It is possible to use your utility bill payment history to help build credit. However, utility bills, like your gas, water, and power bills, aren’t automatically reported to the credit bureau agencies. To get them reported — and thus to have your utility bills affect your credit score — you’ll typically need to work through a third-party company that reports your utility bill payments so they show up on your credit report.
If you’re interested in making this happen, we’ll walk you through how to leverage paying utilities to build credit, and also explore other options to help establish your credit score.
How Do Utility Bill Payments Appear on My Credit Report?
Utility bill payments typically do not automatically appear on your consumer credit report. That’s because they’re not considered credit accounts. When you pay for utilities, you are paying for a service, rather than opening and maintaining a line of credit, or borrowing money that you then repay over time.
However, utility bill payments can appear on your credit report if you work with a third-party service that does the reporting on your behalf. These services typically charge a small monthly fee, but there are companies that offer this free of charge. If you’re paying utility bills on time, then getting that information reported to the credit bureaus could help to build credit.
How Do Utility Bill Payments Affect Your Credit Score?
While utility bill payments don’t appear on your credit report, they still can ding your credit score if you fall behind on payments, and the balance you owe becomes delinquent and goes to collections. Under the Fair Credit Reporting Act, debt can linger on your credit report for up to seven years. Because your payment history makes up a lion’s share of your credit score, a debt that enters collections and then remains on your report can have a significant impact on your credit score.
On the flipside, utility bills also have the potential to build credit. As mentioned, this could occur if you sign up to have your utility payments reported to the three major credit bureau agencies, and you consistently make your payments on time. To ensure this happens, you might consider setting up automatic bill payments.
Utility bills could also help build your credit score if you opt to pay bills with a credit card. Staying on top of your credit card payments is a key determinant of your credit score though, so just make sure to pay off your statement balance on time and in full when it becomes due. That way, you’ll avoid late payment consequences and also dodge paying interest on the utility bill payments charged to your card.
Late utility bill payments can hurt your credit if you miss enough payments for your account to enter “delinquent” status, after which it would get sent to collections or get handled as a charge-off. If this happens, that information can stay on your credit report for up to seven years.
Similarly, if you sign up for a credit reporting service but then are late on making payments, that late payment activity could negatively impact your score. Often services will not report late payments for utility bills too.
Still, given the potential consequences of late payments, organizing your bills is a good idea to help ensure you pay on time and don’t lose track of due dates.
Your payment of the following bills will generally show up on your credit report and as such will have an impact on your credit score:
• Car payments
• Credit card payments
• Student loan payments
• Mortgage payments
Similarly to your utility bills, some bills have the potential to impact your credit, but don’t automatically show up on your credit report. However, you may be able to sign up for a credit reporting service or pay them using your credit card to have them help build your score. These types of bills include your rent payments, insurance payments, and bills for services like internet and cable.
Other Ways to Build Credit
Beyond your utility bills, there are other ways you can establish credit. This includes:
• Opening a traditional credit card and then using it responsibly.
• Taking out an auto loan to pay for your next car.
• Getting a secured card, which is easier to qualify for than a traditional credit card because it requires a deposit.
• Taking out a personal loan and then staying on top of payments.
• Becoming an authorized user on the credit card account of someone with a solid credit history and responsible credit usage.
• Getting your timely rent payments reported to the credit bureaus.
• Taking out a credit-builder loan, which gives you the funds once you pay it off.
While paying utilities doesn’t automatically establish credit, it can help your score if you work with a third-party service to have your payment activity reported. There are other ways you can build credit from scratch as well, such as taking out a personal loan or opening a credit card account, and then handling payments responsibly.
If you’re looking for a credit card, the SoFi Credit Card offers an array of perks. Cardholders can earn cash-back rewards on all eligible purchases. Plus, you’ll get rewarded for responsible usage, as SoFi will lower your APR after you make 12 on-time payments of at least the minimum amount due.
FAQ
What is the impact of paying your utility bills early on your credit score?
Historically, utility bills are not reported to the credit bureaus and in turn, don’t impact your credit score. However, if you work with a third-party service, you could have your utility bills reported. In this instance, paying your utility bills on-time could help build your score.
Are utility bill payments reported to a credit reporting service?
Utility bill payments can be reported to a credit reporting service if you sign up for an account and opt in to have your utility bills reported. You might need to pay a monthly fee for this service though.
Photo credit: iStock/tommaso79
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .
Updating the wiring in a house could cost between $6 and $10 per square foot, but keeping old wiring could have disastrous consequences. Electrical issues are the third most common cause of house fires in the United States.
