Feb
01
2023
Do Credit Unions Help You Build Your Credit?

Do Credit Unions Help You Build Your Credit Score?

By | Credit, credit card | Comments Off on Do Credit Unions Help You Build Your Credit Score?

While joining a credit union likely won’t affect your credit score in and of itself, some of the financial products offered by credit unions can have an impact on your score. For example, a credit union may offer lower interest rates on loans, which can help you keep an affordable monthly payment that’s easier to make on time. You also may be more likely to get approved for a credit union credit card than one from a bank, and responsibly using that card could help you build your credit score.

If you’re considering a credit union membership in the hopes that a credit union can help build credit, it helps to first understand how you can accomplish this. That way, you can better determine if joining a credit union is worthwhile for you.

Recommended: What is the Average Credit Card Limit?

What Is a Credit Union?

A credit union is a non-profit financial organization that exists to serve its members, who are also its owners. This can mean that credit unions are able to offer higher interest rates on savings and lower interest rates on loans and credit cards, as well as charge fewer fees.

Credit unions can offer many of the same financial services and products as banks and online lenders, though their lineup and number of locations can be a bit more limited. To gain access to a credit union’s products, you’ll need to become a member, which entails meeting certain requirements. Credit unions often target certain communities or regions.

Recommended: What is a Charge Card?

Credit Unions vs Banks vs Online Lenders

Here’s a brief look at how credit unions compare with both banks and online lenders:

Credit Unions

 Banks

 Online Lenders
Not-for-profit Usually for-profit Usually for-profit
Typically offer lower interest rates on loans than banks or online lenders Typically charge higher interest rates on loans than credit unions Typically charge higher interest rates on loans than credit unions
May offer an array of basic financial products Often offers a full spectrum of financial products and services May offer an array of basic financial products

What Is a Credit Union Credit Card?

Many credit unions partner with credit card issuers to issue a co-branded credit card. The types of credit cards that are offered by credit unions vary widely depending on the particular credit union. They can include rewards credit cards that offer points or cash back or secured cards designed for those looking to build their credit.

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

What Credit Score Is Typically Needed for a Credit Union Credit Card?

Each credit union is owned by its respective members, so there isn’t a set credit score that’s needed for a credit union credit card. Rather, each credit union sets its own parameters for the credit score and other financial requirements for approval.

That being said, you may have better luck getting approved at a credit union compared to a traditional bank, even if you are still building your credit.

How a Credit Union Credit Card Can Help Build Your Credit Score?

Here are some of the ways a credit union credit card could help you to build your credit score.

Potentially Easier Approval

Getting approved for and opening a credit card or loan is key to establishing credit. However, it can be challenging to get credit if you’ve never had it before. Because credit unions are owned by their members, you may find it easier to get approved for a new credit card. And if you are denied, it may be easier to talk with a customer service representative.

Lower Interest Rates

While this isn’t necessarily true across the board, many credit unions offer lower interest rates on debt products like loans and credit cards. Having a lower interest rate can help you build your credit score by making it easier to stay on top of paying down debt.

Recommended: How to Avoid Interest On a Credit Card

Fewer Fees

Along with lower interest rates, it ‘s common for credit unions to charge fewer fees than traditional banks or other lenders. Since credit unions are not-for-profit, they don’t need to charge some of the fees that banks and other financial institutions do. Paying fewer fees can help you keep more of your money in your pocket to pay down debt and save for the future.

Automatic Payments Option

Many credit unions allow you to set up automatic payments on your credit union credit card account. Additionally, most credit unions offer different checking and savings account options, so you can easily pay your credit card from your checking account. This setup helps avoid missing payments, which can help to build your credit score, given one of the best tips for building credit is to pay your debt obligations in full and on time, each and every month.

Recommended: When Are Credit Card Payments Due?

Are Credit Unions Safe?

Just like money in banks is insured by the Federal Deposit Insurance Corporation (FDIC), the funds you keep in credit union accounts are insured by the National Credit Union Administration (NCUA). The NCUA is an organization of the federal government that insures up to $250,000 per account that you have at a federally insured credit union.

Still, you’ll also want to take simple steps to keep your credit union account safe online, such as verifying transactions and choosing strong passwords.

Is It Worth it to Join a Credit Union?

Joining a credit union can be a wise financial move, especially if you find one that is a good fit for you and that offers the products and services you need. Many people enjoy being a partial owner of a credit union rather than just being one more customer at a for-profit bank, as credit unions tend to be more community-oriented. And the good news is that switching banks is usually not that difficult.

Alternative Ways to Build Your Credit Score

Joining a credit union won’t help build your credit score on its own, but it can be a good first step toward building your credit. Here are a few other ways that you can build your credit score:

•   Use a credit card cosigner to increase your approval odds.

•   Apply for a secured credit card, which requires making a deposit.

•   Get a traditional credit card, like the SoFi credit card.

•   Review your credit report regularly for any inaccurate information.

•   When you buy your next vehicle, use an auto loan and then responsibly make payments.

•   Take out and responsibly use a personal loan.

•   Become an authorized user on the account of someone with strong credit.

Recommended: Tips for Using a Credit Card Responsibly

The Takeaway

Credit unions are nonprofit financial institutions that offer many of the same financial products as banks and other online lenders. But unlike banks, credit unions are owned by their members, which can help keep interest rates high and fees low. Joining a credit union won’t help you build your credit by itself, but taking advantage of credit union perks and financial products may help you build your credit.

