Oct
17
2023
Are Bank Bonuses Worth It?

Are Bank Bonuses Worth It?

By | Budgeting & Goals, money | Comments Off on Are Bank Bonuses Worth It?

When researching new bank accounts, you may find some that offer sign-up bonuses — free cash for opening an account and depositing some money — and wonder if it’s worthwhile. The answer is: It depends. This can make a bank account seem more attractive because of the quick payout, but it’s important to think about the long-term value of a bank account before opening it.

Are bank bonuses worth it for you? They can be if the bank also offers other features that align with your needs, like a high interest rate, no monthly fees, a large ATM network, and cash back rewards.

But in other cases, they may wind up just being an incentive that leads you into an arrangement that involves, say, high fees and low interest rates.

Here, you’ll learn more, including:

•   What is a bank account bonus?

•   Are bank account bonuses worth it?

•   What are the pros and cons of bank bonuses?

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 4.00% APY on savings balances.

Up to 2-day-early paycheck.

Up to $2M of additional
FDIC insurance.


What Is a Bank Account Bonus?

A bank account bonus is a reward that customers earn for opening a new checking or savings account and meeting specific criteria during a set period. That might include setting up direct deposit, funding the account with a set amount of cash, using your new debit card a certain number of times, or meeting a specific spend threshold.

Bank account bonuses can vary in size, with some banks offering $50 and others offering up to $2,000 (expect some very strict criteria on very large deposit amounts to nab that kind of a gift).

Banks may offer other types of bonuses, but sign-up bonuses are the most common and are meant to entice you to open a new bank account.

Note: Banks generally offer bonuses during promotional periods that last a set number of months. At the end of that period, they may choose to extend the bonus, end it, or offer a new bonus that could be more (or less) valuable than the preceding one.

How Do Bank Account Bonuses Work?

A traditional sign-up checking account bonus generally requires that you are a new client of the bank — or haven’t had an account with the bank for a set number of years. Each bank will have varying criteria to earn the bonus. Depending on the bank, you might:

•   Simply need to set up and receive qualifying direct deposits

•   Deposit a certain amount of money into the account (say, through an external bank transfer) and keep the account funded for a set number of days

•   Use your debit card a set number of times or for a minimum spend amount in a given timeframe

•   Pay a minimum amount of bills using the account

Evaluation periods for such bonuses may range from a few weeks to several months to an entire year. That means it could take a while to receive the sign-up bonus.

Some banks may also take back the bonus if you close the account too soon after receiving the bonus. That’s why it’s a good idea to read all the fine print for a bank bonus before opening a new account.

What Are Some Common Bank Account Bonuses?

You may often see the phrase “bank account bonus” used interchangeably with “sign-up bonus.” However, banks may offer other types of bonuses that have nothing to do with opening a new account. Here are some common bank account bonuses to watch for:

•   New account bonus: A sign-up bonus, or new account bonus, is what we generally think of when we hear “bank bonus.” Consumers can earn these bonuses for opening a new account and meeting specific criteria.

•   Referral bonus: Some banks may offer referral bonuses. Get friends and family to sign up for a new account, and you — and maybe your referral — can earn a cash bonus.

•   Cash back bonuses: Though we often think of cash back with rewards credit cards, some banks may pay out cash back with debit card. You might get a percentage back when you make qualifying purchases.

•   Waived fees: Some bank accounts charge monthly service fees for keeping the account open. Often, these banks offer a way for you to have the fees waived — usually by maintaining a minimum balance, earning direct deposits, or meeting certain spending criteria. While you won’t earn cash, you’ll avoid paying fees; in that way, it’s like a bonus.

And don’t forget: Many banks offer sign-up bonuses on their credit cards as well. These also have their own criteria for earning the bonus that you may want to review before applying.

Pros of Bank Account Bonuses

Bank bonuses can be advantageous for consumers who are looking for a new account. Here are some of the pros:

Many Are Offered for Opening a New Account

Sign-up bonuses are a common form of bank bonus. Because the criteria are built around things you’d commonly do with a new account — setting up direct deposit, funding it with cash, using the debit card on everyday purchases — it can be easy to earn the bonus for activities you would’ve done anyway.

Recommended: Checking vs. Savings Account

Bonuses Can Be Enough to Pay Off Potential Fees

While it’s wise to prioritize a bank account without any monthly fees, big bonuses can offset such fees for several months. And even if you find a bank account with no monthly fees, you may still end up paying:

•   ATM fees

•   Minimum balance fees

•   Overdraft and NSF fees

•   Foreign transaction fees

Such occasional fees might be easier to swallow if you’ve already earned a bonus worth several hundreds of dollars.

Recommended: What Are ATM Fees?

Bonuses Can Help You Build Your Savings

If you earn a bonus for opening a new savings account, you can keep that money in your account where it will continue to earn interest. This makes bank account bonuses an easy way to jump-start your savings, whether you’re building an emergency fund or saving for a wedding, house down payment, or vacation.

Recommended: Different Types of Savings Accounts

Cons of Bank Account Bonuses

While it’s hard to imagine how free money could be a bad thing, bank account bonuses may have drawbacks for certain consumers. Here are some considerations as you decide if bank bonuses are worth it.

Bonuses Are Considered Taxable Income

First and foremost, a bank account bonus is never as big as it sounds. Here’s why: because Uncle Sam takes his cut. The IRS considers bank account bonuses earned income, just like any interest you earn on the account.

You Might Pay More in Fees

Sign-up bonuses are meant to entice you to open a new account, but it’s a good idea to consider the account as a whole before moving forward. While a shiny sign-up bonus may offer you money up front, consider how much you’ll spend on fees (or how much you’ll miss out on in interest if it’s a low-interest account).

Once you factor in fees and missed earning opportunities, a bank account offering even a large bonus may not be the best long-term option for you.