Modern technology also may demand rewiring a house. Powering multiple electronic devices, having adequate interior and exterior lighting, and heating and cooling a home to today’s standards are difficult if a home’s electrical system is not up to the task.
Key Points
• The cost to rewire a house typically ranges from $6 to $10 per square foot, influenced by factors such as accessibility and overall complexity of the project.
• Signs indicating the need for rewiring include flickering lights, tripped breakers, and warm switches, which suggest outdated or faulty electrical systems.
• Rewiring often involves installing new wiring and a circuit breaker panel to meet current electrical standards, ensuring safety and compliance with building codes.
• Homeowners may need to budget for additional costs related to drywall repairs and painting, as rewiring can disrupt living spaces during the process.
• Although rewiring can be expensive, it enhances home safety, adds property value, and may be required for homeowners insurance coverage.
What Is Rewiring Your Home?
Rewiring a home involves removing the outdated wiring inside a home’s walls and installing new, modern wiring that can safely meet today’s electrical needs.
Rewiring is typically done by a licensed electrician who strips out the old wiring and runs new wiring throughout the entire house, installs a new circuit breaker panel to handle the load of the new wiring system, and ensures that building codes are met.
In the past, families may have needed only one or two outlets per room because there were fewer electric items used. Now, homeowners use outlets for phone chargers, routers, computers, TVs, video game consoles, and speaker systems — not to mention kitchen gadgets that have come into common use over the years.
All of these modern electronics can overload older electrical wiring.
Flickering lights, outlets making a popping sound, or tripped breakers indicate that a home might need to be rewired. When buying an older home, a home inspection typically reveals if rewiring is recommended or necessary.
Even before a professional inspection, prospective homebuyers may be able to get a good idea of how the home is wired by peeking into the attic, basement, or crawl space.
Vintage charm does not extend to knob and tube wiring, which was common through the mid-1900s. The lack of a ground wire is seen as a significant fire hazard, and most carriers will deny homeowners insurance for a home that has knob and tube electrical wiring.
Another way to check for outdated wiring is to find the electrical panel and see if it has modern breaker switches or round fuses. The fuses indicate that the system is outdated, and rewiring the house might be recommended.
In almost every state, home sellers must disclose defects, but cautious buyers may still want to include the inspection contingency in the purchase contract.
If you’re living in a home with older wiring and notice that your circuit breakers trip often, lights flicker, the light switches feel warm to the touch, or there is a burning smell coming from an outlet, it’s time to schedule an appointment with an electrician.
How Much Does It Cost To Rewire a House?
The cost of rewiring a house depends on square footage and how easy or difficult it is to access the space, but on average it could cost between $6 and $10 a square foot, including labor and materials.
Some sources put the cost at just $2 to $4 per square foot for labor and materials. In any case, ask what a bid includes. Does it include the finishing work, permits, inspections, and new outlets and switches?
Rewiring an older home can cost upward of $30,000 because the wiring might be more difficult to access, the panel and other components may need to be upgraded, and the job just might be more involved overall.
So this is not a small expense. Options to pay the tab are cash or a withdrawal from your emergency fund, if you have one.
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Can You Rewire a House Without Removing Drywall?
If a professional has access to a basement, attic, or crawl space, a house may be able to be rewired without removing much, if any, drywall or plaster. Having access to the blueprint of the house will help.
To rewire without removing drywall, the usual process is to cut openings at the tops or bottoms of the walls for the wiring to be pulled through. Another way is to cut a section of drywall around the perimeter of the room to make it easier to access the studs.
Is It Worth It to Rewire a House?
Although rewiring might seem cost-prohibitive when buying a single-family home, owners of older homes with outdated wiring systems may find that the cost to rewire a house can be money well spent.
Replacing outdated wiring can help prevent a house fire and add value to the property. Plus, insurance may mandate upgrades. Updated, energy-efficient fixtures like recessed lighting are sometimes included in a remodeling job of this scope and can potentially lower utility costs.
The amount of time it takes to rewire a house can vary based on the electrician’s work schedule, the size of the house, and any problems encountered during the process, but on average it takes three to 10 days to rewire a home.
You may consider staying with family members or a friend or at a hotel as rewiring a home likely will disrupt your living space for that time.
Also, because one or more electricians will be cutting into your walls (and potentially ceilings and floors, too), you may need to budget additional money for patches, paint, and other repair work.
The Takeaway
The cost to rewire a house may seem high, but adequate electrical panels and modern wiring can amp up your home value and prevent fires.
