Jul
15
2024

Are High-Yield Checking Accounts Worth It?

By | Budgeting & Goals, money, Money & Life | Comments Off on Are High-Yield Checking Accounts Worth It?

Checking accounts generally aren’t known for their high interest rates. But the days of earning nothing (or practically nothing) on the money sitting in checking may be coming to an end. While the average annual percentage yield (APY) on checking is still a measly 0.08%, many banks and credit unions now offer significantly higher rates for their checking accounts. So-called “high-yield checking accounts,” these accounts often pay more than many savings accounts. Some even rival high-yield savings accounts.

But there is a catch: You generally need to follow certain strict rules to earn the high rate. If you don’t, you may learn little or no interest for the month. Are high-yield checking accounts worth it? Maybe. Here’s what you need to know.

What Are High-Yield Checking Accounts?

High-yield checking accounts (also known as high-interest checking accounts) are checking accounts that offer higher interest rates than standard checking accounts. Like any other checking account, you can use a high-yield checking account for everyday transactions, like paying bills online, receiving your paycheck, writing checks, and making purchases using a debit card.

The key difference between a traditional checking account and a high-yield checking account is that the latter offers a higher interest rate. Although rates vary, you can currently find high-yield checking accounts with a 3.00% APY, and sometimes higher.

Some high-yield checking accounts offer the same APY on all balances, while others offer a tiered rate with higher APYs for higher balances. You may also have to meet certain requirements to access the advertised rate, such as making a certain number of transactions each month, signing up for direct deposit of your paycheck, and enrolling in electronic statements.

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 3.80% APY on savings balances.

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How High-Yield Checking Accounts Work

You can use a high-yield checking account as you would a standard checking account. That means you can deposit and withdraw funds, pay bills, transfer money to and from linked bank accounts, use a debit card for purchases and cash withdrawals at ATMs, and more.

At the same time, your checking account balance earns interest each statement period. To earn the highest APY or waive a monthly account maintenance fee, however, you may need to meet certain requirements. For example, you may have to:

•   Use your debit card for a certain number of transactions each month

•   Maintain a minimum balance for the statement period

•   Have a minimum amount in direct deposits each month

•   Use bill pay a minimum number of times each month

•   Enroll in online banking and electronic statements

•   Have other accounts at the same financial institution, such as a savings account or investment account

If you can’t meet your financial institution’s requirements, you likely won’t be able to earn a competitive interest rate or you might get hit with a fee that can outweigh the benefits of a high interest rate.

Pros of High-Yield Checking Accounts

Deciding whether high-yield checking accounts are worth it means considering both the benefits and drawbacks of these accounts. Here’s a look at two key advantages.

Extra Interest

A high-yield checking account allows you to earn significantly more interest than you could in a regular checking account. The best high-yield checking accounts pay rates that may be competitive with high-yield savings accounts or certificate of deposit (CD) rates.

While you likely have money moving and out of your checking account, it may be worth earning as much as you can on the money that sits in the account. This is especially true if you tend to keep a large balance in checking and can easily meet the bank’s requirements to earn the high rate.

Liquidity

High-yield checking accounts offer the interest often associated with savings accounts combined with accessibility of a checking account. Though the Federal Reserve no longer requires banks to limit savings account transactions to six per month, many banks have continued to impose the rule and will charge you a fee if you exceed the limit. Checking accounts don’t impose these limitations, however. You can write checks, use a debit card, and make withdrawals as needed.

Recommended: Checking vs Savings Accounts: A Detailed Comparison

Cons of High-Yield Checking Accounts

Although you have the potential to earn a competitive interest rate with a high-yield checking account, these accounts also come with a few drawbacks. Here are some cons to consider.

Transactional Requirements

To earn the high interest rate, high-yield checking accounts typically require you to meet specific transactional requirements. These may include making a certain number of debit card purchases per month, having direct deposits, or logging into online banking regularly. The requirements may be complex, and if you’re unable to meet them at any time, you may risk not earning any interest or earning a much lower rate than you anticipated.

Rate Caps

Many high-yield checking accounts cap the balance eligible for the high interest rate. For example, the high rate might only apply to balances up to $10,000, with any amount above that earning a significantly lower rate or no interest at all. This can limit the overall interest you can earn in the account, especially if you maintain a higher balance.

Who Benefits Most From These Accounts?

Those who benefit most from a high-yield checking account are individuals who can meet the requirements to earn the highest interest rate without difficulty.

For example, if you frequently make debit card purchases or get your paycheck from your employer through direct deposit, you may already be meeting the requirements for top rate and don’t have to put in any extra effort. In this case, a high-yield checking account earns interest on money that would otherwise sit earning little to nothing.

However, a high-yield checking account probably doesn’t make sense if you’ll struggle to meet the bank’s criteria to earn a high rate or avoid fees. In that case, you might be better off with a regular checking account and a high-yield savings account, which can pay as much as many high-yield checking accounts but with less hassle.

Comparing High-Yield vs Regular Checking

High-yield checking accounts serve the same basic purpose as regular checking accounts but have different benefits and requirements. Here’s a look at how they compare.

Interest Earnings Examples

High-yield checking: If you have a $10,000 balance earning the 3.00% APY in a high-yield checking account, you could earn $300 in one year.

