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Q: Are prize-linked savings accounts legal?

Yes, prize-linked savings accounts are legal in 34 states. Congress passed the American Savings Promotion Act in 2014, which authorizes banks and thrift banks to conduct savings promotion raffles.

Q: Is a lottery account safe?

Lottery accounts are a safe way to save money. There is no actual gambling involved with a prize-linked savings account. Account holders get to keep all of their savings whether or not they win prize money.

Jun

2024

Guide to Prize-Linked Savings Accounts (PLSA)

By Jacqueline DeMarco | Budgeting & Goals, Growing Wealth, money | Comments Off

Everyone likes to win big. So what if saving money could offer the potential to win more money? Such a scenario is possible, thanks to prize-linked savings accounts that combine a normal savings account with an opportunity to win prize money.

🛈 Currently, SoFi does not provide prize-linked savings accounts to members.

What Is a Prize-Linked Savings Account?

A prized-linked savings account is essentially a savings account that gives account holders the opportunity to win prizes. In addition to their presence in the U.S., are found in other countries, including Germany, Argentina, and Japan.

The way that prize-linked savings accounts work is they allow account holders to enter raffles to earn cash prizes. If you have one of these prize accounts, how would you enter? By making deposits into a savings account. Currently, these types of accounts are offered by financial institutions such as credit unions in more than 30 different states.

These savings accounts earn a nominal amount of interest and aren’t a solid replacement for a traditional savings account or a high-yield savings account in the long run.

However, prize-linked savings accounts may be good for short-term savings. They’re designed to encourage people with low- or moderate-income levels to save more.

Types of Prize-Linked Savings Accounts

To make it easier to understand how prize-linked savings accounts work, here are a few real-life examples of these savings accounts that are available domestically.

Save to Win

Save to Win allows participating credit unions to hold savings promotion raffles. Every qualifying $25 an account holder deposits into a Save for Win account earns them an entry into a drawing for cash prizes. Save to Win says it awards more than $200,000 in prizes every year.

Lucky Savers

Lucky Savers is designed to motivate New Yorkers to save by rewarding smart savings habits. This program is exclusive to credit unions and is formatted as a 12-month share certificate with unlimited deposit capabilities. Opening this account requires a $25 initial deposit. Then, for every $25 in month-over-month balance increase, account holders earn one entry into monthly and quarterly prize drawings.

WINcentive

WINcentive® Savings is another credit union-exclusive program. This program in Minnesota offers prize drawing entries for every $25 an account holder saves for up to four entries each month. Prize drawings occur monthly, quarterly, and annually. In 2023, $100,000 in cash prizes were awarded to account holders.

Are Prize-Linked Savings Accounts (PLSAs) Legal?

Prize-linked savings accounts are legal in approximately 32 states that have enacted legislation to allow these types of accounts. In response to concerns surrounding prize-linked savings programs, Congress passed the American Savings Promotion Act which authorizes banks and thrifts (a financial institution specializing in savings accounts and mortgages) to conduct savings promotion raffles. It also excludes these raffles from the prohibition against financial institutions dealing in lotteries.

Pros of Opening a Prize-Linked Savings Account

Depending on your circumstances and financial goals, a prize account can offer a number of advantages. The pros of these savings accounts are:

• Prize-linked savings accounts can incentivize individuals to save more money. Programs have found the amount of savers and savings amounts increase when there is a prize incentive.

• It’s possible to win money that can help offset monthly expenses or may be large enough to be the equivalent of a small lottery prize.

• It’s possible to win prize money without any of the typical risks that come with gambling or buying lottery tickets. These accounts are designed so that the account holder gets to keep their savings whether they win a prize or not.

Cons of Opening a Prize-Linked Savings Account

Along with the benefits, there are disadvantages to prize-linked savings accounts. These include:

• Prize-linked savings accounts earn little to no interest. The chance of winning money may not be worth forgoing a bank account with a higher yield.

• Winning any prize money at all is not guaranteed and not predictable, like a steady stream of interest earnings is.

• These prize-linked savings accounts are often cheaper for financial institutions to offer than traditional savings accounts. For this reason, they might not promote the better savings options an account holder might have.

Opening a Prize-Linked Savings Account

If you want to open a prize-linked savings account, these are the steps you’ll generally take.