Wondering how you’re going to pay for it all? An unsecured personal loan is one way to pay for the average cost to rewire a house. Home improvement loans from SoFi have competitive interest rates with fixed payments and no fees required. No collateral is needed, so there’s no need to have a certain amount of home equity to be considered when applying.
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FAQ
How much does it cost to rewire a 1,500-square-foot house?
It could cost from $9,000 to $15,000 to rewire that size house, according to some estimates, but others put the cost much lower. In any case, the age of the home and other factors influence the total cost.
Does a 1950s house need rewiring?
If a 1950s home has the original wiring, it most likely needs to be updated, at least in part.
Having changed out a fuse box to a breaker panel is nearly a must when selling a 1950s house. Cloth-covered wiring and ungrounded outlets also may keep the house from passing an inspection.
What are the signs that a house needs rewiring?
Here are some signs: circuit breakers that trip regularly, slight shocks from switches and outlets, and flickering or dimming lights.
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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.
It’s a good idea to regularly review your credit report. Doing so can help ensure that the information used to calculate your credit scores is accurate and up to date. It can also alert you to fraud or identity theft.
Unfortunately, understanding your credit report can sometimes feel like a challenge — especially if it’s the first time you’re doing it. Below, we’ll explain how to read a credit report, as well as highlight some common credit report errors to look out for.
What Is a Credit Report?
Your credit report contains a large amount of information about your financial life and payment history. If you have credit cards or loans, for instance, those accounts and how you pay them are included in your credit report. Often, you’ll have more than one credit report, as creditors are not required to report to every credit reporting company.
Credit card issuers and lenders can pull these reports and review them in order to determine your creditworthiness. They will rely on this information to make a decision on whether to loan you money, as well as the terms they’ll offer if they do.
Who Compiles Credit Reports?
Credit reports are created by three national credit reporting agencies: Equifax, TransUnion, and Experian. The information the credit bureaus compile in credit reports comes from creditors — like lenders, credit card companies, and other financial companies — that submit information on your accounts and payment history to the bureaus.
Who Can See Your Credit Report?
Your credit report is accessed whenever a lender (or an employer or landlord) conducts what’s known as a hard credit inquiry. This is when a business accesses your credit report to make decisions about your creditworthiness, likely in order to make a decision about extending a loan (or a job or housing).
Hard credit inquiries will appear on your credit report, so you should recognize any credit inquiries that appear. They may also subtly affect your credit score. Multiple inquiries in a short period of time may signify to lenders that you’re seeking multiple loans, which may bring up concerns about your financial stability.
Your credit report can also be accessed by consumers (like you). The Fair Credit Reporting Act requires each of the credit reporting companies to provide you with a free copy of your credit report, at your request, once every 12 months. Your credit score will not be impacted when you request a copy of your own credit report.
How to Get a Credit Report
Each year, you have the right to ask for one free copy of your credit report from each of the credit bureaus. There are a few ways you can request it:
• By visiting AnnualCreditReport.com
• By calling (877) 322-8228
• By downloading and filling out the Annual Credit Report Request form, and mailing it to the following address:
Annual Credit Report Request Service
P.O. Box 105281
Atlanta, GA 30348-5281
You also can request credit reports from consumer reporting companies, though these may charge a fee. Additionally, you’re eligible to request free reports beyond your one per year under certain circumstances, such as being denied credit or due to potential inaccuracies because of fraud.
Also know that you can only check your own credit report — checking someone else’s credit report is generally illegal.
When you get your credit reports, it’s a good idea to read each section closely. Here’s a rundown of the sections you’ll typically find included, so you’ll know what to expect and thus how to read a credit report.
This section of the report is used to identify you. It contains basic information like your name, address, and place of employment. You may also find previous addresses and employer history listed here. Your employment history doesn’t affect your credit score. Rather, it’s included on your credit report only to verify your identity.
When scanning this area you’ll want to make sure that your name, address, and employer match up. Any incorrect or unfamiliar personally identifiable information (like company names you don’t recognize or employers you never worked for) may be a sign of identity fraud.
Personally Identifiable Information Included in Your Credit Report
• Name(s) associated with your credit
• Social Security number variations
• Address(es) associated with your credit
• Date of birth
• Phone numbers
• Spouse or co-applicant(s)
• Current or former employers
• Personal statements, such as fraud alerts, credit locks, or power of attorney
Credit Summary
This section summarizes information about the different types of accounts you have, including credit cards and lines of credit, mortgages and other loans, and any accounts that have been sent to collections. For each account, your credit report will include the date the account was opened, its balance, its highest balance, the credit limit or loan amount, payment status, and payment history.
