Terminology Archives

Sep

2025

What Is a Student Checking Account?

By Janet Siroto | Financial Topics, Going to College, Growing Wealth, Life & Career, Life Stages, Terminology, Tools & Calculators | Comments Off

A student checking account is a bank account that is specially designed for students in their teens and early 20s. This type of account typically offers the same tools as a regular checking account, like a debit card and checks, but may have lower fees and minimal balance requirements to make banking more accessible for young adults. Some student bank accounts may also offer extra perks like sign-on bonuses and financial education tools tailored to students.

But student bank accounts also come with some limitations, such as low or no interest and certain eligibility requirements, so it’s important to weigh the pros and cons before choosing this type of account. Here are key things to know about student checking accounts, including their requirements and costs, and how they compare to traditional checking accounts.

Key Points

• Student checking accounts can offer students a secure, user-friendly, and low-cost way to handle their finances while they’re in school.

• Student bank account features can include no account, ATM, or overdraft fees, along with perks like financial education programs and cash back.

• To open a student checking account, you typically need to provide personal details and proof of school enrollment.

• Students under age 18 may need a parent or guardian to co-own and cosign their student bank account.

• After graduation, a financial institution may automatically convert a student checking account to a standard checking account.

What Are Student Checking Accounts?

A student checking account is a type of bank account tailored specifically for students, typically those in college. These accounts function similarly to traditional checking accounts but come with benefits tailored to young adults who may be new to banking.

Like a standard checking account, a student checking account allows you to easily deposit, withdraw, and transfer funds. These accounts typically offer a debit card, checks, mobile banking, and ATM access to facilitate shopping and bill paying. Some checking accounts may also pay a small amount of interest (especially if your account is with an online bank).

Unlike traditional checking accounts, however, student bank accounts are generally limited to students and usually require proof of enrollment in school. They also tend to charge lower and fewer fees compared to traditional accounts, along with lower balance requirements. In addition, some student accounts offer additional benefits, such as rewards programs and overdraft forgiveness.

Student Checking Account Features

Here’s a closer look at the features that a typical student checking account may offer:

• Low (or no) minimum balance requirements: Typically, students are not required to maintain a high balance in order to avoid monthly fees or keep the account open.

• Free ATM access: Many banks provide fee-free access to a large network of ATMs, making it easy to access funds whether you’re on campus or home for the summer.

• Overdraft protection: You may have the option to link your checking account to a savings account or receive alerts to prevent overdrafts. Some student accounts also forgive overdrafts, which means you won’t be hit with a fee if you accidentally overdraft your account.

• Mobile and online banking: Once you set up your account, you can typically check your balance, make payments, and transfer funds on the go via an app or online platform.

• Debit card access: Debit cards are linked to your checking account and allow you to make purchases (both online and in-store), as well as withdraw cash at ATMs.

• Direct deposit: A student checking account will typically allow you to have your paychecks or financial aid directly deposited into the account, which can give you faster access to your funds.

• Rewards programs: Many student checking accounts offer cash back on purchases made with your debit card, which can help you save money on everday expenses.

• Financial education resources: A student account often comes with tools to help students budget, save, and track expenses.

Recommended: Savings Account Calculator

Who’s Eligible to Open a Student Checking Account?

Student checking account eligibility requirements can vary among financial institutions. In general, these accounts are limited to certain age groups, which can be anywhere from age 13 to 25. If you’re below the age at which you can open a bank account, which is age 18 in most states, you will likely need to open a joint student account with a parent, guardian, or another adult.

To open a student bank account, you must typically also be a current student. This generally means full-time enrollment but some banks may allow part-time students to open a student bank account. Either way, you will likely need to provide proof of enrollment to be approved for a student account.

When you graduate school and/or age out of a student checking account, the financial institution may automatically convert your student account into a standard checking account.

Recommended: How to Deposit a Check

Pros and Cons of Student Checking Accounts

Student checking accounts come with numerous benefits, but also a few downsides. Here’s a look at how the pros and cons stack up.

thumb_up

Pros:

• No or low monthly fees

• No or low minimum deposit required

• No or low minimum balance requirements

• No or low fees for overdrafting

• May offer exclusive student perks

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Cons:

• Must meet eligibility criteria

• May need to open the account in person

• Joint account holder may be required

• Pays little or no interest

• Account conversion after graduation

Advantages of Student Checking Accounts

• Waived or discounted monthly fees: Banks will often waive or reduce monthly maintenance fees for student checking accounts.

• Low or no initial deposit: You may be able to open a student checking account with a small, or no, initial deposit.

• Reduced minimum balance requirements. You may avoid being charged a fee or having your account closed due to not having a certain amount of money in your account.

• Lower (or no) penalties for overdrafts: A student account will often charge reduced penalties for overdrafts compared to traditional accounts. Some student accounts may not charge any overdraft fees.

• Special perks: Some accounts come with exclusive benefits like cash back rewards, student sign-up bonuses, and educational resources tailored for students.

Disadvantages of a Student Bank Account

• Limited availability: Only students can apply, and eligibility ends after graduation or when you turn a certain age.

• May need to visit a branch: While some banks allow you to apply for a student account online, many require you to come into a branch and apply in person.

• Low or no interest on deposits. As with a traditional checking account, student checking accounts generally pay little to no interest on any money sitting in the account.

• You may need a cosigner: Some banks only allow students (especially those under age 18) to open a joint account with a parent or a guardian. This means you may need an adult to cosign your student account when you open it.

• Potential conversion fees: Once you’re no longer a student, or turn a certain age (such as 25), the account may be converted into a regular checking account and start charging monthly fees.

How to Choose Between Different Student Checking Accounts

Choosing the right student checking account involves understanding your needs and finding the right match. Here are some considerations:

• Can you open the account on your own, or will you need a joint account holder due to your age?

• What are the requirements in terms of your school enrollment status?

• What are the monthly fees, if any?

• Will your money on deposit earn any interest? If so, how much?

• How much is the minimum initial deposit when opening the account?

• Must you maintain a certain balance in the checking account to avoid fees?

• What happens if you overdraft your account?

• Is there a sign-up bonus or are any rewards (such as cash back for using your debit card)?

• What kinds of financial education programs are available in conjunction with the student checking account?

• Does the bank have branches and/or ATMs in convenient locations?

• Will your account automatically become a standard checking account when you finish your education or age out of the student checking account?

How to Open a Student Bank Account

Once you’ve figured out which bank is your choice for a student account, you’ll typically follow these steps to open a checking account:

• Find out if you can sign up online or if you need to apply in person at a branch, and whether or not you’ll need an adult cosigner.