Regular checking: If you have a $10,000 balance earning the national average rate for checking accounts, which is 0.08% APY, you could earn $80 in one year.

Total difference: The high-yield checking account would provide $220 more in interest over the course of a year.

Other Considerations

Fees: Regular checking accounts may have fewer or lower bank fees compared to high-yield accounts.

Accessibility: Both types of accounts offer similar access to funds through checks, debit cards, and ATMs.

Requirements: High-yield checking accounts often have stricter usage requirements to qualify for the higher interest rate.

Alternatives To Consider

High-yield checking accounts are a useful financial tool, but they aren’t the answer for everyone. If you’re interested in a bank account that pays a higher-than average APY, here are some alternatives to consider.

•   High-yield savings accounts: The interest rate you can earn in a high-yield savings account can be the same or higher than a high-yield checking account, but without the stringent requirements. While you generally can’t pay bills and make purchases directly from a savings account, you can easily transfer the funds to your checking account when you need to make payments.

•   Money market accounts: Money market accounts (MMAs) typically offer higher APYs than traditional savings accounts, while providing some of the conveniences of a checking account, like a debit card and checks. These hybrid accounts may have certain requirements, however. For example, some institutions require high minimum balances to open an account or avoid fees. Also MMAs can be subject to transaction limits, so they aren’t a perfect substitute for a checking account.

•   Certificates of deposit (CD): CDs offer a fixed APY that’s usually higher than regular savings accounts. In exchange, you agree to leave the money untouched for a set term, which can range from a few months to several years. If you have a large chunk of cash you won’t need for several months or more but want a guaranteed rate of return, a CD may be worth considering.

The Takeaway

If you want the features of a checking account, such as a debit card and frequent access, while growing your money, a high-yield checking account may be worth looking into. However, you’ll want to make sure that you can meet the requirements of the account. If you can’t, you could end up earning little or no interest and/or getting hit with fees. In that case, you may be better off with a regular checking account and a savings account that pays a competitive APY.

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


Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 3.80% APY on SoFi Checking and Savings.

FAQ

What is a good high-yield checking rate?

A good high-yield checking account rate typically is 3.00% APY or higher. This is significantly higher than the current average APY for checking accounts, which is 0.08% APY.

Keep in mind, though, that in order to earn the advertised rate on a high-yield checking account you may need to meet certain conditions, such as a minimum number of debit card transactions, a minimum amount in monthly direct deposits, or maintaining a certain balance.

Do these types of checking accounts have debit cards?

Yes, high-yield checking accounts typically come with debit cards, just like regular checking accounts. The debit card allows you to make purchases, withdraw cash from ATMs, and manage your daily transactions.

In fact, using the debit card is often a requirement to qualify for the high interest rates offered by these accounts. A bank or credit union may specify a minimum number of debit card transactions per month as part of the account’s conditions to earn the advertised high yield.

What are the disadvantages of using a high-yield checking account?

High-yield checking accounts have some disadvantages, including stringent requirements to earn the high interest rates. For example, you may need to maintain a high balance or make a minimum number of debit card transactions and direct deposits per month to earn the advertised rate. If you don’t meet the requirements, you may earn very low (or no) interest for that month or get charged a fee.

In addition, some of these accounts have rate caps, which means that the high interest rate only applies to a specific balance limit, with amounts above that earning lower or no interest.

Photo credit: iStock/Dilok Klaisataporn

SoFi members with Eligible Direct Deposit activity can earn 3.80% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below).

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning 3.80% APY, we encourage you to check your APY Details page the day after your Eligible Direct Deposit arrives. If your APY is not showing as 3.80%, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning 3.80% APY from the date you contact SoFi for the rest of the current 30-day Evaluation Period. You will also be eligible for 3.80% APY on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi members with Eligible Direct Deposit are eligible for other SoFi Plus benefits.

As an alternative to Direct Deposit, SoFi members with Qualifying Deposits can earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Eligible Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving an Eligible Direct Deposit or receipt of $5,000 in Qualifying Deposits to your account, you will begin earning 3.80% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Eligible Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

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

Separately, SoFi members who enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days can also earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. For additional details, see the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.

Members without either Eligible Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, or who do not enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days, will earn 1.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 1/24/25. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.
SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2025 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.

*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.

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Jul
15
2024
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How Much Equity Do You Have in Your Home?

By | Budgeting & Goals, Home Ownership, personal_loan | Comments Off on How Much Equity Do You Have in Your Home?

Making monthly mortgage payments can feel like chipping away at an iceberg, especially in the beginning. Savvy homeowners take heart that each payment earns them a little more ownership in their property. But do you know exactly how much ownership, commonly called “equity,” you currently have? Knowing how to calculate home equity can help you feel a growing sense of satisfaction as you make those mortgage payments.

Simply put, home equity is the difference between the value of a property and the outstanding balance of all mortgages, liens, and other debt on the property. Read on to determine how much of your home you really own, what you can do to increase your equity, and how you can leverage that equity to make it work harder for you.

Key Points

•   Home equity represents the difference between a property’s current market value and the outstanding mortgage balance, calculated using the formula: Home Equity = Home Value – Home Debt.

