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May

2024

How Many Savings Accounts Should I Have?

By Julia Califano | Budgeting & Goals, money | No Comments

How many savings accounts you should have will depend on your savings goals and money management style. You may prefer the simplicity of having just one savings account. Or, you might find it helpful to have different savings accounts for different savings goals, such as an “emergency fund” and a “travel fund.”

There’s no ideal number of savings accounts to have, nor is there a limit to how many savings accounts you can open. So what’s the right number?

Read on to learn why you may want to have more than one savings account, the pros and cons of having multiple savings accounts, types of savings accounts to consider, and how to manage your savings accounts so you reach your financial goals.

Key Points

• Multiple savings accounts can help separate and manage funds for different financial goals effectively.

• An emergency fund should ideally be kept in a distinct account to avoid accidental use.

• Using different accounts facilitates easier tracking of progress towards individual savings goals.

• There are benefits to having multiple accounts, such as better organization and potentially earning more interest.

• Managing multiple accounts might involve additional fees and requires careful monitoring to avoid errors.

How Many Savings Accounts Should You Have?

There is no one-size-fits-all answer to this question. The number of savings accounts you should have depends on your financial goals and personal preferences. Some people find it helpful to have multiple accounts to separate their savings for different purposes, such as an emergency fund, a vacation fund, or a down payment on a house. Others prefer to keep all their savings in a single account for simplicity.

You might aim to have at least two savings accounts, one for your emergency fund (since you don’t want to accidentally deplete that for another purpose) and one for other savings goals. Or, you might want to further subdivide your savings. For example, you might have savings accounts for:

• A vacation

• A home improvement project

• A down payment for a car or home

• Holiday shopping

• A wedding or other event

Reasons to Have Multiple Savings Accounts

Here’s a look at some reasons why you may find it helpful to have more than one savings account.

Separating Your Goals

Having multiple accounts allows you to separate your savings for different goals. This can make it easier to track your progress toward each goal and avoid the temptation to dip into funds earmarked for a specific purpose.

Emergency Fund

Many financial experts recommend having enough money set aside in an emergency fund to cover at least three to six month’s worth of living expenses. This helps ensure you can pay for a sudden expense like a car repair or medical bill without having to run up expensive debt. By keeping your emergency fund in a separate account, you’re less likely to touch it until it’s truly needed.

Tracking Your Progress

If all of your savings are lumped into one account, it can be hard to tell how much you have saved up for different goals, and how much farther you have to go. For example, if your goals include building up your emergency fund, saving for a vacation next year, and making a down payment on a home within three years, it can be unclear how much you’ve put away for each purpose. If you have multiple accounts, on the other hand, you’ll have different balances attached to different goals.

Advantages of Having Multiple Savings Accounts

There are both pros and cons to having more than one savings account. Here’s a look at some of the benefits.

• Organization: Multiple accounts can help you keep your savings organized and easily accessible for different purposes.

• Goal tracking: Separating your savings into different accounts makes it easier to track your progress toward each goal.

• Earning more bonuses: If you set up savings accounts at several financial institutions, you might reap an account-opening bonus (which is usually cash) from each bank or credit union.

• Get a higher interest rate: Opening savings accounts at different banks could help you take advantage of higher interest rates. For example, your brick-and-mortar bank may pay a lower annual percentage yield (APY) for a regular savings account compared to a high-yield savings account at an online bank.

Disadvantages to Having Multiple Savings Accounts

There are also some downsides to having multiple savings accounts. Here are some to consider.

• It may trigger fees: Some savings accounts may be fee-free, while others might charge fees if your account dips below a certain balance. If you can’t meet the minimum balance required for each account, you could end up racking up fees by having multiple savings accounts.

• More difficult to keep track of: Managing multiple accounts can be more time-consuming and require more effort than managing a single account. You may find that monitoring multiple accounts is too much of a juggling act.

• Potential for errors: With multiple accounts, there is a risk of forgetting about or neglecting some accounts, which could lead to missed savings opportunities.

• You could lose out on higher interest rates: Some banks have a tiered interest rate structure for savings accounts, meaning you only earn the highest rates once your balance reaches a certain amount. If your money is spread out, you may find it hard to reach the threshold for the best rate.

Types of Savings Accounts to Consider

There are different types of savings accounts you can open, and which one is best will depend on your goals and needs. Here’s a brief look at how they compare.

• Traditional savings accounts: These accounts are offered by brick-and-mortar banks and credit unions and are designed to be a basic savings option. They typically pay a low interest rate, and may come with a monthly or minimum balance fee.

• High-yield savings accounts: These accounts offer a higher interest rate than the average for savings accounts. You’re more likely to find high-yield savings accounts at online banks, though some traditional banks and credit unions offer them. In addition to providing higher average APYs, online banks usually charge lower (or no) fees due to their reduced overhead costs.

• Money market accounts: These accounts are a hybrid of a checking account and a savings account. They pay interest on your deposits and also allow you to write checks or make withdrawals and purchases using a debit card. Money market accounts typically offer higher interest rates than basic savings accounts but may have higher minimum balance requirements.

• Certificate of Deposit (CD): Certificates of deposit, or CDs, usually pay a higher yield than traditional savings accounts because you agree to let the bank keep your money locked up for a specific term that could range from three months to five years or longer. Should you need to withdraw your money before the CD has matured, you’ll incur an early withdrawal penalty.

Tips on Managing Multiple Savings Accounts

While having more than one savings account may sound confusing, it doesn’t have to be. Here are six tips for making the most of multiple savings accounts.

1. Use account nicknames. If your bank allows it, consider giving each saving account a title, such as “Hawaii Fund” or “New Furniture Fund.” This makes it easy to identify the account and track your progress.

