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Understanding your personal finances is the first step in taking control of your money and making it work harder for you. One valuable tool for determining your financial status involves using personal finance ratios, such as your debt-to-income figure or how your take-home pay gets divided up. These are akin to formulas that show the relationship between numbers and how your cash is tracking.

Calculating and considering these figures can help you manage your money better as well as achieve your short- and long-term goals. To help you put these important ratios to use, this guide shares eight formulas to help you optimize your money.

Emergency Fund Ratio

An emergency fund is the cash you keep on hand to pay for unexpected expenses, such as a job loss, a large medical bill, or a roof repair.

This fund acts as a safety net so you don’t have to go into debt or raid your long-term savings accounts to take care of the situation.

Formula: Monthly Expenses X 6 = Emergency Fund Ratio

To calculate your target emergency fund, you’ll want to add up your essential monthly expenses, or the minimum amount of money you need to live for one month. That includes your mortgage or rent, insurance, utilities, and groceries.

One common rule of thumb is to then multiply this by three months (as a bare minimum); while others may aim for six months or more (say, if you are part of a single-income family). This gives you a good number to shoot for keeping in your emergency fund. You can use an online emergency fund calculator to help you do the math.

Liquid Net Worth Ratio

This liquid net worth formula is essentially an extension of your emergency fund. If you were to need funds as a result of an unplanned event or emergency, this metric looks at how many months of expenses would be covered by your liquid assets — funds that can be easily and quickly converted into cash.

Formula: Liquid Assets/Monthly Expenses = Liquidity Ratio

Liquid assets include your checking and savings accounts, as well as cash-like equivalents. For this number, you do not want to include other assets that are not liquid, such as your home, car, or tax-advantaged retirement savings accounts.

Monthly expenses include essential expenses that you accounted for above to determine your emergency fund ratio.

A common goal: maintaining a liquidity ratio of between three and six months.

Personal Cash Flow Ratio

Cash flow is a term often associated with companies. But this can also be a simple yet powerful personal finance ratio because it tells you how much is flowing in vs. flowing out of your accounts each month.

Knowing how much cash flow you have is useful because it tells you exactly how much money you have available to pay down debt or save or invest for your future.

Formula: Monthly (After-Tax) Income – Monthly Expenses = Personal Cash Flow Ratio

To calculate this, you’ll want to add up all of your average monthly take-home income, including your paycheck, any side hustles, and income from any investments or savings accounts that are available to you for spending.

Next, you can look at credit card and bank statements, as well as receipts, for the past several months to come up with the average amount you are spending each month. This includes necessities like mortgage or rent and utilities, and also discretionary spending such as eating out and entertainment.

You can then subtract your spending number from your income number and you’ll have your net cash flow. If that number isn’t where you want it to be, you can use these calculations as a starting point to make adjustments.

Generally, the higher your cash flow, the better off you are.

Housing-to-Income Ratio

This ratio is vital to helping you understand how much you can afford to spend on your home, whether you buy or rent. It is also an important metric that mortgage lenders use when they decide whether or not to approve your loan.

Formula: Monthly Housing Costs/Gross Monthly Income = Housing Ratio

It’s important to use total housing costs when you calculate this ratio. This includes: your monthly mortgage payments (or rent payments), property taxes, insurance, and utilities.

You can then compare that total cost to your gross monthly income (income before taxes are deducted). Financial experts often recommend keeping this number to 30% or less. In some areas with high cost of living, closer to 40% can be common.

The lower this number, the more affordable your housing costs are and the more income you have for other financial goals.

Debt-to-Income Ratio

The debt-to-income ratio is often used to determine a company’s ability to pay its debts. It works for individuals as well. It tells you what percentage of your income is being used to repay debts.

Formula: Monthly Debt Payments/Monthly Gross Income = Debt-to-Income Ratio

To calculate your debt payments, you’ll want to include credit card, student loan, and other consumer debt, as well as your mortgage payments. Your gross income is how much you earn each month before any deductions or taxes are taken out.

The common wisdom is to keep your debt at or below 36% of your gross income, but the lower your debt-to-income ratio, the financially healthier you likely will be.

Many people are surprised when they calculate this number to find just how much of their income is being whisked out of their checking account to repay debt, often at high interest rates. This ratio can help you rethink that situation.

Net Worth Ratio

Personal net worth is a measurement of an individuals’ total wealth. Your net worth ratio gives a little bit broader perspective than your debt-to-income ratio because it takes your total assets into account.

It is calculated as the total value of all your assets minus the total value of all your liabilities.

Formula: Total assets – Total Liabilities = Net Worth Ratio

To find this ratio, you’ll want to add up the current market values of all of your assets including your home, stock and bond holdings, checking and savings accounts, and any other financial accounts.

Next you’ll want to calculate your total liabilities. This includes any debt such as mortgages, credit card balances, car loans, personal loans and 401(k) loans.

