Mar
21
2025

Cash Stuffing: What Is It and Why Is It So Popular?

By | money, Terminology | Comments Off on Cash Stuffing: What Is It and Why Is It So Popular?

Cash stuffing, also referred to as money stuffing, is a viral budgeting method that involves using cash to pay for things like gas, groceries, and other discretionary purchases. Popularized on TikTok, cash stuffing has become a hot money hack for curbing impulsive spending.

While it might look brand-new, money stuffing is an updated take on the cash envelope budgeting method. With the cash envelope method, you’re simply adding cash to different envelopes that represent individual budget categories.

Does cash stuffing keep you from overspending? And how do you get started? Here’s a closer look at how this budgeting trend works.

What Is Cash Stuffing?

Cash stuffing is a budgeting method that requires you to use cash for discretionary spending instead of a debit or credit card. You add cash to individual envelopes labeled with different categories and then use those funds to make purchases. Once the envelope is empty, you can’t spend any more money in that category until your new budget period (say, the next month or next pay period) begins.

The idea behind cash stuffing is to keep spending in check. It plays into the psychology of money, which suggests that spending cash is more painful mentally and emotionally. Also, using cash may make you more mindful about your spending. Perhaps, when you think about pulling out a 10-dollar bill to buy a bubble tea, you’ll decide it’s not really worth the expense (or at least not today).

Cash stuffing can be a way to help you spend less. It may be easy to swipe your debit or credit card without thinking about the dollar amount. That’s harder to do when you’re having to count out cash pulled from your wallet or bank account each time you want to spend.

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How Does Cash Stuffing Work?

Cash stuffing is a revamped version of the cash envelope method. In terms of the actual process, it works like this:

•   First, you decide which budget categories you want to assign to your envelopes. For instance, you might include entertainment, coffee, and massages. (You can also use folders or pouches in a budget binder; whatever works for you is a good choice.)

•   Next, figure out how much cash should be added to each envelope for the budgeting period.

•   At the beginning of the budgeting period, you “stuff” each of your envelopes with the allotted amount of cash.

•   Throughout the budgeting period, you spend down the cash in each envelope.

When you reach the end of the budgeting period, you start the process all over again. If you have cash left over from the previous period, you can roll it over or apply it to another financial goal, like building your emergency fund. That’s a plus if you struggle with finding motivation to save money.

Meanwhile, you’d still use your debit cards, credit card, or bank account to pay expenses not assigned to your cash envelopes. For example, you might set up an automatic payment from checking to cover your student loan payment and pay your electric bill online using your debit card.

Examples of Cash Stuffing

Cash stuffing is ideal for budgeting categories that are not fixed and may fluctuate from month to month. Some of the categories you might assign to your cash stuffing envelopes include the purely discretionary as well as those that combine needs and wants:

•   Gas

•   Groceries

•   Clothing

•   Personal care

•   Entertainment

•   Dining out

•   Hobbies and recreation

•   Extracurriculars, if you have kids

•   Pet care

•   Travel

•   Gifts

•   “Fun” money

You could also include a miscellaneous envelope to cover any expenses that don’t fit into another budget category.

Why Did Cash Stuffing Get So Popular?

Cash stuffing breathed new life into the cash envelope budgeting method largely thanks to social media. On TikTok, #cashstuffing and its related hashtags currently have about 3 billion views. There are countless clips of users, which largely include members of Gen Z, stuffing their monthly cash envelopes.

Part of the appeal of cash stuffing lies in its simplicity. Once you figure out your budgeting categories and envelopes for the month, all you have to do is repeat the process.

Cash stuffing can work with lots of different budget systems, including:

•   The 50/30/20 budget rule

•   Zero-based budgeting

•   Pay yourself first budgeting

It can also be an easy way to save money if you’re disciplined about keeping track of your cash envelopes and curtailing unnecessary spending. Cash stuffing requires you to be intentional with where and how you spend, so you don’t run out of cash midway through the month.

People who struggle with using credit cards responsibly can reduce their odds of racking up high-interest debt, since they’re using cash to pay in place of plastic. Cash stuffing puts you in control of where your money goes, instead of leaving you to wonder at the end of the month where it all went.

Pros of Cash Stuffing

Cash stuffing has some advantages, especially for people who are navigating budgeting for beginners. You don’t have to be a member of Gen Z to appreciate its usefulness either.

Here are some of the main upsides of cash stuffing.

•   It’s simple. Cash stuffing is an uncomplicated way to budget for discretionary expenses. All you need to get started is a stack of envelopes and some cash.

•   Encourages saving. Stuffing cash envelopes can promote a savings habit if you’re challenging yourself to spend less than what you’ve allocated to individual budget categories. The money you don’t spend can be put into a savings account, perhaps one earmarked for your emergency fund.

•   Track spending. As you spend down the cash in your envelopes, you can easily see at a glance how much cash you have left. You can write down each expense as you go to get an idea of where you tend to spend the most.

•   Avoid debt. Minimizing your dependence on debt is key to creating a financial plan that works. The cash stuffing system can help you break away from credit cards if you’re reliant on them and help you learn to live within your means.

Cons of Cash Stuffing

Is cash stuffing right for everyone? Not necessarily, as there are some drawbacks to keep in mind.

•   It’s time-consuming. Once you get your cash stuffing system in place, you can set it and forget it. But there is some upfront planning that’s required to get your system started, and you have to revisit it each month to restuff your envelopes.

•   You could still overspend. There’s no rule that says you can’t dip into one cash envelope to cover expenses for another envelope. That could make it all too easy to blow your budget.

