Jan
21
2024
Transferring Money From a Credit Card to Your Bank Account: What to Conside

How to Transfer Money From Your Credit Card to Your Bank Account

By | Financial Independence, money | Comments Off on How to Transfer Money From Your Credit Card to Your Bank Account

If you’re in need of cash, you might wonder if it’s possible to transfer money from a credit card to a bank account. The answer is yes, but it’s important to understand the costs and interest rates involved. You’ll also want to consider the potential impact on your credit score, and how you’ll pay the money back.

Read on to learn the nuts and bolts of how to transfer money from a credit card to bank account, the pros and cons of using your credit card to access cash, and a list of alternative options that may help you get the money you need.

How Do Transfers From a Credit Card to a Bank Account Work?

When you transfer money from a credit card to a bank account, it’s considered a cash advance. This means that instead of using your credit card to pay for a purchase, you’re tapping your credit line for a lump sum of cash. Once the money is transferred to the bank, you can spend it as you wish or transfer it to another bank account.

The amount of cash you can access through a cash advance can’t exceed the current available balance on the credit card. Often, you can only access up to your cash advance credit limit, which is typically significantly lower than the full credit limit on the card.

Unlike purchases you make with your credit card, interest on a cash advance starts accumulating right away — there’s no grace period for a cash advance. You may also be charged a cash advance fee for using the service. This might be a flat fee or it could be a certain percentage of the amount you transfer to your bank (often around 3% to 5% of the amount being transferred).

If you’re thinking about getting a credit card advance as a way of racking up cash back or travel points, you’ll want to think twice: Cash advances typically don’t qualify for credit card rewards.

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Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 4.20% APY on savings balances.

Up to 2-day-early paycheck.

Up to $2M of additional
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5 Ways to Transfer Money From a Credit Card to a Bank

If you’re wondering how to transfer money from a credit card to a bank account, you actually have a few different options. Here are some to consider.

Visit a Bank Branch

If you have a credit card issued by a bank, you can visit a local branch of that bank and ask a teller to withdraw funds from your credit card using the cash advance feature. If you have a checking or savings account at that same bank, the teller can deposit those funds into your account. If not, you may need to bring the withdrawn cash to the other bank to deposit the funds.

Use an ATM

You can get a cash advance at an ATM but you’ll need a PIN. If you’re not sure what your PIN is, you can call the number on the back of the card.

Once you have a PIN, you can make the transfer by inserting the card into the ATM, choosing the cash advance option, and entering the amount you want to withdraw. You’ll need to accept any associated fees, then complete the transaction. If you have a credit card and a bank account with the same bank, you may be able to have the cash deposited directly into your bank account. If not, cash will be dispensed and you’ll need to deposit the money into your account.

Transfer Money Online

If your credit card and bank account are with the same institution, you may be able to do the transfer online or through your bank’s mobile app. To do this, you simply need to sign into your account and select Transfer. Choose the credit card for Pay From and the bank account you want the money transferred to for Pay To. Finally, you’ll need to select the amount you want advanced and approve the cash advance. After a few minutes, you can check your bank account to make sure the money was transferred.

Use a Credit Card Convenience Check

If your credit card originally came with convenience checks, you can use one of those checks to transfer money from a credit card account to any type of bank account. If you don’t have checks, you may be able to order them.

To use a convenience check to transfer money from your credit card to your bank account, you simply write the check out to yourself and then deposit it in your bank account.

Keep in mind that these checks work in the same way as a cash advance at an ATM. Typically, they require paying the same cash advance fee and cash advance APR, and the grace period may not apply.

Redeem Cash Back Rewards

If you have a rewards credit card and you have racked up a good amount of points, you may be able to transfer them into your checking account as cash. This is not a cash advance and, as a result, doesn’t involve interest, fees, or the need to repay the sum. However, not all cash back credit cards allow this. And some credit cards only allow you to transfer rewards as cash to a bank account if the bank account is at the same bank that issued the credit card.

Pros and Cons of Transferring Money From Your Credit Card to Your Bank Account

There are advantages to using a credit card to transfer cash to a bank account but also some considerable downsides. Here’s a closer look.

Pros

•   Quick access to funds: Depending on the method you use, transferring money from your credit card to your bank account can take less than 30 minutes. You don’t need to spend time seeking a loan or awaiting approval.

•   Can be helpful in an emergency: If you’re in a temporary financial bind and don’t have an emergency fund, a transfer from your credit card to your bank account can be a reasonable solution, provided you’ll be able to repay the advance quickly.

•   Better option than a payday loan: Transferring money to your bank account via a credit card cash advance isn’t an ideal way to access credit, but can be preferable to a payday loan. Payday loans typically come with sky-high interest rates and fast (often two-week) repayment periods. If you can’t repay on time, you get hit with another round of fees, sinking you deeper into debt.

Cons

•   High interest rates: Cash advance interest rates are sometimes higher than credit card purchase APRs. Plus, interest starts accumulating as soon as you transfer the money. Unlike making purchases with your credit card, there is usually no grace period.

•   Additional fees: Cash advances also come with fees, which may be 3% to 5% of the amount you’re borrowing, adding to the total cost.

