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A deposit account is the kind of account that allows you to store money at a bank or credit union and also withdraw funds. Deposit accounts come in many forms, from checking and savings accounts to money market accounts and certificates of deposit.

Each of these deposit accounts has unique features, and together they can help achieve an array of financial goals. They are typically the hub of your everyday financial life, supporting you as you earn, spend, and save money.

Understanding Deposit Accounts

Deposit accounts are a core offering of banks. Here’s a closer look at the meaning of deposit accounts and look at how they work.

Definition of a Deposit Account

A deposit account, as noted above, is a bank account where you can safely store (i.e., deposit) and withdraw your money. While there are various types of deposit accounts that specify when or how often you can make withdrawals and how much interest your money makes while deposited, they can all help you manage your spending and saving, whether it’s by allowing you everyday access to funds or by helping you save money for larger, longer-term needs.

How Deposit Accounts Work

You can open a deposit account at a bank or credit union. Depending on the financial institution and type of account, you can deposit money into the account in a variety of formats, such as in-person cash deposits, in-person or mobile check deposits, and electronic fund transfers from other sources, such as a bank-to-bank transfer.

When the money is in the account, it is typically insured (meaning you’re protected against loss; more on that below), and it may earn interest. You can likely withdraw funds using a debit or ATM card, electronic transfer, or online payment.

Types of Deposit Accounts

Banks offer four core types of deposit accounts:

•   A checking account is perhaps the most basic type of bank account. It’s a place to store money that you can easily access with a debit card or check, through peer-to-peer money transfer services, and via online payments. Think of it as an easy way to stash and spend money, and it’s safer than carrying cash. It’s also a great place to receive a direct deposit, such as a paycheck, tax refund, or government benefit. However, these accounts typically earn no or low interest.

•   A savings account is designed for money you’ll spend less frequently. Instead, you can store money in a savings account and have it earn interest. Over time, as you add more money and it continues to grow with interest, you could save enough for, say, a vacation, down payment on a house or car, or wedding. You can withdraw money as needed, though some banks may limit the number of withdrawals per statement period.

•   A money market account (MMAs) is like a savings account, though it may earn more interest and/or may have a higher minimum balance threshold. Often, MMAs offer check-writing capabilities, much like a checking account.

•   Certificates of deposit (CDs) are another deposit account geared toward saving, but you must agree to a specific number of months or years (known as the term) during which you won’t access the money. In exchange for keeping your money on deposit, you’ll earn a competitive interest rate. However, if you remove funds before the CD matures, you usually face fees and penalties that could wipe out any interest earned.

Many people have multiple bank accounts. For instance, they might have a checking and savings account, as well as some funds in a CD.

Features of Deposit Accounts

Deposit accounts usually share some of the following core features:

Interest Earnings

When you keep cash in your wallet, stow it in your sock drawer, or hide it under the mattress, it doesn’t grow. In fact, you could argue you’re losing money over time — inflation ensures your dollars won’t go as far in the future.

But when you put it in a deposit account, it often earns some kind of interest. Some checking accounts aren’t interest-bearing or may only earn a nominal interest rate, but other checking accounts, like some online bank accounts, may earn more favorable levels of interest.

But it’s savings accounts (particularly high-yield savings accounts), money market accounts, and certificates of deposit where interest rates may outpace inflation and help your money grow.

FDIC Insurance

Most banks offer $250,000 of insurance on all deposits via the Federal Deposit Insurance Corporation (FDIC). This means, even in the very rare occurrence of a bank failing, your money is protected up to $250,000 per depositor, per account ownership category, per insured institution. (Some banks may offer additional insurance above this level.)

Credit unions don’t offer FDIC insurance; instead, they typically offer similar coverage, with up to $250,000 of insurance on deposits via the National Credit Union Association (NCUA).

Access to Funds

Deposit accounts offer some level of access to your money. Checking accounts are the most liquid type of deposit account; you can withdraw money at any time and for any reason. Savings accounts may limit withdrawals and transfers each statement period, but it’s generally easy to access your money when you need it to cover an emergency or major life purchase.

