Oct
10
2024

Guide to Bank Cash Withdrawal Limits

By | Financial Topics | Comments Off on Guide to Bank Cash Withdrawal Limits

Banks typically restrict how much cash you can withdraw from your account in a single day. In part, this is a security measure designed to keep criminals from wiping out your account. It also helps protect the bank’s cash reserves. 

How much you can withdraw at one time from the bank can range anywhere from $300 to $20,000, depending on the institution and how you’re making the withdrawal (such as at an ATM versus a teller or using your debit card at the point-of-sale). 

If you need to access a large amount of cash quickly, it’s important to understand your bank’s withdrawal limits. Here’s how they break down. 

Do All Banks Have Daily Withdrawal Limits?

Most banks have withdrawal limits, but each institution sets its own rules as to how much they will allow you to take out of your bank account at any one time. 

Withdrawal limits also vary by type of transaction. For example, withdrawal limits at ATMs are generally lower than in-person withdrawal limits seeing a teller. Debit card transactions are also usually capped at a certain dollar amount per day. These ceilings are typically higher than ATM withdrawal limits but lower than teller withdrawal limits.

In some cases, you may be able to increase how much cash you can withdraw from a bank in one day. If you’re going on a vacation or business trip that requires withdrawing more daily cash than your bank’s ATM limit, for example, it can be worth asking your bank to make a temporary increase. If you have a type of job that requires large daily cash withdrawals, you might ask your bank if they would be willing to make a permanent increase. 

The willingness of a bank to increase your cash withdrawal limit typically depends on several factors, including:

•   The length of time you’ve been a customer

•   Your banking history 

•   The size of the increase you’re requesting 

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 4.30% APY on savings balances.

Up to 2-day-early paycheck.

Up to $2M of additional
FDIC insurance.


Bank Secrecy Act

In an effort to combat money laundering, tax evasion, and other financial crimes, the federal government introduced the Bank Secrecy Act in 1970 and adjusted it with the Patriot Act in 2002. The Act generally requires all financial institutions to track and report cash transactions that exceed $10,000 in one business day. 

As a result, if you withdraw (or deposit) more than that $10,000 in cash in a single day, the bank may report your transaction to the internal revenue service (IRS). This doesn’t mean you’ll get into trouble with the law. However, the transaction may be part of the government’s records.

Why Do Banks Have Withdrawal Limits?

Financial institutions maintain withdrawal limits for two main reasons. One is so they can monitor and control liquidity. Banks typically don’t keep much cash in reserve at any given time, nor do ATMs. By establishing a cash withdrawal limit, banks can limit how much cash they need to give out at any given time and avoid depleting their reserves. 

The other primary reason for withdrawal limits is to protect account holders from fraud. If a criminal were to gain access to your account details (or your debit card and PIN) and attempt to fraudulently pull money out of your checking account, they would be capped to a certain amount. Thus, withdrawal limits serve as a security feature that safeguards your money.

ATM Withdrawal Limits

Banks typically cap the amount of cash you can withdraw from ATMs in one day. These limits can range anywhere from $300 to $1,000. This is usually a cumulative daily limit. In other words, if your cash withdrawal limit is $500, you can’t hop from ATM to ATM, taking out $500 each time. Once you withdraw $500 from one ATM, you’ve hit your withdrawal limit for the day.

In addition to bank ATM limits, individual ATMs might have their own limits on cash withdrawals. If a particular ATM has a $600 withdrawal limit and your bank has a $1,000 limit, you can only get $600 from that ATM. However, you can then visit another ATM to get another $400.

Recommended: Cardless ATM Withdrawal: What It Is and How It Works 

Debit Withdrawal Limits

Even though a debit card purchase is an electronic payment (and doesn’t impact the amount of cash a bank has on hand), it does pose the same security risks as an ATM withdrawal. As a result, banks typically limit the amount you can purchase using your debit card in a single day. This limit is usually higher than the ATM withdrawal limit (but lower than in-person withdrawal limits). For example, banks commonly limit point-of-sale debit transactions to $5,000 daily.

While you may not normally come up against your debit card spending limit, it’s something to consider if you make a large purchase (such as plane tickets or a piece of furniture) and still have other debit card transactions to make on the same day. In that case, you might risk having your debit card declined.

Also keep in mind that getting cash back when you make a debit card purchase typically counts toward your point-of-sale limit, not your cash ATM limit for the day. This is one way you may be able to get around your ATM cash withdrawal limit.

Teller Withdrawal Limits

Banks and credit unions also have limits on how much cash you can withdraw from your account per day when you visit a branch in person. Since you can prove your identity when you withdraw funds in person (lessening security risks) and branches hold more cash than ATMs, teller withdrawal limits tend to be higher than ATM and debit card limits. Many banks, for example, will allow you to withdraw up to $20,000 in cash bills from a teller per day. 