1. Find a credit union that offers prize-linked savings accounts. These accounts aren’t available in all states and are more commonly found at credit unions.

2. Apply to open a prize-linked savings account. The applicant will usually need to provide two forms of identification during the application process.

3. Make a deposit. Most prize-linked savings accounts have small initial minimum-deposit requirements.

Are There Taxes on PLSAs?

There are tax requirements surrounding prize-linked savings account winnings. Sure, you can go and spend money from your savings account that’s been plumped up thanks to a cash prize. However, anyone who wins money from one of these accounts should be prepared to pay taxes on their winnings according to state and federal laws.

Alternatives to a Prize-Linked Savings Account

Because there’s no guarantee that you will win any money with a prize-linked savings account, you may want to consider these other savings options that can offer a more guaranteed return.

• High-yield savings accounts. High-yield savings accounts are savings accounts with high interest rates. Often, high-yield savings accounts are found at online banks. Because online banks don’t have to spend a lot of money on brick-and-mortar banking locations, they may be able to offer higher interest rates, lower fees, or other bank account bonuses. High-yield savings accounts also allow consumers to take advantage of compound interest.

Learn more: Basics of High Yield Savings Accounts

• Money market account. Money market accounts are savings accounts that tend to have a higher annual percentage rate (APY) than traditional savings accounts do, but they may have withdrawal limits. Check with your financial institution to see if there is a cap on the number of withdrawals you can make per month.

• Certificate of deposit. A certificate of deposit (CD) generally has a minimum deposit requirement. It also has a set timeframe during which you can’t withdraw your money from the CD without having to pay a penalty fee. CDs may have higher interest rates than both savings accounts and money market accounts.

The Takeaway

The potential to win prize money through a prize-linked savings account can make saving more appealing for some consumers. That being said, these accounts tend to have much lower interest rates than traditional savings accounts, and there is no guarantee the account holder will ever win any money. Before opening one, carefully consider if a prize-linked savings account can meet your needs or if you would be better off with a different financial vehicle, such as a high-yield savings account instead.

FAQ

Are prize-linked savings accounts legal?

Yes, prize-linked savings accounts are legal in about 32 states. Congress passed the American Savings Promotion Act in 2014, which authorizes banks and thrift banks to conduct savings promotion raffles.

Is a lottery account safe?

Lottery accounts are generally a safe way to save money. There is no actual gambling involved with a prize-linked savings account. These accounts are designed so that account holders get to keep all of their savings whether or not they win prize money.

How do I open a lottery account?

The process of opening a prize-linked savings account is the same as opening a normal savings account. Once someone finds a credit union that offers this type of savings account, they will apply and provide all of the information and identifying documentation required during the application process. Then they will make an initial deposit.

Photo credit: iStock/Tevarak

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.

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.

4.00% APY
SoFi members with direct deposit activity can earn 4.00% 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 4.00% 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 4.00% 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 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

This article is not intended to be legal advice. Please consult an attorney for advice.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

*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.

SOBK-Q224-1927357-V1

Jun

2024

Dormant Account: What Is a Dormant Bank Account?

Guide to Dormant Bank Accounts

By Alice Garbarini Hurley | Budgeting & Goals, Financial Independence, money | Comments Off

Dormant bank accounts have had no activity for a certain period of time, typically three to five years. That means no deposits, withdrawals, transfers, or other processes. They have just been sitting untouched. These inactive accounts can be charged inactivity fees by financial institutions, and if there is no activity for an additional period, the account may be closed.

This can be a rude awakening for some consumers, but a bank or credit union has the right to close a dormant account without your permission. Here are the facts you need to know to protect yourself.

What is a Dormant Account?

A dormant account is a financial account in which there hasn’t been any posted activity for a time period set by the bank or credit union. Activity includes such transactions as deposits, withdrawals, ATM usage, or transfers. FYI, earning interest doesn’t count as a posted activity because it is not initiated by you, the account holder.

The official definition of a dormant bank account varies by state and account type, but it most often happens if an account is inactive for three to five years. As with having a negative bank account balance and letting it sit, an inactive account is not a good sign for your wealth health.

💡 Quick Tip: An online bank account with SoFi can help your money earn more — up to 4.00% APY, with no minimum balance required.