As you read this section, make sure that all the information looks familiar. It’s not unusual for a credit report to have slightly dated information, such as a higher balance because you just paid off a bill this month. However, all information should seem recognizable. In particular, you’re looking for:
Unfamiliar accounts
Late payments that do not align with your records
Balances that do not match your records
The information in this section is pulled from public records and may include debt collections or bankruptcy information.
If you have any debt collections and bankruptcy on your record, it’s important to remember that they won’t stay there permanently. The following statutes of limitations apply to different types of debt, restricting how long the information will remain on your credit report:
• Chapter 13 bankruptcy: Removed seven years after the filing date
• Chapter 7 bankruptcy: Removed 10 years after the filing date
• Late payments: Removed seven years after they occur
• Payment defaults: Removed seven years after they occur
If you see information that’s not familiar, you’ll want to flag it, since this could be a sign of identity theft. You may also want to flag any information that is still on your credit report after the statute of limitations has expired.
Credit inquiries list all parties who have accessed your credit report within the past two years.
These could be from lines of credit you opened, such as applying for a credit card, or from applying for a loan.
Both hard inquiries and soft inquiries will appear, though they have different impacts on your credit — hard inquiries will affect your credit, whereas soft inquiries will not. You can distinguish the two types of inquiries based on how they appear on the report:
How a Hard Inquiry Will Appear
How a Soft Inquiry Will Appear
Business name
Company name
Business type
Inquiry date
Inquiry date
Contact information
Date inquiry will be removed
Contact information provided by the creditor for the account
It’s a good idea to make sure you recognize any recent credit inquiries, as they can be a red flag for identity theft.
Why Credit Reports Are Important
Your credit report can play a critical role in determining your financial future. That’s because creditors will refer to your credit report to decide whether to approve you for a loan or a credit card and, if so, what terms they’ll offer you, including the interest rate. In other words, your credit report will help determine whether you’ll get the auto loan you need to purchase a new car, or the mortgage necessary to purchase a home.
It’s not just creditors looking at your credit report either — landlords, insurers, potential employers, and even phone and cable companies may look at your credit report as part of their vetting process. This is why it’s so important to understand what information your credit report contains, so you can know what information these potential parties can learn from viewing it.
What Information Is Not Found on Your Credit Reports?
One surprising piece of data that you may be surprised to find out credit reports do not include is your credit score. Beyond that, your credit report will not contain the following information:
• Salary
• Employment status
• Marital status
• Spouse’s credit history, if applicable
• Assets, such as bank account balances, investments, or retirement accounts
• Any 401(k) loans
• Public records outside of bankruptcy
• Medical information
• Expired information
• Race or ethnicity
• Religious beliefs or information
• Political affiliates
• Disabilities
What To Do If You Find Errors on Your Credit Report
None of the information on your credit report should look unfamiliar. In fact, one of the main reasons you want to read your credit report is to make sure that your credit report matches your records.
But sometimes, there can be discrepancies. If you detect an error on your report, such as a payment incorrectly reported as late, you’ll want to file a formal dispute. You’ll need to dispute credit report errors with both the credit reporting company and the entity that provided the information (such as a credit card company).
When writing a dispute letter, you’ll want to include:
• A clear explanation of what is wrong in the credit report.
• Supporting documentation showing the information is inaccurate (such as a copy of a paid bill).
• A request for the information to be fixed.
By law, the credit reporting company must investigate your dispute and notify you of its findings.
If you notice an error that suggests identity theft (such as unknown accounts or unfamiliar debt), it’s a good idea to sign up with the Federal Trade Commission’s (FTC’s) IdentityTheft.gov site in addition to alerting the credit bureaus. The FTC’s tool can help users create a recovery plan and figure out next steps, which may include placing a security freeze on your accounts.
The Takeaway
It’s easy and free once a year to gain access to your credit reports from the three major bureaus. Taking advantage of this service can help you maintain good credit and good overall financial health.
Reviewing your credit report can give you a chance to correct any errors, and make sure your credit report is an accurate representation of your financial situation. It can also alert you to any fraudulent activity. In addition, reading your credit report can help you understand how creditors see you as a borrower and cue you into any potentially problematic information that may lead to a lower credit score than you would like.
Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.
FAQ
When should you check your credit report?