•   Potential damage to credit: Your credit scores typically won’t be impacted if you repay the money from the cash advance promptly. But cash advances can affect your credit utilization ratio, which is the amount of credit you’re using versus your total available credit. If the added balance of a cash advance goes unpaid for a while, it could hurt your credit.

•   There are more affordable ways to borrow money: Getting a personal loan, a home equity loan, or a home equity line of credit (HELOC) will typically cost less than a cash advance transfer from your credit card to your bank account.


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Alternative Ways to Transfer Money to Your Bank Account

Thanks to high interest rates and fees, a credit cash advance generally should not be your go-to for borrowing money. If you’re in need of extra cash, here are some other options to consider.

Personal Loan

A personal loan is a type of loan that allows flexible use, short- to moderate-term repayment options, and relatively quick funding. Available through banks, credit unions, and online lenders, these loans typically come with fixed interest rates and predictable monthly payments. Most personal loans are unsecured (meaning no collateral is required). However, secured personal loans, which are easier to qualify for, may also be worth considering.

Home Equity Loan or Line of Credit

If you own your home and have built up equity in it, you might be able to borrow against that equity to access the money that you need. A home equity loan is disbursed in one lump sum that you pay back in equal monthly installments over a fixed term (typically five to 30 years) at a fixed interest rate. A home equity line of credit (HELOC) gives you access to a credit line that you can tap as needed. You only pay interest on what you use.

401(k) Loan

If you have money saved for retirement in a 401(k) account, it may be possible to borrow against it, provided your employer allows this type of program.

With a 401k loan (also called a retirement loan), you take money from your retirement account with the understanding that you will make regular payments, with interest, back into your account. The fees involved will vary depending on your plan administrator. You usually have five years to repay a retirement loan.

Salary Advance

Rather than transferring money from your credit card to your checking account bank account, you might be able to receive a portion of your paycheck early. Whether or not this is an option will depend on your employer’s policies. Some employers offer salary advance programs or will consider a salary advance on a case-by-case basis.

Depending on the program, you might repay the advance a little at a time or all at once. While there may be administrative fees and other costs, some programs don’t cost anything, making this a reasonable alternative to a high-interest credit card advance.

The Takeaway

It’s possible to transfer money from your credit card to your bank account using the cash advance feature. However, you generally only want to do this in the event of an emergency. Cash advance fees and interest rates make this an expensive borrowing option that could lead to a dangerous cycle of credit card debt.

To avoid the need to transfer money from your credit card to your bank, it’s a good idea to keep at least three to six months’ worth of basic living expenses set aside in a separate emergency savings account that earns a competitive interest rate. This will serve as a safety net in case you get hit with a major unexpected bill or lose income.

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

Will transferring money from my credit card to my bank account hurt my credit score?

Your credit scores likely won’t be impacted if you repay the money from the cash advance promptly. However, cash advances can affect your credit utilization ratio, which is the amount of credit you’re using versus your total available credit. A high credit utilization ratio (typically anything above 30%) can have a negative impact on your credit scores since it implies you rely heavily on borrowed money.

If the added balance of a cash advance transfer to your bank account goes unpaid for a while, it could adversely affect your credit scores.

Is it a good idea to transfer money from a credit card?

A credit card cash advance can be a quick and easy way to get cash fast, but these transfers come at a high cost. Cash advance annual percentage rates (APRs) are often higher than credit card purchase APRs. Not only that, the interest begins to accrue the day you can get the cash. This can lead to a dangerous cycle of debt that can be hard to break. Cash advances also usually come with fees, adding to the cost.

How much does it cost to transfer money using my credit card?

The cost will depend on the credit card issuer. Transferring money to your bank account using your credit card’s cash advance feature usually requires a 3% to 5% fee. You’ll also pay interest on the advance, starting the day you get the transfer. The annual percentage rate (APR) on a cash advance will vary by card issuer but is generally higher than the APR for purchases.

What is the best way to transfer money from credit card to bank?

To transfer money from a credit card to a bank account, you typically need to use your card’s cash advance feature. If your credit card and bank account are with the same institution, you may be able to do the transfer online or through your bank’s mobile app. You can also access a cash advance by going to an ATM or using your credit card’s convenience checks.

Keep in mind, though, that a cash advance usually comes with fees, and interest begins to accrue on the money right away.

How can I get money from my credit card to my bank account without a fee?

You typically can’t get a cash advance from your credit card without paying fees and interest. However, there may be one workaround: If you have a rewards credit card and you have racked up a good amount of points, you may be able to transfer them into your checking account as cash without paying any fees or interest (since it is not a loan).

Photo credit: iStock/shapecharge

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.

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 .

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Jan
20
2024
What Is an Interest-Bearing Checking Account?

What Is an Interest Checking Account and How Does It Work?

By | Budgeting & Goals, Family Finances, money | Comments Off on What Is an Interest Checking Account and How Does It Work?

An interest checking account is, as the name suggests, a checking account that earns interest. Typically, checking accounts haven’t offered this feature, while savings accounts did. However, there are a number of interest-bearing checking accounts now available that can help your cash on deposit grow.