• Provide your personal information (such as your home address, phone number, and Social Security number) and school information (e.g., school name, address, and phone number).

• Provide a driver’s license, a student ID, or another official photo ID.

• Supply proof of enrollment in a school (if required). This might be a school report card, transcript, or acceptance letter, or your student ID.

• Have your cosigner provide their information (if required).

• Make an initial deposit (if required). Some banks require an initial deposit of $10 or $25; others may allow you to open your account without any cash at first.

Once your application is reviewed and approved, you may be able to start using your account right away. However, it can take up to 10 days or longer for your debit card and paper checks to arrive in the mail. Once that happens, you’re all set to start fully using your student banking account — congrats!

The Takeaway

A student checking account can be a great tool for a young person learning how to manage their finances. With features like low fees, mobile banking, and overdraft forgiveness, these accounts can provide the flexibility and convenience students need. However, it’s important to shop around and compare different options, understand the terms, and prepare for the transition to a regular checking account after graduation.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible 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

Do student checking accounts charge monthly fees?

Many student checking accounts do not charge monthly fees. Banks will often waive or reduce maintenance fees as a benefit to students, helping them manage their finances without extra costs. Some banks will also waive or discount other fees, such as overdraft and ATMs fees, for students. However, it’s important to read the account terms carefully to understand any potential charges before you open a student checking account.

Can I open a student checking account if I’m an international student?

International students are often eligible to open a student checking account in the U.S. Requirements vary by bank but you may need to provide both a foreign and U.S. address, two forms of ID (such as a passport, U.S. student ID, and/or foreign driver’s license), and a foreign tax identification number (FTIN). It’s a good idea to check with specific banks to determine their policies for international students.

What happens to a student checking account after you graduate?

After your scheduled graduation date, your student checking account will likely convert into standard checking accounts, which may include monthly maintenance fees and different account terms. Some banks offer a grace period of a few months post-graduation before making the transition. To avoid unexpected fees, it’s important to check with your bank about post-graduation policies and consider switching to an account that offers benefits that are better suited to your financial situation.

photo credit: iStock/Iryna Melnyk
SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. 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.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible 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 (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, 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 Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

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SOBNK-Q125-007

Sep

2025

Discretionary Income and Student Loans: Why It Matters

By Sulaiman Abdur-Rahman | Fresh Out of School, Student Loans, student_loan, Terminology | No Comments

Knowing what your discretionary income is (and how discretionary income is calculated for student loans) can help you make decisions about how to best repay your federal loans. That’s because the federal government typically uses discretionary income, which is any adjusted gross income (AGI) you have above a certain percentage of the federal poverty guideline, to determine your monthly payments for income-driven repayment (IDR) plans.

However, because of recent legislation, the options for income-driven plans — and the way monthly payments will be calculated — will be changing. For example, the new Repayment Assistance Plan (RAP) starting in July 2026 won’t use discretionary income to calculate payments. It instead looks at AGI, which could result in higher payments for some borrowers.

Here, we’ll discuss different IDR plans and the ins and outs of discretionary income, as well as upcoming changes to student loan repayment options, so you can figure out a repayment strategy that works for you and your budget.

Table of Contents

What Is Discretionary Income?
How Does Discretionary Income Affect Student Loan Payments?
How Else Can Borrowers Lower Their Student Loan Payment?

Key Points

• Discretionary income, calculated by subtracting a protected amount from adjusted gross income, is important for determining monthly student loan payments under current federal repayment plans.

• The IBR plan defines discretionary income as income above 150% of the federal poverty guideline, potentially allowing for $0 payments for borrowers under specific income thresholds.

• Income-driven repayment plans can lower monthly payments but may extend loan terms significantly, resulting in more interest paid over time compared to standard repayment options.

• Borrowers must recertify their income and family size annually, affecting their monthly payment amounts based on changes in financial circumstances.

• Refinancing student loans with private lenders can lower payments but forfeits access to federal benefits like income-driven repayment plans and potential loan forgiveness.

What Is Discretionary Income?

The Department of Education (Ed Dept) calculates discretionary income as your adjusted gross income (AGI) in excess of a protected amount defined by a federal IDR plan.

Discretionary income under the Income-Based Repayment (IBR) Plan, for example, is any AGI you have above 150% of the federal poverty guideline appropriate to your family size. If you don’t qualify for a $0 monthly payment on the IBR Plan, your monthly payment is set to 10% or 15% of your discretionary income, depending on when you borrowed your loans.

Discretionary income as defined by the Ed Dept is different from disposable income, which is the amount of money you have available to spend or save after your income taxes have been deducted.

How Is Discretionary Income Calculated?

This is how federal student loan servicers may currently calculate your discretionary income on an income-based student loan repayment plan:

• Discretionary income under IBR is generally calculated by subtracting 150% of the federal poverty guideline from your AGI.

• Discretionary income under the Income-Contingent Repayment (ICR) Plan is generally calculated by subtracting 100% of the federal poverty guideline from your AGI.

If you’re filing jointly or you have dependents, that will impact your discretionary income calculations. For married couples filing together, your combined AGI is used when calculating discretionary income. Under an income-driven plan, filing with a spouse can drive up your income-driven monthly payments because of your combined AGI.

If you file separately, your student loan payments will be based on your income alone. However, you may lose some tax benefits, so you’ll have to weigh the pros and cons of this approach to determine which makes more sense for your finances.

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What Income-Driven Repayment Plan Are You Eligible For?

There are now three federal IDR plans that have different eligibility criteria and terms. (There are two others that are no longer accepting new enrollments.) These income-driven repayment plans can reduce monthly payments for people with incomes below a certain threshold.

It should be noted that federal IDR plans don’t apply to private student loans. They’re only an option for federal student loans.

Income-Driven Repayment Plans for Federal Student Loans

The Ed Dept offers the following IDR options for eligible federal student loan borrowers:

• Income-Based Repayment (IBR) Plan

• Pay As You Earn (PAYE) Plan

• Income-Contingent Repayment (ICR) Plan

All current IDR plans generally use discretionary income to determine monthly payments. If there is a change in a borrower’s income or family size, their monthly payment could increase or decrease, depending on the change. Borrowers enrolled in an IDR plan are typically required to recertify their income and family size each year.

For the IBR and PAYE plans, eligibility is determined based on income and family size. As a general rule, to qualify, borrowers must not pay more under IBR or PAYE than they would under the 10-year Standard Repayment Plan. There’s no income requirement for the ICR plan.

Due to the recent legislation, borrowers who consolidated their Parent PLUS Loans into Direct Consolidation Loans are newly eligible for IBR if they enrolled in the ICR plan immediately.

