Dec
02
2024

19 Key Banking Terms to Know

By | money, Money & Life, Terminology | Comments Off on 19 Key Banking Terms to Know

Most of us don’t learn bank terms in school, but knowledge of these concepts is an important part of developing your financial literacy. Becoming familiar with banking vocabulary can help you better understand financial products and might even boost your money-management skills.

Here, you’ll find a glossary of 19 banking terms and definitions to know. Whether you’re opening your very first checking account or diversifying your investments, this bank terminology can enhance your personal finance journey.

Key Points

•  Understanding frequently used banking terms, such as FDIC, APY, and EFT, as well as common types of bank accounts can help you manage your finances.

•  Savings accounts, checking accounts, and money market accounts are key banking products, each offering unique features like interest earnings and transaction capabilities.

•  Certificates of Deposit (CDs) are accounts that may provide higher interest rates for funds committed for a fixed term, with penalties for early withdrawal.

•  Knowing the differences and similarities between common banking terms, such as APY vs. interest rate and EFT vs. ACH, can help you make informed financial decisions.

•  Familiarity with financial terms may help you identify and avoid certain types of banking fees.

19 Banking Terms

Here’s a list of 19 important banking terms and definitions to know:

1. Savings Account

A savings account is a type of bank account that lets you safely store your money. Money in a savings account earns interest and grows over time, thanks to the power of compounding interest.

Savings accounts can be a good place to stash funds for an emergency fund or short-term goals, such as next year’s vacation. You can typically access funds as needed, although some financial institutions may limit how often you can take money out of your savings account.

When shopping for a savings account, know that a high-yield savings account can pay out more interest than a typical savings account. Currently, some HYSAs pay 9x the national savings account interest rate or more.

2. Checking Account

Checking accounts are also a common type of bank account that enable consumers to access and spend their money easily. You can tap funds in your checking account by writing paper checks, using an ATM, swiping or tapping a debit card, entering account information online, or using mobile payment apps. Many checking accounts don’t earn interest, but you may find some that offer a low interest rate, often at online banks.

Checking accounts may come with a variety of fees, so it can be wise to compare charges for at least a few accounts before opening one. You’ll also want to make sure you understand whether there’s a minimum opening deposit or balance requirement.

3. Money Market Account

Another type of bank account is a money market account. These are often structured as a blend of savings and checking accounts. Like a savings account, a money market account usually has a higher interest rate than a checking account (which may or may not earn any interest at all) in exchange for having certain restrictions, such as a limited number of withdrawals that can be made each month. But it may also have some checking account features, like the ability to write checks.

4. Certificate of Deposit (CD)

You can also open a certificate of deposit (CD), a kind of term deposit, at many financial institutions. Here, your money is less liquid (i.e., it’s not as easily available). When you put money in a CD, you agree to a set number of months or years that you won’t access that cash — typically between a few months and several years. In exchange, however, you may receive an interest rate that’s higher than most standard savings accounts. If you do tap your funds before the CD term ends, you will likely be assessed a penalty.

5. Account Number

Your bank account number is a unique string of numbers (usually between eight and 12 digits) that identifies your individual bank account. Every time you open a new bank account, you’ll get a new account number — and you can typically find it on your account statements, on paper checks, and on your bank’s website and in its app when you’re logged in.

Recommended: How to Balance Your Bank Account

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6. Routing Number

While an account number is unique to your individual account, a routing number is unique to your bank. Most banks have a single routing number, though larger banks may have multiple routing numbers, with each number attributed to a specific region.

A routing number (also called an American Bankers Association number, or ABA number) is always nine digits and helps other entities route payments to and from your bank.

By the way, when thinking about routing numbers vs. account numbers, remember that they are important bits of personal information, to be kept confidential. In the wrong hands, they could be used to commit bank fraud.

7. Direct Deposit

Direct deposit is a method wherein a business or government agency can pay you electronically by transferring funds into your bank account. If you receive payment from your employer directly into your bank account, you’re already using direct deposit; more than 95% of American workers get paid this way.

8. Annual Percentage Yield (APY)

Annual percentage yield (APY) refers to how much interest you’ll earn each year from money in a deposit account, like a savings account. Unlike the straight interest rate, however, APY also accounts for compound interest (earning interest on the interest you’ve earned thus far).

9. Credit Union

A bank is one common type of financial institution. But you can also get typical banking services — like deposit accounts and loans — from credit unions. Credit unions are member-owned nonprofits and are typically local, rather than a national network. You may need to qualify to join one, based upon such attributes as where you live or your profession. Depending on your needs, you might choose a credit union vs. a bank to get the best fit for your finances.

10. Federal Deposit Insurance Corporation

Congress created the Federal Deposit Insurance Corporation (FDIC) in 1933 to create a safety net in the event of a bank failure and instill confidence in the U.S. banking system. Today, the FDIC offers insurance typically up to $250,000 per depositor, per account category, per insured institution. Some banks have programs to offer even a higher level of insurance than that. Worth noting: Most but not all banks are FDIC-insured. It’s worthwhile to check that you keep your funds at one that is, to enjoy that protection.

Deposits at credit unions are also typically insured in a similar manner, but by the National Credit Union Association, or NCUA, vs. FDIC insurance.

