Oct
18
2023

Guide to Payable on Death vs. In Trust For

By | Family Finances, Life & Career, money | Comments Off on Guide to Payable on Death vs. In Trust For

“In trust for” (ITF) and “payable on death” (POD) are two designations that you can use to pass on bank accounts or other financial accounts after you’re gone. The main difference between in trust for vs. payable on death is that the former has a trustee while the latter does not.

Which one you opt for can depend on your personal wishes for passing on those assets. Understanding how each one works can make it easier to choose between a POD vs. trust account when crafting an estate plan.

This guide will help you learn the pros and cons of each type of financial account and compare them.

What Is Payable on Death (POD)?

A payable on death account allows the owner to pass the assets in that account to a named beneficiary once they die. For example, you might open an online savings account and name your adult child as the beneficiary.

During your lifetime, you’d be able to use the account however you wish. You could make deposits or withdrawals, and the beneficiary would have no rights to the account. Once you pass away, the beneficiary would inherit the account from you. You can use POD designations with multiple bank accounts to name different beneficiaries.

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How Payable on Death Works

Payable on death works by allowing the owner of a financial account to choose one or more beneficiaries to inherit the account. The account owner would fill out a POD form or beneficiary designation form with their bank or the financial institution that holds the account.

When the POD account owner passes away, the bank would be required to release any assets in the account to the individual or individuals named as beneficiaries. The beneficiary will typically need to present a death certificate first to prove that the account owner has passed away.

In a sense, payable on death is similar to designating a beneficiary for a 401(k) plan or Individual Retirement Account (IRA). For example, 401(k) beneficiary rules do not allow access to the account while the owner is alive. Once the owner passes away, however, the beneficiary would be entitled to receive all the funds.

Payable on Death Rules

The main rule to know about payable on death is that the beneficiary has no access to the money in the account until the account owner dies. So again, say that you name your adult child as the beneficiary to your savings account. Even though they’re listed as the beneficiary, they would not be able to go to the bank and withdraw money from the account as long as you’re still living.

Additional rules apply when there are multiple beneficiaries. All beneficiaries would be entitled to an equal share of the assets in the account. For example, assume that you have four children instead of just one. If you name all of them beneficiaries on a savings account, they’d each be entitled to 25% of the account’s assets when you pass away.

What Is In Trust For?

An in trust for, or ITF, account allows a grantor to designate a trustee who will manage financial assets on behalf of one or more named beneficiaries. The grantor is the person who owns the account; they can also be the trustee during their lifetime. The beneficiary is the person who will inherit the account assets when the grantor passes away.

After the grantor dies, the trustee can continue to manage the assets in the account on behalf of the trustee. An in trust for arrangement offers a greater degree of control than payable on death in this way: The trustee is obligated to carry out the wishes of the trust grantor.

Recommended: Putting Your House in a Trust

How In Trust For Works

An in trust for arrangement works by allowing the owner of a financial account or asset to establish a trust to hold those assets. In trust for can apply to savings accounts, checking accounts, or other bank accounts, as well as investment accounts.

The grantor sets the terms of the trust, and the trustee is responsible for ensuring those terms are carried out. For example, the grantor may specify that the beneficiary cannot receive assets from the account until they turn 30 or get married. The trustee would manage the assets in the account until either one of those events comes to pass.

In Trust For Rules

In trust for rules allow for flexibility, since the grantor can decide:

•   Who should serve as trustee

•   Who will be named as beneficiaries

•   How assets in the trust should be managed

•   When and how beneficiaries will have access to those assets.

An in trust for arrangement could allow the beneficiaries access to trust assets while the grantor is still alive, if that’s the wish of the grantor. Meanwhile, trustees are required to follow a fiduciary duty when managing trust assets. In simpler terms, they must act in the best interests of the beneficiaries.

If the trust is revocable, the grantor has the power to change its terms or revoke it while they’re living. Once they pass away, the trust becomes irrevocable and cannot be altered.

In Trust For vs. Payable on Death

When choosing between in trust for vs. payable on death, it might seem a little confusing since they both allow you to designate a beneficiary for financial accounts. Comparing them side-by-side can make it easier to see how they overlap and where they differ.

Similarities

First, consider the similarities:

•   Whether you designate a financial account as a POD vs. trust, the end goal is the same: to pass on assets in the account to one or more named beneficiaries. As the owner of the account, you have the power to decide who to name as a beneficiary to your accounts. If you’re creating an in trust for account, you can also choose who should act as trustee.