•   To accurately determine home value, homeowners can use online property tools or request a professional appraisal from their mortgage lender.

•   The loan-to-value ratio (LTV) helps represent home equity, indicating the percentage of a home’s value that is borrowed, with lenders typically allowing a maximum LTV of 80%.

•   Increasing home equity can be achieved through larger down payments, making extra mortgage payments, or refinancing to shorter-term loans, alongside strategic home improvements.

•   Homeowners can usually borrow 80%-85% of their home equity, and options like Home Equity Lines of Credit (HELOCs) allow for flexible borrowing against property value over time.

How to Calculate Your Home Equity

As noted above, home equity is the difference between your home’s current value and the outstanding balance of your mortgage and other debt on the property. It’s a simple equation:

Home Equity = Home Value – Home Debt

How to Find Your Home’s Value

To estimate your home value, you can use the purchase price of your home, but that doesn’t account for any appreciation in value. For a precise calculation of your home equity, you’ll need to know your home’s current value with appreciation. You can get an estimate of your home’s value with an online property tracking tool. These calculators approximate the appreciation of your home by comparing it with similar properties in the area. While helpful, these tools can’t provide an exact measure.

To determine your real-time home value, you’ll need to contact your mortgage lender and request an official appraisal. Your lender will conduct an inspection and evaluation of what your home is worth in the current market. The appraiser may ask you for documentation of any work you’ve done on your home to come to a more exact figure.

How Much Is Left on Your Mortgage?

Calculating home equity also involves knowing what you owe on your current home mortgage loan. You can find your mortgage payoff amount (which is different from your balance) on your lender’s online portal. Add to that the outstanding amount you owe on any second mortgages, liens (for unpaid taxes or child support, for example), home equity lines of credit, and any other loans that use your home for collateral. The sum of these items is your home debt, the last figure in the equity equation.

Using the Loan-to-Value Ratio to Represent Home Equity

The loan-to-value ratio (LTV) is the percentage of your home’s value that is borrowed — it’s like the opposite of equity. Lenders set maximum LTVs, typically 80%, for home equity loans. This means homeowners cannot borrow more than 80% of their home’s value.

You can calculate your LTV by dividing your outstanding home debt, discussed above, by your home’s appraised value:

LTV = Home Debt ÷ Home Value

For example, if your home is worth $375,000, and you still owe $200,000, your LTV is 53%. (200,000 ÷ 375,000 = .53) This means you still owe 53% of the equity in your home. Subtract 53 from 100 to see how much equity you have built in your home: Your available equity is 47%.

Examples of Home Equity Calculations After 1, 3, 5, 10 Years

The table below shows how much equity a fictional homeowner accumulates over the first 10 years of their mortgage. This assumes an initial home value of $300,000, with annual appreciation of 10%, a mortgage APR of 7.5%, and a monthly payment of $1678.11. The LTV is rounded to the nearest whole percentage. (The actual annual appreciation for American homes over the last 10 years on average was 7.4%.)

Year Home Value Loan Balance Home Equity LTV
0 $300,000 $240,000 $60,000 80%
1 $330,000 $237,596 $92,404 72%
2 $363,000 $235,196 $127,803 65%
3 $399,300 $232,611 $166,689 58%
4 $439,230 $229,825 $209,405 52%
5 $483,150 $226,822 $256,327 47%
6 $531,470 $223,587 $307,882 42%
7 $584,620 $220,101 $364,519 38%
8 $643,080 $216,343 $426,736 34%
9 $707,380 $212,294 $494,085 30%
10 $778,120 $207,931 $570,188 27%

Recommended: How Much Will a $300,000 Mortgage Cost You?

What Is a Good Amount of Home Equity?

Common wisdom says that it’s smart to keep at least 20% equity in your home. This is why many lenders limit your LTV to 80%. To borrow against your home, then, you’ll typically need more than 20% equity.

Fortunately, that’s not a problem for most homeowners. Research firm Black Knight recently estimated that Americans have $193,000 of “accessible” home equity on average, over and above the recommended 20%. This is mostly due to rising home values.

Recommended: How Home Ownership Can Help Build Generational Wealth

How Much Home Equity Can You Take Out?

The amount of equity you can take out depends on the lender and the type of loan. However, most lenders will allow you to borrow 80%-85% of your home’s appraised value. The other 15%-20% remains as a kind of financial cushion.

A homeowner who doesn’t want to take out a home equity loan but needs cash might consider a Home Equity Line of Credit (HELOC). A HELOC allows owners to pull from their property’s equity continually over time. Borrowers can take only what they need at the moment. HELOCs use the home as collateral, which might not appeal to all borrowers.

Homeowners looking to fund renovations often explore home equity loans or HELOCs to access funds at competitive home improvement loan rates, allowing for flexible financing of their projects.

Tips on Increasing Home Equity

Your initial home equity is determined by your down payment. The larger the down payment, the more equity a homeowner has right off the bat. The average down payment among American homebuyers is currently 13%. But a down payment of 20% or more can qualify borrowers for more favorable mortgage rates and also helps you avoid paying for private mortgage insurance.

