May
20
2024

Guide to Direct Deposit

By | Budgeting & Goals, Financial Independence, money | Comments Off on Guide to Direct Deposit

If you’re like most Americans, your paycheck turns up in your bank account automatically, without any check to sign or wad of cash to pocket and then get to the bank.

With direct deposit, funds are electronically transferred out of one bank account and (ka-ching!) deposited into another. It’s a convenient way to automate one’s finances, and it’s not limited to paychecks. It can streamline other financial transactions as well.

Here, you’ll learn more about this process, the pros and cons of direct deposit, and ways you might want to put it to work for you.

Key Points

•   Direct deposit is an electronic transfer of funds from one bank account to another, commonly used for payroll.

•   It was introduced in 1972 with the formation of the first Automated Clearing House (ACH) network.

•   Nearly 93% of employed Americans receive their salaries via direct deposit.

•   The process involves employers sending an electronic file to the bank, which then distributes funds to employees’ accounts.

•   Direct deposit is also utilized for government benefits, tax refunds, and other payments.

What Is Direct Deposit?

As mentioned above, direct deposit is a way of electronically transferring funds between bank accounts.

It was pioneered more than 50 years ago. In 1972, the first automated clearing house (ACH) network formed to manage electronic payments, with other networks quickly following. In 1975, the Social Security Administration (SSA) decided to test the system of direct deposit for payments they issued. Today, 99% of SSA’s payments are directly deposited.

Today, nearly 93% of employed people in the United States receive their salaries or wages this way.

What’s more, these automatic bank transfers are used today in ways beyond having paychecks directly deposited, including bill pay, retirement account contributions, and more.


💡 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 Does Direct Deposit Work?

You’ve now learned a bit about what direct deposit is and how the ACH system facilitates direct deposit, allowing funds to flow seamlessly and quickly from one account to another.

Here, a bit more intel on how this process can be put to work for you and how to set up direct deposit.

Direct Deposit for Payroll

Let’s say that someone is ready to start a new job. The human resources department explains how the company either requires direct deposit or offers the option.

•  If that employee wants to set up direct deposit, they would need to share bank information with their new employer, including the bank’s name, the routing number that identifies the financial institution, and the employee’s bank account number. Sometimes, a voided check is requested.

•  This information would then be entered into the company’s payroll system and, whenever payroll rolls around, the company would send an electronic file to this employee’s financial institute. This file would share how much money should be transferred from the company’s (the “originator’s”) bank account to accounts for each of the employees whose direct deposit accounts are located at that particular financial institution.

•  If, for example, three employees of a company all share Bank A, then let’s say this bank receives an electronic transfer of $4,345. Bank A would then distribute the money appropriately into the proper bank accounts, perhaps:

◦  $2,000 in Person A’s checking account and $500 into their savings account

◦  $1,350 in Person B’s account

◦  $445 in Person C’s checking account and $50 into their savings account.

•  Then, if the employees (known as “receivers”) check their bank balances, they’ll see the deposits made through this direct deposit process. As noted in this example, money may be directly deposited to a checking account or into a savings account. Or some money can be put into a savings account with the rest in a checking account.

•  How long does direct deposit take? Typically, the funds go through like clockwork and are there waiting on payday. Some banks may offer the ability to access your direct deposit up to two days sooner.

What Are the Uses of Direct Deposit?

There are several uses for direct deposit:

•  Payroll. As noted, the vast majority of Americans get paid this way.

•  Tax refund. This can be among the quickest ways to get your tax refund. The IRS can process a direct deposit refund for an electronically filed return in as little as seven to 10 days of receipt.

•  Government benefits. Social Security and Supplemental Security Income benefits, VA, unemployment, and other benefits can be paid via direct deposit.

•  Commissions, rental income, vendor payments and other earnings can be automated with direct deposit.

•  Dividends. Shareholders may receive dividends by direct deposit.

•  Child support. This may also be automated.

Benefits of Payroll Direct Deposits

Direct deposit has many benefits. Here’s a closer look:

•  Convenience: With a direct deposit of their paycheck, employees can skip the step of physically depositing a paycheck into their accounts, which can be a timesaver.

This can be especially true if the employee telecommutes from home, is on vacation, or is otherwise out of the office when payday comes, because that employee doesn’t have to go into the office to retrieve the paper check.

•  Speed: With direct deposit, the money is typically in an employee’s bank account at the start of the designated payment date, which gives them access to the funds that day. No waiting for checks to clear.

•  Security: With paper checks, there’s always the possibility that they will get lost or stolen. So, payroll direct deposit can add a layer of security to the process.

Many times banks will waive fees for customers who have direct deposits set up.

•  Savings: Many times banks will waive fees for customers who have direct deposits set up, although there may be a minimum deposit amount required for this to happen.

•  Better money management: If an employee puts a percentage of each paycheck automatically into a savings account, this can get them into a regular savings habit.

Downsides of Payroll Direct Deposit

Now, for the other side of the coin, the cons of direct deposit:

•  Inconvenience: When people receiving direct deposits decide to change banks, it may be a hassle. It may take workplaces a period of time to change where paychecks are sent, which means that the old account might need to be kept open longer to make sure all paychecks are received.

