May
20
2024
What Is a Returned Item Fee (NSF Fee)?

Returned Item Fees: What They Are & How to Avoid Them

By | Budgeting & Goals, Financial Independence, money | Comments Off on Returned Item Fees: What They Are & How to Avoid Them

Returned item charges are bank fees that are assessed when you don’t have enough money in your account to cover a check (or online payment) and the bank doesn’t cover that payment. Instead, they return the check or deny the electronic payment, and hit you with a penalty fee. Returned item fees are also called non-sufficient funds (NSF) fees. While these fees used to be ubiquitous, some banks have chosen to eliminate them.

Read on to learn exactly what NSF/returned item fees are and how you can avoid paying them.

Key Points

•   Returned item fees, also known as non-sufficient funds (NSF) fees, are charged when an account lacks enough funds to cover a check or electronic payment.

•   These fees can be avoided by closely monitoring account balances and setting up bank alerts for low balances.

•   Linking a savings account to a checking account can provide a backup to cover shortfalls, potentially avoiding NSF fees.

•   Using a debit card strategically can prevent large holds that might lead to NSF fees for other transactions.

•   Choosing a bank that offers no-fee overdraft protection can also help avoid these fees.

What Is a Non-Sufficient Funds (NSF) Fee?

A non-sufficient fund or NSF fee is the same thing as a returned item fee. These are fees banks charge when someone does not have enough money in their checking account to cover a paper check, e-check, or electronic payment. They are assessed because the bank has to put forth additional work to deal with this situation. They also serve as a way for banks to make money. The average NSF fee is $19.94.

In addition to being hit with an NSF fee from the bank, having bounced checks and rejected electronic payments can cause you to receive returned check fees, late fees, or interest charges from the service provider or company you were attempting to pay.

💡 Quick Tip: Banish bank fees. Open a new bank account with SoFi and you’ll pay no overdraft, minimum balance, or any monthly fees.

How Do Non-Sufficient Fund Fees Work?

Here’s a basic example. Let’s say that someone has $500 in the bank. They withdraw $100 from an ATM and forget to record that transaction. Then, they write a check for $425, believing that those funds are available:

•   Original balance: $500

•   ATM withdrawal: $100

•   New actual balance: $400

•   Check amount: $425

•   Problem: The check is for $25 more than what is currently available.

The financial institution could refuse to honor this check (in other words, the check would “bounce” or be considered a “bad check”) and charge an NSF fee to the account holder. This is not the same thing as an overdraft fee.

An overdraft fee comes into play when you sign up for overdraft protection. Overdraft protection is an agreement with the bank to cover overdrafts on a checking account. This service typically involves a fee (called an overdraft fee) and is generally limited to a preset maximum amount.

Are NSF Fees Legal?

Yes, NSF or returned item fees are legal on bounced checks and returned electronic bill payments. However, they should not be charged on debit card transactions or ATM withdrawals.

If you don’t opt in to overdraft coverage (i.e., agree to pay overdraft fees for certain transactions), then the financial institution cannot legally charge overdraft (or NSF) fees for debit card transactions or ATM withdrawals. Instead, the institution would simply decline the transaction when you try to make it.

No federal law states a maximum NSF fee. But The Truth in Lending Act does require banks to disclose their fees to customers when they open an account.

The Consumer Financial Protection Bureau has been pushing banks to eliminate NSF fees, and their efforts have paid off. Many banks have done away with NSF fees and others have lowered them.

Are NSF Fees Refundable?

You can always ask for a refund. If you’ve been with a financial institution for a while and this is your first NSF fee, you could contact the bank and ask for a refund. The financial institution may see you as a loyal customer that they don’t want to lose, so they may say “yes.” That said, it’s entirely up to them — and, even if they agree the first time, they will probably be less willing if it becomes a pattern. (Or, they may say “no” to the very first request.)

Recommended: Common Bank Fees and How to Avoid Them

Do NSF Fees Affect Your Credit?

Not directly, no. Banking history isn’t reported to the consumer credit bureaus. Indirectly, however, NSF fees could hurt your credit. If a check bounces — say, one to pay your mortgage, car payment, credit card bill, or personal loan — this may cause that payment to be late. If payments are at least 30 days late, loans and credit cards can be reported as delinquent, which can hurt your credit.

And if a payment bounces more than once, a company might send the bill to a collections agency. This information could appear on a credit report and damage your credit. If you don’t pay your NSF fees, the bank may send your debt to a collection agency, which could be reported to the credit bureaus.

Also, keep in mind that any bounced checks or overdrafts could be reported to ChexSystems, a banking reporting agency that works similarly to the credit bureaus. Too many bounced checks or overdrafts could make it hard to open a bank account in the future.

What Happens if You Don’t Pay Your NSF Fees?