2. Look for the best rates. If you’re looking to open a new savings account, see what online banks are offering (thanks to lower overhead, online-only banks often offer the most competitive APYs).

3. Automate your savings. Setting up automatic transfers from your checking account to your savings accounts will ensure that you’re consistently saving toward your goals.

4. Use technology to track your accounts. Many banks offer online or mobile banking apps that make it easy to track your savings goals and account balances all in one place.

5. Resist the urge to dip into different accounts for different needs. For example, try not to touch your emergency fund to come up with cash for a home improvement project.

6. Stay on top of your financial goals. If your goals change, you might want to adjust how much money is going into each account – and how often.

Recommended: How Much Money Should I Save a Month?

The Takeaway

Ultimately, the decision of how many savings accounts to have is an individual one. While having multiple accounts can offer benefits such as goal separation and organization, it’s important to weigh these benefits against the potential drawbacks, such as fees and complexity.

By carefully considering your financial situation and goals, you can make an informed decision about how many savings accounts are right for you.

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

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

FAQ

Is it a good idea to have multiple savings accounts?

Having multiple savings accounts can be a good idea for several reasons. It can help you organize your finances by separating your savings goals, such as an emergency fund, a vacation fund, or a down payment for a house. Being able to clearly see individual goals and track progress can help you stay committed and motivated to save.

However, having multiple accounts can also mean more fees (if your bank charges them) and more effort to manage them, so it’s important to weigh the pros and cons based on your individual financial situation and goals.

Can you have multiple savings accounts at the same bank?

Yes. Many banks allow customers to open multiple accounts, each with its own account number and possibly different features or benefits. This can be useful for organizing your savings for different purposes or for taking advantage of different interest rates or account types offered by the bank.

What is the cost of having multiple savings accounts?

The cost of having multiple savings accounts can vary depending on the bank and the specific accounts you have. Some banks don’t charge any fees for savings accounts. Others may charge monthly maintenance fees or only charge fees if your account dips below a certain minimum balance. Before you open multiple savings accounts, you’ll want to make sure you understand what fees (if any) may be involved.

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.

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.

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Checking & Savings Fee Sheet for details at sofi.com/legal/banking-fees/.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOBK0124038

May

2024

The 50/30/20 Rule: Budgeting Your Money Wisely

By Julia Califano | Budgeting & Goals, money | No Comments

Wouldn’t it be great if there were a super simple way to budget; say, no more than three figures you had to keep in mind to take control of your finances? That’s exactly what the 50/30/20 budget rule (aka the 50 30 20 rule) can do for you. It’s a simple and effective way to manage your money, allocating 50% of your take-home income to “musts,” 30% to “wants,” and 20% to saving for your future.

For anyone who has ever felt that budgeting was too complicated and headache-triggering to take on, this guideline can make things clear and easy.

Key Points

• The 50/30/20 budget rule simplifies financial planning by allocating income into three categories: needs, wants, and savings.

• Essential expenses should take up 50% of after-tax income, covering necessities like housing and food.

• Discretionary spending, or “wants,” should account for 30% of the budget, including entertainment and non-essential purchases.

• Savings and financial goals should receive 20% of income, emphasizing the importance of future financial security.

• This budgeting method was popularized by Senator Elizabeth Warren to help individuals manage finances more effectively.

What Is the 50/30/20 Rule?

The 50/30/20 budget or “rule” is a budgeting framework that can be relatively easy to create and implement. It’s one potential way to help keep your finances on track and help you work towards your goals.

The 50/30/20 numbers refer to percentages of your take-home income that you would allocate to three main categories: ”needs” or “musts” (essentials), “wants” (nonessentials), and saving (financial goals), respectively.

The primary goal of the 50/30/20 rule is to learn to prioritize saving money by making it a key part of your spending plan.

Everyone’s financial needs and goals are different, however. And, while these percentages can be a great starting point, you may find that you need to tweak these exact numbers to better suit your needs and current financial situation.

Where Did the 50/30/20 Rule Come From?

The 50/30/20 budget rule gained popularity when Sen. Elizabeth Warren explained it in her book, “All Your Worth: The Ultimate Lifetime Money Plan,” which was first published in 2005.

The simplicity of the concept (and the math) contributed to its appeal. The idea of dividing one’s money into three instantly understandable buckets proved to have staying power.

How the 50/30/20 Rule Works

In the 50/30/20 budget, you allocate your take-home (or after-tax) income into three main categories or buckets according to percentages.

Recommended: Check out the 50/30/20 calculator to see a breakdown of your money.

50% to “Needs”

These are things you cannot live without and the bills you cannot avoid paying. Consider them the “musts;” the items that you need to survive or that would leave you in a difficult situation if you didn’t pay them.

Here are some examples of typical needs:

• Rent or one of the different kinds of mortgage payments that are possible (in a nutshell, your housing costs)

• Utilities, including electricity, WiFi, and water

• Car payments and/or other transportation expenses (say, to get to work)

• Groceries (but not that pricey takeout salad)

• Basic clothing (what you need to wear in daily life, at work, and/or to stay warm; not the latest style of jeans just because they’re cool)

• Insurance payments

• Healthcare costs

• Debt payment, such as the minimums on student loans and/or your credit card

The “needs” category does not include items that are extras, such as Netflix, dining out, and clothing beyond what you need for work. Those fall under the next category.

30% to “Wants”

Also known as personal, discretionary, or nonessential spending, these are the things you buy that you could technically live without. This includes:

• Dining out or takeout food

• Going to the movies, a show, or a concert

• Vacation/travel costs

• Streaming channel subscriptions (unless they are somehow vital for your work)

• New clothes, simply because you feel like buying them

• Electronics that are cool but not vital to your job

• Spa treatments

• Ubers or taxis instead of public transportation.

