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In May 2024, the national unemployment rate hit 4%. This is the first time it has risen to 4% since December 2022. The jobless rate has been very low since then and is still considered relatively low.

Unemployment rates were lower in May than in April in 4 states, higher in 3 states, and stable in 43 states and the District of Columbia, the U.S. Bureau of Labor Statistics reported in the most recently available statistics.

North Dakota and South Dakota had the lowest jobless rates in May, 2% each. The next lowest rate was in Vermont, 2.1%. The rates in Arizona (3.4%) and Tennessee (3%) set new series lows.

On the other end of the spectrum, the District of Columbia had the highest unemployment rate, 5.3%, closely followed by California, 5.2%, and Nevada, 5.1%. In total, 24 states had unemployment rates lower than the U.S. figure of 4%, 4 states and the District had higher rates, and 22 states had rates that were not appreciably different from that of the nation.

Unemployment rates are still considered low. Record low unemployment has been achieved for African Americans, Hispanic Americans, and people with disabilities — and a 70-year jobless low for women. Employment continued to “trend up” in professional and business services, health care, leisure and hospitality, and social assistance.

A low level of unemployment sounds like great news for American workers but it presents challenges too. Economists say that inflation cannot ease significantly while unemployment is this low. For small businesses, the problem can be really acute. Not only is it hard to fill job openings, but salary pressure is intense and if there aren’t enough skilled workers, the business stagnates or slumps.

Looking At Unemployment Data By City

In this story, we are taking a look at unemployment rates by city to get a feel for the job landscape across America. Using Bureau of Labor Statistics data, we have created a list that ranks the jobless statistics for the 50 cities that show the largest populations within their respective states.

On our list, Las Vegas, Nevada is the city with the highest unemployment, closely followed by Los Angeles and then Chicago. Within this list, many fascinating — and even contradictory — trends are revealed that have bearing on small business owners.

What is the Unemployment Rate and How Is it Calculated?

The labor force participation rate in May 2024 was 62.5%, which is virtually the same as April. Why doesn’t that align with a 4% unemployment average?

The Bureau of Labor Statistics, which falls under the Department of Labor, measures labor market activity, working conditions, price changes, and productivity in the U.S. economy. The unemployment rate for any area is the number of area residents without a job and looking for work divided by the total number of area residents in the labor force.

In other words, the unemployment rate represents the number of unemployed people as a percentage of the labor force (the labor force is the sum of the employed and unemployed).

The key factor is the BLS unemployment rate will not tell you how many people have taken themselves out of the workforce, perhaps becoming so discouraged in their job search that they have given up hope of finding a job. The number of people not in the labor force who currently want a job declined by 483,000 to 5.2 million.

Some economists say that the low unemployment could be due, in part, to a low labor participation rate.

50 State Unemployment Rates

As previously noted, we have taken the city with the largest population in each of the 50 states as the city to track within its state, beginning with the city that had the lowest rate of unemployment and moving to the highest. The data from May 2024 was the most recently obtainable from the Bureau of Labor Statistics.

Washington, D.C.

The nation’s capital of Washington, D.C., population 712,000, showed an unemployment rate of 5.3%, which is one of the highest for any large city in America.

The 50 Cities Ranked Lowest to Highest in Jobless Rate

And now, our list of ranked cities.

50.) Burlington, Vermont

In May, the city of Burlington showed an unemployment rate of 1.7%. The statewide unemployment rate was 2.1%. “There are nearly three job openings for every unemployed Vermonter,” according to the Vermont Department of Labor. Burlington is the industrial, tourist, and financial center of the state, with a population of 44,700. Burlington also has the distinction of being the least populous city in the 50 states to be listed as the most populous city within its state.

49.) Sioux Falls, South Dakota

South Dakota showed an unemployment rate of 2%. “South Dakota traditionally has a lower unemployment rate than the rest of the country,” explained an economics professor in a recent paper. But the state’s low rates in 2023 and 2024 — and the extremely low 1.7% jobless rate of its largest city, Sioux Falls — creates a “double-edged sword.” The super-tight labor market means economic growth can be difficult, warned the same economist.

48.) Fargo, North Dakota

Fargo, population 126,000, showed an unemployment rate of 1.9% in May 2024, while the state’s unemployment was 2%. One reason North Dakota has had such a low unemployment rate for years is because it is the fifth least-populated state in the United States. Fargo’s economy is based on education, the medical industry, agricultural equipment, and services.

47.) Manchester, New Hampshire

The state of New Hampshire continued to show low unemployment at 2.5% in May. The jobless rate of Manchester, population 115,000, decreased from 2.4% in April to 2% in May. The continued low jobless rate does create special challenges, such as dealing with the size of the workforce, which is smaller in New Hampshire than it was before the start of the Covid-19 pandemic.

46.) Huntsville, Alabama

The May 2024 jobless rate for Alabama of 3% continues the streak of low joblessness for the state. The unemployment rate of of 2% for Huntsville makes it one of the country’s lowest for cities of its size. A city of rapid growth, Huntsville’s leading sectors are aerospace, defense, information technology, bioscience, and advanced manufacturing. “Alabamians have been finding jobs in record numbers for many months now,” said the state’s governor in a recent interview.

45.) Honolulu, Hawaii

With a population of 345,000, Honolulu had an unemployment rate of 2.1% in May, down from 2.5% in April. Job gains were seen in professional and business services, trade, transportation and utilities, and private education and health services. Overall, Hawaii had an unemployment rate of 3%.

44.) Portland, Maine

Maine’s unemployment rate was 3%. Unemployment has been below 4% for 28 consecutive months, the third longest period of such low rates for the state of Maine. The city of Portland’s was even lower at 2.3%. The state’s economic boom was driven mostly by the leisure and hospitality sector, which added the most jobs since the beginning of Covid-19.

43.) Nashville, Tennessee

The city of Nashville has seen its unemployment rate drop a point over the last five months to 2.3% in May 2024, with the state’s jobless rate coming in at 3%, one of the biggest decreases among all the states. The city is famous for music and entertainment, but healthcare and manufacturing are leading sectors as well. The city, population 1.3 million, is one of the fastest growing in America.

42.) Baltimore, Maryland

At 2.4%, Baltimore continues to rank low for unemployment. Maryland also ranks among the lowest states in unemployment at 2.6%. What makes the achievement of the Baltimore metropolitan area particularly newsworthy is that for the last year it has posted in the bottom 3 for joblessness among large U.S. metro areas with 1 million or more in population.