There Are Often Many Requirements to Receive the Bonus

Some sign-up bonuses are easier than others to earn. If you’ll struggle to meet all the criteria — for example, the account may have too high of a deposit threshold for you to meet — it probably doesn’t make sense to open the account for the bonus alone.

Is It Worth It to Switch Banks for a Bonus?

So are bank account bonuses worth it? That depends on your needs. If you’re happy with your current bank and like all the features it offers, it may not be worth the hassle to switch.

But if you have other reasons to switch banks right now — like you want a higher interest rate, better mobile app, or fee-free overdraft — it could be worth your time to compare bank bonuses and make the switch.

That said, sign-up bonuses are a one-time benefit. It’s a good idea to weigh other features, like annual percentage yield (APY), monthly fees, mobile banking features, and ATM access, along with new account bonuses when making your decision.

Recommended: How to Switch Banks

Banking With SoFi

Bank bonuses can be easy to earn and may offer a great jump-start to your savings. For most consumers, however, it makes sense to consider sign-up bonuses alongside other important banking features, like interest rates and fees, to make a sound financial decision.

Are you looking for an online bank that offers a competitive APY, no monthly fees, which may help your money grow faster, month after month? Open a new SoFi bank account and you’ll enjoy those benefits, plus the ease of spending and saving in one convenient place.

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

FAQ

How can I qualify for a bank account bonus?

Banks offering sign-up bonuses for new accounts have specific terms and conditions to achieve the bonus. Read the fine print of any bank account bonus program to ensure you understand all the steps you need to take to qualify for the bonus.

What are the different types of bank bonuses?

The most common type of bank bonus is a sign-up bonus, which some banks offer when you open a new account and meet certain criteria during an evaluation period. Some banks may also offer:

•   Referral bonuses for getting friends and family members to open an account.

•   Cash back bonuses when you swipe your debit card.

•   Waived accounts fees for meeting criteria every month.

Banks might also have unique credit card rewards, like sign-up bonuses and cash back, travel points, or miles with every swipe.

Does SoFi offer a bank account bonus?

SoFi may offer a bank account bonus to new members when they sign up for the SoFi Checking and Savings Account; it may require setting up direct deposit. Check here to see what may be available right now.

Photo credit: iStock/Prostock-Studio

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

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

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

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

Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

SOBK1122008

Read more
Oct
17
2023
11 Common Checking Account Mistakes

11 Common Checking Account Mistakes

By | Budgeting & Goals, Financial Independence, money | Comments Off on 11 Common Checking Account Mistakes

A checking account is one of the most useful items you can have in your financial toolbox. You can use a checking account to pay bills, get paid early with direct deposit, or build your savings through automatic transfers.

However, it’s possible you’re not getting the most out of your account. Recognizing some of the most common mistakes you’re making with your checking account could help you to save money and time.

Ready to optimize this aspect of your financial life? Read on to learn:

•   Common mistakes you’re making with your checking account

•   Tips for improving your banking habits

Why Banking Mistakes Can Be Costly

Making mistakes with your bank account could cost you in more ways than one. It’s possible that you’re overpaying bank fees unnecessarily, missing out on valuable interest earnings, and possibly leaving yourself vulnerable to fraud. You may also be short-changing yourself and missing out on benefits and features if you’re using the wrong type of bank account for your needs.

Here’s why these issues can cost you:

•   High fees are generally not a good thing, as they can nibble away at your balances over time.

•   Losing out on the best interest rates means your money has less room to grow.

•   Fraud can potentially be the biggest drain on your accounts, if your debit card or bank account is used to make unauthorized withdrawals or purchases.

The good news is that it’s relatively easy to get back on track. That starts with knowing which checking account mistakes to avoid. You’ll learn about them next.

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 4.00% APY on savings balances.

Up to 2-day-early paycheck.

Up to $2M of additional
FDIC insurance.


11 Checking Account Mistakes to Avoid

Managing a checking account shouldn’t be complicated. Here are 11 of the biggest checking account mistakes that you’ll likely want to sidestep.

1. Not Shopping Around

Sticking with the same bank for years may be comfortable, but it doesn’t necessarily mean you’re getting the best deal. It’s a mistake not to shop around for better banking options, as banks regularly introduce new benefits and features to attract customers.

It’s also incorrect to assume that switching banks is time-consuming or difficult. Many banks offer switch kits that help to simplify the process of transitioning your accounts over. These kits include a checklist of steps to complete to get your new accounts open and shut down your old ones if you choose to do so.

2. Overlooking the Benefits of Online Banks

How you use your checking account matters but it’s also important to consider where you keep it. Online banks can offer benefits you don’t always get at traditional banks or credit unions, such as lower fees or higher interest rates for deposit accounts. These two features could help you build wealth.

Opening an online checking and savings account is usually something you can do in just a few minutes. The trade-off of choosing an online bank is that you don’t have branch banking access. Comparing online banking pros and cons can help you to decide if it’s right for you.

3. Paying a Monthly Maintenance Fee

Banks can charge monthly maintenance fees for having a checking account. In some cases, you might pay these fees for savings and money market accounts as well. Paying these fees is a mistake if there are ways to get around them.

Your options for avoiding monthly maintenance fees might include:

•   Meeting a daily or monthly minimum balance requirement

•   Scheduling a qualifying recurring direct deposit

•   Maintaining a minimum balance across multiple linked accounts at the same bank

•   Making a certain number of purchases with your debit card each month

You could also avoid monthly maintenance fees by moving to an online bank. Online banks tend to be more fee-friendly than traditional banks, and you could earn a higher rate on interest-bearing accounts as well.

4. Triggering ATM Fees

Here’s another common mistake you may be making with your checking account: When you need quick cash, you hit the first ATM you come across. Convenient, yes, but that’s a problem if your bank charges ATM fees.

