Is a certificate of deposit better than a savings account?

That depends on your unique financial needs. If you have money you don’t need to access anytime soon and can find a higher interest rate vs. a savings account, then a CD is likely a better fit. If, however, you need to be able to access your money and make withdrawals, a savings account will probably better suit you.

How long should you keep money in a CD?

CDs are offered with different terms, from a few months to a number of years. Typically, you will earn a higher interest rate with a longer CD. However, it’s important to consider how long you can comfortably tie up your money. If you withdraw funds before the CD’s term of deposit is up, you may face penalties.

Financial Topics Archives | Page 4 of 788

Q: Does a certificate of deposit give you better interest than a savings account?

In general, a CD can provide a better interest rate than a savings account, but it pays to research exactly what is being offered. That being said, it’s worth comparing the difference in those interest rates before making a decision. It’s possible that a CD’s interest rate might not be high enough to outweigh the downside of not being able to access your funds the way you can with a savings account.

Q: Is a certificate of deposit safer than a savings account?

Both CDs and savings accounts are insured by either the FDIC or NCUA, depending on which kind of financial institution you make your deposit.

Oct

2024

Certificate of Deposit vs. Savings Account: What You Should Know

CDs vs Savings Accounts Compared

By Jacqueline DeMarco | Budgeting & Goals, Financial Independence, money | Comments Off

Saving money is a good thing, but it’s important to find the right kind of account for your cash. Both savings accounts and certificates of deposit (CDs) can be a safe spot to keep your money, but they have differences. A savings account can be more accessible, meaning you can typically withdraw funds at will, while with a CD, you are supposed to let your money sit for an agreed-upon period of time. Also, interest rates may vary. CDs typically offer higher rates than traditional savings accounts do. However, high-yield savings accounts may offer rates close to (or possibly even exceeding) those of CDs.

Depending on your needs and preferences, you may discover that one option is a better fit for you. Read on for details on what these accounts offer and how they differ. Once you know the pros and cons of each, you will likely be better prepared to make a decision.

Key Points

• High-yield savings accounts can offer more flexibility than CDs, allowing account holders to make withdrawals without penalties.

• CDs typically provide higher interest rates than traditional savings, but high-yield accounts may offer competitive rates.

• High-yield savings are ideal for emergency funds or short-term goals due to their accessibility.

• Interest rates for high-yield savings can fluctuate, unlike fixed-rate CDs.

• Choosing between a high-yield savings account and a CD may depend on accessibility needs, interest rates, and financial goals.

Certificate of Deposit (CD) vs HYSA Savings Accounts

A certificate of deposit (CD) and savings account are both vehicles that can help you grow your money thanks to interest earned. A key difference, however, is that a savings account is more accessible, while, with a CD, you agree to keep the funds on deposit for a period of time. You may, however, be rewarded with a higher interest rate for doing so.

That said, high-yield savings accounts can offer competitive interest rates vs. CDs and provide more flexibility. You can withdraw funds as needed, without being hit with penalties.

To understand more about the difference between a CD and a savings account, it’s a good idea to first learn in depth how each type of account works.

What Is a Certificate of Deposit (CD)?

A certificate of deposit (CD) is a specific type of savings account that pays interest. You agree to keep the money on deposit for a specific term, which can range from a few months to several years, and you are promised a specific interest rate (usually, but not always, a fixed rate). CDs are also known as time deposits for this reason. A couple of points to note:

• Generally, the longer the term you choose, the higher the interest rate may be. You may also find a promotional CD with a higher than usual rate.

• You may find some variable-rate CDs offered. With these, the interest can fluctuate with the market.

• Typically, you will pay a penalty if you withdraw funds before the end of the term. There are some no penalty CDs on the market that don’t involve a penalty for pulling money out early. They may, however, offer lower interest rates.

CDs are considered to be a very safe savings option, provided they are held at a bank with Federal Deposit Insurance Corporation (FDIC) insurance. If so, you will be covered up to $250,000 per depositor, per account category, per insured institution. That means even in the very rare instance of the bank failing, you wouldn’t lose funds up to that amount. (If you open a CD at a credit union, you would likely be insured by the National Credit Union Administration, or NCUA, in a similar way.)

How Does a CD Work?

Here’s how a certificate of deposit works:

• When you open a CD, you typically commit to leaving the money in the account for a set period of time such as six months or three years. In exchange for locking up your funds in this way, the bank issuing the CD will pay out a certain amount of interest.

• Many financial institutions give account holders the option to collect interest at intervals during the term of the CD or at the end of the term.

• However, if you withdraw funds from the CD before its term is over (also known as its maturation date), you will likely be charged a penalty.

• When the agreed upon period of time is over, you can get your original deposit back, along with the interest earned and not yet paid out, or you can roll it over into a new CD.

Recommended: Savings Account Calculator

What Is an HYSA Savings Account?

A savings account, which you can open at a bank, credit union, or other financial institution, is a place where you can save money without locking it away for an extended period of time. Opt for a high-yield savings account to help your money grow even faster.

• A savings account is a good fit for money you want to protect and grow while still being able to access it — say, for an emergency fund or a down payment for a car you plan to buy in the coming months.

• The funds in your account are accessible when you want them, without a penalty, though some financial institutions do limit the number of transactions per month.

• Similar to CDs, savings accounts generate interest, but traditional savings accounts may offer a lower rate. A high-yield savings account, or HYSA (most often found at online banks), can come with a higher interest rate, sometimes a multiple of what traditional accounts offer. For example, as of September 2024, the average interest rate for traditional savings accounts was 0.46% and the rate for high-yield savings accounts could be several times that.

Most savings accounts at major banks offer FDIC insurance. If the savings account is held at a credit union instead of a bank, then the NCUA vs FDIC insures the money with similar guidelines.

“Short-term money is any money you might need in the next couple of years, such as an emergency fund (so long as you have fast access to this money), travel fund, wedding fund, or down payment savings. The priority is it is there when you need it, which is why many people use a high-yield savings account or another cash equivalent.”