•   Less protection. Losing a credit card or debit card is a pain, but there are built-in protections if someone uses your card to make unauthorized transactions. Cash, on the other hand, offers no such benefit. If you lose it or it’s stolen, it might be gone for good.

•   Missed opportunities for growth. Saving money is a good thing, and the cash stuffing method could help you do that. But you could be missing out on earning a great interest rate if you’re keeping all of your money in cash, versus depositing some of it into a high-yield savings account.

Pros of Cash Stuffing

 Cons of Cash Stuffing
Cash stuffing is a simple way to start budgeting money each month. Setting up your cash stuffing system initially can take time.
It could help you build a savings habit if you have money left over each month. Cash stuffing isn’t a guarantee that you won’t overspend.
Cash stuffing makes it easy to see where your money goes. Carrying cash can put you at greater risk for theft or losing money.
Using cash to spend can help you avoid high-interest credit card debit. Cash doesn’t have a chance to earn interest the way it would at a bank.

Tips on Getting Started With Cash Stuffing

If you’re ready to give cash stuffing a try, getting started isn’t that difficult. Here are a few tips for making the most of the cash stuffing budgeting method.

•   Review your budget, and break down all of your individual spending categories.

•   Decide which of those budget categories you want to use cash to pay for each month, noting which expenses you’ll pay for using your debit or credit card.

•   Calculate how much cash you should assign to each category, based on how much you’ve spent on average in the previous three to six months.

•   Choose the cash stuffing system that works best for you (i.e., cash envelopes, a budget binder, folders, etc.).

•   Decide which day of the month you’ll stuff your envelopes, based on when you get paid.

It’s also a good idea to give yourself a cash cushion when setting up a cash stuffing system. Depending on how regular your paychecks are, it may take a pay cycle or two to get used to stuffing envelopes. Keeping a few hundred dollars extra in checking that you don’t touch can help you cover any gaps in your budget until you’ve found your cash stuffing groove.

Alternatives to Cash Stuffing

Cash stuffing is one way to track and manage spending each month. If you’d rather not carry around cash, you could still apply the same basic premise in a different way.

Here are some alternatives to cash stuffing.

•   Use gift cards or prepaid debit cards. Instead of putting cash into separate envelopes, you could purchase gift cards for a set amount each month. For example, you might buy a gift card for $500 to your favorite grocery store in order to make a month’s worth of weekly food runs. That can keep you from overspending, without having to carry cash.

•   Try a budgeting app. Budgeting apps sync with your bank account and credit card accounts to track your spending. They also allow you to divide up expenses into individual budget categories each month. You could set your categories then assign each one a dollar amount, but instead of using cash, you’d use your debit card to pay for those expenses instead. (Your bank’s app may offer tools to help with this.)

•   Open a dedicated account. If you’d like to use a debit card to cover discretionary expenses, you might open a separate checking account just for that purpose. You could link it to the account where you deposit your paychecks, and then transfer over a set amount of money each payday. One thing to keep in mind, however, is that overspending could put you at risk of overdraft fees.

The Takeaway

Cash stuffing is one way to tackle the task of budgeting and to get in the habit of tracking spending regularly. It involves designating your discretionary spending categories, allocating your budget for those expenses, and then using cash (and only cash) to pay for those purchases. This can help you avoid overspending and high-interest credit card debt.

Having the right checking and savings account can help you manage your budget better, too.

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

Is cash stuffing better than debit cards?

Cash stuffing can be better than using debit cards in the sense that it forces you to keep track of what you spend. Using cash to pay requires you to be intentional or mindful with your money since you don’t have an unlimited amount of money to work with.

Is cash stuffing better than credit cards?

Cash stuffing can be preferable to credit cards if you’re worried about accumulating high-interest debt. When you pay with a credit card, you’re using the credit card company’s money, which has to be repaid later with interest. When you pay with cash, you’re not creating debt or incurring interest charges.

Is cash stuffing a fad or a long-term strategy?

Cash stuffing has become a viral trend, but the idea behind it is a tried and true budgeting method. It’s possible to use cash stuffing or cash envelope budgeting for the long-term to manage your money and keep tabs on what you’re spending each month.

About the author

Rebecca Lake

Rebecca Lake

Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.


Photo credit: iStock/MarsBars

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As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 3.80% 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 3.80% 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.

Separately, SoFi members who enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days can also earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. For additional details, see the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.

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Mar
21
2025

FDIC Insurance: What It Is And How It Works

By | Budgeting & Goals, money, Terminology | Comments Off on FDIC Insurance: What It Is And How It Works

When you deposit money into a bank, you expect it to be safe and accessible whenever you need it. But what happens if the bank itself runs into trouble or even goes out of business? That’s where the Federal Deposit Insurance Corporation (FDIC) comes in.

FDIC insurance is a crucial safety net that protects depositors’ funds in the rare event of a bank failure. This ensures that you don’t lose your money (up to certain limits) if a financial institution goes belly up.

But there are rules and limits surrounding FDIC insurance that are important for banking customers to understand. Read on for a closer look at what the FDIC is, what “FDIC insured” means, and how to make the most of the FDIC’s coverage.

Key Points

•   The FDIC protects depositors’ funds and ensures bank stability by offering insurance, monitoring banks, and managing failures.

•   The agency insures checking accounts, savings accounts, money market accounts, CDs, and certain retirement accounts and prepaid cards.

•   Coverage limits for FDIC insurance are $250,000 per depositor, per insured bank, and per account ownership category.

•   When a bank fails, the FDIC ensures quick access to insured funds, typically by transferring them to another bank or issuing a check.

•   Uninsured financial products like stocks, bonds, and crypto assets carry risks.

What Is the FDIC?

