May
20
2024

8 Common Online Bank Scams and How to Avoid Them

By | Financial Independence, money | Comments Off on 8 Common Online Bank Scams and How to Avoid Them

These days, it’s all too easy to get sucked into a bank scam. The reason is that scammers, and their scams, are getting increasingly sophisticated. According to the latest Federal Trade Commission data, consumers lost more than $10 billion to fraud in 2023, a 14% increase over reported losses in 2022. The most commonly reported scam category in 2023 was imposter scams, which saw significant increases in reports of both business and government impersonators.

Scammers often use savvy tactics to commit fraud that make it hard to cancel or reverse the transaction. As a result, one of the best ways to protect your hard-earned cash is to be aware of what’s out there. Learn what the most common bank account scams are and how to spot them.

Key Points

•   Online bank scams are increasingly sophisticated, with consumers losing over $10 billion to fraud in 2023.

•   Overpayment scams involve fraudulent checks where sellers are tricked into refunding excess amounts.

•   Check cashing scams exploit the victim’s compassion, leading to financial losses when the fake check bounces.

•   Unsolicited check fraud can trap recipients into unwanted contracts through fine print on the checks.

•   Phishing scams mimic communications from trusted entities to steal personal information.

1. Overpayment Scams

If you sell products online, you could inadvertently be hoodwinked by this popular scam. Here, the fraudster will pose as a buyer and send you a check or money order for more than the purchase price. Then, they’ll ask you to refund the difference either through an online payment or wire transfer. But the original payment type was fraudulent, meaning you lose the refunded money. If you already sent the item you “sold” them, you’ll lose that too. But it doesn’t end there: You’ll likely also be on the hook for a returned item fee from the bank.

How to Avoid Them

If you ever receive an overpayment, your best bet is to ask the buyer to void it and send the correct amount.

2. Check Cashing Scams

This scheme appeals to your compassion. A scammer approaches you outside your bank to see if you would be willing to cash a check for them. They explain that they don’t have any ID on them or don’t have a checking account at that particular bank and really need the money. You deposit the check and, since it generally takes time for a check to clear, you give them the amount it’s written for from your own funds. Days or weeks later, the bank comes back to you and says the check is fake, and you’re responsible for the withdrawn amount, plus any fees.

How to Avoid Them

You’re better off saying no to anyone who asks you to cash a check for them, no matter what reason they give. You never know, and it’s not a good idea to risk it.

Recommended: Avoiding Mobile Deposit Scams, Fakes, and Hacks

3. Unsolicited Check Fraud

This banking scam involves a check you get in the mail. It might be described as a “rebate check,” a refund on an overpayment, or prize money for a contest you’ve won, even though you don’t remember entering one. You deposit it into the bank — why not?

Here’s why: There may be some (very) fine print on the front or back of the check stating that by cashing the check you are entering into a legally binding contract — one you likely don’t want to enter. It might be a membership with monthly fees, a loan, or other long-term commitment that ends up costing you far more than the “free” check you deposited.

How to Avoid Them

Be sure to double check any unsolicited checks with your bank before cashing or depositing them.

4. Automatic Withdrawal Scams

Also known as automatic debit scams, these involve unauthorized withdrawals from your bank account — typically checking accounts. Scammers get access to your bank account numbers through fraudulent telemarketer calls or by stealing them from unsecured websites when you sign up for a free trial.

Once a scammer has access to your account information, they set up an automatic withdrawal. When your bank receives the draft, they transfer money from your checking account to pay the scammer. Unless you pay close attention to your daily bank transactions, you may not notice the scam until much later.

How to Avoid Them

It’s a good policy to never share sensitive information over the phone, unless it’s with a trusted friend or family member.

Also make sure you only use encrypted websites when entering your bank information: Look for “https://” before the URL (not “https://”) and a locked padlock in the left corner of the address bar.

5. Phishing Scams

Phishing scams are particularly tricky because they come dressed as emails or texts from trusted companies you already know. The message may even mention suspicious activity on a personal account, such as your savings or checking account.

Typically, you need to click on a link in the email or text, and then complete an action like confirming personal information. When you click through, it usually looks like the website from your bank or the company in question. So you tap in the required information (which may be a password, account numbers, or some other type of personal information). The scammers now have your sensitive data.

How to Avoid Them

If you get an email or text warning you of suspicious activity or a compromised account, and asks you to click on a link, don’t. Instead, head to the website for the financial institution or company, and log into your account there. If there aren’t any notices asking you to update your information, chances are it’s a phishing scam.

6. Government Imposter Scams

A fraudster will contact you by phone, email, or text posing as a representative from a government or law enforcement agency (like the IRS, Medicare, or the FBI). They may ask you to provide personal information needed to issue a payment (like for a tax refund) or tell you that you owe money and need to make a payment immediately. The imposter could even threaten to put you in jail if you don’t reveal your personal information or send payment.

How to Avoid Them

Don’t engage with anyone who makes this type of contact. The reality is that a federal agency will never call, email, or text you and ask for personal information or a payment of any kind. This is not a strategy the government uses to collect payments or to get missing information on tax returns or other forms.

7. Charity Scams

Sadly, many scammers play on people’s compassion, kindness, and generosity to line their own pockets. A charity scammer might contact you by phone, email, or ringing your doorbell. They claim to represent a real (or real-sounding organization) and tell you in detail about an urgent need or crisis. They often flash legit-looking IDs.

You want to help, so you give them cash, a check, or, perhaps, your credit card or bank account information for a recurring donation. Unfortunately, they aren’t connected to any type of nonprofit organization and you’ve given funds or sensitive financial information to a scammer.