-Brian Walsh, CFP® and Head of Advice & Planning at SoFi

How Does an HYSA Savings Account Work?

High-yield savings accounts, like traditional savings accounts, work by putting money in your account, where it earns interest. You can then withdraw funds as needed (though some financial institutions may put a limit on how many transactions they allow per month). The difference is, however, that you’ll earn a more robust interest rate.

Someone might put money in savings to:

• Earn interest and help their money grow

• Save money for a short-term financial goal

• Create an emergency fund

• Keep their money safe vs. having cash at home

• Separate the money they want to save from the money they want to spend

3 Similarities Between a CD and HYSA Savings Account

If you’ve ever thought of a CD and a savings account being almost the same thing, there’s a good reason why: There are a few similarities between them.

1. Insured

Typically, a CD or savings account is insured by either the FDIC or the National Credit Union Administration (NCUA) which helps protect the money in these savings vehicles.

2. Earns Interest

Both CDs and savings accounts earn interest on the money deposited into them, unlike checking accounts which often offer no interest. While CDs may earn a higher interest rate than traditional savings accounts, a HYSA may offer a competitive interest rate vs. a CD, but it won’t charge you an early-withdrawal penalty.

3. Good Ways to Save Money

You know the saying: Out of sight, out of mind. By putting money into a CD or savings account, you may find it easier to save money and resist the temptation to spend it.

Differences Between a CD and HYSA Savings Account/2>

Of course, there are some key differences between these accounts worth understanding. Knowing these points could help you decide between a high-yield savings account vs. a CD.

1. Accessibility

With a CD, you can’t remove your money until the date of maturity without being penalized. With a high-yield savings account and traditional ones as well, you can usually make either up to six withdrawals a month or unlimited withdrawals. (Check with your financial institution for specifics.)

2. Amount of Interest Earned

Traditional savings accounts generally earn less interest than CDs. However, a high-yield savings account may offer a rate that’s competitive with a CD. Comparison-shop to see what’s offered.

When to Use a CD Instead of an HYSA Savings Account

Here’s some guidance on when you might opt for a CD vs. a savings account.

• A CD is a good fit if you don’t need to access your money in the near future. If you can agree to leave the money untouched for a number of months or years in a CD, you could earn a higher interest rate vs. a savings account.

For instance, say you got a bonus at work and aren’t quite sure what you want to do with it. Putting it in a CD will keep it safe and earning interest while you decide how you might want to use it.

• Another scenario in which a CD could be a wise move is if interest rates are expected to fall. Locking in your rate with a CD before that happens could help your money grow.

When to Use an HYSA Savings Account Instead of a CD

A savings account can be a better option if you need your money to be easily accessible in the near future.

• A savings account can be a good place to store an emergency fund (since you never know when you might need to withdraw some funds) or when saving up for a short-term financial goal.

• Putting money in a savings account can be a wise move if interest rates are expected to rise. That way, you can enjoy higher earnings as rates climb. That wouldn’t be the case if you locked in to a fixed-rate CD.

How to Open a CD

To open a CD, you can choose a financial institution, and pick the type and term of CD you want. This can mean deciding between a no-penalty or traditional CD. You’ll also determine how often you want to collect your interest payments (say, monthly or when the CD matures, meaning when it reaches the end of its term).

You can likely open a CD in person or online. The process also typically involves sharing your government-issued photo ID, personal details (name, address, Social Security number, and so forth), and other credentials.

The final step will be to fund the CD: That happens by transferring the money online, via a phone transfer, handing over cash if you’re at a branch, or by using a check.

How to Open an HYSA Savings Account

The first step for opening a savings account, including a high-interest savings account, is to compare financial institutions and account options and make your decision.

You may find options depending on minimum opening deposits and minimum balances; interest rates will likely vary between standard and high-yield accounts. You may also find a variety of fees relating to the accounts available, so consider how those might impact your savings.

Next, you will likely have to provide personal information (such as name, address, and SSN), government-issued photo ID, and other details in order to complete the process. This holds true whether you are opening an account in person at a brick-and-mortar location or online.

Lastly, you’ll need to add cash to open the account, whether by handing over money in person or otherwise transferring funds. A typical deposit requirement for a basic savings account might be $25 to $100; you might find some that don’t need any deposit. For a HYSA, you could see minimums ranging from similar levels to thousands of dollars in some cases.

The Takeaway

Both certificates of deposit and savings accounts are secure, low-risk places to keep money and earn interest. With a CD, you may earn higher interest than with a standard savings account, but you agree to keep your money on deposit for a specific term or else be penalized for an early withdrawal. With a savings account, your funds are accessible without that kind of penalty, so you can dip in as needed. With a high-yield savings account, you might earn as high an interest rate as a CD. Which financial product is the right choice will depend on your particular needs and goals.

If a savings account seems like a good option to you, SoFi might be 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 4.30% APY on SoFi Checking and Savings.

FAQ

Is a certificate of deposit the same as a savings account?

No, a certificate of deposit (CD) is not the same thing as a savings account. Money placed in a CD is not easily accessible like a savings account; you agree not to touch it for a period of time, usually from six months to a few years. CDs are also known as term deposits.

Is a high-yield savings or CD account better?

Whether a high-yield savings account or CD is better for you depends on your unique financial needs. If you have money you don’t need to access anytime soon and can find a higher interest rate for a CD vs. a savings account, then a CD is likely a better fit. If, however, you need to be able to access your money and make withdrawals, a savings account will probably better suit you. And you might find a HYSA that has a rate that’s as good as a CD’s.

Does a certificate of deposit give you better interest than a savings account?

In general, a CD can provide a better interest rate than a traditional savings account, but it pays to research exactly what is being offered. It’s possible that a CD’s interest rate might not be high enough to outweigh the downside of not being able to access your funds the way you can with a savings account. Or you might find that a high-yield savings account offers an interest rate on a par with that of a CD, plus greater accessibility.