After the down payment, home equity typically accumulates in three ways: monthly mortgage payments, appreciation, and home improvements. Beyond waiting for their home to appreciate, homeowners can increase their equity in several ways:
Pay more than your minimum mortgage payment each month. The extra money will go toward your principal, increasing your equity more quickly. Learn how to pay off a 30-year mortgage in 15 years.

Make biweekly payments instead of monthly. Your mid-month payment will incrementally lower your interest due. And by the end of the year, you’ll have made an extra mortgage payment.

Make strategic home improvements. Certain updates increase your home’s value more than others.

Refinance to a shorter-term loan. By refinancing to a 10- or 15-year mortgage instead of a standard 30-year, each mortgage payment will increase your equity at a faster rate.

The Takeaway

Calculating home equity involves subtracting your mortgage payoff balance (found on your lender’s website) from your home’s current value. To get the most accurate idea of your home’s market value, you’ll need an appraisal by your mortgage lender, which can cost $300-$450. Homeowners typically can’t borrow more than 80%-85% of their home equity. Knowing how to calculate equity in your home can be a first step in determining how to use that equity to fund renovations or another important expense.

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

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

FAQ

How do you determine your home equity?

To quickly estimate your home equity, subtract the amount you owe on your current mortgage from your home’s current value.

What is the formula to calculate home equity?

To figure out home equity, simply subtract the amount you owe on your home mortgage loan (and any other loan you may have that is secured by your home) from your home’s current value.

How much equity can you borrow from your home?

A lender will generally let you borrow 80%-85% of your home’s value, minus the amount you owe on your mortgage. Some lenders allow you to borrow more.

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.


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



*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.


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.

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

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Jul
12
2024

Average Checking Account Balance in the USA

By | Budgeting & Goals, money, Money & Life | Comments Off on Average Checking Account Balance in the USA

Your checking account plays an essential role in your financial life. It allows you to receive your payroll direct deposits, pay bills, write checks, make debit card purchases, withdraw cash at ATMs, even send money digitally to friends and family.

But since these accounts generally pay little to no interest, it can be tricky to figure out exactly how much to keep in your checking account. If you keep the balance too low, you risk overdrafts, bounced checks, and account fees. But if you keep the balance too high, you give up the opportunity to earn a better interest rate elsewhere.
So how much money should you keep in your checking account? Below, we’ll explore the average checking account balance — and the factors that can affect the average amount of money in a checking account.

What Is Considered a “Normal” Balance?

There’s no one ideal amount to keep in checking, since everyone’s financial situation is different. A common rule of thumb, however, is to keep around one to two months’ worth of living expenses in either a traditional or online checking account.

So, for example, if your monthly expenses are $4,000, you’d want to keep around $8,000 in checking. This helps to ensure you’re able to cover your short-term expenses and don’t accidentally overdraft your account or dip below the minimum balance required to avoid a monthly fee.

While a “normal” checking account balance will vary by income and expenses, we can get a sense of the average checking account balance in the U.S. by looking at the Federal Reserve’s most recent Survey of Consumer Finances (which is based on 2022 data). According the the Fed, Americans hold a median balance of $8,000 in transaction accounts (which include both checking and savings accounts).

Recommended: Reasons to Balance Your Checking Account Every Month

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 3.80% APY on savings balances.

Up to 2-day-early paycheck.

Up to $3M of additional
FDIC insurance.


Average vs Median

Government data on the average amount of money in checking accounts includes two different figures: the median and the mean (or average). For example, Americans hold a median balance of $8,000 in transaction accounts, but a mean balance of $62,410.

Why such a large disparity? The mean, or average, number is skewed by people holding high balances. As a result, it doesn’t paint a realistic picture of how much money the average American is really keeping in the bank.

Think back to math class where you learned about the difference between mean and median. The average balance in a checking account is determined by adding together every single checking account balance and dividing by the number of checking accounts. Extremely high and low balances can really skew that number.

The median balance, on the other hand, is the middle value when a data set is ordered from least to greatest. For instance, if you were analyzing five checking accounts, ordered by lowest to highest to balance, you’d look at the balance of the third checking account to get the median:

•   $300

•   $500

•   $2,000

•   $10,000

•   $20,000

Here, the median checking account balance is $2,000. However, the average balance of the checking accounts is $6,560.

Recommended: Current vs. Available Balance in a Checking Account

Factors Impacting Balances

There are a number of things that can impact the average amount in a checking account, from income to age to geographical location. Here’s a look at three key factors that can lead to keeping different amounts in a checking account.

Income Levels

As you might expect, income level can have a significant impact on checking account balances. People who make more money tend to spend more on things like rent, food, shopping, and entertainment. And when your living expenses are higher, you generally need to keep more money in your checking account.

Based on the Fed’s data, for example, Americans who earn less than $20,000 a year have a median transaction account balance of $900. For those who earn between $90,000 and $100,000, however, the median balance rises to a whopping $111,600.

Savings Rates

Interest rates on savings rates can also impact how much people keep in their checking account. When annual percentage yields (APYs) for savings accounts are especially high, it’s natural to want to take advantage of that and keep more in savings and less in checking.

These days, keeping only as much as necessary in checking and moving your extra cash in savings can really pay off. While the average checking account interest rate is 0.08%, you can now find high-yield savings accounts offering APYs as high as 3.00% APY or more.