The FDIC is shorthand for the Federal Deposit Insurance Corporation. It’s an independent agency of the U.S. government that provides insurance to protect depositors’ money in case of a bank failure. You don’t need to apply for this insurance when you open a bank account — your deposits are automatically insured up to at least $250,000 at each FDIC-insured bank.

The National Credit Union Administration (NCUA) offers similar protection at credit unions.

History and Mission of the FDIC

The FDIC was created under the Banking Act of 1933 in response to the many bank failures during the Great Depression. In the early 1930s, the U.S. experienced one of the most severe banking crises in history. Thousands of banks failed, wiping out savings and triggering widespread financial panic. To prevent future economic disasters and protect the savings of ordinary Americans, Congress established the FDIC.

The FDIC officially began operations on January 1, 1934. Its initial insurance limit was $2,500 per depositor, which has been increased multiple times over the decades to reflect inflation and changing economic conditions. Today, the standard insurance coverage limit is $250,000 per depositor, per insured bank, for each account ownership category (more on exactly how this works below).

What Does the FDIC Do?

The FDIC plays a crucial role in the U.S. financial system by acting as both an insurer and a regulator.

Role of the FDIC in Maintaining Financial Stability

The FDIC’s primary responsibility is to safeguard depositors’ funds and ensure that banks operate in a sound and secure manner. It does this by:

•   Providing deposit insurance: By insuring deposits, the FDIC protects individual and business accounts from losses due to bank failures. Customers do not pay for this insurance; banks cover the cost of insurance premiums.

•   Conducting bank examinations: The FDIC regularly audits banks to ensure they are following sound financial practices and complying with federal regulations.

•   Managing risk: The FDIC monitors financial institutions for signs of instability and typically steps in to address problems before they lead to failure.

•   Handling bank failures: If a bank does fail, the FDIC ensures that depositors’ insured funds are quickly accessible. They often do this by transferring the funds to another bank or directly reimbursing depositors.

Recommended: What Are National Banks?

How the FDIC Protects Consumers

Thanks to FDIC insurance, the money you deposit in a checking account or savings account remains safe (up to certain limits), even if your bank goes out of business. In fact, no depositor has lost any insured money as a result of bank failure since the creation of FDIC insurance.

The FDIC’s protection extends beyond just insuring deposits, though. The agency also enforces consumer protection laws to prevent unfair practices by banks. These protections include:

•   The Truth in Lending Act, which requires banks to disclose the terms and costs of loans and credit products.

•   The Electronic Fund Transfer Act, which protects consumers when they use ATMs, debit cards, and electronic payment systems.

•   The Fair Credit Reporting Act, which regulates how banks use and share consumer credit information.

Through these regulations, the FDIC ensures that banks treat consumers fairly and transparently, and help foster trust in the financial system.

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Types of Accounts Insured by the FDIC

The FDIC covers common banking products, including checking accounts, savings accounts, and money market accounts. However, not all financial products qualify for FDIC coverage.

How to Tell if Your Money Is FDIC-Insured

To determine if a bank is FDIC-insured, you can ask a bank representative or look for the FDIC sign when visiting a branch. If you use an online bank, the company’s website should contain information about its coverage.

Another option is to use the FDIC’s BankFind tool. BankFind provides access to detailed information about all FDIC-insured institutions, including branch locations, the bank’s official website, and the current operating status of the bank.

Commonly Covered Accounts Under FDIC Insurance

The FDIC insures all deposit accounts at insured banks and savings associations up to the FDIC’s limits, including:
Checking accounts

•   Checking accounts

•   Savings accounts, including high-yield savings accounts

•   Money market accounts

•   Certificates of deposit (CDs)

•   Prepaid cards (if certain FDIC requirements are met; also note that funds are only insured in the event of bank failure, not loss or theft of card)

•   Certain retirement savings accounts (in which plan participants have the right to direct how the money is invested)

Types of Accounts Not Insured by the FDIC

While the FDIC protects many types of deposit accounts, not all financial products are covered. For example, investments in the stock market and other securities carry inherent risks, and the FDIC does not cover losses in these markets.

Examples of Uninsured Financial Products

Products that are not insured by the FDIC include:

•   Stocks

•   Bonds

•   Annuities

•   Crypto assets

•   Mutual funds

•   Municipal securities

•   Life insurance policies

•   The contents of a safety deposit box

How FDIC Insurance Works

Understanding how FDIC insurance works is essential to maximizing your coverage and protecting your assets.

Coverage Limits and How They Apply

FDIC insurance covers up to $250,000 per depositor, per institution, and per ownership category. But what exactly does that mean? Let’s break it down.

•   “Per deposit, per institution” refers to one person (the depositor) at one insured bank. If you own multiple deposit accounts at the same bank those deposits count towards the $250,000 limit. If you own accounts at two different banks, each account would have separate and full coverage.

•   “Per ownership category” generally refers to whether the account is owned by one person (single) or owned by two or more individuals (joint). (Other types of ownership categories include certain retirement accounts, employee benefit plan accounts, and business accounts.)

For example:

•   An individual with a checking account and a savings account at the same bank is insured for up to $250,000 across both accounts.

•   A couple with a joint account is insured for up to $500,000 ($250,000 per depositor).

•   A person with a checking account at one insured bank and a savings account at another insured bank is insured for up to $250,000 at each bank.

If you’re married and want to maximize your FDIC insurance, you and your spouse could each open individual accounts at one bank (resulting in each of you having up to $250,000 FDIC-insured), then also open a joint account (where each of you has $250,000 insured). Across all three accounts, you could have up to $1 million FDIC-insured at one bank.

If you’re not sure if all your cash on deposit at a bank is insured, the FDIC’s Electronic Deposit Insurance Estimator can show your specific deposit insurance coverage once you put in your account details.