How Does a Dormant Account Work?

These steps change a bank account from active to dormant:

1. No deposits, withdrawals, or transfers for one year. Some accounts get no love. Perhaps you ignore rainy-day savings while balancing your day-to-day budget and forget about an account. But 12 months with no transactions in an account will set this dormancy process in motion. (One of the top benefits of bank account linking on your bank’s website or app is that you can see all accounts at a glance. This can be a good way to fend off an account going dormant.)

2. The financial institution flags account as inactive. Nada is happening, not even a deposit, withdrawal, or transfer to pay for a Starbucks latte. The bank takes note and declares it a dormant bank account.

3. The financial institution starts charging an inactivity fee. Some banks charge zero, but others slap on fees of $5 to $15 per month. Look for these fees on your monthly bank statement.

4. After beginning one year, there’s no account activity for another two years. The timing varies by state. In California, Connecticut, and Illinois, for example, most bank accounts go dormant after three years. In Delaware, Georgia, and Wisconsin, five years must pass.

5. The financial institution changes the account from inactive to dormant. The bank will try to contact the account holder (a problem if you moved and didn’t update your address) and allow a certain amount of time for a response.

6. The financial institution closes the account and sends any leftover funds to the state. This is an automatic legal process called escheatment. But the story is still not officially over. You do have options if your assets have been transferred to the state due to a forgotten or lost bank account (more on this below).

Types of Accounts That Can Be Considered Dormant

Several different types of bank accounts can fall under the dormant account heading, including checking accounts, savings accounts, money market accounts, certificates of deposit (CDs), and investment accounts. Even safe deposit box holdings can be considered a dormant account if inactive for a number of years.

Worth noting: Your bank account might also be locked, or frozen, because of suspected fraud, unpaid child support, or unpaid bills. These are reasons why you have a frozen bank account, which is different from a dormant one.

What Is Escheatment?

If you have a bank account that is dormant, escheatment will likely occur. Escheatment is the process by which unclaimed assets are automatically transferred by the bank to the state. When this transfer happens, it means you can no longer reclaim your funds from your financial institution. If you want to get them back, you will have to take other steps.

Recommended: Guide to Bank Account Closure Letters

How Can I Reclaim Escheated Funds?

Every state must follow procedures to document the escheatment and is required to allow time for the original owner to come forward. Here is the process to get your money back:

1. Search a public database such as Unclaimed.org or MissingMoney.com to link to your state’s unclaimed funds. The search should be free of charge. Don’t put your trust in fraudster sites that charge any fee at all, even $1 for a “trial search period.”

2. If you see your name and property listed, follow the stated procedure to verify ownership. You will need to provide specific documents and of course, identification.

3. The money will be released to you.

Consequences of Having a Dormant Account

Having an account go dormant can impact your ability to access and use the funds.

• No withdrawals at ATM or branch

• No address changes

• Cannot add or delete joint account holder

• No online banking transactions

• No investment transactions

• No ATM card renewal

• You might wait months or even years to reclaim escheated funds from the state

• Risk of fraudsters stealing your escheated funds

Difference Between a Dormant and Frozen Account

A dormant account is a bank or investment account so named after showing no transactions over a period of three to five years.

A frozen account is a bank or investment account that is temporarily locked, meaning you cannot withdraw money or funds. Usually, an account is frozen because you owe money to a creditor or the government. You may need to take steps to remove a hold on your bank account.

Whether dormant or frozen, both situations can cause you financial hardship.

Why Does an Account Go Dormant?

An account goes dormant when the bank does not see any activity in it for three to five years. This can indicate that the account has been abandoned or forgotten.

Keeping Your Account From Going Dormant

To keep your checking or savings account from going dormant, be sure to use it regularly, even if it’s just to make a transfer or deposit from another of your linked bank accounts a couple of times a year. If you let it sit without any activity, you run the risk of the account going dormant.

When an account goes dormant but the funds haven’t been transferred out or your bank account is closed for any other reason, it’s wise to take steps to remedy the situation and either reopen your bank account or officially close it.

The Takeaway

Banks and credit unions take note of accounts that show no transactions for a long period of time. The dormant account process starts with one year of no activity. After three to five years, depending on your state, ends with your money being turned over to the state.

