Aug
08
2024
Checking Account vs Debit Card

Checking Account vs. Debit Card: What’s the Difference?

By | Budgeting & Goals, Family Finances, money | Comments Off on Checking Account vs. Debit Card: What’s the Difference?

Checking accounts and debit cards are both key to storing and accessing your money for making everyday payments. Think about how often you use them as you pay bills, grab a latte, and check your balance to see if you can afford some new shoes.

Though they are linked, they are two separate financial tools — and it’s possible (though uncommon) to have one without the other.

Key Points

•   A checking account allows individuals to store and access funds for daily transactions, often featuring options for writing checks and electronic transfers.

•   A debit card provides a convenient method for making purchases and withdrawing cash from a linked checking account, requiring a PIN for secure transactions.

•   Both checking accounts and debit cards offer various features, such as direct deposit capabilities and mobile wallet integration, enhancing accessibility and usability.

•   Checking accounts are typically insured by the FDIC, while debit cards are linked to these accounts, providing an easy way to manage finances without incurring debt.

•   Choosing the right checking account and debit card involves considering personal needs, such as fee structures, interest rates, and banking features that align with individual financial goals.

What Is a Checking Account?

A checking account is a type of bank account that allows you to access your money when you need it for paying bills or making purchases. Unlike other deposit accounts (like saving accounts), checking accounts allow you to make regular withdrawals by writing checks, swiping your debit card for purchases, or taking money out of an ATM.

Most checking accounts are insured by the Federal Deposit Insurance Corporation (FDIC) or NCUA (National Credit Union Administration), meaning your funds are protected up to $250,000 per depositor, per bank, per ownership category. You can typically fund your checking account through bank transfers and via direct deposit from your employer.

You can also connect your checking account to a peer-to-peer payment app like Venmo or Cash App to send money to and receive money from friends and family. Some banks may even offer built-in payment programs through their mobile apps.

Some checking accounts charge monthly fees while in other situations you can open a free checking account. Banks charging fees for accounts may offer ways to waive the fees. Other “fine print” details to consider when selecting a checking account include minimum balance requirements, overdraft fees, and annual percentage yield (APY).

Recommended: How Much Money Do You Need to Open a Checking Account?

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 4.20% APY on savings balances.

Up to 2-day-early paycheck.

Up to $2M of additional
FDIC insurance.


What Is a Debit Card?

A debit card is a form of payment that gives you access to the funds in your checking account.

You can use a debit card online and in person to make purchases, wherever that card is accepted. You can even add your debit card to mobile wallets, like Apple Pay or Google Pay. You typically must use a unique personal identification number (PIN) to use the card for in-person purchases and ATM withdrawals.

Unlike a credit card that allows you to loan money from the card issuer, a debit card only gives you access to the funds in your checking account. If you don’t have enough funds in your account to cover a purchase, the transaction may be declined or you may overdraw the account (and face overdraft fees).

You can also use a debit card to withdraw cash at ATMs. Most banks and credit unions offer a network of fee-free ATMs where you can safely take out cash without incurring charges. You may also be able to request cash back at the point of sale at some businesses when paying with your debit card.

While we typically think of debit cards as a component of a checking account, consumers without a checking account can purchase a prepaid debit card, load funds onto it, and spend it at stores like a bank debit card.

Do You Automatically Get a Debit Card When Opening a Checking Account?

Most checking accounts come with debit cards nowadays, but it’s always a good idea to confirm before opening up a new account. Upon account creation, the bank or credit union will generally send your debit card in the mail. In some cases, you may have to request the debit card.

Not all debit cards are created equal. When looking for a checking account with a debit card, you may want to prioritize one that:

•   Has a large network of ATMs

•   Doesn’t charge fees for card replacements

•   Doesn’t charge foreign transaction fees

•   Offers cash back on debit card purchases.

Can You Have a Checking Account Without Having a Debit Card?

While most checking accounts come with debit cards these days, it’s still possible to encounter a checking account that doesn’t have a debit card. However, you’re more likely to find a checking account that no longer supplies free paper checks to members.

Debit Card vs. Checking Account

Let’s break down the difference between a checking account vs. a debit card.

Checking Account Debit Card
Deposit account at bank or credit union that is typically federally insured A card that allows you to make purchases and withdraw cash, typically tied to a checking account
May earn interest May earn cash back
May have monthly maintenance fees May have foreign transaction fees and overdraft fees
Can be used for online transactions Can often be used for online transactions
Can be linked to P2P app Can be linked to P2P app
Federally insured Insured if tied to insured account

The best way to think about the difference between checking accounts and debit cards? A checking account is a deposit account for storing and spending your money; a debit card is a common tool to access the money in that deposit account.

Pros and Cons of Checking Accounts

Now that you know how a debit card vs. checking account stacks up, here’s a closer look at checking accounts. These accounts are a staple of personal finance and, as such, offer plenty of benefits to consumers. There are also some downsides to be aware of.

Here are some of the pros and cons of checking accounts:

Pros

•   Easy access to funds: A checking account allows you to make purchases (in person or online), pay bills, and receive direct deposit paychecks.

•   Security: Checking accounts are typically insured by the FDIC or NCUA.

•   Banking benefits: Depending on the checking account, you may enjoy premium features like mobile check deposit, automatic savings tools, and early paycheck access.

Cons

Checking accounts have a specific and necessary purpose for most consumers, but they do have drawbacks:

•   Low or no interest: In terms of checking vs. savings accounts, checking accounts typically have low APYs — if they earn interest at all.

•   Fees: Some checking accounts may have monthly maintenance fees, overdraft fees, account inactivity fees, and other charges that can add up.

•   Minimum balance requirements: Some checking accounts may require you to maintain a specific amount of funds in your account. They may also require a minimum deposit to open the account.