If you don’t pay your NSF fees, the bank could suspend or close your account and report your negative banking history to ChexSystems. This could make it difficult for you to open a checking or savings account at another bank or credit union in the future. In addition, the bank may send your debt to a collection agency, which can be reported to the credit bureaus.

How Much Are NSF Fees?

NSF were once as high as $35 per incident but have come down in recent years. The average NSF is now $19.94, which is an historical low.

When Might I Get an NSF Fee?

NSF fees can be charged when there are insufficient funds in your account to cover a check or electronic payment as long as the bank’s policy includes those fees.

Recommended: Negative Bank Balance: What Happens to Your Account?

What’s the Difference Between an NSF and an Overdraft Fee?

An NSF fee can be charged if there aren’t enough funds in your account to cover a transaction and no overdraft protection exists. The check or transaction will not go through, and the fee may be charged.

Some financial institutions, though, do provide overdraft protection. If you opt in to overdraft protection and you have insufficient funds in your account to cover a payment, the bank would cover the amount (which means there is no bounced check or rejected payment), and then the financial institution may charge an overdraft fee. So with overdraft, the transaction you initiated does go through; with an NSF or returned item situation, the transaction does not go through and you need to redo it. Fees may be assessed, however, in both scenarios.

How to Avoid NSF Fees

There are ways to avoid overdraft fees or NSF fees. Here are some strategies to try.

Closely Watch Your Balances

If you know your bank balance, including what’s outstanding in checks, withdrawals, and transfers, then a NSF situation shouldn’t arise. Using your bank’s mobile app or other online access to your accounts can streamline the process of checking your account. Try to get in the habit of looking every few days or at least once a week.

Keep a Cushion Amount

With this strategy, you always keep a certain dollar amount in your account that’s above and beyond what you spend. If it’s significant enough, a minor slip up still shouldn’t trigger an NSF scenario.

💡 Quick Tip: If your checking account doesn’t offer decent rates, why not apply for an online checking account with SoFi to earn 0.50% APY. That’s 7x the national checking account average.

Set Up Automatic Alerts

Many financial institutions allow you to sign up for customized banking alerts, either online or via your banking app. It’s a good idea to set up an alert for whenever your balance dips below a certain threshold. That way, you can transfer funds into the account to prevent getting hit with an NSF fee.

Link to a Backup Account

Your financial institution may allow you to link your savings account to your checking account. If so, should the checking balance go below zero, they’d transfer funds from your savings account to cover the difference.

Use Debit Cards Strategically

If you use your debit card to rent a car or check into a hotel, they may place a hold on a certain dollar amount to ensure payment. It may even be bigger than your actual bill. Depending upon your account balance, this could cause something else to bounce. So be careful in how you use your debit cards.

Look for No-Fee Overdraft Coverage

You can avoid NSF fees by shopping around for a bank that offers no-fee overdraft coverage.

The Takeaway

Returned item fees (also known as NSF fees) can be charged when there are insufficient funds in your account to cover your checks and electronic payments. When you get hit with an NSF fee, you’re essentially getting charged money for not having enough money in your account — a double bummer. To avoid these annoying fees, keep an eye on your balance, know when automatic bill payments go through, and try to find a bank that does not charge NSF fees.

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 4.20% APY on SoFi Checking and Savings.

FAQ

What happens when you get an NSF?

If you get charged an non-sufficient funds (or NSF) fee, it means that a financial transaction has bounced because of insufficient funds in your account. You will owe the fee that’s listed in your bank’s policy.

Is an NSF bad?

If a financial transaction doesn’t go through because of insufficient funds, then this can trigger returned item charges (NSF fees). This means you’re paying a fee for not having enough money in your account to cover your payments, a scenario you generally want to avoid.

Does an NSF affect your credit?

An NSF fee does not directly affect your credit, since banking information isn’t reported to the consumer credit agencies. However, if a bounced check or rejected electronic payment leads to a late payment, the company you paid could report the late payment to the credit bureaus, which could impact your credit.

Photo credit: iStock/MicroStockHub

SoFi members with direct deposit activity can earn 4.20% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.20% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

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

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

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

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 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.

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.

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

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May
20
2024
Can I Deposit Foreign Currency Into My Bank Account? 5 Steps for How to Do It

Can I Deposit Foreign Currency Into My Bank Account? 5 Steps for How to Do It

By | Budgeting & Goals, money | Comments Off on Can I Deposit Foreign Currency Into My Bank Account? 5 Steps for How to Do It

If you’ve ever returned from a trip and wondered if it’s possible to deposit foreign currency into your U.S. bank account, the answer is yes — but not directly. Typically, you need to convert the money back to U.S. dollars first, then make the deposit. And there may be a few steps — and costs — involved in that process.

Let’s take a look at the five steps involved in depositing foreign currency to a bank account, as well as your alternatives.