Looking for options for a bank account you’ll use often?

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 4.00% APY on SoFi Checking and Savings.

FAQ

What happens if my account is dormant?

If your account is deemed dormant due to inactivity for three to five years, your bank will try to notify you before closing it. If you don’t respond in the given period of time, the account will be closed and the money turned over to the state.

How do I reactivate my dormant account?

You can reactivate a dormant account with your bank or credit union between the time it has been declared dormant and the time the funds are turned over to the state. The key is responding promptly to the bank’s communication saying your account will be closed.

How many years is an account dormant for?

After a total of about three to five years “asleep” with no transactions (though this can vary by state), a bank moves an account to dormant status. The account remains dormant while the bank tries to contact the account holder before turning the funds over to the state.

Photo credit: iStock/AntonioSolano

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 4.00% 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 4.00% 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 4.00% 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 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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

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

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

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.

SOBK-Q224-1929352-V1

Jun

2024

Guide to Voucher Checks

By Jacqueline DeMarco | Family Finances, money, Terminology | Comments Off

Voucher checks (also called check vouchers) are an extended check format that includes payment details not typically seen on a standard check. For example, a payroll voucher check allows the recipient to view taxes and other deductions from their gross pay. Voucher checks get their name from the two detachable sections (the “vouchers” or stubs) below the check itself.

A disadvantage of voucher checks is the additional clerical work required by the business issuing the check. Keep reading for more insight into how voucher checks work.

What Is a Voucher Check?

Many consumers don’t know what a voucher check is. A voucher check is a type of check that has detailed informational sections attached. These vouchers outline what the content and purpose of the check is. The voucher check is typically printed as a full sheet of paper, with the check at the top and the two removable vouchers below.

The check payee holds on to the first voucher. Before cashing the check, the recipient will remove the remaining voucher and keep it for their records. Both parties can refer back to their vouchers in the event of a payment dispute.

A number of small businesses use voucher checks for employee payroll. Payroll vouchers, also referred to as “pay stubs,” usually list payroll deductions for taxes, insurance premiums, and other withholding items. This information can help employees better understand their pre- and post-tax income, and the breakdown of deductions.

💡 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 Do Voucher Checks Work?

For payees, voucher checks are handled the same as standard checks, with one exception: The payee should remove the voucher from the check before deposit. The voucher can be kept on file for future reference.

Anyone with a bank account can deposit a voucher check. Consumers who don’t have a bank account (about 1 in 20 Americans) can sign over a check to another recipient.

Or they might try cashing the check at a local bank or credit union for a fee. As with most corporate checks, recipients should try to deposit the check within 6 months or the check may expire.

Recommended: How to Balance a Checkbook

Who Uses Voucher Checks?

As mentioned above, voucher checks are commonly used by businesses to pay their staff or vendors. Even if a company uses direct deposit to pay employees, they may choose to keep a paper trail via a voucher check system.

Preparing a Voucher Check

Voucher checks (or check vouchers) may be prepared by a business’ accounts payable or payroll department, using the following steps.

• Step 1 All related documents — contracts, purchase orders, invoices, statements of accounts — are collected, either in hard copy or digitally.

• Step 2 A voucher is created that incorporates any relevant info from the backup documentation, but always includes the voucher number, bank name, payor, date, amount, and recipient.

• Step 3 The voucher is then attached to a standard written check, and both are signed by the authorized signatory.

• Step 4 Once the recipient deposits or cashes the check, the business will file its own voucher and supporting documents.

Advantages of a Voucher Check

There are important advantages associated with voucher checks, which prompts businesses to go to the extra effort. Here are some of them:

Documents Maintained in Check Voucher System

When preparing a check voucher, a business must first gather all supporting documentation. This helps keep all relevant paperwork organized and in one place. It’s not possible to maintain a check voucher system without doing this.

Records Are in Order With No Irregularities

The bookkeeping process is considerably simpler when a payroll department uses a check voucher system, because all important documents are easily accessible in one place, in hard copy or digitally. Also, check vouchers are numbered and filed in chronological order, which keeps filing systems simple.

Easier to Track Checks

Businesses commonly do not file check vouchers until the check is deposited or cashed. Only cleared checks are filed.