Here are the pros and cons of checking accounts in chart form:

Pros of a Checking Account Cons of a Checking Account
Easy access to funds Low or no interest
Security Fees
Banking benefits Minimum balance requirements

Pros and Cons of Debit Cards

To better understand the difference between a debit card and a checking account, it can be helpful to consider debit cards’ unique features. These cards also have their fair share of pros and cons.

Pros

Advantages of debit cards include:

•   Easy way to spend and withdraw cash: Debit cards are more convenient than paper checks and give you quick access to your cash at ATMs.

•   No risk of debt: Unlike credit cards, debit cards don’t let you spend money on credit. This means you don’t risk overspending and falling into high-interest credit card debt.

•   No fees or interest: Debt isn’t the only risk of credit cards. You also have to worry about annual fees and annual percentage rates (APRs) when opening a credit card. Neither applies to debit cards.

Cons

Debit cards have drawbacks, as well:

•   Less fraud protection: Credit cards may pose more debt risk, but they typically offer better fraud protection than debit cards.

•   Ability to overdraft: Some banks and credit unions charge fees if you accidentally overdraft using your debit card.

•   Daily spend limits: Your debit card likely has a daily spend limit, and it may be less than you think (possibly $300 or $400). Before using your card for a big purchase, you may want to check with your bank to see if they need to increase the limit temporarily.

Take a look at how these pros and cons look in chart form:

Pros of a Debit Card Cons of a Debit Card
Easy way to spend and withdraw cash Less fraud protection
No risk of debt Ability to overdraft
No fees or interest Daily spend limits

Tips for Finding the Right Checking Account and Debit Card

How can you find the right checking account and debit card for you? Each person’s banking needs are different, but here are a few tips to get you started:

•   Think about the features that are right for you: It’s likely that no checking account will tick all the boxes for you, so it’s a good idea to make a list of the most important features of your ideal checking account. Maybe you want an interest-bearing account that also has a cashback debit card, or perhaps you just want a standard account with no monthly fees or overdraft fees. Deciding on your wish list will help you narrow down the options.

•   Ask friends and family: Getting recommendations from people you trust is a great way to instill confidence in any big financial decision.

•   Consider online banking: Online banks can often offer lower (or no) fees and higher interest rates because of their low overhead. With the advent of mobile banking, including mobile check deposit, online bill pay, and P2P payments, you may find that you don’t miss your brick-and-mortar bank — while enjoying the checking and debit features.

•   Bank in one place: It’s possible to have checking and savings accounts at separate institutions, but you may appreciate the convenience of banking in one place (or in one app). If you already have a credit card or savings account with a specific institution, it might be worth researching their checking account and debit card offerings.

Banking With SoFi

Looking for a new checking account with a debit card? Open an online bank account with SoFi. Our Checking and Savings account allows you to unlock a wealth of banking features, including a competitive annual percentage yield (APY), no account fees, automatic savings tools, and cashback on select local purchases when swiping your debit card.

Bank smarter with SoFi, and see why people love the SoFi debit card and Checking and Savings Account.

FAQ

Is a checking account a debit card?

A checking account is not a debit card. Rather, a debit card is a common way for consumers to spend and withdraw cash from their checking accounts.

Can you withdraw cash without a debit card?

It is possible to withdraw cash without a debit card. If your bank has a physical branch, you can go in person to take out funds. Some banks offer ATM cards for ATM withdrawals, and others may even offer cardless ATMs that allow you to access your funds through a mobile app.

Do checking accounts come with a debit card?

Most checking accounts come with a debit card. The bank may automatically send you the card upon account creation, but in some cases, you may have to request the card before the bank will send it.

Photo credit: iStock/Phiromya Intawongpan

SoFi members with direct deposit activity can earn 4.20% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.20% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

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

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

Interest rates are variable and subject to change at any time. These rates are current as of 10/31/2024. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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.

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Aug
08
2024
Guide to Tiered-Rate Savings Accounts

Guide to Tiered-Rate Savings Accounts

By | Budgeting & Goals, Growing Wealth, money | Comments Off on Guide to Tiered-Rate Savings Accounts

Putting cash into a savings account can be one way to help your money grow, not only by stashing it away so you don’t spend it, but also by potentially earning interest as it sits in the account. One type of interest-earning savings account you might want to0 consider is a tiered-rate savings account.

The interest rate that a tiered-rate savings account earns typically increases as the amount of your savings increases — which can make saving cash even more motivating.

Key Points

•   A tiered-rate savings account offers multiple interest rates based on the account balance, encouraging higher savings as interest rates increase with larger deposits.

•   Minimum balance requirements often apply to open and maintain tiered-rate accounts, along with potential monthly transaction conditions to retain higher interest rates.

•   These accounts generally provide higher interest rates compared to traditional savings accounts, allowing savings to grow more rapidly through the effects of compound interest.

•   Investing in tiered-rate accounts may yield lower long-term returns compared to other investment options, like stock market investments, due to lower interest rates.

•   Alternatives to tiered-rate savings accounts include high-yield savings accounts, money market accounts, and certificates of deposit, each with varying benefits and requirements.

What Is a Tiered-Rate Savings Account?

A tiered-rate savings account is a savings account that has multiple interest rates that can be applied, depending on the amount of money in the account.

The way tiered-rate savings accounts generally work is that as the account holder’s savings grow, their interest rate on the savings account also rises. Interest rates for these accounts are offered on a tiered scale with the largest balances getting the highest interest rates.

A tiered savings account might encourage customers to save more money as they work towards earning the highest possible interest rate. It may also keep account holders loyal to their current bank with a long-term account.

How Do Tiered-Rate Savings Accounts Work?

If you open a bank account that’s a tiered-rate account, the higher your balance is, the higher your interest rate is likely to be. That means as your balance grows, your interest rate has the potential to rise, and your savings may grow more quickly.

