money Archives | Page 38 of 165

Jul

2024

Debit Card Fraud: How It Works and How To Prevent It

By Jackie Lam | Financial Independence, money, Money & Life | Comments Off

Credit card scams have been well publicized in recent years, but you may not be aware of the uptick in debit card scams. According to FICO®, the total number of compromised debit cards in 2023 was up 96% over the last year surveyed, and more than 315,000 cards were impacted.

Whether swiping your debit card in person or while shopping online, you’ll want to be vigilant. Here, learn the ins and outs of debit card fraud, plus how to protect yourself.

What Is Debit Card Fraud?

Debit card fraud occurs when an unauthorized third-party or individual uses your debit card to take out cash or make purchases without your permission. Scammers can use sensitive financial details — your card number, PIN, CVV code, and expiration date — to make purchases that drain your bank account.

If left undetected, debit card fraud could potentially wipe out your bank balance. You’ll need to go through a process to dispute the charges and/or withdrawals to try to get your money back.

💡 Quick Tip: Tired of paying pointless bank fees? When you open a bank account online you often avoid excess charges.

Common Debit Card Fraud Tactics

Debit card scams can take many forms. Here are some of the most common types of debit card fraud.

Skimming Devices

Fraudsters install skimming devices on ATMs and payment terminals. These devices can look as if they are simply part of the machine; they fit over the slot where your card usually goes. If you unwittingly insert your debit card, the skimmer can scan the microchip on your card. Your card’s details can then be downloaded, stored, and used without authorization. Skimming can happen at any payment terminal, but it tends to be most common at gas station pumps and ATMs.

Phishing Scams

A phishing scam occurs when scammers create fake sites, and/or send bogus emails or text messages in hopes of luring you to reveal your debit card details. Then, your financial credentials can be used by criminals.

These fraudsters often pretend to be an individual or company with a too-good-to-be-true offer or an urgent situation that spurs you to take action. For instance, they might offer a new laptop at a remarkably low price, or they could tell you your bank account has been compromised and you need to update your credentials immediately.

The goal is to get you to click on a fake site and input your debit card information. While less common, you might get a phone call with an offer that requires your card info on the spot.

Card Theft

Another common way fraudsters can use your debit card to make purchases or take out cash is to steal your physical card. Once they have their hands on your card, they might try to guess your PIN by taking a stab at what your PIN might be — for instance, your birth year. (This information may also be gleaned from social media accounts or the dark web once they have your name.)

Scammers might also figure out your PIN by “shoulder surfing” or subtly peering over your shoulder as you punch in your PIN at an ATM. Once they have that information, they could steal your card and use it to empty your checking account.

Recommended: When Were Debit Cards Invented?

Preventing Debit Card Fraud

Here are steps you can take to safeguard your personal and financial card data from would-be thieves:

Secure Your Card

You can secure your card by signing the back of your debit card, keeping your PIN private, and changing your PIN regularly.

You might also want to consider using a credit card for online purchases and when paying for gas at the pump. Credit cards typically have greater fraud protection than debit cards.

Monitor Accounts Regularly

By monitoring your accounts, you can spot any suspicious debit card activity more quickly. For instance, set text or email alerts for debit card transactions and aim to check recent activity through your bank’s mobile app.

Many people find checking their bank accounts once or even a few times a week is a wise move. It’s also a good idea to comb through your recent banking statements for anything that seems out-of-the-ordinary, such as:

• Purchases you didn’t make, including micro payments of a dollar or so

• Unauthorized big-ticket transactions

• Multiple purchases from the same store you didn’t authorize

Use Chip Cards and Digital Wallets

Chip cards use EMV technology, which involves a tiny embedded computer chip that makes it harder for fraudsters to skim and access your debit card’s details. They can be less susceptible to fraudulent activity than those with the standard magnetic strip.

Digital wallets have greater protections, too. They employ security features such as encryption and tokenization, which add a wall of protection against fraudsters trying to access your card data. Additionally, because digital wallets are stored on your phone, they’re usually safeguarded by biometric screening, multi-factor authentication, and passwords.

What To Do if Fraud Occurs

Should you fall victim to hackers, know that it can (and does) happen to anyone. With more sophisticated tactics and greater technology, fraudsters are getting better at finding ways to snag your debit card data. Here’s what to do should you find yourself a victim of debit card fraud.

Report It Immediately

If your debit card has been lost or stolen or you suspect fraud, the first step is to report it to your bank immediately. Reporting the fraud as soon as possible limits your financial responsibility and can halt the damage the scammer can do. Contact your bank ASAP if you notice unusual activity and request guidance. Depending on your particular situation, you may also have to take steps to report identity theft.

Dispute Fraudulent Charges

If the issue is a fraudulent charge on your debit card, try contacting the merchant to see if you can resolve the issue on their end.

At the same time, you’ll also want to dispute fraudulent charges by contacting the bank or credit union, as mentioned above. It’s important to do this ASAP (and no more than 60 days after the problem occurs). Once you dispute a charge, the financial institution can take up to 90 days to investigate and resolve your dispute.

You can also request a “chargeback” on debit card transactions. Essentially, a chargeback occurs when you dispute a transaction and reverse it. The money that got charged goes back into your account as the financial institution investigates the issue. When it’s resolved, you either keep the credit or, if the bank decides there wasn’t fraud, the funds are taken out of your account.

Get a New Debit Card

When you report fraudulent charges, the bank or credit union can freeze your account, which blocks anyone — including yourself — from using it. If they aren’t already sending you a new debit card, ask for one. Your old card is compromised, so you’ll want a new one.

Also, if you lose your debit card, that’s another reason to call your bank about freezing your account and getting a new one sent to you. Your missing card could be in the hands of a criminal.

Recommended: What Is An ATM Card?

Debit Card Fraud Protections

Under the Electronic Fund Transfer Act (EFTA), if you let your financial institution know within two business days after you notice suspicious activity, you are typically only liable for up to $50. If you inform them after that 48-hour period but within 60 days, you could be liable for up to $500. If you don’t notify them until more than 60 days has passed since the incident, you could face unlimited losses.

Tips for Safer Debit Card Use

Next, delve into best practices to keep your debit card and its details secure.

Avoid Unsecured Wifi

Hackers will go to great lengths to try to tap unsecured networks and steal private information, including personal details, passwords, and data about your checking and savings accounts, plus other financial intel.