What are ATM fees? They’re fees you pay to use another bank’s machine. Typically, your bank won’t charge if you use their ATMs. But they might tack on a foreign ATM surcharge if you use a machine that’s out of the bank’s network. The ATM owner can also charge a fee of their own. Typically, out-of-network ATM fees will cost you between $2.50 and $5 per transaction and possibly even more.

Knowing where you can withdraw cash fee-free is a simple way to avoid that mistake. You might also consider looking for a bank that reimburses foreign ATM fees each month. Some banks offer reimbursement, either as a flat dollar amount or up to a certain number of foreign ATM fees per month.

5. Not Keeping Enough in Your Account

Maintaining a lower balance in your checking account isn’t necessarily a bad thing, but it could put you at risk of incurring overdraft of non-sufficient funds (NSF) fees.

Banks can charge overdraft fees to complete transactions when you don’t have enough money in your account. Non-sufficient funds fees may apply when you don’t have enough money in your account and the bank cancels or rejects the transaction.

In terms of how much you’ll pay for NSF vs. overdraft fees, that depends on the bank. However, it’s not uncommon for banks to charge anywhere up to $40 for these fees.

You could avoid overdraft fees by enrolling in overdraft protection. What is overdraft protection? It’s a service that allows banks to transfer money automatically from your savings account to checking if you’re in danger of overdrafting your account. You can avoid high overdraft fees by opting in, though banks may charge a smaller transfer fee.

6. Keeping Too Much Money in Checking

Keeping too much money in checking could also be a mistake if you’re missing out on interest earnings. Siphoning off some of the money in checking into a high-yield savings account or money market account, for example, could allow you to earn a competitive interest rate and APY on your balances.

It’s also important to consider how FDIC coverage limits apply to checking accounts. The Federal Deposit Insurance Corporation insures deposits up to $250,000 per depositor, per account ownership type, per financial institution. If you keep more than that in checking, you could be at risk of losing money in the rare event that your bank fails.

7. Choosing a No Frills Checking Account

A basic checking account should have all the features you need to pay bills, deposit money, or make purchases with a linked debit card. But a specialty account could offer a wider range of benefits.

For example, a high-yield checking account earns interest on balances. That’s like getting free money just for keeping a balance in checking. You will, however, have to pay tax on the interest you earn at the end of the year.

8. Missing Out on Potential Rewards

Another checking account mistake to avoid is losing out on potential rewards and bonuses. What are reward checking accounts? These are bank accounts that reward you with points or cash back for completing certain activities. For example, you might earn rewards when you make a specific number of debit card purchases each month or link a savings account.

These accounts are similar to rewards credit cards but the difference is you’re spending your own money to earn them, rather than borrowing from the credit card company. They can offer you some nice perks as you conduct your usual banking business.

9. Not Protecting Your Account When You Shop Online

Shopping online is convenient and you might be able to save money versus shopping in store if you’re using promo codes or coupons at checkout. However, you could be putting your checking account at risk if you’re shopping over unsecured WiFi networks or making purchases on untrusted websites.

A simple way to verify a site’s authenticity is to look for “https” in the site’s address. That indicates the site uses a Secure Sockets Layer certificate to encrypt and protect user data.

You can also protect yourself by not storing your debit card information at the checkout. If you’d like to be able to automatically enter your debit card details to pay, you can add them to a secure mobile wallet like Google Pay, Apple Pay, or Samsung Pay.

10. Not Enrolling in Email and Text Alerts

There are different ways to keep track of your bank accounts, including online and mobile banking. If you don’t always have time to log in, you could use email and text alerts to monitor your accounts instead.

Banks can allow you to set up different types of alerts, including notifications for:

•   Low balances

•   New credit transactions

•   New debit transactions

•   Updates to your personal information or login information

•   New linked accounts

•   New wire transfer transactions

•   Failed login attempts

Not using alerts can be a mistake as it can save you time as you manage your financial life.

Enrolling in alerts can also help you to spot potentially fraudulent activity before someone is able to do any major damage with your account.

Recommended: The Biggest Money Scams in the U.S.

11. Using Weak Passwords

Your password is your entry key to your online and mobile banking accounts and it’s important to choose a strong one. The stronger your password, the more difficult it might be for hackers to steal your information, and your money.

If you’re using weak passwords that are easy to guess, you could be leaving yourself open to fraud. It’s also a mistake to reuse the same passwords to log in to multiple accounts. If a hacker gets their hands on the password, they could have instant access to bank accounts, credit cards, investment accounts, email accounts, and any other accounts you manage online.

Choosing strong passwords and updating them regularly can help you avoid that scenario. If you have trouble remembering passwords, you might consider storing them online in a secure password keeper.

Ways to Improve Your Banking Habits

Building better habits can take time, but it may be well worth the effort if you’re able to avoid making common checking account mistakes. Here are a few ways to improve your banking habits:

•   Check your accounts regularly. Logging in to your bank accounts once a day or every few days is a simple way to check your transaction history and balances so you know what you have to spend.

•   Sign up for alerts. Banking alerts can help you to spot potential fraud, track your balances, and know what’s being debited or credited to your account. It’s typically free to enroll, and you can personalize which alerts you want to receive.

•   Maintain a buffer. Getting in the habit of maintaining a cash cushion in your checking account can help you to minimize your risk of overdraft. For example, you might want to keep an extra $500 to $1,000 in your account at all times and not let your balance fall below that amount.

•   Review your accounts. Reviewing your checking account once a year can be a good way to see what you’ve paid in fees and what benefits you’ve enjoyed. You can then use that as a guide for deciding whether to stick with your current bank or shop around for a new one.

Recommended: Guide to Practicing Financial Self-Care

The Takeaway

Having a checking account can make managing your financial life easier, but it’s important to make sure you’re using it the right way. Avoiding common checking account mistakes and developing good banking habits can help you use your account to its full potential. Doing so can also help you earn more interest and pay fewer or lower fees.