Checking and Savings Withdrawal Limits

Since checking accounts are designed for everyday money management, there is no restriction on the number of withdrawals you can make per statement period. That’s not necessarily the case with savings accounts, however.

In the past, the Federal Reserve (a.k.a, “the Fed”) limited the number of withdrawals and transfers you could make from a savings account to six per month. The rule, called Regulation (or Reg) D, was designed to help ensure banks had sufficient reserves on hand and encourage people to use their savings account to save, rather than spend. 

While the Fed lifted this restriction in 2020 in response to the coronavirus pandemic, many banks and credit unions have continued to enforce the rule. If you exceed your bank’s savings account transaction limit, you will typically get hit with a fee. Doing this repeatedly, however, can lead to closure of your account. 

The Takeaway

Banks and credit unions generally limit the amount of cash you can take out of your account in one day. Rules vary by bank, but limits are typically lowest for ATM withdrawals (ranging from $300 to $1,000), somewhat higher for debit card transactions (commonly around $5,000), and highest for in-person withdrawals at a teller (often up to $20,000). Banks apply withdrawal limits to protect your money from theft and maintain their cash reserves. 

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


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

FAQ

How much cash can I withdraw from a bank?

How much cash you can withdraw from a bank in one day can range anywhere from $300 to $20,000. The cap will depend on your bank’s policies, as well as how you are withdrawing the money. Daily withdrawal limits are typically lowest at ATMs (ranging from $300 to $1,000). They tend to be somewhat higher for debit card transactions (commonly around $5,000) and highest for in-person withdrawals at a teller (which can be as high as $20,000).

How do I withdraw large amounts of cash from my bank?

To take out a large sum of cash, your best bet is to visit a branch and make the withdrawal through a teller. Often, banks will let you withdraw up to $20,000 per day in person (where they can confirm your identity). Daily withdrawal limits at ATMs tend to be much lower, generally ranging from $300 to $1,000. 

How much cash can you withdraw without reporting it to the IRS?

You can generally withdraw up to $10,000 from your account within a 24-hour period without the bank or credit union reporting the transaction to the internal revenue service (IRS). 

Photo credit: miniseries/iStock

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.
 
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

SoFi members with direct deposit activity can earn 4.30% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.30% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.30% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

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

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

Interest rates are variable and subject to change at any time. These rates are current as of 10/8/2024. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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.
 
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

SOBK0323023

Read more
Oct
10
2024

High-Yield Savings Account vs. Traditional Savings Account

By | Financial Topics | Comments Off on High-Yield Savings Account vs. Traditional Savings Account

A savings account can be an important aspect of your financial life. It typically lets you earn some interest while safely storing funds you might need for emergencies or big expenses, such as down payment on a house, a vacation, a wedding, or a new car. 

A traditional savings account at a local bank or credit union can be convenient and offer in-person help, but a high-yield savings account  — often available from online-only banks  — will often earn you a higher interest rate and lower fees. That can help your money grow faster. Read on to take a closer look at these two different kinds of savings accounts. 

Understanding High-Yield Savings Accounts

A high-yield savings account (HYSA) pays out significantly more interest than a typical savings account. While there’s no regulated savings account definition for high-yield savings accounts (also called high-interest savings accounts), these accounts usually earn a considerably higher interest rate than standard options.

How high? That depends. As of August 2024, the average interest rate for a traditional savings account was 0.46% APY, while some HYSAs pay out 3.00% APY or more in interest. That means you could be earning six times more with an HYSA than a traditional account.

Online banks and credit unions commonly offer high-yield savings accounts, though it is possible to find HYSAs at brick-and-mortar banks. It’s worth noting that these accounts usually have many of the features of traditional bank accounts, such as FDIC (Federal Deposit Insurance Corporation) insurance up to $250,000 per account holder, per account ownership category, per insured institution. If offered by a credit union, the account will likely have similar insurance via NCUA, or the National Credit Union Administration. 

Earn up to 4.30% APY with a high-yield savings account from SoFi.

No account or monthly fees. No minimum balance.

9x the national average savings account rate.

Up to $2M of additional FDIC insurance.

Sort savings into Vaults, auto save with Roundups.


What Is a Traditional Savings Account?

Traditional savings accounts are just that — the traditional savings account that has been around for decades and is typically offered at financial institutions with brick-and-mortar branches. These offer all the benefits of a savings account, including interest, insurance, and accessibility. Traditional savings accounts don’t pay as much interest as a HYSA, but they may have other advantages. They might have lower or no minimum balance requirement vs. some HYSAs, and they may be a good option for those who like going into a local branch and getting one-on-one assistance with banking matters.