Money market accounts often come with an ATM card and/or checks that allow you to access your funds. CDs have a maturity date, but you can access your money before then, though you will likely pay a penalty.

Online and Mobile Banking Capabilities

Increasingly, banks have made it easy to monitor your spending and savings online. Before opening an account, it’s a good idea to read reviews of mobile banking apps to see which banks have the best security features and easiest-to-use apps for managing your money online. Many offer features such as dashboards to track your earnings, spending, and savings, as well as other useful tools.

Recommended: Does Switching Bank Accounts Affect Your Credit Score?

Benefits of Deposit Accounts

When you open a bank account, you’ll likely find that deposit accounts offer a number of benefits, including:

Safety and Security of Funds

When you don’t store your money in a bank, you’re exposed to loss or theft. If you can’t find a $100 bill you swear was in your wallet, no one is going to reimburse you.

But if you keep your money in an insured deposit account — and most bank accounts are insured — you know your money has a safety net. Most banks insure your money with the FDIC, as noted above.

Potential for Earning Interest

Storing your cash in a bank where it earns a competitive interest rate is a great way to inflation-proof your money. Particularly look for CDs, MMAs, and/or high-yield savings accounts to maximize interest on what’s in your deposit account.

Just remember you need to keep some money in a checking account, even if it earns less interest, to cover your everyday expenses.

Convenience for Daily Transactions

Deposit accounts make managing your money easy. You can use a checking account’s debt card to make purchases at the grocery store or pay your bills, and it’s also a good spot for receiving your paycheck as a direct deposit.

Savings accounts can be a little less liquid than checking accounts, but they help you save for regular goals, like home improvements and birthday gifts. When you’re ready to spend the funds, access it at a branch or ATM, or simply transfer it over to your checking account. Many MMAs offer check-writing privileges.

CDs are less convenient for daily transactions, but you can choose from a mix of short- and long-term CDs, ranging from several months to several years, to suit your needs.

Choosing the Right Deposit Account

Ready to open a deposit account? Here are some strategies to help:

•   Assess your financial needs: Do you need to write checks and make regular cash deposits at an ATM? A checking account with a wide ATM network may be ideal. Hoping to earn a lot of interest on money you won’t touch for a few years? Consider a CD.

•   Compare account features and fees: When trying to choose which bank is right for you, it can be helpful to compare factors like annual percentage yields (APYs), mobile app reviews, monthly maintenance fees, and overdraft fees. This can guide you to the right deposit account for your needs.

•   Consider online vs. traditional banks: Online banks typically offer higher interest rates and lower (or not) fees on deposit accounts, and their mobile app tech is generally very easy to use. But if you prefer going to a brick-and-mortar bank to cash checks, make deposits, and get help from a teller, you may want to consider a traditional bank, even if it means earning less interest.

Managing Your Deposit Account

Managing a deposit account is generally straightforward, and often, you can do so online, through a mobile app, or (with traditional banks) in person. Here are some things to consider when managing a deposit account:

•   Real-time alerts: It can be wise to set alerts to make sure no one is spending your money (perhaps via stolen debit card) without your permission. Real-time alerts can also notify you of a low balance so you don’t overdraft.

•   Automation: Some banks may offer automated savings features, such as automatically moving money from checking into savings when you get paid or pay with your debit card. Or they might have a rounding-up function for some transactions. Opting into such features can help you grow your savings faster.

•   Patience: The key to savings accounts, MMAs, and especially CDs is to practice patience vs. spending. Leaving the money untouched (or adding to it) for several months or even years ensures it grows so you can reach larger goals down the line.

Recommended: 50/30/20 Budget Calculator

Regulations Governing Deposit Accounts

Several government regulations protect banking consumers and their deposit accounts.

•   Truth in Savings Act: This landmark regulation requires banks to be transparent about fees, interest rates, and other terms impacting deposit accounts such as checking and savings accounts.

•   Electronic Fund Transfer Act: This act, from 1978, protects consumers during electronic fund transfers (ETFs). Nowadays, this offers protection for a variety of transactions, such as ATM, debit card, point of sale, direct deposit, Automated Clearing House (ACH), and other similar electronic transfers. Among consumer protections are error resolution and liability limits for unauthorized transactions.