Tiered-rate accounts offer account holders different “tiered” interest rates that correspond with different account balances. For example, if a bank offers a tiered-rate savings account they may give a 0.05% interest rate for savings account amounts up to $25,000. For savings ranging from $25,000 to $100,000 they may raise that interest rate to 1.00%.

Tiered-rate savings accounts tend to have a minimum balance threshold needed to open an account for the first time. Typically, a minimum daily balance must also be maintained. In addition, these accounts may require that their holders make a minimum amount of monthly transactions, such as making deposits or transferring money to another account.

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 4.20% APY on savings balances.

Up to 2-day-early paycheck.

Up to $2M of additional
FDIC insurance.


Characteristics of Tiered-Rate Accounts

The following features are typically associated with tiered-rate accounts:

•   Interest rates rise as account balances grow

•   Minimum initial deposit and ongoing balance requirements

•   Minimum monthly transaction requirements

Pros of Tiered-Rate Savings Accounts

These are some of the advantages to having a tiered-rate savings account:

Opportunity to Earn Higher Interest Rate on Savings

Tiered-rate savings accounts typically offer higher interest rates than traditional savings accounts do — especially for motivated savers who work to increase their account balances.

Potential for Money to Increase Quicker

Because interest rates can be higher with tiered-rate savings accounts, it’s possible for money held in these accounts to grow faster than it might in other types of savings account, as long as it remains in the account. Because of the effect of compound interest, your money could make more money.

Cons of Tiered-Rate Savings Accounts

There are also some disadvantages of tiered-rate savings accounts that are worth keeping in mind.

Putting Money Elsewhere May Be Better to Build Wealth

The interest rates offered by tiered-rate accounts tend to deliver a lower return when compared to some other investments over time, such as investing in the stock market. While investing in stocks is considered far riskier than earning interest in a savings account, investors could potentially see a higher return over the long term from stocks. This could be helpful when saving for long-term goals like retirement.

Need a Larger Account Balance for the Highest Rates

To secure the best interest rates through a tiered-rate savings account, account holders may need to keep a large sum of money in their savings account. If someone doesn’t have that amount of money, they may find that a standard savings account is better for them.

Here is a chart comparing the pros and cons of tiered-rate accounts:

Pros of Tiered-Rate Accounts

Cons of Tiered-Rate Accounts

Opportunity to earn higher interest rates on savingsPutting money elsewhere may be better for building wealth
Potential for money to increase more quicklyNeed a larger account balance for the highest rates

Alternatives to Tiered-Rate Savings Accounts

If you’re looking to earn money on your savings, there are a few different vehicles you can consider for earning competitive interest on your funds.

•   High-yield savings accounts: High-yield savings accounts are similar to standard savings accounts, but they earn much higher interest rates. High-yield savings accounts are often found at online banks. These financial institutions don’t have to finance bricks-and-mortar branch locations, so they may pass along the savings to their customers in the form of higher interest rates, lower fees, and/or special bonuses.

•   Money market accounts: Money market accounts are typically insured by the Federal Deposit Insurance Corporation (FDIC) or National Credit Union Administration (NCUA) like savings accounts. They tend to have higher annual percentage yields (APYs) than traditional savings accounts. There is, however, a potential downside: Money market accounts may have significantly higher minimum deposit and balance requirements, and they might also have withdrawal limits much like some savings accounts do.

•   Certificate of deposit (CD): Certificates of deposit vs. savings accounts can be a wise choice for some consumers. CDs are time or term deposits, meaning the money stays in the account for a specific period of time (typically six months to a few years, though longer and shorter terms are available). If you withdraw the funds before the maturity date, or the end of the term, you will likely pay a penalty fee. Because of the time commitment involved, CDs may offer higher interest rates than savings accounts and money market accounts.

The Takeaway

If an individual has a sizable amount of money to deposit, they may find that a tiered-rate savings account could be a good option. This type of account offers a way to earn a higher interest rate the more the account holder has in the account.

If, however, a person is just starting their savings journey, a traditional savings account may be a better fit. Either way, an aspiring savings account holder should evaluate such variables as interest rate, minimum deposit and balance requirements, and account fees. That can help them find the right savings account for their needs.

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 4.20% APY on SoFi Checking and Savings.

FAQ

What is tiered APY?

Tiered-rate accounts offer account holders different tiered APY, or annual percentage yield, which is how much you will earn on your cash over the course of a year. The amount of money an account holder has on deposit will qualify them for a certain tier or level. Typically, the more money on deposit, the higher your APY.

What is tiering in banking?

Tiering in banking refers to tiered-savings accounts, which provide account holders with different interest rates based on the balance in their savings account. Usually, the higher someone’s account balance is, the higher their interest rate is.

Is a tiered interest rate good?

A tiered interest-rate structure tends to benefit savers who have high account balances because the more money you have on deposit, the higher your interest rate. If someone has a smaller amount of savings, a traditional or high-yield savings account with a single interest rate may be more advantageous to them.

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.

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.

4.20% APY
SoFi members with direct deposit activity can earn 4.20% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.20% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

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

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

Interest rates are variable and subject to change at any time. These rates are current as of 10/31/2024. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

*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.

SOBK-Q224-1927417-V1

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Aug
08
2024
11 Ways to Make Money Online Without Selling Anything

11 Ways to Make Money Online Without Selling Anything

By | Life & Career, money | Comments Off on 11 Ways to Make Money Online Without Selling Anything

When you think about making money online, chances are, you visualize selling something, whether it’s beaded necklaces you make, electronics you don’t use anymore, or a cool product you cooked up. But there are many ways to make money without offering a product, which can eliminate a lot of barriers to entry, along with the hassles of order fulfillment and shipping.