To avoid making your banking data vulnerable to thieves, don’t use public or unsecured wifi. Instead, make sure you’re on a secure network. Secure networks have protective measures in place to ward off unauthorized access and theft.

Update PINs and Passwords

Make it a habit to update your debit card and app PIN and banking passwords regularly. Make sure you use unique, strong passwords. In other words, alphanumeric passwords that also contain special symbols. You’ll also want to steer clear of using weak passwords that can be easily guessed, like your date of birth.

Use Credit Cards for More Protection

Credit cards can offer greater protection than debit cards. When a hacker uses your credit card for fraudulent purchases, they’re not using your money but your credit. So you won’t risk having your bank account wiped out.

Plus, most credit cards provide zero liability protection for unauthorized charges. And, if you notice any suspicious activity, you can likely freeze your card to prevent any additional credit card scams from occurring.

The Takeaway

While debit card fraud is on the rise and scammers are more sophisticated in their tactics, you can take steps to prevent debit card fraud from happening. Monitoring your accounts regularly, keeping your credentials private, and being wary of skimmers are among those moves that can help you keep your bank account secure.

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

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.20% APY on SoFi Checking and Savings.

FAQ

What are common debit card fraud red flags?

Red flags for credit card debt include multiple transactions from the same retailer, unusually large purchases, or purchases made in a place you haven’t visited. It’s always a good idea to check your transactions and monitor your banking activity regularly, at least once a week.

Are debit or credit cards safer?

Credit cards offer greater fraud protection and are generally safer to use than debit cards. Many major card issuers offer zero liability fraud protection. However, you can accrue interest on your purchases, while debit cards simply tap funds you have on deposit.

Can a bank reverse fraudulent debit charges?

Yes, a bank may be able to reverse fraudulent debit card charges. You can request a chargeback, for example, when a transaction goes awry. If your card was lost or stolen and there has been suspicious activity, let your financial institution know ASAP. If you alert them within two business days after discovering the fraudulent charges, you generally won’t be held accountable for more than $50. If it’s been more than two days but less than 60 days, you can be liable for $500. If you wait more than 60 days, you could endure unlimited losses.

Photo credit: iStock/Bussarin Rinchumrus

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

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

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

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

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

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

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

*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.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOBK-Q224-1900742-V1

Jul

2024

Average Checking Account Balance in the USA

By Timothy Moore | Budgeting & Goals, money, Money & Life | Comments Off

Your checking account plays an essential role in your financial life. It allows you to receive your payroll direct deposits, pay bills, write checks, make debit card purchases, withdraw cash at ATMs, even send money digitally to friends and family.

But since these accounts generally pay little to no interest, it can be tricky to figure out exactly how much to keep in your checking account. If you keep the balance too low, you risk overdrafts, bounced checks, and account fees. But if you keep the balance too high, you give up the opportunity to earn a better interest rate elsewhere.
So how much money should you keep in your checking account? Below, we’ll explore the average checking account balance — and the factors that can affect the average amount of money in a checking account.

What Is Considered a “Normal” Balance?

There’s no one ideal amount to keep in checking, since everyone’s financial situation is different. A common rule of thumb, however, is to keep around one to two months’ worth of living expenses in either a traditional or online checking account.

So, for example, if your monthly expenses are $4,000, you’d want to keep around $8,000 in checking. This helps to ensure you’re able to cover your short-term expenses and don’t accidentally overdraft your account or dip below the minimum balance required to avoid a monthly fee.

While a “normal” checking account balance will vary by income and expenses, we can get a sense of the average checking account balance in the U.S. by looking at the Federal Reserve’s most recent Survey of Consumer Finances (which is based on 2022 data). According the the Fed, Americans hold a median balance of $8,000 in transaction accounts (which include both checking and savings accounts).

Average vs Median

Government data on the average amount of money in checking accounts includes two different figures: the median and the mean (or average). For example, Americans hold a median balance of $8,000 in transaction accounts, but a mean balance of $62,410.

Why such a large disparity? The mean, or average, number is skewed by people holding high balances. As a result, it doesn’t paint a realistic picture of how much money the average American is really keeping in the bank.

Think back to math class where you learned about the difference between mean and median. The average balance in a checking account is determined by adding together every single checking account balance and dividing by the number of checking accounts. Extremely high and low balances can really skew that number.

The median balance, on the other hand, is the middle value when a data set is ordered from least to greatest. For instance, if you were analyzing five checking accounts, ordered by lowest to highest to balance, you’d look at the balance of the third checking account to get the median:

• $300

• $500

• $2,000

• $10,000

• $20,000

Here, the median checking account balance is $2,000. However, the average balance of the checking accounts is $6,560.

Factors Impacting Balances

There are a number of things that can impact the average amount in a checking account, from income to age to geographical location. Here’s a look at three key factors that can lead to keeping different amounts in a checking account.

Income Levels

As you might expect, income level can have a significant impact on checking account balances. People who make more money tend to spend more on things like rent, food, shopping, and entertainment. And when your living expenses are higher, you generally need to keep more money in your checking account.

Based on the Fed’s data, for example, Americans who earn less than $20,000 a year have a median transaction account balance of $900. For those who earn between $90,000 and $100,000, however, the median balance rises to a whopping $111,600.

Savings Rates

Interest rates on savings rates can also impact how much people keep in their checking account. When annual percentage yields (APYs) for savings accounts are especially high, it’s natural to want to take advantage of that and keep more in savings and less in checking.

These days, keeping only as much as necessary in checking and moving your extra cash in savings can really pay off. While the average checking account interest rate is 0.08%, you can now find high-yield savings accounts offering APYs as high as 3.00% APY or more.

High vs Low Cost of Living Areas

If you live in an area of the country where the cost of living is relatively steep, you’ll need more money available in checking to cover everyday expenses like rent, utilities, groceries and gas. If you live somewhere with a relatively low cost of living, on the other hand, you can likely keep a lower-than-average checking account balance without running the risk of dipping into negative territory and, in turn, triggering fees or bouncing checks.

Balances by Age Group

Age also has a significant impact on the average checking account balance. As we get older, we tend to build wealth and, in turn, keep more money in transaction accounts like checking accounts. Here’s a closer look at how checking account balances vary by age.

Average for Millennials/Gen Z

According to the Fed’s data, Millennials and Gen Z’s keep somewhere between $5,400 and $7,500 in their transaction accounts.

Age	Median Value of Account Holdings
Under age 35	$5,400
Age 35 to 44	$7,500

Average for Gen X

The Fed’s survey shows that adults aged 45 to 54 (who are considered “Gen Xers”) have a median balance of $8,700 in their transaction accounts.