You’re more likely to find a traditional savings account at a local bank or credit union, rather than online, meaning accessing your funds may be more convenient, in some instances. 

And if you have a traditional checking account, opening a traditional savings account with the same bank can be convenient.

Key Differences Between High-Yield and Traditional Savings Accounts

Here’s how these two different types of savings accounts (high-yield savings vs. traditional) compare.

Interest Rates Comparison

As the name implies, a high-yield savings account has a higher yield than a traditional savings account. That means these accounts earn more — sometimes significantly more — interest than savings accounts at traditional banks, as noted above. 

Accessibility and Convenience

Traditional banks may be more convenient if you regularly need to deposit cash, simply because it’s more likely that a traditional bank has local branches. However, there’s a good deal of flexibility here. Online banks with HYSAs often offer large networks of ATMs for withdrawals and deposits, and some brick-and-mortar banks offer high-yield savings accounts.

Traditional bank accounts may be more convenient if you already have a checking account at a specific bank. However, many online banks offering HYSAs also offer checking accounts — sometimes even high-yield checking accounts. This can make it easy to transfer funds back and forth as needed.

Fees and Minimum Balance Requirements

High-yield savings accounts come with varying fee structures. With accounts offered by online banks, you may find no fees. However, with accounts at traditional banks, you may be more likely to pay fees. Often, however, there are requirements at financial institutions to qualify for a HYSA, such as a minimum direct deposit amount or maintaining a minimum balance. 

It can be wise to shop around and see what both traditional banks and online ones offer.

Pros and Cons of High-Yield Savings Accounts

High-yield savings accounts offer several advantages, but there may be some drawbacks to consider.

Pros of HYSAs

•   High interest rate: The major draw of a high-yield savings account is the interest rate. You’ll earn significantly more money on your savings deposits, so your money can grow faster.

•   Security: High-yield savings accounts should offer the same FDIC or NCUA insurance on all your deposits that you would get with a traditional savings account.

•   Account features: Many online banks with high-yield savings accounts offer additional features that might help you save more money, like automatic savings tools with a linked checking account.

•   No fees: Depending on where you open a HYSA, you may not have to pay fees. This can be especially true with accounts held at online banks. 

Cons of HYSAs

•   Less earning potential than other types of accounts: While HYSAs offer more interest than a traditional savings account, you might be able to earn even more with a money market account, certificate of deposit, retirement account, or investment in stocks and bonds. However, those options are less liquid, and some are riskier — so you’ll have to see which works best for your financial needs and money style.

•   Less likely to have in-person banking: Many banks and credit unions offering high-yield savings accounts are online-only. If you prefer in-person banking, this might not be the right account for you.

•   Fees: As noted above, some banks don’t charge fees. However, this varies from bank to bank. Some HYSAs (often those at traditional banks) have fees to contend with, which can erode your earnings. 

Pros and Cons of Traditional Savings Accounts

Traditional savings accounts also have their share of pros and cons.

Pros of Traditional Savings Accounts

•   Convenience: If you have a traditional savings account with a local branch, it’s easy to access your money.

•   Relationship building: If you like in-person interaction when banking and being able to discuss other financial products, like a home loan, in that way, a traditional savings account may suit you well.

•   Low fees: Traditional savings accounts typically have low fees — or no fees at all. (This can, however, be true of HYSAs as well, depending on where you bank.)

Cons of Traditional Savings Accounts

•   Low earnings: Traditional savings accounts often don’t have significant interest rates. In fact, they typically don’t keep up with inflation over time, which may be true of some HYSAs, as well, depending on their interest rate.

•   Liquidity: Money in a savings account is less liquid than money in a checking account. Your bank or credit union may limit how many withdrawals you can make in a month. (This may also be true of HYSAs as well.)

•   Access: If your bank doesn’t have a nearby branch and/or doesn’t offer 24/7 online services, you may find it hard to conduct transactions when you want to.

How to Choose the Right Account for You

Ready to open a savings account but not sure which account is right for you? Here are some things to consider:

•   Interest rate: Ideally, you should pick a savings account that pays out competitive interest so your money grows faster.

•   Liquidity: Some banks let you withdraw from your savings more frequently than others. Think about how often you’ll want to move money to your checking account or withdraw from an ATM.

•   Convenience: Choose a savings account that makes it easy to manage your money. For some people, that may mean a traditional savings account at a financial institution with local branches. For others, it may mean a HYSA at an online-only bank that has all kinds of digital tools that suit your needs. 

•   Fees: Compare fees for savings accounts, and consider choosing one that doesn’t take a bite out of your earned interest.