•   Regulation CC: Reg CC, as it’s often known, implemented the Expedited Funds Availability Act of 1987, which required banks to make deposited funds available within a certain timeline. In 2003, it also allowed Congress to pass Check 21, which made it easier for consumers to mobile-deposit checks. These provisions continue to benefit consumers today.

The Takeaway

Deposit accounts are an essential part of banking and safe money management. You can use these accounts to store your money securely, spend, and help it grow over time with interest. Finding the right deposit account(s) for your needs can involve assessing your needs and comparing offerings to see which bank offers the best combination of competitive interest rates, low fees, and easy-to-use tech features.

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.

FAQ

What’s the difference between a checking account and savings account?

While they’re both deposit accounts, checking accounts are designed for spending and savings accounts are for keeping money in the bank and helping it grow. Checking accounts offer easy access to your money via debit cards and checks but usually earn low or no interest. Savings accounts tend to earn more interest but may have withdrawal limits.

Are there limits on withdrawals from deposit accounts?

It depends. Checking accounts typically don’t have withdrawal limits, but some may limit the number of transactions you can make per day. Previously, Regulation D limited withdrawals from savings accounts and MMAs to six per month. This regulation is no longer enforced, but some banks may still cap how many monthly withdrawals you can make. Lastly, CDs are designed so that you don’t make any withdrawals until they mature.

How does FDIC insurance work for deposit accounts?

FDIC insurance typically covers deposit accounts in the very rare event of a bank failure. It insures up to $250,000 per depositor, per account ownership category, per institution. That means account holders would have their funds reimbursed up to that amount. (Some banks may offer programs that insure more than $250,000).

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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.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

*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.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

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SOBNK-Q424-050

If you don’t have a 20% down payment on a home, that’s OK. Most buyers don’t. But if you’re in that league and acquire a conventional mortgage, the lender will want extra assurance — insurance, actually — that you’ll pay the loan back. Private mortgage insurance (PMI) is usually the price to pay until you reach 20% equity or, as lenders say, 80% loan-to-value.

In an effort to help low- and middle-income borrowers, the Biden-Harris Administration reduced monthly mortgage insurance premiums for new FHA loans — that is, loans backed by the Federal Housing Administration. However, those cuts do not affect homebuyers with conventional loans and PMI.

Can you avoid PMI? It’s tough. Below, we’ll take a closer look at PMI, strategies to avoid it, and how to know when you can get rid of it.

What Is PMI?

Private mortgage insurance is charged by lenders of conventional home mortgage loans, which are loans not insured by a government agency. FHA, VA (Veterans Administration), and USDA (U.S. Department of Agriculture) loans are government-insured loans.

The 30-year conventional home loan is the most common mortgage, and 20% down is ideal. But…

You’ve seen home prices lately. Twenty percent down on a $250,000 or $400,000 or $750,000 home is just not doable for everyone. In 2024, the median down payment for buyers was 18%, but for first-time homebuyers, it was nine percent, according to the National Association of Realtors.®

PMI is meant to protect the lender from risk. The premiums help the lender recoup its losses if a borrower can’t make the mortgage payments and goes into default.

How Much Does PMI Cost?

PMI is often 0.5% to 1.5% of the total loan amount per year, but can range up to 2.25%.

The cost of PMI depends on the type of mortgage you get, how much your down payment is, your credit score, the type of property, the loan term, and the level of PMI coverage required by your lender.

If you’re shopping for a mortgage and you apply for one or more, the premium will be shown on your loan estimate. If you go forward with a home loan, the premium will be shown on the closing disclosure.

How to Pay PMI

Most borrowers pay PMI monthly as a premium added to the mortgage payment.

Another option is to pay PMI with a one-time upfront premium at closing.

Yet another is to pay a portion of PMI up front and the remainder monthly.

How to Avoid PMI Without 20% Down

One way to avoid PMI is to make use of a piggyback mortgage. Another is to seek out lender-paid mortgage insurance.

Piggyback Loan

With a piggyback loan, typically an 80/10/10 mortgage, you’d take out two loans at the same time, a first mortgage for 80% of the home price and a second mortgage for 10% of the home value, and put 10% down. Note: SoFi does not offer piggyback loans. SoFi does offer fixed-rate and adjustable-rate first mortgages, as well as VA and FHA loans.