Also because of the legislation, the PAYE and ICR plans will be eliminated in the coming years. For borrowers taking out their first loans on or after July 1, 2026, there will be only one income-driven plan: the Repayment Assistance Program. RAP will set borrowers’ payments at 1% to 10% of their AGI, rather than using discretionary income.

Pros and Cons of Income-Driven Repayment Plans

IDR plans come with trade-offs. While they can lower your monthly payment and help free up your cash flow now, they may extend the life of your loan. The standard student loan repayment plan is based on a 10-year repayment timeline. Current income-driven repayment plans can extend your payment timeline to up to 25 years. And the RAP plan to be introduced in 2026 extends the payment timeline to 30 years.

This means you’ll be paying off the loan longer and possibly paying more in interest over time. If you stay on the IBR plan, the government might forgive any remaining balance after 20 or 25 years of payments. On RAP, the amount may be forgiven after 30 years. But the amount that is forgiven on these plans may be taxed as income.

Navigating the changes to IDR plans can be complicated. PAYE and ICR are due to close by July 1, 2028, so you may have to switch to IBR or the new RAP plan in the next few years. And as noted above, for borrowers who take out loans after July 1, 2026, RAP will be the only income-driven option.

How to Apply for an IDR Plan

To apply for an IDR plan, you can go to StudentAid.gov and log into your account using your Federal Student Aid (FSA) ID. The online application is estimated to take no more than 10 minutes to complete. (If you prefer, you can download a paper application to fill out and then send it to your loan servicer.)

To fill out the application, you’ll need to supply your address, email address, and phone number, as well as information about your family size. You will also need to provide your most recent income tax return (a tool on the site can link your tax information to the application).

Once you complete the application you will see which IDR plans you qualify for. You can select one and then sign the form and submit it. Your loan servicer should send you an email or letter confirming receipt of the application. The servicer will notify you when your application has been processed.

How Does Discretionary Income Affect Student Loan Payments?

Income-driven repayment plans currently use your discretionary income to dictate the amount you’re required to repay each month. In the case of borrowers enrolled in the IBR Plan, payments are set at 10% of discretionary income for loans borrowed after July 1, 2014, and 15% for loans borrowed before that date. On the PAYE plan, payments are set at 10% of discretionary income. On ICR, payments are 20% of discretionary income.

Examples of Monthly Payment Calculations

To calculate your monthly payments on an IDR plan, you’ll need your adjusted gross income (plus your spouse’s if you file a joint return) and your family size, which includes the number of dependents you have, such as your children.

Next, find the federal poverty guideline for your family size and state, and multiply that number by 150%. Subtract this amount from your AGI to get your discretionary income. Your payment on IBR will be 10% of that amount.

Here’s an example:

Let’s say your AGI (plus your spouse’s) is $100,000.

Your family size is 3 (you, your spouse, and one child).

The federal poverty guideline for you is: $26,650.

Using that information, the calculation would look like this:

$26,650 x 1.50 (150%) = $39,975

$100,000 – $39,975 = $60,025

$60,025 x 0.10 (10%) = $600.25

Your payments on the IBR plan would be $600.25 per month.

To get an official payment amount, you can use the Federal Student Aid Loan Simulator to determine your payments.

Annual Recertification Requirements

IDR certification is typically required annually, and you’ll need to recertify your income and family size. This is mandatory even if there has been no change to your situation or income. If you fail to recertify, there may be negative consequences, such as higher monthly payments or even loss of eligibility for IBR.

You’ll be given a recertification deadline, and you’ll need to recertify by that date. As part of the process, you’ll include your family size as well as your most recent federal income tax return. You can recertify online.

If you gave the Ed Dept permission to access your federal tax information when you first applied for IDR, your yearly certification will be automatic. The Ed Dept will notify you about any change to your monthly payment amount.

How Else Can Borrowers Lower Their Student Loan Payment?

Besides IDR, there are other strategies borrowers can use to help lower their monthly student loan payments. These include:

Student Loan Refinancing

Borrowers may be able to reduce their student loan payments by refinancing student loans. With student loan refinancing, you take out a new loan with new terms from a private lender. The new loan is used to pay off your existing student loans.

Depending on your credit and financial profile, refinancing could result in a lower interest rate or a lower monthly payment depending on which terms you choose. Just be aware that you may pay more interest over the life of the loan if you refinance with an extended term.

Refinancing federal student loans with a private lender also forfeits your access to federal IDR plans, Public Service Loan Forgiveness, and Teacher Loan Forgiveness.

To find out how much you might be able to save with refinancing, try our student loan refi calculator.

Extended and Graduated Repayment Plans

Another option for current federal student loan borrowers is to consider the Extended Repayment Plan or the Graduated Repayment Plan to help lower their monthly payments.

To qualify for the Extended Repayment Plan, you must have more than $30,000 in outstanding Federal Direct Loans or Federal Family Education Loans (FFEL). Monthly payments on this plan are typically lower than payments of the standard 10-year repayment plan because borrowers have a longer period of time — up to 25 years — to pay them off. However, this means you’ll pay more in interest over the extended term.

Due to the recent legislation, the Extended Repayment Plan will be closed to new borrowers as of July 1, 2026. Current borrowers on the plan will continue to make payments on their extended term.

The Graduated Plan allows borrowers to pay off their loans over 10 years. Payments typically start out relatively low and increase gradually (usually every two years). The plan may be right for you if your income is low, but you expect it to rise.

The Graduated Repayment Plan is eligible to most current borrowers, however, the plan will be closed to new borrowers as of July 1, 2026. Borrowers currently on the plan can continue to make payments on the graduated timetable.

Applying for Deferment or Forbearance

You might also be able to qualify for a deferment or forbearance, allowing you to temporarily stop or reduce your federal student loan payments. Reasons you can currently apply for deferment include being in school, in the military, or unemployed. However, as part of the new domestic policy legislation, economic hardship and unemployment deferments will be eliminated for student loans made on or after July 1, 2027.

If you’re in deferment and you have certain federal loans, such as Direct Subsidized Loans, you typically won’t have to pay the interest that accrues during the deferment period.

You could apply for student loan forbearance if your federal student loan payments represent 20% or more of your gross monthly income, you’ve lost your job or seen your pay reduced, or you can’t pay because of medical bills, among other reasons. Note that interest accrues on your loans while they are in forbearance. As part of the new legislation, forbearance will be capped at nine months in any 24-month period beginning on July 1, 2027 for new borrowers.

The Takeaway

The government uses discretionary income to calculate your federal student loan monthly payments under a qualifying IDR plan. IBR and PAYE use a more generous formula to calculate discretionary income than ICR, and they offer lower monthly payments. Over the next few years, your IDR plan options will be whittled down to IBR and the new RAP plan, both of which use different income calculations.