Is a certificate of deposit safer than a savings account?

CDs and savings accounts can be equally safe. Most major banks and credit unions are insured by either the FDIC or NCUA, protecting consumers in the very unlikely event of the financial institution

What is the biggest negative of putting your money in a CD?

The biggest negative of a CD is lack of access. You are locking up your money for a set period of time, or term. If you withdraw funds before the CD’s term of deposit is up, you typically face financial penalties.

Photo credit: iStock/Moyo Studio

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
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SoFi members with direct deposit activity can earn 4.30% 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 4.30% 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 4.30% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

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

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

Interest rates are variable and subject to change at any time. These rates are current as of 10/8/2024. 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.

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

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SOBNK-Q324-103

Oct

2024

How to Pay off $100K in Student Loans

By Melissa Brock | Debt Payoff, Student Loans, student_loan | Comments Off

When you’re facing $100,000 in student loan debt, you may wonder if you’ll ever be able to pay it all off. To make it even more daunting, you’re probably facing tens of thousands of dollars in interest charges.

Fortunately, there are a number of strategies to make your payments manageable and more affordable. Learn how to pay off 100K in student loans and find the repayment option that’s best for you.

Understanding Your $100,000 Student Loan Debt

According to the Education Data Initiative, 8% of borrowers owe more than $100,000 in student loan debt. As the interest continues to build on the loan, you’ll owe even more than $100,000 over time. That’s what makes living with student loan debt so challenging.

For example, if you have a $100,000 loan balance with a 7% interest rate and a 10-year repayment term, you’ll owe $39,330 in interest payments over the life of the loan. So your $100,000 loan becomes $139,330, with monthly payments of $1,161.

The longer you take to pay off your $100,000 in student loans, the more you’ll pay. But of course, your payments also need to fit into your budget each month, along with your rent, utilities, and other necessities.

Breaking Down Federal and Private Loans

There are key differences between federal and private student loans that can affect how you repay what you owe. Federal student loans come from the Department of Education, while private student loans are offered by private institutions like banks, credit unions, and online lenders.

Federal student loans have fixed interest rates, flexible repayment options, and federal protections and programs such as income-driven repayment plans and loan forgiveness.

Private student loans are often used to help fill the gap that federal loans, scholarships, and other financial aid doesn’t cover. These loans may have fixed or variable interest rates, and they often require a cosigner. Private student loans don’t offer the same flexible repayment options or federal programs that federal student loans do.

Check to see what kinds of loans you have. You may have federal student loans only or a combination of federal and private student loans. Knowing exactly what your loans are will help you determine the best way to tackle your debt.

Recommended: Student Loan Debt Guide

Calculating Interest and Total Repayment Costs

Once you’ve identified the kinds of student loans you have, calculate how much your total repayment cost, including interest, will be based on the loan term of your current repayment plan. With federal student loans, unless you pick another plan, you will automatically be placed on the 10-year Standard Plan.

You can check with your student loan service provider to get your total student loan costs. You can also use a student loan calculator or calculate it yourself.

To determine how much the monthly simple interest on your loan will be, you first need to calculate the daily interest on the loan. To do this, divide the loan’s interest rate by 365 and multiply that number by the principal amount. Then multiply the resulting number by the number of days in your billing cycle.

On a $100,000 loan with an interest rate of 6.00% and a repayment term of 10 years, your monthly payment would be $1,110.21, and $276.88 of that would be interest.

That adds up to $33,224.60 in interest over the life of the loan, giving you a total loan repayment cost of $133,224.60.

Creating a Budget and Repayment Plan

To start paying off $100,000 in student loans, it helps to create a budget. You might consider using a popular budgeting technique such as the 50/30/20 rule, which allocates 50% of your income toward needs (housing, utilities, bills), 30% toward wants (nonessential items like dining out and entertainment), and 20% toward savings and investments. You may decide to forgo a big chunk of the wants and direct that extra money into paying off your student loans.

Once you’ve set up a budget, evaluate your loan repayment options. The Standard Plan with its 10-year repayment term might not be the best choice for you, especially if the monthly payments are too steep. Instead, you may want to consider income-driven repayment (IDR) plans. These plans are designed for borrowers who have a high debt relative to their income.

With income-driven repayment, your monthly payment amount is based on your income and family size. Your loan term will be approximately twice as long as on the Standard Plan. However, the longer loan term means you will pay more interest over time.

Exploring Loan Consolidation and Refinancing

Student loan consolidation and refinancing are two other possible options to help manage student loan debt.

Consolidating Federal Student Loans

When you have multiple federal student loans, you can consolidate them into a new federal Direct Consolidation Loan. With this loan, you can choose more flexible loan terms, like a longer time to repay the loan. You’ll also simplify your payments. Instead of making several different loan payments, with consolidation you make just one payment.

Refinancing with Private Lenders

When you refinance your student loans, you replace your current loans with a new loan from a private lender. Ideally, you might be able to qualify for better rates and terms.

It’s possible to refinance private student loans, federal student loans, or a combination of both types. However, if you refinance your federal student loans into private loans, you’ll lose access to the federal programs and protections those loans offer, such as deferment, forbearance, forgiveness, and income-driven repayment plans.

Recommended: Private Student Loans Guide

Weighing the Pros and Cons

There are benefits and drawbacks to refinancing and consolidating your student loans. Here are the pros and cons of each option.

Pros of federal student loan consolidation:

• Simplified payments.You’ll have a single monthly loan payment, rather than multiple payments.

• Lower monthly payment. You might be able to get a lower monthly payment, but that means you’ll make more payments over a longer term.

• Longer loan term. Consolidation gives you the flexibility to choose a lengthier loan term.

Cons of federal student loan consolidation:

• Consolidation may result in more payments and interest over time if you extend your loan term.

• With consolidation you might lose certain benefits such as interest rate discounts, principal rebates, and loan cancellation benefits.

• A longer loan term could mean you’ll be making payments for years longer than your original term.