Recommended: Maryland Small Business Grants

41.) Jackson, Mississippi

With a population of 149,000, Jackson had a jobless rate of 2.5% in May, going up almost a percentage point from 1.6% in April. Jackson has a lower cost of living average than the U.S. average and shows major sectors in advanced manufacturing, health care, information technology, and food processing. The state of Mississippi’s unemployment rate was 2.8%.

40.) Des Moines, Iowa

The largest city in Iowa had a May 2024 jobless rate of 2.6%, compared to 2.1% in April. Iowa’s seasonally adjusted unemployment rate was 2.8% in May, unchanged from April and the same as one year ago.The state is recognized for its leading position in the agricultural sector, particularly corn, soybean, pork, and egg production.

39.) Minneapolis, Minnesota

With an unemployment rate of 2.6% in May, Minneapolis is surging. The Twin Cities are expected to continue to thrive through 2024, with industries such as healthcare, finance, manufacturing, and technology playing an expanded role. Minnesota’s unemployment rate was 2.8%.

38.) Billings, Montana

The largest city in Montana showed an unemployment rate of 2.7% in May. Billings has a history of strength in agriculture and energy; more recently, it has focused on retail. Total employment and the number of people in the labor force were mostly unchanged in Montana in May, leading to no change in the unemployment rate of 3.1% since April.

37.) Virginia Beach, Virginia

Virginia Beach has a jobless rate of 2.8%, edging up from a month earlier but still lover than a year ago. Real estate, defense, and tourism are major sectors of the city’s economy. The state has a jobless rate of 2.7%.According to household survey data in May, the state’s labor force decreased by 5,946 to 4,578,538 as the number of unemployed residents decreased by 4,972 to 124,379.

36.) Omaha, Nebraska

In May, Nebraska continued its low unemployment rate of 2.5%. Nebraska’s low jobless rate is believed to be due to the dominance of industries like manufacturing and agriculture, which are less volatile than the energy or hospitality sectors during downturns. Omaha, population 487,000, had a jobless rate of 2.8%.

35.) Phoenix, Arizona

Phoenix, population 1.6 million, has seen its unemployment rate plunge in the last six months. It’s now at 2.9%, compared to 4% last August. One of the fastest-growing cities in America, Phoenix reached a record jobless high of 13.7% in April of 2020 and a record low of 2.5% in April of 1998. In the last 50 years, Phoenix’s economy has been powered by hospitality and leisure, but the city is also home to a growing number of high-tech, IT, renewable energy, and bioscience industries. Arizona had a 3.4% jobless rate in May.

Recommended: Small Business Grants in Arizona

34.) Jacksonville, Florida

The largest city in Florida with a population of 954,000, Jacksonville had a jobless rate of 3% in May, edging down from 3.2% in April. The state of Florida showed an unemployment rate of 3.3% in May. It was one of the states with the largest gain in employment with +222,200). Florida’s unemployment rate has remained lower than the national rate for 40 consecutive months.

Recommended: Small Business Grants in Florida

33.) Little Rock, Arkansas

Arkansas’s unemployment rate was 3.4% in May 2024, the same as in April. Little Rock, its largest city at 202,000, showed a jobless rate of 3.1%, a decrease over the last several months. Healthcare is a leading sector in Little Rock, followed by manufacturing and construction.

32.) Cheyenne, Wyoming

With a jobless rate of 3.1%, Cheyenne’s economy is based on light manufacturing, agriculture, the military and government, tourism, and transportation. Cattle- and sheep-raising continue to thrive throughout the region too. The unemployment rate in Wyoming was 2.9% in May, pretty much unchanged for the last six months.

31.) Charleston, South Carolina

The May jobless rate of 3.1% for Charleston, population 151,000, helps it return to pre-pandemic status and more. In April 2020, unemployment raged at 13%. The city’s economic strength is diverse, ranging from aerospace and life sciences to hospitality. The statewide unemployment rate was 3.4% in May 2024.

30.) Salt Lake City, Utah

Salt Lake City had a jobless rate in May 2024 of 3.1%, inching up from 2.8% in April. Known as the “Crossroads of the West,” the city’s major industries are government, trade, transportation, utilities, and professional and business services. The state’s unemployment rate is also 2.9%.

29.) Boise, Idaho

With a population of 237,000, Boise had a jobless rate of 3.2% in May, virtually unchanged since April. The major economic drivers in the region include semiconductor and other computer product manufacturing, food product manufacturing, administrative and business support services, and construction. Statewide unemployment stood at 3.3%.

28.) Oklahoma City, Oklahoma

The largest city in Oklahoma hung in there with a low jobless rate of 3.3% in May. Oklahoma City has one of the world’s largest livestock markets, with oil, natural gas, and petroleum products as its largest sectors. As for the state, Oklahoma’s rate of 3.5% is part of a slow increase over the last six months.

27.) Wichita, Kansas

The unemployment rate in Wichita, population 395,000, was 3.4% in May. Agriculture, manufacturing, healthcare, and energy drive the Wichita regional economy. The state of Kansas had a jobless rate of 2.9% in May, which means it is holding to its two years of low joblessness.

26.) Atlanta, Georgia

Georgia’s largest city with a population of 496,000, Atlanta had a jobless rate of 3.4% in May, up from 2.8% in April. Georgia’s unemployment rate rate was 3.2%. The sectors with the most job gains included accommodation and food services, health care and social assistance, arts, entertainment, recreation, and management of companies and enterprises.

25.) Milwaukee, Wisconsin

The state of Wisconsin had a jobless rate of 2.9% in May 2024, edging up from its unemployment rate low of 2.4% in April 2023. Its largest city, Milwaukee, had an unemployment rate of 3.4%. The three sectors that comprise most of Milwaukee’s workforce are service sectors, manufacturing, and retail trade.

24.) Charlotte, North Carolina

With a population of 879,000, Charlotte is home to corporations such as MetLife, NASCAR, Wells Fargo, Bank of America, and Lowe’s. Its unemployment rate was 3.4% in May, while the state’s jobless rate was 3.6%. Unemployment rates (not seasonally adjusted) increased in 95 of North Carolina’s counties in May 2024, decreased in four, and remained unchanged in one.