If you’re ready to try a new banking experience, you might consider opening an online checking and savings account with SoFi. You can enjoy the convenience of saving and spending in one place, plus you’ll get benefits like paying no account fees and enjoying a great APY on deposits, which can help your money grow faster.

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

FAQ

What is the worst checking account mistake that I need to avoid?

The worst checking account mistake may simply be choosing the wrong account or the wrong bank. When you fully understand what you need a checking account for and what kind of features you’d like to have, that can make it easier to find the right banking option that’s convenient and low-cost.

What to do if the bank makes a mistake?

If your bank makes a mistake with a deposit, bill payment, or any other transaction, it’s important to contact the bank right away. You can explain what you believe the mistake to be so the bank has an opportunity to correct it.

What are the disadvantages of these banking mistakes?

Making banking mistakes can cost you both time and money. You may end up spending more time than you’d like to managing your accounts. Or you might overpay banking fees if you’re not paying attention. Correcting any banking mistakes can help you avoid those scenarios.

Photo credit: iStock/MStudioImages

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

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

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

Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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

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

SOBK1122006

Read more
Oct
17
2023
What Is a Money Pool?

Guide to Money Pools

By | Budgeting & Goals, Family Finances, money | Comments Off on Guide to Money Pools

Money pools provide a platform for friends, relatives, or colleagues to combine their savings. The purpose of this arrangement is to leverage each member’s financial resources to save money, reach short-term money goals, or create financial security.

While money pools gained popularity centuries ago in developing countries, such as India and Southern Africa, they have continued to provide a banking solution for migrant communities in the U.S. Here’s a look at how money pools work and how they benefit folks that don’t have access to traditional banking products like savings accounts.

Read on to learn:

•   What is a money pool?

•   How do money pools work?

•   What are the pros and cons of money pools?

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 4.00% APY on savings balances.

Up to 2-day-early paycheck.

Up to $2M of additional
FDIC insurance.


What Is a Money Pool?

So, what are money pools exactly?

A money pool is when a group of individuals (friends, family members, neighbors, or coworkers) combine their savings into one pot. The group decides on a monthly contribution amount they will each put into the pool.

Then, every month, one person from the group will receive the total sum of the money pool to do as they wish. The group can either draw names to decide who gets the money or make an arrangement based on a mutual understanding. Funds are distributed monthly until the entire pool is depleted. In this way, it’s somewhat akin to peer-to-peer lending.

However, money pools don’t just happen; they must have a responsible party that organizes the group. The money pool organizer tackles tasks such as collecting the money, tracking contributions, and planning distributions. The organizer keeps order, so each member understands and adheres to the group’s guidelines.

Money pools mainly exist in developing countries, with minimal access to credit or banking solutions like savings accounts. However, many U.S. immigrant communities nationwide use money pools as a solution for helping people within the community pay bills or save for financial goals. It can also serve as an example of pay-it-forward finance and helping those close to you.

Recommended: Short-Term Financial Goals to Set for Yourself

How Do Money Pools Work?

A money pool works like this: Let’s say a group of three friends decide to create a money pool. They decide that they will contribute $400 per month creating a $1,200 money pool. Each month, one friend from the group will receive $1,200. No matter who receives the funds for the month, every person in the group continues to contribute so the money pool amount always has $1,200 in it.

A money pool provides an immediate source of funds for someone needing to pay for unexpected expenses. In other words, the money pool can act as an interest-free loan to pay off medical expenses you can’t afford, car repairs, or tuition costs. A money pool can also provide a forced savings method for the last person who receives the funds.

The organizer usually determines who should receive the funds first. They may consider financial needs to assess the arrangement of the distribution of funds.

Reasons Why People Use Money Pools

For centuries, people have been using money pools around the world as an alternative to traditional savings solutions. However, folks are more likely to use money pools if they have:

•   Limited or no access to traditional banking institutions.

•   A bad credit score that making it challenging to qualify for financing.

•   Minimal financial resources; the money pool can be a way to save money with a low income.

•   The need to borrow or save money.

Examples of Money Pools

Money pools exist around the world and often go by various names. In U.S., Americans usually refer to this type of arrangement as a money pool or rotating savings and credit association (ROSCA).

Different communities call money pools by different names. Some examples of other names for money pools are:

•   Tandas in south and central Mexican communities

•   Cundinas between northern Mexico and Washington state

•   Susus in the Caribbean

•   Pandeiros in Brazil

•   Hui in Asia

•   Arisan in Indonesia

•   Ayuuto in Somalia

Recommended: Creative Ways to Save Money

How to Determine if You Should Join a Money Pool

If a money pool piques your interest, consider a few key points before moving forward with this financial decision.

•   Affordability of recurring payments. Make sure you can afford and have the money discipline to contribute the recurring payment amounts. A money pool isn’t like a traditional savings account where you can pull money out whenever you want. Think carefully to be sure that contributing won’t put you in a financial bind.

•   Trustworthiness of key members. You may feel uncomfortable contributing to a money pool with a group of members you don’t know well. Instead, consider creating a money pool with people you know and trust.

•   Organization of the money pool. Someone must be the organizer if you establish your own money pool. Money pool apps are available to help you organize your group and streamline contributions and distributions.

If you’re still on the fence, you may want to explore Community Development Financial Institutions or CDFIs as an alternative solution. What is a CDFI? These financial institutions cater to underserved communities. In addition, CDFIs offer banking products such as checking accounts to those who may have been turned away by traditional banking institutions. So, if you have a low credit score or are struggling to find a suitable savings vehicle, CDFIs could be worth considering.

Pros of Money Pools

Money pools can be advantageous to consumers for the following reasons:

•   Provide access to cash. A money pool offers an alternative solution for accessing funds if individuals don’t have access to lending institutions.