Typically more flexible than savings accounts, interest checking can give you a financial boost if they’re a good fit for you. In some cases, however, they may have minimum requirements and other aspects that may not sync up with your money style.

Here’s a closer look at these interest-bearing checking accounts, so you can decide if one might be right for you. Learn more about:

•   What is an interest-bearing checking account?

•   How do interest-bearing checking accounts work?

•   How much interest could you earn?

•   What are the pros and cons of interest checking accounts?

What Is an Interest Checking Account?

Whether it’s called an interest-bearing checking account, interest checking account, or high-yield checking, this is a type of checking account where the account holder can earn interest. The interest rate may not be amazingly high: At the end of 2023, the rate averaged 0.70% APY, or annual percentage yield, which is the real rate one earns when compounding interest kicks in. (Occasionally, APYs of 3.00% or higher may pop up.) Even at the lower range, the interest accrued is better than nothing. Honestly, who doesn’t want to earn more interest?

There may, however, be a catch:

•   Although the account will pay an APY, account holders may be required to pay monthly maintenance fees or maintain a certain account balance (say, $500 or more).

•   In addition, you may be required to receive a certain number of or dollar amount of direct deposits per month or meet other criteria, such as relating to debit card usage.

•   You might also have to pay a monthly account fee; again, it depends on the bank you choose. Recent research found that checking accounts had an average monthly fee of $10.77; where an interest account will fall can vary with the financial institution.

•   One more point: In many cases, interest checking accounts earn less interest compared to savings accounts.Yes, a checking account has added flexibility that may be beneficial (say, unlimited transactions and debit-card and check-writing features), but it’s worth noting. You might consider a combined checking and savings account to get the best of both worlds.

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How Do Interest-Bearing Checking Accounts Work?

These types of accounts work in a similar way to other kinds of checking accounts. Account holders can make deposits at ATMs, online, by direct deposit, or at branch locations depending on the financial institution.

As for withdrawals, account holders can make bank transfers, withdraw cash from an ATM, write a check, use bill pay, or pay for purchases with a debit card. The only difference is that, instead of earning no money on your balance, you will accrue some interest, usually on a monthly basis.

How Are Interest Checking Accounts Different Than Other Checking Accounts?

The truth is, checking account interest rates will vary depending on the type of account and the financial institution. On average, banks offer an APY of 0.07%. There are high-yield checking accounts that could pay more, but these rates are generally still lower than what you could earn with a savings account. That said, with a little online research, you might find an interest checking APY of 3.00% or higher at this time. Those couple of extra points of interest may well be worthwhile as part of your plan to grow your wealth.

Just be sure to note the account requirements, as mentioned above. If you have to keep more money in the account that is comfortable for your budget and cash flow, you could wind up incurring late fees elsewhere in your financial life.

Here’s an example:

•   Perhaps you decide to pay your credit card bill late because you didn’t want your checking account balance to dip below the minimum to earn interest.

•   You opt to wait for your next paycheck to hit before you send your payment to your card issuer.

•   The credit card fee for the late payment is likely more than the interest you’re earning on the money in your checking account.

So in this situation, keeping your money in an interest checking account might not be a win-win for you.

Common Account Requirements for Interest Checking Accounts

When it comes to opening an interest-bearing checking account, there may be some requirements to wrangle. Keep the following factors in mind:

•   Minimum-balance and other account requirements: When you open an account, some financial institutions may require a minimum initial deposit. Current offers for interest-bearing checking range from zero dollars to $500 and occasionally significantly higher amounts as a minimum deposit. Shop around to find the right account for your needs.

   Plus, as mentioned above, you may need to maintain a certain balance in order to avoid fees. There may also be other rules such as the amount of transactions you can make on your debit card.

•   Fees: Some interest checking accounts may charge monthly fees, as described earlier in this article, which could eat into the interest you earn. You may have to keep a higher balance in your account to avoid fees. Other fees to consider are overdraft fees, and whether you’ll need to pay third-party network fees to access certain ATMs.

•   Application requirements: Depending on the financial institution, you may be required to submit documents such as your Social Security number, proof of address, and government-issued photo ID. If you want to open a checking account with a credit union, you’ll most likely need to become a member.

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 4.20% APY on savings balances.

Up to 2-day-early paycheck.

Up to $2M of additional
FDIC insurance.


Advantages and Disadvantages of Interest Checking Accounts

An interest checking account may not be the best option for you. Consider the following advantages and disadvantages before opening an account.

Advantages of Interest Checking Accounts

•   You’ll earn interest Most traditional checking accounts won’t pay you any interest, but with an interest-bearing one, you’ll earn high interest. That means your money will help you earn some money while it’s sitting in the account. Typical APYs can range from 0.50% to 3.00% or higher.

•   You’ll have more flexibility Checking accounts tend not to have transaction limits as you may with savings accounts or money market accounts. Plus, you can use checks and a debit card, offering you more flexibility to access your money.