23.) Kansas City, Missouri

Missouri had a jobless rate of 2.9% in May 2024, and Kansas City, its largest city, had a rate of 3.4%, up from 3% in April. The unemployment rate in Missouri reached a record high of 11.4% in April of 2020 and a record low of 2.1 in May of 2022. Kansas City is the third largest beef-processing city in America and has strong sectors in health care, tech, retail, and finance.

22.) Boston, Massachusetts

At 3%, Massachusetts showed low unemployment in May, but Boston’s unemployment moved up to 3.5% in May, up from 2.8% in April. The city is the economic engine and cultural hub of New England, with higher education, health care, and financial services as the major drivers. In a recent survey of cities most attractive to recent college graduates when considering job openings and affordability, Boston came in at number 12, making it the top city in the Northeast.

21.) New Orleans, Louisiana

The May 2024 jobless rate of 3.6% in the Big Easy ticked up slightly from 3.65 the previous month. And unemployment has come a long way since its alarming Covid-19 days of 20% in April 2020 and an April 2021 rate of 9%. As a tourist favorite and a major port on the Gulf Coast, New Orleans is considered an economic and commercial hub, and Louisiana’s 4.1% unemployment rate is considered low for the state.

20.) Indianapolis, Indiana

The city of Indianapolis showed an unemployment rate of 3.6% in May. An economist said in 2023 that there were 5 job seekers for every 10 open positions in the state. Central Indiana’s life sciences and healthcare sector generates nearly $84 billion in total economic output. The state of Indiana showed a jobless rate of 3.7%.

19.) Charleston, West Virginia

The city with the largest population in West Virginia has 46,700 people and an unemployment rate of 3.7% in May, the same as in April. As it is the state capital, Charleston has government jobs as well as those in trade, utilities, education, and medicine. The chemical industry and the manufacturing sector are also significant. The jobless rate in West Virginia is 4.2%.

18.) Wilmington, Delaware

Located midway between Washington, D.C. and New York City, Wilmington is Delaware’s largest city and its economic engine. Wilmington had an unemployment rate of 3.7% in May, up slightly from 3.6% in April. The state itself is at 3.9% unemployment.

17.) Albuquerque, New Mexico

The largest city in New Mexico had a jobless rate of 3.7% in May, up from 3.1% in April, a long way down from its pandemic high of 10%. Albuquerque and the rest of the state are on a growth curve — the top three industries are oil drilling and gas extraction, scientific research and development, and hospitals. New Mexico’s unemployment rate was 3.8% in May.

16.) Portland, Oregon

Oregon’s unemployment stands at 4.2%, higher than the national average, while Portland, its largest city, has a jobless rate of 3.8%. This progress could ease the concerns of Portland leaders, who thought that, compared to similarly-sized cities, Portland was lagging behind on financial recovery from Covid-19.

15.) Anchorage, Alaska

Anchorage, the city with the largest population in Alaska, had a jobless rate of 3.9% in May, down from 4.1% in April. Alaska often shows a relatively high unemployment rate. Over the last 40 years, the average unemployment rate in the United States has been 6.3%, while in Alaska, it averaged 7.9% since 1976. Therefore, the Mayr rate of 4.5% is low for this state.

14.) Denver, Colorado

Colorado’s jobless rate was 3.8% and Denver, its largest city, had a rate of 3.9%. Considered a magnet for work-from-home professionals, Denver is a fast-growing city, but one with housing costs that are 36% higher than the national average. Software and financial services are among its hottest industries. Aerospace, digital communications, and food and beverage sectors are also expanding.

Recommended: Small Business Grants in Colorado

13.) Philadelphia, Pennsylvania

The unemployment rate for Philadelphia stood at 3.9% and the state of Pennsylvania ranked at 3.4% in May 2024, and while that may not sound like one of the good news stories, Pennsylvania’s jobless rate continues a record low for the state. This low unemployment bolsters the region’s ongoing recovery from the pandemic, which hit Philly hard and led to the loss of more than 100,000 jobs in the first two months alone of Covid-19.

12.) Louisville, Kentucky

With an unemployment rate of 4% in May, the city is seeing job growth as payrolls have managed to expand. In April the jobless rate was 3.8%. Louisville, with a population of 628,000, is known for shipping and cargo and, more recently, for major manufacturing, with two Ford plants in the region, and health care. Kentucky’s jobless rate of 4.6% is higher than the national average.

11.) Houston, Texas

Houston’s May unemployment rate at 4% was the exact same as the state of Texas’ rate. Since June 2022, Texas employment grew by over 542,500 positions— the largest annual increase in the nation. The expanding ranks of the unemployed is believed to reflect an increase in the size of the metropolitan workforce rather than layoffs in the state with the second-highest population in the United States.

Recommended: Small Business Grants in Texas

10.) Providence, Rhode Island

With a population of 189,000, Providence had a jobless rate of 4.3% in May and the state’s unemployment rate was the same. About one-third of the city’s economy is based in trade, transportation, utilities, and educational and health services. The four Fortune 500 companies based in Rhode Island are CVS Heath, United Natural Foods, Textron, and Citizens Financial Group.

9.) Detroit, Michigan

The unemployment rate of 5.2% in Detroit in May 2024 was actually quite a feat in a city that went through bankruptcy and experienced a 61% decrease in population from 1950 to 2010, lowering its ranking from the 4th most populous city in America to the 27th. Detroit’s jobless rate was an eye-popping 27% in June 2009. But new development in the city fuels talk of a real comeback post Covid-19. The state’s jobless rate was 3.9%.

8.) Seattle, Washington

Seattle, population 733,000, was tracking above the national unemployment rate with a jobless figure of 4.3% in May. Thousands of tech sector layoffs in the Seattle area have had an impact, but the city continues to support innovation. Overall, the unemployment rate is considered low. Washington’s unemployment rate was a high 4.9% in May.

7.) Columbus, Ohio

Ohio’s unemployment rate was 4.2% in May 2024. Columbus, its largest city, clocked in at 4.3%. However, job growth could slow as employers struggle to fill openings in such a tight market, Columbus leaders say. The city does a great job of drawing young professionals with diverse sectors, ranging from education and food to defense and steel.

6.) Bridgeport, Connecticut

The unemployment rate in Bridgeport, population 148,000, rose to 4.4% in May from 3.6% in April. The state was at 4.3% in May. While some fled New York or New Jersey during the pandemic, Connecticut added 66,000 people in 2021. However, Bridgeport struggles, with some 19% of its residents living in poverty.