If you’re not relying on income-driven repayment, you may want to consider the Graduated Repayment Plan or the Extended Repayment Plan to help lower your monthly payments, though those plans will be closing to new borrowers in the summer of 2026. Other options include deferment or forbearance or student loan refinancing.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

FAQ

How does discretionary income impact income-driven repayment plans?

Currently, income-driven repayment plans base your monthly payments on your discretionary income and family size. Typically, the higher your discretionary income, the higher your monthly student loan payments will be. For example, on the Income-Based Repayment (IBR) Plan, your discretionary income is the difference between your taxable income and 150% of the poverty guideline for your family size and state.

What percentage of discretionary income is used for student loans?

The percentage of discretionary income that’s used for student loan payments depends on the income-driven repayment plan a borrower is enrolled in. For instance, on the Income-Based Repayment (IBR) Plan, your discretionary income is the difference between your taxable income and 150% of the poverty guideline for your family size and state. On the Income Contingent Repayment (ICR) Plan, your discretionary income is the difference between your taxable income and 100% of the poverty guideline for your family size and state.

Can refinancing affect your discretionary income calculation?

Yes, but in an indirect way. Refinancing federal student loans makes you ineligible for income-driven repayment plans that base your payments on your discretionary income and family size. If you think you may want to apply for an IDR plan, refinancing is probably not right for you.

How do I find out my discretionary income for student loans?

To calculate your discretionary income for income-driven repayment plans, you’ll need your adjusted gross income (AGI) and your family size (you plus a spouse and any children, if applicable). Next, determine the federal poverty guideline for your family size and state (you can find this information on the Health and Human Services website) and multiply that number by 150% for the IBR plan or 100% for the ICR plan. Subtract the resulting amount from your AGI to get your discretionary income.

Is discretionary income the same as disposable income?

No, discretionary income and disposable income are not the same thing. Discretionary income as defined by the Department of Education under an income-driven repayment plan is any adjusted gross income you have above 150% or 100% (depending on the plan) of the federal poverty guideline appropriate to your family size. Disposable income, by comparison, is the amount of money you have available after income taxes have been deducted.

SoFi Student Loan Refinance
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SOSLR-Q325-025

Sep

2025

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What Is a Global Remittance? A Complete Guide

By Timothy Moore | money, Terminology | Comments Off

Table of Contents

What Is a Global Remittance?
How a Global Remittance Works: Step by Step
How Much Does a Global Remittance Cost?
How to Choose the Best Remittance Service
Best Practices for Sending Money Abroad Safely
Comparison of Leading Global Remittance Services
The Global Impact of Remittances
FAQ

Global remittances are an important resource for anyone who needs to send money internationally. Global remittances are used to send money to an individual (or group) in another country, commonly to family members abroad. Remittances may be sent in a number of different ways, such through wire transfers, money transfer apps, cash pick-up services, and more recently crypto-related services. Below, we’ll cover how global remittances work, how much they cost, and how you can safely send money around the globe.

Key Points

• Global remittances involve movement of money from one country to another.

• Remittances help migrants, travelers, and businesses engaged in global commerce.

• Transfers can be made through banks, online platforms, cash pick-up services, mobile apps.

• A global remittance can take anywhere from a few minutes to several business days.

• Typical remittance fees are around 6.4% of the total amount sent.

What Is a Global Remittance?

A global remittance is a transfer of money from one country to another. According to the Consumer Financial Protection Bureau, the U.S. government considers any electronic transfer of $15 or more from consumers in the U.S. to another country to be a global remittance.^[1]

While the term “global remittance” is often used to describe money that migrants send to family members in their home countries^[2], people make international money transfers for many reasons. For instance, you may need to send a global remittance to make an international purchase, support a loved one traveling aboard, fund international travel or education, or contribute to charitable organizations in other countries.

How Is a Global Remittance Different From a Wire Transfer?

An international wire transfer is a specific type of global remittance. It refers to an electronic payment that moves funds from a bank account in one country to a bank account in another country using the SWIFT network (a system that connects thousands of banks worldwide). Wire transfers are processed individually, verified in real time, and are typically irreversible once completed, which makes it a preferred transfer method for large or time-sensitive transactions.

A global remittance, by contrast, is defined as any type of international money transfer. This includes transfers made via wire transfer, an international ACH transfer (an electronic bank-to-bank transfer made using a network called the Automated Clearing House), or via cash transfer services (like Western Union) or through an online transfer platform. More recently, some groups are beginning to integrate crypto-related services as a means of sending payments across borders.

(Note that SoFi announced plans in June 2025 to introduce a global remittance service transmitting payments through blockchain networks.)

Importance of Global Remittance

Global remittances are an important part of the global economy. They are used by migrant workers to send money to family and friends in their home countries, helping them afford food, shelter, health care, and education. According to the International Fund for Agricultural Development, one in eight people rely on remittances worldwide.^[3] In some low-income countries, remittances make up 30% to 40% of the county’s domestic product (GDP).^[2]

International payments are also crucial to global commerce by facilitating trade between countries and allowing businesses to expand their operations beyond domestic borders. Businesses in the U.S. and throughout the world use global remittances for a wide range of activities, including paying overseas suppliers for goods, compensating international employees, and receiving payments from foreign customers.

How a Global Remittance Works: Step by Step

The process for making an international money transfer varies by method and provider, but this is generally looks like this:

1. Register with a transfer service. If you’re not using your bank, select a transfer service that meets your needs and create an account. You may be required to verify your identity by providing your driver’s license, passport, or other government-issued ID.

2. Provide the recipient’s information. Enter specific details about your recipient, such as their name, bank account details, and/or the location where they will pick up the money.

3. Select the amount you’d like to send. Choose how much money you want to send and in what currency.

4. Pay for the transfer. You can typically pay by debit card, credit card, or direct transfer from your bank. The total cost typically includes the transfer amount, transfer fee, plus an exchange rate markup (an additional percentage added to the mid-market exchange rate).

5. Track the transfer. Providers typically give you an expected delivery date and time and a tracking code so you follow the status of your remittance.

Depending on the provider and payment/transfer method, the total time for this process can range from minutes to several business days.

Example of a Global Remittance

Here’s an example of a global remittance. Suppose Maria needs to send $200 to her family in Mexico:

• Maria logs into an online remittance app and chooses to send $200.

• She pays with her debit card.

• The service charges her a fee of $3.99 and converts dollars into Mexican pesos at the day’s rate and does not add a markup.