• Consolidating your loans might cause you to lose credit for payments made toward income-driven repayment plan forgiveness.

Refinancing student loans also has advantages and disadvantages.

Pros of student loan refinancing:

• You may get a lower interest rate. If you qualify for a lower interest rate, you could save money. A student loan refinancing calculator can help you determine what you might save.

• You might qualify for better terms. You may be able to extend the length of your loan, which could lower your monthly payment.

• Simplified payments. With refinancing, you only have one payment each month, rather than multiple loan payments.

Cons of student loan refinancing:

• You’ll lose federal protections and programs. When you refinance your student loans with a private lender, you lose all federal benefits and protections, including deferment and forbearance.

• No access to income-driven repayment plans. IDR plans are another thing you give up with refinancing.

Utilizing Repayment Assistance Programs

Loan repayment assistance programs (LRAPs) are another resource that could help you manage your student debt. States, employers, and other organizations may offer these programs that can help you repay your student loans.

Do some research to find out if there are any LRAPs you might qualify for — for instance, some are offered to college grads that work in public service fields — and check with your employer to find out if they offer such a program.

Strategies for Accelerating Loan Repayment

There are several different strategies for repaying your student loans faster, which could help you save money over the long term. Here are some options to consider.

• Start paying off your loans sooner. If possible, make student loan payments while you’re still in school or during the six-month grace period after graduation. If you can’t afford to make full payments, pay off enough to cover the interest each month and keep it from accruing.

• Sign up for automatic payments. Making your loan payments automatic will ensure that they’re made on time, and prevent any late penalty charges. Plus, you may get an interest rate deduction for enrolling in an automatic payment program.

• Pay a little extra each month. Paying more than the minimum on your loan can help you pay off the loan faster. It can also reduce the amount of interest you’ll pay.

• Put any extra money toward your loans. Use a windfall, a tax refund, or birthday money from family members to help pay off your student loan.

• Consider student loan refinancing. With refinancing you may be able to qualify for a lower interest rate or a shorter loan term.

The Takeaway

A student loan debt of $100,000 might seem daunting, but there are ways to repay your loans that might also save you money or allow you to pay off your loans faster. Options include income-driven repayment plans, putting additional money toward your loan payments each month, loan consolidation, or student loan refinancing. Weigh the pros and cons of the different options to decide which one is best for you.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

FAQ

How long will it take to pay off 100K in student loans?

The length of time it will take to pay off $100K in student loans depends on a variety of factors, including the repayment plan you choose and whether or not you regularly make extra payments toward your student loans each month. For instance, if you’re on the Standard Repayment plan for federal student loans and you don’t make additional payments on your loans, it will typically take you 10 years to pay off your loans. If you opt for an income-driven repayment plan, your loan repayment term will generally be 20 years or longer.

Can I settle student loan debt for less than I owe?

It’s difficult to settle student loan debt for less than you owe. However, if you find yourself in very dire circumstances and your loans are in default, you may be able to get a student loan settlement. That means you pay off your student loans for less than you owe typically in one lump sum, depending on the settlement terms. Your lender must be willing to work with you in order to qualify for a student loan settlement. Check with your loan servicer for more information.

What happens if I can’t make my student loan payments?

If you can’t make your student loan payments, reach out to your lender or loan servicer right away to let them know you’re struggling. They will explain the options you have, which might include income-driven repayment plans, forbearance, or deferment. It’s important to reach out to the lender or loan servicer immediately because if you miss payments, they may report the missed payments to the credit reporting agencies, which can hurt your credit.

Photo credit: iStock/damircudic

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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.

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

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

SOSLR-Q324-005

Oct

2024

What Is a Minor in College? A Comprehensive Guide

By Marcy Lovitch | Going to College, Student Loans, student_loan | Comments Off

All college students are required to declare a major, but what about a minor? This is a question many students find themselves asking halfway through their college curriculum.

Knowing about what a minor is, what it entails, and if it’s something that can bolster your career can help determine if it’s really right for you.

Keep reading to learn more about what a college minor is, how it differs from a major, and the pros and cons that come with it.

Defining a College Minor

A college minor, sometimes referred to as a “mini major,” is a group of courses you take in a certain discipline. Minors in college can complement your chosen college major or be totally unrelated.

While most colleges don’t require a student to declare a minor, some do. Schools may have a definitive criteria about your choice of minor. For instance, you may not be able to pursue a minor in the same department as your major.

For the most part a college minor is voluntary, and a student may not feel it’s important enough to take on the additional coursework in addition to their main area of study. Instead, they may want to have complete freedom to use those class credits for electives that may not be as labor intensive.

Differences Between a Major and Minor

Your major is the main area of specialty that determines the type of bachelor’s degree you’ll earn. It’s the field of study you’ve chosen based on your professional aspirations. One way to think of it is that your major is your primary job and your minor is more of a side gig.

When you’re finally awarded your college diploma, it will be for your major, not your minor. That’s because a college minor is typically considered optional and not a requirement for your core curriculum. Even if your school is one that does require you to choose a minor, it won’t be reflected on your degree unless your school is one with an exception to that rule. However, it will most likely be included in your college transcript.

Another key distinction between a college major and a minor is the amount of coursework you have to complete and how much it counts toward your final credits. Depending on your school, a major will make up one-third to one-half of the school’s credits needed to graduate, which is typically 120 credits for a four-year program.

In general, a college major will require you to complete at least 10 courses compared to five to seven classes for a minor. A minor typically requires anywhere between 16 and 30 credits.

Benefits of Pursuing a College Minor

There are many upsides to tacking on a college minor. If you’re wondering whether or not it’s worth pursuing, consider these pros:

Explore Complementary Interests

A college minor related to your major allows you to expand your expertise in that related field. For instance, if you’re a biology major and decide to minor in chemistry, you’re already familiar with the basics of science and look at things from a scientific perspective. There are similar analytical skills you can apply.

