May
20
2024
stack of hundred dollar bills

5 Ways to Send Money Online to Family and Friends

By | Budgeting & Goals, money | Comments Off on 5 Ways to Send Money Online to Family and Friends

Situations can crop up all the time where you want to send money to someone you know. Perhaps your coworker brought you back a cold brew (nice) or you need to pay your roommate for your share of the utility bill. Fortunately, there are plenty of ways to move cash from your account to theirs, from using mobile payment apps to traditional money transfer services like Western Union.

Which method you choose to transfer funds will depend on to whom you are sending the money, where the recipient is located, how much money you need to send, and how fast the money needs to get there.

Read on to learn all about several safe, quick, and easy ways to send someone money.

Key Points

•   Various methods are available for sending money online, including mobile payment apps and traditional services like Western Union.

•   The choice of method depends on the recipient’s location, the amount, and urgency.

•   Money transfer services may allow sending to a bank account or for pickup at a physical location.

•   Bank-to-bank transfers are common for domestic transactions, often without fees.

•   Personal checks, though less common, are still used for payments and require recipient details for mailing.

5 ways to send money online

1. Money Transfer Services

Money transfer companies have been around for decades, and some — like Western Union and MoneyGram — still have locations all around the world where you can send money to a person so they can go and pick it up. In some cases, you may be able to send money directly into a person’s bank account or mobile wallet.

•   What you need: The recipient’s full name, phone number, address, bank name and account details for electronic transfers to them. For a recipient who will pick up the money in person, you may just need the person’s full name and address.

•   Fees: The fees for money transfer services can vary based on how you’re paying (with a credit or debit card, or directly from your bank account), where you’re sending the money, and how much you’re sending.

•   Timing: Depending on the delivery and payment methods, the money may arrive within a few minutes or in a few days.

•   Reach: Unlike many other money transfer options, these services typically offer both domestic and international transfers. Western Union, for example, specializes in the ability to send or receive cash quickly overseas.

Worth noting about these services: Since they allow you to send money via money orders and other methods, they can be a good way to transfer funds to or from someone without a bank account.

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

2. Bank-to-Bank Transfers

Knowing how to transfer money from one bank to another can be valuable when you want to move funds.

•   What you need: You will likely need the routing number and account number where you are sending funds to, and you may have to verify your identity before completing the transfer.

•   Fees: Many banks allow you to click on their transfer feature and send money to a bank account at another bank, often with no fees involved.

•   Timing: It usually takes just a day or two to move the funds.

•   Reach: These are typically done domestically. If you want to send funds internationally, you may need to complete an international wire transfer.

3. Send a Check Via Your Bank

Although they may not be as popular as they once were, checks are still a reliable way to send money to someone.

•   What you need: You will need the name of the person receiving the check (the payee) and possibly their mailing address if you are sending a check.

•   Fees: Checks are typically included at no charge when you open a bank account. If you don’t have any checks handy, you can order checks from your bank or retailers. This can be done online, and check prices can range from five cents to more than 20 cents per check.

•   Timing: Once deposited, the money should move into the recipient’s bank account and be available in a couple of days or possibly up to a week, depending on such factors as when it is deposited and how.

•   Reach: In the US, it should be no problem to deposit a check (even if it’s from an international account). However, if you are planning to mail a check to someone in a foreign country, you may want to check with them to make sure they can deposit it at their bank without any issues.

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No account or overdraft fees. No minimum balance.

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4. Wire Transfers

Wire transfers offer another way to send money to someone. They can be a good option for sending a large amount of money that is needed extremely quickly, for both domestic and international transactions.

•   What you need: In terms of how to wire money, you can call, visit, or go online with your bank or a wire transfer company. For a domestic transfer, you will need the recipient’s name, address, and bank account and routing number.

For international transfers, you will also need the bank’s SWIFT code plus possibly the International Payments System Routing Code.

•   Fees: Domestic wire transfers may be free for some banking customers, but the median charges tend to be $25 for outgoing wire transfers and $15 for incoming wire transfers (meaning your recipient may be assessed a fee for receiving funds this way).

Internationally, the figures are a median of $15 for incoming international wire transfers and $45 for outgoing international wire transfers.

•   Timing: Typically, domestic wire transfers can be completed in one day (perhaps even within hours or sooner), and international ones can take up to a few days.

•   Reach: Bank policies vary; some may offer only domestic wire transfers, others also do international transfers, and some offer neither service.

5. Third Party Person-to-Person (P2P) Apps

A growing number of P2P services (also known as person-to-person or peer-to-peer services) allow customers to use an app or website to send money from a bank account, a credit card, or a debit card to someone else.

You are probably familiar with these apps. If you went out with friends for dinner but didn’t have money on you, your pal might pay for the whole meal. You could then pay your friend without cash by using an app to send them what you owe. These services can possibly provide an answer to the questions, “How to send money instantly to a friend or family member?”

The set-up, services, and transaction times can vary somewhat from one app to the next. Generally, however, they’re easy to use and are typically free, although there may be fees involved (say, to expedite the transfer of funds to a bank account, or when paying using a linked credit card).

Some, though not all, providers may require both the sender and receiver to set up an account within the same transfer service.

Here are some popular P2P providers to consider:

PayPal

PayPal is the grandaddy of money transferring apps. It remains popular because it’s so ubiquitous, tends to be easy to use, and offers a variety of payment methods.

•   It’s free to register for an account, and when you send money to another PayPal account holder, the money can be transferred to that person’s bank account as soon as the next day.

•   Sending money to someone in the US through a PayPal account balance or linked bank account is free, but there may be extra costs if you use a credit or a debit card, or if the money is going overseas.

Cash App

Cash App is another P2P money transfer app that’s used in the US and the United Kingdom.

•   Both parties involved in a transaction must download the app and log in.

•   There are no extra charges to send funds, although your bank might assess a fee if you move money internationally, and you’ll be assessed a fee if you use a credit card to fund your transaction.

•   There are limits to how much you can send at first: $250 during the first seven days after you sign up, but after a month, you can send up to $1,000 at a time.

Venmo

Venmo is a subsidiary of PayPal, and the process and costs for sending money to someone work in much the same way.

•   There’s also a social aspect to Venmo that has made it popular. You can add friends, share posts, and use emojis. Or you can change your settings to keep things a bit more private.

•   Transfers between Venmo accounts are instantaneous.

•   If you realize you made a mistake, the transfer cannot be undone.

Recommended: How to Transfer Money from Your Credit Card to Your Bank Account

Facebook

Facebook allows users to send and receive money free of charge through both the Messenger app and Meta Pay (previously known as Facebook Pay).

•   Both the person sending and the person receiving the money need to live in the U.S. and link a debit card or PayPal account to Facebook or Messenger.

•   Meta Pay works similarly to Messenger, but unlike Messenger, it allows users to send and receive money across its platforms (Facebook, Messenger, Instagram, and WhatsApp).