Disadvantages of Voucher Checks

There are downsides associated with voucher checks that small businesses in particular may want to keep in mind.

Maintenance Process Can Be Time-Consuming

Because of the additional documentation and organization requirements, it can be tedious for businesses to maintain a check voucher system.

Lack of Consumer Familiarity

Many consumers aren’t familiar with how paper check vouchers work, which can cause concerns about security. Consumers should take care to keep their vouchers private.

Check Voucher Alternatives

Some employers may choose to use the following alternative payment methods. None of these options, however, provides as extensive and organized a paper trail as check vouchers do.

• Standard checks. A simple physical check still provides some form of a paper trail. Paper checks can also be tracked digitally or via duplicate checks.

• Direct deposit. Many businesses and employees prefer the direct deposit route because of how fast and simple it is to electronically transfer the funds.

• Prepaid debit cards. This is a newer and less common payment option. Workers paid in prepaid debit cards won’t need a bank account to access their funds.

Recommended: How to Verify a Check

The Takeaway

Voucher checks (also called check vouchers) are an extended check format that includes payment details not typically seen on a standard check, such as taxes and other deductions from their gross pay. These checks can provide a details paper trail for both the business issuing the check and the recipient.

Need a good place to deposit your pay? See what SoFi offers.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.00% APY on SoFi Checking and Savings.

FAQ

How do you use a voucher check?

What is the difference between a check and a voucher?

Voucher checks get their name from the two detachable sections (the “vouchers” or stubs) below the check itself. The voucher portion outlines the content and purpose of the check. Aside from the voucher, the check portion works like a standard paper check.

What does a voucher check look like?

A voucher check is typically printed as a full sheet of paper, with the check at the top and two removable vouchers below. The vouchers contain additional payment information that usually isn’t included on a standard check.

SOBK-Q224-1931220-V1

Jun

2024

What Is the 30-Day No-Spend Challenge?

By Samuel Becker | Budgeting & Goals, Family Finances, relay | Comments Off

A 30-day no-spend challenge is a set period of time — 30 days, in this case — during which you can only spend money on absolute necessities. Allowed expenses include utility bills, rent, transportation costs, and groceries. Anything that falls outside the necessity bucket is banned for the 30-day duration.

With many people looking to cut back on expenses due to recent price increases, a 30-day no-spend challenge can be a great way to take stock of your spending habits and find ways to use your money more wisely.

How Does the 30-Day No-Spend Challenge Work?

Again, a no-spend challenge is a time period during which you stop spending money on anything other than what you absolutely need to live. To get started, you create a list of items and services you consider essential. When you review the list, ask yourself if all of your so-called essentials really are that important, or are some superfluous or impulsive?

Keep in mind that this challenge is designed to help curb troublesome overspending or more specific bad spending habits. So don’t beat yourself up if you do spend some money on wants versus needs.

💡 Quick Tip: We love a good spreadsheet, but not everyone feels the same. An online budget planner can give you the same insight into your budgeting and spending at a glance, without the extra effort.

Allowed Expenses During the 30-Day No-Spend Challenge

During the no-spend challenge, you will still need to pay your rent or mortgage, gas, utility bills, insurance, and things like your internet and phone bills. You can purchase essential personal care items, too, such as medications, groceries, and cleaning products. A budget planner app can help you decide on your “needs” list.

But the lines can get blurry. For instance, what happens if you wear out your shoes and want/need a new pair? After all, walking in cheap, poorly made shoes could lead to injury or avoiding activity. Feel free to give yourself some wiggle room in deciding what’s essential for you.

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Recommended: The 70/20/10 Rule for Budgeting

Forbidden Expenses During the 30-Day No-Spend Challenge

Remember that before you begin the challenge, you’ll be questioning what’s essential and how strict you want to be. It’s smart to decide in advance which of the following will be on your do-not-spend list:

• Eating out: fast food, restaurants, takeout, alcohol, coffees, etc.

• Personal care items or services

• Clothing

• Gifts and gift cards

• Home decor and furnishings

• Hobbies

• Entertainment: movies, concerts, books, streaming services

You may determine ahead of time that there will be certain exceptions to these categories. For example, you can decide on “no gifts” except for your mom’s birthday. Or no salon appointments except for a needed haircut.