What FDIC Insurance Does Not Cover

FDIC insurance does not cover:

•   Investment losses (stocks, bonds, mutual funds)

•   Losses due to bank fraud or theft

•   Funds held at non-FDIC-insured banks

•   Failure or bankruptcy of a non-bank

•   Business losses related to bank failure

What Happens if a Bank Fails?

When a bank fails, the FDIC steps in to protect depositors and minimize disruption to the financial system.

Steps the FDIC Takes to Protect Depositors

If a bank were to collapse, the FDIC would intervene in two ways:

Giving Customers Access to Their Funds

The FDIC would pay depositors up to the insurance limit to cover their losses. So, if you had $10,500 in an insured account and the bank failed, you would be reimbursed for that amount. Typically, this happens within a few days after a bank closes.

The FDIC may pay depositors by providing a new account at another insured bank for the insured amount they had at the failed bank, or by issuing a check for that amount.

In some cases, you may be able to receive amounts higher than the coverage limit, but there is no guarantee. If the failed bank is acquired by another institution, your uninsured funds may also be transferred. If the failed bank is dissolved, you typically need to file a claim with the FDIC to recoup uninsured funds.

Becoming the “Receiver” of the Failed Bank

The FDIC also takes responsibility for collecting the assets of the failed bank and settling its debts. As assets are sold, depositors who had more than the $250,000 limit in an insured account may receive payments on their claim, though this can take several years.

How to Recover Your Money if a Bank Fails

Recovering your funds after a bank failure is usually straightforward. Here’s how it works.

FDIC Claims Process Explained

Because of the FDIC safety net, you won’t likely see fearful customers lining up to get their money the way they did before deposit insurance was established.

Still, when a bank closes, it can cause depositors to worry and wonder how to get their money. Typically, there are one of two scenarios when a bank fails:

•   Most commonly, you would become a depositor at a healthy, FDIC-insured bank. You would have access to your insured funds at this new bank and could likely choose to keep your accounts there if you like.

•   If there is not a healthy, FDIC-insured bank that can step in quickly, the FDIC will likely pay the insured depositor by check within as little as a few days after the bank closes.

As for immediate next steps if you learn your bank is closing, the FDIC aims to post information as promptly as possible, or you can contact the agency at 877-ASK-FDIC or visit the FDIC Support Center website.

The Takeaway

Though it’s a rare occurrence, a bank can fail when it takes on too much risk. This means the bank can’t meet its financial obligations to its depositors and borrowers. If your bank is covered by FDIC insurance, you can receive reimbursement up to certain limits, meaning your funds aren’t lost for good. FDIC insurance covers checking accounts, savings accounts, money market accounts, CDs, and other deposit accounts.

The FDIC does not cover some of the other financial products or services offered by banks, including stocks, bonds, mutual funds, annuities, and securities.

Putting your money in a brick-and-mortar financial institution isn’t the only way to make sure it’s protected. Many online banks, including SoFi, are FDIC-insured.

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 3.80% APY on SoFi Checking and Savings.

FAQ

How often does a bank fail?

Currently, bank failure is relatively uncommon. Since January 2020, there have been 12 bank failures in the U.S., but only three of these were major banks.

In stable economic periods, bank failures tend to be rare due to strict regulations and oversight. If an insured bank does go under, the FDIC steps in to protect depositors by covering funds up to the standard limit. This ensures customers can access their money with little to no disruption.

How does the FDIC differ from the NCUA?

The FDIC (Federal Deposit Insurance Corporation) insures deposits at banks, while the NCUA (National Credit Union Administration) insures deposits at credit unions. Both provide up to $250,000 in coverage per depositor, per institution, and per account ownership category.

The FDIC is an independent government agency, while the NCUA is a federal agency overseeing credit unions. Although they serve similar functions, they apply to different types of financial institutions — banks (FDIC) and credit unions (NCUA).

How many banks are FDIC insured?

As of the third quarter of 2024, the FDIC (Federal Deposit Insurance Corporation) insured 4,517 banks and savings institutions in the U.S. The FDIC protects deposits up to $250,000 per depositor, per insured bank, per account category. The number of FDIC-insured banks has declined over time due to mergers and acquisitions, but the FDIC continues to monitor and regulate the banking system.

Are credit unions FDIC insured?

No, credit unions are not insured by the FDIC (Federal Deposit Insurance Corporation). Instead, they are insured by the NCUA (National Credit Union Administration), which provides similar protection for deposits up to $250,000 per depositor, per credit union, and per account type.

The NCUA operates the National Credit Union Share Insurance Fund (NCUSIF) and ensures that credit union members’ deposits are safe even if the institution fails, similar to how FDIC insurance protects bank customers.

Does FDIC insurance cover online banks?

Yes, FDIC insurance typically covers online banks just as it does traditional brick-and-mortar banks. This protects your deposits up to $250,000 per depositor, per insured bank, per ownership category, even if the online bank fails. You can confirm an online bank’s FDIC status by checking the FDIC website, the bank’s website, or contacting the bank directly.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2025 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 3.80% 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 3.80% 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 3.80% 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.

Separately, SoFi members who enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days can also earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. For additional details, see the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.

*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.

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Checking & Savings Fee Sheet for details at sofi.com/legal/banking-fees/.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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Mar
20
2025

Can You Get a Debit Card for a Savings Account?

By | money, Money & Life, Terminology | Comments Off on Can You Get a Debit Card for a Savings Account?

You usually can’t get a debit card for a savings account. Typically, debit cards are issued for checking accounts.

There’s a simple reason for that. Savings accounts are designed to hold money that you don’t plan to spend right away. Earning interest on deposits is the reward you get for adding money to your savings balance. Checking accounts, on the other hand, are designed for spending.