Key Points

•   Depositing foreign currency into a U.S. bank account requires converting it to U.S. dollars first.

•   Initial contact with your bank is advised to check if they offer currency exchange services.

•   If your bank doesn’t offer the service, other financial institutions might help convert the currency.

•   Understanding the official exchange rate and potential fees is crucial before converting currency.

•   After conversion, the U.S. dollars can be deposited into your bank account.

How to Deposit Foreign Currency into a Bank Account

If your pockets are jingling with foreign currency and you want to deposit it into your bank, you’ll have to exchange it into U.S. dollars first. If you live in a major city or have an account at a larger bank, you may not have too much trouble accomplishing this. If not, you might have to shop around a bit for another bank or business that can help. Let’s take a closer look at how this works.

💡 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.

1. Check With Your Bank First

It may save time if you contact your own bank or credit union (or look on its website) to see if it offers foreign currency exchange services. Many financial institutions require that you have a checking or savings account with them in order to do an exchange. This could wind up being a win-win for you.

If they do offer to exchange foreign currency, you may want to schedule an appointment to make the exchange instead of just going in and heading to the nearest teller. That way, you can be sure the bank staff is ready for the transaction, that it can take the currency you’re carrying, and that a knowledgeable person will be on hand to assist you and answer your questions. You can call your branch, or you may be able to make the appointment online or on the bank’s mobile app.

2. Find a Bank to Convert Foreign Currency to U.S. Dollars

If your bank can’t do the exchange, another financial institution may be willing to work with you. It’s a good idea to reach out in advance and be clear about the type of currency you have, how much you have, and whether you have to have an account with that financial institution. This will save you time and energy versus just strolling into local brick-and-mortar banks.

Recommended: How to Deposit Cash at Local and Online Banks

3. Sell Foreign Currency to Buyer of Choice

Whether it’s your local branch bank, your bank’s larger main office, or a different bank than you usually use, you’ll likely have to do the transaction in person. It’s a good idea to come prepared with a current photo ID and some understanding of what will happen when you get there. Here are a few things to be aware of:

•   The bank may have a required minimum value — $20 in U.S. dollars, for example — for the currency you hope to exchange. If you don’t have that much leftover currency to exchange, you might decide to just keep what you have as a souvenir, save it for another trip, or give it to a friend or family member who plans to travel abroad.

•   The bank may only be able to exchange commonly requested foreign currencies. If you have Canadian dollars, Euros, or Mexican pesos, for example, things should go smoothly. But if you come in with paper money you picked up a bit off the tourist-beaten path, you may be out of luck. Checking in advance about services offered can be a very good idea before you head to a location.

4. Learn the Official Exchange Rate

Before you went on your trip, you probably had to figure out how much of the country’s currency you needed and how much getting that money would cost you in U.S. dollars. (Or perhaps your banker or travel agent did the math for you.)

That amount was calculated using the current exchange rate (the basic cost to exchange one country’s currency for another), plus whatever the bank charged you to convert your dollars prior to your trip.

The process is the same when you return and want to convert back to U.S. dollars. The amount of money you’ll get when you hand over your leftover currency (Euros, yen, rupees, pesos, etc.) will be based on the current rate of exchange for that currency, plus the bank’s markup.

It’s important to note that exchange rates fluctuate frequently, based on what’s happening in foreign currency markets. It’s probable that the exchange rate when you get home from your trip may not be the same as when you were preparing to travel.

You can check the exchange rate online at sites like Google Finance, Xe, and Oanda. Just keep in mind that wherever you end up exchanging your currency, a fee will likely be added.

The bank also may charge a transaction fee that’s based on how much currency you’re converting. This could be on top of the fee that’s already figured into the exchange rate.

5. Deposit the Money in Your Bank Account

Can you deposit foreign currency directly into your account? No. But once you’ve exchanged your foreign currency to U.S. dollars, go right ahead! You can deposit the money into your bank account — or do anything with it you like.

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 4.20% APY on savings balances.

Up to 2-day-early paycheck.

Up to $2M of additional
FDIC insurance.


What Banks Will Not Accept

While you may want to exchange and deposit all of your foreign currency after you travel, be prepared to hear a couple of “sorry, but no” responses. Specifically, banks generally won’t accept any foreign coins. They also won’t exchange old foreign currency that isn’t in use anymore (so if you were hoarding some French francs or Italian lira, you are out of luck unfortunately). And if the bills you have are in bad condition, you may have trouble exchanging them.

💡 Quick Tip: Bank fees eat away at your hard-earned money. To protect your cash, open a checking account with no account fees online — and earn up to 0.50% APY, too.

Other Places to Exchange Foreign Currency

If you can’t find a bank that can exchange your leftover foreign currency, you may have a few other options, depending on where you live. It can take a bit of research and/or legwork, but if you have more than a few dollars left from your travels, it can be well worth it.