Another way to build credit can be by applying for a credit card like the SoFi credit card. If you’re approved for a cash-back rewards credit card with SoFi, you can earn unlimited cash-back rewards. You can use those rewards as a statement credit, invest them in fractional shares, or put them toward other financial goals you might have, like paying down eligible SoFi debt.

FAQ

Will joining a credit union improve my credit score?

Joining a credit union in and of itself will not improve your credit score, since the fact that you are a member of a credit union does not usually appear on your credit report. However, credit unions offer many financial products, including loans and credit cards. Making responsible use of some of these credit union offerings can help you build your credit.

What are the disadvantages of joining a credit union?

Because credit unions are owned by their members, you generally can’t simply open up an account. Instead, you may have to belong to a specific group or pay a small membership fee to get an account. Many credit unions are also smaller than most banks, so they may not offer all of the financial products you’d find at a larger bank.

Will credit union credit card payments show up on my credit report?

Most credit card payments — including credit union credit card payments — are reported to the major credit bureaus. Paying your statement balance on time and keeping your balance low can be great ways to help build your credit.

Photo credit: iStock/sshepard


1See Rewards Details at SoFi.com/card/rewards.

Members earn 2 rewards points for every dollar spent on purchases. No rewards points will be earned with respect to reversed transactions, returned purchases, or other similar transactions. When you elect to redeem rewards points toward active SoFi accounts, including but not limited to, your SoFi Checking or Savings account, SoFi Money® account, SoFi Active Invest account, SoFi Credit Card account, or SoFi Personal, Private Student, Student Loan Refinance, or toward SoFi Travel purchases, your rewards points will redeem at a rate of 1 cent per every point. For more details, please visit the Rewards page. Brokerage and Active investing products offered through SoFi Securities LLC, Member FINRA/SIPC. SoFi Securities LLC is an affiliate of SoFi Bank, N.A.

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

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


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Feb
01
2023
Do Store Credit Cards Help Build Credit?

Do Store Credit Cards Help Build Credit?

By | Credit, credit card | Comments Off on Do Store Credit Cards Help Build Credit?

Store credit cards can help you get started with building credit as long as you use them responsibly and the activity is reported to the major credit bureaus. If you’re not sure if you’re ready for a traditional credit card, you might consider a retail store credit card as an alternative.

Retail credit cards, also known as store credit cards, are credit cards issued by specific retailers. Some store credit cards are good only at the issuing store (or their partners). Others are co-branded by a network like Visa or Mastercard and accepted anywhere those networks are.

What Is a Store Credit Card?

A store credit card is a credit card that is issued by a specific retailer, and usually has perks and benefits associated with that specific store or chain. This category of credit card generally works much like other credit cards, which means they can be useful in building credit as long as they’re used responsibly. However, store credit cards tend to have higher interest rates and easier approval requirements compared to traditional credit cards.

Recommended: How to Avoid Interest On a Credit Card

Types of Store Credit Cards

Similarly to prepaid credit cards, there are two main types of store credit cards:

•   Close-loop store credit cards: The first type of store credit card is a closed-loop store credit card. These can typically only be used at the retailer that issues the card.

•   Open-loop store credit cards: Open-loop store credit cards are another type of store credit card. They’re typically co-branded alongside a credit card payment network like Mastercard, American Express, or Visa, and are good anywhere those networks are accepted.

Is Getting a Store Credit Card a Good Idea?

Getting a store credit card can be a good option if you are working on establishing credit. If your store credit card reports usage to the major credit bureaus, then responsibly using a store credit card can be helpful. However, this can work against you, too, if you open a store credit card and don’t follow good credit card habits.

Factors to Consider When Getting a Store Credit Card

The biggest factor you’ll want to consider when getting a store credit card is whether it’s a closed-loop or open-loop card. That will let you know whether you can only use it at the issuing store or whether it’s good at other places.

You’ll also want to understand whether your store card is a charge card or credit card (with a charge card, you won’t have the option to carry a balance). Also find out whether the issuer reports usage to the major credit bureaus, especially if you intend to use the card to build your credit from scratch.

Recommended: What is a Charge Card?

How a Store Credit Card Can Help Build Credit

Store credit cards can help build your credit, as long as the card reports usage information to the major credit bureaus. Responsibly using a store credit card can show a history of on-time payments and add an additional line of credit to your credit mix. Additionally, it has the potential to positively affect your overall credit utilization — the amount of your total available credit limit you’re using — by bolstering your overall credit limit.

Recommended: What is the Average Credit Card Limit?

Can a Store Credit Card Set Back Your Credit Progress?

It’s important to use credit cards wisely, and that includes store credit cards. A store credit card certainly can set back your credit progress if you don’t use it responsibly. If you have late or missed payments or carry a balance that’s near your total credit limit, it may have a negative impact on your credit score.

Recommended: When Are Credit Card Payments Due?

Do Store Credit Cards Applications Require Hard Inquiries?

Yes, in most cases a store credit card application will generate a hard inquiry on your credit report. A hard credit inquiry shows up on your credit report when a potential lender asks for your complete credit report. This inquiry may lower your credit score by a few points for a short period of time, so you’ll want to limit how many credit accounts you apply for.

Benefits of Store Credit Cards

One benefit of a store credit card is that it may be easier to get approved for, especially if it’s a closed-loop store card. Retailers know that cardholders are likely to shop more frequently at their store. As such, they may be more inclined to approve you for a card, even if you don’t have an extensive history of good or excellent credit.

Another potential benefit is the store-specific perks, rewards, or benefits that a store may offer to its cardholders.