Wants are all the little extras and upgrades you spend money on that make life more fun.

20% to Savings

This is the money you save for future financial goals. This category often provides a means to financial security. This includes:

• Money put into an emergency fund

• Saving for a downpayment on a home

• IRA or other retirement contributions

• Extra payments to help pay off your loans sooner (minimum payments are part of the “needs” category).

Even though the budget is written as 50/30/20, the purpose of this system is to prioritize the saving aspect, this 20%. (It may be more appropriately named the 20/50/30 budget.) The goal here is to get people to save for tomorrow rather than just spend today.

The idea is to make space for the 20% without laboring over the rest. The minutiae of where your fun money is going ($5 for a latte here, $10 for an appetizer there) isn’t super important if you’re saving enough to meet your financial goals.

Another point to note: If you aren’t saving 20% of your income right now, that’s okay. The process of setting up the 50/30/20 budget will help you find out where your money is going so that you can make adjustments. After completing your budget breakdown, you can address the areas where you’d like to cut back.

Benefits of the 50/30/20 Budget

The 50/30/20 rule may be a minimalist budget, but it can pack the same powerful benefits you would get with a more labor-intensive budget.

Some of the payoffs of setting up and following a 50/30/20 include:

• Knowing where you stand. As a popular adage goes, “what gets measured gets improved.” It can be hard to start spending less and saving more if you aren’t clear on how much and where you are currently spending.

• Identifying easy ways to cut back. As with any budgeting process, the 50/30/20 budget can reveal opportunities to cut back on spending. Simply going through the process – and seeing exactly where your money is going each month – can help to motivate you to make some relatively pain-free adjustments.

• Reducing financial stress. While building a budget may seem like a stress-inducing exercise, it can ultimately relieve a lot of financial worry. It can add structure and clarity to your spending. Instead of angsting over every purchase, you’ll have built-in boundaries that allow you to spend freely within your budget.

• Simplifying the budgeting process. By having fewer categories than a traditional monthly budget, the 50/30/20 rule of thumb can be easy to set up and to maintain. It can also be simple to track a 50/30/20 budget digitally.

• Achieving your savings goals. By making saving a priority and setting some money aside before you start spending, a 50/30/20 budget can help you work effectively towards your financial goals. Whether that’s creating an emergency fund, making a downpayment on a home, or going on a great vacation is your decision.

Tips for Implementing the 50/30/20 Budget

Want to give the 50/30/20 budget a try? If you decide to go this route, or you’re just looking for some budgeting basics, here are some steps you can take to get started.

Gathering Your Financial Records

To get started with any kind of budget, it’s helpful to collect the last three months or so of bank and credit card statements, pay stubs, receipts, and bills.

Calculating Your Monthly Income

You can use your statements to figure out exactly how much money you are bringing in each month after taxes are taken out. You can think of after-tax dollars as the pot of money you have to siphon into the three budget categories each month.

Setting a Savings Target

You may want to begin with the most important category, which is the 20% (savings). Since the goal for this budget is to turn the 20% into a nonnegotiable part of the plan, you’d calculate 20% of your monthly after-tax income and set that figure aside for things like debt repayment, cash savings, retirement investing, and any other financial goals that you have.

Even if you don’t feel it’s realistic for you to put 20% into saving right now, you might run the exercise assuming that you will. You’ll be able to tinker with the numbers later.

Calculating Essential Monthly Expenses

Next, you may want to make a list of all of your monthly essential or fixed expenses, such as rent/mortgage, utilities, groceries, and insurance.

Currently, do essential items absorb more than 50% of your take-home income each month? If so, what percentage do they comprise? And, is there any way to reduce any of these monthly expenses?

Building a Hypothetical Budget

After adding up savings and essentials, what is left over is what can be allocated towards discretionary spending, or the “wants” outline above.

It can be helpful to keep in mind that the 50/30/20 numbers are just a guideline. If the cost of living is high where you live, for example, it may not be feasible to keep essentials to 50% of your take-home income. In this case, you may need to reduce spending on wants.

Or, you may decide that at this point you can’t quite afford to put 20% into savings. There are variations on the 50/30/20 theme that accommodate these situations, such as the 70/20/10 rule, which acknowledges that for some people, a hefty 70% will be needed for the “musts” of life.

Recommended: Cost of Living by State Comparison

Once you see your numbers in black and white, you can play with the percentages and come up with a workable plan for roughly how much you can spend on nonessentials, or fun, each month.

Putting Your Plan into Action

Now that you have a basic guideline of how much money you will put into one type of savings account each month and how much cash you can spend each month on wants, it’s time to give your budget a try.

You may want to plan on tracking your spending for two to three months to start. You can do this by saving receipts and logging expenses according to the three categories at the end of the day. Or, you could use a budgeting app that makes it easy to track and categorize expenses.

Another tip: Try automating your finances and having money transferred from your checking account to your savings right after payday. That way, you won’t see the cash sitting in checking and think it’s there for the spending.

Making Some Tweaks

After tracking your spending for several months, you’ll probably have enough data to refine your original 50/30/20 budget. From there you can adjust the categories based on your actual spending, not just your projected spending.

You may also find that you need to adjust your spending. Discretionary spending is typically the easiest place to do some trimming.

You may decide you need to cook at home (rather than get takeout) a few more times a week, save on streaming services by dropping a channel you rarely watch, or ditch the gym membership and work out at home.

it may also be possible to pare back some of your fixed monthly expenses. Reducing utility bills, saving on gas, and, if possible, rent, could free up more money for fun spending.

After making some adjustments, you can execute your new and improved budget. You may want to continue to track spending in a method that works best for you until spending according to your budget becomes second nature.