There’s a backdoor way to use a debit card for a savings account, but it requires you to have a checking account and transfer funds. Knowing the rules for debit cards and bank accounts can make it easier to manage your money.

Key Points

•  Savings accounts typically don’t come with debit cards; they are designed for holding money and earning interest.

•  Debit cards are often linked to checking accounts, which are meant for spending.

•  ATM cards can sometimes be issued for savings accounts, allowing limited access to funds.

•  Alternatives to debit cards for savings accounts include transferring funds to checking accounts or making in-person withdrawals.

•  Understanding the rules and limits of savings accounts can help you manage funds effectively.

What Accounts Offer Debit Cards?

Usually, you cannot get a debit card with standard or high-yield savings accounts. You can, however, get a debit card with other types of bank accounts, such as:

•  Traditional checking accounts

•  High-yield checking or interest checking

•  Money market accounts

•  Cash management accounts

•  Health savings accounts

You can find traditional checking accounts, high-yield checking, and money market accounts at traditional banks or online banks. Some banks also offer HSAs with a debit card so that paying for health care is easy and convenient.

A cash management account is a little different. These accounts, which you can find at a brokerage, blend features of savings and checking accounts. You can use them to pay bills, make purchases with a debit card, or hold funds that you plan to transfer into your investment account.

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 3.80% APY on savings balances.

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Debit Cards vs. ATM Cards

Debit cards and ATM cards may look the same at first glance, but there are some key differences between them.

•  A debit card is a PIN-enabled card that’s linked to a checking account or a money market account. You can use a debit card to make purchases, pay bills, or withdraw cash at ATMs. When you complete a debit card transaction, the money is deducted from your checking or money market account.

•  ATM cards are also PIN-based but they have less functionality than a debit card. You can use an ATM card to view your balance, withdraw cash, or make deposits at an automated teller machine. You cannot, however, use a debit card to make purchases.

Banks can issue ATM cards for checking accounts, though it’s more common to get a debit card instead. Some banks also offer ATM cards for savings accounts, though that’s more of an exception than the rule. If you have an ATM card for checking or savings, there may be an ATM withdrawal limit that dictates how much cash you can take out daily or weekly.

Accessing Your Savings Account Funds

If you want to access money in your savings account but don’t have a debit card, your options will depend on your bank’s policies. Generally, the alternatives can include:

•  You can use an ATM card if you’re issued one for transferring funds into a checking account and withdrawing from there. Or you can make a transfer on your financial institution’s website or in the app. That’s the backdoor method that was mentioned earlier. This process can be especially easy if you have linked checking and savings accounts at the same financial institution.

•  If you have a savings account at a traditional bank, you could also make withdrawals in person at the teller window.

When accessing savings account funds, it’s important to know what limits your bank imposes. For instance, it’s not uncommon for banks to limit you to six withdrawals from savings per month. If you go over that limit, the bank can charge an excess withdrawal fee for each additional transaction or convert your savings into a checking account.

Tips for Using Your Savings Account

Savings accounts are not meant to be complicated or confusing, but there are some rules to know about using them. These tips can help you make the most of your savings.

•  Choose the right bank to open a savings account. Online banks can offer higher interest rates on savings with fewer fees, compared to traditional banks. The trade-off is that you don’t have access to bank branches.

•  Know your limits. As mentioned, banks may limit you on the number of withdrawals you can make from savings per month. There may also be limits on how much you can transfer from savings to checking or withdraw in cash at a teller.

•  Link savings to checking. Linking your savings account to a checking account can make it easy to transfer funds between them. Just keep in mind that linking accounts is not an excuse to siphon away money from savings unnecessarily. This is especially true if your savings account is your emergency fund.

•  Automate deposits. Setting up automatic deposits to savings is an easy way to grow your balance. You can also use direct deposit to send some of your paycheck to savings or create a recurring transfer from checking to savings each payday.

If your bank offers an ATM card with a savings account, remember to check the ATM withdrawal limits. Also, it’s important to be aware of any added ATM fees you might pay for using another bank’s machine to withdraw cash.

Alternatives to Getting a Debit Card for Savings Accounts

If you can’t get a debit card for a savings account, you have some other options for managing your money. For instance, you could:

•  Link your savings account to a checking account (especially an interest-bearing one) for convenient transfers.

•  Set up a cash management account that combines features of a checking and savings account, including a debit card.

•  Open a money market account that includes a debit card and check-writing privileges.

•  You could also use a prepaid debit card to hold your savings. That can make it easy to access your money, but there are a few drawbacks. You won’t earn interest the way that you could with a savings account at a bank. Also, if your card is lost or stolen you might be out your entire savings if you don’t report the loss to the card issuer right away. Prepaid debit cards can also charge fees, which can nibble away at your savings balance.

These are some work-arounds since you usually can’t get a debit card with a savings account, and as you see, each can have its pros and cons.

The Takeaway

Savings accounts can help you set aside money toward your big (or small) financial goals. While you usually don’t get a debit card for savings accounts, you could still get a great rate for your money to make up for it. If you are determined to get something akin to a debit card with a savings account, you might look at such alternatives as money market or cash management accounts or link your checking and savings accounts for easy transfers and then withdrawals.

Another smart move: Bank with SoFi. We offer checking and savings in one convenient place, with debit card access.

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 3.80% APY on SoFi Checking and Savings.

FAQ

Do banks give debit cards for savings accounts?

Banks usually do not issue debit cards for savings accounts. Money market savings accounts may be an exception, as those can sometimes come with a debit card, paper checks, or both. Debit cards are most commonly associated with checking accounts.