Tips for Completing the 30-Day No-Spend Challenge

Anticipate what will be the most difficult part of the challenge for you, and create strategies for coping. Is your busy social life going to tempt you to break the rules? Or will the siren call of online shopping be your undoing?

Come up with a plan on how you will get past your specific spending challenges. If your social life will be tough to navigate that month, recruit pals to join the challenge and make it a friendly competition. If online shopping is your budget-killer, unsubscribe from retail email lists and delete shopping apps from your phone. The point is to make the challenge as easy on yourself as possible.

Here are a few additional ways to set yourself up for success:

• Unsubscribe from memberships and apps

• Set aside time during the week for meal prep, and bring lunch to work

• Dust off your travel mug, and skip the coffee shop

• When you get an urge to buy something, add it to a post-challenge wish list

• Print out a 30-day calendar and make a checkmark at the end of each successful day. Visual reinforcement can motivate you to keep going.

10 Free Things to Do Instead of Spending Money

Taking part in a 30-day no-spend challenge doesn’t have to mean isolating yourself at home in an effort to save money. This is a time to get creative and search out free activities. You may find that some free experiences are more fun than what you normally spend money on.

1. Take a Hike

Whether you’re walking a mile or seven, hiking is a great way to spend the day outdoors. You can invite friends or go solo and get in tune with nature.

2. Get Some Exercise

Many great athletes and trainers offer workouts on social media and YouTube. Or download one of the many free apps that feature yoga, strength training, and high-intensity workouts.

3. Set Up a Sports League

Call your friends and organize a weekly game of flag football, basketball, or frisbee. Encourage folks to BYO beverages and snacks so that there’s no need to visit a restaurant or bar after the game.

4. Dine Al Fresco

Get your picnic blanket and paper plates ready, and propose a pot-luck in the park.

5. Host a Movie Night

Try a free, library-affiliated streaming service like Hoopla or Kanopy, and immerse yourself in a great film. If you’re feeling inspired, select a classic film, and ask friends to come dressed in the style of that time period.

6. Sand and Surf

Sticking to your challenge budget during summer is simple: Head to the nearest free parking beach. Bring towels, chairs, and umbrellas and set up shop for the day. And of course, pack a cooler full of sandwiches and drinks.

7. Have an At-home Spa Night

You don’t need to spend hundreds at the spa. Set the tone with candles and music.
And use personal care items that you already have to pamper yourself.

8. Check Out a Local Park

Odds are, there’s at least one park near your home that you’ve never visited. If you live near a botanical garden, even better. Also, see if any national or state parks nearby have free visitor days.

9. Visit Art Galleries and Museums

Support local artists by visiting small art galleries, or see if any local museums have free visitor days.

10. Whip Up a Gourmet Meal

Instead of dining out, try recreating your favorite meal yourself. Take your time, find recipes, get groceries, and have fun with it. You can pull up an online recipe or follow along with a cooking show.

The Takeaway

Intended to encourage better spending habits, the 30-day no-spend challenge asks you to limit your purchases for one month to essential items and services only. Utilities and groceries are allowed; dining out and other “treats” are not. You’ll likely learn a lot about your money habits, and perhaps let go of some “needs” that you really aren’t.

Before the challenge, review your monthly spending habits with SoFi.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

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

FAQ

What is the no-spend challenge?

A no-spend challenge is a stretch of time during which participants vow not to spend money unnecessarily. Essentials are still allowed, such as bills, transportation, and groceries. Anything that falls outside of your predetermined needs has to wait until the challenge is over.

How do you do a no-spend month challenge?

Don’t spend any money you don’t have to — it can be as simple as that. Before you begin the challenge, ask yourself which items are essential (such as groceries) and how strict you want to be. The goal is not to purchase anything unnecessary.

How do you challenge yourself to not spend money?

Make spending less money a game by trying a 30-day no-spend challenge. Motivate yourself to stick with it by setting up a reward once the challenge is over. And be sure to track how much you save over those 30 days.

Photo credit: iStock/Seiya Tabuchi

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

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

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

SORL-Q224-1921296-V1

Jun

2024

What Is Earned Income vs Unearned Income?