How to Avoid Them

If you’re approached by a charitable organization asking for money, don’t give right away — even if you fully believe in the cause. Instead, look up the charity to see whether it’s legitimate. There are online databases, such as Charity Watch, that will let you know if the organization is real, as well as exactly how the group will use your donation. If you’re still interested in giving to that charity, you can then reach out to them yourself and make a donation.

8. Employment Scams

A job scammer posts an enticing ad on a job board. The job they’re offering sounds too tempting to pass up. It might be a work-from-home set-up, the chance to be a mystery shopper, or a job that pays a full-time salary for part-time work. Before the employer can onboard you, however, you’ll need to pay a fee or supply your bank account information and other personal details so they can pay you. It’s all a front to get you to part with your money.

How to Avoid Them

Use only reputable job boards when job hunting and verify the position directly before sending any personal information. If a job offer sounds suspicious, research the company, check online reviews, and find out if there have been any complaints on the Better Business Bureau’s site before applying.

Also know that applying for a job should never involve paying a fee, even one supposedly needed to process your application or conduct background screening. If you encounter this scenario, the job is unfortunately too good to be true.

Recommended: Different Types of Bank Account Fraud to Look Out For

More Tips on How to Protect Yourself From Bank Fraud

To make sure you don’t inadvertently fall for a bank scam, here are some general guidelines to keep in mind.

Know the Red Flags

While today’s scammers are increasingly sophisticated, there are some red flags that can give them away:

•   You need to act urgently.

•   You’re threatened with law enforcement or a government agency action.

•   You’re told to purchase gift cards and provide codes as a form of payment.

•   You need to mobile deposit a check and then transfer cash from your account to the person or company that wrote the check.

Don’t Trust Strangers

Never cash a check for someone you don’t know, no matter what reasons they give you. Also refrain from engaging with unknown callers on the phone, even if they have government agency names as their caller ID.

Contact Your Bank

If you receive any calls, emails, or texts from your financial institution asking for information, don’t respond directly. Instead, reach out to your bank on your own using the phone number listed on your statement or debit card. You only want to provide information when you have initiated the conversation using a vetted contact number.

Stay Up to Date With Your Bank Statement

It’s important to carefully check your monthly bank statements, whether you view them online or receive them by mail. This will allow you to spot any suspicious activity right away. The sooner you catch and report a scam, generally the easier it is to resolve the situation.

The Takeaway

These days, scammers can come off as entirely believable — they can fake the caller ID and may already have a lot of your data so they sound like they’re legitimate. Fortunately, by knowing the red flags and all the latest scams for stealing your hard-earned cash, you can protect yourself and your bank account.

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


Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.00% APY on SoFi Checking and Savings.

FAQ

How do bank scams work?

Bank scams usually involve someone asking for your banking or personal info — like account numbers, passwords, PIN codes — for a seemingly legit reason. They may have a “real” caller ID or a website that looks exactly like your bank’s. Once you provide or input your information, however, they use it to drain your account.

What bank information does a scammer need?

Having your bank account number and routing number is often enough for a scammer to perform fraudulent activities. While it’s not sufficient to access your bank account, it can allow a scammer to make fraudulent payments, create checks for your account, and make online purchases from retailers that only require bank account information.

What do you do if you suspect an online bank scam?

If you believe a scammer made an unauthorized transfer from your bank account, contact your bank as soon as possible. Let them know it was an unauthorized debit or withdrawal and request that they reverse the transaction and give you your money back.

If you gave a scammer your username and password, you’ll want to create a new, strong password. If you use the same password anywhere else, change it there, too.

If you gave a scammer your Social Security number, you can go to IdentityTheft.gov to see what steps to take, including how to monitor your credit.

Photo credit: iStock/eggeeggjiew

SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

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

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

Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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

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

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.

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

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May
20
2024

Helpful Tips on Recovering From Being Scammed

By | Financial Independence, money, Money & Life | Comments Off on Helpful Tips on Recovering From Being Scammed

You might associate scams with far-fetched ruses about foreign “princes” or emails, full of misspellings, that claim to be from your bank. And you might think you would never fall for those ploys. Scams, however, have grown more convincing over time, as evidenced by a growing amount of consumer dollars lost to fraud each year. And no, internet-savvy younger folk aren’t immune. In fact, according to data collated by the Federal Trade Commission (FTC), those between the ages of 30 and 39 were the most likely to get scammed in 2023.

Fortunately, there are ways to recover from the financially and emotionally draining experience of being scammed — and to avoid falling victim to scams in the first place. Read on for wise advice on how to rebound from being scammed, plus what to look out for so you don’t become a future scam statistic.

Key Points

•   Immediately inform your bank if you suspect a scam to protect your accounts.

•   Replace compromised debit or credit cards to prevent further unauthorized transactions.

•   Document all details of the scam to aid in any investigations.

•   File a complaint with the FTC to help track and stop scammers.

•   Use two-factor authentication and regularly update passwords to enhance security.

How Many People Are Scammed Every Year?

The short answer: Lots. The FTC states they received fraud reports from 2.4 million consumers in 2022 — and chances are not everyone who was scammed followed through on filing a report about it. (If you have been scammed, though, you should; the FTC’s data can help law enforcement build cases against scammers and stop the problem from happening to others.)

Recommended: Different Types of Bank Account Fraud to Look Out For

Common Scams in the United States

Scams come in a wide variety of shapes, sizes, and styles, but here are some of the most common scams reported in the US.

Imposter Scams

In imposter scams, the fraudster acts as if they’re a person or business entity you already know and trust to swindle you out of your money. This is by far the most common type of scam in the US, and it can be perpetrated in a variety of different ways.

•   You might get an email that looks like it’s from your bank (but is not) and prompts you to enter your login information. This however allows the fraudster to get access to your login credentials, which they can then use to drain your checking account.

•   Imposter scams also include romance scams, wherein someone often woos you online from afar and asks you to wire them money to help them through some emergency.