The 80% loan is usually a 30-year fixed-rate mortgage, and the 10% loan is typically a home equity line of credit that “piggybacks” on the first mortgage.

A 75/15/10 piggyback loan is more commonly used for a condo purchase because mortgage rates for condos are higher when the loan-to-value ratio (LTV) exceeds 75%.

Both loans do not have to come from the same lender. Borrowers can tell their primary mortgage lender that they plan to use a piggyback loan and be referred to a second lender for the additional financing.

Because you’d be taking out two loans, your debt-to-income ratio (monthly debts / gross monthly income x 100) will fall under more scrutiny. Mortgage lenders typically want to see a DTI ratio of no more than 36%, but that is not necessarily the maximum.

Piggybackers will need to be prepared to make two mortgage payments. They will want to examine whether that secondary loan payment will be higher than PMI would be.

Lender-Paid Mortgage Insurance

In most cases with lender-paid mortgage insurance (LPMI), the lender pays the PMI on your behalf but bumps up your mortgage interest rate slightly. A 0.25% rate increase is common.

Monthly payments could be more affordable because the cost of the PMI is spread out over the whole loan term rather than bunched into the first several years. But the loan rate will never change unless you refinance.

Borrowers will want to look at how long they expect to hold the mortgage when comparing PMI and LPMI. If you need a short-term mortgage, plan to refinance in a few years, or want the lowest monthly payment possible, LPMI could be the way to go. Note: SoFi does not offer LPMI.

When PMI Is No Longer Required

Borrowers generally need to have 20% equity in their home to drop PMI.

The Homeowners Protection Act was put in place to protect consumers from paying more PMI than they are required to. Specifically for single-family principal mortgages closed on or after July 29, 1999, the law covers two scenarios: borrower-requested PMI termination and automatic PMI termination.

Once you’ve built 20% equity in your home, meaning you’re at an 80% LTV based on the home’s original value (the sales price or the original appraised value, whichever is lower), you can ask your mortgage loan servicer — in writing — to cancel your PMI if you’re current on all payments. Your monthly mortgage statement shows your loan servicer information.

The very date of this occurrence, barring no extra payments, should have been given to you in a PMI disclosure form when you received your mortgage. It’s based on your loan’s amortization schedule.

As long as you’re current on all payments, PMI will automatically terminate on the date when your principal mortgage balance reaches 78% of the original value of your home.

If that LTV ratio is not reached by the midpoint of the mortgage amortization period, PMI must end the month after that midpoint.

PMI vs. MIP vs. Funding Fees

The upside of PMI is that it unlocks the door to homeownership for many who otherwise would still be renting. The downside is, it adds up.

If you’re tempted to go with an FHA mortgage, realize that this type of loan requires up front and annual mortgage insurance premiums (MIP) that go on for the life of the loan if the down payment was less than 10%.

Mortgages insured by the Department of Veterans Affairs come with a sizable funding fee, with a few exceptions, and loans backed by the Department of Agriculture come with up front and annual guarantee fees.

Ways to Boost a Down Payment

A bigger down payment not only may allow a borrower to avoid PMI but usually will afford a better loan rate and provide more equity from the get-go, which translates to less total loan interest paid.

So how to afford a down payment? You could shake down Dad or Granny (just kidding; Grandma responds better to sweet talk than coercion). For a conventional loan, gift funds from a relative or from a domestic partner or fiance count toward a down payment. There’s no limit to the gift, but you may be expected to come up with part of the down payment. You’ll also need to present a formal gift letter to validate the funds given to you.

A gift of equity is a wonderful thing indeed. When a seller gives a portion of the home’s equity to the buyer, it is shown as a credit in the transaction and may be used to fund the down payment on principal or second homes.

You could look into down payment assistance from state, county, and city governments and nonprofit organizations, which usually cater to first-time homebuyers. And home listings on Zillow now include information about down payment assistance programs that might be available to buyers searching for homes on the platform.