Recommended: Are High-Yield Checking Accounts Worth It?

High vs Low Cost of Living Areas

If you live in an area of the country where the cost of living is relatively steep, you’ll need more money available in checking to cover everyday expenses like rent, utilities, groceries and gas. If you live somewhere with a relatively low cost of living, on the other hand, you can likely keep a lower-than-average checking account balance without running the risk of dipping into negative territory and, in turn, triggering fees or bouncing checks.

Balances by Age Group

Age also has a significant impact on the average checking account balance. As we get older, we tend to build wealth and, in turn, keep more money in transaction accounts like checking accounts. Here’s a closer look at how checking account balances vary by age.

Average for Millennials/Gen Z

According to the Fed’s data, Millennials and Gen Z’s keep somewhere between $5,400 and $7,500 in their transaction accounts.

Age

 Median Value of Account Holdings
Under age 35 $5,400
Age 35 to 44 $7,500

Average for Gen X

The Fed’s survey shows that adults aged 45 to 54 (who are considered “Gen Xers”) have a median balance of $8,700 in their transaction accounts.

Recommended: What Is the Average Savings by Age?

Average for Baby Boomers/Retirees

Baby Boomers and retirees have the highest average amount of money in their checking and other transactional accounts. Depending on their age, Boomers and retirees typically have median balances somewhere between $8,000 and $13,400. Interestingly, account balances tend to start decreasing in adults 75-plus.

Age

 Median Value of Account Holdings
55-64 $8,000
65 to 74 $13,400
75+ $10,000

Recommended: Importance of a Free Checking Account

Balances by Household Income

Government data shows large disparities in account balances between low-, mid-, and high-earners in the U.S. Here’s a detailed look at how household income affects how much Americans keep in their transaction accounts.

Income Range

 Median Value of Holdings
Less than $20,000 $900
$20,000 to $39,900 $2,550
$40,000 to $59,900 $7,400
$60,000 to $79,900 $15,760
$80,000 to $89,900 $33,800
$90,000 to $100,000 $111,600

Typical Emergency Fund Recommendations

Personal finance experts generally recommend keeping at least three to six month’s worth of living expenses in the bank to help cover the unexpected, such as an expensive car or home repair, medical emergency, or loss of income. So, for example, if your monthly living expenses are $4,000, you would want to keep $12,000 to $24,000 in your emergency fund. If you’re self-employed or work seasonally, however, you may want to aim for closer to six to 12 months’ worth of expenses.

That said, your emergency savings is generally not part of your checking account balance. Instead, you’ll want to keep that money in a savings account at a traditional or online bank or credit union. For one reason, you’ll be less tempted to spend your emergency fund on nonessential purchases if it’s a little further out of reach. For another, the interest rate for a savings account is typically higher, which will help your emergency grow over time.

The Takeaway

The average or normal checking account balance varies by age, income, lifestyle, and other factors. Ideally, you want to have enough in checking to cover one to two months’ worth of living expenses. This can help you avoid accidentally overdrafting the account or dipping below any required minimums. You can then move any additional cash to a vehicle that offers a higher return, enabling your money to grow faster.

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

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 3.80% APY on SoFi Checking and Savings.

FAQ

How much does the average person have in their checking account?

The average checking account balance can vary significantly depending on age, income level, spending habits, and other factors. According to the Federal Reserve’s most recent Survey of Consumer Finances, Americans have a median balance of $8,000 in transaction accounts (which include checking and savings accounts).

Can you have too much money in your checking account?

Yes. Keeping too much money in a checking account can be inefficient because these accounts typically offer low or no interest. A good rule of thumb is to keep enough money to cover one to two months’ worth of expenses in checking, and move excess cash to an account where you can earn higher returns, such as a high-yield savings account, investment account, or individual retirement account (IRA).

Photo credit: NIKOLA ILIC PR AGENCIJA ZA DIZAJN STUDIOTRIPOD SURCIN

SoFi members with Eligible Direct Deposit activity can earn 3.80% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below).

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning 3.80% APY, we encourage you to check your APY Details page the day after your Eligible Direct Deposit arrives. If your APY is not showing as 3.80%, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning 3.80% APY from the date you contact SoFi for the rest of the current 30-day Evaluation Period. You will also be eligible for 3.80% APY on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi members with Eligible Direct Deposit are eligible for other SoFi Plus benefits.

As an alternative to Direct Deposit, SoFi members with Qualifying Deposits can earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Eligible Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving an Eligible Direct Deposit or receipt of $5,000 in Qualifying Deposits to your account, you will begin earning 3.80% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Eligible Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

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

Separately, SoFi members who enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days can also earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. For additional details, see the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.

Members without either Eligible Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, or who do not enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days, will earn 1.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 1/24/25. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.
SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2025 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.

*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.

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Jul
12
2024

Money Market vs Checking Account

By | Budgeting & Goals, Growing Wealth, money | Comments Off on Money Market vs Checking Account

Money market and checking accounts can both offer a safe place to store your cash, easy access to your funds, and the ability to earn a bit of interest. However, they are not identical. Money market accounts generally offer higher interest rates, but may require higher minimum deposits and balances, and they may also restrict how many transactions you can make per month.