Recommended: What Is the Average Savings by Age?

Average for Baby Boomers/Retirees

Baby Boomers and retirees have the highest average amount of money in their checking and other transactional accounts. Depending on their age, Boomers and retirees typically have median balances somewhere between $8,000 and $13,400. Interestingly, account balances tend to start decreasing in adults 75-plus.

Age	Median Value of Account Holdings
55-64	$8,000
65 to 74	$13,400
75+	$10,000

Balances by Household Income

Government data shows large disparities in account balances between low-, mid-, and high-earners in the U.S. Here’s a detailed look at how household income affects how much Americans keep in their transaction accounts.

Income Range	Median Value of Holdings
Less than $20,000	$900
$20,000 to $39,900	$2,550
$40,000 to $59,900	$7,400
$60,000 to $79,900	$15,760
$80,000 to $89,900	$33,800
$90,000 to $100,000	$111,600

Typical Emergency Fund Recommendations

Personal finance experts generally recommend keeping at least three to six month’s worth of living expenses in the bank to help cover the unexpected, such as an expensive car or home repair, medical emergency, or loss of income. So, for example, if your monthly living expenses are $4,000, you would want to keep $12,000 to $24,000 in your emergency fund. If you’re self-employed or work seasonally, however, you may want to aim for closer to six to 12 months’ worth of expenses.

That said, your emergency savings is generally not part of your checking account balance. Instead, you’ll want to keep that money in a savings account at a traditional or online bank or credit union. For one reason, you’ll be less tempted to spend your emergency fund on nonessential purchases if it’s a little further out of reach. For another, the interest rate for a savings account is typically higher, which will help your emergency grow over time.

The Takeaway

The average or normal checking account balance varies by age, income, lifestyle, and other factors. Ideally, you want to have enough in checking to cover one to two months’ worth of living expenses. This can help you avoid accidentally overdrafting the account or dipping below any required minimums. You can then move any additional cash to a vehicle that offers a higher return, enabling your money to grow faster.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.20% APY on SoFi Checking and Savings.

FAQ

How much does the average person have in their checking account?

The average checking account balance can vary significantly depending on age, income level, spending habits, and other factors. According to the Federal Reserve’s most recent Survey of Consumer Finances, Americans have a median balance of $8,000 in transaction accounts (which include checking and savings accounts).

Can you have too much money in your checking account?

Yes. Keeping too much money in a checking account can be inefficient because these accounts typically offer low or no interest. A good rule of thumb is to keep enough money to cover one to two months’ worth of expenses in checking, and move excess cash to an account where you can earn higher returns, such as a high-yield savings account, investment account, or individual retirement account (IRA).

Photo credit: NIKOLA ILIC PR AGENCIJA ZA DIZAJN STUDIOTRIPOD SURCIN

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

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

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

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

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

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

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

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

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

SOBK-Q224-1890458-V1

Jul

2024

Money Market vs Checking Account

By Jackie Lam | Budgeting & Goals, Growing Wealth, money | Comments Off

Money market and checking accounts can both offer a safe place to store your cash, easy access to your funds, and the ability to earn a bit of interest. However, they are not identical. Money market accounts generally offer higher interest rates, but may require higher minimum deposits and balances, and they may also restrict how many transactions you can make per month.

Understanding the differences between these two accounts, and the pros and cons of each, can help you determine which is the best choice for your needs.

What Is a Checking Account?

A checking account is a deposit account where you can keep your money, safely storing your earnings and managing your everyday spending. A deposit account, for those who aren’t used to the term, is a type of bank account that lets you deposit and withdraw funds.

Unlike a savings account (which is often designated for an emergency fund and future goals, like a new car), a checking account is designed for frequent use, such as paying for your living expenses and basic purchases.

Checking accounts typically feature unlimited transfers, deposits, and withdrawals. If the checking account is with a bank, the funds are likely protected by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per depositor, per account ownership category, per insured institution. If the account is with a credit union, the money is likely insured up to the same limits by the National Credit Union Administration (NCUA).

💡 Quick Tip: Typically, checking accounts don’t earn interest. However, some accounts do, and online banks are more likely than brick-and-mortar banks to offer you the best rates.

What Is a Money Market Account?

A money market account (MMA) is also a deposit account. If you’re putting different deposit accounts on a spectrum, a money market account leans more toward the savings account end of the range. They tend to have higher interest rates than a checking account and are typically better suited to storing your funds for future goals.

Money market accounts are protected by the FDIC and NCUA in the same way as checking accounts. However, these accounts often have limits on withdrawals and transfers. Another feature to note: They frequently have higher minimum deposit and balance requirements than checking accounts.

Key Differences

Here are some key differences when comparing money market vs. checking accounts.

Interest Rates

You have a better chance of scooping up a higher interest rate on a money market account vs. a checking account. (Some checking accounts offer no interest at all.)

The national average interest rate for money market accounts is 0.67%, but you’ll likely find higher rates than that. Some financial institutions offer money market accounts with annual percentage yields (APYs) of 5.00% and higher. On the other hand, the national average rate for checking accounts is 0.08%.

Accessibility of Funds

As checking accounts are made for everyday purchases, they feature unlimited transactions — transfers, deposits, and withdrawals. A money market account will likely provide similar forms of access to your money, such as check writing privileges, debit card transactions, and ATM withdrawals. However, how often you can conduct these transactions with a money market account may be limited, as you’ll learn in the next point.

Transaction Limits

With a checking account, you typically can access your funds as often as you like. With money market accounts, this may not be the case. While the Federal Reserve lifted previous caps on monthly limits for withdrawals, deposits, and transfers set by Regulation D, a bank or credit union might still set limits. You could find yourself restricted to, say, six transactions of a certain kind per statement period. It’s therefore important to read the find print on your account agreement or to ask a customer service rep for details.

Opening Deposit Requirements

Another key difference between a money market account and a checking account is the opening deposit requirements. Money market accounts typically have higher minimum opening deposits than their checking counterparts.

Plus, you might need to maintain a higher monthly balance. Stashing a larger sum of cash (say, $2,500) in your money market account may be necessary to snag a higher interest rate and lower account fees. Standard checking accounts typically don’t have these conditions, although some premium accounts do require higher balances.

Pros of Checking Accounts

When comparing these two financial products, ponder the pros and cons of checking accounts. First, consider their advantages:

Low opening deposit. You can open a checking account with no initial deposit at some financial institutions. Others may require $25 to $100.