•   Scammers might even impersonate someone you already know, like a friend or relative. They could hack someone’s online accounts and then send messages that they need money for an emergency, help buying gift cards or some other scam.

Prize and Sweepstakes Scams

As their name implies, prize and sweepstake scams trick consumers into believing they’ve won something. They take a person’s sensitive information under the pretense of giving them the prize, only to wrest away their hard-earned money.

Job Opportunity Scams

It’s pretty cruel to target people who are looking for job opportunities, but scammers can do just that. You might find their ads in the exact same places you’d find legitimate employment opportunities, but instead of offering a position, they’re really in the business of getting your private information — and using it to steal from you.

Many people have fallen victim to overpayment scams this way, in which a person is told they are hired and is sent money to buy home officer equipment. However, the check was for a higher amount than needed, and the unwitting scam victim sends back the overage. By then, the funds they received from their supposed new employer? That check bounces ultimately, and they are out of cash and still without a job.

Investment-Related Scams

A smart investment can be a great way to make money… but when scammers use the guise of an investment opportunity to get your cash up front, the return never comes. According to the FTC, among the most common investment scams are those related to financial markets, real estate, or precious metals and coins.

Be extremely careful about individuals or companies you invest with. Some fraudsters create very official-looking websites that can fool people out of a lot of their money. These ”get rich quick” schemes can sound very believable.

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 4.00% APY on savings balances.

Up to 2-day-early paycheck.

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What Can You Do if You Have Been Scammed?

If you’ve been scammed, don’t panic: You have options. And in many cases, you may be able to recoup some or all of your lost funds. Here’s advice on how to recover from being scammed.

Tell Your Bank That You Have Been Scammed

Here’s what to do after being scammed: If a fraudster got hold of your bank account information, let your bank know ASAP. After all, the sooner they can change your checking and savings account numbers, the sooner you can stop any theft. While FDIC insurance does not cover money lost due to theft, fraud, or scams, many banks will reimburse you money you’ve lost in a fraudulent transaction. It’s not a guarantee, but it’s definitely worth a try.

Request a New Debit or Credit Card

If a scammer got hold of your debit card or credit card information, immediately call the issuer to report that the card was stolen so they can hook you up with a brand new card and account number. Again, many credit card issuers will refund you for charges that were unauthorized or fraudulent transactions, so it’s critical to reach out to them pronto.

Remember the Details

If you suspect you’ve been the victim of a scam, you should immediately write down everything you can remember about the interaction: the details of how the scam was carried out, how much money or which pieces of information were stolen, the time of day, the payment and communication methods, and where you were. All of these details could help law enforcement catch the perpetrator and ensure your case is solid if it gets taken to court.

File a Complaint With the FTC

As discussed above, another step to take after being scammed is filing a complaint with the FTC. This can help track down and stop fraudsters. The FTC can also provide you with valuable information to help you protect yourself from future scams, too.

Tips on Protecting Yourself From Being Scammed Again

There are steps you can take to help ensure you don’t become victimized by a scam for a second time. These can also be good moves to make to avoid being scammed in the first place.

Use Two-Factor Authentication

Chances are, you’re already familiar with two-factor authentication: It’s the process where a website or platform verifies your identity with both a password and a second form of authentication, like a code texted to your cell phone or using facial recognition. Use these tools to secure as many of your accounts as you can.

Reset Your Passwords

Whether or not you’ve been scammed in the recent past, it’s always worthwhile to reset your passwords regularly.

•   Use strong, distinct passwords for each account you have. No reusing!

•   To keep all your accounts straight, you may want to consider utilizing a password manager, which can also help you generate stronger passwords and remind you to change your passwords from time to time.

Be Wary of Suspicious Emails and Phone Numbers

If you get an email or phone call that promises you a lot of money very quickly — or says there’s a problem you have to pay to fix very quickly — be suspicious. If you’re not totally sure you’re dealing with the person or entity who says they’re on the other side of the interaction, hang up or click delete and reach out yourself (say, directly to your bank, Apple, or whatever company is allegedly contacting you).

It’s also worth looking for tiny typos in email addresses or slightly “off” logos. In all cases, be very wary before you offer sensitive information over email or the phone. It’s highly unlikely you will be asked to “verify your account immediately” by text message, for instance.

Recognize Sometimes Things May Be Too Good to Be True

If someone calls you promising you a prize of thousands of dollars as soon as you provide your Social Security number or says they have the investment of a lifetime if you just cough up $1,000 to start, think twice. If something sounds too good to be true, there’s a good chance it’s just that.

Order Credit Reports

Keeping an eye on your credit report is one of the best ways to stay ahead of any fraud you may fall victim to without otherwise knowing. You’re entitled to one free credit report each year from each of the big three credit bureaus via annualcreditreport.com.

You can also sign up for ongoing credit monitoring with a variety of service providers, though this may be a paid service. You can also consider whether you want to activate a fraud alert or security freeze on your credit files with the credit bureaus. This can help prevent new accounts from being opened without your permission.

The Takeaway

Scams are getting more sophisticated these days, which can mean they can be harder to detect and avoid. Popular ploys are romance and job opportunity scams. Staying vigilant and immediately reporting any fraudulent transactions can help minimize your losses — and possibly recoup lost funds.

Check with your financial institution to see what tools they offer to help you monitor and protect your accounts.

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


Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.00% APY on SoFi Checking and Savings.

FAQ

How do I report a fraud to the FTC?

The FTC makes it easy to file a fraud report online. Just navigate to the FTC’s website at reportfraud.ftc.gov, and hit “Report Now,” and follow the online prompts. While the FTC can’t help investigate or solve your individual fraud case, your report can be used to help track down fraudsters at large and stop future fraud from happening to others.

What do I do if I do not remember all details of the scam?