11. Fintech

Fintech, meaning “financial technology,” refers to companies leveraging new technologies to improve or provide innovative financial services. They may be a chartered online bank or an unchartered neobank, often offering higher interest rates on savings accounts and lower or no fees as a result of their having less overhead than traditional brick and mortar banks. Many fintechs have built their models on younger consumers’ frustrations with the traditional banking experience.

12. Automated Teller Machine (ATM)

You probably know automated teller machines as ATMs, and they’re an important part of banking. An ATM allows you to access certain banking services — like cash withdrawals — on the go. You can find ATMs all over, from inside bank branches to hotels and airports.

Just make sure an ATM is in your bank’s network before using it. If you use an out-of-network ATM, you may incur high ATM fees.

13. Debit Card

A debit card is a form of payment that typically comes with a checking account. You can swipe, tap, or wave the debit card at a point of sale to pay for goods and services with money from your checking account. You can also enter your debit card to pay bills or shop online, or tie your debit card to peer-to-peer transfer apps to send money between friends.

14. Joint Account

A joint bank account allows more than one person to manage the account. That means any account holder can withdraw or deposit money at their discretion. With so much power available to multiple account holders, there are a lot of pros and cons of joint accounts to consider before moving forward, but it can be a good tool for couples or family members who want to merge their finances.

15. Electronic Fund Transfer (EFT)

An electronic fund transfer refers to any type of electric payment where money moves electronically. Examples of EFTs include wiring money, paying with a debit or credit card, sending funds via P2P transfer, receiving direct deposit, and conducting ACH transfers. They are typically quick and secure.

16. ACH Transfer

An ACH transfer is a type of electronic fund transfer. ACH stands for Automated Clearing House, and an ACH transfer simply refers to the electronic movement of money from one bank account to another. That process is regulated by the Automated Clearing House (governed by the National Automated Clearing House Association, or NACHA).

17. Overdraft Fee

If you pay for a transaction with a check or debit card but don’t have enough money in your account to cover the purchase, your payment can be declined or the purchase can still go through, which is called overdrafting. Essentially, your bank may cover the shortfall. Some financial institutions charge you an overdraft fee when this happens. The average fee is currently quite high, over $27. You may be able to link accounts (say, your checking and savings accounts) to provide coverage in the case of overdraft.

18. Emergency Fund

An emergency fund is money set aside in a savings account that you can access in an emergency, such as if you are laid off, need unexpected car repair, or have to pay a high vet bill. The amount of money you need in an emergency fund can vary, but most experts advise working toward saving enough cash to cover three to six months’ worth of basic living expenses. Saving this much can keep you from needing to take out a personal loan or going into credit card debt when unplanned expenses arise.

19. Minimum Account Balance

A minimum account balance, also called minimum daily balance or simply minimum balance, is the amount of money you must keep in your bank account to avoid minimum balance service fees (if your bank charges these). Not all bank accounts require minimum balances, and, of those that do, the amount can vary from one financial institution to the next. The amount may also vary by account type.

Why Understanding Banking Terms Matters

Understanding banking terms — and the concepts and products they describe — can help you pick the right bank for your needs. It can also help build a good foundation of knowledge that can enhance your money management for years to come.

The Takeaway

Knowing basic financial terms, like ACH, EFT, and FDIC, as well as those that describe different types of bank accounts, can build your financial literacy. This, in turn, can help equip you to make well-informed decisions and manage your money better.

Another important aspect of managing your money is partnering with the right bank.

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 are basic banking terms?

Some basic banking terms include savings account, checking account, direct deposit, routing number, and electronic fund transfer. If you’re new to banking, it’s a good idea to review a list of common banking terminology to get a better handle on your finances and how to manage them.

What are common banking transactions?

Some common banking transactions include cash withdrawals or deposits at the bank or ATM, mobile check deposits via an app, and direct deposits into and direct debits from a bank account. Individuals can also transfer money from one bank account to another, like from their checking to their savings.

What are banking processes?

Common banking processes include managing customers’ checking and savings accounts, which can include charging fees or paying interest. Banks also often offer loans, which have a range of processes from underwriting to account servicing.

Photo credit: iStock/george tsartsianidis

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.

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

SoFi 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.

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.

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

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Dec
02
2024

Counter Credits Explained

By | money, Money & Life, Terminology | Comments Off on Counter Credits Explained

Despite the advent of digital banking and managing your finances on a screen, many people still step inside a brick-and-mortar bank to make a deposit. When they do, this transaction may turn up on their monthly statement as a “counter credit.” The reason why: They approached the counter at the branch and handed over funds that were credited to their account.

Here, learn more about counter credits and the role they can play in your financial life.

Key Points

•  Counter credits involve in-person deposits at a bank branch, using cash or checks handed to a teller.

•  Counter credits often clear immediately or within a business day, providing individuals with quick access to funds.

•  Bank statements reflect counter credits to differentiate them from other deposit types.

•  Those less comfortable with digital technology and frequently making large cash deposits may find counter credits ideal.

•  Despite digital banking trends, counter credits can be helpful for personal interaction and when handling large sums.

What Is a Counter Credit?