Some possibilities include:

•   You can try a large hotel. If you live near a hotel that’s popular with international visitors, you may be able to sell your currency there. There could be an exchange desk or the front desk could prove helpful.

•   Your travel agency may be able to help. If you worked with a travel agent, see if they might be willing to exchange your foreign currency back to U.S. dollars. Or your agency may have suggestions for where you can go to have the currency converted.

•   You can exchange money at an airport kiosk. If you’re flying into an international airport, you can convert your remaining foreign currency at a booth that sells this service. But customers typically pay a higher markup for this easy access, so you might want to weigh the cost vs. the convenience.

•   You can look for a nearby currency exchange storefront. One way to find local businesses that might exchange your foreign currency is to simply do an online search of the term “currency exchanges near me.” Once you get a list and/or map of local exchanges, you can check out their websites or contact them to see if they will convert your money, what they’re charging, and if they’re licensed. Remember, the markup will be higher at some locations than others, so you may be able to save money by doing a little research.

In the future, if you want to avoid the inconvenience and cost of coming home with foreign currency, you could go old-school with traveler’s checks. But they can be more difficult to get and use than in the past — and they also may come with a cost.

Recommended: What Is a Foreign Currency Bank Account?

The Takeaway

If you come home from a trip (welcome back, btw) with leftover foreign currency, don’t expect to deposit that money directly into your bank account. You’ll likely have to exchange those foreign funds to U.S. dollars first, then make the deposit.

A local bank or credit union may be willing to convert your foreign currency if you have an account there. But if not, you’ll likely have to do some research to find the most convenient and affordable alternative for making the exchange.

All this talk about fees leads us to an option: Consider opening a SoFi Checking and Savings account, and start banking better. Open an account with direct deposit, and you will have access to any of the fee-free 55,000+ ATMs in the worldwide Allpoint Network when you travel. But the benefits don’t end there: SoFi Checking and Savings currently offers a competitive APY, and you won’t pay account fees.

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 4.20% APY on SoFi Checking and Savings.

FAQ

Can you deposit foreign currency into an ATM?

Probably not. ATMs generally accept only one type of currency. Instead of using an ATM, you likely will have to go in person to your local branch bank to exchange foreign currency, then deposit it into your checking, savings, or money market account. Or, you may need to seek out another location to complete your currency exchange.

Can I receive money from abroad into my bank account?

Yes, you can use an international money transfer service to send money from abroad directly into your bank account. The process may differ depending on the service provider you choose to send the funds, but you should be prepared with some key bits of information.

You typically need to provide your full bank account number, your full name (as it appears on your account), the bank’s address for incoming wire transfers, and a Swift Code that identifies your bank. The fees involved will vary. And the current exchange rate will apply, as your foreign currency will be converted into U.S. dollars before the funds are credited to your account.

Photo credit: iStock/Agustin Vai

SoFi members with direct deposit activity can earn 4.20% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.20% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

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

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

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

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 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.

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.

Our account fee policy is subject to change at any time.

SOBK0124035

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May
20
2024
Sending & Receiving Money From Someone Without a Bank Account

How to Send Money to Someone Without a Bank Account

By | Budgeting & Goals, Building Your Career, money | Comments Off on How to Send Money to Someone Without a Bank Account

Many people send and receive funds via their checking account, the hub of their financial life. But not everyone has an account. In fact, an estimated 4.5% of U.S. households (approximately 5.9 million) were “unbanked” in the most recent year studied, according to the FDIC. This means that, in their household, no one held a checking or savings account at a financial institution such as a bank or credit union.

Not having a bank account can make it more challenging to send and receive money, but it’s not impossible. Here, you’ll learn how you can move funds around without a bank.

Key Points

•   Many U.S. households do not have a bank account, making traditional money transfers challenging.

•   Before choosing a transfer method, consider reliability, cost, and security.

•   Mobile wallets offer a convenient way to send and receive money without fees.

•   Money orders provide a reliable alternative for transferring funds without a bank.

•   Prepaid debit cards and money transfer services are practical options, though they may involve fees.

What to Consider Before Choosing a Transfer Method

As with all financial services, you don’t want to rush and just go with the first method available. Each option you review will probably have its pluses and minuses. If you are trying to send or receive money without a bank account, do your research. Consider these important factors as you move toward making your decision.

Reliability

Reputation matters, always — and especially with something as important as money. You want to use services that have been around long enough to have a track record. You can start by asking your inner circle of friends and family to hear what they use. You can read online reviews as well at trusted sites. Key things to consider are whether money transfers were completed successfully, on time, and without excessive charges.