Disadvantages of Interest Checking Accounts

•   You may have to meet certain requirements Though there are some interest checking accounts that don’t have minimum balance requirements or monthly fees, some do. That means you could be on the hook for a monthly fee if you can’t meet account requirements. In some cases, these fees could negate the amount you earn in interest.

•   You may not get a high interest rate The interest you earn on a checking account tends to be lower compared to ones you earn from a high-yield savings account or money market account. But there are definitely exceptions to the rule: Some banks have offered as much as 3.00% APY or higher on interest checking accounts, so it can truly pay to shop around and see if you can snag one of those deals.


Where Can I Get an Interest Checking Account?

You can open an interest checking account at most financial institutions, including traditional and online banks, as well as credit unions. As mentioned before, you may be required to become a member of the credit union you want to open a checking account with.

When shopping around, look beyond interest rates. Other equally important factors to consider are:

•   Account features (access to your funds, for instance; when the interest accrues)

•   Account-holder benefits (are there other perks to being an account-holder, such as a sign-up bonus?)

•   ATM, overdraft, and other fees

•   Minimum opening deposit and account balance requirements to earn interest.

Is It Worth It to Get an Interest Checking Account?

Thinking carefully about your financial situation and goals should help you determine whether it’s worth getting an interest bearing checking account.

•   For those who want to keep a decent amount of money in a checking account to ensure bills and daily transactions are taken care of, it might be worth considering. Why not earn a bit of interest if you can find an account that doesn’t charge fees?

•   However, if you’re interested in having a stash of cash available for short-term or medium-term savings goals — as in, you’re not planning on making frequent withdrawals — then a high-yield savings or a checking and savings account might be the better choice.

•   If your goal is to save for long-term goals like retirement or a college fund for your child, then an investment account could be the way to go.

Recommended: How to Avoid ATM Fees

The Takeaway

An interest-bearing checking account may be a good fit if you’re looking for an account for daily transactions that can grow your money a bit. It’s important to check the fine print to see if there are any minimum balance requirements and what the fees are. Comparing the potential interest to be earned with any fees that may be charged is a vital step before applying for an interest checking 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 4.20% APY on SoFi Checking and Savings.

Photo credit: iStock/FG Trade

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.

SOBK0124008

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Jan
19
2024
bride and groom's feet

Should Married Couples Have Joint Bank Accounts?

By | Budgeting & Goals, Family Finances, money | No Comments

Whether to have a joint bank account when married is a personal decision, but most couples do merge finances, according to research at the Kellogg School of Management at Northwestern University. Between 52% and 65% of couples surveyed do so, while 10% to 15% maintain completely separate bank accounts. The remainder have a hybrid approach, sharing some accounts and keeping others separate.

If you’re wondering whether to merge bank accounts when married, it can be a wise move to consider the pros and cons of joint and separate scenarios and then make your decision. In this article, you’ll delve into the upsides and downsides, so you’re ready to make an informed decision about what suits your finances and your relationship best.

What Is a Joint Bank Account?

First, consider this definition of a joint bank account: It’s similar to a standard account, but it has more than one owner. With a joint account, the account holders each fully share access to the account. Each of you will get a debit card, checkbook, and the other typical benefits that come with a checking account.

In this way, a joint bank account brings transparency to a marriage, which may make some people cheer and others cringe. Everything’s out in the open, including debits (those pricey clothes sneaking into your closet? Check), deposits, and your in-real-time account balance.

💡 Quick Tip: An online bank account with SoFi can help your money earn more — up to 4.20% APY, with no minimum balance required.

Why Have a Joint Bank Account in Marriage?

A joint account in marriage can offer a simplified approach to your personal finances, and it can symbolize trust. But, as with most things in life, there are pros and cons to this kind of banking relationship. Take a closer look.

Pros and Cons of a Joint Bank Account in Marriage

Whether a joint bank account in marriage is right for you can depend on a variety of factors. Are you starting out on equal financial footing? Are you comfortable revealing your spending habits? Would a shared account come in handy when setting financial goals? Consider the following points:

Pros

 Cons
Clarity: An easy, instant read on how much, as a couple, you’ve spent and how much you’ve saved. Less time needed to communicate about finances. Total transparency: Spending habits become completely visible, which can become ammo in money arguments.
Teamwork: Two sets of eyes on the account. You’re both contributing to your shared financial life and health. Loss of autonomy: You may feel as if you’ve lost your sense of independence, both financially and personally. Also, potential resentment if partners enter with unequal assets.
Convenience: Easier management of monthly payments such as mortgage and insurance. You may save on fees, too. Vulnerability: Generally, each of you has the right to withdraw the funds and even close the account.
Legal streamlining: Shared access in case of emergency or death; avoidance of court proceedings. Legal complications: More challenging division of assets if you divorce.

As you can see, a joint account in marriage offers convenience and a sense of more complete coupledom. You are truly partners in finance. It can make managing your money and shared goals easier.

However, along with this, your finances become an open book. Some expenses that you might have kept private — from pricey personal-training sessions to a surprise gift for your spouse — become totally visible to your partner.

There are also legal implications: If your sweetie brings significant debt to the marriage, your money is now mixed in as an asset should a collector come calling. Also (and we hate to mention the d-word), if you were to split, untangling whose money is whose may be a major endeavor.