•   Whether you choose payable on death vs. in trust for, the assets in the account avoid probate. Probate is a legal process in which a deceased person’s assets are inventoried, any outstanding debts owed by their estate are paid, and remaining assets are distributed to their heirs.

Going through probate can be costly and time-consuming for heirs. Naming a beneficiary, whether it’s through an in trust for or POD arrangement, allows those assets to bypass the probate process.

Differences

Next, look at how these two kinds of accounts vary

•   The main difference between a beneficiary in trust vs. payable on death account is that one has a trustee and the other doesn’t. When you name a trustee, you’re essentially choosing someone to manage assets on behalf of your beneficiary rather than handing them over directly.

The upside is an in trust for arrangement allows you to have greater control over what happens to the assets that you’re passing on. Setting up an in trust for arrangement usually requires a little more paperwork than establishing a POD account.

Depending on the value of the assets in question, you might need an estate planning attorney’s help to set up an in trust for account.

Pros and Cons of POD

Payable on death accounts have advantages and disadvantages. Here are the main benefits to know:

•   Account owners can decide who gets their assets, without needing to include them in a will.

•   Beneficiaries can bypass the probate process.

•   Naming beneficiaries means that heirs don’t have to go looking for lost bank accounts when you pass away.

Are there some cons? It depends.

•   If you’re the account owner, you may appreciate the fact that you can leave assets to heirs and still have the use of them during your lifetime.

•   Beneficiaries, on the other hand, may be unhappy about having to wait to gain control of those assets until you pass away.

Pros and Cons of In Trust For

In trust for arrangements have similar pros and cons. On the plus side:

•   You’ll be able to pass money on to named heirs. If you’ve ever been in a situation where you’re trying to track down unclaimed money from deceased relatives, then you might appreciate an in trust for situation which would eliminate any questions about who gets what.

•   This kind of arrangement could also be helpful in situations where it’s likely that heirs may dispute the division of assets. By creating an in trust for agreement, you can decide who will get the assets, who will manage them as trustee, and when beneficiaries can receive the assets.

•   Again, both POD and in trust for accounts can be excluded from probate.

Also be aware of the potential cons:

•   Trusts can be costly to establish if you’re working with an attorney.

•   The trustee is also entitled to collect a fee for overseeing the trust, which can add to the total cost.

Recommended: What Is the Difference Between Will and Estate Planning?

The Takeaway

In trust for and payable on death are designed to make the process of passing on bank accounts and other financial accounts easier. You might consider setting up either one if you’d like to ensure that your assets go to the right people when you pass away. Your bank accounts typically have value, and you probably want to make sure that those assets you tended to during your lifetime get into the hands of the right people with a minimum of effort and expense.

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.


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FAQ

Is In Trust For or Payable on Death better?

Whether it’s better to choose in trust for vs. payable on death can depend on the specifics of your situation. In trust for is usually better when you want to maintain a greater degree of control over the financial assets that you’re passing on. Payable on death may be preferable when you simply want to ensure that a specific beneficiary inherits a financial account.

Is ITF the same as POD?

ITF stands for in trust for, which is an arrangement in which a grantor establishes a trust to hold assets on behalf of one or more beneficiaries. POD stands for payable on death, which means that assets in a financial account are payable to one or more named beneficiaries when the account owner passes away.

What is the difference between In Trust For and a beneficiary?

In trust for means that a financial account or asset is being held in trust on behalf of one or more beneficiaries. A trustee is responsible for managing the assets for the beneficiaries, according to the terms set by the person who created the trust. A beneficiary is someone who stands to benefit financially from the death of another person, either by inheriting assets or receiving proceeds from a life insurance policy.

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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.

This article is not intended to be legal advice. Please consult an attorney for advice.

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Oct
18
2023

Guide to Non-Bank Financial Institutions (NBFI)

By | Family Finances, money, Terminology | Comments Off on Guide to Non-Bank Financial Institutions (NBFI)

Non-bank financial institutions provide financial services, but they don’t hold the same license or charter as a bank. Also referred to as non-bank financial companies or NBFCs, these entities can extend credit, provide investment services, cash checks, and exchange currencies. However, they generally can’t accept deposits from customers.

There are different types of non-bank financial institutions, and the way they’re structured can determine what services they provide. An NBFC can serve as a complement to traditional banking services or act as a competitor to licensed banks.

Here, you’ll learn more about these businesses, how they compare to banks, and their pros and cons.

What Are Non-Bank Financial Institutions?