5.) Newark, New Jersey

In May, the city’s unemployment rate was 4.6%, up from 4.2% in April. This is a marked decrease from a high of 9.7 percent in 2010. The city of Newark has a population of over 305,000, and some 25% of residents are living in poverty, according to U.S. Census data. The state’s jobless rate of 4.6% is well above the national average.

4.) New York, New York

The Big Apple had a jobless rate of 4.6% in May, up from 4.2% in April, which makes it one of the cities on our list with an unemployment rate higher than the national average. However, New York City, with its population topping 8.4 million, is also beginning to show gains in employment three years after the start of Covid-19. New York is estimated to have lost about 2 million jobs in the immediate wake of the pandemic. The state has a jobless rate of 4.2%.

Recommended: Small Business Grants in New York

3.) Chicago, Illinois

The May 2024 unemployment rate of 4.8% ticked up from 4.3% in April. The city and its suburbs are home to 35 Fortune 500 companies, with strengths in manufacturing, printing, insurance, transportation, financial trading, and food processing. Illinois’s rate of 4.9% was one of the highest in the nation.

2.) Los Angeles, California

The city on our list with the second-highest population in America at 3.9 million had an unemployment rate of 5.2% in May, up from 4.2% in April. The state has struggled since Covid-19. The state’s unemployment rate was 5.2%. Several factors are believed to contribute, including a mismatch between job skills among those who seek employment and what skills are needed.

1.) Las Vegas, Nevada

On our list, Las Vegas, the largest city in Nevada, had the highest rate at 5.6%, up from 5.2% in April 2024. Las Vegas shows a lot of turbulence in employment, with a high number of people in the workforce actively looking for jobs while the city shows the lingering effects of the Covid-19 lockdown. Nevada’s rate was 5.1%.

What Factors Affect Unemployment Rate?

Unemployment is a key measure of the health of the American economy and considerable resources are put into analyzing it. There are many different reasons for unemployment. Apart from the common causes found in any economy–a worker leaving for another job or being fired–there is cyclical unemployment and structural unemployment.

Cyclical unemployment is caused by economic downturns or is related to changes in business conditions, As the name indicates, it can be temporary. After a recession ends, unemployment falls.

Structural unemployment is different. It usually means there is a mismatch between the jobs available and the skill levels of the unemployed. Technological changes, a lack of relevant skills, and jobs moving overseas to another country cause structural unemployment.

Structural unemployment can be hard for a society to deal with — it produces permanent disruptions in the economy and obviously a lot of stress among the people who want to work but can’t get a job.

Recommended: How Does Unemployment Work?

How Does a Low Unemployment Rate Affect The Economy?

The problem of high unemployment seems far away indeed. A reasonable unemployment rate is somewhere between 3% and 5%. The current low rate of unemployment means that the economy is producing near its full capacity, maximizing output, and driving wage growth.

However, the labor market can reach a point where each additional job added does not create enough productivity to cover its cost. This causes an output gap, or the “slack,” in the labor market. The economy is in danger of becoming “overheated.”

How Does Unemployment Affect Small Businesses?

When there’s an increasing demand for labor yet the unemployment rate keeps falling, this causes wage inflation. With fewer people available to work, employers have to increase wages to attract and hold on to talent. While that’s pleasant for the workers, some businesses can’t afford to pay a lot more. The money that might go to growing the business has to go toward payroll.

And when there are more jobs than there are people with the necessary skills and experience, this leads to employees feeling overwhelmed and stressed. Small businesses typically have less money to funnel toward training and recruitment. This is a time when small businesses may turn to debt financing, whether it’s seeking a small business loan or looking for investors.

Recommended: Six Step Guide to Getting a Small Business Loan

The Takeaway

In May 2024, Las Vegas, Nevada, continued to be the city on our list with the highest unemployment at 5.6%. The cities with the lowest unemployment were Burlington, Vermont, and Sioux Falls, South Dakota, both at 2% or even lower.

If you’re seeking financing for your business, SoFi can help. On SoFi’s marketplace, you can shop top providers today to access the capital you need. Find a personalized business financing option today in minutes.

If you’re seeking financing for your business, SoFi can help. On SoFi’s marketplace, you can shop top providers today to access the capital you need. Find a personalized business financing option today in minutes.

With SoFi’s marketplace, it’s fast and easy to search for your small business financing options.

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For many people, owning a business is the American Dream. And for more and more entrepreneurs from underrepresented groups, setting up a business of their own has become a dream turned into reality. In growing numbers, underrepresented entrepreneurs are opening businesses across the country and helping to fuel the U.S. economy.

While small businesses in the U.S. are on the rise overall, exhibiting historic growth, minority-owned businesses in particular are experiencing a surge, according to data from the U.S. Census Bureau. Black business ownership is skyrocketing, with the share of Black households owning a business growing from 5% to 11% between 2019 and 2022 — the fastest pace in 30 years. And business ownership by Latinos increased from 7% to 10% between 2019 and 2022 — the fastest rate in a decade.

Businesses owned by members of underrepresented groups are opening all over the country. But which cities are the best places for entrepreneurs of color to own and run a business? In what areas are such businesses thriving?

To find out, SoFi looked at 50 major metro areas across the U.S. with populations of 1 million or less, and ranked them on eight different criteria, including diversity, inclusion, prosperity, and minority-owned business representation. (See below for the complete details about our methodology.)

What we discovered was that while businesses owned by underrepresented groups are in every region, certain areas of the country seem to be hotspots. Read on to learn about the 10 best metro areas for minority-owned businesses in the U.S.

Key Findings

•   Southern cities are seeing increasing numbers of businesses owned by underrepresented groups. For instance, Florida has two of the top five cities on our list, including the number-one city, Cape Coral. Charleston, SC ranks at number 6, and Fayetteville, AR is number 10.

•   Diverse populations are on the rise across Western states, fueling a boom in businesses owned by underrepresented groups in cities like Stockton, CA, Ogden, UT, and Colorado Springs, CO.

•   Palm Bay, FL was the only city in our top 10 to earn a perfect score of 5 in three of the key categories in our rankings: racial equity, inclusion, and revenue growth for minority business owners. And Palm Bay was the only city on the entire list of 50 to score a 5 in revenue growth for minority businesses.

Recommended: How to Start a Minority Woman Owned Business

The Top 10 Metros for Business Owners From Underrepresented Groups

The best metro areas for minority-owned businesses are located across the nation, as shown on the map below. These cities tend to offer a variety of programs and initiatives to encourage and assist underrepresented business owners.