If you don’t remember all the details of a scam, be sure to write down the details you do remember and file them in your report or claim. Writing down information can help you remember it for longer.

Will I get any money back if I get scammed?

Many banks are willing to reimburse some or all of the money you transferred in a fraudulent transaction, depending on the circumstances. Credit card companies, too, may cover you for unauthorized charges. It’s worthwhile to ask for details.

Photo credit: iStock/Delmaine Donson

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 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

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

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

Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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

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.

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

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May
20
2024

6 Advantages of Having a Savings Account

By | Budgeting & Goals, Family Finances, money | Comments Off on 6 Advantages of Having a Savings Account

Sure, you could store all the cash you’re likely to need in the near future in a checking account and call it a day. But that would mean missing out on the many benefits of having a savings account.

While savings accounts don’t offer the returns you could potentially get in the market, they pay interest (generally a lot more than you can earn in a checking account), while still keeping your money safe and accessible. This makes them ideal for housing your emergency funds and money you’re saving for shorter-term goals, like buying a car or going on vacation.

Here’s a closer look at the perks of having a savings account and why this type of account likely deserves a place in your financial toolkit.

Key Points

•   A savings account safely stores money while earning interest, making it ideal for short-term savings like emergency funds or vacation funds.

•   These accounts are insured up to $250,000, providing security against bank failures.

•   Savings accounts offer easy access to funds, unlike some investments that may require time to liquidate.

•   Opening a savings account doesn’t necessarily require a large initial deposit, making it accessible to start saving immediately.

•   Money can be earmarked for specific goals, helping to manage finances effectively by separating funds for different purposes.

What Savings Accounts Are

A savings account is a type of deposit account at a bank, credit union, or other financial institution where you can safely store your money and earn interest. Savings accounts at banks insured by the Federal Deposit Insurance Corporation (FDIC) are typically covered up to $250,000 per depositor. Co-owners of joint accounts at the same bank are typically each insured up to $250,000. Credit unions offer similar insurance through the National Credit Union Administration (NCUA).

Unlike a checking account, which is set up for everyday money management, a savings account is designed to store money you don’t need right away, separate from everyday spending cash. These accounts typically don’t come with checks and debit cards, and some banks may limit you to a certain number of withdrawals per month.

Because savings accounts offer safety, liquidity, and interest, they can be a great place for setting aside money for shorter-term goals, such as:

•   An emergency savings fund

•   A down payment on a house

•   A wedding

•   A vacation

•   A new car

•   A large purchase

•   Home renovations

Dive deeper: How Do Savings Accounts Work?

6 Benefits of Savings Accounts

Here’s a look at some of the main advantages of a savings account.

1. You Earn Interest on Your Deposits

Savings accounts earn interest, expressed as an annual percentage yield (APY). That means you’ll earn money just for keeping your funds in the bank, making it a low-risk way to build wealth. Not every savings account offers the same interest rate, however. While the current national average savings yield is 0.57 percent, top-yielding savings accounts are currently earning APYs above 5% percent.

To see how that translates into actual dollars, let’s say you currently have $5,000 sitting in your checking account you don’t need right away, and you transfer it to a 5% APY high-yield savings account. Even if you don’t add any additional money to the account, you could increase your balance in one year to $5,250, just by letting the initial deposit sit in your new savings account.

Recommended: How Does a High-Yield Savings Account Work?

Earn up to 4.00% 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.


2. Your Money Is Insured

Savings accounts are typically insured by the FDIC or NCUA, depending on where the account is held. That means your money is protected against major losses (up to $250,000) in the event that the bank or credit union goes out of business. You would either be paid that money directly or, more likely, a new account would be opened for you at another bank with the same balance as before. This makes a savings account safer than keeping your money in a sock drawer or under the mattress, where it is susceptible to theft or loss.

3. It’s Low Risk

Savings accounts don’t offer high returns compared to what you could potentially make in an investment account over the long term. However, these accounts won’t let you down either. With many investments, you can lose money over the course or days, weeks, months, and even years. The balance on a savings account, on the other hand, will typically continue to go up over time (unless, of course, you make a withdrawal).

If you have money you plan to use within the next couple of years that you can’t afford to lose, a savings account can be the perfect place to store it.

4. It Doesn’t Require a Large Initial Investment

Savings accounts are easy to open and typically do not require you to make a big initial deposit. In fact, many online-only savings accounts allow you to open an account with $0, so you can start saving from scratch. Savings accounts at traditional brick-and-mortar banks may require deposits of $25 to $100 to open a new account. By contrast, many investments (such as real estate and mutual funds) often require a significant amount of money as an initial investment, sometimes as much as several thousand dollars.

Keep in mind, though, that some savings accounts do offer higher interest rates and low (or no fees) if your balance stays above a certain minimum threshold or you meet other criteria.

5. You Can Separate Money for Different Goals

If you’re saving for a particular goal, like buying a car or putting a downpayment on a home, it can be helpful to keep that money in a separate savings account. This helps to ensure that you don’t blow the money on something else, like groceries or clothing.

If you have several things you’re saving for, you might even want to open multiple savings accounts, such as one for emergency savings, one for a new car, and one for a vacation. Separating money can help you visualize progress toward each goal. Some savings accounts let you organize your savings into separate buckets or “vaults” so you can save toward multiple goals within one account.

6. Easy Access When You Need It

Savings accounts are relatively liquid, meaning you can access your money when you need it by transferring it into your checking account or withdrawing it at an ATM or through a teller at a local branch. That’s not true for many investments, which may take a few days to convert to cash. Some investment products, such as real estate properties, can potentially take months or years to sell off.

That makes a savings account an ideal spot for your emergency fund. When an unexpected expense comes up, you can access your funds immediately — and avoid running up expensive credit card debt — in order to cover it.