Nonbanking financial institutions (NBFI) are institutions that don’t have a banking license but are able to facilitate certain types of financial services. They’re different from depository institutions, which can offer deposit accounts such as checking accounts, savings accounts, or money market accounts. An NBFI or NBFC is not licensed or equipped to accept deposits.

Non-bank financial institutions can specialize in niche financial services, including:

•   Investments

•   Financial consulting

•   Brokeraging

•   Money transfers

•   Check cashing

•   Risk pooling.

They can target a broad or narrow range of customers, which can include consumers, business owners, and corporate entities. Because they’re not licensed the same way that banks are, NBFCs are not subject to the same degree of government regulation and oversight.

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How Do NBFCs Work?

Now that you know NBFCs’ meaning, consider how these institutions work. In general, NBFCs work by providing financial services that are outside the scope of what traditional banking typically entails. There are different types of organizations that can bear the NBFC (or NBFI) label. The type of organization can determine how it works and what services it offers.

Here are some of the most common types of NBFCs:

•   Investment companies

•   Loan companies

•   Companies that offer asset-based financing

•   Micro-lending companies

•   Risk pooling institutions.

In terms of regulation, NBFCs generally operate within the framework of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. However, the scope of regulation that extends to NBFCs and NBFIs is limited. For that reason, they’re sometimes referred to as “shadow banks” since they operate within the shadows of traditional banking institutions.

Pros and Cons of NBFCs

Non-bank financial institutions have both advantages and disadvantages. On one hand, they can play an important role in providing financial services outside the confines of traditional banking.

However, questions have been raised about the lack of oversight for NBFCs and what implications that might have for the individuals and businesses that use them.

Here are some of the main pros and cons of NBFCs at a glance.

Pros of NBFCsCons of NBFCs
NBFCs can provide easier access to credit for individuals and businesses who need to borrow money. NBFCs cannot provide certain banking services, including offering deposit accounts.
Investors may be able to find higher-yield through an NBFC or NBFI that isn’t offered at a bank. Financial experts have argued that NBFCs and NBFIs can pose a systemic risk to the financial system as a whole.
NBFCs can offer alternative services to customers, such as check cashing, that may otherwise be inaccessible.Operations are largely unregulated and there may be less transparency around NBFCs vs. traditional banks.

Accountability is more of a question mark with non-bank financial companies since there’s less oversight overall. The increase in popularity of NBFCs has raised questions about the need for greater regulation of this section of the financial services industry.

Recommended: How to Switch Banks in 3 Easy Steps

NBFCs vs Banks vs Fintech

You may wonder how NBFCs and NBFIs compare to banks and fintech companies. Here are some points to consider:

•   Non-bank financial companies are not the same as banks, and they can also be differentiated from fintech. Again, a bank is a financial institution that holds a license or charter which allows it to accept deposits from its customers. Some banks may fall within the category of Community Development Financial Institutions (CDFIs), which help to promote access to capital and financial services in underserved areas.

•   Fintech or financial technology is a term that describes the use of innovation to improve financial services and products. Fintech generally encompasses tools, apps, and other tech that can make managing money or borrowing it easier. There can be some overlap between NBFCs and fintech or between fintech and banks.

Which is better, an NBFC vs. a bank vs. fintech? There is no single answer as each one can fulfill different needs. Comparing them side by side can make it easier to distinguish between them.

NBFCsBanksFintech
What It IsAn NBFC or non-bank financial company provides alternative financial services but does not hold a banking license.Banks are financial institutions that hold a federal or state license or charter which allows them to accept deposits.Fintech is a broad term that can refer to technological innovations that are applied within the financial services industry.
How It WorksNBFCs work by offering financial services (other than accepting deposits) to their customers, such as check cashing, investment services, or insurance. Banks work by accepting deposits, lending money, and facilitating financial transactions. Some of the benefits of local banking include being able to open a checking account, apply for a mortgage, or pay bills online. How fintech works can depend on its application. For example, budgeting apps can link to your checking account to track spending automatically. Robo-advisors make it easy to invest using an algorithm.
Whom It’s ForNBFCs may be right for individuals or businesses who are seeking services outside of traditional banking.Banks are suited to people who want to be able to deposit funds, withdraw them on demand, or borrow money. Fintech may appeal to people who want easier access to their finances online or via mobile apps.