You can then subtract your liabilities from your assets. The resulting number is, hopefully, positive, and the higher that positive number, the better for your financial health.

This is a snapshot of your net worth at this moment. You may want to calculate this metric periodically, perhaps quarterly or annually, to track your wealth. Ideally, you should see increases over time.

Savings Ratio

Since saving for the future is such a key part of personal finances, it makes sense there would be a personal finance ratio to help you gauge how you’re doing.

Your savings rate is expressed as what percent of your gross income you are putting away for the future, including retirement and other shorter-term financial goals.

Formula: Savings/Gross Income = Savings Ratio

To calculate this, you’ll want to add up your annual savings in any retirement accounts, including employer-sponsored retirement plans such as 401(k)s, traditional and Roth IRAs, and taxable accounts earmarked for retirement. Do not include your emergency fund or college savings accounts.

Compare that savings to your annual gross income (your earnings before taxes and deductions are taken out).

Generally speaking, you want to aim for a saving rate of 10% to 20%. Younger people may want to aim for a 10% savings ratio, and then gradually increase their savings rate as their income increases.

50/30/20 Budget Ratio

The 50/30/20 formula can help you manage your budget no matter what your income. It proves a simple guideline as to how to apportion your income so you can afford to pay your bills, have some fun, and also put money into savings.

Formula: 50% Essential Spending + 30% Discretionary Spending + 20% Savings = Budget Ratio

Essential needs are the largest allocation at 50% of monthly take-home income. These are bills you must pay including mortgage or rent, utilities, health insurance, minimum debt payments, and groceries. Housing will likely take up a big chunk of this category.

With this formula, you’ll want to keep discretionary spending at no more than 30% of your monthly take-home income. These are most likely the things you do for fun, like dining out, travel, clothing beyond what you need for work, and entertainment.

Saving for future financial goals accounts for the remaining 20% of monthly take-home income. This includes retirement savings, saving for a house, tuition savings, saving to repay debt beyond minimum amounts, etc.

Recommended: 50/30/20 Budget Calculator

The Takeaway

Personal finance ratios can give you a clear snapshot of your financial health in a variety of areas and help you make better decisions about money management and future planning. Once you’ve done some of these calculations, you may discover that you want to make some changes, such as watching your spending more closely and/or putting more money into savings each month. Having the right banking partner can help you optimize your money.

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

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy 3.30% APY on SoFi Checking and Savings with eligible direct deposit.

FAQ

What is the 50/30/20 ratio in finance?

The 50/30/20 budget rule says to allocate your take-home pay as 50% to necessities, 30% to discretionary (or “fun”) spending, and 20% to savings and additional debt repayment.

What is the 70/20/10 ratio for money?

With the 70/20/10 budget guideline, you put 70% of your after-tax income to needs and wants, 20% to savings and investments, and 10% to debt repayment or charitable donations.

What are the 5 basics of personal finance?

To effectively manage your money and meet your financial goals, many experts advise that you focus on these five basics: budgeting, saving, understanding credit, managing debt, and investing.

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

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

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There are times when you may need to move a large sum of money safely and speedily or get cash to someone in another country. A wire transfer can be a good solution.

A wire transfer is a way of moving money electronically between people or businesses. Perhaps you won a vintage watch in an auction, or you need to send cash to a friend in France who’s arranging a rental car for you. Those are a couple of the situations when a wire transfer could get the job done.

Here, you’ll learn more about this process, its cost, and the pros and cons of transferring money. Once informed, you’ll be able to make an informed decision about the best way to send and receive funds.

What Is a Wire Transfer?

A wire transfer is an electronic transfer of funds by banks or nonbank money transfer providers like Western Union and MoneyGram.

The term lingers from the era when transferring money — $2.5 million a year by 1877 — occurred via coded pulses of electric current through dedicated wires. (A sender would take money to a telegraph office, and an operator would use codes and passwords to “wire” the money to the telegraph office of the recipient.)

A wire transfer is an electronic transfer of money used around the globe.

These days, wire transfers allow a certain amount of money to be sent electronically from your bank account to a recipient’s bank account, anywhere, or vice versa.

How Wire Transfers Work

Banks and transfer service providers wire money for retail customers. They have varying processes and fees, so looking into the choices may save some money. Some details to consider:

•  Banks require account numbers in order to process wire transfers; transfer service providers do not.

•  Wire transfers can include a person’s name and other contact information or, for a cash-based transfer, be anonymous.

•  The banks and transfer providers will have different processing times, so money could be sent within hours if it’s a domestic transaction or a few days if it’s an international transaction.

•  Wire transfers are much like cashier’s checks. When someone is receiving money, the bank will treat the payment like cleared money, so as soon as the recipient’s account is credited, they can withdraw or spend the money.

•  When someone is sending money, the funds must be in their account before the bank will initiate the transaction. The money will be removed immediately after the wire transfer.

How Long Does it Take to Wire Money?

A wire transfer can be set up in minutes at a bank or wire transfer service. Then, once it’s sent, wire transfers will take up to 24 hours for processing when they are domestic.