Understanding the differences between these two accounts, and the pros and cons of each, can help you determine which is the best choice for your needs.

What Is a Checking Account?

A checking account is a deposit account where you can keep your money, safely storing your earnings and managing your everyday spending. A deposit account, for those who aren’t used to the term, is a type of bank account that lets you deposit and withdraw funds.

Unlike a savings account (which is often designated for an emergency fund and future goals, like a new car), a checking account is designed for frequent use, such as paying for your living expenses and basic purchases.

Checking accounts typically feature unlimited transfers, deposits, and withdrawals. If the checking account is with a bank, the funds are likely protected by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per depositor, per account ownership category, per insured institution. If the account is with a credit union, the money is likely insured up to the same limits by the National Credit Union Administration (NCUA).

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 3.80% APY on savings balances.

Up to 2-day-early paycheck.

Up to $3M of additional
FDIC insurance.


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

What Is a Money Market Account?

A money market account (MMA) is also a deposit account. If you’re putting different deposit accounts on a spectrum, a money market account leans more toward the savings account end of the range. They tend to have higher interest rates than a checking account and are typically better suited to storing your funds for future goals.

Money market accounts are protected by the FDIC and NCUA in the same way as checking accounts. However, these accounts often have limits on withdrawals and transfers. Another feature to note: They frequently have higher minimum deposit and balance requirements than checking accounts.

Recommended: Money Market Account vs Certificate of Deposit (CD)

Key Differences

Here are some key differences when comparing money market vs. checking accounts.

Interest Rates

You have a better chance of scooping up a higher interest rate on a money market account vs. a checking account. (Some checking accounts offer no interest at all.)

The national average interest rate for money market accounts is 0.67%, but you’ll likely find higher rates than that. Some financial institutions offer money market accounts with annual percentage yields (APYs) of 5.00% and higher. On the other hand, the national average rate for checking accounts is 0.08%.

Accessibility of Funds

As checking accounts are made for everyday purchases, they feature unlimited transactions — transfers, deposits, and withdrawals. A money market account will likely provide similar forms of access to your money, such as check writing privileges, debit card transactions, and ATM withdrawals. However, how often you can conduct these transactions with a money market account may be limited, as you’ll learn in the next point.

Transaction Limits

With a checking account, you typically can access your funds as often as you like. With money market accounts, this may not be the case. While the Federal Reserve lifted previous caps on monthly limits for withdrawals, deposits, and transfers set by Regulation D, a bank or credit union might still set limits. You could find yourself restricted to, say, six transactions of a certain kind per statement period. It’s therefore important to read the find print on your account agreement or to ask a customer service rep for details.

Opening Deposit Requirements

Another key difference between a money market account and a checking account is the opening deposit requirements. Money market accounts typically have higher minimum opening deposits than their checking counterparts.

Plus, you might need to maintain a higher monthly balance. Stashing a larger sum of cash (say, $2,500) in your money market account may be necessary to snag a higher interest rate and lower account fees. Standard checking accounts typically don’t have these conditions, although some premium accounts do require higher balances.

Pros of Checking Accounts

When comparing these two financial products, ponder the pros and cons of checking accounts. First, consider their advantages:

Low opening deposit. You can open a checking account with no initial deposit at some financial institutions. Others may require $25 to $100.

Convenient access. As previously noted, you can typically access the funds in a checking account as often as you like via a debit card, an ATM, electronic transfers, or checks. There may be an unlimited number of transactions you can make in a given month.

Pay bills. You can usually set up automatic bill pay so your financial institution sends funds to payees on your behalf. Plus you can set up autopay with different companies so that they can deduct funds from your checking account to pay for bills each month, such as utility bills, insurance premiums, and credit card payments.

Debit card. When you open a checking account, you typically receive a debit card for everyday purchases, whether in-person and online, and for withdrawing cash at an ATM.

Cons of Checking Accounts

Now, consider some of the downsides of a checking account:

Low interest. Checking accounts aren’t designed to grow your savings; they’re designed to pay bills, make everyday purchases, and constantly move money in and out. As such, they don’t feature high interest rates. Some may not earn any interest. It’s likely that any interest earnings on a checking account will be outpaced by inflation.

Monthly service fees. A checking account might come with a monthly service fee. However, you might be able to opt out of these fees by maintaining a minimum balance or receiving a certain amount in direct deposits in a statement cycle.

Other fees. You might also find yourself paying out-of-network ATM fees, overdraft fees, bounced check or returned payment fees, and paper statement fees with a checking account.

Pros of Money Market Accounts

Here are some advantages to opening a money market account:

Higher interest rates. You will typically enjoy a higher rate with a money market than a standard checking account, though perhaps not as much as a savings account. The rates vary depending on where you do your banking.

Access to cash. Unlike certificates of deposit (CD), your money isn’t locked in your money market account for a specific term. Instead, you can access your money and use a linked debit card to make purchases or ATM withdrawals.

Cons of Money Market Accounts

Next, review some potential drawbacks to money market accounts:

Transaction limits. Depending on the financial institution, monthly transaction limits on electronic transfers and outgoing checks may be in place. For example, you might be limited to six withdrawals and transfers per statement period. If you exceed these limits, you might be on the hook for paying a fee or receiving a lower interest rate.