Transfer Cost

Without a bank account, you may not have the ease of, say, having your paycheck direct-deposited via Automated Clearing House (or ACH) or using a debit card. In fact, you may have to spend time and money to send or receive some cash. So read the fine print on the options you are considering to make sure you’re clear on the fee structure.

When it comes to how to transfer money from one account to another, what will you be charged for and what’s free? Will there be certain criteria to meet in order for a transaction to be done without fees? You don’t want any surprises.

Security

Security is critical. When it comes to cash changing hands, you want to feel confident about safety. You don’t want to risk your hard-earned dough getting stuck in the ether somewhere or vanishing entirely. Look into what layers of protection are in place, such as two-step authentication, data encryption, and an adequate privacy policy. Fraud and identity theft are rampant these days, so safeguarding financial information is a must.

💡 Quick Tip: Help your money earn more money! Opening a bank account online often gets you higher-than-average rates.

Options for Sending and Receiving Money Without a Bank Account

With all those factors in mind, here are specific options you may have to send or receive funds without a bank account involved.

Mobile Wallets

Here’s one idea for how to send money to someone without a bank account: mobile wallets, or digital wallets. These are smartphone apps where you can store your debit and credit cards. Apple Pay, Google Pay, and Samsung Pay are a couple of examples you may have heard of. These services offer a way to pay a friend without cash exchanging hands. Or you might receive funds. Some points to note:

•   There are often no fees involved, and you may enjoy cash back and other rewards for completing a transaction with your linked card.

•   Both the sender and receiver must have the same digital wallet for the transaction to be free. If you have PayPal or Venmo, your recipient needs to have them too in order to do a peer-to-peer or P2P transaction.

•   Fees may apply when using extras like expedited transfers or paying by credit card, and mobile wallets in the US are often restricted to transfers within our country.

•   Mobile wallets can get all sorts of information as you use them — your name, mailing and email addresses, mobile number, records of your calls and texts, your contacts and calendar, the unique ID number of your mobile device, account information, what you buy and where and for how much. Not everyone is comfortable with sharing all of that personal data.

Money Orders

Money orders may seem like they’ve gone the way of the dinosaur, but they still serve a purpose, including offering a way to send money without a bank account (or to someone who is unbanked). Some details:

•   You get one from the post office or stores like CVS and Western Union, among others.

•   They may not be the fastest way to send money without a bank account.

•   The recipient will need to show identification to cash it.

•   Prices vary depending on the service you use and how much money is sent, but they can be reasonably priced. For instance, at the post office, you may pay $2.10 for a money order up to $500 and $3.00 for one that’s more than $500, up to $1,000. By the way, money orders are typically capped at $1,000. You could buy multiple ones if you need to transfer more than that amount.

Credit Cards

If you don’t have a bank account to fund the transfer, know that some money transfer services allow you to pay by credit card. Then, your recipient will be able to pick up cash pretty much instantly. It’s easy and convenient, but it’s likely to be more expensive than other methods.

For example, Cash App allows you to use a credit card to send funds, but will charge you 3% of the transaction value, and then the credit card you’ve linked may also charge you interest or fees. This might not be your first choice if you have less pricey options available.

Prepaid Debit Cards

A prepaid debit card is another way to move money when a person doesn’t have a bank account. It shares some features of a credit card, debit card, and gift card.

•   It is a debit card that’s been pre-loaded with money, and you can generally use it at any retailer (online or in person) that accepts credit cards.

•   Prepaid debit cards may be associated with credit card networks; think MasterCard or Visa, for example. This means they can be used anywhere that accepts that kind of plastic.

•   These cards may be riddled with fees. For instance, you might get hit with a fee for card activation, making a purchase, adding money to the card, and/or withdrawing money at an ATM. You’ll want to read the fine print because these fees may make prepaid cards a less attractive option.

Recommended: Alternatives to Traditional Banks

Cash or a Check

Cash is king and can be a super-simple way to send or receive funds, even if you don’t have a bank account, provided you can safely hand over the bills. If the two parties involved are in different locations, this becomes a lot riskier. Mailing cash is probably never a wise move.

Checks are also a time-honored way to transfer money; the person who receives it can then cash the check, perhaps paying a fee since they don’t have a bank account. But if you use mail to send the payment, a lost check situation can occur or a check might be stolen. So, there could be some risk involved.

Money Transfer Services

Money transfer services can be a godsend. No bank account is required for either the sender or recipient. It’s easy. In addition to in person retail outlets, you can now access money transfer services like Western Union and MoneyGram online.

•   It’s a quick transaction; money can arrive as early as the same day.

•   You have some flexibility, such as sending money transfers to a debit card or a mobile wallet.

•   Pay attention to fees, though, as they vary and depend on the amount you’re sending and more. For example, if you use Western Union to send money to someone in Mexico, the fee could be anywhere from $4.99 to $26.49 or more, depending on the specifics.