•   Meta Pay also enables users to purchase things, such as games and items for sale on Facebook Marketplace and Instagram, and to link a major credit card, in addition to a debit card or PayPal account.

•   As with other services listed here, you can’t cancel a payment after you send it.

Apple Cash

Apple Cash is a digital card that is built into the wallet of iPhones. It allows you to spend in stores and online and in apps with Apple Pay.

•   You can load the card with cash and use it where Apple Pay (the technology behind it) is accepted.

•   You can send and receive Apple Cash from friends and family with iPhones through Messages or your Apple Wallet.

•   You can use Siri to send money using spoken instructions.

•   Within a seven-day period, you can send or receive a maximum of $10,000.

•   Children with iPhones can send and receive cash this way.

•   There’s no fee to send, receive, or request funds with Apple Cash.

•   You may be able to cancel an Apple Cash transaction if the recipient hasn’t yet accepted the payment.

Google Pay

Google Pay is another service you can use to send money. You’ll need either the Google Pay or Google Wallet app, plus at least one form of payment, such as a debit card or a credit card. Not all cards are compatible yet with Google Pay so do a bit of research to see if yours are.

•   You can use Google Pay in stores and online.

•   Within a seven-day period, you can send up to $5,000 if you’re verified (or $500 if your identity hasn’t been verified).

•   It’s a free service to pay for goods and services.

•   Google Wallet is currently available in dozens of locations globally.

•   It may be possible to cancel some Google Pay transactions.

Is It Safe to Transfer Money Online?

tips for safer money transfers

You may wonder, “Are mobile payment apps safe?” Overall yes, but remember: Any time your personal information is online, the possibility exists that someone could access it and use it to steal your money.

So even though banks and other major money transfer networks are taking state-of-the-art steps to prevent hacking and cybertheft, no financial site or mobile app is entirely without risk. Bank account fraud and similar crimes can happen when scammers get a hold of your financial details.

Fortunately, there are some simple steps you can take to help safeguard your money:

Only Do Business with a Secure Network

If you’re making a transfer using a website, it’s a good idea to make sure the URL starts with (https://) and there’s a little padlock in front of the web address in the search bar. This shows that the site is secure and the data you enter will be encrypted.

If you don’t see these signs of a secure transaction, there is a chance that your personal and banking details could be visible to others during the transaction. This can in turn lead to fraud and identity theft.

Make Sure Your Device Is Protected

Even if you believe you’re dealing with a secure site, it’s wise to make sure you have the most up-to-date antivirus and antimalware programs enabled on your devices and run regular scans.

Yes, this may seem like a hassle, but the trouble caused by malware can be devastating. Malware can be downloaded onto your device, say, when you plug in to charge your phone at an airport or other public venue or when you click on a fraudulent link. It can then pull highly personal data off your phone and lead to you having to report identity theft.

Don’t Download Any App You Haven’t Vetted

Before you download a financial app, make sure that it’s the one intended. There are plenty of lookalike, sound-alike apps out there.

Then, make sure that you feel confident in the security protocols it has in place. Most financial apps list their security measures somewhere on their description in the app store (it might be under the privacy policy). You’ll also find reviews there.

Use a Strong Password

Here’s another important security protocol for financial apps or any app that involves your personal information. It’s a good idea to make your password as long and complicated as possible. Consider using a mix of numbers, upper- and lowercase letters, and throw in a symbol or two. Don’t use the obvious “password123” option, nor your birthdate, which could easily be available on social media sites.

Also, it’s best not to use the same password for every account you have. Use a well-reviewed password manager if you could use some help handling your passwords.

Vet People and Companies Before You Send Them Money

Do your research before hitting “send.” On some payment apps, you can friend people before you send any funds. This can help you make sure that you are sending money to the person you intend to vs. someone else with a very similar name or handle.

Also, because it’s so easy to transfer money to someone, it’s also easy to get scammed. And often there’s no going back on a transfer once the money is in the other person’s account. So be wary when using these apps to make purchases online.

Double-check All Your Info

Making sure you have the right name, address, account information, and other details for the person you’re sending money to. That can help keep your money from going to the wrong place. It’s easy to make a typo on mobile devices (and actually anytime you’re typing), especially when multitasking or transferring funds while on the go.

If you’re sending a large sum, you may want to send a small test amount first to confirm you have everything correct.

Keep a Record of the Transaction

Consider holding onto the proof of transfer until your recipient confirms that he or she has access to the money. The transfer might take a few minutes or a few days.

Typically, with wire transfers, you have hard copies from a brick-and-mortar bank or downloaded receipts via your banking app or website that you can keep on hand. With checks, the canceled check (or an image of it) can serve as proof that funds were accessed.

Recommended: Guide to ACH Routing Numbers

The Takeaway

Transferring funds to another person has become increasingly quick and easy as technology and financial services have evolved, with such alternatives as a payment app, a wire transfer, a bank transfer, or money transfer service. Depending on the particulars of your transaction, whether you’re repaying a friend for the sushi they got you or making a purchase, there’s likely an affordable and reliable option or two.

Having the right banking partner can help make money transfers as well as all your other everyday financial transactions fast, simple, and safe.

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

Can someone send me money if I don’t have a bank account?

If you don’t have a bank account, you can still receive money via services like Western Union (which can give you cash), and Cash App, PayPal, and Venmo (which can likely give you prepaid debit cards).

Can you send money by text?

Apple Cash and Google Pay (and possibly other services) make it possible to send money by text.

What is the fastest way to send money electronically?

If you want to start sending money online, services like Google Pay can be very quick ways to transfer money electronically. The money can be delivered within minutes. Wire transfers are also regarded as a fast way to move large sums or make international transfers.

How can I send money to someone instantly with routing and account numbers?

You can likely use your financial institution’s transfer feature as a way to transfer money to another account if you have the routing and account numbers. However, you will usually also need the recipient’s name and address, as well as their bank’s name.

How can I send money to someone instantly without a bank account?

If you don’t have a bank account, you can use a money transfer service (such as Western Union or Moneygram) and pay in cash. The funds will be then forwarded as you direct them. Services like Venmo and Cash App may be another good way to move money; you can link them to a prepaid debit card or a credit card.

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SoFi members with Eligible Direct Deposit activity can earn 3.80% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below).

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning 3.80% APY, we encourage you to check your APY Details page the day after your Eligible Direct Deposit arrives. If your APY is not showing as 3.80%, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning 3.80% APY from the date you contact SoFi for the rest of the current 30-day Evaluation Period. You will also be eligible for 3.80% APY on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi members with Eligible Direct Deposit are eligible for other SoFi Plus benefits.