1. Cape Coral, FL

This vibrant waterfront city in southwestern Florida tops our list as the best metro for minority business owners. The city’s population has grown steadily over the past few years and is becoming increasingly diverse as people flock to it for the weather, water access, and economic opportunities.

Of all the cities we analyzed, Cape Coral scores especially high for inclusion, racial equity, and business representation from underrepresented groups. The area has many resources and programs for aspiring minority business owners, including the Southwest Florida Hispanic Chamber of Commerce and Goodwill’s MicroEnterprise Program.

Cape Coral scoring:

Minority-owned business representation: 4

Business growth by minorities: 3

Immigrant share of population: 3

Revenue growth: 3

Racial equity: 4

Inclusion: 5

Prosperity: 3

Diversity: 3

Overall score: 24.30

Monica Spivey (right) of Tamu Cupcakery in Cape Coral, Florida.

Small Business Spotlight: Monica Spivey | Tamu Cupcakery

While the data show that Cape Coral is the best city for businesses owned by members of underrepresented groups, we wanted to go beyond the numbers and find out what it’s really like to run a business there. We spoke to Monica Spivey, the owner of Tamu Cupcakery, which specializes in creative gourmet cupcakes. Here’s what she told us about being a business owner in Cape Coral.

SoFi: How did you come up with your business idea?

Monica: After relocating to Florida from New York, I discovered my passion for baking. Experimenting with various cupcake flavors sparked the idea for Tamu Cupcakery. Encouraged by the enthusiastic feedback, I ventured into selling my creations at farmers markets. Subsequently, I joined the Goodwill MicroEnterprise program, propelling me into the realm of entrepreneurship as the proud owner of Tamu Cupcakery.

SoFi: How did you start the business?

Monica: Initially, Tamu Cupcakery debuted online before expanding to local farmers markets. Following this, I briefly showcased my desserts at the Franklin Shops in Fort Myers before finally establishing a physical storefront in 2021.

SoFi: Has the increased focus on racial inequality in the U.S. affected your business?

Monica: Being an African American female business owner has proven advantageous. Despite opening my storefront during the pandemic, sales have soared. There’s a specific demand for Black-owned businesses, and it’s been rumored that Tamu Cupcakery is the only Black-owned bakery in Cape Coral.

SoFi: What do you think could help more minorities become business owners?

Monica: Minorities embarking on entrepreneurship must conduct thorough research beforehand. Possessing discipline, focus, and strong money management skills are definite advantages in this pursuit.

SoFi: What minority-specific resources have you used to help your business?

Monica: I’ve utilized resources such as SCORE, SBA (Small Business Administration), Kiva,
and the Goodwill MicroEnterprise programs.

SoFi: How can people support your business?

Monica: You can visit us at 311 Del Prado Blvd S, shop online at www.tamucupcakery.com, leave positive Google reviews, engage with us on social media, and spread the word – we thrive on word-of-mouth recommendations.

SoFi: Are there any other minority businesses you’d recommend?

Monica: Absolutely. Please lend your support to my daughter’s clothing business, Spiff Made It, owned by Jade Spivey. Other outstanding minority-owned businesses include Jonesez BBQ, Flourish Hair Care by Monique, Sistah’s Indian Hair Closet by Shelonda, Something Blue TG by Teasha, Tobler Construction, Shop the Black Food Market by Keisha, and Mari G Solution by Marissa.

SoFi: How can we better support businesses owned by underrepresented groups?

Monica: To enhance support for minority businesses, consider spotlighting them, spreading the word through recommendations, making purchases, and offering valuable resources.

2. Boise City, ID

The capital city of Idaho, Boise is booming with new development and has recently seen an influx of residents. It was the fifth fastest-growing city in the U.S. in 2022 and 2023, and it’s projected to keep growing for the foreseeable future.

Boise has experienced an increase in racial diversity in the last decade as well, according to U.S. Census Bureau data. In our research, Boise scores high for racial equity and inclusion. To help the growth of businesses owned by underrepresented groups, the city has numerous resources for Hispanic, Native American, African-American, and Asian-American business owners.

Boise scoring:

Minority-owned business representation: 2

Business growth by minorities: 3

Immigrant share of population: 1

Revenue growth: 4

Racial equity: 5

Inclusion: 5

Prosperity: 4

Diversity: 2

Overall score: 24.10

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3. Colorado Springs, CO

Located at the foot of the Rocky Mountains, Colorado Springs is the second-biggest city in Colorado. This metro area is growing rapidly, and it’s on track to reach a population of 1 million by 2045, thanks in part to the economic opportunities available. Industries in Colorado Springs include aerospace, engineering, healthcare, IT, manufacturing, and insurance.

The city has become more diverse in recent years, and in our research it ranked highly in racial equity, inclusion, and prosperity. As a state, Colorado supports business owners from underrepresented groups: It has a Minority Business Office offering such resources as funding, grants, and networking.

Colorado Springs scoring:

Minority-owned business representation: 3

Business growth by minorities: 3

Immigrant share of population: 1

Revenue growth: 3

Racial equity: 5

Inclusion: 4

Prosperity: 4

Diversity: 3

Overall score: 23.51

4. Palm Bay, FL

Palm Bay, on the east coast of Florida, is a draw for its beaches, nature preserves, and outdoor recreation. The city’s population has increased by more than 15% since 2020 and has become increasingly racially diverse. Palm Bay’s Black and Hispanic residents now make up close to 40% of the city’s total population, and the city scores high for racial equity, revenue, and inclusion in our study. It’s business-friendly, too: Business owners from underrepresented groups can find a number of programs and services through the Florida State Minority Supplier Development Council.

Palm Bay scoring:

Minority-owned business representation: 3

Business growth by minorities: 0

Immigrant share of population: 2

Revenue growth: 5

Racial equity: 5

Inclusion: 5

Prosperity: 3

Diversity: 3

Overall score: 22.79

5. Stockton, CA

Located in the farmland of California’s Central Valley, Stockton is another growing metro area. Its central location and convenient highway access has made the city a home base for many businesses, including telecommunications and manufacturing firms, as well as the agricultural businesses the area is known for. More than 45% of Stockton’s population is Hispanic, 21% is Asian, and nearly 12% is Black. The city ranks high for minority-owned business representation, inclusion, and diversity.