The Takeaway

Having a bank account can be a cornerstone of good money management, but there are a number of Americans who don’t have one. If, for whatever reason you are without one or you want to transfer money with someone who doesn’t have an account, there are still ways to send and receive money. These include digital wallets, money orders, money transfer services, and other options. Some will have fees and security risks, among other downsides. Take your time to explore the safest, most convenient, and affordable choice for your situation.

If you are an account holder in this situation, you might also see what options your financial institution offers to simplify transfers.

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 4.20% APY on SoFi Checking and Savings.

FAQ

Can I transfer money to someone without a bank account?

Yes, there are a number of options to transfer money if someone doesn’t have a bank account. These include using a money transfer service, prepaid debit card, mobile wallet, or money order.

What is the best way to transfer money to someone without a bank account?

What’s best depends on the two people involved. What are any time constraints, what is cost-effective, and what method is most convenient? Once these and other factors are considered, you can determine the best method, which might be a money transfer service, a mobile wallet app, a money order, or a prepaid debit card.

How much does it cost to send money without a bank account?

Costs vary depending on the method you use, the amount of money you’re sending, and whether it is being transferred domestically or internationally. While a domestic money order from the U.S. Postal Service will cost up to $3.00 for an amount between $500 and $1,000, you might wind up paying considerably more for other transactions.

Photo credit: iStock/santypan

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 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 4.20% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.20% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

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

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

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

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

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

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2024
What Is a Bank Account Number? How to Find It

What Is a Bank Account Number?

By | Budgeting & Goals, Financial Independence, money | Comments Off on What Is a Bank Account Number?

Your bank account number is a series of digits that identifies your account. Each account has its own unique number issued by the bank, and you’ll need to know it in order to carry out a number of financial transactions, such as transferring money between accounts or setting up direct deposit.

Here’s a closer look at what a bank account number is and how to keep yours safe.

Key Points

•   A bank account number is a unique series of digits assigned to a specific account by a bank.

•   These numbers can range from eight to 17 digits, depending on the bank’s system.

•   The number is essential for conducting financial transactions like money transfers and setting up direct deposits.

•   Unlike a debit card number, a bank account number solely identifies an account, not the card.

•   Protecting your bank account number is crucial to prevent identity theft and should be done by securing personal banking documents and using secure internet connections for transactions.

How Many Digits Are in a Bank Account Number?

Each bank assigns numbers to accounts based on a proprietary system, and the numbers can be up to 17 digits long, but are typically between eight and 12 digits.

In use since the 1960s, bank account numbers are used by financial institutions to help them differentiate among the many accounts that they hold for customers. You get one when you open a bank account, and each account has a different account number, even if the account holder is the same.

For example, if you hold multiple bank accounts at a single institution, the bank account numbers keep them distinct. That might mean you have a checking and a savings account at a bank or you have two savings accounts earmarked for different purposes at a bank, for instance.

💡 Quick Tip: Want to save more, spend smarter? Let your bank manage the basics. It’s surprisingly easy, and secure, when you open an online bank account.

What Is a Bank Account Number Used For?

A bank account number is a unique identifying number which, along with the routing number (indicating which bank holds the account), can be used to direct funds into and out of a customer’s account.

For example, when you write a check, the account number tells the receiving bank where to draw funds from. When you sign up for direct deposit, the account number directs your paycheck to the right place.

Is a Bank Account Number the Same as a Debit Card Number?

A bank account number and a debit card number are not the same, even if they relate to the same account. The account number identifies only the account.

The debit card number is a separate, different set of digits that is used to pull funds out of your bank account. You might think of it as a code that shares information about the bank identification number (the issuer), a set of digits that indicate your bank account (but doesn’t repeat your account number), and a numeral that signifies whether your card is valid.

Recommended: How Do Banks Make Money?

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 4.20% APY on savings balances.

Up to 2-day-early paycheck.

Up to $2M of additional
FDIC insurance.


How to Protect Your Bank Account Number

Your bank account number is an important piece of confidential information. What can someone do with your bank account number? Because you need it to conduct transactions with your bank, hackers and criminals looking to commit identity theft or fraud could find it useful. Keeping this number confidential is important, so here are ways to protect it – and your security.

•   Keep paper checks, which have your bank account and routing number printed on them, in a secure place. Shred used or void ones.

•   If you are doing an online or mobile banking transaction involving your bank account number, be sure you have a strong password and are using a private and secure internet connection. Avoid doing banking while using a public connection at, say, a hotel or cafe.

•   Only enter your bank account number on secure websites, meaning ones that start with “https” and may show the little lock icon.

•   Monitor your checking account and other accounts carefully, and keep an eye on your bank statements. Look out for purchases or money transfers that you don’t recognize or that you didn’t make, and alert your bank about any unusual activity.