Consider these factors and your comfort level. Depending on your and your spouse’s personalities, comfort levels, and financial situations, a joint account might be the right move for you.

Why Have Separate Bank Accounts in Marriage?

Some couples choose not to merge their bank accounts, or not do so completely. Maybe you check your bank-account balance obsessively, while your partner is more of an “Oops, am I overdrawn?” kind of person. If you have different money styles, separate accounts could be a great peace-keeper, so you don’t argue over money. Take a closer look at the upsides and downsides here.

Pros and Cons of Separate Bank Accounts in Marriage

Here’s a closer look at the pros and cons of separate bank accounts in marriage.

Pros

 Cons
Autonomy: Ability to individually manage your money, which may suit your personalities and accommodate different financial styles. Isolation: You may not feel as connected as a couple when your accounts aren’t merged.
Privacy: No one else sees your spending habits and bank balance. Communication: More conversation about your financial habits and goals will be required.
Protection: Your assets may be safe if your spouse confronts debt collection and available in the event of a death. Complexity: Potentially more time and energy needed to pay monthly expenses like rent, groceries, and utilities.
Ease: Depending on the state you live in, simplified division of assets if you divorce. Separation: Contributing toward shared money goals could be harder.

Marriage is a major life transition, often with lots of adjustments and, yes, compromises required. Having separate bank accounts when you are wed can give you a sense of independence, control, and privacy over your finances.

Keeping your accounts apart can also make sense if one of you entered marriage with, say, child support or with debt to clear up. That spouse can be solely responsible for paying that. And if one person significantly out-earns the other, they can do what they want with some of their moolah rather than pooling it. The fact that separate accounts may protect you in the event of a split is also worth noting.

That said, if you do choose to keep your dollars and cents in separate bank accounts once you’re hitched, know that communication will be key. Having regular check-ins will help you stay aware of how well each of you is managing your spending and progress toward financial goals.

Recommended: How to Make a Budget in 5 Steps

Recap: Joint Bank Account vs Separate Bank Accounts

Should married couples have joint bank accounts? Figuring out your financial life is a big decision, but remember, there’s no right or wrong answer.

When it comes to whether to have a joint bank account or keep your cash separated, it’s all about what works for the two of you. Here’s a recap of the key features of each.

Joint Bank Account

 Separate Bank Account
Equal access for both partners Division of accounts, which can be beneficial if one partner has debt or out-earns the other
Transparency of all transactions for both of you Privacy in terms of how each of you spends and saves
Ability to retrieve funds in emergencies Protection of your assets in case of divorce
Connectedness since your assets are pooled Autonomy because you still control your money

Still not sure whether a joint or separate account is best for you and your spouse? Consider a hybrid approach.

Both of you can keep your separate accounts while contributing to a joint account to handle common expenses such as monthly bills and future financial goals. It’s not uncommon for a single person to have multiple bank accounts, so why not try it as a couple?

If you decide to go down this route, you may want to make sure you’re clear about what the account is used for. Since you and your partner will be juggling multiple accounts and financial priorities, you may have to figure out a system for keeping in touch and on top of your money. Regular check-ins that are scheduled on both your calendars (with reminders switched on) can be a good tactic.

Recommended: How to Automate Your Finances

The Takeaway

There are good reasons for joining together your finances — and there are good reasons for keeping them apart. What’s right for you depends on a number of factors, including how much transparency you want, whether one of you has more payments or debt than the other, and whether one of you comes to the union with a lot more money than the other.

Whether you decide to keep your accounts separate, combine them, or take a hybrid approach, finding the right banking partner is an important step. Investigate your options for joint accounts, including those offered by SoFi.

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

Is it normal for married couples to have joint bank accounts?

The majority of couples do have joint bank accounts, but a significant number also have a hybrid approach (a shared account as well separate ones). About 10% to 15% keep their money completely separate.

Are joint bank accounts the secret to a happy marriage?

While finances are a significant player in how couples get along, there is no one secret to a happy marriage. For some couples, the simplicity and transparency of a joint account work really well. For others, the relationship is happier with separate finances.

What percentage of married couples have joint bank accounts?

Research indicates that 52% to 65% of married couples choose to have joint bank accounts. Another segment will have both a joint bank account as well as separate bank accounts.

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.

SOBK0124002

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Jan
17
2024
piggy bank with dollar bills

How to Automate Savings

By | Budgeting & Goals, Financial Independence, money | Comments Off on How to Automate Savings

Who doesn’t want to save more money? But as common a goal as this may be, it’s hard to achieve. Lack of time, focus, and funds can all play a role. Which is why automating your savings — meaning the endeavor is taken off your plate and happens like clockwork — can be a very helpful tactic.

Saving money is important on so many levels, from building up a healthy emergency fund to having a retirement nest egg. And it seems as if Americans could use some help in this pursuit. The personal savings rate in the U.S. was 4.10% at the end of 2023, which is less than half what it was a couple of years prior.