A counter credit is a cash or check deposit made to your checking or savings account in person at a brick-and-mortar branch of a bank or credit union. In that way, it’s really the most straightforward, traditional kind of deposit you can make.

This counter credit meaning is pretty narrow: It doesn’t include deposits made at an ATM, it doesn’t include mobile check deposits, and it certainly doesn’t include direct deposits from an employer. It has to be in person, at a bank, and with a teller.

As briefly noted, it’s called counter credit because you make the deposit at the counter inside the branch, and the teller then credits your account the amount you deposited. (If you withdraw money at the counter, it should show up on your bank statement as a counter debit.)

How Do Counter Credits Work?

Don’t let the unfamiliar terminology fool you: You’ve likely made a counter credit before. You simply enter your bank and then hand the money or check to a teller.

If you use a deposit slip from your checkbook, you can just add the date and the amount of money. If you use a bank’s blank deposit slip, it will require you to know your bank account number. If you don’t know it, don’t sweat it: Just take the slip to the teller and show your ID, and the teller should be able to help you with the rest.

Or, you may well be able to skip the deposit slip altogether. Often, just having your debit card and PIN handy will be enough to move the transaction ahead with the teller.

How Long Does a Counter Credit Take to Clear?

Cash deposited via counter credit should be available in your bank account quickly; sometimes almost immediately, especially with small sums. At other times, the funds may clear within a business day. This makes it an attractive way to deposit your funds. Worth noting: Large cash deposits may take longer to clear.

Check deposits can take a little longer, whether made at the counter or via mobile deposit. Typically, a domestic check takes one or two business days to clear. Checks for large sums or drawn on international banks may take longer.

Recommended: How Long Does Direct Deposit Take?

Why Do Counter Credits Appear on Bank Statements?

Your bank statement gives a complete picture of account activity during a statement period (usually a month). Every transaction and transfer is accounted for.

Because counter credits are a type of deposit to your account, a bank will include them. Labeling them as counter credits can make it easier for you to identify which deposits were made in person vs. other deposits, like mobile check deposits, ATM deposits, and direct deposits from an employer, a company (like an insurance company depositing a payout), or the government.

How Do You Make Counter Deposits?

As noted above, counter deposits occur when an account holder gives a deposit to a teller at the counter of a bank branch. The customer might use a deposit slip, filled out with account details, or they might swipe their debit card and enter their PIN. This process allows the teller to ensure that the deposit is going to the intended account.

Typically, the bank customer will get a paper receipt, showing that the deposit was accepted.

Although the deposit is handed off in person, typically a check will be verified and processed before the funds are fully available. This can take a couple of business days or sometimes longer. A cash deposit, on the other hand, usually clears within a day, though a large deposit can take longer.

Deposits vs. Counter Credits

Counter credits are a type of deposit. Thus, all counter credits are deposits, but not all deposits are counter credits.

In today’s world of advanced banking technology, you can deposit money into your account in a number of ways:

•  Direct deposit: A third party, like an employer with your paycheck or the federal government with a tax refund or unemployment payment, will electronically transfer money into your account.

•  Other electronic funds transfers: Other forms of electronic fund transfers that you might use to deposit money into your account include transferring money from one bank to another or moving money from a peer-to-peer payment app into your bank account after a friend sends you money.

•  Mobile check deposit: Mobile banking technology enables consumers to take pictures of their checks on their phone, from the comfort of their own home, then deposit them via the bank’s app.

•  ATM and retailer deposits: You can often deposit money to your bank account at an ATM or participating retailer. When depositing cash at an ATM, it can be a good idea to find an in-network ATM to avoid paying ATM fees. However, be aware that not all online banks support cash deposits at ATMs and may instead allow you to make these deposits at participating retailers, which could impose a small fee. (SoFi, for example, only supports cash deposits at participating retailers at this time.)

As you see, counter credits are just one of many techniques that can be used to get money into your bank account.

Recommended: What Is a Cashier’s Check?

Is Counter Credit Obsolete?

With more people using online banking, you might think counter credit is obsolete. However, in-person banking still has its place.

Some people just prefer the customer experience of walking into a bank and working with another human to deposit their funds. A counter credit can also be reassuring when you’re depositing a large sum of cash and don’t want to feed it into an ATM.

Pros and Cons of Counter Credits

What are the advantages and disadvantages of counter credits? Consider these points.

Pros

The upsides of counter credits are as follows:

•  Quick access to funds: When depositing a check or cash, the money is often available in your bank account soon thereafter, especially when depositing cash. There’s no need to wait for, say, the ATM you deposited your money into to be emptied.

•  In-person customer service: If you need help, the bank teller is literally right on the other side of the counter — and should be happy to assist you.

•  Ideal for large deposits and people who use cash: Some people who work primarily with cash and make large deposits may prefer to hand the cash or check directly to the bank teller. This can be a positive when an ATM or retailer deposit may be less practical (and might have deposit limits).

•  Easy to understand: People who have grown up with tech may argue that digital deposits are easier and more convenient, but if you’re not comfortable with these technologies, it may be simpler for you just to head to the bank and deposit money in person.