The Consumer Financial Protection Bureau (CFPB) recommends checking your credit report at least once a year to ensure there are no errors and that all information is up-to-date. You might consider checking them even more frequently than that though to have the most accurate picture of your current financial situation.
What do the numbers mean on a credit report?
Your credit report may contain a variety of different numbers. This can include your name identification number, your Social Security number, the IDs for addresses associated with your credit, phone numbers, account numbers, and more. It can help to go through section by section if you’re unclear as to what a particular number means.
What should I look for on a credit report?
When reading your credit report, you’ll want to look out for any changes to your personal information, such as changes to account details, inquiries, or data available in public records. Keep your eye out for any errors or anything that otherwise seems amiss, as this could be a sign of fraud.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
A mobile wallet can be a great way to pay for things as you go through your day without having to carry an actual, potentially cumbersome wallet with you. Instead, an app holds digital versions of your credit, debit, loyalty, and ID cards, allowing you easy access when needed.
But you may wonder which of the mobile wallet options are best, how safe these transactions are, and whether it wouldn’t just be better to slip your debit card in your pocket on most days.
Read on to learn more, including:
• What is a mobile wallet?
• How does a mobile wallet work?
• How do you set up a mobile wallet?
• What are the pros and cons of a mobile wallet?
What Is a Mobile Wallet?
A mobile wallet is just what it sounds like: It’s a virtual wallet that lives on your mobile device (aka your cell phone). It can store credit cards and charge cards, as well as debit, loyalty, and store card information. This allows you to quickly and easily pay for goods and services with your smartphone, smartwatch, or another mobile device. No more digging through your bag or backpack for your “real” wallet and fishing out the right piece of plastic.
Mobile wallets (sometimes called digital wallets) can go a step further, too. You can also stash insurance cards, ID, coupons, concert tickets, boarding passes, and hotel key card information in them. Some digital wallets also enable you to send money to friends, as well as receive payments.
You may also be able to use your mobile wallet instead of a physical card at some ATMs for contactless withdrawals.
💡 Quick Tip: One way to add your debit card to your mobile wallet is by accessing your online checking account via your preferred banking app and following the instructions in-app.
How Does a Mobile Wallet Work?
Here’s how a mobile wallet works:
• You install the app and type in your personal and payment information, which is securely stored. (Unique identifying numbers are used for your details vs. your actual card or account information.)
• When you are ready to make a payment with the mobile wallet, a technology called NFC (near-field communication) kicks in. This allows the two devices (your mobile wallet and the vendor’s reader) to communicate. Typically, you will wave your device over the merchant’s terminal or tap your device against it.
• As the two devices communicate, your transaction will likely go through. Funds will transfer, and you will usually be pinged with a confirmation.
What Is the Best Mobile Wallet App?
The major mobile wallets are:
• Apple Pay
• Google Pay
• Samsung Pay
These may come already installed on mobile devices. Although they differ in layout, these mobile wallet apps have the same basic function that allows you to pay with a phone tap.
Other ways to make payments on the go include mobile wallets you can download from app stores, including wallets from banks and merchants such as PayPal, Walmart, and Starbucks.
Deciding which mobile wallet is best will largely depend upon your own personal needs, which options are compatible with your device, how you like to manage your money, and what your financial goals are. A couple of points to keep in mind:
• When choosing a mobile wallet app, be aware that a mobile wallet offered by your credit card company may only be accepted at certain retailers.
• Merchant wallets will typically only work in that merchant’s store or online. For instance, the Starbucks wallet will only work at Starbucks. Enjoy that latte, but don’t expect to buy new boots at the mall with it.
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Setting up and Using a Mobile Wallet
Here’s how to set up most of the major mobile wallet apps; it’s usually quite simple:
• You launch the app (it may be pre-installed on your device), take a photo of your card or enter its information (such as your credit card number), and follow the step-by-step instructions.
• This process is then repeated for all other cards entered. Generally, even if you load up several credit cards into your mobile wallet, only one of them will be your default payment option. That card will be the one that is used to process a purchase. If you want to use a different card, you may need to change the default card before you make the transaction.
• Beyond credit and debit cards, the app may also walk you through configuring peer-to-peer payments like Apple Cash or Google Pay fund exchanges. You may also be able to link your PayPal account.
• You may be able to import retail-store rewards cards, as well as museum or library memberships cards, event tickets, and airline boarding passes. This may involve scanning a QR code or selecting the “add to wallet” button in an email or a text message from the issuer.