• Within a few minutes, her family in Mexico receives the equivalent of $196.01 in Pesos, available for cash pick-up at a nearby location.

Common Methods for Sending Global Remittances

There are several ways to send money internationally. Here are a few options to consider:

1. Bank wire transfers: You can use a traditional bank or financial institution to initiate an international wire transfer.

2. Online money transfer services: Digital platforms, like Wise and Xoom, facilitate online payments using your debit/credit card or bank account; the money can be sent to a recipient’s bank account or mobile wallet.

3. Cash pick-up services: If the recipient doesn’t have a bank account, services like Western Union and MoneyGram allow senders to transfer money to a physical agent location, where recipients can pick it up as cash.

4. Mobile money transfers: International payment apps, such as WorldRemit, allow individuals to store, send, and receive money via their mobile phones.

5. International money order: If an electronic transfer isn’t possible, you can purchase an international money order (a prepaid, paper-based payment) and mail it to your recipient. They are available through banks and some retailers. The recipient can cash or deposit it in their local currency.

How Much Does a Global Remittance Cost?

According to a March 2025 analysis by the World Bank, the average fee for sending global remittances is 6.5% of the remittance amount.^[1] However, fees vary widely by transfer method. Here’s a closer look:

Global average	6.5%
Digital transfers	4.9%
Non-digital transfers	5%
Mobile operators	5%
Banks	14.6%

How to Choose the Best Remittance Service

When researching a remittance service to send money internationally, here are key some key factors to consider:

• Fees and exchange rate: Banks and transfer services typically charge a transfer fee, which may be a percentage of the transfer amount or a flat fee. They also generally charge a markup on the exchange rate, which could be anywhere from less than 1% to 6%, or more. Be sure to consider both fees and markups when comparing services.

• Transfer speed: A traditional bank wire transfer can take three or five days, while online platforms and cash transfer services can often complete transactions within minutes or hours.

• Convenience and accessibility: Consider how your recipient will be able to receive the money. Do they have a bank account? Do they need cash in hand right away? Can they make an account on a payment app? This will help you determine the best way to send money overseas.

• Customer support: A reputable transfer service will offer various ways to contact customer service, such as phone, online chat, or email.

Best Practices for Sending Money Abroad Safely

International transfers can be risky if handled improperly, so safety is crucial.

Tips for Secure Transactions

To send money internationally safely be sure to:

• Use only licensed, regulated remittances providers (more on this below)

• Triple-check the recipient’s details.

• Verify all fees and exchange rates up front.

• Set up two-factor (2FA) authentication.

• Keep all receipts and confirmation numbers.

Common Scams to Avoid

Unfortunately, wire transfer scams are common. Here are some of the most popular schemes identified by the Federal Trade Commission (FTC) and how they work:

• Apartment and vacation rental scams: The fraudster will ask you to wire money before touring a unit.

• Fake check scams: You’re asked to deposit a bad check and wire the money before the check is found to be fraudulent.

• Family emergency scams: Someone poses as a loved one in an emergency and asks you to wire money.

• Prize scams: You’re led to believe you’ve won a prize but must first wire money for something such as taxes or shipping and handling.

• Romance scams: Someone online pretends to be romantically interested in you and eventually asks for money.

• Utility scams: A scammer poses as your utility company and threatens to shut off services if you don’t wire money ASAP.

How to Verify a Remittance Service

To find a legitimate service, make sure the provider:

• Is fully licensed and regulated in the countries where it operates. This ensures the provider meets strict financial regulations set up to ensure secure transfers. In addition, they must follow compliance standards that prevent money laundering and other illegal activities. A provider’s licensing should be detailed on its website.

• Has a trusted reputation in the industry. Read online reviews and look for consistently positive feedback about the provider’s reliability, customer service, and transparency. Be wary if you see complaints about delays, hidden fees, or poor communication.

• Offers a high level of security. Look for a service that uses multi-level authentication, such as verification codes or biometric logins (like fingerprint or face scans). These security features make it harder for unauthorized users to access your account.

• Is transparent about refund and cancellation procedures. A legitimate service will make it easy to find these terms before you confirm a transaction. Under federal law, you have at least 30 minutes to cancel the remittance transfer at no charge, unless the transfer has already been picked up or deposited into the recipient’s account.

Comparison of Leading Global Remittance Services

According to a September 2025 analysis by CNBC, these six international money transfer providers are among the top options:

Service	Standout Features	Delivery Options	Drawbacks
Remitly	Can choose Economy or Express transfer; over 350,000 cash pickup locations	Bank account deposit, debit card, mobile wallet, cash pickup	Express transfer fees can be high
Wise	No exchange rate markup	Bank account deposit, mobile wallet	No cash pick-up locations
OFX	No transfer fees for U.S. customers; no maximum transfer limit	Bank account deposit	Bank transfer only; no cash pickup locations
Western Union	More than 500,000 cash pickup locations globally	Debit card, mobile wallet, bank account deposit, cash pickup	Charges fees plus exchange rate markups
MoneyGram	Over 400,000 cash pickup locations globally	Bank account deposit, debit card, mobile wallet, cash pickup	Charges fees plus exchange rate markups
Xoom	Can use PayPal or cryptocurrency to fund transfers; large network of cash pickup sites	Bank deposit, debit card, mobile wallet, cash pickup	Charges fees plus exchange rate markups

The Global Impact of Remittances

Remittances are a big part of the global economy. Let’s take a closer look.

Statistics on Remittance Flows

Here are some recent stats on global remittances:

• In 2024, global remittances totaled $905 billion.^[2]

• Migrant workers typically send $200 to $300 every one to two months to families in their home countries.^[3]

• More than one-third of remittances go to rural areas, helping to improve financial stability and food security in those regions.^[3]

• Global money transfers are now the largest source of external finance for low- and middle-income countries.^[5]

Economic Impact on Developing Nations

The impacts of remittances on low- to middle-income countries include:

• Reducing poverty by providing stable household income

• Boosting household consumption

• Promoting financial literacy

• Reducing a household’s reliance on credit

• Fueling local entrepreneurship

The Takeaway

Global remittances are more than routine money transfers — they are essential tools that help families stay connected, provide financial security, and keep international commerce moving. Whether you’re supporting loved ones, covering overseas expenses, or conducting business, global remittances offer a reliable way to move funds across boards safely and effectively.

SoFi Checking and Savings members can now send money to 30+ countries, including Mexico, India, Brazil, and more. Plus, make three international money transfers by 3/31/26 to earn $30 in rewards points.

SoFi worldwide money transfers are a fast, affordable, and simple way to transfer money to loved ones abroad — directly from the SoFi app.

Fast, easy international money transfers.