Cons

Next, review the downsides of counter credits:

•  Inconvenience: For many, the thought of driving to a bank and waiting in line in person is wildly inconvenient in this era of digital banking.

•  Inaccessible when traveling: Whether you are a digital nomad or simply traveling on your summer vacation, sometimes you simply can’t get to a bank branch. Mobile deposit (or signing up for direct deposit to automate the process) can help eliminate this issue.

•  Limited hours: Banks aren’t always open. They close in the evening, they may have short Saturday hours (if any), and they’re closed for holidays. But with online banking, you can make a mobile deposit any time of day (and often in the evenings at participating retailers).

Recommended: Online Banking vs. Traditional Banking

The Takeaway

Counter credits refer to in-person deposits (check or cash) into your bank account, made at a brick-and-mortar location. If you bank in person at a traditional bank, it’s likely you’ll see these transactions on your monthly bank statement. However, with the advent of online banking, you may make all or most of your deposits via functions like mobile check deposit and electronic fund transfer, as well as at participating ATMs and retailers.

If you don’t have a need for in-person banking, consider the benefits of an online bank account with SoFi. Note that SoFi does not currently support cash deposits at ATMs, though it enables you to make cash deposits at participating retailers nationwide for a small fee.

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.

🛈 While SoFi does not support counter credits, members can deposit funds using the mobile check deposit feature or make in-person cash deposits following these instructions.

FAQ

Is counter credit a direct deposit?

A counter credit is not a direct deposit. A counter credit refers to an in-person deposit made by you at your bank’s counter with a teller. A direct deposit is an electronic process in which a third party, like an employer or the government, transfers money directly into your bank account.

What is a counter transaction?

A counter transaction is a banking transaction made in person with a bank teller at the counter of a brick-and-mortar branch. This might include depositing money (a counter credit) or withdrawing money (a counter debit).

What is an over-the-counter deposit?

An over-the-counter deposit (aka a counter credit) is a cash or check deposit made into a bank account in person at a bank or credit union branch. The counter refers to the counter at which the bank teller works. You may see counter credits on bank statements referencing these transactions.

Photo credit: iStock/Fly View Productions

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.

SOBK0423023

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Dec
02
2024

Can You Get a Debit Card for a Savings Account?

By | money, Money & Life, Terminology | Comments Off on Can You Get a Debit Card for a Savings Account?

You usually can’t get a debit card for a savings account. Typically, debit cards are issued for checking accounts.

There’s a simple reason for that. Savings accounts are designed to hold money that you don’t plan to spend right away. Earning interest on deposits is the reward you get for adding money to your savings balance. Checking accounts, on the other hand, are designed for spending.

There’s a backdoor way to use a debit card for a savings account, but it requires you to have a checking account and transfer funds. Knowing the rules for debit cards and bank accounts can make it easier to manage your money.

Key Points

•  Savings accounts typically don’t come with debit cards; they are designed for holding money and earning interest.

•  Debit cards are often linked to checking accounts, which are meant for spending.

•  ATM cards can sometimes be issued for savings accounts, allowing limited access to funds.

•  Alternatives to debit cards for savings accounts include transferring funds to checking accounts or making in-person withdrawals.

•  Understanding the rules and limits of savings accounts can help you manage funds effectively.

What Accounts Offer Debit Cards?

Usually, you cannot get a debit card with standard or high-yield savings accounts. You can, however, get a debit card with other types of bank accounts, such as:

•  Traditional checking accounts

•  High-yield checking or interest checking

•  Money market accounts

•  Cash management accounts

•  Health savings accounts

You can find traditional checking accounts, high-yield checking, and money market accounts at traditional banks or online banks. Some banks also offer HSAs with a debit card so that paying for health care is easy and convenient.

A cash management account is a little different. These accounts, which you can find at a brokerage, blend features of savings and checking accounts. You can use them to pay bills, make purchases with a debit card, or hold funds that you plan to transfer into your investment account.

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 4.00% APY on savings balances.

Up to 2-day-early paycheck.

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Debit Cards vs. ATM Cards

Debit cards and ATM cards may look the same at first glance, but there are some key differences between them.

•  A debit card is a PIN-enabled card that’s linked to a checking account or a money market account. You can use a debit card to make purchases, pay bills, or withdraw cash at ATMs. When you complete a debit card transaction, the money is deducted from your checking or money market account.

•  ATM cards are also PIN-based but they have less functionality than a debit card. You can use an ATM card to view your balance, withdraw cash, or make deposits at an automated teller machine. You cannot, however, use a debit card to make purchases.

Banks can issue ATM cards for checking accounts, though it’s more common to get a debit card instead. Some banks also offer ATM cards for savings accounts, though that’s more of an exception than the rule. If you have an ATM card for checking or savings, there may be an ATM withdrawal limit that dictates how much cash you can take out daily or weekly.

Accessing Your Savings Account Funds

If you want to access money in your savings account but don’t have a debit card, your options will depend on your bank’s policies. Generally, the alternatives can include:

•  You can use an ATM card if you’re issued one for transferring funds into a checking account and withdrawing from there. Or you can make a transfer on your financial institution’s website or in the app. That’s the backdoor method that was mentioned earlier. This process can be especially easy if you have linked checking and savings accounts at the same financial institution.