Automating your savings could help change that. Read on to learn:

•   Why automating savings can be such a good idea

•   How to automate savings nine different ways

Why Automating Savings Makes Sense

When people say one thing and then do another, it’s called the value-action gap or intentional-behavior gap. Psychologists have lots of theories about why this disconnect exists.

When it comes to saving money, lots of things can get in the way: routine bills, an unexpected big night out with friends, a shopping splurge, or simply forgetting to move money into savings.

But by taking some of the human element out of saving money and using an automatic savings technique, it may be possible to overcome some of the obstacles that make it hard for people to save.

Automating your finances also reduces the amount of time you have to spend each month on tasks like paying bills and other aspects of routine cash management. And it helps you sidestep procrastination and instant gratification, which can be powerful forces to overcome — and often stand in the way of growing savings.

💡 Quick Tip: Banish bank fees. Open a new bank account with SoFi and you’ll pay no overdraft, minimum balance, or any monthly fees.

Earn up to 4.20% APY with a high-yield savings account from SoFi.

No account or monthly fees. No minimum balance.

9x the national average savings account rate.

Up to $2M of additional FDIC insurance.

Sort savings into Vaults, auto save with Roundups.


9 Ways to Automate Savings

How to automate savings? Simply decide which actions to automate and set them up with a lender (if they offer automated services).

Here are some good ways to get started.

1. Set Up Direct Deposit

A good first step to automating savings is setting up direct deposit for paychecks. This means that on payday, your paycheck goes directly into the bank account. People often plunk their full paycheck into their checking account, but a smart move can be to send some of those funds into a savings vehicle.

•   Whether you fund a dedicated savings account or investment fund, this process will ensure a regular, ongoing flow of money to help you build a nest egg.

•   If your employer doesn’t have a way for you to divide your automatic deposit, there’s a simple workaround: Have your paycheck go into your checking account and then have a sum automatically transferred to savings on the next day.

2. Earmark Money for Each Goal

There are a lot of things people can choose to do with their money. Most people have more than one savings goal, from accumulating cash for a vacation, a new car, or the down payment on a home.

If all of your money goes into a single savings account, it can be difficult to determine how effectively they are tracking for each individual goal. You can gain financial clarity by setting up separate savings accounts for each goal and then making regular automated deposits into each.

How much should go into each savings account? That depends on your goals and the immediacy of each. If you’re saving for a vacation a year from now, figure out the price tag for your trip, divide by 12, and that’s how much to stash away each month.

Recommended: How to Calculate Savings Account Interest

3. Choose a High-Interest Account

Saving can be hard work. But without the right savings account, those hard-earned dollars may not go as far as they potentially could. Instead of putting money in just any account, look for a high-interest savings account to increase the returns of your automated savings.

There are different ways to earn more interest on your money.

•   Some lenders may reward automatic savers, helping them to reach their goals faster. For example, a recurring automated deposit of $100 may earn interest at a lower starting rate, but increasing that deposit to $500 each month may trigger a higher rate.

•   Or look for an online bank which, since they don’t have to pay for brick-and-mortar locations and in-person staff, typically pay higher rates than traditional banks.

4. Take Advantage of Employer Programs

For those who have savings for retirement among their financial goals, employers can be a great savings partner. Those with a 401(k) may want to arrange automatic paycheck deductions, so the contribution comes out of your pay before it even lands in their bank account.

Some companies will also match 401(k) contributions up to a certain level each year. Aim to earmark at least enough to get that match; otherwise, it’s akin to leaving money on the table. It’s an easy way to increase retirement savings.

Recommended: 15 Creative Ways to Save Money

5. Pay Bills Automatically

The late fees associated with missing a bill payment needlessly take a bite out of savings. So if you’re trying to save money, ensuring that all payments go out on time is an easy way to reduce losses that can derail a savings plan. A few pointers:

•   Organizing your bills is important, but you don’t need a great memory to stay on top of rent, car, and utility payments — these can usually be done automatically. It makes sense to automate predictable billings that don’t fluctuate each month. Set them up in the payment system, and rest assured they’ll be paid by the due date as long as adequate funds are available.

•   For credit card bills, it’s good to ensure that spending habits don’t exceed the amount flowing into the account from paychecks and other sources.

•   If you spend more in a particular month, it’s wise to check in advance of the payment date that there are sufficient funds to cover the automatic payment.

•   Setting up a calendar alert each month several days before the credit card payment date is a good reminder to make sure there’s enough money to cover the amount owed, particularly if your credit card spending habits are irregular.

6. Monitor Financial Insights

Setting — and sticking to — a budget is an important part of successful financial management. But it can be a lot of work to monitor spending in each category and to stay on the right side of all targets.

Here’s where technology can definitely give you a boost. Instead of crunching the numbers week after week and month after month, apps and other digital tools can improve the ease of fulfilling this important, but arguably boring, mathematical task.

Your bank may well offer an automated tool or dashboard that shows in real-time your spending and saving. This means you can see account balances and itemized spending category breakdowns to have a clear picture of where your money goes and where you might cut back.

Some banks also allow account holders to set up personal financial goals — such as monthly savings targets — and then automatically track their transactions against them. This can be helpful when you are trying to boost savings and your sense of financial security.