•   Sign-up bonuses: Many banks and credit unions offer savings account bonuses for signing up and meeting certain criteria. This could be an easy way to make extra cash, if you choose the right account.

The Takeaway

There’s no right or wrong answer when trying to decide between a high-yield savings account and a traditional one. Each can deliver an important way to secure and grow your cash. Often offered by online-only banks, HYSAs can help you earn more interest, and some may be fee-free. Traditional accounts typically don’t pay as much interest, but some people may enjoy the convenience of having local branches for conducting financial transactions.

Looking for an HYSA? See what SoFi offers.

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


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

FAQ

What is the main advantage of a high-yield savings account?

The main advantage of a high-yield savings account is the higher interest rate. HYSAs earn significantly more interest than a traditional savings account, meaning you can make good money just for keeping your money safely stored in a bank.

Are high-yield savings accounts safe?

Yes, high-yield savings accounts are safe. You should expect the same level of FDIC or NCUA insurance for your deposits as you would with a traditional savings account, though you should always confirm that your bank is insured. Also look for a bank that offers 24/7 account monitoring, two-factor authentication, and real-time alerts. 

How often do interest rates change for high-yield savings accounts?

Interest rates on any type of savings account are variable and can change at any time. However, banks typically adjust rates after the Federal Reserve committee meets and changes the federal funds rate.

Photo credit: pixdeluxe/iStock

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

SoFi members with direct deposit activity can earn 4.30% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.30% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.30% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

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

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

Interest rates are variable and subject to change at any time. These rates are current as of 10/8/2024. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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

SOBNK-Q324-009

Read more
Oct
10
2024
colorful rollercoaster

What Is Risk Tolerance and How to Determine Yours

By | Growing Wealth, invest, Investing | No Comments

Risk tolerance refers to the level of risk an investor is willing or able to assume as a part of their investment strategy. Knowing yourself and your risk tolerance is an essential part of investing. Of course, it’s good to have a diversified portfolio built with your financial goals in mind.

Still, the products and strategies you use should ideally fall within guidelines that make you feel comfortable — emotionally and financially — when things get rough. Otherwise, you might resort to knee-jerk decisions, such as selling at a loss or abandoning your plan to save, which could cost you even more.

Key Points

•   Risk tolerance is the level of risk an investor is willing to assume to achieve financial goals.

•   Factors that influence risk tolerance may include risk capacity, need, and emotional risk.

•   Investors tend to fall within or between three main categories of risk tolerance: conservative, moderate, and aggressive.

•   Someone with a conservative risk tolerance may focus on preserving capital, as opposed to maximizing potential returns.

•   Diversifying investments into different risk buckets can align your risk tolerance with your personal goals and timelines.

What Is Risk Tolerance?

As noted, risk tolerance is the amount of risk an investor is willing to take to achieve their financial goals when investing — whether through online investing or any other type of investing. In a broad sense, an investor’s risk tolerance level comprises three different factors: risk capacity, need, and emotional risk.

Risk Capacity

Risk capacity is the ability to handle financial risk. While it’s similar to risk tolerance, and can certainly influence it, it’s not the same thing. Unlike your emotional attitude about risk, which might not change as long as you live, your risk capacity can vary based on your age, your personal financial goals, and your timeline for reaching those goals. To determine your risk capacity, you need to determine how much you can afford to lose without affecting your financial security.

For example, if you’re young and have plenty of time to recover from a significant market downturn, you may decide to be aggressive with your asset allocation; you may invest in riskier assets like stocks with high volatility or cryptocurrency. Your risk capacity might be larger than if you were older and close to retirement.

For an older investor nearing retirement, you might be more inclined to protect the assets that soon will become part of your retirement income. You would have a lower risk capacity.

Additionally, a person with a low risk capacity may have serious financial obligations (a mortgage, your own business, a wedding to pay for, or kids who will have college tuition). In that case, you may not be in a position to ride out a bear market with risky investments. As such, you may use less-risky investments, like bonds or dividend stocks, to balance your portfolio.

On the other hand, if you have additional assets (such as a home or inheritance) or another source of income (such as rental properties or a pension), you might be able to take on more risk because you have something else to fall back on.

Recommended: Savings Goals by Age: Smart Financial Targets by Age Group

Need

The next thing to look at is your need. When determining risk tolerance, it’s important to understand your financial and lifestyle goals and how much your investments will need to earn to get you where you want to be.

The balance in any investment strategy includes deciding an appropriate amount of risk to meet your goals. For example, if you have $100 million and expect that to support your goals comfortably, you may not feel the need to take huge risks. When looking at particular investments, it can be helpful to calculate the risk-reward ratio.