•  If you have a savings account at a traditional bank, you could also make withdrawals in person at the teller window.

When accessing savings account funds, it’s important to know what limits your bank imposes. For instance, it’s not uncommon for banks to limit you to six withdrawals from savings per month. If you go over that limit, the bank can charge an excess withdrawal fee for each additional transaction or convert your savings into a checking account.

Tips for Using Your Savings Account

Savings accounts are not meant to be complicated or confusing, but there are some rules to know about using them. These tips can help you make the most of your savings.

•  Choose the right bank to open a savings account. Online banks can offer higher interest rates on savings with fewer fees, compared to traditional banks. The trade-off is that you don’t have access to bank branches.

•  Know your limits. As mentioned, banks may limit you on the number of withdrawals you can make from savings per month. There may also be limits on how much you can transfer from savings to checking or withdraw in cash at a teller.

•  Link savings to checking. Linking your savings account to a checking account can make it easy to transfer funds between them. Just keep in mind that linking accounts is not an excuse to siphon away money from savings unnecessarily. This is especially true if your savings account is your emergency fund.

•  Automate deposits. Setting up automatic deposits to savings is an easy way to grow your balance. You can also use direct deposit to send some of your paycheck to savings or create a recurring transfer from checking to savings each payday.

If your bank offers an ATM card with a savings account, remember to check the ATM withdrawal limits. Also, it’s important to be aware of any added ATM fees you might pay for using another bank’s machine to withdraw cash.

Alternatives to Getting a Debit Card for Savings Accounts

If you can’t get a debit card for a savings account, you have some other options for managing your money. For instance, you could:

•  Link your savings account to a checking account (especially an interest-bearing one) for convenient transfers.

•  Set up a cash management account that combines features of a checking and savings account, including a debit card.

•  Open a money market account that includes a debit card and check-writing privileges.

•  You could also use a prepaid debit card to hold your savings. That can make it easy to access your money, but there are a few drawbacks. You won’t earn interest the way that you could with a savings account at a bank. Also, if your card is lost or stolen you might be out your entire savings if you don’t report the loss to the card issuer right away. Prepaid debit cards can also charge fees, which can nibble away at your savings balance.

These are some work-arounds since you usually can’t get a debit card with a savings account, and as you see, each can have its pros and cons.

The Takeaway

Savings accounts can help you set aside money toward your big (or small) financial goals. While you usually don’t get a debit card for savings accounts, you could still get a great rate for your money to make up for it. If you are determined to get something akin to a debit card with a savings account, you might look at such alternatives as money market or cash management accounts or link your checking and savings accounts for easy transfers and then withdrawals.

Another smart move: Bank with SoFi. We offer checking and savings in one convenient place, with debit card access.

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

Do banks give debit cards for savings accounts?

Banks usually do not issue debit cards for savings accounts. Money market savings accounts may be an exception, as those can sometimes come with a debit card, paper checks, or both. Debit cards are most commonly associated with checking accounts.

Is there a card for a savings account?

A bank may offer an ATM card for a savings account. If you get a savings account with an ATM card, you could use your card to deposit or withdraw cash at ATMs. You would not, however, be able to make purchases with the card.

Can I use an ATM card to access my savings account?

You could use an ATM card to access a savings account if the bank issues one to you. If you don’t have an ATM card for your savings account, you may need to first transfer money to checking and then withdraw it using your debit card.

Photo credit: iStock/Miljan Živković

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.

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Dec
02
2024
What Are the Conforming Loan Limits for 2022?

What Are the Conforming Loan Limits for 2023?

By | Financial Independence, Home Ownership, mortgage | Comments Off on What Are the Conforming Loan Limits for 2023?

A 5.2% increase in the conforming loan limits for 2025 raised the baseline loan limit for a single unit to $806,500 in most counties in the United States.

The adjustment is a result of a change in the average price of a home nationwide from the third quarter of 2023 to the third quarter of 2024. Home prices increased an average of 5.21%, and the baseline conforming loan limit kept pace.

Conforming loans may be cheaper than nonconforming loans like jumbo mortgages, but jumbo loans have their place.

Key Points

•   For 2025, the conforming loan limit for one-unit properties in most of the U.S. is set at $806,500.

•   In high-cost areas, the limit for a one-unit property reaches $1,209,750.

•   Staying within these limits enables buyers to secure lower-cost mortgages.

•   Loans within these limits can be acquired by Fannie Mae and Freddie Mac.

•   This arrangement reduces risk for lenders and lowers costs for consumers.

Conforming Loan Limits for 2025

The conforming loan limits set by the Federal Housing Finance Agency can vary based on area and the number of units in the property.

In most counties, that number increased to $806,500 in 2025 for a one-unit property. In high-cost areas, the limit is $1,209,750 for a one-unit property.

In general, here’s how the baseline conforming loan limits break down for 2025.

Maximum baseline loan limit for 2023

Units

 Many counties in the contiguous states, District of Columbia, and Puerto Rico

 Alaska, Hawaii, Guam, and the U.S. Virgin Islands
1 $806,500 $1,209,750
2 $1,032,60 $1,548,975
3 $1,248,150 $1,872,225
4 $1,551,250 $2,326,875

Recommended: The Cost of Living by State

Why Care About Conforming Loan Limits?