FAQ

What is the average cost of a global remittance?

The average cost of a global remittance is 6.5% of the amount of money being transferred, according to a 2025 analysis by the World Bank. However, cost can vary widely depending on the transfer method (bank transfers are generally more expensive than online transfer services) and where you’re sending the money.

How long does it take for a global remittance to complete?

International money transfers can take anywhere from a few minutes to several business days, depending on how you send the money. Transfers using a cash pick-up service or digital transfer platform often take only minutes or hours, while traditional bank wire transfers can take one to five business days.

Can I send a global remittance without a bank account?

Yes, it is possible to send a global remittance without a bank account. Some cash transfers services like Western Union allow you to pay for the transfer in person using cash. In addition, many online transfer platforms permit you to fund a transfer using a prepaid card or credit card with no need to link a bank account.

Are there any limits on a global remittance?

There are no federal limits on the amount of money that can be sent from the U.S. to other countries. However, remittance providers may set their own limits on how much you can send in a single transaction or per day or month. For example, transfer limits for banks typically range from $1,000 to $50,000 per transaction; while some transfer platforms limit you to $5,000 per transaction or $15,000 every 30 days.

How can I track my global remittance?

Remittance services typically provide tracking tools to monitor the status of your transfer. After sending, you’ll likely receive a confirmation number or tracking code, which you can use on the provider’s website, app, or through customer support. Some services also send emails or text updates to notify you when the funds are processed or received. Tracking helps ensure transparency and can provide peace of mind, as you’ll know where your money is and when it reaches your recipient.

What are the potential security concerns with remittance services?

While remittance services are generally safe, there are potential risks to be aware of. International money transfer scams are common, especially if you send money to someone you don’t know. Data breaches or weak cybersecurity practices could expose your personal or financial information. To reduce risks, always use licensed providers that require multi-factor authentication, confirm the recipient’s details carefully, and avoid sharing sensitive information on unsecured networks or suspicious platforms.

About the author

Timothy Moore

Timothy Moore is a personal finance writer and editor and a Certified Financial Education Instructor. His work has been featured on sites such as USA Today, Forbes, Business Insider, LendingTree, LendEDU, and Time. Read full bio.

Article Sources

Consumer Financial Protection Bureau (CFPB). What is a remittance transfer and what are my rights?.
Migration Data Portal. Remittances.
IFAD. 15 reasons remittances matter.
World Bank. Remittance Prices Worldwide Quarterly.
Niskanen Center. The 1% U.S. remittance levy: Impacts on Mexico & India.

Photo credit: iStock/MicroStockHub

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SOBNK-Q325-113

Aug

2025

Market Capitalization: Definition, What It Tells You, Formula

By Austin Kilham | Growing Wealth, invest, Investing, Terminology | Comments Off

Table of Contents

What Is Market Capitalization?
Market-Cap Categories
How to Calculate Market Cap
Market Cap vs Stock Price
Evaluate Stocks Using Market Cap
What Market Cap Can Tell You
Market Cap and Diversification
What Is Free-Float Market Cap?
Market Cap vs Enterprise Value
FAQ

Market capitalization (market cap) is a basic formula that multiplies a company’s current price per share by the number of outstanding shares to get the total value of its equity.

A company’s market capitalization, or market cap, provides a useful measure of its size and value, versus revenue or sales figures. Knowing what the market cap is for a given company can help investors compare it to other companies of a similar size.

Note that the market cap (the value of a company’s total equity) is different from a company’s market value, which is a more complex calculation based on various metrics, including return-on-equity, price-to-earnings, and more.

Key Points

• Market capitalization (market cap) refers to the total market value of a company’s outstanding shares and provides a measure of its size and value.

• Market cap can be calculated by multiplying the current price per share by the number of outstanding shares.

• Market cap helps investors compare companies of similar size in order to evaluate the potential risk and reward.

• Companies are categorized into small-cap, mid-cap, large-cap, and mega-cap based on their market cap range.

• Smaller companies (nano-cap and micro-cap) can be riskier, but offer growth opportunities, while larger companies (large-cap and mega-cap) tend to be more stable.

What Is Market Capitalization?

A company’s market cap, or market capitalization, is the total dollar value of its outstanding shares. Outstanding shares simply refers to the amount of stock that has been issued by the company and is held by shareholders.

Market-Cap Categories

Analysts, as well as index and exchange-traded fund (ETF) providers, commonly sort stocks into small-, mid-, and large-cap stocks, though some include a broader range that goes from micro- or nano-cap stocks all the way to mega cap on the other end.

Understanding the market capitalization for different stocks and funds can help investors evaluate risk and performance when investing online or through a traditional brokerage.

The size criteria for these categories can change depending on market conditions but here are some basic parameters.

Nano-Cap and Micro-Cap Stocks

Nano- and micro-cap companies are those with a total market capitalization under $300 million. Some define nano-cap stocks as those under $50 million, and micro-cap stocks as those between $50 million and $300 million.

These smaller companies can be riskier than large-cap companies (though not always). Many microcap stocks trade over-the-counter (OTC). Over-the-counter stocks are not traded on a public exchange like the New York Stock Exchange (NYSE) or Nasdaq. Instead, these stocks are traded through a broker-dealer network.

As a result there may be less information available about these companies, which can make them difficult to assess in light of certain risk and performance factors.

Small-Cap Stocks

Small-cap companies are considered to be in the $300 million to $2 billion range. They are generally younger and faster-growing than large-cap stocks. Investors often look to small-caps for growth opportunities.

While small-cap companies have historically outperformed large-caps, these stocks can also be more risky, and may require more due diligence from would-be investors.

Mid-Cap Stocks

Mid-cap companies lie between small- and large-cap companies, with market caps of $2 billion to $10 billion.

When investing in stocks, investors may find mid-cap companies attractive because they can offer some of the growth potential of small-caps with some of the maturity of large-caps.

But mid-cap stocks likewise can share some of the downsides of those two categories, being somewhat vulnerable to competition in some cases, or lacking the impetus to expand in others.

Large-Cap Stocks

Large-cap stocks are those valued between $10 billion and $200 billion, roughly. Large-cap companies tend not to offer the same kind of growth as small- and mid-cap companies. But what they may lack in performance they can deliver in terms of stability.

These are the companies that tend to be more well established, less vulnerable to sudden market shocks (and less likely to collapse). Some investors use large-cap stocks as a hedge against riskier investments.

Mega-Cap Stocks

Mega cap describes the largest publicly traded companies based on their market capitalization. Mega cap stocks typically include industry-leading companies with highly recognizable brands with valuations above $200 billion.