Convenient access. As previously noted, you can typically access the funds in a checking account as often as you like via a debit card, an ATM, electronic transfers, or checks. There may be an unlimited number of transactions you can make in a given month.

Pay bills. You can usually set up automatic bill pay so your financial institution sends funds to payees on your behalf. Plus you can set up autopay with different companies so that they can deduct funds from your checking account to pay for bills each month, such as utility bills, insurance premiums, and credit card payments.

Debit card. When you open a checking account, you typically receive a debit card for everyday purchases, whether in-person and online, and for withdrawing cash at an ATM.

Cons of Checking Accounts

Now, consider some of the downsides of a checking account:

Low interest. Checking accounts aren’t designed to grow your savings; they’re designed to pay bills, make everyday purchases, and constantly move money in and out. As such, they don’t feature high interest rates. Some may not earn any interest. It’s likely that any interest earnings on a checking account will be outpaced by inflation.

Monthly service fees. A checking account might come with a monthly service fee. However, you might be able to opt out of these fees by maintaining a minimum balance or receiving a certain amount in direct deposits in a statement cycle.

Other fees. You might also find yourself paying out-of-network ATM fees, overdraft fees, bounced check or returned payment fees, and paper statement fees with a checking account.

Pros of Money Market Accounts

Here are some advantages to opening a money market account:

Higher interest rates. You will typically enjoy a higher rate with a money market than a standard checking account, though perhaps not as much as a savings account. The rates vary depending on where you do your banking.

Access to cash. Unlike certificates of deposit (CD), your money isn’t locked in your money market account for a specific term. Instead, you can access your money and use a linked debit card to make purchases or ATM withdrawals.

Cons of Money Market Accounts

Next, review some potential drawbacks to money market accounts:

Transaction limits. Depending on the financial institution, monthly transaction limits on electronic transfers and outgoing checks may be in place. For example, you might be limited to six withdrawals and transfers per statement period. If you exceed these limits, you might be on the hook for paying a fee or receiving a lower interest rate.

Opening deposit. Money market accounts typically require a larger chunk of change for the opening deposit. The amount depends on the bank but usually starts at roughly $2,500.

Fees. As with checking accounts, you may find yourself paying a number of fees that can eat away at the interest you earn.

Which Account Is Right for You?

When comparing a money market account to a checking account, a checking account may be a better fit if you intend to keep the funds for everyday use. Most people (82% or more of Americans) have a checking account, and it can be the hub of one’s daily financial life. Think of it as a well from which you’re constantly drawing water — you’ll enjoy unlimited access to withdrawals, transfers, and debit card spending.

It might also be a stronger fit if you’re looking for an account that requires a low minimum opening deposit and monthly balance thresholds.

If you have a larger sum of money to keep in an account, want to earn more interest, and don’t anticipate needing to make a lot of transactions, a money market account could be a better fit. It’s also important to look at the initial deposit requirement and monthly balance minimum before making your decision.

Using Both Account Types

Consider using both a checking and a money market account. For instance, you can use your checking account for your everyday spending and to set up autopay on some of your recurring monthly bills.

Your money market account can be linked to pay a few of your bills. If you don’t touch your money market account otherwise, you can stay within any monthly transaction limits that may exist and earn a higher rate of interest, perhaps even an APY that’s competitive with high-yield savings accounts.

The Takeaway

While checking and money market accounts do share some similarities, they have important differences. A money market may offer higher interest, but it could have higher opening deposit and balance requirements, as well as transaction limits. Which kind of account works best for you will depend on your preferences and your unique financial situation.

If you’re considering where to keep your checking and savings account, see what SoFi offers.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.20% APY on SoFi Checking and Savings.

FAQ

Can a money market account replace checking?

It depends: A money market account can have limited monthly withdrawals. Plus, there might be a higher minimum opening deposit and monthly balance needed. That said, it could potentially replace your checking if you don’t typically make a lot of transactions with your checking account and the potential requirements mentioned don’t bother you.

Do money market accounts have debit cards?

Yes, money market accounts typically come with debit cards, which can make spending easier. Money market accounts might have monthly caps on the number of withdrawals and transfers, however. The limit, if it exists, can vary depending on the bank or credit union.

How do money market rates compare to savings?

Money market rates can be comparable to those of some savings accounts. To get the most competitive rate, you might find a money market that’s offering around what you’d earn with a high-yield account at an online bank (currently around 3.00% APY).

Photo credit: iStock/PeopleImages

SOBK-Q224-1900765-V1

Jul

2024

Guide to Selling Used Items

By Kylie Ora Lobell | Budgeting & Goals, Financial Independence, money | Comments Off

Table of Contents

21 Places to Sell Stuff Online
15 Places to Sell Stuff In Person
What Are the Benefits of Selling Your Things?
Keeping Your Cash in a SoFi Savings Account
FAQ

Offloading your used items can do you good on a couple of fronts. You can declutter your home, help fight waste (since you’re not just throwing things out), and you can make money by selling your still-useful stuff.

Whether you are looking to sell unwanted items like clothing, shoes, bags, furniture, housewares, books, electronics, or anything else, you can probably find a platform to help you get the job done. Some ways to sell are online, others aren’t, but all can do their part to connect your items with buyers. And get some additional cash flowing your way.

Here’s a guide on where to sell stuff, with dozens of places that can help you turn your unwanted items into cash.

Key Points

• Online platforms like eBay, Facebook Marketplace, and Craigslist provide convenient ways to sell used items.

• Specialized platforms like Poshmark for clothing or Decluttr for electronics offer targeted selling options.

• Local consignment stores and thrift shops can be good options for selling used items in person.

• Hosting a garage sale or participating in community flea markets can help sell multiple items at once.

• Utilizing social media platforms and local buy/sell/trade groups can connect you with potential buyers in your area.

21 Places to Sell Stuff Online

If you have items you no longer want or need, and you’re looking to make some extra money, exploring online platforms to sell used items can be highly beneficial. Whether you’re decluttering regularly to keep your space tidy or need a financial boost, online resale apps and sites offer convenient ways to reach a wide audience. Many of these platforms are free to list, some take a percentage of profits, and others offer direct payment upon sale.

1. Craigslist

One of the original online marketplaces, Craigslist (Craigslist.org) , is where you can sell used things. You can list all sorts of things, from tools to toys to DVDs to antiques (and much more) for free.