Staying under a conforming loan limit means you’ll most likely obtain a lower-cost mortgage. Mortgages that “conform” to the limits can be acquired by Fannie Mae and Freddie Mac, government-sponsored enterprises.

Because these mortgages can be bought by the agencies and then sold to investors on the secondary mortgage market, they represent a lower risk to the lender and a lower cost to the consumer.

If you need to finance more than the conforming limit, you’ll need to look at jumbo mortgage loans.

Getting a jumbo loan involves clearing more hurdles than a conforming loan. The rate will usually be similar to conforming loan rates, but sometimes it can be lower. How jumbo can a loan be for a primary residence, second home, or investment property? It’s up to each lender.

Government-backed mortgages are also nonconforming loans, and although they serve certain homebuyers, they also may be more expensive than conforming conventional loans because they usually come with additional fees.

Recommended: How to Get a Mortgage Loan

Notable Counties Above the Standard Loan Limits

Loan limits are higher in counties where the average home price is above 115% of the local median home value. The loan ceiling is 150% of the baseline value.

For 2025, the high-cost-area loan limit increased from $1,209,750 to $1,209,750 on a one-unit property. Alaska, Hawaii, Guam, and the U.S. Virgin Islands also have a baseline loan limit of $1,209,750.

The following is a chart of counties (and some cities) in high-cost areas with an increased baseline loan limit. The increased amount for high-cost areas maxes out at $1,209,750 in select areas.

State

 County

 2024 limit for a single unit

 2025 limit for a single unit % change year over year
Alaska All $1,209,750 $1,209,750 5.21%
California Los Angeles County, San Benito, Santa Clara, Alameda, Contra Costa, Marin, Orange, San Francisco, San Mateo, Santa Cruz $1,209,750 $1,209,750 5.21%
California Napa $1,017,750 $1,017,750 0%
California Monterey $920,000 $970.600 5.50%
California San Diego $1,006,250 $1,077,550 7.09%
California Santa Barbara $838,350/td>

$913,100 8.92%
California San Luis Obispo $929,200 $967,150 4.08%
California Sonoma $877,450 $897,000 2.23%
California Ventura $954,500 $1,017,750 6.63%
California Yolo $806,500 $806,550 5.21%
Colorado Eagle, Garfield, Pitkin $1,209,750 $1,209.750 5.21%
Colorado San Miguel $994,750 $994,750 0%
Colorado Boulder $856,750 $862,500 .07%
Florida Monroe $929,200 $967,150 4.08%
Guam All $1,209,750 $1,209,750 5.21%
Hawaii All $1,209,750 $1,209,750 5.21%
Idaho Teton $1,209,750 $1,209,750 5.21%
Maryland Calvert, Charles, Frederick, Montgomery, Prince George’s County $1,209,750 $1,209,750 5.21%
Massachusetts Dukes, Nantucket $1,209,750 $1,209,750 5.21%
Massachusetts Essex, Middlesex, Norfolk, Plymouth, Suffolk $862,500 $914,250 6.00%
New Hampshire Rockingham, Strafford $862,500 $914,250 6.00%
New Jersey Bergen, Essex, Hudson, Hunterdon, Middlesex, Monmouth, Morris, Ocean, Passaic, Somerset, Sussex, Union $1,209,750 $1,209,750 5.21%
New York Bronx, Kings, Nassau, New York, Putnam, Queens, Richmond, Rockland, Suffolk, Westchester $1,209,750 $1,209,750 5.21%
Pennsylvania Pike $1,209,750 $1,209,750 5.21%
Utah Summit, Wasatch $1,209,750 $1,209,750 0%
Utah Wayne $997,050 $997,050 0%
Virgin Islands All $1,209,750 $1,209,750 5.21%
Virginia Arlington, Clarke, Culpeper, Fairfax, Fauquier, Loudoun, Madison, Prince William, Rappahannock, Spotsylvania, Stafford, Warren, Alexandria City, Fairfax City, Falls Church City, Fredericksburg City, Manassas City, Manassas Park City $1,209,750 $1,209,750 5.21%
Washington King, Pierce, Snohomish $997,500 $1,037,300 6.11%
Washington D.C. District of Columbia $1,209,750 $1,209,750 5.21%
West Virginia Jefferson County $1,209,750 $1,209,750 5.21%
Wyoming Teton $1,209,750 $1,209,750 5.21%

Will Conforming Loan Limits Rise or Fall?

The baseline conforming loan limit is adjusted each year to reflect the change in the average home value in the United States.

The conforming loan limit has increased steadily for the past 10 years and has never declined. From 2006 to 2016, for example, the conforming loan limit remained at $417,000, despite declining home values across the country. If home values continue to rise, the conforming loan limit will also rise.

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

Conforming Loan Limits Over the Past 10 Years

The 5.2% increase in loan limits for 2025 is lower than the previous year’s increase of 5.5% and far lower than the 18% increase of 2022, which was the largest jump in the past 40 years. But it still represents an increase of $39,950 over the past year alone.