But there is rarely one correct answer. Following the example above, it may seem like a good idea to take risks with your $100 million because of opportunity costs — what might you lose out on by not choosing a particular investment.

Emotional Risk

Your feelings about the ups and downs of the market are probably the most important factor to look at in risk tolerance. This isn’t about what you can afford financially — it’s about your disposition and how you make choices between certainty and chance when it comes to your money.

Conventional wisdom may suggest “buy low, sell high,” but emotions aren’t necessarily rational. For some investors, the first time their investments take a hit, fear might make them act impulsively. They may lose sleep or be tempted to sell low and put all their remaining cash in a savings account or certificate of deposit (CD).

On the flip side, when the market is doing well, investors may get greedy and decide to buy high or move their less-risky investments to something much more aggressive. Whether it’s FOMO trading, fear, greed, or something else, emotions can cause any investor to make serious mistakes that can blow up their plan and forestall or destroy their objectives. A volatile market is a risk for investors, but so is abandoning a plan that aligns with your goals.

And here’s the hard part: it’s difficult to know how you’ll feel about a change in the market — especially a loss — until it happens.

The Levels of Risk Tolerance

Generally, it’s possible to silo investors’ risk tolerances into a few key categories: aggressive, moderate, and conservative. But those terms are subjective, and depending on the institution they can be broadened to include other levels of risk tolerance (for example, a moderate-aggressive level). But because risk tolerance is subjective, the percentages of different assets is hypothetical, and ultimately an investor’s portfolio allocation would be determined by the individual investor themselves.

Again: the hypothetical allocation or investment mix, as it relates to any individual investor’s risk tolerance or risk profile, is not set in stone. You can read more about conservative, moderate, and aggressive risk tolerances below, but first, to help you get an idea of what the investment mix or allocation might look like for a broader range of risk tolerance profiles, here’s a hypothetical rundown of how an investor from each category might allocate their portfolio:

Risk Tolerance Level and Hypothetical Investment Mix
Bonds, Cash, Cash Equivalents

 Stocks
Conservative 70% 30%
Moderately Conservative 55% 45%
Moderate 40% 60%
Moderately Aggressive 27% 73%
Aggressive 13% 87%

And, as promised, here’s a bit more about what the three main risk tolerance categories could entail for investors:

Conservative Risk Tolerance

A person with conservative risk tolerance is usually willing to accept a relatively small amount of risk, but they truly focus on preserving capital. Overall, the goal is to minimize risk and principal loss, with the person agreeable to receiving lower returns in exchange.

Moderate Risk Tolerance

An investor with a moderate risk tolerance balances the potential risk of investments with potential reward, wanting to reduce the former as much as possible while enhancing the latter. This investor is often comfortable with short-term principal losses if the long-term results are promising.

Aggressive Risk Tolerance

People with aggressive risk tolerance tend to focus on maximizing returns, believing that getting the largest long-term return is more important than limiting short-term market fluctuations. If you follow this philosophy, you will likely see periods of significant investment success that are, at some point, followed by substantial losses. In other words, you’re likely to ride the full rollercoaster of market volatility.

How to Determine Your Own Risk Tolerance

Risk Tolerance Quiz

Take this 9 question quiz to see what your risk tolerance is.

⏲️ Takes 1 minute 30 seconds

There are steps you can take and questions to ask yourself to determine your risk tolerance for investing. Once you know your risk preference, you should be able to open a retirement account with more confidence. Both low risk tolerance and high risk tolerance investors may want to walk through these steps to ensure they know what investment style is right. Matching your specific risk tolerance to your personality traits can help you stick to your strategy over the long haul.

Consider the following questions, especially as they relate to your post-retirement life – or, what your life might look like once you reach your financial goals (which, for many people, is retirement!).

1.    What will your income be? If you expect your salary to ratchet higher over the coming years, then you may want to have a higher investment risk level, as time in the market can help you recover from any losses. If you are in your peak-earning years and will retire soon, then toning down your risk could be a prudent move, since you don’t want to risk your savings this close to retirement.

2.    What will your expenses look like? If you anticipate higher expenses in retirement, that might warrant a lower risk level since a sharp drop in your assets could result in financial hardship. If your expenses will likely be low (and your savings rate is high), then perhaps you can afford to take on more retirement investing risk.

3.    Do you get nervous about the stock market? Those who cannot rest easy when stocks are volatile are likely in a lower-risk, likely lower-return group. But if you don’t pay much attention to the swings of the market, you might be just fine owning higher-risk, (potentially) higher-return stocks.

4.    When do you want to retire? Your time horizon is a major retirement investing factor. The more time you have to be in the market, the more you should consider owning an aggressive portfolio. Those in retirement and who draw income from a portfolio are likely in the low risk-tolerance bucket, since their time horizon is shorter.