Stockton scoring:

Minority-owned business representation: 4

Business growth by minorities: 1

Immigrant share of population: 4

Revenue growth: 2

Racial equity: 3

Inclusion: 5

Prosperity: 2

Diversity: 5

Overall score: 21.98

6. Charleston, SC

The biggest city in South Carolina, Charleston blends historic restoration with new development. Key industries in this Southern metro include aerospace, healthcare, automotive, defense, and technology. The city is considered pro-business, with a focus on economic development and growth. Charleston’s population has grown steadily in recent years, and it’s considered one of the fastest-growing cities in the U.S, with minorities making up about 24% of the population. The city offers programs to support minority-owned businesses, as does the state of South Carolina. In our rankings, Charleston earns high scores for business growth by underrepresented groups, racial equity, and inclusion.

Charleston scoring:

Minority-owned business representation: 2

Business growth by minorities: 4

Immigrant share of population: 1

Revenue growth: 1

Racial equity: 4

Inclusion: 4

Prosperity: 3

Diversity: 3

Overall score: 21.22

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7. Omaha, NE

Located on the Missouri River near the Iowa border, Omaha is the biggest city in Nebraska. It has a vibrant economy and a low cost of living, with job opportunities in healthcare, manufacturing, financial services, and agribusiness, among others. The city’s population has grown and become more diverse in recent years, with people from underrepresented groups making up about 30% of the residents. Nebraska has resources to support minority-owned businesses, and Omaha earns high scores for racial equity, prosperity, and inclusion.

Omaha scoring:

Minority-owned business representation: 2

Business growth by minorities: 3

Immigrant share of population: 2

Revenue growth: 2

Racial equity: 4

Inclusion: 4

Prosperity: 4

Diversity: 3

Overall score: 21.08

8. Bridgeport, CT

Connecticut’s largest city is booming. Bridgeport, which is located on Long Island Sound, draws people with its bustling downtown, numerous parks, and a strong job market. The city is culturally and ethnically diverse, and it has a Small & Minority Business Enterprise to aid and provide resources for business owners from underrepresented groups, as well as programs and initiatives aimed at “creating a level playing field for minority businesses” from the Chamber of Commerce. In our study, Bridgeport got high marks for diversity, racial equity, inclusion, and immigrant share of the population.

Bridgeport scoring:

Minority-owned business representation: 3

Business growth by minorities: 2

Immigrant share of population: 4

Revenue growth: 0

Racial equity: 4

Inclusion: 4

Prosperity: 4

Diversity: 4

Overall score: 20.86

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9. Ogden, UT

Situated north of Salt Lake City at the foot of the Wasatch Mountains, Ogden boasts hundreds of locally owned and independent businesses. This active community attracts residents with its outdoor recreation; industries such as aerospace, life sciences, tech, and manufacturing; and a bustling arts and cultural scene. Ogden’s population is growing steadily, and it’s considered one of the more diverse cities in Utah, with a 30% Hispanic population. Ogden earns high scores for minority business representation and racial equality in our analysis.

Ogden scoring:

Minority-owned business representation: 4

Business growth by minorities: 3

Immigrant share of population: 1

Revenue growth: 0

Racial equity: 5

Inclusion: 4

Prosperity: 4

Diversity: 2

Overall score: 20.76

10. Fayetteville, AR

This city, nestled in the Ozark Mountains in the northwestern section of Arkansas, is one of the fastest-growing metro areas in the country. Top employers include companies like Walmart, Tyson Foods, and colleges like the University of Arkansas. Fayetteville is becoming increasingly diverse, and minorities account for about 24% of the population. Businesses owned by members of underrepresented groups are on the rise here, and the area has programs and nonprofits to help support them, including a free Business Accelerator program that provides business training and mentorship.

Fayetteville scoring:

Minority-owned business representation: 1

Business growth by minorities: 3

Immigrant share of population: 2

Revenue growth: 2

Racial equity: 4

Inclusion: 3

Prosperity: 4

Diversity: 3

Overall score: 20.71

Rankings By Cities We Looked At

Reviewing the full list of metro areas we studied can reveal some additional information about minority-owned businesses. For instance, Syracuse, NY and Provo, UT have some of the highest minority-owned business representation scores of the cities on our list. And New Haven, CT and Worcester, MA rank well for racial equity and inclusion.

Check out how other top metro areas are doing when it comes to minority-owned businesses.

Ranking	City	Minority-Owned Business Representation Score	Business Growth by Minorities Score	Immigrant Share of Population Score	Revenue Growth Score	Racial Equity Index Score	Inclusion Score	Prosperity Score	Diversity Index Score	Overall Score (Total possible is 40)
1	Cape Coral, FL	4	3	3	3	4	5	3	3	24.30
2	Boise City, ID	2	3	1	4	5	5	4	2	24.10
3	Colorado Springs, CO	3	3	1	3	5	4	4	3	23.51
4	Palm Bay, FL	3	0	2	5	5	5	3	3	22.79
5	Stockton, CA	4	1	4	2	3	5	2	5	21.98
6	Charleston, SC	2	4	1	1	4	4	3	3	21.22
7	Omaha, NE	2	3	2	2	4	4	4	3	21.08
8	Bridgeport, CT	3	2	4	0	4	4	4	4	20.86
9	Ogden, UT	4	3	1	0	5	4	4	2	20.76
10	Fayetteville, AR	1	3	2	2	4	3	4	3	20.71
11	Albuquerque, NM	3	1	2	2	4	5	3	4	20.32
12	Durham, NC	2	0	2	1	5	4	4	4	19.91
13	North Port, FL	4	2	2	1	4	4	3	3	19.91
14	Lakeland, FL	3	3	2	0	4	5	2	4	19.70
15	Baton Rouge, LA	2	2	1	4	3	4	2	3	19.28
16	Augusta, GA	2	2	1	2	4	4	2	3	19.16
17	Greensboro, NC	2	1	2	1	4	4	3	4	18.96
18	Honolulu, HI	4	0	4	-3	5	5	4	5	18.91
19	Allentown, PA	3	2	2	1	4	4	3	3	18.86
20	Provo, UT	3	5	1	-3	5	4	4	2	18.54
21	Greenville, SC	2	2	1	1	4	4	3	3	18.53
22	Oxnard, CA	3	1	4	-1	4	4	3	4	18.52
23	Deltona, FL	3	2	2	0	4	5	3	3	18.28
24	Syracuse, NY	4	5	1	1	3	2	4	2	18.20
25	Worcester, MA	3	1	2	-1	5	4	4	3	17.82
26	Harrisburg, PA	2	0	1	1	4	4	4	3	17.57
27	El Paso, TX	5	1	5	0	3	4	2	2	17.37
28	Spokane, WA	3	2	1	-1	4	5	3	2	17.12
29	Portland, ME	3	3	1	1	4	3	4	1	16.82
30	Toledo, OH	3	2	1	1	4	3	3	3	16.81
31	New Haven, CT	2	2	3	-3	4	4	4	4	16.81
32	Little Rock, AR	2	2	1	0	4	4	3	3	16.61
33	Bakersfield, CA	4	1	4	-1	3	5	1	4	16.45
34	Jackson, MS	2	2	0	1	4	4	2	3	16.44
35	Dayton, OH	2	0	1	1	4	4	4	3	16.23
36	Columbia, SC	2	2	1	-1	4	4	3	3	16.16
37	Springfield, MA	3	1	2	-1	4	4	4	3	15.99
38	Madison, WI	3	3	2	-1	3	2	5	3	15.71
39	Modesto, CA	3	0	4	-2	3	5	1	4	15.42
40	Wichita, KS	3	1	1	-2	4	4	3	3	15.30
41	Knoxville, TN	3	0	1	1	4	4	3	2	14.67
42	Des Moines, IA	2	3	2	-3	4	2	4	3	14.27
43	Chattanooga, TN	4	1	1	-4	4	4	3	3	11.73
43	McAllen, TX	5	0	5	1	1	2	1	1	11.08