Drawbacks of Store Credit Cards

There are downsides to store credit cards to consider as well. For one, they may come with higher interest rates and lower credit limits. It can be easier to drive up your credit utilization ratio, a factor that affects your credit score, with a lower credit limit. Further, if your store credit card is a closed-loop card, you’ll be limited to using it at that specific retailer.

To recap, here are some of the pros and cons of applying for and using a store credit card:

Pros of Store Credit Cards

 Cons of Store Credit Cards
Easier to get approved for than a traditional credit card May come with higher interest rates
Can offer solid store-specific perks, benefits, and rewards May have lower credit limits, which can make it easier to drive up credit utilization
Can help you build credit when used responsibly Closed-loop store cards can only be used at that specific store or chain

Recommended: Tips for Using a Credit Card Responsibly

Alternative Ways to Build Credit

If applying for and using a store credit card doesn’t fit into your financial plans, here are a few other ways to build credit that you might consider:

•   Apply for a traditional credit card, like the SoFi credit card

•   Consider getting a secured credit card, which requires a deposit

•   Take out and responsibly use a personal loan

•   Use an auto loan to purchase your next vehicle

•   Get a supplementary credit card, also known as an authorized user credit card

•   Regularly review your credit report for any inaccurate information

•   Use a credit card cosigner for your application

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

The Takeaway

A store credit card can help you build credit, as long as it reports usage to the major credit bureaus. In fact, opening a store credit card and using it wisely can be a smart step toward establishing credit since, in many cases, they’re easier to get approved for than a traditional credit card.


FAQ

Do store credit cards affect your credit?

Yes, store credit cards can affect your credit if they report usage and history to the major credit bureaus. If you regularly pay off your bill each month and keep your statement balance low, it should help build a positive credit history.

Do store credit cards require hard credit checks?

Yes, most store credit cards require a hard credit check when you apply. A hard credit check (or hard pull) happens any time a potential lender asks for your full credit history to help decide whether they will extend you credit. Because each hard pull can temporarily lower your credit score by a few points, you’ll want to limit how many new credit accounts you apply for in a short period of time.

Will closing store credit cards hurt my credit score?

There are some cases where closing a credit card — either a store credit card or a traditional credit card — can hurt your credit score. The main reason why closing a credit card can impact your credit score is by possibly driving up your credit utilization percentage, as your overall credit limit will decrease. Make sure that you understand the possible ramifications before you close a credit card account.

Do retail credit cards build credit?

Retail credit cards can help you build credit as long as they report to the major credit bureaus. Just make sure to use your store or retail credit cards wisely so that it will have a positive impact on your credit score.

Photo credit: iStock/Nastasic


1See Rewards Details at SoFi.com/card/rewards.

Members earn 2 rewards points for every dollar spent on purchases. No rewards points will be earned with respect to reversed transactions, returned purchases, or other similar transactions. When you elect to redeem rewards points toward active SoFi accounts, including but not limited to, your SoFi Checking or Savings account, SoFi Money® account, SoFi Active Invest account, SoFi Credit Card account, or SoFi Personal, Private Student, Student Loan Refinance, or toward SoFi Travel purchases, your rewards points will redeem at a rate of 1 cent per every point. For more details, please visit the Rewards page. Brokerage and Active investing products offered through SoFi Securities LLC, Member FINRA/SIPC. SoFi Securities LLC is an affiliate of SoFi Bank, N.A.

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.

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Jan
31
2023
Promotional Certificate of Deposit (CD): How It Works

Understanding Promotional Certificate of Deposit (CD) Rates

By | Growing Wealth, Investing, money | Comments Off on Understanding Promotional Certificate of Deposit (CD) Rates

There’s a good chance that you’re familiar with certificates of deposit, or CDs, a financial product that typically pays a fixed interest rate if you keep your funds on deposit for a specific period of time. Sometimes, though, you may encounter an offer for a promotional CD, or bonus CD. This is a type of savings account offered by a bank or credit union for a short time, usually with a higher interest rate, to entice new deposits.

As with standard certificates of deposit, interest is earned on the funds that the account holder agrees to invest. This interest accrues until the CD matures, or reaches its maturity date, which is usually in several months or a few years. Because CDs are insured up to $250,000, they can offer a secure way to grow one’s money.

Promotional CDs can sweeten the deal by offering a higher-than-normal interest rate. That said, they may also require a higher initial deposit or a longer term in order to snag that loftier return.

Is a promotional or bonus CD right for you? Read on to learn:

•   What is a promotional certificate of deposit?

•   What are the pros and cons of a promotional CD?

•   When do promotional CDs make sense?

•   Are bonus CDs worth it?

What Is a Promotional CD?

A promotional CD is a timed deposit account, similar to a regular CD, but offered with more advantageous terms, such a higher rate. However, there’s usually a requirement or condition to nab that rate, such as making a larger deposit, keeping the funds on deposit longer, or already being a client of the bank.

Banks and credit unions offer these accounts to attract new investors and build capital, which they can then invest at a higher rate elsewhere. Just like regular CDs, promotional CDs usually earn interest on the deposited amount at a set rate until maturity. Most CD accounts are insured by the FDIC or NCUA (Federal Deposit Insurance Corporation or the National Credit Union Administration), depending on whether the money is on deposit at a bank or credit union.

Because there are a wide variety of CDs — including jumbo CDs and brokered CDs, and more — it’s wise to explore the exact terms of the CD you’re interested in, including interest rates, fees, and other stipulations.

How Does a Promotional CD Rate Work?