Opening deposit. Money market accounts typically require a larger chunk of change for the opening deposit. The amount depends on the bank but usually starts at roughly $2,500.

Fees. As with checking accounts, you may find yourself paying a number of fees that can eat away at the interest you earn.

Which Account Is Right for You?

When comparing a money market account to a checking account, a checking account may be a better fit if you intend to keep the funds for everyday use. Most people (82% or more of Americans) have a checking account, and it can be the hub of one’s daily financial life. Think of it as a well from which you’re constantly drawing water — you’ll enjoy unlimited access to withdrawals, transfers, and debit card spending.

It might also be a stronger fit if you’re looking for an account that requires a low minimum opening deposit and monthly balance thresholds.

If you have a larger sum of money to keep in an account, want to earn more interest, and don’t anticipate needing to make a lot of transactions, a money market account could be a better fit. It’s also important to look at the initial deposit requirement and monthly balance minimum before making your decision.

Using Both Account Types

Consider using both a checking and a money market account. For instance, you can use your checking account for your everyday spending and to set up autopay on some of your recurring monthly bills.

Your money market account can be linked to pay a few of your bills. If you don’t touch your money market account otherwise, you can stay within any monthly transaction limits that may exist and earn a higher rate of interest, perhaps even an APY that’s competitive with high-yield savings accounts.

The Takeaway

While checking and money market accounts do share some similarities, they have important differences. A money market may offer higher interest, but it could have higher opening deposit and balance requirements, as well as transaction limits. Which kind of account works best for you will depend on your preferences and your unique financial situation.

If you’re considering where to keep your checking and savings account, see what SoFi offers.

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


Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 3.80% APY on SoFi Checking and Savings.

FAQ

Can a money market account replace checking?

It depends: A money market account can have limited monthly withdrawals. Plus, there might be a higher minimum opening deposit and monthly balance needed. That said, it could potentially replace your checking if you don’t typically make a lot of transactions with your checking account and the potential requirements mentioned don’t bother you.

Do money market accounts have debit cards?

Yes, money market accounts typically come with debit cards, which can make spending easier. Money market accounts might have monthly caps on the number of withdrawals and transfers, however. The limit, if it exists, can vary depending on the bank or credit union.

How do money market rates compare to savings?

Money market rates can be comparable to those of some savings accounts. To get the most competitive rate, you might find a money market that’s offering around what you’d earn with a high-yield account at an online bank (currently around 3.00% APY).

Photo credit: iStock/PeopleImages

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2025 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 Eligible Direct Deposit activity can earn 3.80% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below).

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning 3.80% APY, we encourage you to check your APY Details page the day after your Eligible Direct Deposit arrives. If your APY is not showing as 3.80%, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning 3.80% APY from the date you contact SoFi for the rest of the current 30-day Evaluation Period. You will also be eligible for 3.80% APY on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi members with Eligible Direct Deposit are eligible for other SoFi Plus benefits.

As an alternative to Direct Deposit, SoFi members with Qualifying Deposits can earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Eligible Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving an Eligible Direct Deposit or receipt of $5,000 in Qualifying Deposits to your account, you will begin earning 3.80% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Eligible Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

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

Separately, SoFi members who enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days can also earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. For additional details, see the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.

Members without either Eligible Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, or who do not enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days, will earn 1.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 1/24/25. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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


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

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Jul
12
2024

Timberland Investment: Benefits and Risks

By | Growing Wealth, invest, Investing | Comments Off on Timberland Investment: Benefits and Risks

An increasing number of investors looking for diversification and long-term profits have turned their focus to timberland investments, a strategy that involves purchasing and managing forested land for profit.

Timberland provides a special combination of potential long-term land value appreciation, revenue from lumber sales, and in some cases environmental advantages. This strategy also, however, comes with a unique set of risks and challenges owing to climate and geographical factors.

What Exactly Is a Timberland Investment?

Buying forest land with the primary goal of managing and harvesting the timber for profit is known as a forestry investment. Because the growth and production of timber is not correlated with the stock or bond markets, timberland investing is considered an alternative asset class.

It also may be a hedge against inflation, as the demand for lumber and other wood-based products tends to grow over time, and rarely tracks the movement of stock and bond markets.

Periodic wood sales, land value appreciation, and prospective leasing opportunities for recreational use or conservation easements are some of the ways that a timberland investment may pay off over time.

Investments in timberlands that are managed responsibly may yield a renewable resource, and balance commercial interests with environmental management. This asset class combines aspects of real estate and agricultural investment to provide a practical investment in natural resources.

Ways to Invest in Timberland

Large institutional investors like pension funds and universities may own millions of acres of timberland outright. While land management on that scale may be difficult for retail investors, individuals can invest in this asset class through mutual funds as well as exchange-traded funds (ETFs) that are focused on forest land, and companies that supply infrastructure or produce timber-based goods.

REIT investing (real estate investment trusts) is another avenue that individual investors can use to access timberland investing. Certain types of REITs include lumber-producing properties, and related real estate.

Alternative investments,
now for the rest of us.