Conforming loan limit

Year

 Amount
2025 $806,500
2024 $806,500
2023 $726,200
2022 $647,200
2021 $548,250
2020 $510,400
2019 $484,350
2018 $453,100
2017 $424,100
2016 $417,000
2015 $417,000
2014 $417,000

The Takeaway

Conforming loan limits are intended to keep costs low for homebuyers. This means competitive pricing on mortgages, no matter what the housing market looks like each year.

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

SoFi Mortgages: simple, smart, and so affordable.

FAQ

Is a conforming loan a good thing?

Yes, generally speaking, staying under a conforming loan limit means you’ll most likely obtain a lower-cost mortgage.

Is a conforming loan the same as a conventional loan?

No, a conventional loan is one that is not backed by a government agency — it might come from a private lender such as a bank. A conforming loan is one in which the underlying terms and conditions adhere to the funding criteria, including loan amount limits, spelled out by Freddie Mac and Fannie Mae. Conventional loans can be conforming. Those that do not follow the conforming loan limits are considered “jumbo” loans.

Photo credit: iStock/marchmeena29

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

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

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

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

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.

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

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Dec
02
2024
No Annual Fee and No Foreign Transaction Fee Credit Cards

No Annual Fee and No Foreign Transaction Fee Credit Cards

By | Credit, credit card | Comments Off on No Annual Fee and No Foreign Transaction Fee Credit Cards

Depending on the credit card issuer and the card, there can be foreign transaction fees assessed when you purchase an item overseas as well as annual fees. There are also some credit cards that don’t charge any foreign transaction fees or annual fees at all.

Opting for a no annual fee and no foreign transaction fee credit card may seem like the obvious choice when selecting a card — and often it is. However, there are some scenarios in which avoiding fees won’t necessarily be a cardholder’s top priority. Learn the full story here.

Key Points

•   Credit cards with no annual fees and no foreign transaction fees help avoid extra charges for online shoppers and international travelers.

•   Foreign transaction fees typically range from 1% to 3% of the transaction amount but are sometimes not assessed.

•   Annual fees vary widely, but some cards offer no annual fees or waivers.

•   Not all cards with no annual fees also lack foreign transaction fees; check terms and conditions.

•   These no fee cards may save money but could lack competitive rewards or perks.

What Are Foreign Transaction Fees and When Are They Applied?

A foreign transaction fee is a charge that you might pay when you make a purchase on your credit card while in a foreign country. For instance, you might get charged a foreign transaction fee when buying a ticket to visit a museum or dining at a restaurant abroad. These fees might also get tacked on when you take out money from an ATM in another country.

You don’t necessarily have to be in a foreign country to get charged a foreign transaction fee though. Sometimes, a foreign transaction fee might kick in if you’re buying something from a company that’s based in a foreign country and that processes the transaction in its local currency. For instance, let’s say you buy a pair of shoes from a retailer based in France. If the purchase is processed in euros, you might be charged a foreign transaction fee.

A foreign transaction fee is typically based on a percentage of the transaction amount. For instance, if your card charged a 2% foreign transaction and you bought an item that cost $100, the foreign transaction fee would be $2.

Foreign transaction fees are a common credit card fee that will show up on your credit card statement, and they can make your travels more expensive. Say you spend $4,000 on a trip overseas, and your credit card charges a 2% foreign transaction fee. In that case, you’d pay $80 extra to cover the cost of foreign transaction fees.

How Much Are Foreign Transaction Fees?

The amount of foreign transaction fees varies depending on the credit card issuer. That being said, most foreign transaction fees are between 1% and 3% of the transaction amount. A number of cards don’t have a foreign transaction fee.

One thing to note: Foreign transaction fees are different from currency conversion fees. In some cases, you might get hit with a double whammy and be charged both. You could also face a credit card convenience fee, depending on where you use your card.

Foreign Transaction Fees by Credit Card Issuers

Here’s a look at foreign transaction fees charged by the major credit card issuers. On average, here’s how much they can run, depending on which card you’re using and the issuing bank or credit union. Just keep in mind that they may vary depending on the different types of credit cards available from an issuer.

Credit Card Issuer

 Average Foreign Transaction Fee
Visa 0% or 3%
Mastercard 0% or 3%
Discover 0%
American Express 0% to 2.7%

Recommended: How Credit Cards Work

What Are Annual Credit Card Fees and When Are They Applied?

Some cards come with an annual credit card fee. This fee is a yearly charge collected by a credit card issuer in order to use the card. Often, paying an annual credit card fee allows cardholders to tap into special perks and benefits, such as higher credit card points earnings on purchases, extended warranties and price protection, and travel or cash back perks.

The annual credit card fee will turn up on your credit card statement once a year as a single lump-sum charge. Usually you’re charged during the same billing cycle or month in which you initially signed up for the card. Once you pay the annual fee, the next time you’ll get charged is in 12 billing cycles.

You’ll cover a card’s annual fee just like you would any other purchase you put on your card. The fee will show up on your card and get folded into your statement.

How Much Are Annual Fees Typically?

The amount of an annual fee depends largely on the card, but in general, annual fees can run anywhere from $95 per year to upwards of $500. There are a number of credit cards available that don’t charge an annual fee. And some that do also offer the opportunity to get the fee waived.