2. Facebook Marketplace

Facebook Marketplace makes it easy to sell items in your local area. It’s free to create a listing that can be seen by anyone on and off Facebook. You can also choose to post your listings to any “Buy and Sell” Groups you’re a member of.

However, a word of caution: Facebook Marketplace and other similar platforms can be used for banking scams. Read up on common ploys and proceed with caution when selling this way.

3. Amazon

While you may think that Amazon is where you can buy new things, there are also a lot of opportunities to list used items, especially books. Current pricing can be $39.99 a month plus selling fees, so you will likely want to be confident you can sell more than that before enrolling.

💡 Quick Tip: Don’t think too hard about your money. Automate your budgeting, saving, and spending with SoFi’s seamless and secure mobile banking app.

4. eBay

The original selling platform, eBay can still be a good way to sell your stuff, especially if you want to reach buyers from around the world who are looking to save money daily. Or it can be a huge help if you’re looking to unload an unusual item (there is almost nothing you can’t sell on eBay). But you may want to keep an eye out for selling fees, which may include a listing fee, a percentage of the sales prices, and possibly other fees.

One example of fees: For most categories, you will pay 35 cents per listing and, when an item sells, you will owe 13.255 of the total sales amount up to $7,500. If the item’s price is higher than that, you’ll pay an additional 2.35% on the overage.

5. OfferUp

Developed as a locally-driven platform, OfferUp is another good bet for selling used things. It allows you to sell to someone local, or ship an item to a buyer who lives anywhere in the US. Most items are free to post. When you sell a shipped item on the site, you may be charged a fee that is 12.9% of the sale price, with a minimum of $1.99.

6. Poshmark

Primarily a site for selling used clothing, Poshmark also lets you list home decor, jewelry, and beauty products. For sales you make under $15, Poshmark takes a flat commission of $2.95. If you make a sale that’s worth $15 or more, it takes 20%.

7. Etsy

Etsy may be best known as a platform for artists to sell their handmade goods and launch a low-cost side hustle. But the site also allows you to list some used goods. However, you can only resell in the “Vintage” and “Craft Supplies” categories. There is a listing fee of 20 cents per item, and, when you sell an item, there’s a transaction fee of 6.5% of the price, plus the amount you charge for shipping and gift wrapping.

8. thredUP

An online consignment and thrift store, thredUP sells thousands of major brands. You can send your gently used clothing directly to the service. If they accept (and sell) your clothing, you can choose from cash or credit.

A $2.99 Clean Out Kit fee and a service charge of $14.99 or higher may be assessed when you send in your clothes.

💡 Quick Tip: If you’re saving for a short-term goal — whether it’s a vacation, a wedding, or the down payment on a house — consider opening a high-yield savings account. The higher APY that you’ll earn will help your money grow faster, but the funds stay liquid, so they are easy to access when you reach your goal.

9. eBid

Like eBay, you can sell just about anything on eBid, either for auction or at a fixed price. eBid is organized into three tiers of selling, with different membership costs and selling fees. eBid may or may not wind up costing you less than other selling platforms, depending on how much you will sell and at what price.

10. Bookoo

Another platform for selling stuff locally is Bookoo, which doesn’t charge any listing or selling fees. Bookoo may not be as well known as other sites, but it is available in nearly every state throughout the U.S.

11. Vinted

If you have a lot of gently used clothes, shoes, and accessories to sell, you may want to check out Vinted (Vinted.com), a peer-to-peer online marketplace that focuses on vintage and second-hand fashion. And, for sellers, it’s free. Buyers pay a “protection fee,” typically 5% of the purchase price plus 70 cents.

12. Vestiaire Collective

If you have luxury items you want to sell, you may want to try Vestiaire Collective, a resale website where you can buy and sell high-end clothing, handbags, and accessories. When you sell an item, you can usually keep up to 85% of your money from the sale, minus a payment processing fee (usually 3%).

13. TheRealReal

TheRealReal is a luxury consignment site where you can drop off or ship designer clothing, accessories, and jewelry, as well as fine art and upscale home decor. They sell your items for you in exchange for a percentage of the profit.

Recommended: Ways to Make Money Online

14. Rebag

If you have a designer bag that you no longer want, you might consider selling it on Rebag, a site that’s focused on buying, selling, and trading luxury handbags. The site will let you know how much your bag is worth. If you like the offer, you can send them your bag with no shipping charges. Once it’s received and approved, you’ll get your payment.

15. Bag Borrow or Steal

Another site for selling luxury handbags is Bag Borrow or Steal. You can sell directly to the site (and get paid right away), or you can consign and receive 70% of the sales price after it’s sold.

16. PreOwned Wedding Dresses

If you aren’t sentimental about keeping your wedding dress, bridal party gown, or accessories, then you can list it on PreOwnedWeddingDresses.com, with a $25 listing fee and an 80% payout of the sale price when someone buys it.

17. BookScouter

If you’re looking to sell textbooks, you may want to check out BookScouter. The platform simplifies the process by searching sites that buy used textbooks, then displaying the prices from those sites, so you can compare and decide where to sell your books.

18. GoTextbooks

GoTextbooks also allows you to sell your college textbooks and hopefully recoup some of the money you spent on them. When you let the site (sellback.gotextbooks.com/) know about what you have for sale, they will give you an instant quote. You can then ship your books for free and receive your money.

19. DeCluttr

If you mainly have electronics to sell, DeCluttr offers a straightforward way to sell old things for cash, buying used tech, cell phones, DVDs, and video games. The site will give you an instant valuation. If you like the price, you can ship your item for free. If it meets expectations, you receive payment a few days later.

20. Gazelle

You may be able to turn your old cell phone into some quick cash at Gazelle. The site will give you an instant quote. If you like the numbers, you can ship the phone to them for free, and get paid via Amazon Gift Card, PayPal, or check.

21. Instagram

If you have a fair number of followers on Instagram, you might consider listing items you’re looking to sell there. As with Facebook groups, you simply need to snap a photo, write a brief description, and name your price. Or, you can go the more professional route and integrate Instagram’s shopping tools.

15 Places to Sell Stuff In Person

For those who prefer face-to-face transactions, selling items in person can be equally rewarding. If you have items cluttering your home and you need quick cash, local stores, markets, and community sales provide great opportunities to sell your goods directly. Whether you choose to consign your items or sell them outright for cash, these in-person places can offer immediate results and personal interactions with buyers.