The Takeaway

Risk tolerance refers to an investor’s comfort with varying levels of investment risk. Each investor may have a unique level of risk tolerance, though generally, the levels are broken down into conservative, moderate, and aggressive. The fact is, all investments come with some degree of risk — some greater than others. No matter your risk tolerance, it can be helpful to be clear about your investment goals and understand the degree of risk tolerance required to help meet those goals.

Investors may diversify their investments into buckets — some less-risky assets, some intermediate-term assets, and some for long-term growth — based on their personal goals and timelines.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

For a limited time, opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.

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.

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.

Claw Promotion: Customer must fund their Active Invest account with at least $25 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.

SOIN-Q324-048

Read more
Oct
10
2024
Are You Allowed to Have Two Checking Accounts With the Same Bank?

Can You Have Multiple Checking Accounts With the Same Bank?

By | Budgeting & Goals, Financial Independence, money | Comments Off on Can You Have Multiple Checking Accounts With the Same Bank?

Most people begin their banking journeys with one checking and one savings account. But, as financial lives evolve and get more complex, having more than one checking account can make sense. It may help you if, say, you have a full-time job but also have a side gig and want to keep the earnings separate.

Read on to learn more about when you can have two (or more) checking accounts at the same bank, as well as the pros and cons of having more than one checking account.

Key Points

•   It is possible to have multiple checking accounts with the same bank, each with its own account number.

•   Multiple accounts can help manage finances by dedicating each to specific expenses or savings goals.

•   Separate accounts can prevent overdrawing, especially when automated payments are involved.

•   Having multiple accounts can also facilitate easier bookkeeping for side hustles or shared expenses with others.

•   Managing multiple accounts requires careful organization to avoid confusion and potential overdraft fees.

Can I Have Two Checking Accounts at the Same Bank?

You might be wondering if you can have two checking accounts with the same bank. Sometimes, this kind of arrangement can suit a person’s specific needs (more on that in a minute). The good news is, yes, it is possible to have more than one checking account. In fact, SoFi’s April 2024 Banking Survey, which looked at banking usage across 500 adults in the U.S., found that 51% of respondents had two or more checking or savings accounts.

•   While each bank and credit union will have their own rules about how many checking accounts someone can have with them, generally people are allowed to have more than one checking or savings account (Currently, SoFi members can have one Checking and Savings account. That means you can have an individual account or a joint account, but not both at this time). They will be separate entities with separate account numbers, but they will both belong to you.

•   If someone chooses to open multiple checking accounts at multiple different financial institutions then they shouldn’t run into any problems. There aren’t any restrictions on how many different bank accounts someone can have.


💡 Quick Tip: Don’t think too hard about your money. Automate your budgeting, saving, and spending with SoFi’s seamless and secure online banking features.

Reasons for Opening Multiple Checking Accounts

So, what are the reasons you might want to have multiple checking accounts? Having more than one checking account can give you more control over how you manage your finances. It can allow you to dedicate specific checking accounts for certain purposes. For example:

•   Separate accounts can make automated bill paying easier. Forty percent of people frequently use automatic bill paying via online banking, SoFi’s survey found. But problems can arise. For instance, say that you want to automate your mortgage payment each month. But sometimes your mortgage and credit card payments hit on the same day, leaving you at risk of overdrawing your account. Separate accounts are one way to manage this situation.

If your mortgage payment is $2,000 a month, you might want to open a second checking account and deposit exactly $2,000 a month into it. That way, when it’s time for that automatic debit to do its job, you know it’s covered. If you have another checking account for general spending and that credit-card payment, you can stress less about accidentally falling short when that mortgage payment is withdrawn.

•   Perhaps you have a side hustle — maybe you sell an item you make or sometimes drive a rideshare. You might want to keep payments you receive separate in a second checking account for easier bookkeeping.

•   You might also use a secondary checking account to help save for a specific, shared goal with another person. Perhaps you and your significant other are saving to rent a beach house together next summer. Or maybe you have a roommate and you both contribute to expenses equally each month. It can help to have a separate joint checking account in these situations.

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 4.30% APY on savings balances.

Up to 2-day-early paycheck.

Up to $2M of additional
FDIC insurance.


Pros and Cons of Having Multiple Checking Accounts

There are both advantages and disadvantages to consider before opening multiple checking accounts. As you decide how many bank accounts to have, keep these points in mind.

Pros

•   It can be easier to manage automatic deposits.

•   You can set aside money for different types of purchases or goals.

•   You can create a joint checking account with another person for specific needs.

•   You can have more control and organization over finances.