Even if you can’t come up with 20%, it’s all good because PMI doesn’t last forever, and real estate is one of the key ways to build generational wealth.

The Takeaway

What is PMI? Private mortgage insurance typically goes along for the ride when a borrower puts less than 20% down on a conventional mortgage. A gift or other down payment assistance can fatten the down payment and help you avoid PMI. If you do end up paying, you can step away from PMI once your equity reaches 20%.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

Is it better to put down 20% or pay PMI?

It would be great to make a down payment of 20% and avoid private mortgage insurance (PMI) but not everyone can afford it. It’s particularly hard for first-time homebuyers, who often don’t have income from the sale of another residence to fund their next home. Use a home affordability calculator to look carefully at monthly mortgage payment amounts for different home prices and interest rates. Then put down what you feel you can afford without compromising your ability to cover other bills.

How long do I have to pay PMI?

If you are paying private mortgage insurance, you’ll need to pay until you have built up 20% equity in your home (based on the original sale price of the home). At this point, you can request in writing that your loan servicer cancel PMI if you are current on your payments.

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SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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SOHL-Q125-041

Time in force (TIF) is a stock investing term referring to the length for which a trading order is good. Although casual or buy-and-hold investors may not use time-in-force stock limits, they’re an important tool for active traders.

Understanding different time-in-force options may help you close out positions more efficiently.

What Does Time in Force Mean?

Time in force is a directive, set by a trader, that defines how long a trade will remain open (or “in force”) before expiring. Options traders and other active traders can set an appropriate end date for their trades to help prevent unintended executions.

Without an end date, an order could be filled at an unfavorable time or price, particularly in markets that move fast. This is especially true for investors employing day-trading strategies and taking advantage of volatile market conditions with rapidly changing prices.

Basics of Time in Force

Before you place a time-in-force stock order, you’ll want to make sure that you understand exactly how they work. As with options trading terminology, it’s important to understand the language used to describe time-in-force orders.

Recommended: A Guide to Trading Options

Types of Time in Force Orders

Time in force is not a specific kind of stock market order. Instead, the phrase refers to the collection of order types that set how long a trade order is valid — or “in force” — in order to pursue potential investment opportunities. If you are considering a buy-to-open (purchasing a new position) or buy-to-close order (closing an existing position), you can also specify the time in force for either of them.

There are several kinds of time-in-force orders, although not every broker or dealer supports them.

1. Day Order

Of the different time-in-force orders used in options trading and other types of trading, day orders are the most common. With a day order, your trade remains open until the end of the trading day. This may happen if the order’s pricing conditions were not met (such as the price on a limit order). If your order has not been executed at the close of the day’s markets, it will expire.

With many brokers, including online brokerage firms, day orders represent the default option. Thus, this is the time in force order with which most people are likely familiar.

2. On-Open Order

Depending on the types of order that your broker or dealer offers, there can be two different types of options for trades executed at market open: MOO and LOO.

A MOO is an order filled when the market opens, at the prevailing opening price. With a LOO order, you can set a limit price for the highest price you’ll pay or the lowest price at which you’ll sell. If the market opens within the constraints of your limit order, it will be executed. Otherwise, your broker will cancel the LOO order.

3. Market on Close Order

A market-on-close (MOC) order requests the sale or purchase of a security at the final closing price of the trading day. These orders may help you avoid intraday trading volatility or simplify trade execution without having to closely monitor the market for fluctuations.

If your brokerage offers MOCs, they may have a cutoff time by which you need to enter in any MOC orders.

Recommended: Buy to Open vs. Buy to Close

4. What Is Good ‘Til Canceled (GTC)?

As its name suggests, a good-til-canceled (GTC) order is a type of time-in-force order that remains in force until you proactively cancel the order or it is filled. Depending on the type of trading or options trading strategy you’re employing, a GTC order may be worth considering if you’re waiting for the underlying stock price to move. Many brokerages will restrict the number of days a GTC order can remain open, often to 90 days.

The maximum potential gain for these orders is the difference between the limit price and the original purchase price, so long as the stock moves in your favor and the trade executes. If the stock fails to reach your target and continues to decline, you may face missed opportunities for smaller gains or risk holding a depreciating asset, leading to unrealized losses.