It’s not a cinch, but if you have a clever idea or some expertise, you can make money online without selling anything. For example, if you have an Instagram account with loads of followers, you might earn cash by creating a YouTube channel sharing the secrets of your social media success.

Think about where your strengths and skills lie: Is it coding? Then you might consider building an app. Do you know how to reach out to people and coalesce them into an active, supportive community? Then you might succeed in building a membership website.

Ready to find out how to make money with a website without selling anything? There’s inspiration ahead.

Key Points

•   Various online income opportunities exist that do not require selling products, minimizing barriers to entry and logistical hassles associated with traditional selling.

•   Starting a dropshipping business allows individuals to earn money by acting as a middleman between suppliers and customers without holding inventory.

•   Creating a YouTube channel can lead to monetization through ads once a sufficient subscriber base is established, focusing on engaging content in a specific niche.

•   Freelancing offers many ways to leverage skills such as writing or design, enabling individuals to work remotely and access various job platforms to find clients.

•   Building a membership website can generate income by offering exclusive content to subscribers, fostering a community, and utilizing specialized web-building software for management.

Is It Possible to Make Money Online Without Selling a Product?

Fortunately, there are many ways to make passive income online without manufacturing and selling a product in the traditional sense. If you dread the idea of renting a warehouse or packing up and shipping items, this will be good news.

For example, many influencers on YouTube make money simply by providing informational videos that people find valuable. Once they have a following, they make money through YouTube ads that run on their channel. Did you know, for instance, that YouTuber Mr. Beast set a new high-earning record recently of $54 million? While that’s hardly a typical achievement, it does show that the sky is the limit, as the saying goes.

Beyond YouTube, there are plenty of other ideas for how to make money with a website without selling anything. You might translate your tech knowledge and experience into building an app, or you could create a blog based on your favorite hobby that resonates with a particular audience.

11 Ways You Can Make Money Without Selling Anything

Ready to dig into some specifics? From dropshipping to streaming, the following are 11 ways people make money online without actually manufacturing or selling products.

1. Start Dropshipping

Dropshipping is one way to make money with a website without selling anything. Dropshippers sell products to customers, but they do not own or stock them. For the dropship business model, a customer places an order, and the dropshipper forwards the order to the supplier for a fee. The supplier then takes care of the shipping.

In essence, the dropshipper is the middle man. You don’t need to buy any items or manufacture anything yourself. And it can help you bring in some cash: One recent survey showed that dropshippers earn almost $20 an hour.

Recommended: 11 Benefits of Having a Side Hustle

2. Launch a YouTube Channel

A YouTube channel can be lucrative once you have 1,000 subscribers. At that point, YouTubers can monetize their channel by accepting ads. How do you get 1,000 subscribers? By providing content that people want to see.

That could be showing off your cake decorating skills, your super cute Pomeranian puppy, or your ability to do your own taxes quickly and correctly. Choose a niche where you have expertise and create compelling content on that topic. Use clever headlines that will draw people to your channel, plus keywords to optimize them for YouTube searches and help you gain traction. Keep viewers engaged by producing a series of videos on a topic so that they continue to tune in.

Recommended: Can You Make a Living on Social Media?

3. Write a Blog or Podcast

Have ideas, intel, and opinions you’d like to share? Why not start a blog, which is similar to starting a YouTube channel. The cost of running a blog can be minimal, and it can be an exciting way to share your passions in life. You can create content on a niche topic that people are curious about and that you love. It could be travel, DIY advice, fashion, fitness, or finance.

If you are good, you can build a following. Once your following is big enough, companies will pay you to promote their products or services on your blog through ads and links. Brands may even sponsor you to write about them or invite you to write blogs for their own sites.

4. Create a Membership Website

If you find demand for your content, you could build a website for subscribers only and charge for the membership. The idea is to build a community of like-minded people who want to share knowledge and access exclusive content. A paid membership could offer videos, webinars, other educational products, and the ability to interact with other members.

Membership web-builder software can help you build a site and wrangle your followers, or you could use a third party to do it for you. The software allows you to register new members; process monthly dues, donations, and event payments; update member profiles; send emails to members about upcoming events, and send invites. A simple website builder will run from $20 to a few hundred dollars per month, and help you get your site up and running and hopefully growing.

Recommended: 25 Tax Deductions for Freelancers

5. Try Freelance Work

You probably have had some work-from-home experience due to the pandemic. You might want to transition even more to remote work. Some careers can be transferred to the digital environment. For example, writers, teachers, designers, and coders can all learn how to make money from home. There are marketplaces for freelancers, such as Fiverr and Upwork, and you can establish a website of your own to pull in work.

There are also many job boards for freelancers, such as Flexjobs.com. Freelancers need to build a portfolio of work, which may require taking on lower-paying jobs at first as you work your way up.

Recommended: 15 Low-Cost Side Hustles

6. Become a Writer

Being a writer is an aspiration for many people, and there happens to be a huge market for website content. Many companies want to create informative blogs with SEO-optimized articles that will drive traffic to their websites. If you have expertise and knowledge in a niche area, you could write engaging articles for companies in that niche. Companies want ghostwriters, but there are also opportunities for bylined articles. Look for writing jobs on job boards like Flexjobs.com and Upwork.

7. Be a Product Tester

This is a fun one: You can make money online without selling by being a product tester. Brands often need people to try out their products to see how they rate with consumers. In return for their time and feedback, product testers may receive payment in the form of cash, merchandise, and gift cards.

Popular products for testing include toys, food, electronics, beauty products, household products, baby products, clothes, and websites. These gigs may pay about $25 an hour and can sometimes feel like play time.

You might also take surveys and provide feedback on marketing ideas online, as well. Sign up with a market research firm like I-Say by Ipsos, Opinion Outpost, and Branded Surveys to get started.