That said, the money is not quite as accessible as the money in a checking account. Savings accounts typically don’t come with checks and debit cards, and some banks limit the number of withdrawals you can make to six or nine per month. However, you might see these limitations as benefits, since they encourage saving rather than spending.

Recommended: Can You Write Checks From a Savings Account?

Is a Savings Account Right for You?

Savings accounts offer numerous benefits, including insurance on your deposits, higher APYs than checking accounts, and liquidity. Plus, you generally don’t need a large (or sometimes any) initial deposit to get started.

However, the interest you earn on a savings account may not always keep up with inflation, which means your balance could become less valuable over time. As a result, a savings account is generally not the best place to put the money you are saving for a long-term goal, such as retirement or your child’s college education. You might earn a better return if you invest that money in the market.

If you’re interested in opening a savings account, it’s a good idea to research your options and compare APYs, minimum deposits, balance requirements, and any fees. And if you have a savings account but aren’t satisfied with the perks, there’s likely a better fit for you offering the full benefits of a savings account.

Recommended: Perks of Long-Term Savings Accounts

Opening a Savings Account With 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 4.00% APY on SoFi Checking and Savings.

FAQs

What is the benefit of a savings account?

The primary benefit of a savings account is that it allows you to grow your money over time (by earning interest), while still keeping it safe and accessible.

What are the advantages and disadvantages of a savings account?

Advantages of savings account include:

•   Earning Interest Savings accounts accrue interest on deposited funds, helping your money grow over time.

•   Safety and security Funds in savings accounts are typically insured by the Federal Deposit Insurance Corporation (FDIC) or National Credit Union Administration (NCUA), providing protection against loss.

•   Liquidity Savings accounts offer easy access to your funds, making them ideal for emergency savings.

Disadvantages of savings accounts include:

•   Lower interest rates While savings accounts offer interest earnings, the rates are often lower compared to other investment options.

•   Inflation risk Inflation may erode the purchasing power of your savings over time, especially if the interest earned does not keep pace with inflation rates.

•   Fees and minimum balance requirements Some savings accounts may have fees or minimum balance requirements, potentially reducing the overall return on your savings.

How is a savings account most useful?

Savings accounts can be most useful for storing your emergency funds and money you plan to spend in the next few months or years, since they pay interest while keeping your funds safe and accessible. However, returns on savings accounts are often lower than what you could potentially earn by investing in the market over time. That makes these accounts less useful for long-term savings goals like retirement or a child’s future college education.

Photo credit: iStock/PeopleImages

SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

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

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

Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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

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

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May
20
2024

Guide to Overdraft Fees: What Happens if You Overdraft Your Bank Account and Don’t Pay It Back?

By | Financial Independence, money | Comments Off on Guide to Overdraft Fees: What Happens if You Overdraft Your Bank Account and Don’t Pay It Back?

An overdraft is a negative balance in your bank account and can occur for any number of reasons. You might accidentally spend more than you have available in your checking account, for example, or forget to transfer funds before an automated payment gets debited from your checking account. Whatever the cause, an overdraft comes with a number of negative consequences, especially if you don’t pay what you owe right away.

Read on to learn exactly what happens when you overdraft a bank account, plus tips on how to repair the damage and avoid overdrafts in the future.

Key Points

•   Overdrafting occurs when spending exceeds the account balance, and the bank covers the shortfall.

•   Banks charge hefty fees for overdrafts, which must be repaid along with the overdrawn amount.

•   Unresolved overdrafts can lead to account closure and debt collection efforts.

•   Negative banking records from unresolved overdrafts may hinder the ability to open new accounts.

•   Setting up alerts and linking accounts for overdraft protection can prevent future overdrafts.

What Is an Overdraft?

An overdraft happens when you spend more than you have available in your bank account and the bank pays for the transaction anyway. Think of it as a form of credit, where the bank is lending you money to cover the transaction and you’ll need to pay them back. Having this feature can be convenient, since it allows you to cover payments or withdrawals, like subscription services or a utility bill, even if you don’t have enough funds in your account to cover them.

However, many financial institutions charge their customers hefty fees for this convenience. Depending on the bank, overdraft fees can run upwards of $35. You are expected to pay the fee, plus the amount that was overdrawn.

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

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 4.00% APY on savings balances.

Up to 2-day-early paycheck.

Up to $2M of additional
FDIC insurance.


What Happens if You Overdraft Your Bank Account and Don’t Pay It Back?

If you overdraft your bank account and don’t pay what you owe plus the overdraft fee, you could face several unpleasant consequences, such as owing additional fees, your account being closed, and having the debt go to collections. Here’s a closer look at the potential fallout.

You Owe the Bank

The amount that was overdrawn, plus any fees, is what you owe the bank. You can repay your debt by transferring or depositing the owed amount into your account. Depending on the financial institution, you may have a certain amount of time to pay the bank back, such as within 30 days of the overdraft.

Pay the Overdraft Fee

Some banks charge a fee each time you overdraft, while others charge a fee for each day you overdraft. This is an important distinction: If your bank charges a fee for each overdraft and you inadvertently overdraft your account multiple times on the same day (which can happen if you have a low balance to start with), you’ll face multiple overdraft fees. For example, if your bank charges $35 per overdraft and you have three transactions in one day, you’ll owe the bank $105 in fees.

Your Account Could Be Closed

If you continue to overdraft your bank account and don’t pay it back, the bank may close your bank account to prevent any more withdrawals. You will still owe the amount you’ve overdrawn, plus any fees you’ve incurred. In some cases, the bank will send your debt to a collection agency.

The Bank Can Sue You

Anyone you owe a debt to can take you to court to try to collect it. The bank can sue you or, if it turns the matter over to a collection agency, the agency can sue. If the court grants a judgment against you, the bank or collection agency can garnish your wages or to place liens against your property in an effort to collect the debt.