Examples of NBFCs

As mentioned, there are different types of NBFCs and NBFIs. If you’re looking for a specific non-banking financial institution example, the list may include:

•   Life insurance companies

•   Insurance companies that underwrite disability insurance policies

•   Property insurance companies

•   Mutual funds

•   Pension funds

•   Hedge funds

•   Financial advisors and investment advisors

•   Securities traders

•   Broker-dealers

•   Mortgage companies

•   Peer-to-peer lending companies

•   Payday lenders

•   Leasing or financing companies

•   Companies that provide money transfer services

•   Check cashing companies.

If you invest money, send money to friends and family via an app, or own a home, then chances are you’ve encountered an NBFC somewhere along the way. Examples of companies that may be classified as NBFC include LendingClub, Prosper, and Quicken Loans.

At the same time, you may also use traditional banking services if you have a checking account or savings account at a brick-and-mortar bank or an online bank.

NBFCs and the 2008 Financial Crash

The 2008 financial crash was fueled by a number of factors, including risky lending and investment practices. The resulting fallout included bank failures, banking bailouts, and a housing market crisis. Many of the companies that were engaging in these risky behaviors were NBFCs.

In 2010, the Dodd-Frank Act was passed to address some of the conditions that led to the crisis, including the lack of regulation and oversight as it pertained to NBFCs. The legislation made it possible for non-banking financial institutions to flourish, rather than whither away in the wake of the crisis.

Why? Simply because NBFCs continued to lend money at a time when traditional banks were placing greater restrictions on lending. While questions linger about the degree of regulation needed for NBFCs, their popularity has only increased since the financial crisis.

Recommended: Alternatives to Traditional Banking

The Takeaway

Non-bank financial institutions can play a part in how you manage your money. For some people, they may provide financial services that make their lives easier. However, they are not regulated in the same way that licensed or chartered banks are. Also, if you want to be able to deposit money into your checking or savings account, then you can do that through a bank.

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 are NBFCs different banks?

NBFCs are different from banks because they do not hold a banking license or charter. While they can provide some of the same financial services as banks, they’re not equipped to accept deposits from customers.

What is the difference between fintech and NBFCs?

Fintech refers to the use of innovation and technology to improve financial products and expand access to financial services. An NBFC can use fintech in order to offer its products and services to its customers. For example, an investment company may offer robo-advisor services that operate on a fintech platform.

What are the disadvantages of NBFCs?

The main disadvantages of NBFCs include lack of government regulation and oversight, as well as their inability to offer deposit accounts. However, NBFCs can offer numerous advantages, including convenient access to credit and the potential to earn higher returns on investments.

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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.

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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Oct
18
2023
Tips for Helping Someone Who Is Struggling Financially

15 Tips to Help Someone With Financial Problems

By | money | Comments Off on 15 Tips to Help Someone With Financial Problems

Most of us know at least one relative or friend who is struggling financially. Should you step in or let them ride out the storm on their own? With so many facing mounting debt, especially American Millennials and likely Gen Z following behind, advice and assistance can be a welcome prospect. But it’s important to think carefully about how exactly to extend an offer.

Should you offer cash? Strategies for better money management? A link to a personal finance podcast you love?

Maybe the person will be embarrassed or insulted if you offer money. Perhaps they would feel more comfortable with moral support or meals and childcare rather than a cash infusion. Gauge what your loved one needs and will accept. If you are planning on loaning them a bundle of cash, you’ll have to be clear that you’re not gifting them the money free and clear and establish reasonable repayment terms.

Here’s guidance on how to help someone budget their money and rise above financial struggles. You will find pointers on:

•   How financial stress can affect mental health

•   Challenges you could face when you try to lend a hand

•   Non-financial ways to help someone with a spending problem.

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

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Why Helping With Finances Can Be Difficult

We get by with a little help from our friends, to paraphrase the Beatles lyrics. But knowing when and how to assist in a financial crisis is often tricky. Most people want to be better with money, but achieving that can be a challenge.

Money mismanagement often runs deep. It may have been established when the person watched their own parents spend in a flurry and then not be able to pay bills on time.

The issues could also stem from clashing money mindsets between spouses, a failed business startup, job loss, crushing medical debt, or the difficulty of setting money aside when raising a family. The list goes on and on.

The Effects of Financial Stress

Money worries can affect life in many ways. Be sensitive to these signs of financial stress; they can reveal that a person is struggling even when they don’t come out and say so.

•   Depressed attitude. Maybe the burden is so heavy that your friend can’t get out of bed in the morning or fall asleep. Now she can’t take a cycling class at the gym, or keep up with the membership payments.