As noted above, CD promotional rates can be used to attract new investors and to build capital that they can then invest elsewhere at a higher interest rate. Promotional CDs will probably have better rates than a regular savings or CD account, but they may also require a higher initial deposit (perhaps closer to that of a jumbo CD) or longer term.

Like any CD these are low-risk investments, so generally the returns will be lower than other investments, like stocks. While bonds are also generally lower-risk vehicles, and bonds can seem similar to CDs in that they pay a fixed rate, the typical rate on a CD is often lower than a bond.

At maturity, promotional CDs are often rolled over into another CD that pays a lower interest rate, or they can be cashed out. Some banks might offer a higher rollover rate to retain the investment. The financial institution will generally charge a fee if an account holder withdraws the funds before the maturity date (there are no-penalty CDs, but they tend to pay a lower interest rate).

Recommended: What Is a Variable Rate CD?

Example of a Promotional CD Rate

Let’s say an investor wants to set up a certificate of deposit investment plan. They invest $5,000 in a CD for five years. A bank that offers a five-year promotional CD with a competitive 4% annual percentage yield (APY) would provide earnings of around $1,083. A regular savings account with a lower rate of 3.5% would earn about $938 with the same $5,000 deposit, or almost $150 less.

When to Consider Opening a Promotional CD?

A promotional CD makes sense when a bank or credit union is offering a better interest rate than a regular CD or savings account, you have the required amount to invest, and you don’t need the funds for the length of the CD term. While it’s impossible to say for sure which investments are the safest, if you’re worried about the higher risk associated with investing in assets like stocks or bonds, a promotional CD is a reasonably safe investment.

For example, CDs are sometimes used as college savings accounts or when parents are thinking about how to create an investment plan for a child.

How to Get a Promotional (Bonus) Rate CD

If you’re in the market for a promotional or bonus rate CD, follow these steps:

•   Do a bit of research to see what may be offered. Often, the best or only deal is what your bank may offer you.

•   Read the fine print. Make sure you qualify for the account and fully understand the term, the rate, and penalties for early withdrawal, among other features.

•   Apply for the CD when you are ready to invest, and set up funding to transfer money into your new CD account.

When a Promotional CD Does Not Make Sense

Now that you know how certificate of deposit promotions work, consider whether it’s really the right move for you. A promotional CD does not make sense if you may need the funds before the maturity date of the CD. The bank or credit union will likely charge a fee if you withdraw your funds early. In some cases, you might want to consider a no-penalty certificate of deposit.

Also, CDs do not keep up with inflation, so once taxes are paid on the interest earned, there may not be much of a return on the investment. If you want to explore other ways to earn interest, you might consider high-yield savings or fixed-income investment.

The Pros of Promotional CD Rates

The main advantages of promotional CDs are that they are safe and predictable.

•   Promotional CDs, like regular CDs, are likely a safe investment with a guaranteed rate of return.

•   Funds are typically insured by the FDIC up to $250,000.

•   The interest rate is usually fixed for the life of the CD, which helps to predict income.

The Cons of Promotional CD Rates

The main disadvantages of promotional CDs are that they do not offer high returns because they are low-risk.

•   The promotional rate is generally only offered for shorter maturity terms, and the rollover option is often to a standard CD at a lower rate (not the promotional rate).

•   Promotional CDs often require a larger initial deposit.

•   Promotional CDs may demand a longer term.

•   These financial products may only be available to current clients of a specific financial institution.

Promotional CD Rates vs Regular CD Rates

Promotional CD rates pay depositors a premium for parking their funds into a particular financial institution. The exact APY offered will depend on the bank, the length of the term, and the amount deposited. Most promotional CDs are shorter-term: e.g. about a year or less. Rates as of January 27, 2023 might be as high as 5.5% (the higher rates are likely to be offered by an online bank vs. a traditional bank or at a credit union).

Rates ranged from about 4.25% at CapitalOne, 0.02% at Chase, and 0.03% at Bank of America for CDs of a year or two in length with a deposit of less than $10,000.

Are Promotional CD Rates Worth It?

Do your research and think seriously about financial security as you consider a certificate of deposit promotion. A couple of points to recognize:

•   When interest rates are down, investing in the stock market using an IRA or 401(k) may make more sense than a CD in terms of helping your money grow, though investing carries risk.

•   Promotional CDs are often offered by banks with low interest rates overall, and what one bank considers a competitive rate might be much lower than other banks’ standard rates. In other words, if a financial institution is offering an additional 0.05% for opening a new CD, but their base APY is very low, it’s likely not the best deal for you.

The Takeaway

For risk-averse investors who want to invest a sum of money safely and know exactly what return they can expect, a promotional CD can be a good option. It’s a way to take advantage of temporary favorable interest rates offered by a bank or credit union that can yield a higher return than a simple savings account.

That said, there are also some savings accounts that offer higher rates and could be the right place to stash your cash. When you open an online bank account with SoFi, you can qualify for a competitive APY when you set up direct deposit. In addition, these innovative, all-in-one accounts offer all the convenience of spending and saving in one place with no minimum balance requirement or account fees.

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

🛈 While SoFi does not offer Certificates of Deposit (CDs), we do offer alternative savings vehicles such as high-yield savings accounts.

FAQ

Can a certificate of deposit be discounted?

CDs are not sold at a discount, unlike other short-term money market instruments. CDs pay interest on the money deposited usually on an annual basis. For CDs with a maturity of less than one year, interest is paid at maturity, and taxes are due on the earnings each year. However, for investors who don’t need to receive interest payments each year, a zero-coupon CD provides a return by being sold for their face value at maturity, which is higher than the initial investment.