7. Increase Deposits Over Time

While learning how to automate savings can take the headache out of managing finances, it’s wise to revisit the amounts periodically. Cash flows change from time to time (you get a raise, you pay off a car loan, you have a baby), and there may be new opportunities to save.

Even if nothing of note has changed, some individuals may find that they have more room to contribute to savings than they estimated at the outset. Even increasing automated savings by 1% per paycheck can help savings grow faster.

Setting a periodic automatic calendar reminder to closely review finances (perhaps every quarter) can be a wise move.

8. Use a Cash-Back Card

If you have a cash-back credit card, you may typically use that 1% to 5% back on purchases to… purchase more. Instead, direct your cash-back rewards into a savings account. Whether you get $10, $100, or more in cash back per month, it will help your savings account grow.

9. Funnel Your Windfalls Wisely

If you get a tax refund or a bonus at work, send that money into savings (or at least some of it) versus checking. Sure, it’s fun to get an infusion of cash and go shopping or dining out, but you can hit those financial goals more quickly if you send the money straight to savings, where it can earn compound interest and grow.

The Takeaway

Automating your savings can help ease your path to reaching your financial goals, from saving for a wedding to nurturing a retirement nest egg. This process is quick and convenient, and doesn’t require you to remember regular money transfers nor break out the calculator to see where you stand financially. Finding a savings account with a competitive interest rate and low or no fees can help your savings grow even faster.

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.

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.

SOBK0124018

Read more
Jan
02
2024
man and woman couple bills laptop kitchen mobile

What Tax Bracket Am I In?

By | Budgeting & Goals, money | Comments Off on What Tax Bracket Am I In?

There are seven federal tax brackets for the 2023 tax year, ranging from 10% to 37%. As a general rule, the more you earn, the higher your tax rate. And the higher your income and tax rate, the more money you will probably owe the IRS (Internal Revenue Service) in taxes.

How much you’ll pay in federal tax on your 2023 income (due in 2024) will depend on which bracket your income falls in, as well as your tax-filing status and other factors, such as deductions.

When people look at tax charts, however, they often assume that having an income in a particular tax bracket (such as 22%) means that all of your income is taxed at that rate. Actually, tax brackets are “marginal.” This term means that only the part of your income within each range is taxed at the corresponding tax rate.

Read on to learn more about this at times complicated topic, including answers to these questions:

•   Which tax bracket am I in?

•   How can I use the 2023 tax chart to figure out how much I will owe?

•   What are some tips to lower my tax bracket?

What Are Tax Brackets?

A tax bracket determines the range of incomes upon which a certain income tax rate is applied. America’s federal government uses a progressive tax system: Filers with lower incomes pay lower tax rates, and those with higher incomes pay higher tax rates.

There are currently seven tax brackets in the US which range from 10% to 37%, as briefly noted above. However, not all of your income will necessarily be taxed at a single rate. Even if you know the answer to “What is my federal tax bracket?” you are likely to pay multiple rates. Read on to learn more about how exactly this works.

Also note that the income levels have been adjusted in 2023 vs. 2022 to take into account the impact of inflation and other factors. So even if you made the same amount in 2023 as in 2022, you are not necessarily in the same bracket again. It’s important to note these changes.

💡 Quick Tip: Banish bank fees. Open a new bank account with SoFi and you’ll pay no overdraft, minimum balance, or any monthly fees.

How Do Tax Brackets Work?

Whether you’re filing taxes for the first time or have been doing so for decades, you may wonder how you know what tax bracket you’re in.

While there are seven basic tax brackets, your income doesn’t necessarily get grouped into one level in which you pay that rate on all of your income. This only happens if your total income is in the lowest possible tax bracket.

Otherwise, the tax system is also graduated in such a way so that taxpayers don’t pay the same rate on every dollar earned. Instead, you pay higher rates on each dollar that exceeds a certain threshold.

•   For example, if your taxable income is $50,000 for 2023, not all of it is taxed at the 22% rate that includes incomes from $44,726 to $95,375 for single filers. Some of your income will be taxed at the lower tax brackets, 10% and 12%. Below, you’ll find a specific example of how this works.

In addition to knowing which tax bracket you’re in, it’s important to be aware of standard deductions that are applied when calculating taxes. (This is separate from common payroll deductions, such as health insurance.) The standard deduction will lower your taxes owed.

For income earned in 2023, the standard deduction is $13,850 for unmarried people and for those who are married, filing separately; $27,700 for those married, filing jointly; $20,800 for heads of household. (There may be tax benefits to marriage beyond your bracket, by the way.)

There are additional deductions that may lower your taxable income, too, such as earmarking certain funds for retirement.

In addition to federal taxes, filers may also need to pay state income tax. The rate you will pay for state tax will depend on the state you live in. Some states also have brackets and a progressive rate. You may also need to pay local/city taxes.