Start trading funds that include commodities, private credit, real estate, venture capital, and more.

How Can Timberland Be Profitable?

Timberland can be a desirable alternative investment since it can provide income from a number of sources. The main source of income is the recurring sales of harvested timber, which is utilized in many different businesses such as energy, paper, and construction. But timberland offers a range of potential growth opportunities, including:

•   The value of timber itself. Trees gain value over time as they grow, and the demand for timber tends to increase as well — a potential upside for investors long term.

•   Land value. The land itself may also increase in value over time. By building infrastructure, such as roads, bridges, and trails that increase accessibility and appeal for a variety of applications, investors may also see higher land values, or profits from land use deals.

•   Potential for development. After the trees have been harvested, a property may be developed for residential or commercial use.

•   Recreational activities. Additionally, timberland can make money through leases for outdoor activities like fishing, hunting, and ecotourism, or by selling carbon credits. While preserving the forest’s natural health, long-term income can be realized through effective management and sustainable methods.

Benefits of Investing in Timberland

There are several advantages to investing in forestry that may provide both financial and environmental benefits. Timber is a tangible good with steady demand in sectors like building, paper, and energy — unlike stocks, which may be volatile and subject to market swings.

As a result, timberland investments typically have a low correlation with traditional asset classes such as stocks and bonds. One of the main advantages of investing in timberland is that it offers portfolio diversification, which can help investors manage risk.

The consistent biological development of trees — which, depending on species, temperature, age, and other factors, increases their volume by an average of 5% annually — makes forest investment attractive. Timberland may yield relatively consistent, long-term profits from the sale of timber, as well as possible increases in property values. As such, it offers a hedge against inflation, as timber prices tend to rise with general price levels.

While not exactly known as a green investing strategy, investments in timberland may promote environmentally sound forestry methods, and aid in carbon sequestration, which improves the ecological health of forests and the planet as a whole.

Additionally, owning timberland may result in tax benefits, such as possible deductions for land management initiatives like conservation easements.

Timberland investors can benefit greatly from the expansion of the housing sector in particular, since they can take advantage of the growing demand for building materials.

Risks and Challenges of Timberland Investing

Although investing in timberland has many advantages, there are also risks and challenges that potential investors need to take into account.

Timber prices may be subject to market volatility, which might result in inconsistent revenue from sales of timber. Furthermore, timberland is an illiquid asset, which means that selling it rapidly without risk of loss is challenging.

Wildfires, pests, and diseases are examples of environmental dangers that can seriously harm wood supplies and lower the investment’s value.

It can be expensive and time consuming to manage a timberland investment because it calls for specific knowledge and constant attention to forestry techniques and markets.

The profitability and operational flexibility of timberland investments may be impacted by modifications to laws and policies pertaining to environmental protection and land use.

Timberland Investing Pros and Cons

Potential Advantages

 Risks and Challenges
Portfolio diversification May succumb to volatility in certain markets
Potential for long-term profits Highly illiquid
A hedge against inflation Vulnerable to climate change and environmental risk factors
Environmental benefits Political issues and land disputes
Potential tax advantages Management/maintenance costs
Tends to rise with housing market Regulatory hurdles

Alternative Investments With SoFi

Investing in timberland can be a wise alternative investment, since it can provide income as well as potential profits from a number of sources. And because the demand for timber is typically steady over time, investors in this asset class may be able to enjoy long-term growth.

Ready to expand your portfolio's growth potential? Alternative investments, traditionally available to high-net-worth individuals, are accessible to everyday investors on SoFi's easy-to-use platform. Investments in commodities, real estate, venture capital, and more are now within reach. Alternative investments can be high risk, so it's important to consider your portfolio goals and risk tolerance to determine if they're right for you.

Invest in alts to take your portfolio beyond stocks and bonds.

FAQ

What are the key advantages of investing in timberland?

Timberland investments offer several benefits, such as portfolio diversification, inflation protection, the potential for consistent long-term earnings, sustainable forestry, and possible tax advantages.

What are the major risks and challenges of timberland investments?

The major risks and challenges of timberland investments include market fluctuations affecting timber prices, illiquidity of the asset, environmental threats such as wildfires and pests, high management costs, and regulatory changes impacting land use and profitability.

Is timberland investment a good way to diversify?

Investing in forestry may help to lower overall investment risk because it has a low correlation with other conventional asset classes like stocks and bonds.

Photo credit: iStock/SimonSkafar

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SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
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Alternative investments, including funds that invest in alternative investments, are risky and may not be suitable for all investors. Alternative investments often employ leveraging and other speculative practices that increase an investor's risk of loss to include complete loss of investment, often charge high fees, and can be highly illiquid and volatile. Alternative investments may lack diversification, involve complex tax structures and have delays in reporting important tax information. Registered and unregistered alternative investments are not subject to the same regulatory requirements as mutual funds.
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Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.

Disclaimer: The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.
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Shares of ETFs must be bought and sold at market price, which can vary significantly from the Fund’s net asset value (NAV). Investment returns are subject to market volatility and shares may be worth more or less their original value when redeemed. The diversification of an ETF will not protect against loss. An ETF may not achieve its stated investment objective. Rebalancing and other activities within the fund may be subject to tax consequences.

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