As an alternative to Direct Deposit, SoFi members with Qualifying Deposits can earn 3.80% 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 Eligible 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 an Eligible Direct Deposit or receipt of $5,000 in Qualifying Deposits to your account, you will begin earning 3.80% 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 Eligible 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 Eligible 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 Eligible 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 Eligible Direct Deposit or Qualifying Deposits until SoFi Bank recognizes Eligible Direct Deposit activity or receives $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Eligible Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Eligible Direct Deposit.

Separately, SoFi members who enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days can also earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. For additional details, see the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.

Members without either Eligible Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, or who do not enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days, will earn 1.00% 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 1/24/25. There is no minimum balance requirement. Additional information can be found at http://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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May
20
2024

What Is an ACH Payment and How Does It Work?

By | Budgeting & Goals, Financial Independence, money | Comments Off on What Is an ACH Payment and How Does It Work?

To put it simply, an ACH transfer moves funds electronically from one bank account to another. The three letters ACH stand for Automated Clearing House, which is a centralized system. You might think of it as Grand Central Station for the electronic distributions of funds. The ACH network could be how your paycheck appears right on schedule in your bank account thanks to direct deposit, and it may be how you send online payments to, say, your WiFi provider.

Key Points

•   ACH transfers electronically move funds between bank accounts via a centralized system known as the Automated Clearing House.

•   These transfers are integral for direct deposits from employers, government benefits, and online bill payments.

•   The ACH network was established in the late 1960s to reduce the overwhelming number of checks processed by banks.

•   ACH payments are typically faster and more cost-effective than traditional methods, often completing within one business day.

•   Despite their benefits, ACH transfers can have limitations such as transaction caps and potential fees for expedited services.

🛈 SoFi members interested in ACH payments can review these details.

What Is an ACH Payment?

An ACH transfer is a convenient way to move money around, without using checks, credit cards, or other methods. It enables direct deposits from employers and government benefit programs, bill payments, and external fund transfers. What’s more, ACH transfers fuel person-to-person payments. Such providers as PayPal and Venmo use the ACH network.

As mentioned above, ACH stands for Automated Clearing House. But it’s not a bricks and mortar location. It is a network that financial institutions use to aggregate transactions for processing. This processing is then typically completed three times a day on every business day.

💡 Quick Tip: Make money easy. Enjoy the convenience of managing bills, deposits, and transfers from one online bank account with SoFi.

How Do ACH Payments Work?

Here, you’ll learn a little more about what is ACH, the history of ACH payments, and how they work.

History of ACH

The ACH network began in the late 1960s, when a group of U.S. bankers worried about the increasing number of checks being issued and cashed. They feared that rising numbers of checks would overwhelm the banking system, and they began to explore technological solutions.

•   In 1972, an ACH association formed in California to manage electronic banking transactions, with other regional ACH networks forming soon after that.

•   In 1974, these regional networks formed NACHA (the nonprofit National Automated Clearing House Association) to oversee and administer the ACH network. This organization creates and enforces how this network works, while the Federal Reserve and The Clearing House actually process the transactions.

•   In 1975, the Social Security Administration began testing direct deposit, which led to today’s widespread adoption. Approximately 99% of SSA’s payments are currently completed via direct deposit.

•   In 2001, online and phone payments via ACH became available, a key step forward to accelerating and automating banking transactions.

•   In the most recent year studied, ACH payments numbered more than 30 billion, and the total dollars transferred exceeded $77 trillion. These figures indicate how big a role ACH transfers play in global finance.

Get up to $300 with eligible direct deposit when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 3.80% APY on savings balances.

Up to 2-day-early paycheck.

Up to $3M of additional
FDIC insurance.


Categories of ACH

The ACH network processes bank transfers for both direct deposits and direct payments. Direct deposits usually include:

•   Paychecks

•   Government benefits

•   Tax refunds

•   Expenses that an employer is reimbursing an employee for

•   Annuity payments

•   Interest payments.

In terms of direct payments, the ACH network may process other transactions. What is an ach transfer can include:

•   Online bill payments from your bank account

•   PayPal, Venmo, and other P2P services.

Types of ACH

As you’ve already learned, ACH works both ways: incoming and outgoing payments can be processed via the ACH network.

ACH Credit

An ACH credit occurs when one party sends funds to another entity. A very familiar instance of this would be the way (if you are among the millions who have direct deposit) arrives in your designated bank account on payday. Your employer sent instructions, their bank transmitted funds to yours, and you received your money.

ACH Debit

An ACH debit, as you might expect, moves in the opposite direction. In this case, funds are pulled from one account and processed in batches to get to their destination. In the situation of a direct deposit paycheck, while the employee receives the ACH credit, the employer’s account gets debited.

Recommended: How to Calculate Savings Account Interest

What Is an Example of an ACH Payment?

You’ve just gotten the scoop on ACH credits vs. debits, but what is a specific example of an ACH payment? When Social Security payments get deposited in millions of Americans’ bank accounts monthly, that’s the ACH system at work.

Also, if you’ve set up an automated payment of a utility or other recurring bill, that may also be an example of an ACH payment in action.

Benefits of ACH Payments

So now you know what ACH transactions are and how they became so popular. Let’s look at their benefits to your daily life and banking.

•   Speed. They are quick and save you time running around with checks and the like. Plus, the transactions themselves can be fast. The transfers are typically completed within one day. There may be ways offered to speed up your payment, often for a fee (such as when PayPal or Venmo offers an instant transfer).

•   Convenience. It can be very convenient to have mortgage payments, utility bills, and other payments automatically deducted from a bank account. Or send money to someone via a P2P service. With ACH payments, as we noted, there’s no need to travel to the financial institution to pay the bills or to write a paper check and mail it in.

•   Low cost. ACH transfers are typically free and may even actually save you money. For example, a bank may offer a lower rate on a mortgage loan or student loan if you set up an automatic ACH funds transfer for your payments. (An exception may be when a financial institution charges a nominal fee to transfer funds to another bank.)

Downsides of ACH Transfers

There are a few potential disadvantages when it comes to using ACH transfers. Specifically:

•   Transaction limits. Some banks will limit how much money you can send by ACH transfer in a specific time period, or they might not accept international ACH transfers.

•   Penalties for too many transactions. If you are completing ACH payments from your savings account and that account has a cap on how many withdrawals you can complete per month, you could be penalized.

•   Timing matters. Not all banks send ACH transfers at the same time of day — meaning they may have a cut-off time for a transfer to be processed on the next business day. This might cause problems for people needing to pay a bill by a certain due date and/or time.

Security of ACH Transfers

You may wonder whether these electronic transactions are secure. An ACH transfer can in fact be more secure than many other payment methods.

•   The reality is that paper checks can always be lost or stolen. With ACH deposits or payments, you only need to provide bank information once, when the automated transaction is set up. Contrast that with writing a check every month and mailing it.

•   Regulations exist that protect consumers in the rare case of an electronic funds transfer negatively impacting their bank accounts because of fraud or error.