How long that period of time may be can vary. But, before you close your old account, ensure that all direct deposits are being put into the new account. Also make sure that all withdrawals and checks have cleared at your old bank and that any automated payments are coming out of the new bank.

•  Scheduling: With direct deposit, it’s important to make sure the correct deposit dates and amounts are recorded. Otherwise, account holders could write checks beyond what’s available, which could trigger overdraft or non-sufficient fund (NSF) fees — which can be costly, especially when they add up.

•  Lack of access: Not everybody in the United States has a bank account. If someone doesn’t but their employer requires direct deposit (more about that next), then employees without a bank account would likely receive their paychecks through a prepaid debit card. These can come with fees and, like paper checks, can be lost or stolen.

Here are the pros and cons in chart form:

Pros of Direct Deposit

Cons of Direct Deposit

Convenience receiving fundsInconvenience if you change banks
Speed (no waiting for checks to clear)Scheduling; must be sure funds arrive
Security (no carrying around cash or checks getting lost in the mail)Lack of access for those who are unbanked
Savings; banks may offer discounts or bonuses if you receive qualifying direct deposits
Better money management

Employers Requiring Direct Deposit

Just as there are benefits to payroll direct deposit for employees, there are also benefits for employers. For instance, it’s cheaper to manage payroll payments this way, versus physical checks.

Plus, they have a record of accounts, which makes it easier for companies when they’re reviewing expenses — and they don’t have to reissue a check if an employee loses one.

And, after a person’s payroll information has been entered into the system, paying employees can be faster and easier with direct deposit.

Laws governing payroll direct deposit vary by state and, if a state has no specific laws on this subject, it defaults to federal regulations. Federal law states that employers must give each employee using direct deposit a summary of rights and liabilities and must get their signature on an authorization form along with relevant banking information.

Some states allow employers to actually require direct deposit for payroll, as long as the program is administered in a way that’s consistent with federal regulations. (In some cases, the rule only applies to public sector workers.) Most states, however, still give employees the choice between direct deposit and receiving a physical check.

A handful of states have laws that are unique to them, ones that don’t fit into any of the broad categories already described.

Automating Your Finances

The concept of electronic funds transfers is at the heart of payroll direct deposits, but goes beyond that. Here are additional ways to benefit from automating your finances.

•  Automation is a tool that can also help people to build an emergency savings account. In general, traditional wisdom says this account should contain three to six months’ worth of living expenses.

That way, if an emergency arises (whether that’s a job loss, an unanticipated repair, or unexpected medical expenses), a financial cushion exists. By setting up a regular funds transfer to a savings account, this can make it easier to build up that emergency fund.

•  Another way to streamline your financial life: paying bills through autopay. In some instances, lenders may offer a discounted interest rate for borrowers who use automated payments to pay their bills. Autopay can help borrowers make their payments on time, rather than forgetting them when life gets hectic. This can mean fewer or no late fees.

Autopay can help borrowers to make their payments on time, rather than forgetting them when life gets hectic.

•  Because payment history plays a key role (35%) in a person’s FICO® Score, autopay can help you establish and maintain your credit score. By automating payments (as long as enough money is in their checking or savings account when the payment is due) you can optimize this aspect of your cash management.

•  Autopay helps to reduce the number of paper bills that need to be sent out and the number of paper checks that may be written to pay those bills. This means that automated funds transfers can therefore be an eco-friendly choice to make.

•  Whenever funds are electronically transferred, either in or out of a bank account, a digital record is automatically created. This can be helpful when balancing accounts, creating a budget, looking for tax deductible items, searching for ways to trim discretionary spending, and more.

•  Autopay might also be a good strategy to use to contribute to a retirement account. Employers may automatically deduct an amount from employee paychecks to transfer it into a retirement account that’s set up by the company. That can make saving super easy.

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 4.00% APY on savings balances.

Up to 2-day-early paycheck.

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FDIC insurance.


Types of Accounts for Direct Deposits

For people who decide to use forms of automated funds transfers, here are some options to consider for receiving direct deposit:

•  Checking accounts

•  Savings accounts

•  Money market account

•  Investment accounts

•  Some prepaid debit cards

•  Some payment apps, such as PayPal or Cash App.

Getting Direct Deposit With SoFi

If you’re interested in opening a bank account to receive direct deposits, take a look at what SoFI offers and see if SoFi direct deposit is a good fit for you.

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 4.00% APY on SoFi Checking and Savings.

FAQ

What is the meaning of direct deposit?

Direct deposit refers to the automated transfer of funds from one bank account to another. This means cash doesn’t need to change hands, nor does a check need to be written and then deposited.

How do you get direct deposit?

Typically, signing up for direct deposit involves sharing your bank account and routing number with, say, your employer or the government so they can direct deposit funds in your account. In some cases, you may be asked to share a voided check.

Is direct deposit only for paychecks?

Direct deposit is not only for paychecks. It can also be used for government benefits (such as Social Security), commissions, tax refunds, investment dividends, and other forms of payment.


SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
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SoFi members with direct deposit activity can earn 4.00% 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 4.00% 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 4.00% 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 12/3/24. 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.

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.

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

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May
20
2024

15 Things to Stop Buying When Trying to Save Money

By | Budgeting & Goals, Financial Independence, money, Money & Life | Comments Off on 15 Things to Stop Buying When Trying to Save Money

Short of getting a raise, the only way to save more money is to spend less. While that may sound like a bitter pill to swallow, tightening your budget could be a lot easier than you think.

Thanks to the constant allure of consumerism, many of us mindlessly overspend on small recurring expenses that can seriously add up over time. We often don’t realize how much we waste on things we don’t need or, in truth, really care all that much about.

By becoming more intentional in your spending, and cutting out unnecessary costs, you could potentially save hundreds per month with much sacrifice. That’s money you can then put towards things that are important to you, like going on a great vacation, buying a car, or putting a downpayment on a home.

While everyone’s spending habits are different, we’ve got 15 ideas for how to spend less and save more starting today.

Key Points

•   Cutting out unnecessary purchases can significantly boost savings, such as opting for fewer streaming services.

•   Unused gym memberships are a common area where money can be saved by switching to free workout alternatives.

•   Premium cable packages often include unwatched channels; consider cheaper alternatives or cutting the cord.

•   Daily coffee purchases add up; brewing at home can reduce monthly expenses significantly.

•   Opting for generic brands over name brands can offer similar quality for a fraction of the cost.

Tips For Saving Money

One of the best ways to save money is to take a close look at where your money is currently going each month. You can track your spending by scanning your credit card statements and receipts over the last few months. But a simpler way is to use a budgeting app that syncs with your accounts and keeps track of what you spend in different categories in real time.

Once you have a bird’s eye view of your cash flow, you may realize that you’re spending more than you thought (or want to) in certain categories. You may also find some easy places to cut back — such as getting rid of a monthly subscription you rarely use or switching to a cheaper cell phone plan.

If you want to get started saving right away, we’ve got some simple suggestions for things you can stop buying right now. Eliminating even small recurring expenses can add up dramatically by the end of a year.

💡 Quick Tip: Help your money earn more money! Opening a bank account online often gets you higher-than-average rates.

15 Things to Stop Buying If You Are Trying to Save Money

To start saving money right away, stop buying these 15 things.

1. Multiple Streaming Services

With the proliferation of streaming services now available, it can be easy to sign up for more platforms than you can possibly watch. Consider picking one or two services that you actually watch consistently and getting rid of the rest. Or, stagger your streaming services so that you have each one for a few months out of the year. That can give you access to all the shows you want but keeps the price down.

2. Unused Gym Membership

A gym membership can be worth the cost if you’re actively using it. But if you rarely see the inside of your gym these days, it might make sense to cancel your membership and find lower-cost fitness alternatives, such as running/walking outside, lifting weights at home, or following free workout videos on YouTube.

Recommended: 27 Fun Things to Do for Free

3. Premium Cable

Premium cable subscriptions come with a high monthly price tag and often include tons of channels you never watch. To save money fast, think about cutting back to basic cable or negotiating for a cheaper rate with your provider. Or, cut the cord entirely and just use a few streaming services. If you still want live TV channels, consider options like Sling TV or YouTube TV.

4. The Daily Coffee

You may really enjoy your morning (or afternoon) takeaway coffee, but if you add up how much you’re actually shelling out on coffee drinks each month — and year — you might decide that there are better uses for this money. Consider buying a quality coffee maker or French press and (if you don’t have one) a portable coffee mug, so you can make your delicious brew to go at home.

5. Name Brand Items

Generic brands typically have the same ingredients and offer comparable quality to name brands but for a fraction of the price. Whether you’re shopping in the supermarket or a drug store, opt for the generic option whenever it’s offered. This small change can lead to significant savings without compromising your needs or lifestyle.

Recommended: How Much Should I Spend on Groceries a Month?

6. Extended Warranties

These days, you can get extended warranties on practically everything — appliances, cars, electronics, and even homes. While having that extra protection may sound like a good idea, it typically comes at a hefty cost. And, the odds of you using an extended warranty is low. Companies have done the math and generally offer warranties that end before the usual problems crop up — otherwise they would lose money. A better bet: Skip the extended warranty and put that money into your emergency fund.

7. Greeting Cards

Surprising but true: A greeting card can set you back as much as $10. Rather than a canned card from a greeting company, most people would likely rather you share your own words and thoughts. Consider stocking up on a box of pretty cards that are blank inside. You can then personalize and customize each one for any occasion, whether it’s a birthday, baby shower, or wedding.

8. Bottled Water

While keeping bottled water on hand is convenient, the cost can add up, especially if you have a family. A simple way to spend less at the grocery store each week is to give each person in your household their own reusable water bottle to fill with tap or filtered water. You can then take bottled water (and if you really want to save, all store-bought drinks) off your shopping list. This will not only save money but also reduce plastic waste.

9. Impulse Purchases

Those little purchases you make here and there without thinking can add up. Consider setting a 24 hour (or longer) waiting period for any item you have a sudden urge to buy but really don’t need. You may find that the urge passes. Or, try a “no-spend” week or month where you pause all unnecessary spending for a set time period. This can not only save cash but shed light on things you’re buying but can easily do without.