The Takeaway

The 50/30/20 rule of thumb is a set of easy guidelines for how to plan your budget. Using them, you allocate your monthly after-tax income to the three categories: 50% to “needs,” 30% to “wants,” and 20% to saving for your financial goals.

Your percentages may need to be adjusted based on your personal circumstances and goals. But using this simple formula can be a good way to get a better handle on your finances, and to start working more effectively towards your goals.

You may find that technology can make sticking to a budget simpler. If you open a bank account online with SoFi, you’ll have features and perks that can help make the most of your money. Our Checking and Savings offers a competitive annual percentage yield (APY) and charges you no account fees. Plus you’ll spend and save in one convenient place, be able to track where your money goes, and use Vaults and Roundups to boost your savings.

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

Is the 50/30/20 rule a realistic goal?

For many people, the 50/30/20 rule is a realistic way to budget for essentials, discretionary expenses, and savings contributions. For others, it may not be realistic. If you are just starting your work life, earn a lower salary, live in an area where housing is very expensive, or have considerable debt to manage, you might do better with a different budget guideline.

Is the 50/30/20 rule weekly or monthly?

When budgeting, people typically work with their monthly expenses, since that is how housing costs, utilities, and other payments (say, student loans and credit card debt) are assessed. You could, however, apply the 50/30/20 guideline to your weekly spending and see how your finances are tracking.

What is the 60/30/10 rule budget?

The 60/30/10 budget is a different version of the 50/30/20 rule that can work well for super savers. It allocates 30% more for the “musts” of life and 10% for discretionary spending. The remaining 60% is for saving, investment, and paying off debt.

What is the 70/20/10 rule for money?

The 70/20/10 rule is a budgeting system that allocates 70% of one’s take-home income towards needs (minus debt) and “wants” (discretionary spending), 20% to saving and investing, and 10% towards debt repayment or donations.

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.

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.

SOBK0123023

May

2024

Guide to Direct Deposit

By Kelly Boyer Sagert | Budgeting & Goals, Financial Independence, money | Comments Off

If you’re like most Americans, your paycheck turns up in your bank account automatically, without any check to sign or wad of cash to pocket and then get to the bank.

With direct deposit, funds are electronically transferred out of one bank account and (ka-ching!) deposited into another. It’s a convenient way to automate one’s finances, and it’s not limited to paychecks. It can streamline other financial transactions as well.

Here, you’ll learn more about this process, the pros and cons of direct deposit, and ways you might want to put it to work for you.

Key Points

• Direct deposit is an electronic transfer of funds from one bank account to another, commonly used for payroll.

• It was introduced in 1972 with the formation of the first Automated Clearing House (ACH) network.

• Nearly 93% of employed Americans receive their salaries via direct deposit.

• The process involves employers sending an electronic file to the bank, which then distributes funds to employees’ accounts.

• Direct deposit is also utilized for government benefits, tax refunds, and other payments.

What Is Direct Deposit?

As mentioned above, direct deposit is a way of electronically transferring funds between bank accounts.

It was pioneered more than 50 years ago. In 1972, the first automated clearing house (ACH) network formed to manage electronic payments, with other networks quickly following. In 1975, the Social Security Administration (SSA) decided to test the system of direct deposit for payments they issued. Today, 99% of SSA’s payments are directly deposited.

Today, nearly 93% of employed people in the United States receive their salaries or wages this way.

What’s more, these automatic bank transfers are used today in ways beyond having paychecks directly deposited, including bill pay, retirement account contributions, and more.

💡 Quick Tip: Did you know online banking can help you get paid sooner? Feel the magic of payday up to two days earlier when you set up direct deposit with SoFi.

How Does Direct Deposit Work?

You’ve now learned a bit about what direct deposit is and how the ACH system facilitates direct deposit, allowing funds to flow seamlessly and quickly from one account to another.

Here, a bit more intel on how this process can be put to work for you and how to set up direct deposit.

Direct Deposit for Payroll

Let’s say that someone is ready to start a new job. The human resources department explains how the company either requires direct deposit or offers the option.

• If that employee wants to set up direct deposit, they would need to share bank information with their new employer, including the bank’s name, the routing number that identifies the financial institution, and the employee’s bank account number. Sometimes, a voided check is requested.

• This information would then be entered into the company’s payroll system and, whenever payroll rolls around, the company would send an electronic file to this employee’s financial institute. This file would share how much money should be transferred from the company’s (the “originator’s”) bank account to accounts for each of the employees whose direct deposit accounts are located at that particular financial institution.

• If, for example, three employees of a company all share Bank A, then let’s say this bank receives an electronic transfer of $4,345. Bank A would then distribute the money appropriately into the proper bank accounts, perhaps:

◦ $2,000 in Person A’s checking account and $500 into their savings account

◦ $1,350 in Person B’s account

◦ $445 in Person C’s checking account and $50 into their savings account.

• Then, if the employees (known as “receivers”) check their bank balances, they’ll see the deposits made through this direct deposit process. As noted in this example, money may be directly deposited to a checking account or into a savings account. Or some money can be put into a savings account with the rest in a checking account.

• How long does direct deposit take? Typically, the funds go through like clockwork and are there waiting on payday. Some banks may offer the ability to access your direct deposit up to two days sooner.

What Are the Uses of Direct Deposit?

There are several uses for direct deposit:

• Payroll. As noted, the vast majority of Americans get paid this way.

• Tax refund. This can be among the quickest ways to get your tax refund. The IRS can process a direct deposit refund for an electronically filed return in as little as seven to 10 days of receipt.

• Government benefits. Social Security and Supplemental Security Income benefits, VA, unemployment, and other benefits can be paid via direct deposit.

• Commissions, rental income, vendor payments and other earnings can be automated with direct deposit.

• Dividends. Shareholders may receive dividends by direct deposit.