•   Members instill accountability. The social pressure of accountability encourages the group members to adhere to the money pool commitment.

•   Interest-free loans. Money pools provide an interest-free way to pay for unexpected expenses like medical bills or car repairs.

Recommended: What Is a Lifeline Checking Account?

Cons of Money Pools

While money pools have benefits, they can also have some drawbacks, including:

•   Funds in the account are not interest-bearing. Members can grow their money in other interest-bearing accounts, like a high-yield saving account.

•   Members who don’t make payments put the group at financial risk. Members of the money pool could suffer a financial loss if someone doesn’t contribute when they are supposed to. This is especially true for the last member to receive the lump sum.

•   Risk of social disapproval. You must make an agreed-upon payment or you could be kicked out of the money pool and face social consequences such as being shunned from your community.

Recommended: Different Types of Savings Accounts

The Takeaway

Money pools allow a group of people to combine their savings while helping each other financially. Each member contributes to a fund of money, which is then disbursed to members sequentially, allowing every person involved to receive a lump sum of cash. While this type of savings vehicle is used in the U.S., it’s more prevalent in developing countries since financial resources are often limited.

3 Money Tips

  1. 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.

  2. If you’re faced with debt and wondering which kind to pay off first, it can be smart to prioritize high-interest debt first. For many people, this means their credit card debt; rates have recently been climbing into the double-digit range, so try to eliminate that ASAP.

  3. When you feel the urge to buy something that isn’t in your budget, try the 30-day rule. Make a note of the item in your calendar for 30 days into the future. When the date rolls around, there’s a good chance the “gotta have it” feeling will have subsided.
Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.00% APY on SoFi Checking and Savings.

FAQ

Is there a reason for developed countries to use money pools?

Yes, for communities with limited access to traditional banking and credit, money pools can offer a platform to help individuals achieve their financial goals.

Are money pools safe?

While there is a risk of members failing to contribute to a money pool, the peer pressure of the group usually ensures they will go to great lengths to make timely payments. So even though it’s possible, loss typically occurs only rarely.

Do money pools still exist?

Yes, money pools exist. You may find them in developing countries as well as the U.S.

Photo credit: iStock/bob_bosewell

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

SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

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

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

Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

SOBK1122019

Read more
Oct
17
2023
10 Questions to Ask Your Bank Before Opening an Account

10 Questions to Ask Your Bank Before Opening an Account

By | Budgeting & Goals, Financial Independence, money | Comments Off on 10 Questions to Ask Your Bank Before Opening an Account

Having a bank account can provide a solid foundation for your financial life. It can make it easier to pay bills, track spending, and get paid if you’re enrolled in direct deposit. But how can you know you’re putting your money at a financial institution that’s the right fit for you?

If you’re interested in moving to a new bank or you’re opening a bank account for the first time, it’s important to do your research first. That starts with knowing what questions to consider when opening a checking account or savings account. Asking the right questions can make it easier to choose an account that fits your needs.

Read on to learn the key questions to ask, as well as the answers to look for, before you open a new bank account.

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 4.00% APY on savings balances.

Up to 2-day-early paycheck.

Up to $2M of additional
FDIC insurance.


The Importance of Choosing a Reliable Bank

Where you choose to keep your money matters when it comes to things like convenience, benefits and features, and cost. Ideally, you want to choose a bank that:

•   Has a good reputation

•   Is fee-friendly or fee-free

•   Offers a good selection of products and services

Does that mean you have to choose a brick-and-mortar bank? Not necessarily. Online banks can be just as reliable as traditional banks or credit unions, and often charge fewer fees. The difference, however, is that online banks usually lack a physical presence.

It’s also important to choose a bank that’s going to keep your money safe. That means banks that are insured by the Federal Deposit Insurance Corporation (FDIC) or credit unions that are insured by the National Credit Union Administration (NCUA).

These institutions insure deposits against the rare event that a bank or credit union fails. The primary difference between the FDIC vs. NCUA is where deposits are insured. Coverage limits extend up to $250,000 per depositor, per account ownership type, per financial institution.

10 Questions to Ask a Bank Before Opening an Account

Ready to get your new accounts set up? Here are 10 of the most important questions to ask a bank before opening an account.

1. What Are the Options for Accessing Accounts?

One of the most important questions to ask when opening a checking account or savings account centers on how you’ll be able to deposit or withdraw money. It’s a good idea to know what options you have, which may include:

•   Branch banking

•   Phone banking

•   Online and mobile banking

•   ATM access

If you’re opening an account at a traditional bank, you may ask a secondary question about where branches are located. With an online bank, you might want to review features like direct deposit, mobile check deposit, or whether you can deposit cash at an ATM.

2. What Is the Minimum Deposit to Open an Account?

It’s not unusual for banks to impose minimum deposit requirements for new and existing customers. So what is a minimum opening deposit? It’s just an amount of money that you’re required to deposit upfront as a condition of opening your account.

The amount of money needed to open a bank account typically varies from institution to institution. At online banks, the sum might be as low as $1 or even $0, while traditional banks might set the minimum at $25, $50, or more. Credit unions may require a $5 minimum to join and open a savings account, with a different minimum for checking accounts.

3. What Are the Fees for the Account?

One of the ways banks make money is by charging fees, so you’ll want to be clear on what you might pay to have your account upfront. Some of the most important fees to ask about include:

•   Monthly maintenance fees for checking and savings accounts

•   Overdraft fees and returned item fees

•   Check ordering fees

•   Paper statement fees

•   Excess withdrawal fees, if you’re opening a savings account (these may be triggered by more than six withdrawals per month)

•   Wire transfer fees

You may be able to find a copy of the bank’s fee schedule on its website. If not, you can ask the bank to provide you with a list of fees. That way, you can review them before opening an account.