Is there a card for a savings account?

A bank may offer an ATM card for a savings account. If you get a savings account with an ATM card, you could use your card to deposit or withdraw cash at ATMs. You would not, however, be able to make purchases with the card.

Can I use an ATM card to access my savings account?

You could use an ATM card to access a savings account if the bank issues one to you. If you don’t have an ATM card for your savings account, you may need to first transfer money to checking and then withdraw it using your debit card.

About the author

Rebecca Lake

Rebecca Lake

Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.


Photo credit: iStock/Miljan Živković

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2025 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 3.80% 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 3.80% 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 3.80% 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.

Separately, SoFi members who enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days can also earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. For additional details, see the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.

*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.

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Mar
19
2025

What is Transunion vs. FICO Score

By | Financial Topics, Terminology | Comments Off on What is Transunion vs. FICO Score

FICO® and TransUnion® are two terms affiliated with credit that you may be familiar with. TransUnion is a consumer credit reporting agency — one of the three major credit bureaus that maintains credit reports on most consumers. FICO generally refers to a FICO credit score, which is issued by the Fair Isaac Corporation and is one of the most popular types of credit scores.

Learn more on what TransUnion and FICO are, how they differ from each other, and why both are important when it comes to your credit profile.

Key Points

•   TransUnion is a credit reporting agency that collects and maintains consumer credit data, while FICO Score is a credit scoring model that analyzes this data to assess creditworthiness.

•   TransUnion provides credit reports with details like payment history and outstanding debts, while the FICO Score calculates a numerical credit score based on this information.

•   Lenders use TransUnion reports to review credit history and FICO Scores to gauge the risk of lending to a borrower.

•   TransUnion offers credit monitoring and identity theft protection services, while FICO focuses on developing scoring models for credit risk assessment.

•   Both affect loan approval decisions, interest rates, and financial opportunities, but consumers can improve their FICO Score by managing the data reported by TransUnion.

What Is a Credit Report?

Your credit report is a record that details your history of borrowing and repaying loans, as well as your use of credit. The three major credit reporting agencies — Equifax®, Experian®, and TransUnion — each compile consumer credit information, meaning many individuals have reports from all three.

Credit scores are usually determined based on the data in these reports. One way to build your credit is by enhancing the information reflected in your credit report.

Check your credit score for free. Sign up and get $10.*

and get $10 in rewards points on us.

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What Is TransUnion?

TransUnion is a leading global credit reporting agency that collects and manages consumer credit data to help lenders and businesses assess credit risk. Alongside Equifax and Experian, TransUnion is one of the three major credit bureaus in the United States. It compiles information such as payment history, credit utilization, and outstanding debts, which are used to generate credit reports for individuals and businesses.

In addition to providing credit reports, TransUnion offers services like credit monitoring, fraud protection, and identity theft prevention.

Recommended: Which Credit Bureau Is Used Most?

What Is a FICO Score?

A FICO Score is a widely used credit scoring model developed by the Fair Isaac Corporation to assess an individual’s creditworthiness. It is calculated based on factors such as payment history, credit utilization, length of credit history, types of credit accounts, and new credit inquiries.

Ranging from 300 to 850, a higher FICO Score indicates lower credit risk, making it easier for borrowers to qualify for loans and secure favorable interest rates.

Difference Between TransUnion vs. FICO

The key difference between TransUnion and FICO is their roles in the credit industry. TransUnion is a credit reporting agency that collects and maintains consumer credit data, such as payment history, debts, and credit accounts, and provides credit reports. On the other hand, FICO is a credit scoring model that uses the data from credit reports, including those from TransUnion, to generate a numerical score assessing a person’s creditworthiness.

Credit scores and credit reports are two different things, although they are similar. TransUnion, along with the other two major credit reporting agencies — Experian and Equifax — created the VantageScore® credit score model in 2006. When you compare VantageScore vs. FICO, you are comparing apples to apples, as these are two different credit score models.

How Credit Scores Are Calculated

There are many different types of credit scores, calculated by different companies. Each company may use a different formula or different information. Some companies may provide their specific criteria, while others may keep that information proprietary. The Fair Isaac Corporation lists five factors that affect your FICO score:

•   Payment history (35%)

•   Amounts owed (30%)

•   Length of credit history (15%)

•   Credit mix (10%)

•   New credit (10%)

Lowering your credit card utilization is one way that you may be able to build your credit score.

Why Are There Different Scores?

There are different types of credit scores because there are different companies that provide and promote these scores. Each company creates credit scores because they believe they have a better model for defining credit risk, and can sell that model to a bank, credit union, or spending app. The good news is that most of these credit score companies use similar information, which means that each of your credit scores should usually be within a few points of each other.

How to Check a TransUnion Credit Report

If you want to check your TransUnion credit report, follow these steps:

•   Visit the TransUnion website: Go to TransUnion’s official site at www.TransUnion.com.

•   Create an account: Sign up for an account by providing personal details such as your name, address, Social Security number, and date of birth.

•   Request a credit report: Once your account is set up, you can access your credit report for free once a year through AnnualCreditReport.com or request it directly from TransUnion.

•   Review the report: Look through your credit report for any inaccuracies or unfamiliar accounts that could be signs of identity theft.

•   Dispute errors: If you find mistakes, use TransUnion’s online platform to file a dispute for corrections.

How to Check a FICO Score

If you want to check your FICO Score, you can do so in a variety of ways:

•   Check with your credit card issuer: Many credit card companies, like Discover and American Express, offer free FICO scores to customers.

•   Visit MyFICO.com: The official FICO website provides access to multiple score versions for a fee.

•   Use free credit monitoring services: Platforms like Experian offer free access to your FICO Score.