But even if your minor is in a different area, there are still ways it can positively impact your major. An example is if you’re majoring in political science, you may want to minor in public speaking, which can be helpful if you have any ambitions to run for elected office.

You may even find your minor is more exciting and decide to change your major to that area of interest, or decide to combine the two disciplines and pursue a double major.

However, before making any big changes, it’s a good idea to talk to your academic advisor. Depending on when you decide to do a change-up, it could add extra time toward getting your degree. This can translate into additional costs and more student debt.

Develop Secondary Skill Sets

Regardless of whether your minor directly corresponds to your major, you’re acquiring and polishing both hard and soft skills. Those more technical hard skills can be directly applied to the type of work your career requires. Soft skills, on the other hand, are more of a social and interpersonal nature. Both are important to employers and offer skills they want their prospective employees to have under their belt.

Enhance Marketability and Job Prospects

Homing in on a subject offers you the opportunity to develop more of an in-depth knowledge and expertise. A minor shows your well-roundedness, flexibility, and the ability to wear other hats. For example, a marketing major who minored in communications can be an asset in the areas of advertising, journalism, and public relations.

A complementary minor can also give you a more solid base and deeper understanding of some issues you may deal with in your occupation. If a nursing major chooses to minor in psychology, it can help them better understand patient behavior.

Overall, a minor shows a level of seriousness and willingness to challenge oneself. These are qualities that can go a long way and put you at an advantage when applying for your first job out of school, graduate school, or even for a college internship.

Recommended: 6 Ways to Save Money for Grad School

Popular College Minor Options

There are certain college minors that attract more students than others. Here are some popular ones:

STEM Minors

STEM, which stands for science, technology, engineering, and math, consists of natural, physical, and life sciences; computers; electronics and other types of tech; all kinds of engineering; mathematics; and areas that rely on the principles of math. Examples of STEM minors include computer science, kinesiology or exercise science, civil engineering, and statistics.

Deciding on a STEM subject for your minor can give you a leg up in the job market. According to the U.S. Bureau of Labor Statistics, job opportunities in the STEM field are expected to grow 7% by 2032, compared to 2% for all occupations.

Business Minors

With a business minor, you can take classes in accounting, marketing, human resources, and e-commerce. Choosing business as a minor allows you to learn the fundamentals of business, which can be extremely valuable and practical out in the real world.

Knowing more about how business is conducted and becoming more savvy about finance benefits you both professionally and personally. Career-wise, it can come in handy if you’re applying for a job that may require a deeper understanding of certain business practices. In your own life, you may even get a better handle on your own financial situation when it comes to managing private student loans and staying on top of how to pay for college.

Liberal Arts Minors

Liberal arts is a field with a broad range of disciplines, including creative arts, social sciences, humanities, and more. People who decide to minor in liberal arts may choose sub-studies in English, psychology, sociology, anthropology, philosophy, or communication.

For someone with a very demanding major, a liberal arts minor can offer a less taxing curriculum. Instead of being geared toward technical skills, liberal arts classes give students an opportunity to focus on critical thinking, collaboration, creativity, and verbal and written communication skills.

Language and Cultural Minors

Minors specializing in different aspects of cultural heritage and language can expose a student to different world views, beliefs, and practices.

A foreign language minor allows you the ability to become bilingual or multilingual, which is a huge asset in the workforce where there’s an increasing demand for people who speak other languages. You may want to expand on your high school language classes or minor in a completely new one.

A language minor may also be one in linguistics, which is the study of language structure, including phonetics, syntax, semantics, and the history of how language has changed over time. Students may also find there’s an option at their college to minor in American Sign Language.

Cultural studies minors are designed to study all types of cultures, their histories, and perspectives. These can include groups based on class, gender, ethnicity, race, religion, and geographical location. Classes in popular culture, women’s studies, world religions, and African-American or Asian studies are some examples of cultural studies minors.

Choosing a Complementary College Minor

Picking a minor in general adds extra knowledge and allows you to build more expertise in another subject. Minoring in a complementary course of study, however, shows you’re serious about exploring an area that closely aligns with your major.

Regardless of whether your minor directly corresponds to your major, you’ve decided to use a portion of your credits toward another group of required classes, and that indicates a commendable level of focus and commitment.

Potential Drawbacks of a College Minor

There are some cons that can come with declaring a minor. For one, a minor can take up a lot of time, so you’ll want to make sure it’s an area you’re genuinely curious about and have a real interest in. Consider the amount of work you’ll have to do, such as writing papers, studying, and taking exams. These additional classes could end up adding unnecessary stress to your major’s workload.

A minor could also end up costing you more money, especially if you declare a minor late in the game. You may not be able to get all the necessary classes before graduation, which means you may have to extend your education by a semester or more.

The Takeaway

A minor is, in most cases, an optional supplementary course of study that can broaden your knowledge, expand your skill set, and open up more career options after graduation. Having a college minor can also make your undergrad studies a lot more fun, especially if it’s a topic where you have a strong personal interest.

Ways to finance your minor include cash savings, scholarships, grants, and both federal and private student loans.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.

FAQ

What’s the difference between a minor and concentration?

A minor can be a secondary course of study in any area, while a concentration is a sub-group of structured classes that directly relate to your major. For example, if you’re an English major, your concentration may be in creative writing, made up of poetry, fiction, nonfiction prose, and dramatic writing classes.

Do minors appear on your diploma or transcript?

Minors will appear on your transcript, but the mass majority of colleges and universities don’t include it on your diploma. The standard practice is to list only the student’s major on their bachelor’s degree.

How late in your college career can you add a minor?

Most colleges ask students to choose their major by the end of sophomore year or beginning of their junior year, which can also be an ideal time to choose a minor. You could declare it before you start your senior year, but it’s important to consider the fact you’ll have to cram all of that minor’s classes into one year’s time. This could impact your graduation date if you need to carry your studies over to another semester in order to fulfill your minor’s requirements.

Do minors impact financial aid eligibility?