Cons

•   If not organized and managed properly, it’s easy to get confused about how much money is in each checking account and what it’s supposed to be used for.

•   This confusion can lead to overdrafting, which can result in fees.

•   If each checking account comes with monthly maintenance fees, those fees can add up. You might even want to find a new bank in that case. Of the 55% of people in SoFi’s survey who say they’ve switched banks, 29% did so because they wanted lower fees.

Recommended: How to Avoid ATM Fees

How to Manage Multiple Checking Accounts

One of the disadvantages of having multiple checking accounts is that they can be hard to manage if the account holder (or multiple account holders) don’t have a plan. Here are some tips:

•   It’s wise to have a clear system for allocating money into each checking account, withdrawing money, and avoiding overdraft fees.

•   Monitoring these checking accounts weekly can be a good idea to make sure everything is working as intended. In SoFi’s survey, 32% of people say they check their account balance a few times a week, and 38% check it at least once a day.

•   You may also want to schedule automatic transfers in and out, to make sure recurring payments (like rent or a mortgage) are happening when funds are available.

Recommended: Guide to Kakeibo: The Japanese Budgeting Method

The Takeaway

Everyone has options for how they choose to organize their finances, and maintaining multiple checking accounts works well for some people. Multiple checking accounts may help you manage your financial life, but it’s necessary to have a plan in place to avoid overdrafting or paying too many account maintenance fees. With a little forethought and smart scheduling, you can enjoy the rewards of having multiple checking accounts without running into any issues.

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

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

FAQ

Is it bad to have two checking accounts?

If managed correctly, it’s not necessarily a bad thing to have two checking accounts. For some people, it may be a helpful financial tool. However, people with multiple accounts may risk incurring more bank fees and have to stay organized.

How many bank accounts can a person have?

There is no rule in place limiting how many different bank accounts a consumer can open at banks or credit unions. Consumers can open as many bank accounts as they want.

Can I combine two bank accounts?

Yes, you have the option to combine two bank accounts. If they are at the same bank, ask customer service to help. If they are at different banks, you can research which financial institution offers the best benefits and lowest fees before choosing where to combine accounts. Linking bank accounts is also an option.

Photo credit: iStock/Petar Chernaev

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

SoFi members with direct deposit activity can earn 4.30% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.30% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.30% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

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

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

Interest rates are variable and subject to change at any time. These rates are current as of 10/8/2024. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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

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

SOBK0124014

Read more
Oct
10
2024
7 Places to Put Your Cash

7 Places to Put Your Cash

By | Budgeting & Goals, money | Comments Off on 7 Places to Put Your Cash

If you’ve racked up a nice sum of cash or recently came into a windfall (such as a work bonus or tax refund), you may wonder where to put that money. Should you just keep it in checking? Open a high-yield savings account? Invest it all in the stock market?

The answer will depend on how soon you think you’ll need the money and how much risk you’re willing to take. Here’s a look at seven places you might consider storing your extra cash.

Key Points

•   Checking accounts are designed for spending, and offer easy access to funds through checks, ATMs, debit cards, and unlimited withdrawals.

•   Savings accounts are designed for saving toward shorter-term goals; they offer higher interest rates than checking, but typically limit accessibility as well.

•   Money market accounts combine features of checking and savings accounts, offering higher interest rates as well as checks and debit cards, but typically limit the number of transactions permitted.

•   High-yield savings accounts offer higher interest rates than standard savings accounts, often with low or no fees.

•   Stocks, bonds, ETFs, and mutual funds are higher-risk options often suited for long-term investments — they may provide higher returns over time than other accounts.

Low-Risk Places to Put Cash

What follows are four types of bank accounts that provide safety, convenience, and (in some cases) a competitive interest rate.

Checking Account

If you want easy and regular access to your cash, you might consider keeping it in a checking account at a bank or credit union. These accounts keep your money safe, since they are typically federally insured up to $250,000 per depositor, per institution. They’re also highly liquid — they provide check-writing privileges, ATM access, and debit cards, and there’s no limit on how many withdrawals you can make per month. These accounts are popular: According to SoFi’s April 2024 Banking Survey of 500 U.S. adults, 88% of people with a bank account have a checking account.

Since checking accounts are designed for spending (not saving), however, they generally pay little to no interest. As a result, these accounts aren’t ideal for storing extra money you plan to use later — say a few months or years from now. Some checking accounts also charge monthly fees.

Savings Account

A savings account is an interest-bearing bank account that is designed for saving (and growing) your money rather than spending it. You can open a savings account at the same bank or credit union as your checking account, or explore many of the online-only banks now available. Seventy-one percent of the people with a bank account in SoFi’s survey have a savings account.