Example of Tax Brackets

According to the 2023 tax brackets (the ones you’ll use when you file in 2024), an unmarried person earning $50,000 would pay:

10% on the first $11,000, or $1,100.00
12% on the next $33,725 ($44,725 – $11,000 = $33,725), or $4,047.00
22% on the next $5,275 ($50,000 – $44,775 = $5,275), or $1,160.50
Total federal tax due would be $1,100.00 + $4,047.00 + $1,160.50, or $6,307.50

This doesn’t take into account any deductions. Many Americans take the standard deduction (rather than itemize their deductions).

2023 Tax Brackets

Below are the tax rates for the 2024 filing season. Dollar amounts represent taxable income earned in 2023. Your taxable income is what you get when you take all of the money you’ve earned and subtract all of the tax deductions you’re eligible for.

Not sure of your filing status? This interactive IRS quiz can help you determine the correct status. If you qualify for more than one, it tells you which one will result in the lowest tax bill.

2023 Tax Brackets For Unmarried People

Tax rate of:

•   10% for people earning $0 to $11,000

•   12% for people earning $11,001 to $44,775

•   22% for people earning $44,726 to $95,375

•   24% for people earning $95,376 to $182,100

•   32% for people earning $182,101 to $231,250

•   35% for people earning $231,251 to $578,125

•   37% for people earning $578,126 or more

2023 Tax Brackets For Married People Who Are Filing Jointly

Tax rate of:

•   10% for people earning $0 to $22,000

•   12% for people earning $22,001 to $89,450

•   22% for people earning $89,451 to $190,750

•   24% for people earning $190,751 to $364,200

•   32% for people earning $364,201 to $462,500

•   35% for people earning $462,501 to $693,750

•   37% for people earning $693,751 or more

2023 Tax Brackets For Married People Who Are Filing Separately

Tax rate of:

•   10% for people earning $0 to $11,000

•   12% for people earning $11,001 to $44,725

•   22% for people earning $44,726 to $95,375

•   24% for people earning $95,376 to $182,100

•   32% for people earning $182,101 to $231,250

•   35% for people earning $231,251 to $346,875

•   37% for people earning $346,876 or more

2023 Tax Brackets For Heads of Household

Tax rate of:

•   10% for people earning $0 to $15,700

•   12% for people earning $15,701 to $59,850

•   22% for people earning $59,851 to $95,350

•   24% for people earning $95,351 to $182,100

•   32% for people earning $182,101 to $231,250

•   35% for people earning $231,251 to $578,100

•   37% for people earning $578,101 or more

Recommended: How Income Tax Withholding Works

Lowering Your 2023 Tax Bracket

You may be able to lower your income into another bracket (especially if your taxable income falls right on the cut-off points between two brackets) by taking tax deductions.

•   Tax deductions lower how much of your income is subject to taxes. Generally, deductions lower your taxable income by the percentage of your highest federal income tax bracket. So if you fall into the 22% tax bracket, a $1,000 deduction would save you $220.

•   Tax credits, such as the earned income tax credit, or child tax credit, can also reduce how you pay Uncle Sam but not by putting you in a lower tax bracket.

Tax credits reduce the amount of tax you owe, giving you a dollar-for-dollar reduction of your tax liability. A tax credit valued at $1,000, for instance, lowers your total tax bill by $1,000.

Many people choose to take the standard deduction, but a tax expert can help you figure out if you’d be better off itemizing deductions, such as your mortgage interest, medical expenses, and state and local taxes.

Whether you take the standard deduction or itemize, here are some additional ways you may be able to lower your tax bracket as you think ahead and prepare for tax season:

•   Delaying income. For example, if you freelance, you might consider waiting to bill for services performed near the end of the 2023 until early in 2024.

•   Making contributions to certain tax-advantaged accounts, such as health savings accounts and retirement funds, keeping in mind that there are annual contribution limits.

•   Deducting some of your student loan interest. Depending on your income, you may be able to deduct up to $2,500 in student loan interest paid in 2023.

It can be a good idea to work with a CPA (certified public accountant) or tax advisor to see if you qualify for these and other ways to lower your tax bracket.

Recommended: 10 Personal Finance Basics

The Takeaway

The government decides how much tax you owe by dividing your taxable income into seven chunks, also known as federal tax brackets, and each chunk gets taxed at the corresponding tax rate, from 10% to 37%.

The benefit of a progressive tax system is that no matter which bracket you’re in, you won’t pay that tax rate on your entire income. If you think you might get hit with a sizable tax bill, you may want to look into changing your paycheck withholdings or, if you’re a freelancer, making quarterly estimated tax payments.

You may also want to start putting some “tax money” aside each month, so you won’t have to scramble to pay any taxes owed when you file in April. An interest-bearing checking and savings account could be a good option for this purpose.

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

Has anything changed from 2022 to 2023 tax brackets?

Yes, the IRS has adjusted tax brackets for tax year 2023 to reflect the impact of inflation and other factors.

What is a marginal tax rate?

The marginal tax rate refers to the highest tax bracket that you possibly fall into. However, your effective tax rate averages the taxes you owe on all of your income earned. For this reason, your effective tax rate will likely be lower than your marginal rate.

How do deductions affect your tax bracket?

Deductions lower your taxable income. The more deductions that are taken, the more of your earnings are taxed at reduced brackets.

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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.

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.

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.

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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