•   Contact your bank or credit union: Some banks and credit unions provide FICO scores as part of their customer benefits.

Recommended: Free Credit Score Monitoring with SoFi

The Takeaway

TransUnion is one of the three major credit bureaus that produces credit reports. FICO Scores, on the other hand, are credit scores produced by the Fair Isaac Corporation and are one of the most popular forms of credit scores, used by 90% of top lenders.

While credit reports (such as TransUnion) and credit scores (such as FICO) are similar, they have different roles when it comes to evaluating your credit.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

See exactly how your money comes and goes at a glance.

FAQ

Is the FICO Score more important than TransUnion?

Many lenders use your FICO Score as a way to determine whether they will extend you credit, such as a new credit card. If you are applying for a new loan or a mortgage, a bank or credit union may pull your full credit report from a credit bureau such as TransUnion, Equifax, or Experian.

Do lenders look at FICO or TransUnion?

Whether a lender looks at just your credit score (such as your FICO credit score) or your full credit report (such as from TransUnion) will depend on why they are interested in you. Often, if you are applying for a credit card or something with a smaller balance, they may only look at your credit score. If you are applying for a mortgage or something with a larger credit line, the lender may look at your full credit report.

Is TransUnion the correct credit score?

TransUnion is not actually a credit score — TransUnion is a credit bureau that provides a credit report. It is one of the three major credit bureaus in the United States, along with Equifax and Experian. Lenders may pull a credit report from Equifax, Experian, or TransUnion, depending on a number of different factors that are generally out of your control as a consumer.

Is FICO owned by TransUnion?

No, FICO credit scores are issued by the Fair Isaac Corporation. TransUnion is a separate company that is primarily focused on issuing credit reports. TransUnion issues credit score updates when new information is received that is relevant to your credit report.

What is a good FICO Score?

FICO scores are typically categorized into five levels, ranging from poor to exceptional. A FICO Score between 670 and 739 is considered good. Scores falling within the very good range (740 to 799) or the exceptional range (800 to 850) are even more favorable.

Which credit score is most accurate?

No single credit score is considered more accurate than another. Instead, different credit scores offer unique insights into a consumer’s spending and borrowing patterns. Because of this, banks and lenders may rely on different scoring models based on what they find most relevant or predictive for their needs.

photo credit: iStock/tolgart
SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

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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Mar
19
2025

What Is FICO Score 8 vs. FICO Score 9?

By | Credit, relay, Terminology | Comments Off on What Is FICO Score 8 vs. FICO Score 9?

FICO® Scores, issued by the Fair Isaac Corporation, are one of the most popular types of credit scores. FICO Scores were first introduced in 1989, and there are currently 16 distinct FICO versions in use today. FICO Score 8 and FICO Score 9 are two of the more popular versions (or models).

Keep reading to learn more on FICO Score 8 and FICO Score 9, including how each works, how they differ, and which score lenders use the most.

Key Points

•   FICO Score 8 remains more widely used by lenders, while FICO Score 9 adoption is increasing but not yet universal.

•   FICO Score 9 provides a more comprehensive evaluation of a borrower’s creditworthiness due to its updated scoring model.

•   FICO Score 9 reduces the impact of medical debt on credit scores, unlike FICO Score 8, which treats all collection accounts similarly.

•   FICO Score 9 disregards paid collection accounts, whereas FICO Score 8 still considers them.

•   Your scores on both models should be relatively similar, as all FICO Scores take into account payment history, amounts owed, length of credit history, credit mix, and new credit.

What Are FICO Scores?

A FICO Score is a type of credit score produced by the Fair Isaac Corporation. They list five factors that can affect your FICO score:

•   Payment history (35%)

•   Amounts owed (30%)

•   Length of credit history (15%)

•   Credit mix (10%)

•   New credit (10%)

Your FICO Score is a three-digit number that ranges from 300 to 850, and can help lenders decide how much of a credit risk you might be. Lowering your credit card utilization is one way that you may be able to build your credit score.

Recommended: 10 Strategies for Building Credit Over Time

Why There Are Different FICO Score Versions

While the Fair Isaac Corporation does share the broad information that makes up a FICO Score, they do not share exactly what goes into a FICO Score. The same is true of other companies that produce credit scores. When you look at VantageScore vs. FICO Scores, for example, you may find that the same person has varying scores, though they’re usually fairly close across all scoring companies.

FICO is constantly tweaking its model to make it as predictive as possible, which is why there are multiple FICO Score versions used.

Check your credit score for free. Sign up and get $10.*

and get $10 in rewards points on us.

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How Different FICO Score Versions Are Used

Different FICO Score versions are used depending on the type of loan and the lender’s preferences. Here’s a breakdown:

FICO Score 8 (Most Common)

•   Widely used for credit card approvals, auto loans, and personal loans

•   Known for being sensitive to high credit card utilization

FICO Score 9 (Improved Model)

•   Used by some lenders for personal loans and credit cards

•   More lenient on medical debt and paid collection accounts

•   Incorporates rent payment history, if reported

FICO Score 2, 4, and 5 (Mortgage Scores)

•   Specifically used in mortgage lending

•   Required by Fannie Mae and Freddie Mac for home loans

•   Older models that focus heavily on payment history and derogatory marks

FICO Auto Score 8 & Auto Score 9

•   Tailored for auto loan approvals

•   Gives more weight to auto loan payment history

FICO Bankcard Score 8 & Bankcard Score 9

•   Used for credit card approvals

•   Score ranges from 250 to 900

•   Places more emphasis on credit card behavior and revolving credit usage

FICO Score 10 and 10T (Newest Versions)

•   Not yet widely adopted

•   FICO 10T incorporates trending data, which looks at credit usage patterns over time

•   More predictive and accurate, but lenders are slow to switch due to compatibility issues

Lenders choose specific versions based on the type of risk they want to assess and the industry standards they follow.