What is the typical interest rate for a certificate of deposit?

A typical interest rate for a CD could range from 0.03% to 5+% for CDs with a one-to-five-year term and deposit of less than $10,000. It depends on the bank and the terms. CD rate promotions typically add to these rates.

What is the typical minimum balance for a certificate of deposit?

A typical minimum balance for a CD ranges from $500 to $5,000 or more, depending on the CD and the bank. Jumbo CDs typically require a $50,000 or higher deposit. Some banks offer CDs with no minimum balance requirement.

Photo credit: iStock/Ridofranz

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.

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

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

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Is Mining Cryptocurrency Worth It in 2021?

Is Crypto Mining Still Profitable in 2023?

By | Growing Wealth, Investing | Comments Off on Is Crypto Mining Still Profitable in 2023?

Crypto mining is still profitable, but it’s potentially not as profitable as it was in years past. That’s true for a number of reasons, including the fact that for most of 2022 and into early 2023, crypto values were down way off their peaks.

Cryptocurrencies generally still have value, but calculating miner profitability can be a bit trickier than before, given the expense of computer hardware and software, as well as the energy it takes to keep that mining equipment running.

As the oldest and largest crypto, Bitcoin uses a proof-of-work consensus mechanism, and as such it is one of the main sources of crypto mining. Before deciding whether Bitcoin mining is worth it, and crypto mining in general, it’s important to know how it works and what the pros and cons are.

Why Bitcoin Mining Exists

Mining Bitcoin isn’t just the creation of Bitcoin (BTC). It’s also the decentralized global system by which miners validate and secure all Bitcoin transactions — and earn Bitcoin themselves.

It goes back to the blockchain technology that Bitcoin and other cryptocurrencies are built on. To run these networks, miners rely on powerful computer systems — or in some cases cloud-based technology — to solve complex mathematical puzzles and validate blocks of digital transactions.

This system is known as proof-of-work (PoW). With Bitcoin and other PoW systems, every transaction gets recorded in a transparent, immutable, public ledger known as the blockchain. The miner/s who solved it get rewarded with new Bitcoin.

What Is Bitcoin Halving?

It takes about 10 minutes for miners to confirm a 1MB block of transactions and earn new Bitcoin. But remember mining is intensely competitive, especially because the reward is halved every 210,000 blocks and now stands at 6.25 BTC.

As more Bitcoins are mined and the supply of new Bitcoins drops, the amount of Bitcoins released with every new block diminishes over time. This is known as Bitcoin halving, and generally, the value of Bitcoin increases after periodic Bitcoin halving.

So, to sum it all up, mining serves the purpose of validating a crypto network, and generating rewards for network participants, sometimes called validators or miners.

How Much Does a Miner Earn?

As of January 2023, a Bitcoin miner that successfully validates a new block on Bitcoin’s blockchain will earn 6.25 BTC. That reward will be reduced, however, during the next halvening.

And remember, Bitcoin is a deflationary cryptocurrency — so fewer BTC are produced every year, until the total amount of 21 million BTC is mined. If miners are working in teams or in pools, however, that reward is split up between them, too.

Hurdles to Mining BTC

While Bitcoin mining may seem lucrative, there are some caveats. For instance, to mine crypto effectively and efficiently, specialized machines built and tuned specifically to mine cryptocurrencies are often required. It also requires space — and a great deal of energy — to house and cool these powerful machines that operate around the clock.

There’s also competition to consider: The mining market is dominated by large companies who secure large warehouse facilities to house their army of ASIC mining rigs. Some of these companies might run mining pools that smaller miners can contribute to in order to get a piece of some block rewards in exchange for a small fee.

This is all to say that today, mining Bitcoin as an individual is rarely profitable unless someone has access to extra low-cost electricity and affordable equipment.

Bitcoin Mining Advantages and Disadvantages

Here are some positive and negative aspects of mining crypto.

Advantages

•   Proven track-record. Proof-of-work (PoW) consensus algorithms, which are the basis for crypto mining, have been around for many years. During that time, the Bitcoin network hasn’t seen a significant security problem.

   Many in the industry believe this is a result of Bitcoin’s significant hash rate, which refers to the amount of computing and process power being contributed to the network through mining.

   In the past, hackers have been able to destabilize smaller PoW networks, although the same can be said for smaller proof-of-stake (PoS) networks.

•   Cryptographic security. When trusting a network with large sums of money, PoW might be the best bet. It’s difficult to attack a PoW blockchain, so much so that would-be hackers are often content to become honest miners instead.

Disadvantages

•   Energy usage. Bitcoin mining uses a lot of electricity. Critics point to this as the main flaw of PoW. It’s possible that the Bitcoin network uses as much energy as an entire small country. Although Bitcoin’s overall energy usage is decreasing and much of it now comes from sustainable sources, this is still a primary concern.

•   Barriers to entry. PoW mining becomes more difficult with time, making it harder for the average person to get involved. A major principle of a decentralized PoW network is to distribute tasks as well as profits among many users. But as mining becomes more complex and difficult, a handful of large companies — which can afford to build warehouses full of mining machines — dominate the mining sphere.

Crypto Mining Advantages

 Crypto Mining Disadvantages
Proven track record High energy usage
Cryptographic security Greater barrier to entry
Difficult to attack Gets more difficult over time

The Risks of Crypto Mining

While crypto mining can be profitable in some instances, it does have its risks and downsides. Here’s a brief rundown.