International wire transfers can take between one and five days. They usually arrive within two days, but transfers made to or from a “slow-to-pay country” may add to that.

How to Wire Money in 5 Steps

Anyone interested in how to wire funds can follow these step-by-step directions to do it in an efficient and safe manner.

1. Make Sure You Have the Funds

Ensure that the money is in the sender’s bank account. Wire transfers cannot be sent if the money isn’t there.

2. Pick a Wire Transfer Service

The sender can transfer the money online or go to providers in person and use cash or a bank account, depending on the service. (Some services, like Western Union, may allow you to send money without a bank account.)

3. Fill Out the Forms/Create an Account

When sending money through a bank, senders will need to fill out forms and include their bank account information, their bank’s contact information, and the recipient’s bank account information, including the account number and contact information for the bank. They will also need to provide a government-issued ID and/or their online login information for the bank.

When sending through a wire transfer service, they may have to log in online or go to the service in person and link their bank account or take cash, choose the recipient’s country, delivery method, and account information, and fill out any other information that’s required.

Senders have to be careful that the bank account numbers they provide are accurate, or the money will not get to the recipient.

4. Include Fees in the Amount You Send

Banks and wire transfer services should be able to tell users what the fees are going to be upfront, and users will add those fees to the amount they are sending.

5. Ask for a Receipt

The last step in how to wire money is to get your receipt. This ensures that senders have a record of the transaction. If something goes wrong and no receipt exists, they have nothing to show that they sent the wire transfer correctly.

Recommended: How to Transfer Money From One Bank to Another

Pros of Wiring Money

Reasons that people might want to wire money include the following.

They Need to Move a Big Amount

Limits tend to be high, so wire transfers are common for real estate transactions and sending money to and from family members.

The Money Is There

With checks and debit cards, payment can bounce or an account can go into overdraft. With a wire transfer, that’s not possible, since the money must be there in order to be sent. A wire transfer request will be declined if someone has limited funds.

It’s Safer Than Checks

While checks are typically safe, mailing them is not necessarily. People could open mail that isn’t theirs and take checks out and try to cash them. Wire transfers offer a more secure alternative.

Money Can Be Sent Internationally

Say a person goes to work in another country but wants to send money to family members back home every month. With a wire transfer, that’s easily done.

Recommended: What Are Intermediary Banks?

Cons of Wiring Money

Wire transfers have a few possible drawbacks.

Cost

Expect to pay about $15 to $30 for an outgoing bank transfer within the United States, $0 to $15 for a domestic incoming payment, and $35 to $50 for an international outgoing payment and $0 to $30 for an international incoming wire transfer.

Juxtapose that with free or low-fee peer-to-peer payments or using a credit card and paying the balance when it’s due.

No Do-Overs

Wire transfers are typically irrevocable, so both sender and recipient should be sure that all of the required information is correct.

Potential Scams

Scammers may ask unsuspecting people to wire them money for goods or services and then never follow through, so it’s best to avoid wire transfers unless the sender and receiver know each other.

Unlike with a credit card, where someone could dispute the charge, the money may be gone forever once it’s sent.

Here are the pros and cons of wire transfers in chart form:

Pros of Wire Transfers	Cons of Wire Transfers
Can move large sums	Cost
Reliable; the money is there	No do-overs
Safer than checks	Potential for scams
Can move funds internationally

An Alternative to Wiring Money

If you want to move money but don’t want to use a wire transfer, here are some other options.

Peer-to-Peer Services

P2P payments usually can be made from a linked bank account or directly from the P2P account for free. You may already use some of these services, such as PayPal and Venmo.

Some providers do charge around 1.5% to 3.5% to process payments drawn from a credit or debit card.

Bank Account Money Transfer

You may also set up electronic transfers (you may hear the terms ACH and EFT used) with your bank. Funds can often be sent to any other bank account, not just those held at the same financial institution.

There may not be any account fees or service charges. Check with your bank to be sure.

While all can offer a secure transfer of funds, here’s how they compare on other fronts:

Wire Transfer	P2P Services	Bank Account Transfer
Often involve a fee	May involve a fee, depending on the provider and funding source	Often free
Can take up to 5 days internationally	Can take a few days internationally	Can take up to 5 days internationally

The Takeaway

Wire transfers can be an efficient electronic way to move funds between people or businesses. Depending on the specific details, such as whether the transaction is domestic or international and where the funding comes from, the timing and fees may vary. A good first step can be to check with your banking partner to learn what they offer.

FAQ

What is required to wire money?

To wire money, you will need the amount of cash available, a provider of the transfer (your bank or a service), the proper forms and/or account information filled out, coverage of any fees, and a receipt.

How much does wiring money cost?

The amount you will pay to wire money can depend on the financial institution and whether the money is moving to your account or into someone else’s account, and whether the funds are being sent domestically or internationally. You are likely to find fees from $0 to $50 per transaction.