•   ACH payments are very safe because they go through a clearing house that has strict rules about confidentiality of information. In addition, ACH transfers typically have an extremely low rate of error.

ACH Transfers vs. Wire Transfers

When thinking about these kinds of transactions, you may wonder, “What’s the difference between ACH transfers vs. wire transfers?” A wire transfer is another method of electronically transferring funds, which means this system comes with many of the same benefits as ACH transfers bring.

Consider a couple of scenarios that highlight the potential differences:

•   Wire transfers may occur within one business day, with funds often available for use the same day. In many cases, though, a bank employee needs to review this largely automated process, so the funds may not be immediately visible in the recipient’s account — and international wire transfers may take more than a day.

•   ACH transfers, however, are processed in clearinghouses and banks in batches. The ACH system may sometimes provide same-day transfers and is increasingly moving towards this same-day benefit being available more often.

•   In general, a wire transfer cannot be reversed.

•   An ACH transfer, though, can be reversed in some situations.

•   A last but important point: ACH transfers are often free, while wire transfer fees can cost the person sending it up to $35 or more, and the recipient might have to pay a small fee, too.

Recommended: Can You Use Your Debit Card in Another Country?

The Takeaway

ACH transfers can speed and smooth your financial life, automatically depositing and withdrawing funds so you don’t have to deal with checks, cards, or the time it takes for money to clear. That’s why they are such a popular way to transfer funds, such as receiving one’s paycheck by direct deposit.

In addition to ACH payments, another way to ensure a smoothly functioning financial life is to partner with a bank account that offers convenient access and the tools you need most.

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 3.80% APY on SoFi Checking and Savings.

🛈 SoFi members interested in ACH payments can review these details.

FAQ

How long does an ACH transfer take?

ACH transfers typically take a day, but they may take as long as three days.

What is needed for an ACH transfer?

To complete an ACH transfer, the following are needed: the name, routing number, and account number of the destination, whether the account is a business or personal account, and the amount of money to be sent.

How do I set up an ACH payment?

An ACH payment can be set up in a variety of ways. As a consumer vs. a business, you might use a payment app or see what forms of money transfers your bank uses. For instance, many use Zelle®. Or you could see if the prospective recipient of your funds (say, a utility company) offers an automated payment system, which might use the ACH network.

Can you send an ACH to a personal account?

Yes, you can send an ACH payment to a personal account. For example, if you use a payment app to send a friend money for your share of a dinner out that they paid for, you would likely be sending an ACH payment.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2025 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 Eligible Direct Deposit activity can earn 3.80% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below).

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning 3.80% APY, we encourage you to check your APY Details page the day after your Eligible Direct Deposit arrives. If your APY is not showing as 3.80%, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning 3.80% APY from the date you contact SoFi for the rest of the current 30-day Evaluation Period. You will also be eligible for 3.80% APY on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi members with Eligible Direct Deposit are eligible for other SoFi Plus benefits.

As an alternative to Direct Deposit, SoFi members with Qualifying Deposits can earn 3.80% 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 Eligible 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 an Eligible Direct Deposit or receipt of $5,000 in Qualifying Deposits to your account, you will begin earning 3.80% 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 Eligible 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 Eligible 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 Eligible 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 Eligible Direct Deposit or Qualifying Deposits until SoFi Bank recognizes Eligible Direct Deposit activity or receives $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Eligible Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Eligible Direct Deposit.

Separately, SoFi members who enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days can also earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. For additional details, see the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.

Members without either Eligible Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, or who do not enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days, will earn 1.00% 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 1/24/25. There is no minimum balance requirement. Additional information can be found at http://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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May
20
2024
Can a Certificate of Deposit (CD) Lose Value?

Can a Certificate of Deposit (CD) Lose Money?

By | Budgeting & Goals, Growing Wealth, money | Comments Off on Can a Certificate of Deposit (CD) Lose Money?

While it’s unlikely, a certificate of deposit (CD) could lose money if you withdraw funds before you’ve earned enough interest to cover the penalty charged. Typically, CDs are safe time deposits that guarantee an interest rate for the term that you agree to keep money at a financial institution. In fact, CDs are considered one of the lowest-risk savings vehicles available. But, if you pull your money out before the maturity date, you might take a loss.

Here’s a closer look at this topic, so you can decide if a CD is the right way to grow your money.

Key Points

•   A Certificate of Deposit (CD) could lose money if funds are withdrawn early, incurring penalties that may exceed earned interest.

•   CDs are generally low-risk and guarantee a fixed interest rate for the term.

•   Early withdrawal penalties can sometimes reduce the principal, not just the interest.

•   CDs offer higher interest rates compared to regular savings accounts, especially for longer terms.

•   CDs are insured up to $250,000 by FDIC or NCUA, providing additional security against bank failures.

What Is a Certificate of Deposit (CD)?

A certificate of deposit is a savings account offered by banks or credit unions that holds a certain amount of money for a fixed period of time. Some specifics:

•   This time frame can typically range from six months to five years, but you might find even shorter- or longer-term products.

•   There may be a minimum deposit amount, too, of possibly $1,000 or a similar sum.

•   The bank pays you interest over the term of the CD. At the end of your CD’s term (you may hear this referred to as when your CD matures), you receive the money you originally put in along with the interest earned from having your money locked away.

•   CDs can be a more attractive savings vehicle than an ordinary savings account because they may offer higher annual percentage yields (APYs).

•   Typically, the longer your money is in the CD, the higher the rates offered.

•   If you get a CD from a bank that is insured by the FDIC (Federal Deposit Insurance Corporation) or NCUA (National Credit Union Administration), you are typically covered up to $250,000 per account holder, per account ownership category, per insured institution in the very rare event of a bank failure.


💡 Quick Tip: Typically, checking accounts don’t earn interest. However, some accounts do, and online banks are more likely than brick-and-mortar banks to offer you the best rates.

How Standard Certificate of Deposits Work

A CD is similar to a standard bank account, but the difference is CDs have a “lock-in” period where you cannot access the money during that time (the CD’s term). In exchange, you earn interest on the account.

When you open a certificate of deposit, you have to determine how long you are able to keep your money stowed away. This term length generally ranges from six months to several years.
If you need to access the money before the term ends, you will usually pay a penalty for withdrawing the money before the account’s maturity. There are CDs that allow early withdrawal without penalties; these are typically called no-penalty CDs, and the trade-off for this flexibility may offer a lower APY.

Get up to $300 with eligible direct deposit when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 3.80% APY on savings balances.

Up to 2-day-early paycheck.

Up to $3M of additional
FDIC insurance.


Can You Lose Money on a CD?

The risk of having a CD is very low. Unlike how the stock market or a Roth IRA can lose money, you typically cannot lose money in a CD.