It depends. Federal financial aid rules mandate only courses required for your major and degree program are eligible. However, classes required for a minor may be eligible for financial aid if they also satisfy major, core, or elective requirements for your degree. Otherwise, financial aid will be reconfigured or removed to reflect eligibility based on qualifying courses.

Photo credit: iStock/Drazen Zigic

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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.

SOISL-Q324-034

Oct

2024

Where to Cash a Check Without Paying a Fee

By Julia Califano | Budgeting & Goals, money | Comments Off

Getting a check is typically good news — money is coming your way. However, it’s not available to spend just yet. First, you need to convert that check into cash. While there are many options for cashing checks that are free, some places charge a hefty fee for this service, shrinking the value of your check. Here’s how to cash a check for free (or a low fee).

Key Points

• Account holders can typically cash a check for free at the bank or credit union where they have an account.

• Non-account holders may be able to cash a check at the bank that issued it, sometimes for a small fee.

• Large retail stores and supermarkets often offer check-cashing services for a low fee, typically around $4 for checks up to $1,000.

• Many payment apps and prepaid card providers allow mobile check deposits, often with fees for expedited access to the funds.

• Check-cashing stores tend to charge high fees for their services, sometimes up to 10% of the check’s value.

1. Your Bank or Credit Union

Banks and credit unions generally allow you to cash a check for free if you’re an existing customer. As an account holder, you can typically cash or deposit a check in person at a branch, at an ATM, or through the bank’s mobile app. If you deposit a check at an ATM or through a mobile app, however, you may not get the entire amount of the check immediately. Usually the first $225 is available right away or in one business day, with the rest of the money being released on the second business day.

If you’re cashing a check in person, you’ll need to bring your debit card and, in some cases, a photo ID.

If you attempt to cash a check at a bank where you do not hold an account, you may be charged a fee, or the bank may simply refuse to cash the check. If you don’t have a bank account, opening a checking account will give you an easy way to cash checks for free.

2. Check Writer’s Bank

Another option for cashing a check for free, or a small fee, is to visit the bank where the funds were drawn from, also known as the issuing bank. You can find the name of the issuing bank on the front of the check.

Banks will typically cash a check for free if the check is written from one of their own accounts. However, some banks may charge a small fee for non-account holders, such as a percentage (like 2%) of the check. In some cases, a bank might offer free check-cashing up to a certain dollar amount (such as $25), with a fee for higher amounts. To cash a check as a non-account holder, you may also have to supply two forms of ID.

3. Retail Stores

Some large retail stores and supermarkets offer check-cashing services, though there is typically a fee. For example, Walmart will cash payroll checks, government checks, tax refund checks, and some other types of pre-printed checks for a low fee (at the time of publication, up to $4 for checks up to $1,000; a max off $8 for larger checks). Certain grocery store chains, such as Kroger or Albertsons, also offer check-cashing for payroll, government, insurance, or business checks for a fee (typically around $4).

If you’re heading to a store to cash a check, be sure to bring a government-issued ID, such as a driver’s license or passport. Also keep in mind that retail stores might not cash certain checks, such as personal checks.

Recommended: Can You Cash Checks at an ATM?

4. Payment Apps

Some payment apps offer the ability to deposit checks into your account without a fee if you’re willing to wait a while to access the funds. PayPal and Venmo, for example, have mobile check deposit features that allow users to take a photo of a check and deposit it electronically into their account.

With PayPal, there is no fee if you’re willing to wait 10 days to access your funds. If you want expedited check cashing, the fee is 1% for payroll and government checks with a pre-printed signature (with a minimum fee of $5) and 5% for all other accepted check types, including hand-signed payroll and government checks (with a minimum fee of $5). Venmo offers similar terms.

5. Load Onto a Prepaid Card

Another way to cash a check (potentially for free) is to load it onto a prepaid card using the card’s mobile check deposit feature. Once the check clears, you’ll be able to access the funds as cash by making a withdrawal at an ATM. Depending on the service, you may be able to get some of the funds right away.

Before using this option, however, you’ll want to check whether your prepaid card provider charges fees for reloading the card and/or cashing a check, as terms vary by company.

Recommended: What Is a Second Chance Checking Account?

Where Not to Cash a Check

If you’re looking to cash a check for free or a low fee, you’ll generally want to avoid check-cashing stores. These stores specialize in cashing checks for individuals without bank accounts, and typically charge steep fees for their services. Costs can run as high as 10% of the check’s value, which can be a hefty sum, especially for large checks.

Some check-cashing services are located in low-income areas, often within or alongside payday loan shops. In some cases, a check-cashing outlet might try to lure you into taking out a high-interest payday loan, which can trap you into a cycle of fees and high costs.

The Takeaway

Banks generally allow you to cash a check for free if you’re an account holder. If you don’t have a bank account, you may be able to cash a check for free by visiting the check writer’s bank, loading it to a prepaid card, or using the check-deposit feature on a payment app. You can also cash payroll and government checks at some retail stores, but expect to pay a fee.

If you don’t have a bank account, opening one will provide a long-term solution for cashing checks. Cashing a check at a bank where you have an account is free and, typically, the most convenient method.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.30% APY on SoFi Checking and Savings.

FAQ

Where is the cheapest place to cash a check?

The cheapest place to cash a check is likely the bank or credit union where you have an account, where it’s likely to be free. Another option is to cash the check at the check writer’s bank; many banks offer this service for free or for a minimal fee if you are not an account holder. Retail stores like Walmart also offer check-cashing services at a low fee, typically under $4 for checks up to $1,000. Additionally, some prepaid cards and payment apps provide free mobile check deposit options if you’re willing to wait for processing.

Where can I cash a check without having a bank account?

If you don’t have a bank account, you may be able to cash a check at the check writer’s bank or at a large retailer or supermarket (for a fee). Other options include loading the check onto a prepaid card or using a payment app’s mobile check deposit feature. You can also cash a check at a check-cashing store, but this tends to be the most expensive option.