Environmental Risks:

As mentioned, crypto mining is resource-intensive. Running mining rigs eats up a lot of electricity, which, in turn, generates environmental pollution.

Security Risks:

Malware and other security risks exist in the mining sphere, too. For instance, it’s possible that bad actors could use techniques (like phishing) to access someone’s computer, and then load mining codes and programs onto it without them knowing. As such, the victim could be sharing their computing resources and electricity mining with a hacker without even realizing it.

Regulatory Risks:

Regulation has yet to make it to the crypto space, but the federal government is working on it, and anyone involved in crypto can probably expect new rules and regulations to be announced within a few years. Those new rules and regulations will likely affect miners, too, so that’s another thing to keep in mind.

Investment Risk:

Crypto mining requires some upfront investment. You’ll need to buy a “rig,” first and foremost, and stocking up on computer power isn’t always cheap. But, as with any investment, there are risks in doing so. Mining may not be as profitable in the future, meaning your investment may not earn you the types of returns you were hoping for.

Or, if new regulations make mining illegal (though there’s no indication that will happen), investing in mining equipment may have all been a sunk cost.

Bitcoin Mining Pools

Due to the high cost and rising difficulty of mining Bitcoin, most miners today use something called a mining pool, as mentioned previously. Participating in mining pools is considered by many to be the only way for smaller miners to make any profit today, and even then it can be difficult to recoup the costs of equipment and electricity.

Within a mining pool, individual miners pool their resources together with other miners, improving their chances of mining a block and earning the Bitcoin rewards. When a block gets mined, the rewards are then split up among the different miners in proportion to the amount of computing power (known as hashing power) they contributed.

Mining pool owners typically charge mining fees for maintaining and participating in the pool. There are several different pools to choose from, each with their own structure.

Further, there are also Bitcoin cloud mining opportunities out there, which effectively allow miners to use computing resources over the internet. Miners using this strategy are renting others’ equipment, which incurs more costs.

Factors to Consider When Choosing a Mining Pool

After securing the Bitcoin mining equipment and electricity required for mining, a small miner will need to find a suitable mining pool. There are a few important factors to consider:

•   Fees: Most, but not all, Bitcoin mining pools charge fees. The fees are taken from the reward payout and can be as high as 4%.

•   Pool size: The larger the pool, the more frequent the potential payout, as more hashing power equals more blocks being found. However, this also means that the payouts are smaller, since rewards are shared between more people. On the flip side, smaller pools pay out less frequently, but in larger amounts.

•   Security and reliability: Miners might want to find a mining pool that they can trust won’t steal users’ funds or get hacked. Joining established pools with long histories may help to reduce these risks.

•   Required equipment investment: You’ll need to bring some power to the pool, too. And it’s becoming increasingly expensive to mine. When Bitcoin was first created, the computer power required for Bitcoin mining was enough for the computer-processing unit (CPU) of an average laptop computer to handle. But over time, the calculations have become more complex. Today, mining can mostly only be accomplished with advanced Application Specific Integrated Circuit (ASIC) machines, created specifically for mining Bitcoin.

And yet the hardware needs of Bitcoin mining is constantly evolving, as older machines become obsolete. An ASIC that was powerful enough to be profitable six months ago might not be able to produce enough coins to match the cost of electricity needed to run that same ASIC today. When this happens, miners must acquire new, more advanced hardware.

If you plan to try Bitcoin mining on your own, here are some things to consider when purchasing equipment:

•   Equipment cost

•   Electricity cost

•   The time it will take to recoup equipment costs

•   How BTC price fluctuations might impact profitability

•   The frequency with which you will need to buy newer, more powerful machines and sell old ones

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How Long Does it Take to Mine 1 Bitcoin in 2023?

There’s no correct answer here: The amount of time it takes to mine one whole bitcoin varies, and depends largely on the amount of hashing power a miner contributes.

In general, the more hashing power, the faster a block will be solved, resulting in the miner reaping the block reward in the form of newly minted bitcoins. Mining difficulty is another important variable. The lower the difficulty, the greater the odds of finding a new block.

When prices rise, more people are generally motivated to mine crypto. Then, as the Bitcoin hash rate increases due to more miners coming online, the difficulty adjustment (which happens every two weeks) tends to increase.

When prices fall, the opposite tends to happen, as the costs of Bitcoin mining equipment and electricity rise in relation to the value of the coins being mined. As hashing power comes offline, the difficulty tends to adjust downward.

How Many Bitcoins Will Be Mined in 2023?

There are about 900 new Bitcoins being mined every day. Assuming that rate held up during the entirety of 2022, then about 328,500 Bitcoin would’ve been mined in total. That should hold true during 2023, too. Roughly speaking, the amount of Bitcoin remaining to be mined totals around 2 million.

The interesting thing to note is that more people mining Bitcoin does not lead to an increase in the number of coins being mined. The block reward is currently set at 6.25 (this will remain true until the next Bitcoin halving), and one block gets mined roughly every 10 minutes. Increased competition for blocks leads to a higher hash rate, but the number of new coins being minted remains the same.

Alternatives to Mining Bitcoin

For those who choose to undertake the cumbersome task of mining crypto, the best cryptocurrency to mine might be the one with the lowest difficulty and highest price. But it’s critical to remember that these dynamics are in a constant state of flux, so the best cryptocurrency to mine today might not be the best one to mine tomorrow.

Historically, the only time altcoin miners have made significant profits has been when they were mining lesser-known, cheaper coins in the weeks and months before a large increase in prices, or an “alt season.” This has happened twice so far — once in 2017 and again in late 2020/early 2021.