8. Accept Micropayments

Looking for more ways to make money online without selling stuff? Let’s say you write a blog that benefits a community. For example, you might be someone on the autism spectrum and blog about your experiences for a supportive audience. You can use a free app like “Buy Me a Coffee” to accept micropayments on your blog; this allows people who want to show their appreciation to send you a bit of money. Readers click on a widget on your blog to donate a few dollars to your site.

9. Set Donation Requests

One step up from accepting micropayments is to request donations directly. An example is Wikipedia, which intermittently asks its visitors to donate to fund the site’s research. Another example is virtual tip jars that appear on websites. Basically, it’s a way to monetize a website. You can collect feedback from engaged users at the same time to better understand what visitors would like to see on your site.

10. Create an App

Even if you are not a coder or app developer, you might have a great idea for an app that would make people’s lives simpler, better, or just more fun. Once you have an idea, a market that you’re targeting, and a brand concept, you can hire an app creator to do the coding for you. Once you have the app, add it to the App Store or Google Play. Start with a free app, and if it is a success, you can offer add-ons or premium features for a fee.

Recommended: How to Pay for Coding Bootcamps

11. Monetize a Twitch Channel

Chances are, you’ve heard of Twitch, the streaming platform that has expanded from gaming to a variety of content types, such as sports and entertainment. Still, gaming is its heartbeat, and Twitch streamers can monetize their love for the platform by sharing their gameplay with fans and subscribers who can hear and watch them live.

Streamers can gain a sizable following by providing consistent entertainment, and they can then sell products and Twitch ads. They can also land brand sponsorships, obtain fan donations, and sell subscriptions. Of course, not everyone will be a success at this, but those with the right skills and personality can thrive. For those who gain a real following, earnings can be in the $3,000 to $5,000 a month range if working 40 hours a week.

How Making Money Online Can Help You on Your Financial Journey

You might not become a billionaire by choosing an online gig, but you can certainly supplement your day job or help with your college expenses. Making money online is flexible, and you can leverage your expertise and your niche. Start small and see where it leads.

Recommended: How to Earn Residual Income

The Takeaway

How to make money online without selling anything comes down to creative thinking and a will to experiment. It’s actually a very accessible marketplace for anyone; you can avoid the typical startup costs en route to making a profit. Plus, you can work from home and tap your particular skills, whether that means creating fitness videos or developing an app.

3 Money Tips

  1. When you overdraft your checking account, you’ll likely pay a non-sufficient fund fee of, say, $35. Look into linking a savings account to your checking account as a backup to avoid that, or shop around for an online bank that doesn’t charge you for overdrafting.

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

  3. When you feel the urge to buy something that isn’t in your budget, try the 30-day rule. Make a note of the item in your calendar for 30 days into the future. When the date rolls around, there’s a good chance the “gotta have it” feeling will have subsided.
Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.20% APY on SoFi Checking and Savings.

FAQ

Is it hard to make money online?

How to make money online without selling products is not difficult as long as you pick the right niche. It helps to choose an activity where you have an interest and skills. You also need to be creative if you want to scale. Some tenacity and determination will help when you experience a lull or want to get to the next level and grow organically.

What is a great way to learn skills to make money?

There are so many online and offline resources where you can learn skills. If you are interested in programming, you can learn coding languages online. If you are interested in marketing, you can take a course and get certified in Google Analytics and Google Ads. YouTube and webinars can help you train up; just do your research and make sure the so-called expert has solid credentials.

Do donation requests work?

Donation requests work if people value what you are doing. There are quite a few scams out there, and people are becoming more wary. However, if you can establish a following and provide content of value, you’re onto something. The trick is to engage people by connecting them to a community that means something to them.

Photo credit: iStock/Eva-Katalin

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.

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 4.20% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.20% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

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

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

Interest rates are variable and subject to change at any time. These rates are current as of 10/31/2024. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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08
2024
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Guide to Signing Over a Check

By | Budgeting & Goals, Financial Independence | Comments Off on Guide to Signing Over a Check

At some point in your financial life, you’re likely to want to sign over a check to someone else instead of depositing it or cashing it. Maybe you received a check but don’t currently have a bank account so a friend will cash the check for you. Or perhaps you want to endorse a check you received and give it to your landlord as part of your rent payment.

To sign a check over to someone else isn’t hard, but you do need to follow the right protocol. In a few simple steps, the check can be ready for processing by the person you’re giving it to.

Here’s a quick guide on how to sign over checks to someone else, plus some points to consider before accepting a check that has been endorsed to you.

Key Points

•   Signing over a check involves a few important steps to ensure it is valid and acceptable by the recipient’s bank.

•   Verifying the check’s date is crucial, as banks typically only accept checks that are less than six months old.

•   Endorsing the check requires writing your signature along with “Pay to the order of [Recipient’s name]” on the back of the check.

•   Confirming the recipient’s bank policies regarding third-party checks is essential to avoid complications during the cashing or depositing process.

•   Alternatives to signing over a check include using money transfer apps or opening a bank account if unable to cash the check directly.

5 Steps to Signing Over a Check

Generally, when someone writes you a check, you (the payee) are the only person who can cash it or deposit it into your bank account.

But can you sign a check over to someone else? Yes. These five steps detail how to sign a check over to someone else (you may hear a check that’s been signed over referred to as a “third-party check,” incidentally).

1. Make Sure the Check is Still Good

Before you begin the process of signing over a check, it’s a good idea to take a look at the date it was written by the payer, especially if the check has been lying around for a while.

How long are checks good for? Generally, checks are good for six months. After that, the bank may refuse to accept it.

(This is true for both business and personal checks, incidentally.)

If the bank does accept a check older than six months, the check could potentially bounce if the issuer no longer has the funds in their account.