By Austin Kilham | Financial Independence, Life & Career, relay | Comments Off

There are two basic types of income: earned and unearned. Earned income is the money you make from working, and unearned income is money you receive that isn’t tied to a business or job.

The difference between these two types of income is very important when it comes to saving for retirement and paying your taxes. Here’s what you need to know about each of them, and how they affect your finances.

What Is Unearned Income?

Unearned income is a type of passive income. It’s money you make without working or performing some kind of professional service. For example, money you get from investing, such as dividends, interest, and capital gains is unearned income.

Other types of unearned income include:

• Retirement account distributions from a 401(k), pension, or annuity

• Money you received in unemployment benefits

• Taxable social security benefits

• Money received from the cancellation of debt (such as student loans that are forgiven)

• Distributions of any unearned income from a trust

• Alimony payments

• Gambling and lottery winnings

Dividends from investments in the stock market and interest are two of the most common forms of unearned income. Dividends are paid when a company shares a portion of its profits with stockholders. They may be paid on a monthly, quarterly, semi-annual, or annual basis.

Interest is usually generated from interest-bearing accounts, including savings accounts, checking accounts, money market accounts, and certificates of deposit (CDs).

How Is Earned Income Different From Unearned Income?

Earned income is the money you make from a job. Any money you earn from an employer — including wages, fees, and tips in which income taxes are withheld — counts as earned income.

If you’re part of the freelance economy and the companies you work for don’t withhold taxes, those wages still count as earned income. These could be wages earned by performing professional or creative services, driving a car for a ride share service, or running errands.

Money you make from self-employment — if you own your own business, for example — also counts as earned income, as does money you earn from a side hustle.

Other types of earned income include benefits from a union strike, disability benefits you receive before you reach full retirement age, and nontaxable combat pay. This guide can help you learn about all the different types of income there are.

You can keep tabs on all the types of income you have by tracking your checking, savings, investment, and retirement accounts in one place with an online money tracker. It allows you to organize your accounts on a single dashboard, as well as monitor your credit score and budget for financial goals.

Track your credit score with SoFi

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How Income Types Affect Taxes

All earned income is taxed at your usual income tax rate. Taxes on unearned income are more complicated and depend on what type of unearned income you have, including:

Interest

Interest, which is unearned income from things like bank accounts and CDs, is taxed the same as earned income that you work for.

Dividends

Dividends from investments fall into two categories: qualified and non-qualified. Generally speaking, qualified dividends are those paid to you by a company in the U.S. or a qualified foreign company, and are taxed at a lower rate. Non-qualified dividends don’t meet IRS requirements to qualify for the lower tax rate and are taxed at the same rate as ordinary income.

Capital Gains

Investments that are sold at a profit are subject to capital gains taxes. If you held the investment for less than a year, your profits are subject to short-term capital gains rates, which are equal to your normal income tax rate. If you kept the investment for a year or more, it’s subject to long-term capital gains rates, which means it will be taxed at 0%, 15% or 20%, depending on your taxable income and filing status. The higher your taxable income, the higher your rate.

Social Security

If your income is more than $25,000 a year for individuals or $32,000 a year for married couples filing jointly, you will pay federal income tax on a portion of your Social Security benefits. You’ll be taxed on up to 50% of your benefits if your income is between $25,000 and $34,000 for an individual, or $32,000 to $44,000 for a married couple. And you’ll be taxed on up to 85% of your benefit if your income is more than that.

Alimony

As a result of the Tax Cuts and Jobs Act of 2017, alimony payments that are part of divorce agreements made after January 1, 2019, are not taxable by the person who is paying the alimony, nor are they taxable for the person receiving the alimony.

Gambling Winnings

Money you earn from gambling — including winnings from casinos, lotteries, raffles, and horse races — are all fully taxable. This applies not only to cash, but also to prizes like vacations and cars, which are taxed at their fair market value.

Debt Cancellation

If you have a debt that is canceled or forgiven for less than the amount you were supposed to pay, then the amount of the canceled debt is subject to tax and you must report it on your tax return.

If you have debts to pay off, debt payoff planning can help you pay what you owe.

How Earned vs. Unearned Income Affects Retirement Savings

Retirement accounts, including 401(k)s, IRAs, and the Roth versions of both, provide tax advantages that help boost the amount that you are able to save.