What app will cash a check immediately?

Several payment apps allow you to cash a check immediately, but it typically comes with a cost. For example, PayPal and Venmo also offer mobile check deposit services. If you can wait 10 days before the funds are available in your account, the service is free. If you want immediate access, you’ll pay a fee of 1% to 5%, depending on the type of check.

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.
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SoFi members with direct deposit activity can earn 4.30% 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 4.30% 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 4.30% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

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

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

Interest rates are variable and subject to change at any time. These rates are current as of 10/8/2024. 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.

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.

SOBNK-Q324-087

Oct

2024

How Long Do Closed Credit Accounts Stay on Your Credit Report?

By Caroline Banton | Credit, Money & Life, relay | Comments Off

You might think that if you close a loan or credit card account it will no longer affect your credit report, but they can actually stay on your credit report for up to 10 years. During this time period, these accounts can help or hurt your credit score, depending on a number of factors.

Here’s what you should know about closing loan and credit card accounts from your credit report.

Key Points

• Closed credit accounts can stay on your credit report for up to 10 years, impacting your score.

• On-time payments on closed accounts positively affect your credit history.

• Late payments on closed accounts can negatively impact your credit history for seven to 10 years.

• Closing accounts can affect your credit utilization rate and credit mix, influencing your credit score.

• Removing closed accounts with poor payment history or fraudulent activity can build your credit profile.

How Closed Accounts Affect Your Credit

Closed credit accounts and loans can have varying effects on your credit, some positive and some negative, due to the factors that make up your credit rating. Here’s a closer look at three of those that are significant in this situation: your credit history, your credit utilization rate, and your credit mix.

Your Credit History

A closed account on which you made on-time payments will help your credit score by building your credit history. The effect will be less than if it were an open account, but it would be a positive factor nonetheless, since it shows that you can manage credit responsibly.
However, if you made late payments on an account that is now closed, the negative impact may linger in your credit history for seven years and up to 10 years if you file for bankruptcy.

Longevity is a factor on your credit report. Credit scoring systems reward borrowers with a longer history of managing debt and repayment. That means that if you close an account and seven years pass, you’ll lose any benefit of having had that account. It won’t make a significant change, but it is another factor to be aware of.

Track your credit score with SoFi

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Your Credit Utilization Rate

Part of your credit rating is based on how much debt or credit you already have. Creditors look at your credit utilization ratio, which is how much credit you have available to you versus how much you actually use. The best case scenario is to not use more than 10% of your accessible credit; otherwise, no more than 30% is a good move.

Two examples:

• Say you have a $10,000 credit limit on your credit card, you might want to limit your balance to $1,000. That’s 10%.

• Otherwise, keeping your balance to no more than $3,000 would be 30%, the upper end of what’s considered a good credit utilization ratio.

If you close a loan or a credit card account, that might reduce the amount of credit available to you, which will increase your utilization rate. If you open a credit card or take out a loan, that will increase the amount of credit available to you, thereby decreasing your utilization rate.

Your Credit Mix

Credit scoring systems, such as the FICO® Score and VantageScore® look at the types of loans you have and how you manage them. These systems reward a mix of loan types, such as installment loans (auto loans and mortgages), and revolving accounts such as credit cards. Eliminating a credit card account or other type of loan (such as when it is closed and eventually drops off your report) could limit your credit mix, and that could negatively impact your credit score. Worth noting though: Credit mix counts for 10% of your score vs. 35% for your payment history (meaning, how successfully you make payments on time).

Why Do Closed Accounts Stay on Your Credit Report?

Both closed and open accounts can contribute to your credit rating as they stay on your credit report. That’s because the credit agencies can gain a fuller picture of your risk as a borrower the more information they have.

Monitoring and understanding your credit report (perhaps with a credit score monitoring app; your bank may offer this) is an important part of your financial wellness.

When to Remove a Closed Account from Your Credit Report

If possible, remove a closed account from your credit report if it has a poor payment history. Also, remove any accounts that are found to be fraudulent. If an account shows that you made regular, on-time payments, don’t remove it because it will be helping your score.

Recommended: Average Salary by State

How to Remove a Closed Account from Your Credit Report

A few factors affect your credit score; one of which is your credit history. As noted above, your credit history shows the loans and credit cards you have obtained in the past seven to 10 years, along with your repayment patterns. Even closed accounts are part of that narrative for the stated period of time.

That said, there may be a way to remove a closed account from your credit report, which you might want to do if it is having a negative effect. Here are some options.

1. File a Dispute if There Is an Error on Your Credit Report

It might be that you notice a fraudulent account when you check your credit report. If that is the case, you can remove the record by submitting a dispute in writing with each of the three credit bureaus (Equifax®, Experian®, and TransUnion®). You must include supporting documents. The bureaus will investigate your complaint and update your credit score if there is fraudulent data.

2. Contact the Creditor and Pursue a Goodwill Deletion

Another way to remove a closed account from your credit report is to directly contact the creditor that’s involved and ask them to remove the account from your credit report. (This is sometimes known as a goodwill letter or goodwill request.) The creditor will have to contact the credit bureau(s) directly to do so. You will be more successful if you have a positive credit history and relationship with the creditor.

3. Wait It Out

In time, a closed account will no longer be reflected on your credit report, but it might take seven to 10 years. The good news is that the accounts that stay the longest are usually ones that you closed in good standing, and these will positively influence your credit score.

What Does “Account Closed” Mean on a Credit Report?

“Account closed” on your credit report indicates an account that is no longer active. There can be several reasons for an account being closed.

• Perhaps it was an installment loan that you paid off.

• You might have opened a credit card account and then decided to close it (maybe you weren’t using it much).

• The creditor closed it, which could be positive (you paid off a loan) or negative (you weren’t paying your bills in a timely manner).

These are typical scenarios that lead to seeing “account closed” on your credit report.

How Long Will a Paid-off Account Take to Show up on Your Report?