1. Garage Sales

If your goal is to unload a large amount of stuff all at once, hosting a garage sale can be a good way to go. You could even get some neighbors together and hold a community garage sale to attract more people.

Just be sure to double-check community guidelines first to see if a permit is required.

2. Flea Markets

Community flea markets can be a great way to sell unwanted things. The owner and operator of the flea market will likely charge you a fee for a booth. If you live in a big city, you may have to register early to get a spot.

3. Buffalo Exchange

Buffalo Exchange is a vintage and used clothing store with locations throughout the U.S. If one of their stores is convenient to you, you can make an appointment to meet with a buyer. If they like your stuff, they will pay 25% of their selling price in cash or 50% in store credit. (Using that store credit could prove to be a good way to save money on clothes.)

4. Crossroads Trading

Crossroads Trading is a second-hand clothing store with brick-and-mortar locations throughout the U.S. If you visit a store, you may be able to receive cash for your clothing on the spot. For higher-end pieces, you can opt to consign. Crossroads also offers mail-in service.

5. Plato’s Closet

You can bring your gently used brand-name clothing and accessories to a Plato’s Closet near you. They’ll review your items and, if accepted, you’ll get paid on the spot.

6. Style Encore

A women’s resale store, you can bring in stylish, gently used clothes, shoes, handbags, and accessories to one of Style Encore’s retail locations. If they (style-encore.com) like your items, you will get paid right away in cash.

7. Once Upon a Child

If you have gently used children’s clothing and shoes, toys, and/or baby gear lying around, you may want to cart it over to Once Upon a Child, which has locations throughout the U.S. An employee will check out your goods and, if they think they sell them, will give you cash in return.

Recommended: Weird Ways to Make Money

8. Play It Again Sports

If you live near Play it Again Sports, you may want to consider bringing in all the no-longer-used sports equipment in your garage. You’ll clear out the space, and may get a nice amount of cash in return.

9. Music Go Round

Live in a musical household? Music Go Round is a resale music shop where you can bring in used instruments and sound equipment (like amps, MIDI equipment, and mixers) and get paid cash in return.

10. Local Thrift Stores

Unlike Goodwill or Salvation Army which accept donations, thrift stores — specifically ones that sell high-end or vintage clothing — might be willing to buy your clothes and other items. Look up local stores, and ask them what they buy and how much they typically pay.

11. Used Book Stores

Your local used book stores may be looking to purchase your books from you. You can call ahead, let them know what you have, and see if they are interested. You might wind up selling your old things for cash.

12. Pawn Shop

You may be able to make some quick money selling your old stuff to a local pawn shop. Typically, pawn shops are only interested in things of value, such as jewelry, collectible coins, and electronics. It can be a good idea to bring in proof of purchase so that the owner knows you aren’t trying to sell stolen goods.

13. Facebook Groups

If you’re in any local or niche Facebook groups, you may want to post items that might appeal to members of the group. You simply need to snap a picture, describe your item, set your asking price, and see what offers you get.

14. Nextdoor

Nextdoor is a network of local community websites and can be a good place to post items. You click on the “Sell or give away an item” option when posting and can set your terms. While the number of people who are in a particular area’s community will vary, Nextdoor does have approximately 37 million active users, so you just might find a buyer.

15. A “Raid My Closet” Event

Do you have friends who might be interested in checking out what you have for sale? You may want to consider inviting them over for a “raid my closet” event, or a “raid my garage” party. You can offer food and drinks, and make it a fun celebration to declutter your home.

What Are the Benefits of Selling Your Things?

Selling your things can have several benefits:

• You can declutter or downsize by selling unwanted items.

• You can help the environment by passing the item along versus throwing it in the garbage.

• You can help someone who is looking for a gently used item that you have and wants to get a good deal on it.

• You can bring in extra income.

However, as mentioned before, there are also downsides of selling your stuff. There is the possibility of being scammed in some direct sales, and there are also income tax implications to doing those kinds of transactions as well. Educate yourself on these situations.

Keeping Your Cash in a SoFi Savings Account

If you’re holding on to clothes, furniture, books, or other items you no longer want or need, you could be sitting on a way to make some extra money while decluttering.

What to do with all the profits that start rolling in? You might want to bank it and earn some interest.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.20% APY on SoFi Checking and Savings.

FAQ

What is a good website to sell stuff on?

The right website to sell stuff on will depend on the item you are selling to some extent. If you are selling a piece of furniture or large appliance, you might try Craigslist or Facebook Marketplace. For clothing, there are sites like thredup and Vinted, among others.

How do I sell my stuff online for free?

This will depend on the kind of item you are selling. Craigslist, Facebook Marketplace, and Vinted are some examples of platforms that typically don’t charge the seller any fees.

What is the best app for selling used items?

Among the apps to consider when selling your used items are eBay, OfferUp, and Poshmark. These can reach a large number of potential buyers, though as a seller, you will likely pay some fees.

Photo credit: iStock/Zinkevych

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

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

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

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

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

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

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

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

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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.

SOBK0723036

Jul

2024

Guide to Achieving a Better Life Experience (ABLE) Accounts

By Rebecca Lake | Budgeting & Goals, Financial Independence, money | Comments Off

An ABLE account — short for Achieving a Better Life Experience — is a tax-advantaged savings vehicle that’s designed for eligible people with disabilities. Designated beneficiaries can use an ABLE savings account to set aside money to pay for qualified disability-related expenses.

An ABLE savings account can offer substantial tax benefits for qualified individuals, as contributions grow tax deferred and qualified withdrawals are also tax free. Also referred to as a 529 A account (owing to its similarity to a 529 college savings plan), the ABLE account is designed to make saving and investing more advantageous for people with disabilities and their families.

What Is an ABLE Account?

An ABLE account is a tax-advantaged savings account for people with disabilities and their families. ABLE savings accounts allow people to pay for qualified disability expenses (QDEs) without impacting their ability to qualify for Medicaid or other government assistance programs.

The Achieving a Better Life Experience Act became law in December 2014. The intention behind the ABLE Act and the creation of ABLE accounts was to ease financial stress associated with paying for many of the QDEs associated with different disabilities. Qualified expenses include: housing, education, assistive technologies, specially equipped vehicles, and even food.

Under the ABLE Act, states have the authority to establish an ABLE disability account program. As of June 2022, all 50 states offer at least one ABLE savings account program, according to the ABLE National Resource Center. However, plans are currently inactive in Idaho, North Dakota, South Dakota, and Wisconsin.