Difficulty Opening Another Account

Some financial institutions will report closing your bank account and your unpaid overdraft debt to ChexSystems, the reporting agency for banking. ChexSystems maintains a report of your banking activity, which banks and credit unions can use to determine whether to approve your application for a new checking or savings account. Having an overdrawn and closed account could impact your ability to open a new account, even if it’s at a different bank or credit union.

How to Avoid Overdrafts

Overdrafts are an expensive nuisance. Here are some strategies that can help you avoid overdrawing your account in the first place.

Monitor Your Spending

Keeping an eye on how much you have in your checking account each day and knowing when bills are due can help you avoid spending more than you have available.

Set Up Low Balance Alerts

Many financial institutions allow you to sign up for customized banking alerts, either online or via your banking app. It’s a good idea to set up an alert for whenever your balance dips below a certain threshold. That way, you can top up your account to prevent the account from being overdrawn.

Check Your Account Statement Regularly

Looking at your account statement each month can help you spot patterns, like when your account balance tends to dip and, if you have an overdraft, when and why it happened. This can help you better monitor your account and adjust your spending.

Link Your Checking Account to Another Account or Credit Line

Many banks offer overdraft protection, which allows you to link your checking account to a savings account within the same financial institution or, if you qualify, a credit line. That way, if you don’t have enough funds in your checking account to cover a transaction, the bank will automatically transfer money from your savings to cover the transaction. In the case of a credit line, the bank will borrow what it needs from your credit line.

Overdraft protection avoids overdraft fees, but may come with interest and other fees.

💡 Quick Tip: Want a new checking account that offers more access to your money? With 55,000+ ATMs in the Allpoint network, you can get cash when and where you choose.

The Takeaway

Overdrafting your bank account and not paying what you owe could result in some negative consequences, like racking up even more fees, having your account closed, the debt going to collections, and difficulty opening a new bank account.

Even if you do all you can to prevent an overdraft, the reality is that it can happen on occasion. If you’re worried about the occasional overdraft, it may be worth looking for a bank that doesn’t charge overdraft fees.

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


Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.00% APY on SoFi Checking and Savings.

FAQ

Can you go to jail for an overdrawn bank account?

Having an overdrawn bank isn’t considered a criminal offense, so you won’t go to jail. You could face other consequences, though, such as overdraft fees, the bank closing your account, and the balance you owe going to collections.

How long can your bank account be overdrawn?

The time period will depend on your bank. Some may require you bring the negative balance to zero (basically, deposit the amount you’ve withdrawn plus any fees) by the next business day, while others will give you a 30-day grace period.

Can I close my account with a negative balance?

In most cases, banks won’t let you close a checking account that has a negative balance. You will need to ensure your account is current — getting the overdraft amount back to zero and paying any fees you owe.

What happens if your bank account goes negative and you never pay it?

Your bank may close your account and send the amount you owe to collections. The account closure and overdraft debt will also be reported to ChexSystems (an agency that tracks consumer banking history). This could mean you’ll have a hard time opening another bank account.

Can your bank sue you for the overdraft?

Yes. If you’re not aware of an overdrawn account or simply choose to ignore it, the bank could eventually take legal action against you. The amount your account is overdrawn is a legal debt you owe, which means the bank can sue you and use legal tactics such as wage garnishment to recoup their losses.

Photo credit: iStock/vorDa

SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

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

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

Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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

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

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

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May
20
2024

How to Save Money: 33 Easy Ways

By | Budgeting & Goals, Financial Independence, money | Comments Off on How to Save Money: 33 Easy Ways

You likely agree that saving money is a good idea. Putting extra cash aside every month can help you reach your financial goals, whether that’s building an emergency fund, going on vacation, or putting a down payment on a car or home.

But wanting to save money and actually doing it are two very different things. It’s easy to get caught up in day-to-day needs (and wants), and never gain any traction on savings. But don’t give up. We’ve got 33 tricks and tips that can make saving simple and pain-free. The best part — you can get started as soon as today.

Key Points

•   Tracking your spending helps identify areas where you can cut back and save more effectively.

•   Selling unused items can generate extra cash and declutter your space.

•   Setting specific savings goals with target dates can motivate consistent saving habits.

•   Buying generic brands instead of name brands can significantly reduce spending.

•   Automating your savings ensures a consistent transfer of funds into your savings account.

Saving Money Doesn’t Have to Be Overwhelming

While spending less and saving more admittedly sounds painful, it doesn’t have to be that hard. You don’t have to go to the extremes like never shopping or having fun. Just making a few small changes in your day-to-day spending habits can actually add up to a big difference in how much you save each month.

Getting better with money is like any type of behavior modification — the key to lasting change is to make small, incremental changes that stick.

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

33 Easy Ways to Save Money

What follows are 33 simple money-saving tips you can start working on right now.

1. Tracking Your Spending

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

Once you have a big-picture idea of your cash flow, you can make adjustments. Spending a lot more on takeout than you thought? Commit to cooking one or two more nights per week. Is keeping up with fashion killing your budget? You may want to focus on spending less on clothing.

2. Selling Items You Never Use

An simple way to earn some extra cash is to periodically sell gently used items you no longer want or need. You might organize a yard sale or resell your items piecemeal via online marketplaces like OfferUp, Facebook Marketplace, or eBay. If you have extra clothes, shoes, or accessories in good condition, consider listing them on Poshmark or thredUP. Selling your unwanted stuff is essentially getting paid for clearing out clutter.

3. Limiting Time Spent on Social Media

Watching influencers take luxury vacations and promote their favorite products can prompt you to spend more and live beyond your means. In fact, recent research finds that social media can significantly impact your finances — and not in a good way.