Recommended: Overdraft Fees vs. Non-Sufficient Funds Fees (NSF): What’s the Difference?

4. Is Overdraft Protection Offered?

Overdraft occurs when your checking account balance ends up in negative territory. Your bank can charge an overdraft fee for each item that exceeds your balance. One option for avoiding overdraft fees is enrolling in the bank’s overdraft protection.

That feature allows you to link a savings account to your checking. Then, if you’re in danger of an overdraft, the bank can transfer money over for you. The bank might charge you a fee to transfer funds, but the fee is usually less than the typical overdraft fee.

5. How Large Is the ATM Network?

If you routinely visit the ATM for cash, then you’ll want to ask the bank how large its network is and where you can complete transactions fee-free. It’s also a good idea to ask what fees you might pay for using an out-of-network ATM; the fee typically runs between $2 and $3.50 per transaction. You may also want to check whether any of those fees might be refunded to you at the end of the statement cycle.

6. Are There Transaction Limits?

Here’s another in the list of what questions to ask when opening a bank account: What are the transaction limits? This will let you know how much money can move in and out of your account over a set time period. Some of the transaction limits you might want to ask about include:

•   Debit card purchases

•   Cash withdrawals at ATMs

•   Cash withdrawals at a teller

•   ACH transfers

•   Wire transfers

•   Deposits, including direct deposits, ATM deposits, or ACH deposits

Banks can impose daily, weekly, or monthly limits on different types of transactions so it’s helpful to know what they are beforehand. You don’t want to be stuck trying to withdraw cash or make a large purchase, for example, only to find that you’ve already exceeded the allowed limit.

7. Do Accounts Earn Interest?

Savings accounts, money market accounts, and certificate of deposit (CD) accounts typically earn interest. If you’re interested in one of these accounts, it’s important to look at the interest rate vs. APY to see how much you could earn. Also of course check other details such as minimum deposit and account fees to make sure you get the best deal for your situation.

This is also a wise question to ask when opening a checking account. While some banks offer interest checking, those accounts are more of an exception than the rule. But if you’re specifically looking for interest-bearing checking, then you’ll want to ask the bank if that account option is available. You may find the best high-interest checking accounts at online banks and credit unions.

Recommended: Different Ways to Earn More Interest on Your Money

8. What Documents Are Needed to Open an Account?

Banks ask for certain information when opening an account. Knowing what you’ll need can save time during the account opening process. A typical bank account opening checklist includes:

•   Personal information, such as your name, date of birth, and address

•   Social Security number and birth date

•   Government-issued photo ID

•   Bank account information if you’re making your initial deposit via an ACH transfer.

What if you’re opening a bank account for someone else to use? For example, what if you’re setting up a checking account for your teen, but you’re listed as the account owner? In that case, the bank might ask for some information about your child, like their name and date of birth.

9. Are Accounts FDIC- or NCUA-Insured?

As mentioned, the FDIC and NCUA insure deposit accounts against losses in case a bank or credit union fails. While it’s rare to find a bank or credit union that isn’t insured, it’s still a good idea to double-check and make sure you’re protected. An easy way to tell if a financial institution is covered is to look for FDIC or NCUA signage at a branch or on its website.

10. What Other Banking Products and Services Are Offered?

When opening a bank account, consider what else the bank or credit union offers besides checking and savings. For example, you might be interested in:

•   Credit cards

•   Home loans

•   Auto loans

•   Student loans

•   Personal loans or lines of credit

•   Business loans

•   Retirement products

•   Investment accounts

•   Insurance

•   Wealth management services

Looking at the bigger picture can help you to find a bank that fits where you are in life currently and where your financial goals might take you down the line. If you know you may need one or more of these products in the not too distant future, it could be wise to open your account at a place where you can easily access these offerings.

The Takeaway

Setting up a new bank account shouldn’t be a headache. Knowing which questions to ask and answer can make the process easier and help you determine which financial institution best meets your needs. It’s also helpful to compare accounts from different banks to get an idea of what each one has to offer.

If you’re interested in banking online, you might consider opening an online bank account with SoFi. You’ll pay no account fees while earning a great APY on deposits, both of which can help your money grow faster. And it’s super convenient: You can quickly open an account online and then spend and save in one place with our Checking and Savings account.

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

FAQ

How much money do you need to open a bank account?

The amount of money you need to open a bank account can depend on the bank. At online banks, for instance, you might be able to open an account with as little as $1 or even no money at all. Traditional banks, on the other hand, might require $25 or more for a minimum opening deposit.

Is there a fee for closing a bank account?

Banks can charge a fee for closing an account if it hasn’t been open very long. For instance, you might pay a fee if you open a new account and then close it within six months. If there’s an account closing fee, it should be included on the bank’s fee schedule, so check their details or contact customer service.

Are online banks better than traditional banks?

Online banks can offer some advantages that you don’t always get with traditional banks. For example, online banks may not charge any monthly maintenance fees for checking or savings accounts. Initial deposit requirements may be lower, and interest rates for deposit accounts might be higher. Traditional banks, however, can offer branch banking access, so that’s something to weigh in the balance when deciding where to open an account.

Photo credit: iStock/Sakibul Hasan

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

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

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

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

Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

SOBK1122010

Read more
Oct
17
2023
What Is a Freelancer?

What Is a Freelancer? Guide to Freelancing

By | Building Your Career, Life & Career, money | Comments Off on What Is a Freelancer? Guide to Freelancing

A freelancer is a self-employed worker who provides services for a client or multiple clients as an individual contractor. Freelancers typically have flexible hours, work remotely, and can be involved in as many or as few projects as they would like. Think about people you may know who provide social-media consulting for a few businesses, drive an Uber, or take catering gigs. All of them are freelancers.