What is the process of wiring money?

To wire money, you will need to have funds available and fill out paperwork with the recipient’s banking information. Part of the process may involve paying a fee also, and it’s wise to always get a receipt.

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

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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

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

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

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A bank deposit is defined as funds that are put into a checking or savings account, among other types of financial products. This money is kept safely at a financial institution like a bank or credit union, and it may earn interest in return for keeping your cash there.

You can make bank deposits via cash, checks, online transfers, or direct deposit, among other methods. The type of deposit you make will determine when you can withdraw funds.

Understanding how bank deposits work and the pros and cons of each type of deposit can help you better manage your money. Here’s what you need to know.

What Are Bank Deposits?

A bank deposit involves putting money into a bank account. Your bank deposits can go into various accounts such as a savings or checking account, a money market account, or a certificate of deposit (CDs).

Depositing your money into a bank account can help you accomplish two things:

•   It can keep your money safe.

•   It can help your money grow.

Here’s a little more detail: Bank deposits are typically insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000 per depositor, per account ownership category, per financial institution, and in some cases even more. That means your money is a whole lot safer in a bank account than under your mattress.

The other thing you can accomplish by depositing your money is helping it grow. Because many financial institutions offer interest-bearing bank accounts, you can capitalize on compounding interest by not withdrawing funds and also consistently adding to your balance over time.

How Do Bank Deposits Work?

The type of deposit you make will dictate the process of your cash getting into an account.

For example, when you deposit a check, the bank sends a digital image of the check to the payer’s financial institution. While large banks usually communicate directly to clear checks, other banks work through a clearinghouse or a third-party intermediary to verify checks. The clearinghouse organizes all the deposits coming in and out of a specific bank and ensures all deposits are put in and taken out of the correct accounts.

If the payer’s account doesn’t have enough funds to process the check, it will bounce and be returned unpaid. If you have already taken out the funds from the check, you will have to pay the total balance back, usually plus a fee.

Direct deposits, on the other hand, work a little differently. Since direct deposits are scheduled payments, the payer’s or employer’s bank will credit the account before sending the direct deposit. This way, the payer’s bank can ensure the account has enough money to cover the transaction.

Once the funds are deposited in your bank account, you can access the sum the next business day.

How Long Do Bank Deposits Take to Process?

Process times vary by the financial institution and how the deposit is made. However, federal law limits the time it takes for a bank deposit to process.

•   For example, if you deposit checks totaling $275 or less, the bank must let you access the funds the next business day. So, if you deposited checks on a Monday, you should be able to access your money on Tuesday. However, if there’s a bank holiday transactions may be delayed.

•   If you deposit a check(s) totaling more than $275 you will have access to the first $275 the next business day. Then, you will have access to the remaining deposit the following business day.

•   When you deposit a check from another account from that financial institution, a government check, or a certified check in person at a bank branch, you should have access to the money the next business day.

Keep in mind some banks and credit unions apply cut-off times, which dictate the end of the day. So, if you deposit after the cut-off time, you may have to wait an extra business day before accessing the deposit.

Also, other types of deposits have different processing time. For example, wire transfers and ACH deposits can usually take a couple of days to process but may take longer in some situations.

Here are a few reasons why it can take longer for your deposit to process:

•   You’re depositing money into a new account

•   You made an ATM deposit to an ATM outside the financial institution’s network

•   If you have a deposited check that was returned unpaid

•   Your deposits exceed $6,725

•   You’ve overdrawn your account too many times.

Recommended: Causes of Overspending

2 Types of Bank Deposits

There are two primary types of bank deposits: demand deposits and time deposits. Here’s a breakdown of each.

Demand Deposits

Demand deposits consist of money you put into a bank account that you can take out when you need cash. Demand deposit accounts usually have minimal interest rates (or no interest), but they give you more freedom to withdraw money when needed. These types of deposits can be made to three types of accounts, including:

•   Checking accounts. This type of account is meant for everyday transactions. You can deposit and withdraw money as often as you want. Usually, checking accounts have checks and debit cards linked to them so you can access your money when you’re on the go.

•   Savings accounts. This type of account is designed to help you sock your money away for short-term or long-term goals. Since the different types of savings accounts are meant for savings, some banks apply withdrawal limits, limiting the number of monthly withdrawal transactions that can occur in an account.

Savings accounts may also have interest rates higher than checking accounts. This is especially true if you deposit funds at an online vs. traditional bank.

•   Money market accounts. This type of account combines the features of a savings account with those of a checking account. Money market accounts let you earn interest, just as a savings account does. They can also provide a debit card and checks so you can withdraw funds more easily.

Time Deposits

A time deposit is when you put money into a deposit account with a fixed rate and term, like certificates of deposit (CDs). You can only take money out of a time deposit account once the term expires. (You may have to pay a penalty if you take money out of the account beforehand. But whether you get a penalty or not depends on the type of account and the financial institution.)