Is It Worth Mining Ethereum In 2023?

Ethereum is the crypto market’s second-largest player. But unfortunately for miners, mining is no longer possible on the Ethereum network.

That’s because the “Ethereum 2.0” upgrade has gone into effect, which changed the consensus mechanism for Ethereum from proof-of-work to proof-of-stake. As such, the network no longer utilizes mining.

Only those who hold large quantities of ETH will be able to stake their tokens and become “validators.” Validators will have a chance at winning the next block rewards, with the highest odds going to those with the greatest amount of ETH staked. You can do more research about crypto mining vs. staking to learn more.

The Takeaway

Crypto mining is still profitable in 2023, however, it’s not as profitable as it once was, given that crypto prices have fallen from their peaks, and that mining operations have become more expensive to run and maintain. That’s not to say that prospective miners won’t make a profit, but there are more things to consider than in years past.

With that in mind, mining is a complex operation that carries considerable costs and risks. Most people interested in crypto mining may find it more worthwhile to join a mining pool than to try and go it alone.

FAQ

Is Bitcon mining profitable?

Bitcoin mining can be profitable, but there are many things prospective miners need to take into consideration. Given lower crypto prices and increased costs for equipment and resources, it may not be profitable for everyone.

What is the average profit margin for mining crypto?

It’s difficult, if not impossible to say what the average profit margin for mining crypto is without knowing a miner’s costs for electricity, mining equipment, and more. Those taking part in a mining pool, too, would have different costs to consider as well.

What risks are associated with mining crypto?

Some of the main risks associated with crypto mining include environmental concerns, security risks, investment risks, and regulatory risks. These are all things that any and all miners should take into consideration.

Photo credit: iStock/Chris Tamas

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INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
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Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments. Limitations apply to trading certain crypto assets and may not be available to residents of all states.

2Terms and conditions apply. Earn a bonus (as described below) when you open a new SoFi Digital Assets LLC account and buy at least $50 worth of any cryptocurrency within 7 days. The offer only applies to new crypto accounts, is limited to one per person, and expires on December 31, 2023. Once conditions are met and the account is opened, you will receive your bonus within 7 days. SoFi reserves the right to change or terminate the offer at any time without notice.
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stock app on phone

Guide to Starting an Investment Club

By | Growing Wealth, invest, Investing | Comments Off on Guide to Starting an Investment Club

An investment club is a group of individuals who discuss the financial markets and make investments. They typically meet regularly to discuss and decide on investment strategies and opportunities. People start and join investment clubs to learn about investing and potentially achieve higher returns than they would by investing on their own.

Maybe you and your coworkers spend breaks discussing the market, or you’re constantly texting friends about financial moves. Or perhaps you want to raise capital for specific stock. Whatever the reason, you may be thinking about starting an investment club to learn more about the financial markets, socialize, and potentially make a profit. Below we lay out some of the steps to start an investment club.

What Is an Investment Club?

An investment club is a novel way for people to come together and help one another reach their shared financial investment goals by discussing them and working together to make them come to fruition. Talking through what-ifs, gathering advice, and learning from other people can be one way to broaden an investor’s knowledge base and alert them to popular investment trends, like investing in cryptocurrency or impact investing.

Typically, an investment club can take on one of two forms, depending on the interest and goals of club members. Some investment clubs pool their money, and the group invests as one unit. Other investment clubs, sometimes called self-directed investment clubs, meet to discuss strategy or invite speakers to share on various topics, but each investment club member makes stock investments independently.

For investors who decide to pool resources and invest as a group, it’s important to understand any regulations and guidelines. Depending on the structure of the investment club, it may be necessary to register with the Securities and Exchange Commission (SEC) as an investment company. Additionally, setting up the investment club as a legal partnership or limited liability company may be necessary.

How Many Members are Usually in an Investment Club?

The number of members in an investment club can vary, but they typically have between 10 and 20 members. Some clubs may have more or fewer members depending on their specific goals and the amount of capital they have to invest.

The size of the club can also be influenced by regulatory restrictions and compliance requirements, as well as the availability of potential members and the size of their financial resources.

How to Start an Investment Club: 4 Steps

The following are some of the initial steps you should take if you’re interested in starting an investment club:

Step 1: Decide On The “Why”

The first step in starting an investment club is figuring out the purpose of the club. Understanding and agreeing on the motivation behind the investment club can help like-minded members craft a mission statement and bylaws.

There are many reasons for starting an investment club. Some people want to invest with friends to pool resources and enjoy the camaraderie that comes with a mutual goal. Others want to explore specific areas, such as impact investing, or invest in alternative investments, such as startups or mineral rights. There are several reasons to start an investment club.

A frank discussion can help narrow focus and weed out members who might be happier in a club with different goals. These discussions can also be a good time to discuss the financial commitment of the investing club. Some clubs may have annual membership fees for club expenses such as speakers, meeting space, and supplies and a monthly expected contribution to earmark for investing.

Step 2: Observe Existing Investment Clubs in Action

Once you’ve decided on the “why” of your club, seeing a few investment clubs in action can be helpful. Browsing stock market forums or performing an online search may help you find clubs in your area. There also may be “model clubs” that are open for observation.

Pay attention to how these club meetings are run, including the format and structure. For example, you may notice whether clubs have guest lecturers or if they operate casually or formally. This will give you and your club members a sense of how you’d like your meetings to go.