Because freelancers are not employees, however, they do not receive typical work benefits like health insurance and paid time off. They are also subject to self-employment tax and are responsible for paying taxes entirely on their own.

Are you committed to being a freelancer or just curious about how it works? In this piece, you’ll get the answers you need to move ahead, including:

•  What is a freelancer?

•  How does freelancing work?

•  What are common types of freelancers?

•  What are the pros and cons of freelancing?

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 4.00% APY on savings balances.

Up to 2-day-early paycheck.

Up to $2M of additional
FDIC insurance.


What Is Freelancing?

So what does freelancing mean? Freelancing is when a self-employed individual offers professional services to a company in exchange for payment. Unlike a traditional employee, the freelancer can set their own rates and hours. They can work for one or multiple companies.

In exchange for this flexibility, freelancers must be prepared to fund their own benefits like health insurance. They also typically pay their own taxes which are potentially higher.

Some people freelance as their sole source of income. If they work on a large or long-term project, you may hear the term “independent contractor” used (you’ll learn more about different terminology below).

However, it is possible to freelance on top of a regular salaried or hourly position. Such freelance work is commonly referred to as a side hustle or side gig and can help people bring in more cash.

Recommended: 15 Low-Cost Side Hustles

How Does Freelancing Work?

Now that you know the answer to “What is freelancing,” here’s more detail on how this kind of employment works. Freelancers make money by selling a service to another individual or company (i.e., a client). Typically, freelancers and their clients will enter into a contract with one another that specifies the nature of the work, the duration of the professional relationship, and the payment for services rendered.

After completing the work, a freelancer will usually submit an invoice to the client, who will then pay the freelancer by a predetermined method (direct deposit, paper check, peer-to-peer transfer, etc.). During tax season, a freelancer will receive an IRS 1099 composite form from each client instead of a W-2. This form will detail the total compensation the freelancer earned from the client.

Because freelancers are self-employed, they are solely responsible for paying federal, state, and local taxes on all earned income. In addition to paying what an employee would traditionally have withheld from their paycheck, a freelancer must also pay what an employer usually contributes toward taxes (typically Social Security and Medicare taxes). And because there is no steady paycheck from which funds are being withheld for taxes, freelancers are responsible for paying quarterly estimated taxes to avoid a penalty from the IRS.

If you decide to become a freelancer, it is a good idea to work with a certified accountant to ensure you are handling your taxes correctly. Not only can an accountant help you with quarterly taxes, but they can also point out important freelancer tax deductions you can be taking.

Recommended: Passive Income Options

Common Fields for Freelancing

Traditionally, freelancers have been thought of as roles like writers, photographers, consultants, and coaches. But today’s gig economy has broadened the definition of freelance work. Rideshare drivers, dog walkers, and online tutors — these just scratch the surface of jobs one can do as a freelancer.

In terms of what a freelancer is specifically, take a look at some common fields and roles:

•  Editorial

◦  Copywriters

◦  Journalists

◦  Bloggers

◦  Proofreaders

◦  Editors

•  Creative

◦  Graphic designers

◦  Photographers

◦  Podcasters

◦  Vloggers

◦  Animators

◦  Videographers

◦  Social media influencers

◦  Musicians

•  IT and Development

◦  Web developers

◦  Mobile developers

◦  Software developers

•  Admin

◦  Virtual assistants

◦  Transcribers

◦  Administrative assistants

•  Financial and Legal

◦  Accountants

◦  Bookkeepers

◦  Tax preparers

◦  Lawyers

•  Sales and Marketing

◦  Social media marketers

◦  Public relations specialists

◦  Digital advertisers

◦  SEO marketers

•  Consultants

◦  Business consultants

◦  Medical consultants

◦  Legal consultants

•  Gig Economy

◦  Delivery drivers

◦  Rideshare drivers

◦  Dog walkers

◦  Babysitters

◦  House cleaners

◦  Fitness instructors

The important thing to remember: Most of these jobs can be done as an actual employee, and many other jobs not listed here can now be done by freelancers. Many businesses rely on a healthy mix of freelancers and independent contractors to achieve success.

Recommended: How to Make Money Through Social Media

Types of Freelancers

You may hear different terms used and wonder what does freelancing mean exactly? Are independent contractors and freelancers the same thing? Here, the answer to that question as well as clarity on some other phrases you may encounter that describe this kind of work:

1.   Independent contractor: Most freelancers are independent contractors. They provide their services to multiple clients and companies, as specified by the contracts they agree to. An independent contractor may do a short, one-off project with a client, but it tends to be used (as noted above) when one is contracted to provide a service on an ongoing basis or does a larger scale project.

2.   Part-time freelancer: People who hold down a full-time job but make extra money on the side — like a weekend wedding photographer or a doctor who does some medical consulting with clients — are considered part-time freelancers.

3.   Small business owners: Some freelancers may earn enough work that they need to hire actual employees to keep up with it. For example, a freelance writer may attract enough clients to eventually form an agency.

4.   Temporary workers: Individuals who find temporary work, often through a temp agency, are considered freelancers. Sometimes, businesses need to fill a full-time role but only for a set number of months or years, like to cover for a full-time employee’s parental leave. The contracted worker who temporarily fills that role is also considered a freelancer but may enjoy some company benefits during their tenure, depending on contract specifics.

Recommended: 5 Ways to Achieve Financial Security

Tips on Becoming a Freelancer

Thinking about becoming a freelancer? The following tips may help you find success:

•  Finding clients: Before quitting a full-time job with steady income and benefits, it’s a good idea to have some clients as a freelancer. Many freelancers start out part-time and transition to full-time freelancers once they have enough steady work.

•  Understanding the financial implications: Knowing how you will pay taxes as a freelancer is an important requirement before transitioning into this career. It’s also wise to have a plan for health insurance, disability insurance, and other benefits that you may be losing by transitioning out of full-time work.