For example, let’s say you deposit $5,000 in a CD that earns 5% interest for one year. Then, after one year, you can withdraw $5,250.00, which includes your deposit and interest earned.

You can think of banks as using time deposit accounts to borrow money from depositors. In exchange for borrowing money for a certain amount of time, the bank usually gives the depositor a fixed interest rate, typically higher than traditional savings accounts. At the end of the term, the depositor can take out the money in the account or renew the time deposit for another term.

Recommended: Savings Account Interest Calculator

What Are Mobile Deposits?

Mobile banking, as you likely know, gives you access to banking services no matter where you are or what time it is. You can make mobile check deposits from your phone as part of this service. So, instead of driving to an ATM or local bank branch, you can deposit it on your mobile device.

The steps involved usually include:

•   Download the bank’s mobile banking app.

•   Log into your account.

•   Choose the account you want to deposit the check into.

•   Endorse the back of the check.

•   Enter the amount of the check.

•   Snap a photo of the front and back of the check.

•   Review the deposit information, and then hit deposit.

Remember, though, there can be limits on the amount and type of checks you can deposit on your mobile app. For example, some banks prohibit depositing third-party checks, money orders, traveler’s checks, and foreign checks. So, verify the rules with your bank or credit union.

Also, if you deposit a check using the mobile app, keep the paper check until the check clears. This way, you’ll have a backup if it doesn’t go through or there is an error.

The Takeaway

A bank deposit is money that is given to a financial institution where it is safely held and may earn interest. Examples of deposit accounts are checking and savings accounts, money market accounts, and CDs. When considering where to keep your money, it’s wise to shop around and consider such factors as interest paid and fees charged.

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

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy 3.30% APY on SoFi Checking and Savings with eligible direct deposit.

FAQ

What are the 2 types of bank deposits?

Demand deposits and time deposits are the two types of bank deposits. A demand deposit references deposits made into an account such as a checking or saving account where you can withdraw the funds at will. A time deposit, on the other hand, refers to a deposit made to an account with a fixed interest rate and set terms (whether several months or years), like certificates of deposits.

What happens if you deposit more than $10,000 in the bank?

When you deposit $10,000 or more into a financial institution, federal law requires them to report the deposit to the federal government. The federal government requires this alert to help prevent money laundering and fraud.

Does deposit mean payment?

Yes, deposits can mean an initial payment towards a product or service. It can also mean putting something of value away for safekeeping, like when you make a bank deposit to a bank, or hand over cash for safekeeping.

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

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

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If you’re like over 93% of Americans, you get paid by direct deposit, meaning funds are electronically transferred directly into your bank account, with no checks or cash changing hands.

But did you know that in some states in the nation, it’s not your choice whether or not you get paid this way? Some businesses are allowed to require that their staff be paid by direct deposit. From the employer’s point of view, this can be a real advantage. It means they don’t have to go to the time and expense of cutting checks. Everything can be automated. Some workers, though, might not love this policy, as they might be unbanked or prefer not to share their account details.

Below are key things to know about direct deposit, including which states allow employers to require it, how to set up direct deposit, and the pros and cons of getting paid this way.

What Direct Deposits Are

First, consider what a direct deposit is and how it works.

•  A direct deposit occurs when money is moved from one bank account to another without the use of a physical check. For example, an employer might shift money from its bank account to an employee’s checking account on payday.

•  Banks use the Automated Clearing House (ACH) network to coordinate electronic payments and other automated money transfers between financial institutions.

•   When you receive a direct deposit, money goes directly into your bank account, without the need for any intermediary steps, such as receiving a check and then depositing that check.

•  The money is cleared automatically through the ACH and is often available immediately or by the next business day. With paper checks, banks might put a temporary hold on the funds while they wait for the check to clear. It can sometimes take several days for a check to clear.

Because it does away with a lot of cumbersome paperwork, direct deposit has become increasingly popular. Direct deposit is not only used to transfer paychecks from employer to employees, but also for things like tax refunds and payments from retirement accounts.

Some government agencies have done away with manual deposit entirely. The Social Security Administration, for example, no longer cuts paper checks and requires people to accept their benefits via direct deposit or a reloadable debit card.

Which States Allow Required Direct Deposit?

Depending on state law, employers may or may not be able to require direct deposit. State law is not always cut and dried, however. In some states, mandatory direct deposit is only allowed for certain types of employers (such as public vs. private) and/or certain types of employees (such as those hired after a certain date).

Here’s a look at direct deposit laws by state; these are the states that allow some form of mandatory direct deposit.