• Child support. This may also be automated.

Benefits of Payroll Direct Deposits

Direct deposit has many benefits. Here’s a closer look:

• Convenience: With a direct deposit of their paycheck, employees can skip the step of physically depositing a paycheck into their accounts, which can be a timesaver.

This can be especially true if the employee telecommutes from home, is on vacation, or is otherwise out of the office when payday comes, because that employee doesn’t have to go into the office to retrieve the paper check.

• Speed: With direct deposit, the money is typically in an employee’s bank account at the start of the designated payment date, which gives them access to the funds that day. No waiting for checks to clear.

• Security: With paper checks, there’s always the possibility that they will get lost or stolen. So, payroll direct deposit can add a layer of security to the process.

Many times banks will waive fees for customers who have direct deposits set up.

• Savings: Many times banks will waive fees for customers who have direct deposits set up, although there may be a minimum deposit amount required for this to happen.

• Better money management: If an employee puts a percentage of each paycheck automatically into a savings account, this can get them into a regular savings habit.

Downsides of Payroll Direct Deposit

Now, for the other side of the coin, the cons of direct deposit:

• Inconvenience: When people receiving direct deposits decide to change banks, it may be a hassle. It may take workplaces a period of time to change where paychecks are sent, which means that the old account might need to be kept open longer to make sure all paychecks are received.

How long that period of time may be can vary. But, before you close your old account, ensure that all direct deposits are being put into the new account. Also make sure that all withdrawals and checks have cleared at your old bank and that any automated payments are coming out of the new bank.

• Scheduling: With direct deposit, it’s important to make sure the correct deposit dates and amounts are recorded. Otherwise, account holders could write checks beyond what’s available, which could trigger overdraft or non-sufficient fund (NSF) fees — which can be costly, especially when they add up.

• Lack of access: Not everybody in the United States has a bank account. If someone doesn’t but their employer requires direct deposit (more about that next), then employees without a bank account would likely receive their paychecks through a prepaid debit card. These can come with fees and, like paper checks, can be lost or stolen.

Here are the pros and cons in chart form:

Pros of Direct Deposit	Cons of Direct Deposit
Convenience receiving funds	Inconvenience if you change banks
Speed (no waiting for checks to clear)	Scheduling; must be sure funds arrive
Security (no carrying around cash or checks getting lost in the mail)	Lack of access for those who are unbanked
Savings; banks may offer discounts or bonuses if you receive qualifying direct deposits
Better money management

Employers Requiring Direct Deposit

Just as there are benefits to payroll direct deposit for employees, there are also benefits for employers. For instance, it’s cheaper to manage payroll payments this way, versus physical checks.

Plus, they have a record of accounts, which makes it easier for companies when they’re reviewing expenses — and they don’t have to reissue a check if an employee loses one.

And, after a person’s payroll information has been entered into the system, paying employees can be faster and easier with direct deposit.

Laws governing payroll direct deposit vary by state and, if a state has no specific laws on this subject, it defaults to federal regulations. Federal law states that employers must give each employee using direct deposit a summary of rights and liabilities and must get their signature on an authorization form along with relevant banking information.

Some states allow employers to actually require direct deposit for payroll, as long as the program is administered in a way that’s consistent with federal regulations. (In some cases, the rule only applies to public sector workers.) Most states, however, still give employees the choice between direct deposit and receiving a physical check.

A handful of states have laws that are unique to them, ones that don’t fit into any of the broad categories already described.

Automating Your Finances

The concept of electronic funds transfers is at the heart of payroll direct deposits, but goes beyond that. Here are additional ways to benefit from automating your finances.

• Automation is a tool that can also help people to build an emergency savings account. In general, traditional wisdom says this account should contain three to six months’ worth of living expenses.

That way, if an emergency arises (whether that’s a job loss, an unanticipated repair, or unexpected medical expenses), a financial cushion exists. By setting up a regular funds transfer to a savings account, this can make it easier to build up that emergency fund.

• Another way to streamline your financial life: paying bills through autopay. In some instances, lenders may offer a discounted interest rate for borrowers who use automated payments to pay their bills. Autopay can help borrowers make their payments on time, rather than forgetting them when life gets hectic. This can mean fewer or no late fees.

Autopay can help borrowers to make their payments on time, rather than forgetting them when life gets hectic.

• Because payment history plays a key role (35%) in a person’s FICO® Score, autopay can help you establish and maintain your credit score. By automating payments (as long as enough money is in their checking or savings account when the payment is due) you can optimize this aspect of your cash management.

• Autopay helps to reduce the number of paper bills that need to be sent out and the number of paper checks that may be written to pay those bills. This means that automated funds transfers can therefore be an eco-friendly choice to make.

• Whenever funds are electronically transferred, either in or out of a bank account, a digital record is automatically created. This can be helpful when balancing accounts, creating a budget, looking for tax deductible items, searching for ways to trim discretionary spending, and more.

• Autopay might also be a good strategy to use to contribute to a retirement account. Employers may automatically deduct an amount from employee paychecks to transfer it into a retirement account that’s set up by the company. That can make saving super easy.

Types of Accounts for Direct Deposits

For people who decide to use forms of automated funds transfers, here are some options to consider for receiving direct deposit:

• Checking accounts

• Savings accounts

• Money market account

• Investment accounts

• Some prepaid debit cards

• Some payment apps, such as PayPal or Cash App.

Getting Direct Deposit With SoFi

If you’re interested in opening a bank account to receive direct deposits, take a look at what SoFI offers and see if SoFi direct deposit is a good fit for you.

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 is the meaning of direct deposit?

Direct deposit refers to the automated transfer of funds from one bank account to another. This means cash doesn’t need to change hands, nor does a check need to be written and then deposited.