Recommended: Investing 101 Guide

How to Calculate Market Cap

To figure out a company’s market cap, simply multiply the number of outstanding shares by the current price per share. If a company has 10 million outstanding shares of stock selling for $30 per share, the company’s market cap is $300 million.

Share prices fluctuate constantly, and as a result, so does market cap. You should be able to find the number of outstanding shares listed on a company’s balance sheet, where it’s referred to as “capital stock.” Companies update this number on their quarterly filings with the Securities and Exchange Commission (SEC).

Market Cap Formula

The formula for determining a company’s market cap is fairly simple:

Current price per share x Total # of outstanding shares = Market capitalization

Remember that the share price doesn’t determine the size of the company or vice versa. When measuring market cap you always have to look at the share price multiplied by the number of outstanding shares.

• Company A could be worth $100 per share, and have 50,000 shares outstanding, for a total market cap of $5 million.

• Company B could be worth $25 per share, and have 20 million shares outstanding, for a total market cap of $500 million.

Market Cap and Number of Shares

In some cases, market cap can change if the number of stocks increases or decreases. For example, a company may issue new stock or even buy back stock. When a company issues new shares, the stock price may dip as investors worry about dilution.

Stock splits do not increase market share, because the price of the stock is also split proportionally.

Changes to the number of shares are relatively rare, however. More commonly, investors will notice that changes in share price have the most frequent impact on changing market cap.

Market Cap vs Stock Price

While the share price of a company tells you how much it costs to own a piece of the company, it doesn’t really give you any hints as to the size of the company or how much the company is worth.

Market cap, on the other hand, can reveal how a particular stock might behave. For example, large companies may be more stable and experience less volatility than their smaller counterparts.

Recommended: Intrinsic Value vs. Market Value

Evaluate Stocks Using Market Cap

Understanding the market cap of a company can help investors evaluate the company in the context of other companies of similar size.

For instance, market cap can clue investors into stocks’ potential risk and reward, in part because the size of a company can be related to where that company is in its business development.

Investors can also evaluate how a company is doing by comparing its performance to an index that tracks other companies of a similar size, a process known as benchmarking.

• The S&P 500, a common benchmark, is a market-cap weighted index of the 500 largest publicly traded U.S. companies.

• The S&P MidCap 400, for example, is a market-cap weighted index that tracks mid-cap stocks.

• The Russell 2000 is a common benchmark index for small cap stocks.

Within this system, companies with higher market cap make up a greater proportion of the index. You may often hear the S&P 500 used as a proxy for how the stock market is doing on the whole.

What Market Cap Can Tell You

Here are some characteristics of larger market-cap companies versus smaller-cap stocks:

Volatility: Larger companies, some of which are considered blue-chip stocks, tend to be less volatile than smaller stocks, and tend to offer steady returns.

Revenue: Larger stocks tend to have more international exposure when it comes to their sales and revenue streams. Meanwhile, smaller stocks can be more oriented to the domestic economy.

Growth: Smaller companies tend to have better odds of offering faster growth.

Valuation: Larger stocks tend to be more expensive than smaller ones and have higher valuations when it comes to metrics like price-to-earnings ratios.

Dividends: Many investors are also drawn to large cap stocks because companies of this size frequently pay out dividends. When reinvested, these dividends can be a powerful driver of growth inside investor portfolios.

Market Cap and Diversification

So how do you use market cap to help build a portfolio? Market cap can help you choose stocks that could help you diversify your portfolio.

Building a diversified portfolio made up of a broad mix of investments is a strategy that can help mitigate risk.

That’s because different types of investments perform differently over time and depending on market conditions. This idea applies to stock from companies of varying sizes, as well. Depending on market conditions, small-, medium-, and large-cap companies could each beat the market or trail behind.

Because large-cap companies tend to have more international exposure, they might be doing well when the global economy is showing signs of strength. On the flip side, because small-cap companies tend to have greater domestic exposure, they might do well when the U.S. economy is expected to be robust.

Meanwhile, larger-cap companies could also outperform when there’s a downturn, because they may have more cash at hand and prove to be resilient. In recent years, the biggest companies in the U.S. have been linked to technology. Therefore, picking by market cap can have an impact on what kind of sectors are in an investor’s portfolio as well.

What Is Free-Float Market Cap?

Float is the number of outstanding shares that are available for trading by the public. Therefore, free-float market cap is calculating market cap but excluding locked-in shares, typically those held by company executives.

For example, it’s common for companies to provide employees with stock options or restricted stock units as part of their compensation package. These become available to employees according to a vesting schedule. Before vesting, employees typically don’t have access to these shares and can’t sell them on the open market.

The free-float method of calculating market cap excludes shares that are not available on the open market, such as those that were awarded as part of compensation packages. As a result, the free-float calculation can be much smaller than the full market cap calculation.

However, this method could be considered to be a better way to understand market cap because it provides a more accurate representation of the movement of stocks that are currently in play.

Market Cap vs Enterprise Value

While market cap is the total value of shares outstanding, enterprise value includes any debt that the company has. Enterprise value also looks at the whole value of a company, rather than just the equity value.

Here is the formula for enterprise value (EV):

Market cap + market value of debt – cash and equivalents.

A more extended version of EV is here:

Common shares + preferred shares + market value of debt + minority interest – cash and equivalents.

The Takeaway

Market capitalization is a common way that analysts and investors describe the value and size of different companies. Market cap is simply the price per share multiplied by the number of outstanding shares. Given that prices fluctuate constantly, so does the market cap of each company, but the parameters are broad enough that investors can generally gauge a company’s market capitalization in order to factor it into their investing strategy.

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FAQ

What is the maximum market cap?

In theory there is no cap on market cap; i.e., there is no maximum size a company can be. As of Aug. 20, 2025, the top five biggest companies by market cap, according to Motley Fool, are: Nvidia ($4.24 trillion), Microsoft ($3.90 trillion), Apple ($3.02 trillion), Alphabet (Google) ($2.30 trillion), Amazon ($2.28 trillion).

How does market cap go up?

A company’s market cap can grow if the share price goes up.

Are large-cap stocks good?

The market cap of any company is neither good nor bad; it’s simply a way to measure the company’s size and value relative to other companies in the same sector or industry. You can have mega-cap companies that underperform and micro-cap companies that outperform.

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SOIN-Q325-115

Aug

2025

Computer Science vs Computer Engineering: What’s the Difference?

By Brian O'Connell | Financial Independence, student_loan, Terminology | Comments Off

The terms “computer science” and “computer engineering” are often used interchangeably, but they are actually separate fields that focus on different aspects of computer technology. While computer science is the study of all aspects of computers with an emphasis on software systems, computer engineering focuses more on designing and building hardware systems.