There is actually no risk the account owner incurs unless you withdraw money before the account reaches maturity. In this case, the early-withdrawal penalty kicks in and typically may eat up some or all of the interest earned. (Read your account’s terms or check a bank’s website for the specifics.)

But to answer “Can CDs lose money?”: In rare cases, an early withdrawal fee might take a bite out of your principal, too. If, say, you deposit $1,000 in an IRA and earn $15 in interest and then decide to withdraw the funds, hypothetically you could be assessed a $25 fee. In this case, you would wind up with $990 vs. the $1,000 you deposited.

Pros of Investing in a CD

Investing in CDs can be a convenient way to grow your money. High-yield checking and savings accounts can be as well, though. Or perhaps you’re tempted by other investments and wonder how CDs vs. bonds perform. Here, consider some of the benefits specific to certificates of deposit, so you can decide what will work best for you.

•   Security. You can count on a CD for its safety. Make sure to open a CD from a federally insured bank or credit union so your money is secure up to the limits of the insurance ($250,000).

•   Dependability. Instead of having your money sit in a bank and not be sure what returns you will receive as interest rates fluctuate, you can expect to get fixed returns from your CD deposit over a specific period of time.

•   Flexible terms. When opening a CD, account holders get to select from a wide range of term lengths. If you prefer a CD with a shorter maturity date, you can choose a term of a couple of months. Looking for a longer duration? Some CDs may be offered with a 10-year term.

Recommended: CDs vs. Bonds: What’s Smart for Your Money?

Cons of Investing in a CD

As with most financial products (and things in life), there are pluses and minuses to certificates of deposit. Here’s a look at the potential downsides of putting your money in a CD.

•   Lack of access. Once you add money to a CD, you won’t be able to access it until the term is over. During this time, you are not able to add money either.

•   Possible penalties. When you open a CD, you are making a commitment with a financial institution that you will not access that money until the CD matures. (Unless you opt for a no-penalty CD, that is.) If you break that commitment and withdraw money from your CD prior to its maturity date, you will incur early CD withdrawal penalties. This could mean the financial institution withholds an amount of interest on the money you withdraw or could even take some of your principal.

•   Low returns. Yields on a CD can be competitive, but when comparing their returns to those historically earned in the stock market, they’re relatively low. That said, remember that risk plays a role in the market. If you are wondering, “Can you lose money with an index fund or other investment?” keep in mind that the answer may well be “yes.”

When you are investing in stocks and exchange-traded funds, investors take on additional risk and are compensated for that risk. But when putting money in a CD, you aren’t taking any risk, which means the returns are lower.

Recommended: What Does Private Banking Offer?

When CDs Work Best

CDs work best when you are able to put away money for a period of time and accumulate interest over the term. There are different scenarios in which a CD can be a great option, such as the following:

Saving for a Purchase in the Near Future

If you are saving up for a big future purchase, such as a home or a car, you can put your money in a CD to help protect it against inflation until you are ready to access those funds.

Building Short-Term Wealth Before You Invest

If you are new to investing and want to build up your funds to have a more consistent strategy, a CD can help. You can often use a short-term CD to steadily grow your cash position before you invest it in the stock market.

Ensuring Returns Without Stock Market Risk

Opening a CD can be a way to grow your wealth, slowly and steadily with low risk. You might consider building a CD ladder to have funds come available regularly in case you need access. This can be a good balance if you are also investing in the market.

The Takeaway

A certificate of deposit is an account you can open at a bank or credit union to lock away your cash for a certain amount of time while earning a predetermined annual percentage yield. CDs are usually considered very safe. If, however, you withdraw your funds before the maturity date, in rare cases, the penalty for doing so could possibly eat into your principal, meaning you’d lose money.

Another way to grow your funds without this kind of potential access issue could be with a high-yield checking and savings 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 3.80% APY on SoFi Checking and Savings.

FAQ

Are CDs safe if the market crashes?

Putting your money in a CD doesn’t involve putting your money in the stock market. Instead, it’s in a financial institution, like a bank or credit union. So, in the event of a market crash, your CD account will not be impacted or lose value.

Is a CD guaranteed to make money?

In return for allowing the bank or credit union to hold your money for a fixed period of time, the bank pays you interest. These payments are guaranteed.

What determines CD rates?

CD rates are determined by a combination of a few factors, such as the CD’s maturity (or term) and what the current interest rate environment is (banks will likely use an index rate, typically that of the federal funds rate). Search online to review the best options.

Photo credit: iStock/MicroStockHub

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2025 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 Eligible Direct Deposit activity can earn 3.80% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below).

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning 3.80% APY, we encourage you to check your APY Details page the day after your Eligible Direct Deposit arrives. If your APY is not showing as 3.80%, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning 3.80% APY from the date you contact SoFi for the rest of the current 30-day Evaluation Period. You will also be eligible for 3.80% APY on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi members with Eligible Direct Deposit are eligible for other SoFi Plus benefits.

As an alternative to Direct Deposit, SoFi members with Qualifying Deposits can earn 3.80% 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 Eligible 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 an Eligible Direct Deposit or receipt of $5,000 in Qualifying Deposits to your account, you will begin earning 3.80% 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 Eligible 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 Eligible 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 Eligible 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 Eligible Direct Deposit or Qualifying Deposits until SoFi Bank recognizes Eligible Direct Deposit activity or receives $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Eligible Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Eligible Direct Deposit.

Separately, SoFi members who enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days can also earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. For additional details, see the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.

Members without either Eligible Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, or who do not enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days, will earn 1.00% 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 1/24/25. There is no minimum balance requirement. Additional information can be found at http://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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May
20
2024
Tips on Managing a Checking Account

7 Tips for Managing a Checking Account

By | Budgeting & Goals, Financial Independence, money | Comments Off on 7 Tips for Managing a Checking Account

Managing a checking account can be a simple process, thanks to all the tools at your disposal today. You can set alerts to let you know if your balance is dipping too low and use your financial institution’s app to see where your funds are flowing, among other conveniences. Doing so can set you up to avoid fees and charges while maximizing rewards and interest you may earn.

Here, you’ll learn seven simple steps to help you manage your checking account with ease.

Key Points

•   Regularly monitoring your account balance helps avoid overdraft fees and supports budget adherence.

•   Utilizing a mobile banking app can facilitate easy monitoring and managing of transactions.

•   Avoiding extra fees is possible by meeting certain bank criteria like setting up direct deposits.

•   Automating deposits and payments ensures timely transactions and helps in achieving financial goals.

•   Taking advantage of checking account perks can offer additional benefits like identity theft protection and cash back on purchases.

Why Is It Important to Manage Your Checking Account?

Knowing how to manage a checking account effectively will help you with many aspects of your financial life such as meeting your savings goals and protecting your money. If you don’t know where your money goes, how effective will you be when it comes to creating a budget or assessing whether you can take that last-minute weekend getaway with a friend?