Interest on a savings account is expressed as an annual percentage yield (APY). This is the rate you can earn on an account over a year and it includes compound interest (which is the interest you earn on interest added to your account throughout the year).

Like a checking account, the funds in a savings account are liquid. However, they are generally less accessible than the money in a checking account. You can’t write checks or use a debit card to draw money from your savings account. And, often, you are limited to six withdrawals per month. While the federal rule that limited savings account withdrawals to six per month was lifted in April 2020, many institutions still enforce this limit for electronic and online transactions and will charge you a fee if you exceed the cap.

A traditional savings account may provide a little more interest than a checking account. However, rates are generally low.

Money Market Account

A money market account is a type of savings account that comes with some of the features of a checking account, such as check-writing privileges and debit cards. You can find money market accounts at credit unions and traditional and online banks.

These hybrid accounts typically pay a higher APY than you can get with a checking account or traditional savings account. However, they often come with higher initial deposit requirements, along with higher ongoing balance requirements to avoid fees. Like other savings accounts, your money is typically insured and you may be limited to six withdrawals per month.

High-Yield Savings Account

High-yield savings accounts, typically offered by credit unions and online banks, are accounts that typically pay a substantially higher APY than the national average of traditional savings accounts. They generally also have low or no fees.

Other than that, these accounts function like regular savings accounts. They are typically federally insured up to $250,000 per depositor, per institution, should the bank or credit union fail. They also allow you to make withdrawals and transfers as needed, though your bank may limit you to six withdrawals per month.

While 59% of people in SoFi’s survey know about high-yield savings accounts, only 23% have one.

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 4.30% APY on savings balances.

Up to 2-day-early paycheck.

Up to $2M of additional
FDIC insurance.


Higher-Risk Places to Put Cash

First, make sure you have a solid emergency fund — 45% of the SoFi survey respondents said they have less than $500 in emergency savings, which is far below the recommended three to six months worth of savings. Once you have enough emergency savings and you’ve paid down any high-interest debt and are contributing to your 401(k) at work (at least up to any employer match), you may want to consider longer-term, higher-risk investment options with your extra cash.

Stocks

Stocks are a type of security that gives you a share of ownership in a specific company. When you buy stock, you have the potential to grow your money in two different ways. One is through appreciation of the stock’s price (or value). In addition, you may be able to earn dividends if the company distributes a portion of its earnings to stockholders.

While stocks offer a great potential for growth, they also come with significant risk. Stock prices can drop significantly in a short time, so it’s possible to lose money by investing in stocks.

Bonds

Bonds are generally considered a lower-risk investment than stocks. With bonds, the company (or government agency or organization) issuing the bond acts as a borrower and you act as a lender, providing the issuer with money to fund projects or expansion efforts. In exchange, the issuer promises to pay you a rate of interest on top of the bond’s principal (your initial investment).

There are several kinds of bonds:

•   Corporate. These are issued by private and public companies.

•   Municipal. These are issued by states, cities, and counties.

•   Treasury. These are issued by the U.S. Department of the Treasury on behalf of the federal government.

When you invest in bonds, you generally get a predictable stream of income through interest payments. If you hold onto the bond until it matures, you also get back the entire principal, so there’s minimal risk involved. However, typical returns for bonds tend to be much lower than typical returns for stocks. Many investors will use bonds to balance out higher-risk investment options, such as individual stocks.

Exchange-Traded Funds and Mutual Funds

Exchange-traded funds (ETFs) and mutual funds offer a pool of securities, such as stocks and bonds, in one investment. You can pick and choose a few mutual funds and/or EFTs to create your own portfolio, or you can choose to go with a target date fund.

Target date funds offer an all-in-one solution by investing in a mix of stocks, bonds, and other investments that suit your goals and risk tolerance. Typically, these funds automatically become more conservative as the fund approaches its target date (such as your retirement age) and beyond. Keep in mind, however, that the principal you invest in an EFT or mutual fund is not guaranteed.

The Takeaway

Where to put a stash of cash? A lot depends on how soon you’ll need the money and your tolerance for risk.

If you plan to use the money right away, you may want to go with a checking account. If you’re saving for a goal that is a few months or years away, you might consider putting the money in a high-yield savings account or a money market account. For longer-term savings goals (at least five years off), investing in the market could make sense.

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

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

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

SoFi members with direct deposit activity can earn 4.30% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.30% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.30% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

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

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

Interest rates are variable and subject to change at any time. These rates are current as of 10/8/2024. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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

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

SOBK0523057U

Read more

CATEGORIES

  • All
  • No categories
Close modal

See what SoFi can do for you and your finances.

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

Student Loan
Refinancing

Personal
Loans

Online
Investments

Other

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

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

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