Whether you choose to major in computer science or computer engineering, some — but not all — of the coursework will be the same. However, the types of jobs you will be best-suited for will differ. Which path is best for you will depend on your skill set and career interests. Here’s what you need to know about computer science vs. computer engineering.

Table of Contents

What Is Computer Science?
What Is Computer Engineering?
Similarities and Differences Between Computer Science and Computer Engineering
Computer Science vs Computer Engineering Job Outlook
Computer Science vs Computer Engineering — Which One Is Better?
The First Step to Becoming a Computer Scientist or Computer Engineer
FAQ

Key Points

• Computer science emphasizes computing theory, algorithms, and software, while computer engineering focuses on hardware design and integration.

• Both fields share foundational coursework in mathematics, programming, and computer systems and typically high salary ranges.

• Computer science job growth is projected at a significant 26% from 2023 to 2033, with diverse career paths.

• Computer engineering can offer specialized career paths in hardware, robotics, security, and embedded systems.

• Financial aid options include scholarships and grants, work-study, and federal or private loans.

What Is Computer Science?

Those working in computer science focus mainly on computing theory, programming algorithms and models to develop software or computer systems that people utilize around the globe. A computer science program will typically cover topics like design and analysis of algorithms, data analysis, an introduction to operating systems, and different programming languages. Computer scientists generally focus on software and are typically the ones to create algorithms that make programs like artificial intelligence, machine learning, cloud computing, and even video games work.

What Is Computer Engineering?

Computer engineers generally focus on creating, testing, and evaluating the technology for hardware and software interfaces. If you choose computer engineering as your major, the program will likely cover topics like computer architecture, computer networks, and physics. It is a computer engineer’s job to develop new processors, microchips, and other components that physically go into computers and smartphones to make them work each and every time someone clicks the “on” button. This field may often require a combination of electrical engineering skills and computer science knowledge.

Similarities and Differences Between Computer Science and Computer Engineering

While computer science and computer engineering are two distinct areas of study, there are similarities between the two. Both professions, for example, involve working with computers. Both also involve data and math and work to advance the field of computing. Because of these similarities, both areas of study could share prerequisites and coursework at your chosen college or university.

Computer Science vs Computer Engineering Job Outlook

Individuals with a computer science or computer engineering degree may be qualified for a variety of different types of tech positions in a wide range of industries. Here’s a closer look.

Computer Science Job Outlook

There’s some good news for those looking at becoming computer scientists in the near future. According to the most recent data from the U.S. Bureau of Labor Statistics (BLS) , the employment of computer and information research scientists is projected to grow 26% from 2023 to 2033, much faster than the average for all occupations.

What’s more, computer and information research scientists earned a median of $140,910 per year in 2024.

The types of jobs you may be able to get with a computer science degree include: software developer, database administrator, web developer, project manager, full-stack developer, engineering manager, user interface designer, information security analyst, information technology specialist, mobile application designer or developer, and more.

Computer Engineering Job Outlook

According to the BLS, the employment rate for computer hardware engineers is projected to grow much more slowly over the same timeframe. From 2023 to 2033, the job market for computer hardware engineers is expected to grow 7%, which is as fast as the average occupation.

The positive? The average salary for computer hardware engineers is high, sitting at a comfortable $155,020 per year in 2023. And while many entry level jobs in computer science require a master’s degree, entry-level computer engineering positions may only require a bachelor’s degree, which can save both time and money.

As computer scientists, those with a computer engineering degree could qualify for roles under a variety of job titles. These include telecommunications engineer, computer architect, communication engineer, network systems engineer, systems architect, and simply computer engineer.

Computer Science vs Computer Engineering — Which One Is Better?

The question of “which is better, computer science or computer engineering?” really comes down to personal choice. To make this decision for yourself, it may be a good idea to consider what your dream computing job looks like.

Computer scientists can typically specialize in the following areas:

• Artificial Intelligence

• Human-Computer Interaction

• Software Engineering

• Mobile and Web Computing

• Game Design

• Computer Graphics

• Data Science

• Programming Languages

Computer engineers can typically specialize in the following areas:

• Hardware Systems

• Robotics and Cybernetics

• Computer and Network Security

• Distributed Computing

• Embedded Systems

As you can see, both computer science and computer engineering are related. However, each comes with unique and exciting specialty areas. Which one is better will depend on your skills, interests, and goals.

The First Step to Becoming a Computer Scientist or Computer Engineer

While computer science is expected to experience more growth in the coming years than computer engineering, both fields can lead to a varied, lengthy, and well-paid career. Both also generally require at least a four-year college degree, which can be a significant financial investment. Once you pinpoint some schools and programs that interest you, you’ll likely need to figure out how you’ll manage the financial side of getting a computer science or computer engineering degree.

Fortunately, there are a number of ways to cover your college costs. A great place to start is by filling out the Free Application for Federal Student Aid (FAFSA). This form puts you in the running for grants, scholarships, work-study positions, and federal student loans.

If financial aid and savings aren’t enough to cover the full cost of attendance (COA) for college, you might look into getting a private student loan.

Unlike federal student loans, which are provided by the government, private student loans are available through banks, credit unions, and online lenders. Rates tend to be higher than federal student loans, but borrowing limits are typically higher. These loans are not need-based and generally require a credit check. Borrowers (or cosigners) with excellent credit tend to qualify for the lowest rates.

Keep in mind that private student loans may not offer the same borrower protections that federal student loans offer, such as Public Service Loan Forgiveness or income-driven repayment.

The Takeaway

While there is some overlap between computer science and computer engineering, the terms refer to two different majors and tech specialties that lead to different types of jobs after you graduate. Computer science tends to focus on computer theory and software, whereas computer engineering is more focused on computer design and hardware.

A career in either field can be rewarding, both financially and intellectually, though job growth is expected to be higher in computer science than computer engineering over the next eight years. Either major could be worth studying, perhaps with scholarships, grants, and federal or private student loans helping to fund your degree.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.

FAQ

Which is better, computer science or computer engineering?

Neither computer science or computer engineering is inherently better. It’s a matter of which one is a better fit for a given student. Computer science tends to focus more on software and applications, while computer engineering trains students to design and build the hardware of computer systems.

Do computer engineers do coding?

Computer engineers often do coding. Understanding coding languages can help them as they work on designing computer hardware and test its capabilities.

Is computer science oversaturated?

Some industry observers feel that entry-level jobs for computer science grads are harder to come by. However, overall, the field has very strong projected growth, with a 26% increase in jobs between 2023-33, which is well above the norm.

Photo credit: iStock/SeventyFour

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