10. Pre-Cut Fruits And Vegetables

Pre-washed and cut produce (and bagged salads) are certainly convenient, but generally cost a lot more than whole fruits and veggies. This is an easy thing to stop buying — prepping produce at home doesn’t take that much time and you may find that your fruits and veggies actually taste fresher.

11. Books

Instead of paying for books, consider getting a (free) library card. This will give you access to countless print, digital, and audiobooks, both at your local library and through partnerships they might have with other libraries and streaming services. This is one of the easiest ways to cut back on spending.

12. Disposable Products

Buying disposable items — like paper plates, plastic cups, napkins, and paper towels — adds up and all of it an unnecessary expense. Consider using real dishware, cloth napkins, and washable cleaning cloths. Your weekly grocery bill (and bags) will get instantly lighter. Avoiding disposable items is also kinder to the environment.

13. Takeout/Delivery

It’s fine to get takeout every once in a while, but if you’re looking to save cash quickly, consider writing off all takeout/delivery for a month (or maybe two). Instead, plan and shop for your meals and do some meal-prepping on the weekend. That way, cooking won’t feel like a chore at the end of a long work day. You’ll end up saving money on food while still eating well.

14. Bank Fees

If your bank charges you monthly maintenance or minimum balance fees, consider switching to a bank that offers free checking and savings accounts. To avoid getting hit with hefty overdraft fees, keep tabs on your balance to ensure you can cover your checks and debits. To avoid ATM fees, plan ahead and stop at an in-network machine before you go out.

💡 Quick Tip: Bank fees eat away at your hard-earned money. To protect your cash, open a checking account with no account fees online — and earn up to 0.50% APY, too.

15. Fancy Cleaning Supplies

Nowadays stores carry a different cleaning product for every spot in your home. There’s tile cleaner, sink cleaner, floor cleaner, window cleaner, you name it. Rather than purchase a dozen different specialized cleaning products, you can simply make your own all-purpose cleaner: Mix one cup of distilled water, one cup of white vinegar, the juice of half a lemon and about 15 drops of essential oil and put it in a spray bottle.

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 4.00% APY on savings balances.

Up to 2-day-early paycheck.

Up to $2M of additional
FDIC insurance.


The Takeaway

Everyday items that drain your budget include expensive daily coffee, unnecessary subscription services, takeout/delivery, brand name products, and daily impulse shopping. Once you stop spending money on these things, you should start to see extra money in your checking account that you can now transfer to your savings account — cha-ching!

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 4.00% APY on SoFi Checking and Savings.

Photo credit: iStock/pixdeluxe

SoFi members with direct deposit activity can earn 4.00% 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 4.00% 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 4.00% 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 12/3/24. 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.

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

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May
20
2024

All You Need to Know About ACH Positive Pay

By | money, Money & Life | Comments Off on All You Need to Know About ACH Positive Pay

The Automated Clearing House (ACH) system is a quick, simple, and secure way to transfer money between banks. However, online identity theft can still happen.

One way to mitigate the possibility of unauthorized electronic payments is to use an ACH positive pay service. Offered by banks and credit unions typically to businesses, ACH positive pay is a tool that allows you to manage and monitor transactions to ensure that only authorized payments will be paid from your accounts.

Read on to learn more about what ACH positive pay is, how it works, and its benefits.

Key Points

•   ACH Positive Pay is a fraud prevention service that allows businesses to control which ACH transactions post to their accounts.

•   Businesses can set up a list of approved vendors for automatic payments and add transaction filters.

•   Any transaction that does not meet set parameters triggers an alert, allowing businesses to approve or deny the payment.

•   This service is typically offered by banks and credit unions, sometimes for a fee, though some institutions may offer it for free.

•   The service enhances security by allowing businesses to manage and monitor transactions, preventing unauthorized payments before they occur.

What Is ACH Positive Pay?

ACH positive pay is a fraud prevention service offered by many banks and credit unions that allows businesses to control which ACH transactions are allowed to post to their accounts.

Also known as positive pay for ACH, the service typically allows you to set up a list of approved vendors that are paid automatically, along with the option to add filters, such as expiration dates and caps on the amount of money that can be paid to a particular company. You can add vendors to your approved list before an initial transaction to make sure the payment goes through.

Any transaction that fails to meet your parameters for payment will trigger an alert. You can then decide if you want to approve or deny the payment. This can go a long way toward preventing fraudulent transactions before they happen.

While banks typically charge for positive pay services, some institutions now offer it for free.

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

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 4.00% APY on savings balances.

Up to 2-day-early paycheck.

Up to $2M of additional
FDIC insurance.


How Does ACH Positive Pay Work?

The exact way that an ACH positive pay service works will vary depending on your financial institution. Generally, there are four key steps in the positive pay process.

1.    Authorization: A business provides its bank with a list of authorized ACH transactions, including details such as the transaction amount, originator ID, and effective date.

2.    Incoming transactions: When an ACH transaction is initiated, the bank checks the transaction details against the authorized list provided by the business.