•   Poor health. Not being able to afford grocery, utility, and housing bills can sometimes take a toll on physical and mental well-being.

•   Phone avoidance and isolation. Constant calls from debt collectors can lead to high anxiety and even shame. Your friend may isolate. It’s hard to hear terms like “broken promises” from a mortgage company or to be told by a car leasing company that your vehicle will be towed from your driveway. Ouch.

•   Shrinking self-confidence. Even job loss due to across-the-board staff downsizing can feel personal, making it hard to stay confident about future career goals.

•   Mourning a former lifestyle. When someone has to step down to a smaller car or apartment, loses health insurance, or can no longer help pay for their kids’ colleges, life might feel futile. It can be hard to remember that good health and family/friends are most valuable, and funds will follow.

Next, the most effective tips on how to help someone with a financial problem.

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

15 Tips for Helping Someone Struggling Financially

These steps can offer immediate as well as long-lasting relief to someone in a cash flow crisis.

1.    Give money free and clear. Some finance coaches say a clear one-time cash gift is best, if you can afford it, rather than extending a loan you expect to be paid back. This way, your friend won’t feel indebted to you. Loans might bring up a minefield of problems, including resentments about how the recipient can afford a vacation (or dinner out or new sunglasses) when the debt is still unpaid.

2.    Teach your friend to budget. If you know how to help someone with an effective budgeting method, you have the golden toolkit. With luck and commitment on your pal’s part, your time and effort will repay itself again and again, as they navigate inevitable ups and downs. Remember the old proverb: “You can give a man an ear of corn or teach him how to grow it.” The second option is a lasting lesson.

Recommended: Common Budgeting Mistakes

3.    Share smart finance apps. To teach your friend ways to manage money better, look together at Mint: Budget & Expense Manager; YNAB (you need a budget); Monarch Money; and Honeydue. The monthly investment to use these apps ranges from zero to $14.99. You might gift them a year’s subscription. Many apps can be used on an iPhone, iPad, Apple Watch, and/or laptop.

Another option: Coach them on the tools their financial institution offers. Many banks offer free tools that help with tracking spending and other aspects of budgeting.

4.    Help set healthy “helping” boundaries. Does your sister still pay the cell phone bill for her grown son, now a husband and father? Is it him or is it her who’s enabling him and holding on to the past? Talk it out.

5.    Provide information about financial support groups. Your loved one may need help with a spending problem or could perhaps use guidance when creating a debt reduction plan. The Debtors Anonymous program, for example, offers help via meetings, literature, and support. But remember to share the idea, and then leave it alone for your friend to pursue vs. nagging.

6.    Find free workshops. Many libraries, churches, and community centers offer no-cost events for job seekers or on topics like how to organize your money. These networking opportunities tend to be less overwhelming than packed job fairs.

7.    Suggest a consolidated debt management plan. Debt management plans (DMPs) can condense several unsecured debts into one monthly payment that generally helps someone pay off debt faster and experience less stress. Most legitimate companies offering this service are nonprofit consumer credit counseling agencies; they work with businesses to reduce interest rates or waive fees. DMPs don’t shrink debt, but restructure it. (Experts say it typically takes three to five years to pay off debts this way.)

💡 Quick Tip: The myth about online accounts is that it’s hard to access your cash. Not so! When you open the right online checking account, you’ll have ATM access at thousands of locations.

8.    Introduce money management software. Programs like Quicken can help with building a financial plan on a laptop or PC by categorizing expenses, simplifying tax prep, and more.

9.    Open up about your money past. People feel less alone when they know others have traveled the same rocky path. Talk about the fear and how you turned your finances around. Don’t forget about how bored you got with ramen noodles.

10.    Help with a LinkedIn profile. Seeing our career accomplishments in one place can be a confidence boost. Assist with a great photo (maybe even pay for a headshot session), attaching links, and reaching out to connections.

11.    Give a gift card toward financial essentials. Buying a gift card to the grocery store or gas station is always welcome and is not too sweeping a gesture to overwhelm someone.

12.    Find out the cost of mental health support. Your friend might really need it now but think they can’t afford it. Offer to call their health insurer regarding coverage and/or co-pays for therapy and psychiatry.

13.    Gift a new interview outfit. Is your loved one job hunting? New clothes can be a major confidence boost, and you could offer to pay for that, right down to shoes. Looking like a million bucks often matters, and shopping together is fun.

14.    Listen. In good or bad times, people often just want to be heard. This allows your pal or relative to put down their stress and share their story.