Plus, having good account-management skills will protect you against fraud. For instance, let’s say someone stole your debit card and used it to make purchases. You’d want to detect that ASAP before a bad situation got any worse. If you report any losses within two business days, you’re only on the hook for a maximum of $50 according to Federal laws.

Otherwise, you could lose up to $500 if you report it after two business days but within 60. If you don’t notice the fraudulent charges until after the 60 business-day limit, you’re on the hook for all fraudulent transactions unfortunately.

To recap, good checking account management will help you:

•   Keep tabs on your bank account balance and activity

•   Allow you to better fund savings goals

•   Avoid fraudulent activity and potential money loss.

Now, here are the seven steps that answer the question, “How do you manage a checking account?”

💡 Quick Tip: Don’t think too hard about your money. Automate your budgeting, saving, and spending with SoFi’s seamless and secure mobile banking app.

1. Know Your Account Balance

Keeping track of your account balance gives you a clearer picture of where you stand financially. Doing so can help you with tasks such as planning for occasional and unexpected expenses, paying off your student loans on time, as well as simply sticking to your budget.

Plus, monitoring your account can help you avoid overdraft fees by preventing your balance from dipping into negative territory. It’s easy to make an online payment or swipe that debit card and forget about it, so figuring out how often to check your balance is a wise idea. (A couple times a week works well for many people.)

You can log into your account online or through the bank’s mobile app, but other ways to check your balance include:

•   Receiving automated text alerts

•   Speaking to a teller at a branch

•   Calling your bank’s customer service hotline

•   Requesting your checking account balance at an ATM.

2. Download Your Bank’s Mobile Banking App

Here’s another idea for how to manage your checking account: If your bank offers a mobile app, it can be a smart idea to download it. Yes, mobile banking is very secure most of the time. By adopting mobile banking, you can easily keep an eye on your checking account. What’s more, you can conduct an array of transactions with just a few clicks, such as paying bills, depositing checks, setting up automated alerts, and transferring money between accounts.

Depending on the mobile app’s features, you may be able to link your debit and credit cards to your account, which makes it easier to purchase and pay for things. There may be other features such as a budgeting section, money management tools, insights into your credit score, and even access to discounts at your favorite retailer.

3. Avoid Paying Extra Fees

Many checking accounts charge monthly maintenance fees, but you may be able to have them waived if you can meet certain requirements. Most commonly, you can skip the monthly fees if you set up direct deposits or maintain a certain account balance.

Perhaps you want to drill down on one kind of fee in particular: those overdraft fees. Those charges can really add up, and if they are left unpaid, they can harm your credit score. Take a bit of time to understand how your bank handles overdraft fees — will it waive it if your account is in good standing, will it charge you a fee and process the payment, or will it reject the transaction totally and assess you a fee?

Plenty of banks also offer options such as overdraft protection. Typically, this means if you’re at risk of having a negative bank balance, they will transfer the overdrawn amount from a linked savings account to your checking account automatically, without any charges. Still, you’ll probably want to set an alert so you’re notified when your checking account reaches a certain balance or hits zero. That way, you can quickly remedy the situation.

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

4. Automate Deposits and Payments

Automation can make your life so much easier. Letting technology assist you with your banking can help you keep on top of tasks such as depositing your paycheck, paying bills, or meeting savings goals.

•   In terms of how to manage a bank account, direct deposit is a great way for your employer to deposit paychecks automatically. In some cases, banks will even give you early paycheck access.

•   Your bank may have automatic bill payment or transfer tools as well. Consider using these for recurring payments to be made automatically, such as ones for subscription services, auto loans, or your mortgage payments. Doing so can prevent missed payments and may be able to help build your credit score.

•   Also, automatically transferring a certain amount each month into a separate account can help you reach your short- and long-term savings goals.

5. Embrace Potential Earnings

Sure, having a nice big cushion of cash in your checking account can make you feel flush. However, keeping excess cash in your checking account could mean you’re losing out on the opportunity to get more out of your funds. Specifically, that money could be earning you more money. As you balance your bank account, you may find there are better ways to make your money work for you.

For instance, there are plenty of ways to earn interest even if you want your cash to remain more liquid. For instance, high-yield savings accounts linked to your checking account can earn you a bit of extra cash while still being very accessible.

6. Take Advantage of Checking Account Perks

To remain competitive, many banks are starting to offer additional perks with their checking account such as:

•   Identity theft protection and assistance

•   Discounts at shopping and dining retailers

•   Extended warranties on purchases

•   Buyer’s protection

•   Health savings cards

•   Cash back on qualifying debit card purchases.

When shopping around for a checking account, consider your financial habits. If you shop frequently at certain retailers, it may be worth taking advantage of an account that offers discounts. Or if you use the ATM frequently, looking for a checking account that reimburses you for third-party ATM fees may be a smart choice.

7. Consider Consolidating

Do you have multiple checking accounts? It’s not uncommon for people to have, say, their main checking account, one that they opened to get some reward or perk, and the one that their parents opened with them in high school. If you can relate, you might benefit from simplifying your finances and consolidating all of them into one main checking account.

That way, all you have to do is log into a single checking account and monitor your finances. Why overwhelm yourself with many accounts to check on and keep track of?

The Takeaway

Managing your checking account is an important path to staying on top of your finances. It will help you keep on your budget, avoid unnecessary fees, and reach your financial goals. Plus, with all the tech tools and alerts available today and the rewards being offered, it can be faster and more profitable than ever.

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 3.80% APY on SoFi Checking and Savings.

FAQ

Why is it important to manage your checking account?

It’s important to manage your checking account so that you can see where your money is coming from and going to. It can help you understand how you can budget better, reach your savings goals, and even detect fraud.

How often should you manage your checking account?

For many people, checking their bank account once or twice a week works well. You can also take actions like establishing alerts when your account balance falls below a certain threshold or setting up automatic transfers for recurring payments to help save you time.

How should you keep track of what’s in your checking account?

The usual ways to keep track of what’s in your checking account are to use your bank’s app, check your balance online, call customer service, or use an ATM to see how your money is tracking.

Photo credit: iStock/jroballo

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2025 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 Eligible Direct Deposit activity can earn 3.80% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below).

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning 3.80% APY, we encourage you to check your APY Details page the day after your Eligible Direct Deposit arrives. If your APY is not showing as 3.80%, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning 3.80% APY from the date you contact SoFi for the rest of the current 30-day Evaluation Period. You will also be eligible for 3.80% APY on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi members with Eligible Direct Deposit are eligible for other SoFi Plus benefits.

As an alternative to Direct Deposit, SoFi members with Qualifying Deposits can earn 3.80% 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 Eligible 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 an Eligible Direct Deposit or receipt of $5,000 in Qualifying Deposits to your account, you will begin earning 3.80% 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 Eligible 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 Eligible 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 Eligible 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 Eligible Direct Deposit or Qualifying Deposits until SoFi Bank recognizes Eligible Direct Deposit activity or receives $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Eligible Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Eligible Direct Deposit.