State	Mandatory Direct Deposit Allowed?	Which Employers Does This Rule Apply To?
Alabama	Yes for private sector, no for public sector	All private employers
Arizona	Yes	All employers
Indiana	Yes	All employers
Iowa	Yes, for employees hired after July 1, 2005. Employers may not require direct deposit if the cost to employees of setting up and maintaining a bank account effectively reduces their wages to below minimum wage.	All employers
Kentucky	Yes	All employers
Louisiana	Yes	All employers; required for all state employees
Maine	Yes	All employers
Massachusetts	Yes	All employers
Michigan	Yes	All employers
Minnesota	No for private sector employees, but the Commissioner of Labor and industry may require direct deposit for public sector employees.	All employers subject to state statutes
North Carolina	Yes	All employers
North Dakota	Yes	All employers
Oklahoma	Yes	All employers
South Dakota	Yes	All employers
Tennessee	Yes	Private employers with at least five employees
Texas	Yes	All employers
Utah	Yes	Private employers except for those involved in farm, dairy, agricultural, viticulturally, or horticultural pursuits; stock or poultry raising; household domestic service; or other employment in which a written agreement provides different terms.
Washington	Yes	All employers
West Virginia	Yes for state higher education institutions.	All state higher education employers
Wisconsin	Yes	All employers

Why Some States Allow Required Direct Deposit

States that permit mandatory direct deposit do so because it offers benefits such as reduced costs for employers (eliminating paper checks, postage, etc.) and increased convenience for both employers and employees. It also enhances security by reducing the risk of lost or stolen checks. However, many states require employers to offer employees a choice between direct deposit and another payment method (like paper checks).

Even in states that allow employers to mandate direct deposit, there are federal protections in place for employees. For example, employers must allow the employee to choose which bank receives the deposit and cannot charge their employees a fee for using direct deposit. In addition, employers must provide workers with access to their pay stubs and, if an employee does not have a bank account, allow payment via paycard.

Can You Be Fired for Refusing Direct Deposit?

In some cases, an employee may want to refuse direct deposit. This could be because they are unbanked. Trying to force a person to accept direct deposit could be unintentional discrimination. This situation could require a case-by-case review.

If you feel you don’t want direct deposit and are being forced to do so, it may be worthwhile to check with your HR department about possible work-arounds.

4 Ways to Accept Direct Deposit

There are several ways to accept direct deposit. Consider these options.

Bank Account

You can have direct deposit go into a checking or savings account. The account can be held at a traditional brick-and-mortar institution or at an online bank. Typically, you’d fill out your banking information (such as your account and routing number) with your payroll department and perhaps provide a voided check.

Investment Account

You may be able to direct some or all of your direct deposit to an investment account.

Prepaid Debit Cards

Some prepaid cards allow you receive direct deposit for future reloads. If so, you will typically get specific instructions on how to set up direct deposit when you register your card.

Payment Apps

Direct deposit can be set up to go directly into some payment apps. For example, PayPal, Cash App, and Venmo generally allow users to receive paychecks, government payments, and other forms of direct deposits.

Recommended: What If Direct Deposit Goes to a Closed Account?

Advantages of Direct Deposit

Whether or not direct deposit is required, there can be some distinct upsides for both employers and employees.

Convenience

Direct deposit takes a lot of the legwork out of receiving a paycheck. The funds are deposited automatically and regularly, requiring no trips to the bank or mobile deposits. You don’t need to be home to receive the check. So if you’re on vacation or working far from your regular stomping grounds, your check will go through without lifting a finger.

You may also be able to send some of your paycheck to a savings account, which can be a great way to automate your savings.

Organization

Keeping track of paper checks can be a hassle for employers and employees, who may end up having to file away hard copies of records for future reference. Electronic transfers provide a paperless transaction history that both parties have access to. The transaction history doesn’t need to be stored in a physical place, so it can be referenced from anywhere at any time.

Resource Saving

Sending money via the ACH is often cheaper for employers than printing and mailing paper checks. Generally, it is free for employees to receive payment through the ACH. It’s also greener, allowing businesses to cut back on the amount of paper, ink, and energy that they consume.

Security

It is possible for paper checks to be lost or stolen, and even for someone to fraudulently cash them. Issuers may charge a fee to replace lost checks, and the process of stopping payment on stolen checks may be slow and expensive.

Generally speaking, direct deposit provides a safer alternative for transferring cash since there is no physical item to be lost or stolen.

There are some potential security issues when setting up direct deposit, as banking information must be exchanged between employees and employers. Making sure that the information is passed through secure channels to a person you can trust can help ensure that direct deposit is set up securely.

Speed

How long does a direct deposit take? While the actual transfer of funds is immediate, it can take one to three business days for your bank to verify the funds and make them available to you. However, many employers factor this delay into their payroll system, so you’ll receive your deposit on payday. You can usually access the money on that day, though in some cases you may need to wait until the next business day.

Some banks offer a benefit known as early paycheck or early pay. This allows you to access your direct deposits up to two days earlier than your normal payday. They can do this because some employers submit payroll information to banks a couple of days in advance. Once the bank gets the payment instructions from the employer, it may expedite the transaction, making sure the funds are available to the account holder a day or two before the usual payday.

Disadvantages of Direct Deposit

Despite the benefits of direct deposit, there are some potential drawbacks to keep in mind.