15.    Offer family support. Drop off a home-cooked meal, have a pizza delivered, or watch the kids for an evening.

Things to Avoid When Trying to Help Someone Financially

Money experts say you usually should not do these things when considering how to help someone with financial problems.

1.    Extend a personal loan. You could lose a friend or create a family rift. This turns a personal relationship into a business one. No one wants to think of their sister as a bank, nor does a sister want to be considered a debt collector.

2.    Hire a friend or relative to work at your business. What if the job doesn’t work out and you wind up firing them? Yes, it’s a worst-case scenario, but if it happened, then seeing them would be painful and awkward for years after. This wound could take years to heal, if it can even be repaired.

3.    Put money before a vital lesson. Did a college student run up credit card debt splurging at the mall? Don’t rush in to save them. Maybe they need to learn a life lesson, by taking the time to pay off the balance on their own.

4.    Give something with strings attached. This means it’s wise not to extend IOUs. This manipulative tactic can prey upon someone at a vulnerable time. Don’t offer someone a place to crash with the condition that “I know you will help me and my family out if this ever happens to us.”

💡 Quick Tip: When you overdraft your checking account, you’ll likely pay a non-sufficient fund fee of, say, $35. Look into linking a savings account to your checking account as a backup to avoid that, or shop around for a bank that doesn’t charge you for overdrafting.

The Takeaway

With factors like inflation and high credit card interest rates, financial struggles can be very real and create great stress. If someone close to you is struggling financially, there are plenty of practical and graceful ways to help, from a no-strings cash gift to financial advice. But beware, some paths are not recommended, as they can cause ill will and relationship rifts.

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

FAQ

What are the downsides of helping someone with financial problems?

The downsides of helping someone who is struggling financially are that you may wind up having less money yourself, you may extend help that isn’t paid back promptly, or your friend may feel shame or embarrassment over accepting your assistance.

Is there a time when you should say no to helping someone with financial problems?

Some money pros say that you should not bail someone out if there is an important lesson to be learned. For example, your friend books a fancy island resort hotel for a week and then cannot swing her household bills. Maybe your friend can figure out how better to budget and plan, rather than having you provide an infusion of money.

How can I find the time to help others with their financials?

Helping others with their money problems does not have to take too much time. It may be as simple as blocking out a couple of hours to give a budget lesson or making a coffee date to discuss financial software programs and money apps. If someone is struggling financially, you can also offer quicker comforts, such as a grocery or gasoline gift card.

Photo credit: iStock/baona

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.

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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18
2023

Guide to Filling Out a Deposit Slip

By | money | Comments Off on Guide to Filling Out a Deposit Slip

Deposit slips are often a basic part of banking, but you may not know how to use them in this era of online financial accounts. Learning how to fill out a deposit slip is a multistep process in which you write down relevant information, including your name, bank account number, and deposit amount, and submit the slip to the bank. When doing so, you’ll list your cash and checks separately.

If you have a wad of cash from earned wages or a particularly lucrative birthday, you can fill out a deposit slip at the bank to deposit the money in your account. Providing the correct information in the right spots will get the funds where they are intended. Using deposit slips is part of managing your checking account.

Here is a step-by-step guide on how to fill out a deposit slip to make your next visit to the bank seamless.

🛈 SoFi is an online-only bank and therefore does not provide physical deposit slips.

Steps to Fill Out a Deposit Slip

Before you learn how to fill out a bank deposit slip, it can be a good idea to understand what a deposit slip is anyway.

A deposit slip allows you to deposit cash and checks into your bank account or someone else’s account. It’s a piece of paper that records the amount of money being moved and where it’s going.

Fortunately, the process is straightforward, but filling out the deposit slip can be daunting if you’re unfamiliar. So here’s how to write a deposit slip, simply and properly:

1. Entering Your Personal Details & Today’s Date Slip

The first section of the slip requires your name and bank account number. If you’re depositing money into someone else’s account, know that not all banks allow this.

If it is possible, you’ll write the other person’s name and account number down, and you may need to add your name as well. You’ll also write the current date and probably have to include information about the bank branch you’re using.

2. Inputting The Amount of Your Deposit

Next, you’ll write the amount you’re depositing, counting both cash and checks. All your cash goes in one line on the deposit slip, and each individual check gets its own line.

Recommended: How Long Does Direct Deposit Take?