💡 Quick Tip: Did you know online banking can help you get paid sooner? Feel the magic of payday up to two days earlier when you set up direct deposit with SoFi.^

How Do ABLE Accounts Work?

An ABLE account is a type of tax-deferred savings account similar to a 529 college savings plan. These accounts work by allowing designated beneficiaries to contribute money, up to prescribed limits.

The money can come from various sources, including individual or corporate contributions, or a trust. The money in an ABLE savings account does not affect your eligibility for other government benefits.

Also like a 529 plan, the money grows on a tax-deferred basis and can be withdrawn tax free when it’s used to pay for qualified disability expenses. Broadly speaking, QDEs are any expenses a person with disability pays in order to maintain their health, independence, and quality of life.

However, withdrawals from an ABLE savings account for non-qualified expenses can result in those distributions being subject to tax. Using money in an ABLE disability account for non-qualified expenses could also affect eligibility for government assistance.

Benefits of an ABLE Account

Generally speaking, ABLE savings accounts are designed to make paying for certain expenses easier for people with disabilities. Here are some of the main advantages of opening an ABLE savings account.

Tax-Deferred Growth and Tax-Free Withdrawals

One of the main draws of ABLE accounts is their tax-advantaged status. The money that goes into an ABLE account can be invested and allowed to grow on a tax-deferred basis. As long as distributions are used to pay for QDEs, withdrawals are always 100% tax-free.

ABLE accounts have an edge over savings accounts, since designated beneficiaries can invest their money in the market. That means they have an opportunity to grow their savings through the power of compound interest.

Flexibility

The ABLE account allows for flexibility, since the money can be used to pay for a wide range of disability-related costs. With a traditional 529 plan, savers are limited to using funds to pay for education-related expenses. The ABLE savings account allows designated beneficiaries (i.e. the disabled individual or family member) to use the money for the categories noted above — housing, transportation, technology, food, etc. — as well as employment training, health and wellness costs, legal and administrative fees, and more.

Friends, family members, and others can contribute to ABLE accounts on behalf of the designated beneficiary, up to the annual limit. For 2024, the annual contribution limit, including rollovers from 529 plans, is $18,000.

And beneficiaries don’t have to worry about those contributions affecting their ability to qualify for Medicaid, Supplemental Security Income (SSI), or other forms of government aid, assuming they’re within certain limits. To learn more about who can make qualified contributions, check the ABLE website, or consult the ABLE program in your state.

One further note: In addition, a U.S.-resident ABLE account owner who doesn’t participate in an employer-sponsored retirement plan can contribute up to an additional $14,580 from their earnings into their ABLE account. The amount that can be added to the account is higher for residents of Alaska at $18,210 and Hawaii at $16,770. (More details on this below.)

Financial Autonomy

ABLE accounts afford designated beneficiaries with a measure of financial independence, since they can set up an ABLE account themselves and make contributions on their own behalf. Individuals can also manage the account, and decide how to invest their savings and when to take qualified distributions for eligible expenses.

An ABLE account can give a person with disabilities more control than something like a special needs trust, a type of trust fund. In a special needs trust, the trust grantor sets aside assets for a disabled beneficiary but that beneficiary doesn’t have a say in how the money can be used.

Drawbacks of an ABLE Account

While ABLE accounts have some positives, they’re not necessarily right for everyone who has a disability. Here are some of the potential drawbacks to consider when deciding whether to open an ABLE account.

Non-Deductible Contributions

Contributions to an ABLE savings account do not offer a tax break in the form of a deduction. (This is also true of some state 529 plans.) So even if you fully fund an ABLE account up to the annual limit each year, you can’t use those contributions as tax deductions.

Age Restrictions

An ABLE account can only be established for someone who has a blindness or disability that began before age 26. So someone who becomes disabled at age 27 or later would not be able to open an ABLE disability account.

The age requirement puts this type of special needs savings account out of reach for some individuals, though they could still be named the beneficiary of a special needs trust.

Worth knowing: There’s legislation afoot to raise the age of eligibility to “before 46” versus “before 26” in 2026.

Means Testing

Money held in an ABLE account is subject to means testing for the purposes of qualifying for Supplemental Security Income and Medicaid. The first $100,000 in ABLE account assets is disregarded for SSI but going over that limit can result in a suspension of your benefit payments.

The $100,000 account balance threshold doesn’t affect Medicaid eligibility. But if a designated beneficiary passes away with money remaining in their ABLE account, the state can lay claim to those assets in order to recoup any Medicaid benefits that were received.

Opening an ABLE Account

People with disabilities can open an ABLE account in any state, as long as that state’s plan is open for enrollment. The ABLE National Resource Center maintains a map with details for each state’s program, including whether out-of-state residents are accepted.

Once you find an eligible program, you can open an ABLE account online. There’s some basic information you’ll need to provide, including:

• Your name

• Date of birth

• Social Security number

• Bank account number

Parents can open an ABLE account on behalf of a minor child with disabilities. You also have to meet the definition of a designated beneficiary. In New York, for example, you must be able to show that one of the following is true:

• You’ve been classified as blind as defined in the Social Security Act

• You’re entitled to SSI or Social Security Disability Insurance (SSDI) due to a disability

• You have a disability that’s included on the Social Security Administration’s List of Compassionate Allowances Conditions

• You have a written diagnosis from a licensed physician documenting a physical or mental impairment which severely limits function, and is expected to last at least one year, or can cause death

Similar to opening a bank account, there may also be a low minimum deposit requirement to open an ABLE account.

Requirements of an ABLE Account

There are certain requirements that must be met in order to open an ABLE account. Generally, you’re eligible for one of these accounts if you:

• Become eligible for Supplemental Security Income based on disability or blindness that began before age 26; or

• Are entitled to disability insurance benefits, childhood disability benefits, or disabled widow’s or widower’s benefits based on a disability or blindness that began before age 26; or

• Certify that you have a medical impairment resulting in blindness or disability that began before age 26.

Again, age and disability status are the most important requirements for ABLE savings accounts. You can open an ABLE account in your home state or in another state, if that state’s program allows non-residents to enroll. It’s important to note, however, that you can only have one ABLE account in your name.

How Much Can You Contribute to an ABLE Account?

The annual contribution limit is pegged to the gift tax exclusion limit each year, which is $18,000 for 2024. Eligible designated beneficiaries can, however, contribute additional money if they’re employed and have earned income for the year.