3.    Decision: If the transaction details match an authorized transaction, the bank allows the transaction to proceed. If there is no match, the bank rejects the transaction and notifies the business.

4.    Notification: The business receives a notification of the rejected transaction and can review the details to determine if it is fraudulent. If it is legitimate, the business can authorize the transaction for future processing.

Recommended: ACH Transfer Limits: All You Need to Know

What Is Positive Pay For Checks?

Just like a positive pay for ACH system, many banks and credit unions offer businesses positive pay services for checks. The service works in a similar way but, rather than protect against fraudulent electronic transactions, it seeks to prevent check fraud.

With positive pay for checks, businesses provide their bank with a list of issued checks. The bank’s positive pay system then matches the date, check number, dollar amount, and account number of each check presented against that list to protect against forged, altered, and counterfeit checks. Checks that are considered suspicious are sent back to the issuer (you) for examination. This gives you the chance to examine and approve any questionable checks, reducing the chances that any fraudulent checks are processed.

Recommended: ACH vs Check: What Are the Differences?

What Is Reverse Positive Pay?

Reverse positive pay is a variation on the concept of check positive pay that gives the job of filtering check transactions to the business rather than bank.

With the reverse positive pay system, the bank provides the company with daily notifications about all presented checks and clears only those that are approved by the company.

If the company does not respond within a set period of time, the bank will typically go ahead and cash the check(s) in question. The reverse positive method is not as reliable and effective as positive pay, but generally costs less.

Recommended: Guide to Check Verification

Features and Benefits of ACH Positive Pay

Here’s a look at some of the benefits of setting up ACH positive pay for your business.

Security and Fraud Control

One of the biggest perks of ACH positive pay is increased security and fraud detection. You can set up several different blocks, filters, and alerts, such as:

•   ACH block This blocks all ACH transactions except for accounts that you specifically authorize.

•   ACH fraud filter This allows you to set up filters to control what activity is and is not automatically processed.

•   Activity alerts This allows you to monitor all activity or only receive alerts for potentially fraudulent transactions.

Flexible Notifications

While the details of ACH positive pay systems vary by financial institution, businesses can typically choose to receive notifications via email, SMS, or through their banking portal. This allows you to choose the communication method that works best for your business. Notifications can typically also be customized based on the type of transaction or alert.

Recommended: How Often Should You Monitor Your Checking Account?

Internal Control Support

Positive pay systems help businesses maintain internal controls by providing a clear audit trail of authorized transactions. This allows businesses to easily reconcile their accounts by comparing authorized transactions with their bank statements.

The Takeaway

Offered by many banks and credit unions, ACH positive pay can be a valuable tool for businesses looking to enhance their security and control over ACH transactions. By implementing ACH positive pay, you’ll be able to make decisions on unusual ACH transactions before the money is removed from your account.

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 4.00% APY on SoFi Checking and Savings.

FAQ

Can I reverse an ACH payment?

While ACH payments are generally non-reversible, there are a few exceptions. You may be able to reverse an ACH payment in one of these scenarios: the payment was for the wrong dollar amount, the account number provided was incorrect, the payment due date was incorrect, or there was a duplicate payment.

To reverse an ACH payment, you typically need to contact your bank or financial institution within 24 hours of the transaction and provide them with the necessary information, such as the transaction details and the reason for the reversal. You typically need to pay a fee to have an ACH payment reversed.

Is positive pay only for checks?

No, positive pay is not only for checks. While positive pay is commonly associated with check fraud prevention, there are positive pay services available for other types of transactions, including ACH transactions.

ACH positive pay allows businesses to control which ACH transactions are allowed to post to their accounts, similar to how positive pay works for checks. With ACH positive pay, businesses can provide their bank with a list of authorized ACH transactions, and the bank only processes transactions that match the list.

What is an ACH block?

An ACH block is a security feature offered by banks that allows businesses to block all ACH transactions from posting to their accounts, except for those explicitly authorized. With an ACH block in place, any ACH transaction that does not match the list of authorized transactions will be rejected by the bank.

Photo credit: iStock/nortonrsx

SoFi members with direct deposit activity can earn 4.00% 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 4.00% 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 4.00% 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 12/3/24. 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.

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

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20
2024
Getting a Bank Account After Being Blacklisted

Bank Account Application Denied? What It Means to Be ‘Blacklisted’ and What to Do

By | Budgeting & Goals, Family Finances, money | Comments Off on Bank Account Application Denied? What It Means to Be ‘Blacklisted’ and What to Do

It may seem as if having a bank account is a given in life, but actually, it’s not: Some people get rejected and have to work hard (really hard) to attain that privilege. There’s a situation called being blacklisted by banks, and it’s a tough one to overcome.

Granted, for many, having enough money for a deposit and valid ID gives you all you need to open a bank account.

But if you’ve had problems with a bank account before and your screening report reveals those issues, you could be denied. But all is not lost: Take a deep breath and read on.

Key Points

•   Being blacklisted by banks often results from negative banking histories reported by ChexSystems, affecting account opening.