Costs and Fees

In some cases, the cost of opening and maintaining a bank account can be burdensome for employees, reducing the amount of their take-home pay. Iowa protects against this possibility by disallowing mandatory direct deposit if it becomes a financial burden.

Lack of Attention

Because direct deposit is automatic, you may forget to check deposits in your bank account regularly. That means that if any problems occur, they may go on for a long time before you catch them.

You can avoid this issue by setting up alerts with your bank so you are automatically notified every time you receive a deposit. This allows you to quickly see if everything is correct, and if not, nip any problems in the bud.

Cyber Threats

Though direct deposit provides a relatively secure way to transfer money, that doesn’t mean it’s immune to cyber criminals looking to steal sensitive financial information and commit bank fraud. Protections against cyber threats include using complicated passwords and password protection and avoiding phishing scams that might give fraudsters access to emails and data.

Setting Up Direct Deposit

To set up direct deposit, you must first have a checking or savings account or another acceptable way to receive the funds, such as a payment app. Then, follow these steps:

•  To receive electronic payments, you typically need to fill out a direct deposit form provided by your employer. Generally, you’ll need to provide information about your bank, as well as the account and routing numbers for your bank account. You may also need to provide a voided check for checking accounts.

•  Once again, always be sure you are sending your information to someone you trust and through a secure channel. You may want to avoid sending sensitive information, like account numbers, through email.

•  Your employer may ask you for other information, such as the name of the account holders on your checking or savings account (if you are using one), your mailing address, and your Social Security number.

•  You may be able to list multiple accounts for direct deposit, which can help you work toward your financial goals. For example, you might direct most of your paycheck to your checking account and a smaller portion to your savings account. That way savings are automated while ensuring that enough is in checking to cover bills.

The Takeaway

Employers can require direct deposit in many states, but not universally. Even in states where employers are allowed to mandate direct deposit, they must allow employees to choose their own financial institution. In some states, mandatory direct deposit is prohibited and employers must offer other payment options.

Whether you’re required to sign up or not, direct deposit offers a number of advantages, including faster access to your money and reduced risk of lost or stolen paper checks. To set up direct deposit, you generally need a checking or savings account, though you may be able to have funds transferred to a prepaid card or payment app.

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

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy 3.30% APY on SoFi Checking and Savings with eligible direct deposit.

FAQ

Can you deny an employee direct deposit?

Depending on state laws and company policy, an employer may be able to deny an employee the option of direct deposit. While the majority of employers offer direct deposit as a convenient payment method, they may not be required to provide it.

Can you be fired for not having direct deposit?

Typically, an employee cannot be fired solely for refusing direct deposit, especially in states where employers are not allowed to mandate direct deposit. In states where employers are allowed to require direct deposit, refusal could be seen as noncompliance with company policy. However, termination solely for this reason could still raise legal concerns.

Which states allow mandatory direct deposit?

States that allow employers to make direct deposit mandatory include: Alabama, Arizona, Indiana, Kentucky, Louisiana, Maine, Massachusetts, Michigan, North Carolina, North Dakota, Oklahoma, South Dakota, Texas, Utah, Washington, and Wisconsin.

Some states allow employers to mandate direct deposit but with certain exceptions. For example, Iowa allows employers to require direct deposit but only for employees hired after July 1, 2005 and for whom setting up and maintaining a bank account won’t cause financial distress. Other states, like Minnesota, allow state employers to mandate direct deposit but not private employers.

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

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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

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 Bank Fee Sheet for details at sofi.com/legal/banking-fees/.
^Early access to direct deposit funds is based on the timing in which we receive notice of impending payment from the Federal Reserve, which is typically up to two days before the scheduled payment date, but may vary.

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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A preferred provider organization (PPO) is a type of health care plan that offers lower out-of-pocket costs to members who use doctors and other providers who are part of the plan’s network.

These preferred providers have signed onto the network at a lower negotiated rate than they might charge outside of the network.

PPOs also offer members the flexibility to see providers outside of the plan’s network, although they will most likely pay more in out-of-pocket costs to do so.

To learn more about PPOs, and how this type of plan compares to other health insurance options, read on.

How Does PPO Insurance Work?

When you join a PPO health plan, you’re joining a managed care network that includes primary care doctors, specialists, hospitals, labs, and other healthcare professionals. PPO networks tend to be large and geographically diverse.

If you see a preferred provider, you will likely pay a copay, or you might be responsible for a coinsurance payment (after you meet the health care plan’s deductible).

While you are free to see any health care provider whether or not they are in the PPO network, if you see a provider outside of the network, you may pay significantly more in out-of-pocket costs. In return for flexibility, large networks, and low in-network cost sharing, PPO plans typically charge higher premiums than many other types of plans.

PPOs are a common, and often a popular, choice for employer-sponsored health insurance.

Recommended: Common Health Insurance Terms & Definitions

What Are the Costs of Going Out of the PPO’s Network?