The IRS limits those contributions to an amount up to the lesser of:

• The designated beneficiary’s compensation for the year, OR

• The poverty line amount for a one-person household as established by the Community Services Block Grant Act

For 2024, the allowable amount for persons with disabilities in the continental United States is up to $14,580. The limit for residents of Alaska $18,210 and Hawaii at $16,770.

Funds from a 529 college savings account can be rolled into an ABLE account. Any rollovers count toward the annual contribution limit. So if $6,000 have been contributed to the plan for the year already, in theory you could rollover up to $11,000 into an ABLE account from a 529 savings account for 2022.

How Can You Use ABLE Money?

As discussed earlier, money in an ABLE savings account can be used to pay for qualified disability expenses. That means expenses that are paid by or for the designated beneficiary and are related to their disability.

Examples of things you can use ABLE money for include such living expenses and other costs as:

• Education

• Housing expenses

• Food

• Transportation

• Employment and career training and support

• Assistance technology and related services

• Health care

• Prevention and wellness

• Financial management and administrative services

• Legal expenses

• Funeral and burial expenses

• Day-to-day living expenses

The IRS can perform audits to ensure that ABLE account funds are only being used for qualified disability expenses. So designated beneficiaries may want to keep a detailed record of withdrawal and how those funds are used, including copies of receipts.

ABLE Accounts vs Special Needs Trusts

A special needs trust (SNT) is another option for setting aside money for disability expenses. In a special needs trust, the beneficiary does not own any of the trust assets but the money in the trust can be used on their behalf. A trustee manages trust assets according to the direction of the trust grantor.

Here’s how ABLE accounts and special needs trusts compare at a glance. You may benefit from consulting a tax professional to understand when and how income from an SNT may be taxed.

	ABLE Account	Special Needs Trust
Tax Treatment	Growth is tax-deferred and qualified withdrawals are tax-free; there is no tax deduction for contributions.	Income generated by the trust (i.e. withdrawals) is generally taxable to the beneficiary during their lifetime.
Control	Designated beneficiaries can control how assets in their account are managed.	The trustee manages the trust on behalf of the beneficiary, according to the wishes of the grantor.
Contribution Limits	Contribution limits correspond to annual gift tax exclusion limits.	No limit on contributions, though the gift tax may apply to contributions over the exclusion limit.
Medicaid/SSI Impact	Up to the first $100,000 in assets is not counted for SSI purposes; balances are not counted for Medicaid eligibility.	Assets are not counted toward Medicaid or SSI eligibility.
Use of Funds	Funds can be withdrawn tax-free to pay for qualified disability expenses.	Funds can be withdrawn for any purpose, though they’re typically used for disability expenses. The beneficiary may owe taxes.
Age Requirement	Disability must have occured before age 26.	Beneficiaries must be under age 65 when the trust is created.

Alternatives to ABLE Accounts

If you don’t qualify for an ABLE account or you’re looking for ways to save on behalf of a disabled child or dependent, there are other accounts you might consider. Here are some options to weigh when looking for alternatives to ABLE accounts.

Special Needs Trust

As mentioned, an SNT can also be used to pay for disability-related expenses. Establishing a trust can be a little more involved than opening an ABLE account, since you’ll need to create the trust on paper, name a trustee, and fund it with assets. But doing so could make sense if you care for a disabled child or dependent and you want to ensure that they’ll be taken care of should something happen to you.

529 College Savings Account

A 529 college savings account is designed to help parents and other individuals save money for education while enjoying some tax benefits. Contributions can be made on behalf of a beneficiary with disabilities. That money can grow tax-deferred, then be withdrawn tax-free to pay for qualified education expenses.

You might open a 529 college savings account for yourself or your child to help them pay for school without incurring student debt.

Bank Accounts

Opening one or more bank accounts is another way to set aside money to pay for disability expenses. Bank accounts won’t yield any tax breaks but they can allow for convenience and accessibility.

• Opening deposits: Brick-and-mortar banks might require an opening deposit of anywhere from $5 to $100 while online banks might allow you to open a checking or savings account with as little as $1 or even $0, with funds to be deposited in the future.

• You’ll need government-issued ID, like a driver’s license, to open an account.

• So how long does it take to open a bank account? Not long, if you’re doing it online. Typically, when you have your basic forms of ID ready, the time it takes to open an online account is minimal.

• When can you create a bank account online? The simple answer is when you’re old enough to do so. Keep in mind that the legal age to open a bank account in your name is typically 18 so if you’re underage, you may need your parents to open the account for you.

• Online banks and traditional banks can offer a variety of account options. Student checking and savings accounts, for example, are designed for younger teens. Older teens who are headed off to university might be interested in opening a bank account for college students.

Banks can also offer certificate of deposit (CD) accounts and money market accounts.

If you’re wondering whether you can open a bank account with no ID, the answer is no. You’ll need some form of personal identification, such as a government-issued ID, in order to open a bank account online or at a brick-and-mortar bank.

The Takeaway

An ABLE account can make it easier for someone with disabilities to meet their needs while maintaining control over their finances. With an ABLE account, the money that’s contributed grows tax-free and can be withdrawn tax free to pay for qualified expenses relating to the care of a disabled person. Another benefit: Those qualified expenses aren’t limited to health care. The range of expenses include housing, food, transportation, employment — as well as health and wellness and preventive care.

In addition, you may want to consider other options, such as online bank accounts, for growing your savings.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.20% APY on SoFi Checking and Savings.

FAQ

What is considered an ABLE account?

An ABLE account is a tax-advantaged account that’s administered through a state program for the purposes of helping persons with disabilities to save and invest money. An ABLE account’s tax status sets it apart from bank accounts, college savings accounts, or Individual Retirement Accounts (IRAs). You can sign up with your state program.

Should you have both an ABLE account and a special needs trust?

It’s possible to have both if that’s desired. An ABLE account can be managed by its designated beneficiary, allowing them control over their finances. Special needs trusts are managed by a trustee on behalf of the beneficiary, meaning they cannot direct how the money is spent. Having both an ABLE account and a special needs trust can help to ensure that someone with disabilities is taken care of financially while allowing them a measure of independence.

Is a Roth IRA an ABLE account?

No. A Roth IRA is a tax-advantaged account that’s used for retirement savings. Roth IRAs are funded with after-tax dollars and qualified distributions are tax-free. They’re not limited to persons with disabilities while an ABLE account is designed to be used specifically for qualified disability expenses.

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

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

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

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What Is a Checking Account?

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Which Account Is Right for You?

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FAQ

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Do money market accounts have debit cards?

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