•   ChexSystems operates like credit bureaus but focuses on banking behaviors, not credit management.

•   A low ChexSystems score can lead to account application rejections, but the score threshold varies by bank.

•   Disputing inaccuracies in a ChexSystems report or settling outstanding debts can help restore banking privileges.

•   Alternative banking options include “second chance” accounts and banks that do not use ChexSystems, offering paths to reestablish banking services.

What Does It Mean to Be on the ChexSystems Blacklist?

Unless you’ve had trouble opening a bank account, it’s possible you’ve never even heard of ChexSystems. Think of ChexSystems as being akin to the credit reporting agencies that determine your all-important FICO credit score. Except instead of keeping track of how well you manage debt the way Equifax, Experian, and TransUnion do, ChexSystems records how well you manage your banking life.

Do you have a history of bouncing checks, overdrawing your account, failing to pay bank fees, suspicious activity, or have had your account closed by a financial institution? If so, it’s likely ChexSystems knows about and is keeping track of those negative activities. Approximately 80% of banks use these agencies’ screening reports when deciding whether to approve a consumer’s application to open a checking or savings account.

Along with your report, banks also may use your ChexSystems Consumer Score to assess your potential risk as a new or returning customer. A score can range from 100 to 899 — and a higher score signifies lower risk.

There’s no official point or score at which consumers are automatically “blacklisted” by ChexSystems or the banks that use its services. Each financial institution determines independently how much risk is acceptable when deciding to open a new account for a client. But if your score is in the lower range, you should be aware that your application could be refused. The reason why: You don’t appear to be someone who will use your bank accounts responsibly.

If you’re planning to open an account and you’re wondering what your current ChexSystems Consumer Score is, you can request it at the ChexSystems website. You’re able to get one free report per year.

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 4.00% APY on savings balances.

Up to 2-day-early paycheck.

Up to $2M of additional
FDIC insurance.


What to Do If You Are Blacklisted

So let’s say you’ve applied for a bank account and got rejected. That can be an upsetting feeling. After all, bank accounts — especially checking accounts — are the hub of most people’s financial lives. Paychecks are deposited there, and bills and other debts are paid out of that same account. You may wonder how you will ever get a bank account after being blacklisted.

We have good news: If a financial institution denies your request to open an account, there are a few things you may be able to do to improve your standing. Here are four steps to take.

1. Request a Consumer Disclosure Report

The bank or credit union that declined to open an account for you should inform you which reporting agency (ChexSystems or another) generated the report it used when considering your application. You can then contact that agency by phone, mail, or online to request a free copy of the report. You’ll then take a look at exactly what’s on your record.

2. Report Any Discrepancies

Once you receive a copy of your file, you should be able to see which banks or credit unions provided negative information about you to the reporting agency. If the report doesn’t match up to your experiences, there may have been an error, or the problem could be connected to identity theft. Either way, it’s a good idea to check your own records for any discrepancies and prepare to address what you may uncover.

3. Dispute Any Errors Found

Consumer reporting agencies must comply with the federal Fair Credit Reporting Act. That means they are required to ensure the information they provide is as accurate as possible. What’s more, by law, they can’t include certain types of negative information that’s more than seven years old. (ChexSystems typically keeps negative information on a report for five years.)

If you feel your banking report has errors, is incomplete, or that some negative information is out of date, your next move may be to file a dispute. The Consumer Financial Protection Bureau (CFPB) provides sample letters for contacting both the financial institution that supplied the incorrect data and the agency that included it in its report. Or, you can file your dispute on the ChexSystems website.

Under the Fair Credit Reporting Act, ChexSystems must verify the negative information within 30 days or delete it from your ChexSystems report.

You also may want to get an updated credit report from one or all three of the major credit bureaus to see if there are similar problems there. You can request those reports for free at annualcreditreport.com. If you find anything amiss, you can dispute those credit report errors.

To be clear, your ChexSystems score is not the same as the FICO credit score lenders look at when you apply for a credit card or loan. And the banking reports ChexSystems provide do not include the same information as credit reports. But if there’s inaccurate information in a report about your checking account activity, there may be similar issues with your credit reports — especially if you’ve been the victim of identity theft. If you can catch discrepancies early, you may be able to head off future questions about your creditworthiness.

4. Pay Off Outstanding Debts and Fees

Of course, there is the possibility that the black marks on your report are valid. Maybe you bailed on an account that was overdrawn or had another negative situation. If information on your report was accurate, you still may be able to improve your chances of opening an account. You will probably want to show that you are trying to rectify past problems.

Check with the bank that declined your recent application for an account. A banker there may have some suggestions. It could help, for example, if you can pay off any old fees you still owe to ChexSystems’ member institutions. Once those past bad debts are taken care of, you can ask the bank or credit union that provided the negative information to update that item on your ChexSystems report.

You still may have to wait five years for the negative information to be completely removed from your report. But ultimately, it’s up to each individual bank — not ChexSystems — to decide if a customer’s application will be approved or denied. If the bank sees you’re making an effort to right old wrongs, it may reconsider your application. That’s why connecting with a banker to explain what steps you’re taking can be a move in the right direction.