How do you get direct deposit?

Typically, signing up for direct deposit involves sharing your bank account and routing number with, say, your employer or the government so they can direct deposit funds in your account. In some cases, you may be asked to share a voided check.

Is direct deposit only for paychecks?

Direct deposit is not only for paychecks. It can also be used for government benefits (such as Social Security), commissions, tax refunds, investment dividends, and other forms of payment.

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.

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.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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

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

SOBK0423032

May

2024

Guide to Applying for a Credit Card With No Security Deposit

By Timothy Moore | Credit, Financial Independence | Comments Off

Getting a credit card with no deposit can be easy if you have an established credit history with a good or excellent credit score. But if you’re just establishing your credit history or are trying to build your credit score, it can be much more challenging to apply for a credit card with no deposit.

For some, a secured credit card (one requiring a security deposit) might seem like the only option, but there are other paths to building your credit history. In this guide, we’ll cover how to find and apply for credit cards with no deposit — and what steps you can take to get closer to approval if you’re getting denied.

What Is a Credit Card Security Deposit?

Because of their established credit history and decent credit scores, many borrowers can open credit cards with no money down (or any other kind of collateral). This is called an unsecured credit card. However, if you don’t have any credit history or have a low credit score, you might find that credit card issuers will only offer you a secured credit card — meaning it requires a security deposit.

A credit card security deposit is refundable and often equal to the value of the credit limit on the card. Typically, the deposit amount ranges from $50 to $300.

While going this route can’t help you with unexpected expenses (as with a debit card, you are technically only able to spend money you already have), it can be a good way to build credit. However, you’ll want to ask the card issuer if they report to the credit bureaus, just to ensure they do.

Eventually, you may be able to graduate to an unsecured card if you consistently make on-time payments — one of the cardinal credit card rules.

Applying for a Credit Card With No Security Deposit

Applying for a secured credit card requiring a deposit might not be appealing to every potential borrower, especially because you need the money for the deposit upfront. These cards also typically have higher interest rates and fees. Fortunately, you have other options when shopping for a credit card.

Checking Your Approval for a Card

There’s no such thing as guaranteed credit card approval with no deposit. However, if you’re receiving emails or snail mail with credit card offers saying you’re preapproved, you might find success when you apply. You’ll still have to go through the formal application process and could ultimately get rejected, but getting a preapproved offer is a good start towards getting a credit card.

You can also proactively check your approval for a credit card online. Take a look at your credit score and then search online for offers for credit cards with no deposit that include your credit score in their target range.

Becoming an Authorized User

If you aren’t having success getting approved for a credit card on your own, ask a parent, family member, or trusted friend about being an authorized user on their credit card. As an authorized user, you’ll receive a credit card with your name on it and can use it like a traditional credit card, but you will not be the primary account holder.

The primary account holder is the one responsible for making on-time payments and monitoring credit usage. As an authorized user, you won’t have control over things like credit limit, and the primary cardholder can even set spending limits on your card.

However, if the primary cardholder uses the credit card responsibly — making regular, on-time payments and keeping credit utilization low — you will likely see a positive impact on your own credit score. Eventually, your score might improve enough for you to try applying for your own card again.

If someone makes you an authorized user on their card, however, it’s important to pay them what you owe each month. Never rack up credit card charges beyond what you’ve discussed with the cardholder. If you abuse your card privileges, it will affect your credit score and the score of the account holder — and the friend or family member will be solely liable for paying off your debts.

Getting a Student Credit Card or a Subprime Card

If the thought of affecting someone else’s credit score as an authorized user makes you uncomfortable, you aren’t out of options. You might be eligible to apply for a student card or a subprime card.

• Student credit card: Most student cards do not require a security deposit and are designed for students who have no credit history. Some cards might even offer cash back rewards and no annual fees. However, as the name implies, you must be able to prove you are a student as part of the application process.

• Subprime credit card: A subprime card is an unsecured card (i.e., no-deposit card) designed for borrowers with bad credit (generally a score below 580 in the FICO® score model). While subprime credit cards provide a way for bad-credit borrowers to get a credit card with no deposit, they often come with their own drawbacks. Typically, subprime cards charge an application fee; some might have annual or even monthly fees. Credit limits tend to be low.

Transitioning to an Unsecured Card

If you have no luck with a student or subprime card and can’t become an authorized user, you may need to consider applying for a secured credit with a deposit after all. Although it might not be ideal, it can be a good first step toward building your credit history.

If you make regular on-time payments, the credit card issuer might eventually transition you to an unsecured card. Alternatively, you can be proactive: After building your credit history and score over several months with a secured credit card, you can apply for a credit card with no deposit through another issuer. You might find that you’re more successful this time around.

Recommended: When Are Credit Card Payments Due

What to Know About the Effects of Your Credit Score

An unsecured credit card can potentially affect your credit score if the credit card issuer reports to the credit bureaus. Before opening a credit card with a security deposit, ask the issuer if they report to the bureaus.

If they do, regular on-time payment could build your score over time. On the flipside, late or missed payments could adversely affect your score.

Getting a No-Deposit Credit Card: What You Should Know

So, should you get a no-deposit credit card? In general, these unsecured cards offer greater flexibility at the start because you aren’t required to pay a security deposit.

However, opening a credit card of any type is a big decision — and not one to be taken lightly. It’s important to consider the potential effects of opening a credit card and to be aware of how much a credit card costs. For example, if you max out a credit card with a high interest rate, you might find yourself drowning in the fast-growing debt it creates.

Before opening a no-deposit credit card (or any credit card), think about the implications it can have on your finances. You might consider alternate ways of establishing credit, like credit-builder loans or even small personal loans.