5. What Is Fill or Kill (FOK)?

FOK orders ensure that trades are executed in full and immediately. If that cannot happen, the order is canceled completely. This helps traders avoid partial fills, which may result in executing orders at differing prices, or with additional transaction fees.

Examples of Time in Force

You currently own shares of a stock that announced earnings last night, and you’re considering liquidating (or selling) your position. You’re not sure how the market will react to the earnings news, so you place a LOO order for more than you paid per share. If the stock opens at this number or higher, your trade will execute. If not, your broker will cancel it.

If the stock’s shares have been rising all day, but you anticipate that it may open at a lower price, you might use a MOC order to try to sell at the end-of-day price.

The maximum potential gain from a market-on-close order depends on how much the stock’s closing price exceeds your original purchase price. For instance, if you bought shares of a stock that closes at an increase in price, your maximum potential gain would be the difference in the price per share (before fees and taxes).

The maximum potential loss can occur if the market moves against your position. In the case of a long position, your loss would be the difference between the original price paid and the lower closing price if the price drops below your purchase price. For a short position, your loss would be the difference between the sale price and the higher closing price, if the closing price rises above the price at which you sold. This loss could be unlimited.

If you prefer to sell the stock when it hits a specific price in the future, you might choose to set a good-til-canceled order as part of your strategy. With a GTC order, you can specify a limit price, ensuring that your trade will only execute if the stock reaches or exceeds that price. Although GTC orders remain active until they are executed or canceled, most brokers set a maximum duration (around 90 days) before an order will expire if it isn’t filled.

This strategy may help investors take advantage of favorable price movements while maintaining flexibility. However, it also carries the risk of missing your target price due to market volatility or unexpected conditions.

Time in Force Day Order vs On-Close Order

Day orders and an on-close order are similar, but they have some important differences. A day order is one that is good for the entire trading day, up to and including close. If you’re placing an order in the middle of the trading day and do not need it to execute at a specific time, this is the type of order you’d use.

Alternatively, an on-close order (either market on close or limit on close) is only good at the close of the trading day. The intent of an on-close order is to execute at the final trading price of the day. If you place an on-close order in the middle of the trading day, it will not execute until the end of the trading day, regardless of its intraday price.

Using Time in Force Orders

How you use the different time-in-force orders will depend on how you buy and sell stocks or execute your options trading strategy. Most buy-and-hold investors won’t use time-in-force orders at all, but if you’re using a more complex strategy, such as buying to cover, you may want to have more control over how and at what price your order is executed.

The Takeaway

Time-in-force orders can be a part of day traders’ execution of specific strategies. It determines how long a trade will remain open before being canceled. It is uncommon for long-term investors to use time-in-force orders.

SoFi’s options trading platform offers qualified investors the flexibility to pursue income generation, manage risk, and use advanced trading strategies. Investors may buy put and call options or sell covered calls and cash-secured puts to speculate on the price movements of stocks, all through a simple, intuitive interface.

With SoFi Invest® online options trading, there are no contract fees and no commissions. Plus, SoFi offers educational support — including in-app coaching resources, real-time pricing, and other tools to help you make informed decisions, based on your tolerance for risk.

FAQ

What happens if my order isn’t executed before it expires?

If your order expires without being executed, it means that the price conditions you set were not met during your chosen specified time period. You will need to place a new order if you still want to trade.

How do I decide which Time-in-Force option to use?

Your choice depends on your trading strategy. For instance:

•   Day orders are for keeping your trade active during the current trading day.

•   GTC orders allow you to execute trades that happen at a specific price level, and orders can stay open for days or weeks.

•   MOC orders are designed for executing trades at the end-of-day closing price.

Are Time-in-Force orders only for active traders?

Active traders frequently use time-in-force orders to manage trades in dynamic markets. While less frequent, these orders can also play a role in long-term investors’ strategies, particularly if they want more control over trade execution timing and price conditions.

Can I change the Time-in-Force setting after placing an order?

No. Once you’ve submitted an order, the time-in-force setting cannot be modified. If you want to adjust the duration, you’ll need to cancel the original order and create a new one with the updated time-in-force option.

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