How to Avoid Being Blacklisted by ChexSystems

Obviously, the best way to avoid getting a low ChexSystems Consumer Score or a negative report is to avoid the activities that could make you a riskier bank customer. If you want to be a good checking and savings account customer, avoid such things as:

•   Bouncing checks or running up too many overdraft fees

•   Having an account closed involuntarily

•   Committing ATM or debit card abuse

•   Being suspected of fraud or illegal activity

•   Opening and closing multiple accounts in a short period of time

But there are other steps you can take to further secure your finances and your financial reputation. Consider these options as well to boost your standing as a banking customer. They can help you avoid being blacklisted.

Monitor Your Financial Health

If there’s information on a ChexSystems report that you weren’t aware of, you may have been the victim of identity theft. Reviewing your accounts regularly could help you clear up problems faster. Even if you don’t have this kind of fraudulent activity on your record, it’s still a good idea to stay on top of your financial profile. Here are some key steps.

•   It’s a good idea to periodically request and scrutinize your free ChexSystems report.

•   You’ll also want to get free copies of your three major credit reports from annualcreditreport.com at least annually. Again, your goal is to make sure that everything is up-to-date and accurate and that there isn’t any fraud or identity theft occurring.

•   It’s also a good idea to regularly check your bank account and credit card statements to make sure there aren’t any transactions you aren’t aware of. Many financial institutions offer online tools and mobile apps that can make tracking your accounts easy and convenient.

•   You may want to set up a low balance alert for your checking account. That way, you’ll get a text or email when your balance reaches a certain threshold, and you’ll know to stop using the account until you make a deposit. That can help avoid overdrawing your account and bouncing checks and/or triggering fees. You also might consider setting up bank alerts for unusual activity, overdrafts, and new log-ins.

Find an Alternative to a Traditional Banking Account

If you’ve been rejected and are worried that you might be unable to open a bank account, don’t give up hope. If your ChexSystems report seems to be blocking you from getting an account, you may have other options.

•   Some banks and credit unions offer what are called “second chance” checking accounts. These typically offer fewer features and higher fees than regular bank accounts to customers who have been blocked by a ChexSystems report or score.

•   There are also some banks and credit unions that don’t use ChexSystems when making decisions on account applications. You might be able to enjoy the same benefits as other account holders, with low or no fees, if you choose to do business with one of those financial institutions. A little online research should show you which banks don’t depend upon ChexSystems.

By investing a bit of time and energy, you should be able to find an account that suits your needs even if you have been blacklisted.

The Takeaway

If a bank denied your application for a new checking or savings account, it could be that you were blacklisted due to negative information on your ChexSystems report.

You still have options, though. If the information on your report is wrong or more than seven years old, you can dispute the negative information and have your report corrected. And if it turns out the negative information is true, you can take steps to remedy the situation and possibly open an account elsewhere. The convenience of a bank account may well be within reach.

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 4.00% APY on SoFi Checking and Savings.

FAQ

Can I open a bank account if I’m blacklisted?

You may have a few options if you’ve been blocked from opening an account. You could try to fix your old problems, and ask the bank to reconsider. You could sign up for a “second chance” account that’s geared to people with a negative banking history. Or, you could look for a bank that doesn’t base its decisions about customer accounts on ChexSystems reports.

How long are you blacklisted from banks?

Every bank has its own policies when it comes to deciding a customer’s account eligibility. But if you have negative items on a ChexSystems report that could cause a bank to decline your account application, you can expect that information to stay on your report for up to five years.

What does it mean when your bank account is blacklisted?

If someone tells you that you have a blacklisted bank account, it generally means you have enough negative information on your ChexSystems report — or a low enough ChexSystems score — that the bank sees you as a risk. They therefore decline to offer you an account.

Photo credit: iStock/PeopleImages

SoFi members with direct deposit activity can earn 4.00% 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 4.00% 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 4.00% 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 12/3/24. 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.

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Checking & Savings Fee Sheet for details at sofi.com/legal/banking-fees/.
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.

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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May
20
2024
3 Reasons Why Your Bank Account is Frozen

3 Reasons Why You Have a Frozen Bank Account

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Bank accounts can be frozen for such reasons as your financial institution suspecting fraud or illegal activity. Your funds can also be made inaccessible if your bank is adhering to a court order about unpaid debts you owe. In addition, the government can freeze your account if you have unpaid student loans or taxes.

Regardless of the reason, having a bank account locked can be an upsetting situation that makes your basic financial life difficult. You might be left scrambling to pay bills and cover daily expenses.

Read on to take a closer look at this situation, including why bank accounts are frozen and what you can do if you find yourself facing this scenario and want your money unlocked.

Key Points

•   Bank accounts may be frozen due to suspected fraud, such as unusual large transactions or activities in unfamiliar locations.

•   Unpaid debts like taxes, student loans, or child support can lead to account freezes without a court judgment.

•   Illegal activities, including money laundering or funding terrorism, might result in a bank freezing an account.

•   The duration of an account freeze varies, depending on the resolution of the issue that caused the freeze.

•   To unfreeze an account, contacting the bank promptly and providing necessary documentation or resolving debt issues is essential.