• When you are ready to pay for purchases using your mobile wallet, you’ll want to make sure the merchant accepts mobile money. These businesses can typically be identified through a contactless payment indicator (usually a sideways Wi-Fi symbol).
• To pay, open your digital wallet app if necessary, hold the phone near the wireless reader or tap your device against the terminal. This will authorize the payment. Your phone’s screen will typically confirm the transaction.
Are Mobile Wallets Safe?
Overall, mobile wallets are considered to be safe. Here’s why:
• Unlike cash, which can be stolen, and credit cards, which can be copied, the card information you load into a mobile wallet is encrypted. That means that your actual card or account numbers are never shared with the merchant.
• In order to make a payment, you typically have to unlock your device and also type the passcode or use your fingerprint or face recognition to unlock the mobile wallet. Or you may be able to unlock an iPhone with a double-click of a button and then authenticate with Touch ID or Face ID.These steps may be simple but they add layers of security.
• In the case of theft, it’s not possible for anyone to use a mobile device to make a payment without providing the required security credentials.
These safeguards actually make mobile wallets more secure than carrying physical credit cards and cash, which can easily be compromised.
Pros and Cons of Using Mobile Wallets
Is a mobile wallet right for you? Here are some key pros and cons you may want to consider.
Mobile Wallet Pros
Here are some of the upsides of using a mobile wallet.
They’re convenient. If you’re out and about without your wallet or bag, you can still make purchases, as well as use your coupons and rewards cards. You may also be able to get cash at an ATM or check a book out of the library, all from your mobile device. What’s more, they’re often allow for a contactless payment, meaning they can be extra quick and easy.
They’re secure. Mobile wallets provide a layer of security you don’t get with cash or using a debit or credit card. Your payment information is saved in one protected, central location. Card numbers are never stored in the app itself but are instead assigned a unique virtual number. This protects your money even if your smartphone is lost or stolen.
They can help you track your spending. A mobile wallet can help you track and better manage your spending. All of your transaction information is stored in the app so it’s easy to see how much you’re spending and where each week. You might even wind up using a credit card more responsibly.
Mobile Wallet Cons
There are also some downsides to mobile wallets to be aware of.
They’re not accepted everywhere. There are still some industries where cash is the only currency accepted. Even in businesses that do take credit, not all of them accept mobile wallets. To accept a mobile wallet, businesses need to have payment readers that take NFC payments, and not all of them have these terminals. This can cause a problem if a mobile wallet is all you have on hand.
Your phone could die. Cell phones often run out of battery life, and if you’re without a charger, that handy mobile wallet will no longer exist. That can put a crimp in your shopping plans or become a major problem if you have important documents such as train passes or concert tickets stored in your mobile wallet.
You may end up overspending. The use of mobile wallets can be similar to that of using a credit card. Because cash isn’t physically leaving your hands, spending can feel less real, which can be a cause of overspending. If you have spending issues, a mobile wallet can make it easy to spend mindlessly and swipe or tap too often.
The Takeaway
A mobile wallet is a digital way to store credit, debit, ID, and gift cards so that purchases can be made using a mobile smart device rather than a physical card.
Mobile wallets can help simplify your financial life. They allow users to make in-store payments without having to carry cash or physical credit cards. They’re easy to use and have hefty safeguards.
However, they aren’t universally accepted. It’s worth your while to determine whether the retailers you frequent accept them to help determine if a mobile wallet is a good option for you.
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4 Tips for Using Your Mobile Wallet
To keep your mobile wallet safe and smooth transactions, keep these tips in mind:
Do your research before downloading payment apps. Look for reliable brands/companies, many positive reviews, and a significant number of downloads. Avoid untested apps; they could be a kind of scam and contain spyware or malware.
Know how to remotely lock and locate your phone in case it gets lost or stolen. Check your phone’s device manager capabilities before you find yourself in an emergency situation.
Always have appropriate locking technology. Carrying around a phone that doesn’t lock means you could be risking loss.
Review your credit and debit card statements. Make sure those purchases are yours. While mobile wallets are secure, problems can occasionally arise, and you want to be alert.
FAQ
How many places support mobile wallets?
While there isn’t a precise tally of how many retailers and other businesses support mobile wallets, a recent study found that there are 1.35 billion registered mobile money accounts globally, indicating significant adoption of and acceptance of this technology.
Do mobile wallets support all debit/credit cards?
Each mobile wallet will have its own policies, but most credit cards from major banks are supported by, say, Google Pay. Small business credit cards may also be added, and possibly some debit cards, especially those from established banks. You may find, though, that prepaid cards are not supported.