Putting a time limit on daily phone scrolling, on the other hand, can automatically lead to less spending and more saving. It also frees up time for activities that can truly enhance your life, like reading, exercising, seeing (real) friends, even taking up side hustle (and earning more money).

4. Setting Goals for Saving

When we do things with focus, intention, and a clear goal in mind, we usually have an easier time making it happen. Instead of saving for the sake of saving, consider setting specific savings goals with target dates and amounts. For instance, maybe you want to save $5,000 for a summer vacation or $2,000 for a new computer.

By setting a target date, you can work backward and figure out exactly how much you need to set aside regularly. For example, if you want a new laptop in eight months, and it will cost you about $2,000, you’ll need to save $250 a month or about $60 a week.

Earn up to 4.00% APY with a high-yield savings account from SoFi.

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5. Buying Generic Brands

Generic brands typically have the same ingredients and offer comparable quality to name brands but for a fraction of the price. For example, generic drugs usually cost 80% to 85% less than their brand-name counterparts. During your next supermarket or drugstore visit, try to go generic whenever it’s offered. Chances are, the only difference you’ll notice is less money draining out of your checking account.

6. Comparison Shopping

Spending a bit of extra time comparison shopping can help you scoop up the best deals and avoid paying full price. You can do it on your phone while you shop in-store. For online shopping, consider installing a browser extension that helps you find the lowest prices and automatically applies coupons and cash-back options at checkout. Many of these tools will also alert you when the price of an item you intend to purchase drops.

7. Automating Your Savings

Rather than transfer money to your savings account whenever you think of it, consider putting your savings on autopilot. Simply set up a recurring transfer from your checking account to your savings account for the same day each month (perhaps right after you get paid). It’s fine to start small. Even $50 can add up to a sizable sum over time, since the transfer happens every month without fail.

8. Making Monthly Debt Payments

While it’s not directly putting money into your bank account, making on-time, consistent payments on your debt means you’ll pay it off quicker. Once your debt is paid off, the money you are currently spending on principal/interest can go towards savings. In addition to your monthly minimum payments, try to put extra payments towards high-interest debt each month. You’ll whittle those balances down faster and save on interest.

9. Delaying Gratification

If you see something you want to buy but don’t actually need, consider putting off the purchase for at least one week (or ideally 30 days). Tell yourself that if you still want the item and can afford it after the waiting period, you can go ahead and buy it. Chances are good that once that waiting period is over, you’ll no longer have a burning need to purchase the item and simply move on.

10. Meal Planning

If it’s 6pm, you’re tired from a full day of work, and have no food in the house, you’ll probably seek out the path of least resistance — getting takeout or eating out. Your best defense against overspending on food is to sit down every Sunday to scan recipes and come up with a meal plan for the week (including breakfast, lunch, dinner, and snacks). You can then make a shopping list and hit the store.

Recommended: Examining the Price of Eating at Home Versus Eating Out

11. Avoiding the Daily Coffee

While it’s fine to occasionally splurge on a fancy coffee, getting your daily coffee out can add up, especially if you sometimes throw in a tempting pastry at the last minute. Even cutting back your coffee shop visits to just two or three times a week and brewing at home the other days can help you save a lot on coffee.

12. Making Repairs Instead of Buying New

While it is easier to replace items than fix them, the latter approach is better for both your wallet and the environment. Depending on the item, a repair could end up costing significantly less expensive than a replacement. Call around for quotes or ask for help from a tech-savvy or handy friend. Also see if there are “repair cafes” in your community. These are volunteer-run events where you can get items mended or fixed for free.

13. Using Cash Instead of Credit Cards

While credit cards are convenient, they make it all too easy to spend money. When you tap or swipe to make a purchase, you don’t really have a sense that you are giving up physical money. Switching to cash-only, even for just a month or so, can help you become more mindful about your spending. You might even try the envelope system. This involves labeling envelopes for each spending category, dividing your available cash for the month into the envelopes, and then only spending what’s in each envelope.

14. Switch to a New Cell Phone Carrier

When it comes to cell service, you don’t have to stick with the big names. Mobile virtual network operators (such as Mint Mobile, Consumer Cellular or Republic Wireless) typically offer the same quality of service at a much lower price tag. It’s also a good idea to look at your last cell phone bill to see how much data you actually use. You may be able to get a smaller plan to save even more.

15. Doing it Yourself Instead of Hiring Someone

Before you hire someone for a home repair or improvement job, like painting a room, re-caulking your tub or shower, or installing a water filter under your sink, consider whether or not you could do it yourself. Often, the cost of materials and a simple YouTube search will lead to significant savings.

16. Stacking Coupons

There are two major types of coupons: Store coupons, which are issued by a specific retailer and can only be used at those locations (you can find these in the paper and through a retailer’s app or mailer); and manufacturer’s coupons, which are found on manufacturer’s and coupon sites. By stacking them, you get an even deeper discount. Stacking coupons for an item that is on sale is a triple whammy that can bring you back to pre-inflation prices.

17. Canceling Some Subscriptions

Dropping subscriptions that you hardly use or are redundant is a simple money-saving move with a potentially big payoff, since these debits occur monthly. It’s worth scanning your checking account and credit card statements for recurring charges to see if there are any items you can cut. If you primarily watch one streaming service but pay for four, for example, canceling three can save you significant cash.

18. Using a Refillable Water Bottle

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

19. Taking Advantage of Free Resources

You might be surprised at how many things you can actually get for free. For example, your library can grant you access to movies, books, activities, and in some cases, passes to state parks and other nearby attractions. You might also join a Buy Nothing group. These are hyper-local virtual communities where neighbors can give and receive essentially anything for free.

20. Canceling Your Gym Membership

If you’re becoming a stranger to your gym, consider canceling your membership. Even if you got a great deal, gyms debit money out of your bank account every month, whether you go or not. You might look for alternative, low-cost ways to get physically fit, such as walking/jogging/biking around your neighborhood, lifting free weights at home, and taking hikes.