2. Get the Okay From the Recipient

Before endorsing a check to a third party, whether that’s a person, a business, or a landlord, it can be wise to first reach out to that third party and confirm that they are open to accepting this form of payment.

When moving through the signing over process, it’s important that you and the recipient both agree to the transfer.


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3. Verify the Bank Will Allow the Signed Over Check

Banks often have different rules and requirements when it comes to accepting third-party checks.

To help ensure the process will go smoothly, it can be a good idea to call the recipient’s bank and ask about their policies before you endorse the check.

That way, you can avoid adding extra signatures and names to the back of the check (which can create confusion and delays if you later need to cash or deposit it somewhere else).

You may also want to find out what kind of identification the recipient will need to bring to the bank or if there is anything special they should do or know before bringing the check to the bank.

4. Endorse The Check Correctly

The next step in how to sign a check over is to endorse or sign it. Checks that typically come in your checkbook have an area on the back that reads “Endorse Check Here.”

On the line just below that, you will want to sign your name in pen, writing it just as it appears on the front of the check.

Underneath your signature, you’ll then want to write, “Pay to the order of [Recipient’s name].”

It’s a good idea to clearly write out the recipient’s name as it appears on their driver’s license or other photo identification they will use at the bank when depositing the check.

Check’s often say “do not write, stamp or sign below this line” beneath the endorsement area. You’ll want to try to avoid running into this area. If you do, the bank may refuse the check.

Recommended: How to Write a Check to Yourself

5. Transfer the Check

Once you’ve endorsed the check, you will have a “third party check” that you can give to the person you signed it over to so that they cash or deposit the check into their bank account.

While it may not be essential, you may also want to consider accompanying the recipient to their bank with your own photo identification to ensure it’s a seamless transaction and in case the bank teller has any questions.

If you decide you will be going to the bank together, you may want to hold off signing over the check until you get there. That way, you can endorse the check right in front of the teller after showing your ID.

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

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Can You Deposit Someone Else’s Check in Your Account?

Depending on your bank, you may or may not be able to deposit or cash a check that has been signed over to you.

As mentioned above, some banks might not want to accept an endorsed-to-you check because there’s a chance it could be a fraudulent check. Many check-cashing places won’t accept this form of a check either.

That’s why it’s a good idea to check with your bank before accepting a third-party check as a form of payment.

In addition, you may want to keep the following considerations in mind before accepting a signed-over check as opposed to one written directly to you.

•  They can be less convenient. Unlike a regular check, you typically can’t deposit a third-party check at an ATM or upload it via your bank’s mobile deposit app. Getting the check cashed or deposited generally requires a trip to the bank.

•  It could be a scam. There are lots of fake check scams out there (see below for more details).

•  It could potentially bounce. Even if you know and trust the person who is signing the check over to you, there may still be a bit of risk involved. That’s because you can’t be certain the original person who wrote the check has the funds to cover it. If they don’t, it will be a case of the check bouncing, and you won’t get the money.

Alternatives to Signing a Check Over to Someone

Perhaps you discover that your bank won’t take a third-party check. Or what if the person you wanted to sign a check over to says “no thanks”? Now what? Try these options.

Use a Money Transfer App

If you wanted to sign a check over to someone because you are trying to pay them, you could instead deposit the check and use a money transfer app, such as PayPal, Venmo, or Cash App.

Open a Bank Account

If the reason you want to sign over a check is that you don’t have a place to deposit it, you could open a free checking account. Or, if you have had issues with your banking in the past (such as too many overdrafts or an account being closed by your bank), you might look into what is known as a second chance checking account. These can have some restrictions but allow you access and may eventually be transitioned to a standard checking account.

Try a Check-Cashing Business

If you have a received check but don’t have an account to deposit it into and need to get funds to someone, you could try a check-cashing business. While this can be a convenient option, the fees can be quite high.

Recommended: What Is an Electronic Check (E-Check)?

Do All Banks Accept Third-Party Checks?

Not all banks accept checks signed over to someone else. That is why it can be a smart move to check first before you try to go this route. You or the person to whom you signed over a check could wind up discovering that the check is not accepted for deposit once you arrive at the bank. Or it could be rejected if mobile or ATM deposit is used.

Also, if the bank does accept these checks and you are going the in-person route to deposit it, you may want to ask what sort of identification may be required. You may need some additional ID in order for the check to be cashed or deposited.

Watch Out for Check Cashing Scams

Third-party checks may be used as a ploy in fraudulent transactions, so be wary. You could become a victim of one if someone you don’t know offers to sign over a check to you (often for a large amount) as payment or in exchange for cash. For instance, if you were selling a used mobile phone for $400 and a person offers to sign over a check for $500 to you and tells you to keep the excess, that’s a major red flag.

That’s why it can be wise to only accept an endorsed check from a person you know and trust or verify the check before depositing.

Opening a Checking Account With SoFi

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 4.20% APY on SoFi Checking and Savings.

FAQ

How can you cash a check that is not in your name?

If you want to cash a check that is not in your name, you could have the person to whom the check is made out endorse the check to you. Then, make sure that your bank will accept it. Another option is to request a new check from the payor if it was mistakenly made out to the wrong name. Or contact your bank for guidance.

Can you mobile deposit a check signed over to you?

It is likely that you can mobile deposit a check that has been signed over to you, but it can be wise to double-check your financial institution’s policies to be sure.

Can someone deposit a check for you without your signature?

Generally, banks require a signature on the back to deposit a check. If someone is depositing a check for you, it will likely need to say “For deposit only” and have your signature to be accepted.


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 4.20% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.20% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

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

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

Interest rates are variable and subject to change at any time. These rates are current as of 10/31/2024. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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

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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2024
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How to Make a Budget in 5 Steps

By | Budgeting & Goals, money | No Comments

Making a budget can be the foundation of taking control of your money and reaching your financial goals. It can help you get in touch with the cash you have coming in, your spending, and your savings. Put simply, a budget can get your financial life in balance.

