 2025 (or $34,750 in 2025 if you’re 60 to 63).

If your employer offers both traditional and Roth 401(k) plans, you may be able to contribute to both, and some may even match Roth 401(k) contributions. Taking advantage of both types of accounts can allow you to diversify your retirement savings, giving you some money that you can withdraw tax-free and another account that’s grown tax-deferred.

However, if you have both types of 401(k) plans, keep in mind while managing your 401(k) that the contribution limit applies across both accounts. In other words, you can’t the maximum amount to each 401(k) — rather, they’d share that limit.

The Takeaway

Putting money into a 401(k) account through payroll deductions is one of the easiest and most effective ways to save money for your retirement. To determine how much you need to put into that account, it helps to know how much you need to save for retirement. If you start early, you may not need to make catch-up contributions. But if you’re 50 or older, taking advantage of 401(k) catch-up contributions is a great way to turbocharge your tax-advantaged retirement savings.

Of course, you can also add to your retirement savings with an IRA. While a 401(k) has its advantages, including automatic savings and a potential employer match, it’s not the only way to grow retirement wealth. If you’re interested in a traditional, Roth, or SEP IRA, you can easily open an IRA account on the SoFi Invest® brokerage platform. If you’re age 50 or older, those accounts will also provide an opportunity for catch-up contributions.

Help grow your nest egg with a SoFi IRA.

FAQ

How does the 401(k) catch-up work?

401(k) catch-up contributions allow you to increase the amount you are allowed to contribute to your 401(k) plan on an annual basis. Available to those aged 50 and older who are enrolled in an eligible plan, these catch-contributions are intended to help older savers meet their retirement goals.

What is the 401(k) catch-up amount in 2025?

For 2025, the 401(k) catch-up contribution limit is $7,500 if you’re aged 50 to 59 or 64-plus. For those aged 60 to 63 in 2025, the 401(k) catch-up contribution limit is $11,250 (instead of $7,500).


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/1001Love

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