If you see a provider who is not part of the plan’s network, you will likely be expected to bear more of the cost. PPOs typically use what’s called a “usual, customary, and reasonable” (UCR) fee schedule for out-of-network services.

Insurers calculate UCR fees based on what doctors in the area are charging for the same service you were provided.

If your doctor charges more than what your insurance company determines to be usual, customary, and reasonable, you most likely will be charged for the difference between the amount charged for the service and the amount covered by your insurer.

Depending on where you live and the service you received, this difference could be significant. It may also come as a surprise to policyholders who assume their medical costs will be covered and don’t fully understand the distinction between in-network and out-of-network providers.

A good way to avoid surprise charges with a PPO (or any health plan) is to talk to your provider and your insurer before you receive treatment about the total cost and what will be covered.

How PPOs Compare to Other Types of Health Care Plans

PPO plans are most often compared with health maintenance organizations (HMOs), another common type of managed care health plan.

HMOs typically offer lower premiums and out-of-pocket costs than PPOs in exchange for less flexibility.

Unlike a PPO, HMO members typically must choose a primary care physician from the plan’s network of providers. Care from providers out of the HMO network is generally not covered, except in the case of an emergency.

Also unlike a PPO, an HMO’s network of providers is usually confined to a specific local geographic area.

Another key difference between these two types of plans: HMO members typically must first see their primary care doctor to get a referral to a specialist. With PPOs, referrals are not usually required.

PPOs are also often compared to point of service (POS) plans.

POS plans are generally a cross between an HMO and a PPO. As with a PPO, POS members typically pay less for care from network providers, but may also go out of network if they desire (and potentially pay more).

Like an HMO, POS plans require a referral from your primary care doctor to see a specialist.

PPOs (as well as HMOs and POS plans) are very different from high deductible health plans, or HDHPs.

HDHPs charge a high deductible (what you would have to pay for health care costs before insurance coverage kicks in).

This means that you would need to pay for all of your doctor visits and other medical services out of pocket until you meet this high deductible. In return for higher deductibles, these plans usually charge lower premiums than other insurance plans.

You can combine a HDHP with a tax-advantaged health savings account (HSA). Money saved in an HSA can be used to pay for qualified medical expenses.

HDHPs are generally best for relatively healthy people who don’t see doctors frequently or anticipate high medical costs for the coming year.

Recommended: Beginner’s Guide to Health Insurance

What Are the Pros and Cons of PPO Insurance?

As with all health insurance options, PPOs have both advantages and disadvantages. Here are a few to consider.

Advantages of PPOs

•   Flexibility. PPO members typically do not have to see a primary care physician for referrals to other health care providers, and they may see any doctor they choose (though they may pay more for out-of-network providers).

•   Lower costs for in-network care. Out-of-pocket costs, such as copays and coinsurance, for care from in-network providers can be lower than some other types of plans.

•   Large provider networks. PPOs usually include a large number of doctors, specialists, hospitals, labs, and other providers in their networks, spanning across cities and states. As a result, network coverage while traveling or for college student dependents can be easier to access than with more restricted plans.

Disadvantages of PPOs

•   High premiums. In return for flexibility, PPO members can expect to pay higher monthly premiums than they may find with other types of plans.

•   High out-of-pocket costs for out-of-network care. Depending on where you live, the treatment you receive, and how your insurer calculates “usual, customary, and reasonable” fees, you may find you are responsible for a large portion of the bill when you receive care outside of the PPOs network.

•   Might be more insurance than you need. If you rarely see doctors and wouldn’t mind potentially switching doctors, you may be able to save money by going with an HMO or a HDHP.

The Takeaway

PPOs are a popular type of health plan because of the flexibility, ease of use, and wide range of provider choices they offer. PPO networks tend to be large and varied enough to include a patient’s existing doctors. If not, members still have the option of going out-of-network and receiving at least some coverage from a PPO. PPO members pay for this flexibility, however.

PPOs typically come with higher premiums, along with extra costs associated with out-of-network care. That can be prohibitive for many consumers.

Your employer’s benefits department or an experienced insurance agent or broker can help you compare PPOs to other types of health care plans and determine which choice is right for your health care needs and your budget.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

Find affordable auto, life, homeowners, and renters insurance with SoFi Protect.

FAQ

What is a disadvantage of having an HMO?

One drawback of PPO plans is that they’re often more expensive than HMO plans. Monthly premiums are usually higher, and you’ll likely have to pay more out of pocket if you see doctors who are out of the plan’s network.

What does PPO mean?

PPO stands for preferred provider organization. It’s a type of health care plan that offers lower out-of-pocket costs to members who see health care providers who are part of the PPO plan’s network.

Is having a PPO worth it?

It depends. PPOs tend to have large networks, which can make them a good choice for someone who travels frequently within the U.S. or lives in two different states.

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SoFi Insurance Agency, LLC. (“”SoFi””) is compensated by Experian for each customer who purchases a policy through the SoFi-Experian partnership.

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

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