21. Saving Change

A nickel here and a quarter there might not seem like much, but if you start dropping all your spare change into a jar every day, you’ll be surprised at how much you’ll accumulate. If you rarely carry or pay in cash, consider collecting digital change. Many money-saving apps automatically round up your purchase to the nearest dollar, then transfer the difference into your savings account.

💡 Quick Tip: Want a simple way to save more everyday? When you turn on Roundups, all of your debit card purchases are automatically rounded up to the next dollar and deposited into your online savings account.

22. Skipping Alcohol at Restaurants

Ordering a cocktail or a glass of wine (or three) when out to dinner can significantly inflate your bill. Consider getting water or a non-alcoholic beverage instead, then perhaps having a glass of wine when you get home. If you must drink, local beer, “house wine” options, and happy hour cocktails are usually the cheapest options.

23. Finding Free Family Entertainment

Taking the family to concerts, movies, and immersive art exhibits can add up quickly. Instead, look for free or low-cost community activities. These offerings typically spike during the summer months and around holidays. To stay abreast of upcoming goings-on, you can sign up for newsletters or follow social media accounts of your local community, recreation centers, and libraries.

24. Doing a No-Spend Challenge

A simple way to save (potentially hundreds) is to do a no-spend month. This involves spending money only on essentials for 30 days. Before you begin, it’s a good idea to set parameters for what you will and won’t spend money on and then commit to the plan. It’s only a month! By the end of the challenge, you may realize there were certain things you didn’t really miss and rethink your approach to spending.

25. Reducing Your Energy Use

You may be able to significantly lower your utility bills with just a few tweaks to your habits and home. Try taking shorter showers, fixing any drippy faucets or constantly running toilets, turning off lights whenever you leave a room, and washing your clothes in cold water. Once you see a difference in your monthly bills, you’ll be encouraged to carry on and find more ways to cut energy use.

26. Adjusting Your Tax Withholdings.

If you typically get a refund after doing your taxes, you’re essentially giving the government an interest-free loan. That’s money that could be working for you by earning interest in a high-yield savings account. Revisit your withholdings and put that extra money into your own bank account.

27. Taking a Staycation Instead of a Vacation

It may sound boring, but you’d be surprised how much a staycation can feel like a fun and luxurious getaway. The key is to take a complete break from your daily routine, change up the scenery, and spend time doing things you truly enjoy. This can provide the respite you’ve been longing for — minus the headaches of travel — and for a fraction of the price.

28. Finding Cheap Ways to Reward Yourself

If you focus too hard on saving and never on fun, you might end up feeling deprived and give up on the whole project. Instead, allow yourself to celebrate small money wins and life events on the cheap. For instance, for every X amount you’ve put away into your emergency fund, you might reward yourself with a fancy coffee, a $5 “spree” at the dollar store, or getting a treat at your favorite ice cream shop.

29. Avoiding Bank Fees

Overdraft fees, ATM fees, and monthly maintenance fees can make your bank account balance move in the wrong direction — down instead of up. To ditch costly overdraft fees, keep regular tabs on your checking account to make sure you have enough to cover your debits and checks. To eliminate other fees, you may want to look for a bank account that doesn’t charge monthly maintenance fees and ATM fees.

30. Haggling

Negotiating prices isn’t just for buying cars or houses. You can haggle for just about any product or service — your cable and cell phone bills, things you buy in stores, and even your rent. The key to success is to come to the negotiation prepared (do all the research you may need in advance), speak with confidence, and start off the conversation with the question, “What flexibility do you have?”

Recommended: 15 Creative Ways to Save Money

31. Saving Your Windfalls

It can be tempting to go hog wild and spend your windfalls. But next time you get a work bonus, cash gift, or tax refund (which you actually want to avoid, see tip #26), consider spending a small percentage of it on something frivolous and fun, then putting the rest into your savings account. This can help you reach your savings goals significantly faster.

Recommended: The Fastest Ways to Get a Tax Refund

32. Timing Your Purchases Right

If you want to buy something that you don’t need right away, it’s worth researching the best times of the year for deals and sales. For example, you can often find great deals on cars in May, October, November and December; clothes are typically cheapest at the end of any season; and the end and the very beginning of the year are generally the best times to buy appliances.

33. Switching to a High-Yield Savings Account

If your extra cash is sitting in a traditional savings account, you’re missing out on a free source of extra cash. A high-yield savings account is a type of savings that you can open at many banks and credit unions. But it differs from a traditional savings account in that it offers an annual percentage yield (APY) that’s 10 to 20 times higher. If, for example, you put $25,000 into a savings account with a 4.60% APY, you’ll earn an extra $177.78 by the end of the year — just for letting the money sit in the bank.

Saving Money with 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 4.00% APY on SoFi Checking and Savings.

FAQ

Why is saving money important?

Saving money enables you to build an emergency fund that protects you against the unexpected. It also allows you to work towards — and achieve — future goals, such as buying a car or home, sending your kids to college, and being able to one day retire.

How can I find the motivation to save money?

To find the motivation to save money, it helps to set specific goals. Think about the things you want to buy or do in the next year or two and how much these things will cost. You can then determine how much you need to set aside each month to reach your goals. Watching your savings account balance go up can also help keep you motivated.

What are the consequences of not saving money?

When you don’t have a cushion of savings, any bump in the road (such as a car or home repair, trip to the ER, or loss of income) can force you to run up credit card debt. This can lead to a debt spiral that can take months, if not years, to recover from. Not saving also means you won’t make any progress towards your financial goals and simply continue living paycheck to paycheck.

Photo credit: iStock/Chaninan Boongate

SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

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

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

Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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

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

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

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.

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.

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