Lenders usually update the credit report agencies with closed account information at the end of a billing cycle. Thus, it could take one or two months before a paid-off account is reflected on your credit report.

How Long Does a Closed Account Stay on My Credit Report?

As noted above, how long closed accounts stay on your credit report can vary.

• Accounts closed in good standing (paid on time and in full) can remain on your credit report for up to 10 years.

• Accounts closed due to nonpayment (these include collection accounts, some bankruptcies, and debt settlement) remain on your credit reports for seven years from the first missed payment or from being turned over to collections. The exception is Chapter 7 bankruptcy, which usually stays on your credit report for 10 years.

Practice Good Credit Habits Going Forward

Here’s advice that can help you manage existing credit card and loan accounts well.

• First, it’s always wise to take control of your budget. Whether you do that with the 50/30/20 budget rule or a financial tracking app, keeping on top of your income, your spending, and your saving can be a money-smart move.

• Check your credit score regularly to make sure there is no fraudulent activity. You might aim for an annual review.

• Extend your credit history as much as you can with accounts that are and have been in good standing. This means it’s probably in your best interest to occasionally use a credit card account and keep it in good shape vs. closing it because you don’t use it often. This can reduce your available credit and possibly lower your debt utilization ratio.

One good idea can be to use a credit card for predictable expenses, such as streaming services, and set up automatic payments. That way, you will be paying a set amount each month and building a positive credit history.

These moves can help you keep your financial profile in good shape.

The Takeaway

Closed credit accounts will stay with you for a long time, seven to 10 years usually. Keep accounts that you have owned for a long time open and in good standing whenever possible. If you have fraudulent accounts on your credit history or ones that were not managed well, you might take steps to have them removed and possibly build your credit profile.
Keeping tabs on your credit score and your budget can be easy with the right tools, like those SoFi offers.

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

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

FAQ

Can I get closed accounts removed from my credit report?

You can remove a closed account from your credit report if you suspect it is fraudulent by filing a dispute with the three credit bureaus. You can also contact a creditor directly and ask them to remove a closed account. However, they are under no obligation to comply with this kind of request for a “goodwill” deletion. Alternatively, you can wait for seven to 10 years, after which closed accounts will fall off your credit history.

What is the 609 loophole?

The 609 loophole is a tactic that some people think will remove bad debt history from their credit reports. A section of the Fair Credit Reporting Act states that you can write a letter to gain documentation on what you may believe is an incorrect entry in your credit history. The 609 letter theory is that if a credit bureau cannot produce a piece of information, such as the original signed copy of your credit application, they have to remove the disputed item because it’s unverifiable. However, these steps are not the same as a dispute. Also, if you have legitimate debt, even without this documentation, the debt may remain. In other words, this process is unlikely to provide a shortcut to building your credit.

How long before a debt is uncollectible?

At which point a debt can no longer be collectible varies based on the type of debt and the state you live in. It is often between three and six years, but it could be as long as 20 years. After the statute of limitations that applies, a debt collector can no longer sue you for repayment, though some might still try to collect.

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

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

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

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

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

SORL-Q324-024

CDs vs Savings Accounts Compared

Certificate of Deposit (CD) vs HYSA Savings Accounts

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What Is a Certificate of Deposit (CD)?

How Does a CD Work?

What Is an HYSA Savings Account?

How Does an HYSA Savings Account Work?

3 Similarities Between a CD and HYSA Savings Account

1. Insured

2. Earns Interest

3. Good Ways to Save Money

Differences Between a CD and HYSA Savings Account/2>

1. Accessibility

2. Amount of Interest Earned

When to Use a CD Instead of an HYSA Savings Account

When to Use an HYSA Savings Account Instead of a CD

How to Open a CD

How to Open an HYSA Savings Account

The Takeaway

FAQ

Is a certificate of deposit the same as a savings account?

Is a high-yield savings or CD account better?

Does a certificate of deposit give you better interest than a savings account?

Is a certificate of deposit safer than a savings account?

What is the biggest negative of putting your money in a CD?

How to Pay off $100K in Student Loans

Understanding Your $100,000 Student Loan Debt

Breaking Down Federal and Private Loans

Calculating Interest and Total Repayment Costs

Creating a Budget and Repayment Plan

Exploring Loan Consolidation and Refinancing

Consolidating Federal Student Loans

Refinancing with Private Lenders

Weighing the Pros and Cons

Utilizing Repayment Assistance Programs

Strategies for Accelerating Loan Repayment

The Takeaway

FAQ

How long will it take to pay off 100K in student loans?

Can I settle student loan debt for less than I owe?

What happens if I can’t make my student loan payments?

What Is a Minor in College? A Comprehensive Guide

Defining a College Minor

Differences Between a Major and Minor

Benefits of Pursuing a College Minor

Explore Complementary Interests

Develop Secondary Skill Sets

Enhance Marketability and Job Prospects

Popular College Minor Options

STEM Minors

Business Minors

Liberal Arts Minors

Language and Cultural Minors

Choosing a Complementary College Minor

Potential Drawbacks of a College Minor

The Takeaway

FAQ

What’s the difference between a minor and concentration?

Do minors appear on your diploma or transcript?

How late in your college career can you add a minor?

Do minors impact financial aid eligibility?

Where to Cash a Check Without Paying a Fee

1. Your Bank or Credit Union

2. Check Writer’s Bank

3. ​​Retail Stores

4. Payment Apps

5. Load Onto a Prepaid Card​​

Where Not to Cash a Check

The Takeaway

FAQ

Where is the cheapest place to cash a check?

Where can I cash a check without having a bank account?

What app will cash a check immediately?

How Long Do Closed Credit Accounts Stay on Your Credit Report?

How Closed Accounts Affect Your Credit

Your Credit History

Track your credit score with SoFi

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

Your Credit Utilization Rate

Your Credit Mix

3. Retail Stores

5. Load Onto a Prepaid Card

Student Loan
Refinancing

Personal
Loans

Online
Investments