Step 3: Kick Things Off with Informative Sessions

Before getting deep into group investing, it may be helpful to have several investment club meetings without pooling funds. These club meetings can include a speaker’s series or an open forum opportunity to discuss approaches to the market, and can be a good way to assess whether or not taking the next step and forming an investment club makes sense.

Step 4: Create a Legal Framework

Many investing clubs operate as a business entity, either as a Limited Liability Company (LLC) or Limited Liability Partnership (LLP). It can be helpful to create a legal framework for your investment club that clarifies and addresses specific financial questions, including:

•   Will returns be reinvested or distributed to members?

•   What happens if someone decides to leave the club?

•   How will investment decisions be made?

The answer to this last question may also change whether your investment club must register with the SEC. For example, if you have one club member making investing decisions, or one member providing investment advice to the rest of the club, that person may need to register as a financial advisor with the SEC. There may also be state-specific securities requirements that a club may need to comply with.

You should also ensure you clearly understand the tax implications of investments and profits.

Creating membership bylaws, even if your club is an informal group of friends and acquaintances, can help ensure everyone is on the same page and there is a clear understanding of the investment club’s finances, commitments, and purpose.

Do Investment Clubs Pay Taxes?

Investment clubs or their members have to pay taxes on any income they earn from investments. The specific tax rules that apply to an investment club will depend on how the club is organized.

If an investment club is organized as a partnership, the club itself does not pay taxes on its income. Instead, the income is passed through to the individual members, who must report their share of the club’s income on their personal tax returns. If the investment club is organized as an LLC, the club will be taxed as a corporation.

In any case, investment clubs must file an annual tax return, and members must report their share of the club’s income on their individual tax returns. They must also report any capital gains or losses from the sale of investments on their tax returns.

Pros and Cons of Starting an Investment Club

Pros

 Cons
Pooled resources increases investment capital Potential for fraud
Provides a learning opportunity Conflicts with other members
Can be a fun social activity Complex tax situation

Pros of Investment Clubs

Investment clubs have many advantages, especially when compared to an individual investing alone without outside help. The following are some of the benefits of an investment club:

•   Pooled resources: Investment clubs allow members to pool their resources together, giving them access to a larger pool of capital to invest with. This can increase the potential for higher stock market returns and diversification of investments.

•   Learning opportunity: Investment clubs provide an excellent opportunity for members to learn about different investment strategies and opportunities. Members can learn from each other’s experiences and expertise and discuss different investment options and ideas.

•   Social interaction: Investment clubs can also provide a social element, as members meet regularly and discuss investments and strategies. This can be a fun and engaging way to learn about investing.

Cons of Investment Clubs

Investment clubs also have risks, including the following drawbacks:

•   Risk of fraud: Investment clubs are generally not regulated by the SEC, and members should be aware that there is a risk of fraud or mismanagement of funds. Before investing, members must perform due diligence and research the background of the club’s organizer and members.

•   Potential for conflicts: Investment clubs can also be prone to disputes among members, particularly when making investment decisions or dividing profits if club rules are not formally adopted.

•   Complex tax situation: Investment clubs can have a complicated tax situation, and members may be responsible for reporting their share of the club’s income on their individual tax returns. This can be confusing and time-consuming, and members should consult with a tax professional to understand the tax implications of being a member of an investment club.

Investment Club Alternatives

There are several alternatives to an investment club for individuals who want to invest and learn about investing. Some of them are:

•   Individual investing: Investing on your own through a brokerage account is always an alternative to pooling resources in an investment club. Investing on your own allows you to purchase individual stocks, bonds, or mutual funds without compromising with members you disagree with.

•   Robo-advisors: Robo-advisors are digital platforms that provide automated investment advice and management. They can be a good option for individuals who want to invest on their own but want the help of technology to make investment decisions.

•   Financial Advisor: Hiring a professional investment manager or financial advisor to manage your investments.

The Takeaway

Starting an investment club has the potential to be rewarding in many ways. For instance, developing and discovering investing strategies with peers can be beneficial and enjoyable. In some cases, pooling resources to invest together can bring members closer to their individual financial goals.

There are other options for investors who don’t have the bandwidth to start up a self-directed investment club. Talking stock tips at the water cooler is one classic strategy, but another option is to join platforms that allow you to “watch” your peers’ investment moves in real-time.

For example, an online brokerage account with SoFi Invest® allows you to follow people’s investment moves. This feature hides actual dollar amounts, but allows you to view watchlists of other participants, view people’s SoFi Invest activity, and see your own investments play out on a dynamic leaderboard. This can be a way to actively participate in the market together while keeping your finances separate.

Take a step toward reaching your financial goals with SoFi Invest.

FAQ

Do investment clubs make money?

Investment clubs can make money if the investments they make are profitable. However, like any other investment, they can also lose money if the investments do not perform well. It’s important to do research and perform due diligence before investing in an investment club, as there are no guarantees of profitability.

Do investment clubs pay tax?

Investment clubs are generally required to pay taxes on their income. The exact type and amount of taxes owed will depend on the type of investment club and the income it generates. Generally, investment clubs are treated as partnerships or corporations for tax purposes and must pay taxes on their income.

How do I start an investment club for fun and profit?

To start an investment club, you’ll need to recruit a group of like-minded individuals interested in investing and pooling their resources together. You’ll also need to decide on a legal structure for the club, such as a partnership or limited liability company, and establish rules and guidelines for making investment decisions and managing the club’s finances. Additionally, you should research and consult a financial professional and attorney to ensure you follow all the legal and regulatory requirements.

SoFi Invest®

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

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