Recommended: How to Avoid ATM Fees

The Takeaway

Your bank account number is akin to a fingerprint: uniquely yours. It’s a valuable piece of information you’ll need for any number of banking transactions. It’s also information you should protect as best you can by carefully disposing of paper checks and statements and practicing secure banking online.

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 4.20% APY on SoFi Checking and Savings.

Photo credit: iStock/filadendron

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 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 4.20% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.20% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

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

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

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

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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May
20
2024
What Is an Add-On Certificate of Deposit?

Guide to Add-On Certificates of Deposit

By | Budgeting & Goals, Growing Wealth, money | Comments Off on Guide to Add-On Certificates of Deposit

A certificate of deposit (CD) can be a good savings vehicle, and an add-on CD can be even better if you crave more flexibility. Traditional CDs allow you to save money for a set term while earning interest. Typically, when you open a CD, you make a one-time opening deposit and leave it in the account until the end of the term.

But add-on CDs offer a convenient twist on that basic principle: They are CDs which permit you to deposit additional funds after the account is opened.

Banks and credit unions may offer add-on CD accounts alongside other types of CDs. Whether it makes sense to open an add-on CD can depend on your financial goals.

Key Points

•   An add-on certificate of deposit (CD) allows additional deposits after the initial investment.

•   This flexibility can be beneficial for those who want to increase their savings gradually.

•   Add-on CDs typically offer lower initial deposit requirements compared to traditional CDs.

•   Interest rates for add-on CDs might be lower than those for traditional CDs.

•   Early withdrawal penalties may apply, which could affect the total interest earned.

What Is an Add-On CD?

Certificates of Deposit (CDs) are designed to help you save money that you can afford to “lock up” for a period of time. Generally, when you open a CD account, you make an initial deposit. That deposit earns interest throughout the CD’s term until it matures, or becomes accessible again. The term can be anywhere from a month to 10 years, but many people opt for several months or a few years.

Once the CD matures, you can withdraw your initial deposit and the interest earned, or you can opt to roll the entire amount into a new CD. CDs typically pay a higher interest rate than a traditional savings account but still keep your money safe, since these accounts are federally insured.

Add-on certificates of deposit, sometimes referred to as add-to CDs, give you the option to make additional deposits to your CD after opening the account. So, for example, you might open an add-on CD with an initial deposit of $500. You might then choose to deposit $100 per month into the CD account for the remainder of the maturity term.

The bank or credit union with which you open the add-on certificate of deposit account might require additional deposits to be made via automatic transfer. There may also be a minimum amount that you’re required to deposit monthly or bimonthly.

💡 Quick Tip: Help your money earn more money! Opening a bank account online often gets you higher-than-average rates.

How an Add-On CD Works

An add-on certificate of deposit account works much the same as any other CD, with one exception: You can make additional deposits to the account. Opening an account for a CD add-on starts with choosing a CD term. This is the length of time you’ll leave the money in your account.

Choosing the right term for an add-on CD matters for two reasons. First, it can determine how much interest you’ll earn on deposits. The longer the term, the more time your money has for compound interest to accrue. Banks and credit unions may also reward you with a higher interest rate and annual percentage yield (APY) for choosing a longer add-on CD term.

Second, you need to be fairly certain that you won’t need to withdraw money from an add-on CD account before it matures. Banks can impose penalties for early CD withdrawals, which can be equivalent to some or all of the interest earned. The penalties might even take a bite out of your principal.

Once you choose an add-on CD to open, you can complete the application and make the initial deposit. The amount required to open an add-on certificate of deposit accounts can vary from bank to bank. It’s typically less than for a traditional CD; perhaps $100. You can also decide how much you’d like to contribute to your add-on CD each month going forward.

As you make new deposits to your add-on CDs, that amount gets added to the principal and earns interest. You’ll then earn interest on the principal and interest as the CD compounds over time.

Recommended: How Long Does it Take to Open a New Bank Account?

Can You Add Money to a CD Before It Matures?

Generally, you cannot add money to a traditional CD beyond the initial deposit you make when you open the account. Once the CD reaches maturity, your bank may allow you a grace period of seven to 10 days in which you can make new deposits to the account. You might choose to add money during the grace period if you plan to roll the funds into a new CD account.

Add-on CDs give you more flexibility since you’re not bound by such strict rules for deposits. You can set up additional deposits to your CD to continue growing your balance, based on an amount that fits your budget and savings goals. You could even take investing in CDs a step further and create a CD ladder.

A CD ladder strategy involves opening multiple CDs, add-on or otherwise, with varying maturity terms and interest rates. Rolling maturity dates mean you may not have to worry about triggering early withdrawal penalties if you need cash. Why? Because with the staggered terms, you can always have a CD getting close to its maturity. This means you’re likely to soon have access to your cash. Laddering also allows you to take advantage of interest rate hikes if they occur.