Methodology

To determine the best places for businesses owned by members of underrepresented groups, SoFi looked at 50 metro areas across the U.S. with populations of 1 million or less. (Note: A few of the metros didn’t have enough data available for certain criteria and were ultimately removed from consideration in the final scores.)

We then developed a scoring system based on the eight criteria listed below. We graded each of the eight on a 5-point scale, where the top metros in each category received a score of 5. The top possible score was 40.

The following breaks down the methodology and data used for the eight criteria:

Number of Minority-Owned Businesses

Using data from the U.S. Census Bureau’s Annual Business Survey, we looked at the percentage of minority-owned businesses in each metro and compared it to the percentage of minorities in the overall population. Higher scores were given to metros that were closest to a 1:1 ratio of minority population to minority-owned businesses because it represents better minority representation in business.

Business Growth by Minority-Owned Firms

Using data from the U.S. Census Bureau’s Annual Business Survey, we looked at the number of minority-owned businesses in each metro in 2021 and compared it to the number of minority-owned businesses in 2017. Higher scores meant those metros had a higher percentage growth in minority-owned businesses from 2017 to 2021 than those with lower scores.

Immigrant Share of Population

To measure a metro’s immigrant population, we looked at data from Data USA. Metros with higher percentages of immigrants in their overall population scored higher.

Racial Equity Index Rank

Using data from the National Equity Atlas, we looked at the racial equity index, which shows how equitable a region is, based on multiple indicators including whether “communities are seeing progress on racial equity and overall prosperity.” The higher the racial equity index ranking, the higher the score.

Revenue Growth for Firms Owned by People of Color

Using data from the National Equity Atlas, we assessed the change in revenue for businesses owned by people of color. The data compared revenue amounts from 2012 to 2017, the most recent data available. The greater the increase in revenue, the better the metro scored.

Prosperity Score

Using data from the National Equity Atlas, we looked at the prosperity score, which shows how populations are faring compared to how they’re doing in other metro areas, using the following indicators:

•   Median wage

•   Unemployment

•   Poverty

•   Educational attainment

•   Disconnected (not working or in school) youth

•   School poverty

•   Air pollution exposure

•   Commute time

•   Housing burden

The higher the prosperity score, the higher the score.

Inclusion Score

Using data from the National Equity Atlas, we looked at the level of inclusion in the 50 metro areas. The score given by the National Equity Atlas assessed how a specific metro area compared to other areas by looking at the racial gaps across several different indicators. The higher the inclusion score, the higher the score.

Diversity Index

Using data from the National Equity Atlas, we looked at the diversity index scores in the 50 metro areas. The diversity score is a measure of the racial/ethnic diversity of residents based on six major racial/ethnic groups. The highest-scoring metros had the most even mix of all the races listed above.

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Tips for Minority Business Owners

If you’re starting or expanding a business as an owner from an underrepresented group, these are some of the steps you can take to help make your venture a success.

•   Get certified. A minority-owned business certification isn’t required, but it can help you apply for certain grants and qualify for some government benefits. You can become certified through government agencies such as the SBA’s 8(a) Business Development Program or the National Minority Supplier Development Council.

•   Tap into the available resources. There are a number of government, state, and local organizations working to help minority business owners. For instance, the Minority Business Development Agency, which is part of the U.S. Department of Commerce, provides a range of services and programs, and it can also supply you with relevant research and data.

The Small Business Administration (SBA) offers programs specially for minority business owners. And finally, be sure to check into the programs and resources available from your local Chamber of Commerce as well as local minority business associations.

•   Secure financing. Minority small business grants typically provide funds and opportunities and they don’t have to be repaid. You can also find grants through the SBA, which offers funding programs to start or grow your business.

Finally, you may also want to apply for a loan. SoFi makes it easy to see options for small business loans, and you can get a personalized offer in just minutes.

If you’re seeking financing for your business, SoFi can help. On SoFi’s marketplace, you can shop top providers today to access the capital you need. Find a personalized business financing option today in minutes.

With SoFi’s marketplace, it’s fast and easy to search for your small business financing options.

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SoFi's marketplace is owned and operated by SoFi Lending Corp. See SoFi Lending Corp. licensing information below. Advertising Disclosures: SoFi receives compensation in the event you obtain a loan through SoFi’s marketplace. This affects whether a product or service is featured on this site and could affect the order of presentation. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider.

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.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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A depository institution is a financial institution into which consumers can deposit funds and where they will be safely held. Banks and credit unions are typical examples of these institutions.

Learning about how these institutions work and their pros and cons can build your financial literacy.

What Is a Depository Institution?

A depository institution is a place or entity — such as a bank — that allows consumers and businesses to deposit money, securities, and/or other types of assets. There, the deposit is kept safely and may earn interest.