Will mobile payments replace cash?
According to a 2022 study by GSMA, the global mobile money industry saw a 31% increase in processing transactions, up to $1 trillion in value. While this might indicate that mobile payments are on track to replace cash completely, that may not happen soon or perhaps even ever: Some sources say cash still accounts for 85% of all consumer payments around the world.
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SoFi members with direct deposit activity can earn 4.20% 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 4.20% 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 4.20% 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 10/31/2024. 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.
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Ethereum 2.0 is the latest upgrade to the Ethereum blockchain network, shifting it from a proof-of-work to a more efficient proof-of-stake consensus mechanism.
As Ethereum gained widespread recognition and adoption within the crypto space in recent years — it’s the second-largest crypto project after Bitcoin — some elements of the network required upgrades. As one of the most innovative blockchains in the DeFi space, Ethereum struggled with transaction times and scalability, among other issues.
The move from a proof-of-work consensus system to a less energy-intensive, more efficient proof-of-stake model aims to address those challenges. This massive overhaul has been termed The Merge.
What Is Ethereum 2.0?
To understand Ethereum 2.0 and its upgrades, you must have a basic understanding of what Ethereum is.
What Is Ethereum?
Ethereum is a form of crypto, of course, but Ethereum is best known as one of the most successful programmable blockchain platforms, with the capacity to support smart contracts, dApps (decentralized apps), non-fungible tokens (NFTs), and other DeFi projects.
The Ethereum native token is the Ether (ETH), and it’s used to fuel operations on the blockchain.
The Ethereum platform launched in 2015, and it’s now the second largest form of crypto next to Bitcoin (BTC), with a market capitalization of about $193 billion, as of Jan. 30, 2023.
Ethereum’s History of DeFi Innovation
The larger idea for Ethereum was to create a programmable blockchain that would enable a sort of free market environment, where developers could create decentralized applications (dApps), smart contract, and other DeFi programs without any control or interference from a third party.
Historically, Ethereum relied on a proof-of-work (PoW) consensus mechanism in order for miners to validate transactions and earn Ether (ETH) or gwei, a denomination of ETH used to pay for DeFi goods and services on the network.
In proof-of-work mining, high-powered computers solve complex mathematical puzzles needed to validate blocks of data or transactions.
Ethereum users can also create code used to build dApps and smart contracts. Smart contracts can execute transactions without a middleman, like a bank or regulator, once certain conditions are met. This innovation set Ethereum apart from other crypto projects, and it has inspired other crypto platforms to launch similar features.
Limitations of Ethereum
Because the Ethereum network has long attracted developers and other innovators, it has experienced growing pains, so to say, that have limited its ability to scale efficiently. In particular, Ethereum has been criticized for long transaction times and high fees.
Ethereum 2.0, or The Merge,”aims “to improve the network’s scalability, security, and sustainability,” according to its creators. As such, it’s hoped that improvements in those areas will be the primary ETH merge impact.
Those goals address several of the network’s key limitations: It needs to be faster, less vulnerable to threats, and eat up fewer resources. Of course, there are challenges to put these changes in place. Programmers have spent many years working on Ethereum 2.0, and though some changes have already been implemented, others will be phased in over the coming years.
How ETH 2.0 Solves Some Limitations
The most critical element of the move to Ethereum 2.0 is the transition from a proof-of-work algorithm that allows the network to be more nimble and efficient. While the proof-of-work system is still used by other crypto networks (most notably Bitcoin), many others are adopting alternatives.
The move to a proof-of-stake consensus mechanism eliminates the need for miners, which reduces the amount of resources required to keep the network’s integrity in check.
While the discussion about proof-of-work versus proof-of-stake algorithms is worthy of a conversation in and of itself (see below), the adoption of a the proof-of-stake system by Ethereum helps solve many of the issues (again, scalability, security, and sustainability) that the network previously experienced.
When Was Ethereum 2.0 Released?
The upgrades to the Ethereum network are being implemented in phases, and many features of the new network were established by late 2022.
The transition began with the introduction of the Beacon Chain in December 2020. During 2022, other upgrades were phased in, including a merge with Ethereum’s mainnet with the proof-of-stake Beacon Chain. The next phase will include a blockchain management strategy known as sharding sometime in 2023 or 2024.
What Are the Upgrades to Ethereum?
As noted above, the move toward Ethereum 2.0, or the Merge, has been accomplished in stages.