Optional: List Cashback Required

If you want a portion of the checks you’re depositing to go into your wallet instead of your bank account, you’ll list that portion next. For example, if you have a $50 check to deposit but want half in your pocket, you can write $25 in the designated space to subtract from your deposit.

Then, when you bring your deposit to the bank teller, they’ll hand you $25 and deposit $25 into your account.

3. Listing Each Individual Check Separately

While you’ll lump your cash together in one line, each individual check gets its own line on the deposit slip. For example, if you have a $20 bill and a quarter, you’ll write your deposit as a cash deposit of $20.25. If you also have a $50 check and a $35 check, you’ll list these in their own lines; that is, on two separate lines. So, the cash portion of your deposit would be $20.25, your first check would be $50, and your second check for $35 would be on the third line.

In addition, signing the back of each check is essential before depositing it in your account. There is a space on the back of checks at the top for your signature. The space is typically labeled ‘endorse here’ for the check recipient (that’s you) to sign. Doing so is part of properly managing your checking account; not doing so could lead to delays in the money becoming available.

4. Adding All Deposits to Get a Subtotal

Once you list your deposit items and subtract your cash back if desired, write the subtotal at the bottom. Using the example above, the total would be $105.25 if you decided to take no cash back.

5. Signing Your Deposit Slip

This final step isn’t always necessary because some banks don’t require depositors to sign their deposit slips. However, if you want cash back from your deposit, you must sign it.

6. Take Your Receipt

The teller will keep the filled-out deposit slip and give you a receipt so you can track the bank transaction deposit in your records. You might also receive a copy of the deposit slip, depending on your bank.

Do You Need a Deposit Slip to Make Mobile Deposits?

Mobile deposits are a convenient way to transfer money into the bank. They don’t require deposit slips; instead, log into your bank account on your smartphone and upload pictures of your checks to deposit them.

Keep in mind, however, that a mobile deposit processes checks, not cash. Therefore, if you have cash to deposit, you’ll need to head to the bank and fill out a deposit slip.

Recommended: Benefits of Automating Your Finances

The Takeaway

Learning how to fill out a deposit slip is a straightforward process in which you provide your name, account number, and money for deposit in the form of cash and checks.

Remember, if you solely have checks to deposit and no cash, you can use the mobile deposit feature in your banking app to deposit the checks. As a result, you’ll only have to go to the bank and fill out a deposit slip if you have cash to put into your account.

FAQ

What is written on the back of a deposit slip?

You may be able to list more checks on the back of a deposit slip if you run out of slots in the front. The back of a deposit slip often has an overflow section for you to list additional checks.

Can I print my own deposit slips?

You can print deposit slips on various online platforms and at office supply stores.

Are deposit slips the same as checks?

Deposit slips are different from checks because you use deposit slips to deposit cash and checks at the bank. On the other hand, checks are a method of payment between two parties.

Who keeps the original deposit slip?

The bank keeps the original deposit slip and typically gives you a receipt from the transaction. Some banks also give a copy of the deposit slip.

Photo credit: iStock/PeopleImages

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.

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Oct
18
2023

Guide to Passbook Accounts

By | Budgeting & Goals, Family Finances, Growing Wealth, money, Money & Life | Comments Off on Guide to Passbook Accounts

Today, it’s common to check your savings account balance on your smartphone, send money to a friend after they covered the cost of lunch, or snap a picture of a paper check to make a mobile deposit. But before the advent of the internet and smartphones, banking was done in person, and people used pen and paper to keep track of everything.

One of the relics of that time period is the passbook savings account. While most consumers now have a traditional or online savings account, passbook savings accounts are still in use today. And, depending on your financial and personal style, it might be an option that you find useful.

But what is a passbook savings account, how do they work, and why would anyone want to open one? We’ll dive in below.

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No account or overdraft fees. No minimum balance.

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What Is a Passbook Savings Account?

A passbook savings account is a type of savings account that comes with a notebook or ledger (called a passbook) to track your deposits and withdrawals.

Unlike other bank accounts, which may allow you to take out funds at an ATM, transfer money electronically, and check your balance online, a passbook account requires in-person transactions at the bank or credit union, with a physical log of the activity.

Recommended: How Many Bank Accounts Should I Have?

How Do Passbook Savings Accounts Work?

Before computers, consumers had to visit their local bank branch to deposit or withdraw cash from their savings account. Period. They’d bring their physical passbook with them, and the bank teller would update the passbook with information about the transaction and their new balance.

Nowadays, most consumers choose traditional savings accounts or online savings accounts. While they may still be able to visit banks in person, they can also monitor their accounts online, move money electronically, and swing by the ATM to make deposits and withdrawals.