Separately, SoFi members who enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days can also earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. For additional details, see the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.

Members without either Eligible Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, or who do not enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days, will earn 1.00% 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 1/24/25. There is no minimum balance requirement. Additional information can be found at http://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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May
20
2024
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A Beginner’s Guide to Investing in CDs

By | Growing Wealth, invest, Investing | Comments Off on A Beginner’s Guide to Investing in CDs

A certificate of deposit (or CD) has many of the same low-risk benefits as a savings account, but a CD holds your money for a fixed time period in exchange for a higher rate of interest than the standard savings account.

You may be familiar with CDs as part of your savings strategy (say, keeping money secure and earning interest until you are ready to buy a house), but they can also be used as a part of a portfolio’s cash allocation. CDs generally pay a higher interest rate than you can get with other cash accounts. Owing to their lower risk profile and modest but steady returns, allocating part of your portfolio to CDs can offer diversification that may help lower your risk exposure in other areas.

Here’s a closer look at the ins and outs of investing in CDs.

Key Points

•   Certificates of deposit (CDs) offer higher interest rates than regular savings accounts by locking funds for a fixed period.

•   CDs are available through banks, credit unions, and brokerages, with varying terms and minimum deposits.

•   Early withdrawal from a CD incurs penalties, typically costing several months’ interest.

•   Investment strategies like CD laddering, barbells, and bullets help manage liquidity and returns.

•   CDs are insured up to $250,000, providing a safe investment option with predictable returns.

How to Buy CDs

Investors can buy CDs at many, if not most financial institutions, such as banks, credit unions, or brokerages. Not all institutions might offer CDs, and others may have limited options, but generally, if you’re looking to buy CDs, you might want to start at your bank, where you might hold a savings account.

Again, a certificate of deposit is similar to a savings account in that you can stash your money for a long period of time, but CDs possess some distinct features you need to understand in order to gauge whether they’re a good fit with your plan. Here are some aspects of CDs to keep in mind.

1. A Fixed Deposit for a Set Time Period

Investors purchase a CD for a fixed amount of money: e.g., $1,000, $5,000, or more. Some banks have a required minimum deposit; others don’t. Generally, you cannot increase the amount of your savings (although you can always buy another CD). Some banks offer jumbo CDs, which might require a minimum $100,000 deposit.

Unlike a savings account, which is open-ended (and allows you to access your cash at any time), you typically purchase a CD for a set period of time during which you can’t withdraw the funds without a penalty. Typical CD terms can vary from one month to five years, so check with the institution that issues the CD.

2. Guaranteed Interest Rates and Insurance

Because investing in CDs is less liquid than a savings account, the interest rate tends to be higher. CD rates are quoted as an annual percentage yield (APY). The APY is how much the account will earn in one year, including compound interest. Banks generally compound interest daily or monthly.

When the period is up, also known as the CD maturity date, the CD holder can receive the original investment, plus any interest earned. The interest rate can vary considerably, depending on the institution. Also, longer-term CDs tend to offer higher rates than shorter-term ones.

The money in a CD is protected by the same federal insurance (FDIC) that covers all deposit products, whether at a bank, credit union, or other institution.

3. Early Withdrawal Penalties

CDs can offer higher yields because customers are promising the bank that they will deposit their money for a set period of time. As a result, investing in CDs means the money is usually locked up until it reaches its maturity date. Withdrawing the money before the CD matures may trigger a penalty, which could effectively eliminate any interest rate gains.

The penalty for an early withdrawal on a CD is often stated in terms of interest: e.g. you would owe 60 days’ worth of interest, 150 days’ worth of interest, and so on. The penalty is usually charged according to the simple interest rate on your account, not the compound interest you might have earned over time.

Before purchasing a CD, it’s best to look at its disclosure statement, which should tell you the interest rate, how often interest is paid, the maturity date of the CD, and any early withdrawal penalties.

Note: There are penalty-free or no penalty CDs. These allow you to withdraw funds before the maturity date without a fee, but they typically have lower interest rates than other CDs.

4. Terms Vary Widely

It’s important to shop around for the best CD rates and terms. Brick-and-mortar banks may pay lower rates, while online banks and credit unions may pay higher rates. Because the interest rates on CDs are based on the federal funds rate, similar to mortgages and other financial products, it’s also a good idea to see whether the Federal Reserve is about to raise or lower interest rates before deciding whether it’s a good time to invest in CDs.

CD Investing Strategies

CDs can be incorporated as part of your financial plan in various ways. They can act as short-term savings vehicles — a way to secure your money for a down payment or a large purchase within five years, say. Or they can be part of a longer-term strategy. Here are some examples.

CD Ladder

A CD ladder uses a combination of shorter-term and longer-term CDs to maximize different rates of return and deliver several years of steady income.

Hypothetically, say you want to invest $10,000 over a 10-year period. You could create a CD ladder by purchasing five CDs of different maturities all at once, and reinvesting them as follows:

•   Deposit $2,000 in a 1-year CD. When that CD matures, roll over the money plus interest into a 5-year CD.

•   Deposit $2,000 in a 2-year CD. When that CD matures, again roll over those funds into another 5-year CD.

•   Do the same for a 3-year, 4-year, and 5-year CD. As each one matures, you roll over the funds, plus any accumulated interest, into a 5-year CD.

The result will be five different CDs that mature one year apart, allowing you to withdraw your funds plus interest. This strategy ensures some diversification of interest rates, so your money isn’t locked into a flat rate for the full 10 years. It can be reassuring to know that, if you need access to cash, you can expect one of the CDs to be on the verge of maturing at regular intervals.

CD Barbell

The CD barbell is like a CD ladder, but without buying any mid-length CDs: Here you invest a certain amount in a short-term CD (say, a 1-year CD), and the rest in a 5-year CD as a way to hedge your bets.

The barbell strategy allows you to take advantage of both short- and long-term rates. When the short-term CD matures, you can either reinvest at the short-term rate, if that makes sense, or shift the money over to a longer-term CD.

CD Bullet

Instead of buying a few CDs of different maturities at the same time, the bullet strategy allows you to invest different amounts at different times, as a way of saving for a specific goal like a down payment.

This strategy could allow you to invest one amount in a CD to start, save up more for a year or two and buy another CD that matures at the same time as the first, and so on. Then you have, say, three CDs that mature at the same time, with interest, allowing you to withdraw the lump sum from each one for your goal.

For example:

•   You could invest $5,000 in a 5-year CD today.

•   Then, in two years, invest $3,000 in a 3-year CD.

•   Last, save up money for another two years and buy a $2,000 1-year CD.