The Beacon Chain
The Beacon Chain introduced a new staking concept (proof-of-stake) to the platform. It launched before many other upgrade components because it’s a cornerstone to Ethereum 2.0’s system and needed to be in place for other components to work on top of it. The Ethereum merge date was in September 2022.
The Ethereum Mainnet Merge
The merge concerns the marriage of the existing Ethereum mainnet (Ethereum’s main network) with the Beacon Chain’s proof-of-stake protocol, as discussed.
This change is now live, and as a result, crypto mining is no longer needed to generate ETH, and instead, the network uses a staking system in order to create additional Ethereum tokens. This change has reduced the network’s energy consumption by more than 99.9%.
These two steps — the launch of the Beacon Chain, and the mainnet merge — paved the way for the next part of the transition: The introduction of shard chains.
Shard Chains
By introducing shard chains, which is scheduled to happen within the next year or two, the Ethereum network will have more capacity and speed, giving it the ability to handle more traffic.
“Sharding” is a bit technical, but it basically means that a database will split up to disperse the load of transactions on the network. Sharding reduces congestion and speeds up transactions, allowing the network to store and process more data in a shorter amount of time. Plus, more people will be able to participate on the network after it is sharded.
Ethereum 2.0 Staking
Remember: Ethereum 2.0 represents a full transition to a proof-of-stake protocol from a hybrid system that uses both proof-of-stake and proof-of-work.
Staking, in general, is the process of locking up cryptocurrencies to earn rewards. It’s like putting your cash in a savings account and accruing interest. Staking is a process used to validate data and transactions in a blockchain network, which is why and how Ethereum uses it.
With a proof-of-stake system, users validate block transactions based on the number of coins they hold. Basically, the more ether a user has, the more mining power they possess. As discussed, mining isn’t necessary under a proof-of-stake algorithm (not the case for proof-of-work).
That means that the process requires less energy and mining power — fewer resources overall — to keep the network running.
The Difference Between Proof-of-Stake and Proof-of-Work
Proof-of-work, conversely, is the original algorithm used by blockchain networks. On this protocol, users “mine” new coins, as they would on the Bitcoin blockchain, to earn rewards.
Mining is extremely energy intensive, which is one reason Ethereum 2.0 is moving to proof-of-stake.
A proof-of-stake algorithm will also bring less risk onto the network, has stronger support for sharding, and is more efficient — all upgrades over the proof-of-work system.
Summary: Ethereum vs Ethereum 2.0
To wrap it all up, Ethereum 2.0’s rollout is designed to make some significant improvement over the old Ethereum network, and make it more secure, sustainable, and increase its scalability. Here’s a brief rundown of the major differences, as they relate to crypto investors:
Ethereum vs. Ethereum 2.0
Ethereum
Ethereum 2.0
Proof-of-work algorithm
Proof-of-stake algorithm
Required mining to generate ETH
Users stake tokens to earn ETH rewards
Slower and more resource-intensive
More secure and energy-efficient
What Will Happen to My ETH?
There is no immediate impact to ETH holders as a result of the rollout of the Ethereum 2.0 project. While the network is getting upgrades, there’s no change to ETH itself, and investors shouldn’t need to do anything. Be suspicious of anyone who says otherwise, as crypto scammers may try to take advantage of the transition.
As for how the rollout has impacted prices for Ethereum? It’s hard to say for sure, as there are numerous factors affecting crypto prices at any given time. You can, however, check the ETH price now to get a sense of the value of your Ethereum holdings.
The Takeaway
Ethereum 2.0 is a series of upgrades to the Ethereum network, which introduces a new proof-of-stake system that makes the network, as a whole, more efficient and secure. While the multi-year rollout of the upgrade has begun, hopes are that Ethereum will become bigger and safer over time, while reducing its environmental impact, setting it apart from other types of cryptocurrency.
FAQ
Has Ethereum 2.0 come out yet?
Ethereum 2.0 is a series of upgrades that are being rolled out in phases, some of which have come out, or have gone live. The process is not complete, though, and likely will finish within the next couple of years.
Did Ethereum 2.0 replace Ethereum?
Yes and no. Ethereum and Ethereum 2.0 are still more or less the same as they were, but the network has changed or been replaced, in a sense. Ethereum 2.0 isn’t so much a replacement for Ethereum, as it is an upgrade to its system.
How are Ethereum and Ethereum 2.0 different?
The most impactful difference between Ethereum and Ethereum 2.0 is the introduction of a proof-of-stake consensus system, which makes the network faster, more secure, and more scalable, while reducing the amount of resources needed to generate new ETH.
Photo credit: iStock/Pekic
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