Recommended: A Beginner’s Guide to Investing in CDs

Add-On CD vs Traditional CD

You might consider add-on CDs and traditional CDs if you’re comparing different types of high-interest accounts. Either type of CD could help you to achieve your savings goals. Before opening an add-on or traditional CD, it helps to know how they compare.

•  Add-on CDs allow you to add money after account opening; traditional CDs do not.

•  Minimum deposit amounts may be lower for add-on certificate of deposits versus traditional CDs.

•  Banks may offer different interest rates for add-on CDs vs. traditional CDs.

•  Different early withdrawal rules and penalties may apply.

When deciding where to open a certificate of deposit account, first consider whether add-on CDs are an option. Then you can look at the interest rates offered and the CD terms available.

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 4.20% APY on savings balances.

Up to 2-day-early paycheck.

Up to $2M of additional
FDIC insurance.


Advantages of Add-On CDs

Opening an add-on certificate of deposit account is something you might consider if you’re looking for something other than a traditional CD or a more flexible financial vehicle. Understanding the benefits of add-on CDs can help you decide if this is the right savings option for you.

Low Minimum Deposit

CDs impose a minimum deposit requirement; otherwise, you’d have no money to earn interest on. These minimums are often around $500 or $1000 or more. Banks may offer lower initial deposits for add-on CD accounts to get you to open them and continue depositing money later. You might find ones in the $100 range. That can be an advantage if you want to save with CDs but you don’t have a large amount of money in your bank account to deposit up front.

Guaranteed Return

If you’re looking for safe investments, it doesn’t get much safer than CDs. Add-on CDs can offer a guaranteed return for your money since you’ll know what the interest rate and APY are before opening the account. You can then use a CD calculator to estimate how much of a return you’ll get for your money over the maturity term.

Flexibility

Perhaps the biggest advantage of add-on CDs is the flexibility they offer. With a traditional CD, you make one deposit and that’s it. You can’t add anything else until the CD matures. An add-on CD, however, gives you the option to continue saving at a pace you can afford.

Disadvantages of Add-On CDs

Add-on CDs have some attractive features but they aren’t necessarily right for everyone. There are few potential drawbacks to keep in mind if you’re debating whether an add-on CD account might fit into your savings plan.

Lower Rates

Banks may offer lower interest rates for add-on CDs and reserve higher rates for traditional CDs. When comparing add-on CDs, consider the different rates you might get at traditional banks vs. online banks. An online bank may be the better choice if you’re hoping to get the highest rate possible for add-on CDs. Or, check and see what kinds of interest rates are being offered on high-yield savings accounts. You might find you fare better with one of those.

Early Withdrawal Penalties

Add-on CDs allow you to add money on your own terms but there are restrictions on when you can take money back out. Remember, the bank can charge an early withdrawal penalty if you decide to pull money from your CD before maturity. Penalties could cost you some or all of the interest earned.

Guaranteed Return

An add-on CD can offer a guaranteed return but it might not match the return you could get by investing your money elsewhere. Trading stocks, exchange-traded funds (ETFs), or IPOs, for example, could yield a better return on your money but there’s risk involved — you could also lose your money.

💡 Quick Tip: Most savings accounts only earn a fraction of a percentage in interest. Not at SoFi. Our high-yield savings account can help you make meaningful progress towards your financial goals.

Example of an Add-On CD

Now that you know the pros and cons of add-on CDs, let’s zoom in on how exactly one might be set up to help you save. Let’s say you open an add-on 12-month CD that earns 5% APY and make an initial deposit of $1,000. At the six-month point, you’ve earned $24.70 in interest and your balance is now $1,024.70. You decide to deposit another $1,000. That extra cash earns the same 5% APY. When the CD matures, you’ll have around $2,075.

The Takeaway

Add-on CD accounts can help you reach your savings goals while offering more flexibility than other CDs. Before opening an add-on CD, it’s helpful to shop around to see which banks or credit unions offer them and how much interest you might be able to earn. You may also want to compare rates to what you could earn in a high-yield savings account (which offers even more flexibility). Also check into the minimum deposit required and different term lengths to find the best match for your needs and financial goals.

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 4.20% APY on SoFi Checking and Savings.

FAQ

What is an add-on CD?

An add-on CD is a certificate of deposit account with more flexibility. It allows you to make additional deposits after the CD has been opened. Banks may impose a minimum deposit requirement, and you may need to automate deposits to add-on CDs.

Can you add additional funds to a CD?

CDs typically do not allow you to make additional deposits once your CD account has been opened. Add-on CDs, however, are designed to allow additional deposits before the CD matures.

Photo credit: iStock/Atstock Productions

SoFi members with direct deposit activity can earn 4.20% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.20% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

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

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

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

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 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.

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

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

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