•   All three CDs mature at the same time, and you can withdraw all the money, plus compound interest.

Benefits of Investing in CDs

Investing in CDs can offer some investors specific benefits.

Peace of Mind

CDs are generally considered one of the safer options for investors. Like traditional savings accounts or high-yield savings accounts, CDs are insured for up to $250,000 per depositor, per account ownership category, per insured institution, when they are purchased through an FDIC-insured bank or an NCUA-insured credit union. In the very rare instance of the CD-issuing bank failing, your deposits would be covered up to $250,000.

Predictability

CD interest rates are usually fixed and will deliver a predictable yield at the end of their term. The same is not necessarily true of traditional savings accounts, which may lower the amount they pay if interest rates drop. The ability to calculate exactly how much you’ll be paid at the end of the CD’s term makes it easier to know how that CD will fit into a financial plan.

A Variety of Options

Thousands of banks and credit unions across the country offer a diverse selection of CDs, which come with many interest rate options and with maturity lengths from a month to a decade.

There also may be different styles of CDs to choose from (you’ll learn about bump-up and add-on CDs in a moment). But, as always, be sure to check the terms.

Drawbacks of Investing in CDs

Of course, like any other investment, CDs can come with their share of potential downsides.

Illiquidity

One of the main drawbacks of a CD is that most of them are relatively illiquid, meaning you can’t access the funds whenever you like. An investor’s money is tied up until the maturity date, and early withdrawals may trigger penalties in the form of lost interest payments or, in some cases, lost principal.

Though there are some CDs that offer penalty-free withdrawals, investors must often accept lower interest rates in trade.

When choosing a CD, it’s best to carefully consider a maturity date you know you will be able to meet. An emergency fund can help you avoid the temptation to tap CD investments when the unexpected happens.

Inflation Risk

Despite the fact that CDs tend to offer higher returns than traditional savings accounts, they can still be subject to the same inflation risk. When inflation is high, CD returns may be unable to outpace it. That means the money sitting in the CD may lose purchasing power before reaching maturity.

Taxes

When investors withdraw money from CDs after the maturity date, they pay no taxes on the principal withdrawn, but the money earned is taxable on state and federal levels as interest income.

The taxes will reduce the amount of money a CD investor will actually get to take home. It’s a good idea to carefully consider taxes when shopping for a CD and deciding on an APY.

Opportunity Cost

Money that’s tied up in a CD can’t be put to work anywhere else — a problem known as opportunity cost. CD interest rates may be higher than some other bank products, but stocks, bonds, and other investments may offer much higher returns. That said, higher returns are often associated with higher risk.

CD investors may be opting to avoid risk or using the accounts to diversify a portfolio that already holds a mix of stocks and bonds.

Types of CDs to Invest In

Above, you learned about the basic structure of a traditional CD, but there are a few other types that may offer features that are more desirable. In some cases, these may come with tradeoffs or additional risk factors, so be sure to weigh the pros and cons and terms of each.

1. Liquid CDs

If you’d prefer a CD that allows you to access your savings before the maturity date without paying a penalty, a liquid CD may offer a solution. These CDs don’t charge a penalty for early withdrawals, but they may offer lower interest rates as a result.

2. Bump-up CDs

Some investors dislike the idea of locking up their cash at a fixed rate, when in theory rates could rise, and you’d lose out on the higher rate of return. A bump-up CD may help address that concern by allowing you a chance to “bump up” to a higher rate.

3. Add-on CDs

If you don’t have the specific amount required to open a CD, another option could be to open an add-on CD, which allows you to make additional deposits.

4. Variable Rate CDs

Like a variable rate loan, a variable rate CD doesn’t pay a fixed interest rate. Having a variable rate may give you higher or lower rates at some points, but the point is that the rate isn’t guaranteed, so you have to be willing to take your chances.

5. Uninsured CDs

If you’re willing to forgo federal insurance on your deposits, you might be able to get a higher interest rate.

In all cases, be sure to check the terms of the CD you’re about to buy, in case there are restrictions or caveats that might make a certain CD less desirable. For example, there are some CDs offered by foreign banks, but denominated in US dollars, which may offer competitive rates but they are not federally insured.

6. Brokered CDs

A brokered CD is a lot like a traditional CD but is purchased through a broker, typically using a brokerage account. This setup can provide access to a wide range of CDs from different financial institutions.

It is also possible to trade brokered CDs on the secondary market. Finding a buyer may be difficult, however, which could mean accepting a lower price for the sale. Brokered CDs may come with additional fees.

The Takeaway

Although CDs are sometimes dismissed as simple savings vehicles, in fact investing in CDs can offer a steady if modest rate of return, and some peace of mind — factors that may appeal to some investors, especially over time. It’s also possible to use different strategies like a CD ladder to create an income stream or maximize different interest rates over time.

If, however, the idea of locking up your money for a set period of time doesn’t suit your needs, you might consider a high-yield checking and savings account instead.

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 3.80% APY on SoFi Checking and Savings.

🛈 While SoFi does not offer Certificates of Deposit (CDs), we do offer alternative savings vehicles such as high-yield savings accounts.

FAQ

Where do you go to invest in CDs?

Investors can purchase CDs at many financial institutions, such as banks, credit unions, or brokerages, although not all institutions will offer them.

How much does a $10,000 CD make in a year?

The ultimate yield on a $10,000 CD in a year will depend on the associated interest rate and compounding frequency, which can vary. But assuming the interest rate is 3.00%, an investor could earn $300 after one year if compounded annually.

Are CDs considered low-risk?

CDs are generally considered to be lower-risk investments, especially compared to assets like stocks.

How much money do you need to invest in a CD?

There are minimums to purchase a CD, which vary, but a ballpark figure is around $500, depending on where you buy them.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2025 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 Eligible Direct Deposit activity can earn 3.80% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below).

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning 3.80% APY, we encourage you to check your APY Details page the day after your Eligible Direct Deposit arrives. If your APY is not showing as 3.80%, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning 3.80% APY from the date you contact SoFi for the rest of the current 30-day Evaluation Period. You will also be eligible for 3.80% APY on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi members with Eligible Direct Deposit are eligible for other SoFi Plus benefits.

As an alternative to Direct Deposit, SoFi members with Qualifying Deposits can earn 3.80% 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 Eligible 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 an Eligible Direct Deposit or receipt of $5,000 in Qualifying Deposits to your account, you will begin earning 3.80% 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 Eligible 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 Eligible 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 Eligible 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 Eligible Direct Deposit or Qualifying Deposits until SoFi Bank recognizes Eligible Direct Deposit activity or receives $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Eligible Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Eligible Direct Deposit.

Separately, SoFi members who enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days can also earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. For additional details, see the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.

Members without either Eligible Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, or who do not enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days, will earn 1.00% 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 1/24/25. There is no minimum balance requirement. Additional information can be found at http://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.


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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