Key Features of FICO Score 8

FICO Score 8 is one of the most widely used credit scoring models by lenders to assess a borrower’s creditworthiness. It places a strong emphasis on payment history and credit utilization, with late payments and high credit card balances significantly impacting the score.

Additionally, FICO Score 8 does not differentiate between paid and unpaid collection accounts. This model is favored for its balanced approach to evaluating risk while helping lenders make more accurate lending decisions.

Key Features of FICO Score 9

FICO Score 9 introduces several enhancements over FICO Score 8, offering a more refined assessment of creditworthiness. It disregards paid collection accounts, which can positively impact borrowers who have settled past debts. Additionally, it reduces the negative impact of medical collections compared to other types of debt.

The model also incorporates rental payment history when reported, providing an opportunity for renters to build credit. These improvements aim to provide a fairer and more accurate reflection of a consumer’s financial behavior, helping lenders make better-informed decisions.

Which Do Lenders Use More: FICO Score 8 or FICO Score 9?

Lenders predominantly use FICO Score 8 for most credit decisions, as it’s the most widely adopted version of the FICO Score. FICO Score 9 is newer and includes some improvements. As of now, though, many lenders still rely on FICO Score 8 because it has been in use longer and has a more established track record.

Major Differences Between FICO Score 8 and FICO Score 9

FICO Score 8 and FICO Score 9 are two different models of the FICO Score credit score model. Here’s a look at the major differences between FICO Score 8 and FICO Score 9:

Medical Debt:

•   FICO Score 8: Treats medical debt the same as other types of debt, potentially lowering your score.

•   FICO Score 9: Excludes medical debt from the score if it’s paid off, making it less impactful once paid.

Collection Accounts:

•   FICO Score 8: Does not differentiate between types of collections, meaning both paid and unpaid collections can harm your score.

•   FICO Score 9: More lenient on paid collection accounts, which won’t negatively impact the score once they’re settled.

Rent Payment History:

•   FICO Score 8: Does not consider rent payments when calculating the score.

•   FICO Score 9: Includes rent payment history if it’s reported, which can benefit renters with a positive payment history.

Authorized User Accounts:

•   FICO Score 8: Considers authorized user accounts as part of the score, even if the primary account holder is not using the card responsibly.

•   FICO Score 9: De-emphasizes authorized user accounts to avoid inflating scores based on potentially inactive accounts.

Credit Utilization:

•   FICO Score 8: Focuses on credit utilization ratios, especially for credit cards, to assess creditworthiness.

•   FICO Score 9: Similar in its approach to credit utilization, but may calculate this slightly differently to reflect more accurate borrower behavior.

Overall, FICO Score 9 offers a more updated approach to certain types of debt and credit behaviors compared to FICO Score 8, but FICO Score 8 is still more commonly used.

How to Check Your FICO Scores

You have a few options to check your credit report and score, including ways to check your credit score without paying. Here are some ways to check your FICO Scores:

•   Check with your credit card issuer: Many credit card companies, like Discover and American Express, offer free FICO scores to customers.

•   Visit MyFICO.com: The official FICO website provides access to multiple score versions for a fee.

•   Use free credit monitoring services: Platforms like Experian offer free access to your FICO Score.

•   Contact your bank or credit union: Some banks and credit unions provide FICO scores as part of their customer benefits.

Recommended: Free Credit Score Monitoring with SoFi

The Takeaway

FICO scores, produced by the Fair Isaac Corporation, are one of the more popular types of credit scores used by 90% of lenders. FICO Score 8 and FICO Score 9 are two different versions of the FICO score model.

According to the Fair Isaac Corporation, FICO Score 8 is still the most widely used version of the FICO score, and FICO Score 9 is also still widely used by lenders, even though both models have been available for over a decade.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

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FAQ

Is FICO 8 or FICO 9 better?

FICO 9 is considered an improvement over FICO 8, as it reduces the impact of medical debt, disregards paid collections, and includes rental payment history if reported. However, FICO 8 remains widely used by lenders, so its relevance depends on the lender’s preference and the borrower’s financial situation.

What is a good FICO 8 score?

A good FICO 8 score typically falls between 670 and 739. This range indicates that a borrower is considered low-risk by lenders, which can lead to better loan terms and interest rates. Scores above this range are considered very good or excellent, further enhancing borrowing opportunities and financial benefits.

Which FICO score is most important?

The different FICO score models are similar, and none is considered to be more important than any others. Different lenders may use different FICO score models depending on which model they find most advantageous for their purposes.

Is FICO score 8 still used?

Yes, even though FICO Score 8 was first introduced in 2009, it is still widely used in the lending industry. However, over time, lenders will likely start migrating to newer FICO scoring models, such as FICO Score 9, FICO Score 10, and FICO Score 10T.

Is a FICO score of 8 good to buy a house?

It is important to understand that FICO Score 8 refers to the eighth version of the FICO credit scoring model, and not to an actual FICO Score of 8. FICO scores have a minimum of 300, so it is impossible to have a FICO Score of 8. To buy a house with a mortgage, you will likely need to have a FICO Score in the good range (meaning a score of at least 670), though requirements vary by lender.

Do any lenders use FICO 9?

Yes, some lenders use FICO Score 9, especially for personal loans and certain types of credit evaluations. However, FICO Score 8 remains the most widely used version. FICO 9 enhances rental payment reporting and reduces the impact of medical debt, making it appealing for specific lending situations.

Photo credit: iStock/milorad kravic

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