The math involved doesn’t have to be complicated, and a good budget can be easily revised to align with changes in your life, whether that’s a rent increase or a raise at work. Read on for the five simple steps to creating a budget that can boost your financial savvy and make your money work harder for you:

Key Points

•   Establishing clear financial goals serves as the foundation for effective budgeting and motivates individuals to manage their money intentionally.

•   Calculating total income accurately is essential for understanding the financial resources available for budgeting purposes.

•   Reviewing monthly expenses helps identify spending patterns and distinguishes between needs and wants, enabling better financial decisions.

•   Selecting an appropriate budgeting method, such as the 50/30/20 rule, helps allocate funds efficiently towards essentials, discretionary spending, and savings.

•   Regularly adjusting the budget in response to life changes or unexpected expenses ensures it remains effective and aligned with financial goals.

5 Steps to Creating a Budget

  1. Determine Your Financial Goals

  2. Calculate Your Income

  3. Review Your Expenses

  4. Choose Your Budgeting Method

  5. Make Adjustments

1. Determine Your Financial Goals

Setting financial goals is a crucial first step to being more intentional with your money management tactics. As in, having a purpose can give you more motivation to stick to your budget and get you on your way to creating smart financial goals that suit your life.

How to set financial goals? Start by taking time to come up with a clear idea of your short-term and longer-term aspirations. What kind of things could you dream about? Anything that’s ultimately important counts.

Examples of financial goals could include:

•  Having $1,000 in the bank

•  Hosting an amazing 30th birthday party for your partner

•  Buying a home

•  Saving enough to cover your kid’s college tuition

•  Getting some new wheels

•  Taking a dream vacation

•  Getting out of credit card debt

•  Starting your own business

•  Planning for retirement

•  Establishing and maintaining an emergency fund.

2. Calculate Your Income

Before allocating money for various spending categories and goals, you need to know how much money you have to work with each month. Calculate your income — you can look at your paystub and/or other earnings from your side businesses or second job. Or maybe you are the lucky holder of an investment account that generates dividends. Perhaps you regularly receive bonuses or tips at work. Add it all up.

💡 Quick Tip: Make money easy. Open a bank account online so you can manage bills, deposits, transfers — all from one convenient app.

Check out our Money Management Guide.

This article is from SoFi’s guide on how to manage your money, where you can learn basic money management tips and strategies.

money management guide for beginners

3. Review Your Expenses

To make a solid, workable budget, you also need to know exactly how much money is typically going out. Pull together all your financial statements and look at how much you typically spend per month for different categories.

Budget categories can include:

•  Loans (such as student or car loan payments) and debt (including credit cards)

•  Insurance premiums

•  Housing

•  Utilities

•  Monthly food expenses

•  Childcare, child support, or related family obligations

•  Transportation-related expenses

•  Healthcare

•  Savings/investments (for instance, 401(k) or IRA automatic savings deductions).

In addition, think about some other spending categories that are more about discretionary purchases. This is about identifying wants vs. needs. For instance, in terms of wants, you can also track discretionary spending:

•  Dining out (even those lattes to go)

•  Entertainment, such as movies, books, concert tickets, and streaming services

•  Personal care (manicures, yoga classes, etc.)

•  Travel

•  Gifts or treating friends to birthday drinks or dinners

•  Non-essential clothing, electronics, home furnishings, and any other fun things you might go shopping for.

As you gather this information, you may want to look at a couple of months’ worth of records. For example, your credit card bill may vary considerably, so averaging a few months will give you a more realistic picture than checking a single month.

Once you have an idea of what you spend, it’s time to take a look at where you may be able to make adjustments.

•   Many people look at their spending as “needs” versus “wants.” A need is something required for basic existence, while a want is discretionary spending. Needs also include debt payment, so if you have a student loan or similar monthly expenses, include that in the need category.

balance needs and wants in a budget

•  Also consider looking at each spending category in terms of fixed and variable expenses. For instance, your mortgage is a fixed expense since it typically won’t change from month to month, whereas entertainment would be a variable expense since it can change. Don’t forget to look at occasional expenses — like semi-annual car insurance payments — so you can set aside money in your budget each month to account for this expense.

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4. Choose Your Budgeting Method

monthly budgeting methods

Subtract your monthly expenses from your monthly income. How are you doing? If there’s money left over, it means you may be able to meet your financial goals. Otherwise, you may need to either cut your expenses a bit or earn more money (or try a combination of both).

Whichever direction your money is trending in, you can benefit from a budget to get your cash aligned with your goals and provide guardrails for your spending and saving.

While there are a bunch of budgeting methods, what’s most important is to find an organizing principle that works for your personal and financial style. Some options to consider:

The 50/30/20 Budget Rule

The 50/30/20 budget rule breaks up your budget using the following percentages:

•  50% on essential expenses. This category could include housing costs, utilities, car payments, debt payments (student loans, credit card minimums due, etc.), education costs, food, basic clothing, childcare, and medical expenses.

•  30% on discretionary expenses. Your discretionary expenses could include shopping, entertainment, personal care, travel, and other expenses that may not necessarily be considered essential.

•  20% toward your goals. This amount of money can go into savings and investments as you work toward things like an emergency fund, a new car, retirement, and/or covering your child’s college education expenses.

Recommended: Check out the 50/30/20 rule calculator to see a breakdown of your money.

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The 70/20/10 Budget Rule

The 70/20/10 rule is another type of budgeting method. It’s similar to the 50/30/20 one, but you organize your money differently. In this case, you divide it up as follows:

•  70% toward spending on both needs and wants

•  20% toward saving

•  10% toward debt payoff and/or giving.