What Is a Frozen Bank Account?

When a bank account is frozen it means the bank will no longer let you perform certain transactions. You can still access your account information and monitor your account. You will still be able to make deposits, including manual or direct deposit of your paycheck.

However, you won’t be able to make any withdrawals from the account or transfer money from the account to a different account.

Typically, any previously authorized payments or transfers will not go through either. That means that any bills you have set up on autopay likely won’t get paid.

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Why A Bank Would Freeze Your Account

Banks have the authority to freeze, or even close, a bank account for a range of reasons. These reasons generally fall into the following three categories.

1. Suspected Fraud

A bank’s reputation relies heavily on its ability to keep money safe, so account security is typically taken very seriously.

Banks are familiar with how you tend to spend your money, so an unusually large purchase or cash withdrawal can indicate fraud and trigger an account freeze.

Banks are also familiar with where you typically spend your money. A transaction that occurs in a different city or especially a different country can be a red flag that could trigger an account freeze.

It can be a good idea to inform your bank about travel plans both nationally and internationally to help prevent any account freezes during a trip.

If your bank flags suspicious behavior you’re certain you weren’t responsible for, it could be due to identity theft.

2. Unpaid Debts

Missing a single bill payment isn’t generally something that would disrupt access to your bank account, but a longstanding overdue bill might.

Collection agencies that purchase unpaid debts can secure court judgments for those debts, giving them the power to freeze (or “attach”) the bank accounts of debtors until they paid the money they are owed.

Most creditors can not have your account frozen unless they have a judgment against you. However, not all. Government agencies that collect federal and state taxes, child support, and student loans do not need to have a court judgment to attach your account.

Recommended: Debt Buyers vs. Debt Collectors

Any of the following types of outstanding debt could be the cause of a frozen account.

•   Unpaid Taxes

•   Student Loans

•   Mortgages

•   Car Loans

•   Personal Loans

•   Civil Lawsuits

•   Divorce Settlements

•   Child Support.

3. Illegal Activity

A bank account that is used to conduct criminal activity, or shared with someone who might be, can lead to the account being frozen.

Banks also work directly with law enforcement agencies and will freeze accounts of individuals that have been convicted of a crime or are under investigation.

Some specific activities that could lead to an account freeze include:

Writing Bad Checks. A single bounced check isn’t cause for alarm, but knowingly writing multiple checks from a bank account that doesn’t hold the funds to support them is illegal. If a bank observes too many bad check transactions, they may be inclined to freeze the account and alert the police.

Money Laundering. This is the process of generating money through illegal activity, and attempting to make it appear legal via multiple financial transactions. All banks and financial institutions are required to comply with federal anti-money laundering regulations and report any suspected activity directly to the authorities.

Terrorist Financing. Funding or organizing funds for terrorist groups and organizations is an illegal activity that can also result in an account freeze. Banks comply with federal laws that help prevent terrorism by freezing and reporting any accounts that exhibit suspicious activity related to terrorists.

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How Long Can A Bank Account Be Frozen?

Banks don’t typically follow any set rules regarding how long an account can be frozen. The length of time generally depends on how long it takes for the account holder to notice the freeze, contact the bank, and can resolve the issue that caused the freeze.

How Does a Frozen Bank Account Affect You?

Having a frozen bank account essentially means not having access to your money, and it can be especially difficult if it is your primary bank account.

Frozen funds means not being able to make purchases with a debit card, or withdrawals from an ATM. It can also mean that any auto-payments linked to that account will likely not be fulfilled, and any scheduled transfers won’t be completed.

Because these payments can bounce, you could also incur a non-sufficient funds charge, which may be deducted from your account.

If you don’t have enough in the account to cover it, you could end up with a negative balance, putting you into an overdraft. In this case, you could end up having to pay additional bank fees and interest to cover the shortfall.

Recommended: How to Avoid Overdraft Fees

Those with frozen accounts often must resort to using credit cards and can end up accumulating debt in order to cover their expenses while they sort out the issue with their bank.

If the bank suspects you’ve been using the account illegally for any reason, it could close your account completely. It can also report your account activity to authorities.

Recommended: Bank Fees You Should Never Pay

How Do You Unfreeze a Bank Account?

It can be a good idea to contact your bank as soon as you notice a freeze on your account. When discussing the issue, it can help to have a clear account of your most recent locations and transactions, and be prepared to share any information and supplemental documentation that can help clear up the issue.

If you can show that there’s no reason for the freeze, the bank will likely release the suspension and grant you full access to the account again.

If your account is frozen over unpaid debts, it can be a good idea to get the creditor’s contact information from your bank and then reach out to them directly. Once you have a better idea of what’s going on with your account, you may be able to work out a payment arrangement.

The Takeaway

When a bank freezes your account, it can mean there is something wrong with your account or that someone has a judgment against you to collect on an unpaid debt.

The government can also request an account freeze for any unpaid taxes or student loans.

Once the bank account is frozen, you cannot make withdrawals but can only put money in your account until the freeze is lifted.

If your account is suddenly inaccessible, it can be a good idea to contact your bank immediately to find a resolution.

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