Do Cards With No Annual Fees Tend to Also Have No Foreign Transaction Fees?

Whether cards that skip out on charging annual fees will also have no foreign transaction fees varies. There’s no hard-and-fast rule. In some instances, a card might have an annual fee but no foreign transaction fee. On the flip side, a credit card might have a foreign transaction fee but no annual fee. Or a card could charge both fees or neither fee.

Before opening an account, it’s important to read the fine print and comb through the terms and fees of a given credit card. This will outline the fees a card might charge as well as the rate of credit card purchase interest charges. That way, you’ll know what you’re getting into with any given card.

Recommended: How to Avoid Interest On a Credit Card

No Annual Fee and No Foreign Transaction Fee Credit Cards: Who They’re Great For

Here’s a closer look at when a one-two punch of a credit card with no foreign transaction fees and no annual fee might best benefit you.

Online Shoppers

If you do a lot of your shopping online, particularly through brands that aren’t U.S.-based, you might find a no annual fee and no foreign transaction fee credit card beneficial. That way, if you happen to buy something from a merchant based in a foreign country and with credit card processing done in their local currency, you can save on foreign transaction fees.

Plus, if you have a strong credit score and can snag a card that offers a better-than-average rate of cash-back rewards or points, you might not need to splurge on a card with an annual fee to gain access to added perks.

International Travelers

Foreign transaction fees can rack up quickly if you’re putting purchases on your card while traveling in other countries. For instance, if you spend $5,000 on your credit card while on a trip overseas, and your card charges 3% for foreign transaction fees, that could cost you an additional $150.

To avoid this expenditure, you might be better off looking for a card that doesn’t have foreign transaction fees. You’ll further avoid cuts to your travel budget by skipping out on paying an annual fee.

Recommended: Does Applying For a Credit Card Hurt Your Credit Score?

No Annual Fee and No Foreign Transaction Fee Credit Cards: Who They’re Bad For

If you fall within one of the following groups, you might not find that it’s worthwhile to focus on finding a credit card with no annual fee and foreign transaction fee.

People Who Want the Most Rewards and Perks

For those looking for the most competitive rewards rate, lucrative travel perks, or a sizable welcome bonus, then a credit card with an annual fee might be their best bet. By taking advantage of these benefits offered by the card, you could still come out ahead even with the annual fee, as the perks can effectively offset the cost of the fee.

Just make sure to do the math ahead of time and ensure you’ll take enough advantage of the available perks before agreeing to a hefty annual fee.

Recommended: Choosing a Rewards Credit Card

Those With Poor or Limited Credit

If you have poor credit or a limited credit history, you might not be faced with the choice of credit card miles vs. cash back when choosing a card. Instead, your options may be pretty limited. For those in this situation, a credit card that charges an annual fee and/or foreign transaction fees may still be their best — or only — available option.

By using your credit card responsibly, you may be able to build your score and qualify for a card with more competitive terms.

Tips for Save on Credit Card Fees When Traveling Abroad

Hoping to avoid credit card fees while you’re out of the country? Here are some pointers to keep in mind:

•   Ask about fees ahead of time. If you’re not sure which of your credit cards does or does not charge foreign transaction fees, it can pay to ask ahead of time. Then, you can opt to avoid using a card with a hefty rate for foreign transaction fees while you’re traveling. Even if you can’t avoid these fees entirely due to the credit cards you have, you’ll at least avoid a surprise when you get home from your trip and be able to spend more strategically.

•   Consider getting a no foreign transaction fee credit card. If you have the time ahead of your trip, can weather a dip in your credit, and are in the market for a new card, then getting a credit card with no foreign transaction fees can make sense. This is especially true if you have a number of trips abroad planned for the future.

•   Exchange cash before leaving the country. Another way to dodge fees while traveling is to exchange U.S. dollars for the local currency in the country you’re visiting before you leave. This will allow you to avoid potentially costly trips to the ATM and added fees when swiping your credit card. Just make sure to take safety into consideration before taking out a huge amount of cash.

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The Takeaway

A no annual fee no foreign transaction fee credit card can save you money — especially if it comes with its own set of perks that you don’t have to pay extra for. Plus, you don’t have to keep as close an eye on your spending abroad so you can better kick back and enjoy the sights. However, these cards aren’t right for everyone. Understanding your financial goals and options can help you make the right decision for your situation.

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

What does it mean when a credit card has no foreign transaction fees?

A credit card with no foreign transaction fee means that you won’t get dinged with a fee should you make a purchase in a foreign country. Depending on how much you end up spending while traveling, it could save you a significant chunk of change.

Why are no annual fees important?

A credit card with no annual fee can mean you save money and access similar services without a surcharge. Plus, you won’t have to work as hard for the annual fee to pay off. In other words, you won’t have to strategize to make the most of any special perks, nor will you need to worry about spending a certain amount to offset the cost.

Is 3% foreign transaction fee a lot?

A 3% foreign transaction fee is on the high end of average. The rate of foreign transaction fees can vary, but they typically run anywhere from 1% to 3%, with some cards not charging any foreign transaction fees.

Photo credit: iStock/RgStudio

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

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

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

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

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