To share a bit more detail, depository institutions are financial institutions that:

•   Engage in banking activities

•   Are recognized as a bank by either the bank supervisory or monetary authorities of the country it is incorporated in

•   Receive substantial deposits as a part of their regular course of business

•   Can accept demand deposits

In the U.S., all federally insured offices of the following are considered to be depository institutions:

•   Commercial banks

•   Mutual and stock savings banks

•   Savings or building and loan associations

•   Cooperative banks

•   Credit unions

•   International banking facilities of domestic depository institutions

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

How Do Depository Institutions Work?

A depository can receive funds from consumers and businesses via such means as:

•   Cash

•   Direct deposit

•   Teller or ATM deposits

•   Checks

•   Electronic transfers

The depository institution holds these funds, and they are insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000 per depositor, per ownership category, per insured financial institution. If the institution is a credit union, funds will be similarly protected by the National Credit Union Administration, or NCUA vs. FDIC.

Funds are accessible on demand (aka demand deposits rather than time deposits), and the depository institution is required to keep a certain amount of cash in its vault to ensure it has funds available for clients.

Customers are able to earn interest on different types of deposits. The depository institution also earns interest; it’s one of the ways financial institutions make money. It does so by lending money on deposit to their customers in the form of different types of loans. (For instance, some of the money on deposit might earn the account holder 2% interest, while the bank then uses the funds for a mortgage that charges 6.00% interest. There’s a good profit margin there for the depository institution.)

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Types of Depository Institutions

To better understand the purpose depository institutions serve, let’s look at some examples.

Credit Unions

Credit unions may offer many of the same services as banks, but they are owned by account holders, who are also sometimes called members. These institutions are not nonprofits. The profits that the credit union earns are paid to members in the form of dividends or are reinvested into the credit union. To put it another way, the depositors are partial owners of the credit union. You often need to live in a certain area or work at a certain profession to keep your money at a credit union.

Commercial Banks

Commercial banks are what many of us visualize when we hear the term “bank,” whether we are thinking of a major bank with hundreds of brick-and-mortar branches or an online-only entity. They are usually owned by private investors and are for-profit organizations.

Commercial banks tend to offer the most diverse services of all depository institutions, from personal banking to global banking services such as foreign exchange-related services, money management, and investment banking. The offerings may depend on how large the institution is and which customer segments it serves (say, consumers and different types of businesses).

Savings Institutions

Savings institutions are the banks that serve local communities and loan institutions. Local residents deposit their money in these institutions, and in return, they can access credit cards, consumer loans, mortgages, and small business loans.

It’s possible to set up a savings institution as a corporation or as a financial cooperative. The latter makes it possible for depositors to have an ownership share in the saving institution.

Recommended: What Is an Intermediary Bank?

Depository Institutions vs Repositories

Repositories and depositories are two different things despite the fact that their names sound almost the same. Here’s some of the key differences.

•   Depositories hold cash and other assets, but repositories hold abstract things such as intellectual knowledge, files, and data.

•   Depositories are usually credit unions, banks, and savings institutions, while repositories are typically libraries, data-storage facilities, and information-based websites.

Depository Institutions vs Non-Depositories

Unlike depository institutions, non-depository institutions don’t accept demand deposits. These are some of the differences between these two types of institutions:

•   Depository institutions accept deposits and store them for safekeeping. Non-depository institutions, on the other hand, provide financial services but can’t accept demand deposits for safekeeping.

•   Depository institutions are FDIC- or NCUA-insured, while non-depository institutions can be SEC-insured or have another type of insurance.

•   Credit unions and banks are commonly depository institutions. Non-depository institutions are often brokerage firms and insurance companies.

Pros of Depository Institutions

Depository institutions have a few benefits to note:

•   Money is safe and FDIC- or NCUA-insured

•   Accounts can earn interest on time deposits such as certificates of deposit (CDs) and possibly other deposits

•   Helps keep the economy healthy by allowing depository institution to lend out deposits and earn interest

•   Reduced risk of assets being lost or stolen

Cons of Depository Institutions

There are a few downsides to depository institutions. Consider these points:

•   Limited growth potential of deposited funds compared to investments, money market accounts, and CDs

•   Banks, credit unions, and savings institutions may charge fees for holding funds

•   Minimum account balance may be required

Tips for Choosing a Depository Institution

When it comes time to choose a depository institution, it can help to keep the following things in mind when comparing different options.

•   Type. Carefully consider if a credit union, saving institution, or commercial bank is the right fit. Some commercial banks have brick-and-mortar locations, while others offer all of their services online. Online banks usually pay higher interest rates on savings and charge fewer and/or lower fees, since they don’t have the overhead associated with operating branch locations. Credit unions also tend to offer higher interest rates and lower fees as they are not-for-profit as commercial banks are.

•   Features. Look for a depository institution that offers perks and services that suit your needs. Special features may include high interest rates, early access to direct-deposit paychecks, cash back deals, fee-free ATMs, and free access to credit scores.

•   Fees. Shop around to see which depository institution has the lowest and/or fewest fees, such as account maintenance fees and overdraft fees. As noted above, credit unions tend to charge lower and/or fewer fees than commercial banks, as do online banks.

•   Convenience. If you like to bank locally and know your bank tellers and officers, choosing an institution that has branches in your neighborhood is a wise move. If you prefer the seamlessness of banking 24/7 by app, however, you might opt to open an online savings account.

Recommended: What Is an Online Savings Account?

The Takeaway

Commercial banks, credit unions, and savings institutions are all examples of depository institutions. Depository institutions can be places to safely store funds that can then easily be accessed. Funds will typically be insured by either the FDIC or NCUA up to their usual limits of $250,000 per depositor, per ownership category, per insured institution.

Looking for a bank to deposit your money in that pays a great APY?

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

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.50% APY on SoFi Checking and Savings.

FAQ

What is the difference between a bank and a depository?

There is no difference between a bank and a depository. A bank is a type of depository institution. Credit unions and saving institutions can also be depositories.

What are the types of depository institutions?

There are three main types of depository institutions. Commercial banks, credit unions, and savings institutions are all types of depository institutions.

Are commercial banks depositories?

Yes, commercial banks are one kind of depository institution where consumers can securely stash their money.

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SoFi members with direct deposit activity can earn 4.50% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.50% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.50% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

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

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

Interest rates are variable and subject to change at any time. These rates are current as of 8/27/2024. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.

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

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

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