However, these options don’t offer some of the same perks and protections that a credit card does, such as credit card chargebacks. If a credit card feels like the right step for you, begin your research process online.

Recommended: What is a Charge Card

The Takeaway

Credit cards without a security deposit, called unsecured credit cards, can be appealing because there is no money down at the start of the loan. However, borrowers without a credit history or who are struggling with bad credit may find it challenging to get approved for a no-deposit credit card. If applying for a secured credit card (i.e., one with a security deposit) is not ideal for your financial situation, you can ask to become an authorized user on someone else’s card or apply for a student or subprime credit card.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

Do all credit cards require a deposit?

Only secured credit cards require a security deposit. Those with no credit history or bad credit scores might only be eligible for secured credit cards. If you have a good credit score, you can apply for a credit card without a deposit.

Can I get a credit card if I have no credit history?

It is possible to get a credit card with no credit history. A secured credit card requires a security deposit but makes it easier for borrowers with no credit history to get approved. Students can also consider student credit cards, which are often issued to student borrowers without any credit history.

What credit score is required for approval?

While having a good to excellent credit score (typically 670+) is ideal for getting the best credit cards with the lowest rates, some credit card issuers do offer cards for borrowers with fair or even poor credit (meaning scores between 580 and 669). These cards might have higher fees and fewer perks and may require a security deposit.

Photo credit: iStock/Prostock-Studio

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.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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.

SOCC-Q224-1884743-V1

May

2024

15 Things to Stop Buying When Trying to Save Money

By Dan Miller | Budgeting & Goals, Financial Independence, money, Money & Life | Comments Off

Short of getting a raise, the only way to save more money is to spend less. While that may sound like a bitter pill to swallow, tightening your budget could be a lot easier than you think.

Thanks to the constant allure of consumerism, many of us mindlessly overspend on small recurring expenses that can seriously add up over time. We often don’t realize how much we waste on things we don’t need or, in truth, really care all that much about.

By becoming more intentional in your spending, and cutting out unnecessary costs, you could potentially save hundreds per month with much sacrifice. That’s money you can then put towards things that are important to you, like going on a great vacation, buying a car, or putting a downpayment on a home.

While everyone’s spending habits are different, we’ve got 15 ideas for how to spend less and save more starting today.

Key Points

• Cutting out unnecessary purchases can significantly boost savings, such as opting for fewer streaming services.

• Unused gym memberships are a common area where money can be saved by switching to free workout alternatives.

• Premium cable packages often include unwatched channels; consider cheaper alternatives or cutting the cord.

• Daily coffee purchases add up; brewing at home can reduce monthly expenses significantly.

• Opting for generic brands over name brands can offer similar quality for a fraction of the cost.

Tips For Saving Money

One of the best ways to save money is to take a close look at where your money is currently going each month. You can track your spending by scanning your credit card statements and receipts over the last few months. But a simpler way is to use a budgeting app that syncs with your accounts and keeps track of what you spend in different categories in real time.

Once you have a bird’s eye view of your cash flow, you may realize that you’re spending more than you thought (or want to) in certain categories. You may also find some easy places to cut back — such as getting rid of a monthly subscription you rarely use or switching to a cheaper cell phone plan.

If you want to get started saving right away, we’ve got some simple suggestions for things you can stop buying right now. Eliminating even small recurring expenses can add up dramatically by the end of a year.

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

15 Things to Stop Buying If You Are Trying to Save Money

To start saving money right away, stop buying these 15 things.

1. Multiple Streaming Services

With the proliferation of streaming services now available, it can be easy to sign up for more platforms than you can possibly watch. Consider picking one or two services that you actually watch consistently and getting rid of the rest. Or, stagger your streaming services so that you have each one for a few months out of the year. That can give you access to all the shows you want but keeps the price down.

2. Unused Gym Membership

A gym membership can be worth the cost if you’re actively using it. But if you rarely see the inside of your gym these days, it might make sense to cancel your membership and find lower-cost fitness alternatives, such as running/walking outside, lifting weights at home, or following free workout videos on YouTube.

Recommended: 27 Fun Things to Do for Free

3. Premium Cable

Premium cable subscriptions come with a high monthly price tag and often include tons of channels you never watch. To save money fast, think about cutting back to basic cable or negotiating for a cheaper rate with your provider. Or, cut the cord entirely and just use a few streaming services. If you still want live TV channels, consider options like Sling TV or YouTube TV.

4. The Daily Coffee

You may really enjoy your morning (or afternoon) takeaway coffee, but if you add up how much you’re actually shelling out on coffee drinks each month — and year — you might decide that there are better uses for this money. Consider buying a quality coffee maker or French press and (if you don’t have one) a portable coffee mug, so you can make your delicious brew to go at home.

5. Name Brand Items

Generic brands typically have the same ingredients and offer comparable quality to name brands but for a fraction of the price. Whether you’re shopping in the supermarket or a drug store, opt for the generic option whenever it’s offered. This small change can lead to significant savings without compromising your needs or lifestyle.

6. Extended Warranties

These days, you can get extended warranties on practically everything — appliances, cars, electronics, and even homes. While having that extra protection may sound like a good idea, it typically comes at a hefty cost. And, the odds of you using an extended warranty is low. Companies have done the math and generally offer warranties that end before the usual problems crop up — otherwise they would lose money. A better bet: Skip the extended warranty and put that money into your emergency fund.

7. Greeting Cards

Surprising but true: A greeting card can set you back as much as $10. Rather than a canned card from a greeting company, most people would likely rather you share your own words and thoughts. Consider stocking up on a box of pretty cards that are blank inside. You can then personalize and customize each one for any occasion, whether it’s a birthday, baby shower, or wedding.