This budget can be a good variation for people who want to be sure they are covered for that debt payoff and/or giving category.

Zero-Based Budget

The zero-based budget system gives every single dollar a purpose so that every bit of your income is accounted for. You start with your monthly income then keep subtracting expenses (even savings or a sinking fund counts here) until you get to zero. This system can help you be more mindful since you know how your money is allocated.

The Envelope Budget System

With this technique, you write the name and cash amount you have for each spending category for a month. For example, you allocate $2,000 for housing for one envelope, and $600 for food in another. You can only spend the allocated amount in each category.

If there is no more cash in the envelope but the month isn’t over yet, you will need to wait until the next month to replenish it or borrow from another category and spend less there. For instance, if you need cash for an insurance premium that went up, you could save on streaming services by dropping a platform or two while you adjust your budget.

This method can be adapted to use debit card payments. You don’t have to literally only use cash.

5. Make Adjustments

A budget is a dynamic, living entity. Some months may be more expensive than others. For instance, you might have an emergency one month (your laptop dies) and wind up spending more (or even going into debt) to make ends meet. Life happens: use these situations to learn and readjust.

You can also look for trends in your money. If you find you are living paycheck to paycheck, you might find ways to economize (such as getting a roommate) or to earn more money.

After using your new budget plan, you should review and update it regularly. You may need to do it more often at the beginning of your budgeting journey when you’re getting used to looking at your finances in a new light. Still, it is typically useful to review your spending at the end of each month to see if your budget is still working for you. If not, then take the time to see what may be happening and tweak your spending as necessary.

Another reason you may want to make adjustments is if your life situation changes, such as you have a baby or get a divorce. Or your income may have gone up, so you will need to think strategically about how best to allocate those dollars to help you reach your financial goals.

Why Is Creating a Budget Important?

Creating a budget is important because it allows you to see where your finances stand: You see how much money is coming and how much is going out, plus what it is being spent on.

It can provide you with a snapshot of your financial life, and it can illuminate any issues you need to address. Think about it: If you don’t know where your money is going, you can easily spend more than your means, leading to more debt than you can handle. Not budgeting can also prevent you from reaching your goals, such as having enough in retirement savings or being able to afford that kitchen renovation you’re pining for.

Although some people think a budget will cramp their style, the truth is that a budget doesn’t have to hold you back, restrict you from fun, or sour your lifestyle. It can eventually set you free from the financial burdens that are keeping you from setting and reaching your ultimate life goals.

Monthly Budget Example

Here is an example of a family’s monthly budget:

Total monthly income: $4,650

Monthly breakdown of expenses:

Monthly income

 $4,650
Monthly expenses
Rent $2,000
Groceries $400
Student loan payments $337.50
Car payment $150
Credit card payment $300
Discretionary spending $232.50
Utilities $330
Auto & renters insurance $150
Career enrichment class $60
Savings $400
TOTAL: $4,360 ($290 surplus)

How to Handle Unexpected Expenses in Your Budget

You know how it goes: Life can be filled with unexpected expenses, such as a car repair or larger than expected medical bills. Instead of letting these derail you, work unexpected expenses into your budget.

There are several ways you can go about it, one of which is to have a bit of a buffer in your account. Meaning, you can allocate some extra cash each month just in case — any money that isn’t spent, you can roll it over onto the next month. It can act as a cash cushion in your checking account.

You can also consider building up an emergency fund, a separate set of savings in case you have unexpected expenses. The amount will vary, but a good rule of thumb for how much to have in an emergency fund is to save three to six months’ worth of basic living expenses.

💡 Quick Tip: An emergency fund or rainy day fund is an important financial safety net. Aim to have at least three to six months’ worth of basic living expenses saved in case you get a major unexpected bill or lose income.

How to Work With Your Family or Partner to Create a Budget

Creating a budget with others means being open to a conversation about what each one needs and how you can keep each other accountable. It can start by having a meeting about family spending. You can discuss and agree to budget goals and reasonable expenses and use a budget planner to help you solidify things.

Once a preliminary budget is created, find a way to ensure that everyone sticks to it. Some tactics include having one joint account to ensure everyone can track spending or having an app where your partner or family can see an overview of the finances. Whatever you choose, it’s important to meet regularly to review your budget to see whether adjustments need to be made.

The Takeaway

Creating a budget to set and reach your financial goals doesn’t have to be hard, and it can be a great way to guide your spending and saving. While there are many approaches and techniques to try, what matters most is finding one that is a good fit for you personally and helps you feel in control of your cash. By learning how to manage your money well, you can be on track to crush your personal and financial goals, whether short- or long-term.

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.


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FAQ

Why is creating a monthly budget important?

Creating a budget is important because it allows you to see where your finances stand: You see how much money is coming and how much is going out, plus what it is being spent on. It can also help illuminate any issues you need to address.

What are some common budgeting mistakes to avoid?

Common budgeting mistakes include not tracking your spending, not saving enough (say, for an emergency fund or retirement), and forgetting to plan for occasional expenses, such as membership renewals, car maintenance, and holiday gift giving.

How often should I review and update my budget?

It’s wise to review and update your budget regularly. Some people may want to do so monthly; others, quarterly. You can find the right frequency to suit your needs. It’s also a good idea to tweak your budget after big life events, such as moving, getting married, or having a child.

How can I involve my family or partner in creating and sticking to a budget?

To involve others in creating and sticking to a budget, you might first meet and develop the plan together. Then, you could share accounts and both (or all) use an app so that all involved are watching where the money is going. This can help everyone stay on track.

How can I handle unexpected expenses in my budget?

You can allocate a bit of money in your budget to be “just in case” funds. This cash cushion or buffer can help if there’s an unexpected expense. If you have a major unplanned expense, you might have to dip into emergency savings; that’s why it’s crucial to have this kind of safety net.

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