For example, 401(k) contributions are made with pre-tax dollars, which can then be invested in the account. The investments are then allowed to grow tax deferred until withdrawals are made in retirement, and then they are subject to income tax. Contributions to Roth accounts are made with after-tax dollars. These grow tax free, and withdrawals made in retirement are not subject to income tax.

You must fund your retirement accounts with earned income. You cannot use unearned sources of income to make contributions.

There are certain exceptions to this rule. If you’re married and you file a joint return with your spouse and you don’t have taxable compensation, you may be able to contribute to an IRA as long as your spouse did have taxable compensation.

The Takeaway

The difference between earned income and unearned income is an important distinction to comprehend, especially when it comes to paying your taxes. Unearned income, which is income you make not from a job but through other means, such as investments, can be taxed at different rates, depending on what type of unearned income it is. Make sure you understand yours — and the tax implications. Doing so can have a big impact on how you save for your future.

SoFi helps you stay on top of your finances.

FAQ

Why do I need to know the difference between earned and unearned income?

It’s important to understand the difference between earned and unearned income because the two may be taxed differently. Also, in most cases, you must use earned income to fund your retirement accounts.

What is an example of unearned income?

Unearned income is money you receive without working for it. Interest, such as that from a bank account, and dividend payments are two of the most common types of unearned income.

Photo credit: iStock/FluxFactory

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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

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

SORL-Q224-1921188-V1

Guide to Prize-Linked Savings Accounts (PLSA)

What Is a Prize-Linked Savings Account?

Types of Prize-Linked Savings Accounts

Save to Win

Lucky Savers

WINcentive

Are Prize-Linked Savings Accounts (PLSAs) Legal?

Pros of Opening a Prize-Linked Savings Account

Cons of Opening a Prize-Linked Savings Account

Opening a Prize-Linked Savings Account

Are There Taxes on PLSAs?

Alternatives to a Prize-Linked Savings Account

The Takeaway

FAQ

Are prize-linked savings accounts legal?

Is a lottery account safe?

How do I open a lottery account?

Guide to Dormant Bank Accounts

What is a Dormant Account?

How Does a Dormant Account Work?

Types of Accounts That Can Be Considered Dormant

What Is Escheatment?

How Can I Reclaim Escheated Funds?

Get up to $300 when you bank with SoFi.

Consequences of Having a Dormant Account

Difference Between a Dormant and Frozen Account

Why Does an Account Go Dormant?

Keeping Your Account From Going Dormant

The Takeaway

FAQ

What happens if my account is dormant?

How do I reactivate my dormant account?

How many years is an account dormant for?

Guide to Voucher Checks

What Is a Voucher Check?

How Do Voucher Checks Work?

Who Uses Voucher Checks?

Preparing a Voucher Check

Advantages of a Voucher Check

Documents Maintained in Check Voucher System

Records Are in Order With No Irregularities

Easier to Track Checks

Get up to $300 when you bank with SoFi.

Disadvantages of Voucher Checks

Maintenance Process Can Be Time-Consuming

Lack of Consumer Familiarity

Check Voucher Alternatives

The Takeaway

FAQ

How do you use a voucher check?

What is the difference between a check and a voucher?

What does a voucher check look like?

What Is the 30-Day No-Spend Challenge?

How Does the 30-Day No-Spend Challenge Work?

Allowed Expenses During the 30-Day No-Spend Challenge

Track your credit score with SoFi

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

Forbidden Expenses During the 30-Day No-Spend Challenge

Tips for Completing the 30-Day No-Spend Challenge

10 Free Things to Do Instead of Spending Money

1. Take a Hike

2. Get Some Exercise

3. Set Up a Sports League

4. Dine Al Fresco

5. Host a Movie Night

6. Sand and Surf

7. Have an At-home Spa Night

8. Check Out a Local Park

9. Visit Art Galleries and Museums

10. Whip Up a Gourmet Meal

The Takeaway

FAQ

What is the no-spend challenge?

How do you do a no-spend month challenge?

How do you challenge yourself to not spend money?

What Is Earned Income vs Unearned Income?

What Is Unearned Income?

How Is Earned Income Different From Unearned Income?

Track your credit score with SoFi

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

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