8. Bottled Water

While keeping bottled water on hand is convenient, the cost can add up, especially if you have a family. A simple way to spend less at the grocery store each week is to give each person in your household their own reusable water bottle to fill with tap or filtered water. You can then take bottled water (and if you really want to save, all store-bought drinks) off your shopping list. This will not only save money but also reduce plastic waste.

9. Impulse Purchases

Those little purchases you make here and there without thinking can add up. Consider setting a 24 hour (or longer) waiting period for any item you have a sudden urge to buy but really don’t need. You may find that the urge passes. Or, try a “no-spend” week or month where you pause all unnecessary spending for a set time period. This can not only save cash but shed light on things you’re buying but can easily do without.

10. Pre-Cut Fruits And Vegetables

Pre-washed and cut produce (and bagged salads) are certainly convenient, but generally cost a lot more than whole fruits and veggies. This is an easy thing to stop buying — prepping produce at home doesn’t take that much time and you may find that your fruits and veggies actually taste fresher.

11. Books

Instead of paying for books, consider getting a (free) library card. This will give you access to countless print, digital, and audiobooks, both at your local library and through partnerships they might have with other libraries and streaming services. This is one of the easiest ways to cut back on spending.

12. Disposable Products

Buying disposable items — like paper plates, plastic cups, napkins, and paper towels — adds up and all of it an unnecessary expense. Consider using real dishware, cloth napkins, and washable cleaning cloths. Your weekly grocery bill (and bags) will get instantly lighter. Avoiding disposable items is also kinder to the environment.

13. Takeout/Delivery

It’s fine to get takeout every once in a while, but if you’re looking to save cash quickly, consider writing off all takeout/delivery for a month (or maybe two). Instead, plan and shop for your meals and do some meal-prepping on the weekend. That way, cooking won’t feel like a chore at the end of a long work day. You’ll end up saving money on food while still eating well.

14. Bank Fees

If your bank charges you monthly maintenance or minimum balance fees, consider switching to a bank that offers free checking and savings accounts. To avoid getting hit with hefty overdraft fees, keep tabs on your balance to ensure you can cover your checks and debits. To avoid ATM fees, plan ahead and stop at an in-network machine before you go out.

💡 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.

15. Fancy Cleaning Supplies

Nowadays stores carry a different cleaning product for every spot in your home. There’s tile cleaner, sink cleaner, floor cleaner, window cleaner, you name it. Rather than purchase a dozen different specialized cleaning products, you can simply make your own all-purpose cleaner: Mix one cup of distilled water, one cup of white vinegar, the juice of half a lemon and about 15 drops of essential oil and put it in a spray bottle.

The Takeaway

Everyday items that drain your budget include expensive daily coffee, unnecessary subscription services, takeout/delivery, brand name products, and daily impulse shopping. Once you stop spending money on these things, you should start to see extra money in your checking account that you can now transfer to your savings account — cha-ching!

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.

Photo credit: iStock/pixdeluxe

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.

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.

SOBK0124050

How Many Savings Accounts Should I Have?

How Many Savings Accounts Should You Have?

Earn up to 4.00% APY with a high-yield savings account from SoFi.

Reasons to Have Multiple Savings Accounts

Separating Your Goals

Emergency Fund

Tracking Your Progress

Advantages of Having Multiple Savings Accounts

Disadvantages to Having Multiple Savings Accounts

Types of Savings Accounts to Consider

Tips on Managing Multiple Savings Accounts

The Takeaway

FAQ

Is it a good idea to have multiple savings accounts?

Can you have multiple savings accounts at the same bank?

What is the cost of having multiple savings accounts?

The 50/30/20 Rule: Budgeting Your Money Wisely

What Is the 50/30/20 Rule?

Where Did the 50/30/20 Rule Come From?

How the 50/30/20 Rule Works

50% to “Needs”

30% to “Wants”

20% to Savings

Get up to $300 when you bank with SoFi.

Benefits of the 50/30/20 Budget

Tips for Implementing the 50/30/20 Budget

Gathering Your Financial Records

Calculating Your Monthly Income

Setting a Savings Target

Calculating Essential Monthly Expenses

Building a Hypothetical Budget

Putting Your Plan into Action

Making Some Tweaks

The Takeaway

FAQ

Is the 50/30/20 rule a realistic goal?

Is the 50/30/20 rule weekly or monthly?

What is the 60/30/10 rule budget?

What is the 70/20/10 rule for money?

Guide to Direct Deposit

What Is Direct Deposit?

How Does Direct Deposit Work?

Direct Deposit for Payroll

What Are the Uses of Direct Deposit?

Benefits of Payroll Direct Deposits

Downsides of Payroll Direct Deposit

Employers Requiring Direct Deposit

Automating Your Finances

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Types of Accounts for Direct Deposits

Getting Direct Deposit With SoFi

FAQ

What is the meaning of direct deposit?

How do you get direct deposit?

Is direct deposit only for paychecks?

Guide to Applying for a Credit Card With No Security Deposit

What Is a Credit Card Security Deposit?

Applying for a Credit Card With No Security Deposit

Checking Your Approval for a Card

Becoming an Authorized User

Getting a Student Credit Card or a Subprime Card

Transitioning to an Unsecured Card

What to Know About the Effects of Your Credit Score

Getting a No-Deposit Credit Card: What You Should Know

The Takeaway

FAQ

Do all credit cards require a deposit?

Can I get a credit card if I have no credit history?

What credit score is required for approval?

15 Things to Stop Buying When Trying to Save Money

Tips For Saving Money

15 Things to Stop Buying If You Are Trying to Save Money

1. Multiple Streaming Services

2. Unused Gym Membership

3. Premium Cable

4. The Daily Coffee

5. Name Brand Items

6. Extended Warranties

7. Greeting Cards

8. Bottled Water

Student Loan
Refinancing

Personal
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