But passbook accounts are still around. While the bank tellers now handle things electronically, consumers are still issued a physical passbook and must visit the branch in person to withdraw and deposit cash.

Why would someone want this kind of account today?

•  People might choose passbook accounts because of the added requirement of visiting in person. If they consider themselves bad with money, this process could make it harder to irresponsibly withdraw and spend their money.

•  Others might like having more control over — and insight into — their finances.

•  Some consumers may appreciate the added layer of security since it would be harder for a criminal to drain the account.

Pros and Cons of Passbook Savings Accounts

Passbook accounts are hard to come by these days, but it’s not impossible to open one. Just as there are pros and cons to online banking, so too are there benefits and downsides to a passbook savings account, such as:

Pros of Passbook Accounts

Cons of Passbook Accounts

Less temptation to spend your savingsInconvenient to access money
Enhanced feeling of control over your accountPotentially low annual percentage yield (APY) compared to online savings accounts, depending on the institution
Added layer of security by requiring in-person transactionsRequires safekeeping of physical ledger
Ideal for people who aren’t good with computersChallenges if you relocate to a place without branch access

Passbook Accounts vs. Savings Accounts

In many ways, passbook accounts and savings accounts are similar, but they also have several notable differences. Let’s break down how they’re alike — and how they’re not.

Similarities

Consider these points:

•  Both savings and passbook savings accounts are deposit accounts that are meant for saving, not spending. Over time, you should expect your money to grow unless you withdraw funds for major purchases, like a house down payment.

•  That means both types of savings accounts earn interest, though the amount they earn can vary. Some traditional savings accounts may earn as little as 0.01% interest while high-yield online accounts may earn significantly more, such as over 4% as of mid-2023.

Passbook savings accounts generally can’t compete with high-yield online accounts, but you’d need to check with specific banks to know what interest you’d earn.

•  Like traditional savings accounts, passbook accounts are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per depositor, per ownership category, per insured institution.

If the account is at a credit union, it would have the same level of insurance, but from the National Credit Union Association or NCUA vs. FDIC.

Differences

While savings accounts and passbook savings accounts have the same purpose — saving money and earning interest — how these accounts work is quite different:

•  Access to funds: With a traditional savings account, you can generally access your funds in person or at an ATM. Most accounts now let you manage your money online as well, meaning you can transfer money between accounts with the click of a button. With a passbook savings account, you must visit a branch in person.

•  Monitoring your account: Similarly, traditional bank accounts send monthly statements, on paper or online. With most banks nowadays, you can access your account details at any time online via a computer or smartphone.

With a passbook account, however, all the information lives in the physical passbook, and you’ll only update it at the bank when making transactions. Note: Some banks, like First Republic, may now let account holders check information online.

Are Passbook Savings Accounts Still in Use?

Though passbook accounts are uncommon, they’re still in use today. You can open a passbook account at certain local and regional banks. Some examples of financial institutions still offering passbook accounts include:

•  Middlesex Savings Bank (Massachusetts)

•  Union Bank (Vermont and New Hampshire)

•  Cathay Bank (largely California, but other locations in Washington, Texas, Illinois, and New England)

•  Naveo Credit Union (Massachusetts)

•  Dollar Bank (Northeast Ohio, Western Pennsylvania, and parts of Virginia and Maryland).

Recommended: How to Switch Banks

The Takeaway

Passbook savings accounts are less common today with the advent of computers and online banking. While most consumers would prefer electronic access to their account, passbook accounts offer unique perks for people who prefer to bank exclusively in person. It may be a good way for them to manage their money.

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

Do any banks still have passbook accounts?

Some banks still offer passbook accounts. Passbook savings accounts are less common today, as most consumers prefer to manage their money online. That said, some local and regional banks and credit unions in your area may offer passbook savings account options.

What is a disadvantage of a passbook savings account?

A major disadvantage of passbook savings accounts is that you can’t access your money electronically. You have to go to a branch in person to withdraw or deposit funds. You usually can’t even get an account summary online; instead, your physical passbook is the only source of information you have about the account.

What is the interest rate on a passbook savings account?

Interest rates on passbook savings accounts will vary by financial institution, but they’re sometimes competitive with traditional savings accounts. That said, they are often less than high-yield online savings accounts. Remember that you’ll want to choose a bank that is geographically convenient, as you’ll have to visit in person to access your money.

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

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

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

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

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

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

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

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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