•  Staying organized: Having an organizational system to keep track of clients, projects, communication, and deadlines can be crucial. Successful freelancers often make their own work schedule with standard hours and stick to it, even if no one else is holding them accountable.

•  Networking: Word-of-mouth referrals are a great way to earn business as a freelancer; networking on sites like LinkedIn and in person with potential clients and others in your field is a great strategy. Depending on your line of work, having a website and portfolio advertising your services can make it easier to win new business.
Feeling unsure about the transition to independent contractor? Consider researching and following some financial planning tips for freelancers.

Recommended: Retirement Options for the Self-Employed

Pros of Freelancing

Freelancers enjoy plenty of perks, including:

•  Setting your own rates: As a freelancer, you can determine how much you’ll charge a client per project or hour. Just remember that if you set the price too high, companies may go with another contractor.

•  Setting your own hours: You can also work as much or as little as you’d like — and at the time of day you’d prefer. You don’t have to ask for permission to go to the grocery store, take a mental health day, or go to yoga class in the morning.

•  Diversifying your client list to keep work interesting: You can choose which clients you work with and have more freedom to define your job responsibilities.

•  Flexible time off: Freelancers may not get paid for their time off, but as long as you fulfill contractual obligations to clients, you can take vacation (or just lazy days) whenever you like.

•  Freedom from regular meetings and office politics: While freelancers may hop on a call or meet up with a client for lunch on occasion, there is typically more freedom to do the actual work instead of sitting through unnecessary meetings. This may not apply to some freelancers, like consultants.

•  Remote work: Most freelancers are able to work on the go or from a home office.

Cons of Freelancing

But there are also downsides to freelancing, like:

•  Lack of company-paid benefits: Freelancers are responsible for getting their own health insurance and can’t count on a company’s 401(k) match. (That’s where the solo 401(k) comes in!) Freelancers also won’t get paid while they’re on vacation.

•  Higher and more complicated taxes: If you’re self-employed, you’ll need to cover some taxes beyond those you would pay as a traditional employee. Freelancers must also pay their taxes quarterly to avoid fines from the IRS.

•  Less job security: Because freelancers are not employees, it is easier for a company to sever ties. Freelance work is sometimes on a per-project basis, so as a freelancer, you may need to spend a significant portion of your time just trying to market your services to find more work.

•  Lack of steady income: As a freelancer, you might not be able to depend on the same amount of money every week; it can vary by the type and amount of projects you take on. This can make it more challenging to build a monthly budget.

•  Loneliness: Working from a home office as a freelancer can be isolating. If you feed off other people’s energy and really enjoy networking and socializing with coworkers, you may find that freelancing isn’t right for you.

•  The constant need for “hustling”: Workers who do an average job might be able to skate by as a traditional employee and still earn a paycheck. To turn a profit as a freelancer, you must constantly impress clients with high-quality work and no missed deadlines. Otherwise, they might look elsewhere.

Here’s a look at the pros and cons of freelancing in chart form:

Pros of Freelancing

Cons of Freelancing

•   Set your own rates

•   Set your own hours

•   Choose your clients

•   Have flexibility with time off

•   Avoid meetings and office politics

•   Can work remotely

•   Don’t get benefits

•   Must cover more taxes

•   Lack job security

•   Don’t receive steady paycheck

•   May be lonely

•   Must constantly be pitching new work

Banking With SoFi

Freelancers rely on many tools to turn a profit, including a bank account that puts their hard-earned money to work. If you sign up for an online bank account with SoFi, you’ll enjoy a suite of tools that makes organizing your earnings, spending, and saving super convenient. Plus you’ll earn a hyper competitive interest rate and pay no monthly fees, so your money can grow faster.

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

FAQ

Is freelancing better suited for full-time or part-time?

Many freelancers are able to turn their work for a client or clients into a full-time career. If you are just starting out, it might be a good idea to freelance part-time and then transition to full-time if you feel confident that you can sustain a freelance career.

What skills are necessary for freelancing?

Beyond the actual job skills required by whatever field you’re freelancing in, being a successful freelancer requires several key skills, including:

•  Excellent communication

•  Strong organization

•  A commitment to deadlines

•  The ability to network

•  A solid understanding of finances.

Is freelancing difficult?

Freelancing can be difficult: You won’t enjoy employer-sponsored benefits, you’ll have to pay self-employment taxes, and you’ll need to “hustle” to win clients — and then deliver impressive work that convinces clients to keep you around. That said, freelancing offers freedom and flexibility and can be lucrative if your business is successful.

Photo credit: iStock/AleksandarNakic

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.

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

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

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

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

Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

SOBK0822038

Read more

CATEGORIES

  • All
  • No categories
Close modal

See what SoFi can do for you and your finances.

Select a product below and get your rate in just minutes.

Student Loan
Refinancing

Personal
Loans

Online
Investments

Other

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or other eligible status, be residing in the U.S., and meet SoFi's underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates reserved for the most creditworthy borrowers. If approved, your actual rate will be within the range of rates at the time of application and will depend on a variety of factors, including term of loan, evaluation of your creditworthiness, income, and other factors. If SoFi is unable to offer you a loan but matches you for a loan with a participating bank, then your rate may be outside the range of rates listed above. Rates and Terms are subject to change at any time without notice. SoFi Personal Loans can be used for any lawful personal, family, or household purposes and may not be used for post-secondary education expenses. Minimum loan amount is $5,000. The average of SoFi Personal Loans funded in 2023 was around $33K. Information current as of 2/26/24. SoFi Personal Loans originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org). See SoFi.com/legal for state-specific license details. See SoFi.com/eligibility for details and state restrictions.

✝ To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

©2024 Social Finance, LLC All rights reserved.
TLS 1.2 Encrypted
Equal Housing Lender