Conventional loans — mortgages that are not insured by the federal government — are the most popular type of mortgage and offer affordability to homebuyers.
Private mortgage lenders originate and fund conventional loans, which are then often bought by Fannie Mae and Freddie Mac, publicly traded companies that are run under a congressional charter.
By buying and selling these mortgages, Fannie and Freddie help to ensure a reliable flow of mortgage funding.
Key Points
• Conventional loans in 2024 typically require a minimum FICO® score of 620, with better interest rates offered to those with higher scores.
• A down payment of 20% is ideal to avoid PMI, but first-time homebuyers can qualify with as little as 3% down.
• A borrower’s loan-to-value ratio and debt-to-income ratio are also important considerations for lenders.
• Conventional loans above a certain amount set by the Federal Housing Finance Administration are considered nonconforming loans.
• Conforming loan limits vary by location, with higher limits in high-cost areas.
Just realize, for one thing, that a higher credit score is usually required for a conventional home loan than an FHA loan backed by the Federal Housing Administration, a type popular among first-time buyers.
Here are factors a lender will consider when sizing you up for a conventional loan.
The FICO score range of 300 to 850 is carved into these categories:
• Exceptional: 800 to 850
• Very Good: 740 to 799
• Good: 670 to 739
• Fair: 580 to 669
• Poor: 300 to 579
In general, the higher your credit score, the better the interest rates you’re offered.
Down Payment
Putting 20% down is desirable because it means you can avoid paying PMI, or private mortgage insurance, which covers the lender in case of loan default.
But many buyers don’t put 20% down. The median down payment on a home is 15%, according to a recent study by the National Association of Realtors®.
Conventional loans require as little as 3% down for first-time homebuyers, and the down payment can be funded by a gift from a close relative; a spouse, fiancé or domestic partner; a buyer’s employer or church; or a nonprofit or public agency. The gift may require a gift letter for the mortgage.
Just keep in mind that the smaller the down payment, the higher your monthly payments are likely to be, and PMI may come along for the ride until you reach 20% equity.
First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.
Debt-to-Income Ratio
Your debt-to-income ratio (DTI) helps a lender understand your ongoing monthly debt obligations relative to your gross monthly income.
To calculate back-end DTI:
1. Add up your monthly bills (but do not include groceries, utilities, cellphone bill, car insurance, and health insurance).
2. Divide the total by your pretax monthly income.
3. Multiply by 100 to convert the number to a percentage.
In general, lenders like to see a DTI ratio of 36% but will accept 43%.
The Fannie Mae HomeReady® loan, for lower-income borrowers, may allow a DTI ratio of up to 50%.
In any case, the lower your DTI ratio, the more likely you are to qualify for a mortgage and possibly better terms.
Loan-to-Value Ratio
The loan-to-value ratio (LTV) is the amount of the mortgage you are applying for compared with the home value. The higher the down payment, the lower the LTV ratio.
Fannie Mae typically sets LTV limits at 97% for a fixed-rate mortgage for a principal residence (think: 3% down) and 85% for a fixed or adjustable loan for a one-unit investment property.
When LTV exceeds 80% on a conforming loan, PMI will likely apply, although some borrowers employ a piggyback loan to avoid mortgage insurance.
Conventional Conforming Loan Limits
Many loans are both conventional and conforming — meaning they meet the guidelines of secondary mortgage market powerhouses Fannie Mae and Freddie Mac, which buy such mortgages and often package them into securities for investors.
Conventional conforming loans fall below limits set by the Federal Housing Finance Agency (FHFA) every year.
Staying under a conforming loan limit often equates to a lower-cost mortgage because the loan can be acquired by Fannie and Freddie.
The conforming loan limits for 2025 in many counties in the contiguous states, Washington, D.C., and Puerto Rico rose with market prices:
• One unit: $806,500
• Two units: $981,500
• Three units: $1,186,350
• Four units: $1,474,400
In high-cost areas like Alaska, Hawaii, Guam, and the U.S. Virgin Islands, the 2025 conforming loan limits are:
• One unit: $1,209,750
• Two units: $1,472,250
• Three units: $1,779,525
• Four units: $2,211,600
If you’re curious about your county’s specific conforming loan limits are, you can check out this FHFA guide.
Nonconforming Loans
Word games, anyone? Nonconforming loans are simply mortgages that do not meet Fannie and Freddie standards for purchase. They usually take the form of jumbo loans and government-backed loans.
A homebuyer or refinancer who needs a mortgage beyond the FHFA limits can seek a jumbo mortgage loan. A jumbo loan is still a conventional loan if it’s not backed by a government agency; it’s just considered a “nonconforming” loan.
FHA, VA, and USDA mortgages — those backed by the Federal Housing Administration, Department of Veterans Affairs, and the U.S. Department of Agriculture — are also nonconforming loans.
Nonconforming mortgage rates for jumbo loans may be higher because the loans carry greater risk for lenders, but when the nonconforming loan is backed by the government, its rate might skew lower than conventional conforming rates.
The Takeaway
Conventional loan requirements are good to know when you’re looking at the most popular type of mortgage around. Would-be homebuyers will want to make sure their credit score, debt-to-income ratio, and down payment numbers are lined up as favorably as possible before pursuing their dream property.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
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FAQ
Are there any drawbacks to a conventional loan?
The main drawback to a conventional loan is that you will need to make some type of down payment on the property. It doesn’t need to be the 20% down payment that was common in decades past. But even a low down payment of, say, 3.5% could add up to tens of thousands of dollars given today’s home prices.
What’s the main reason I might not qualify for a conventional loan?
The most common reason someone might not qualify for a conventional home loan is usually related to credit — perhaps the applicant has a credit score below 620, or maybe there is some other significant warning sign on the credit report, such as a history of delinquencies or bankruptcy.
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*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
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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¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.
First-time parents can be so preoccupied with the love they feel for their new babies and the constant care required that they may lose sight of their larger financial goals. When you’re busy getting to know your little human, you may not prioritize money management.
But securing your growing family’s finances is an important consideration. You have new needs and goals evolving, such as your child’s education and your retirement. Here’s smart advice to help you manage your money well during this new life stage and beyond.
Key Points
• Parents can avoid overspending on baby gear by considering secondhand items or accepting hand-me-downs.
• Creating a budget using the 50/30/20 rule may help first-time parents manage new expenses like daycare.
• Parents can prepare for unexpected expenses by building an emergency fund in a high-yield savings account.
• New parents should continue to prioritize retirement savings by utilizing employer 401(k) plans or IRAs.
• Parents can start saving early for their child’s education with 529 plans or Coverdell ESAs.
7 Financial Tips for New Parents
Raising a child can cost more than $15,000 a year, according to one recent calculation using U.S. Department of Agriculture data. That can put some serious stress on your finances. Here’s guidance on making your money work for you and your family.
1. Avoid Overspending on Baby Gear
As a first-time parent, you likely have quite a bit of work to do before the baby arrives. You may need to create and furnish a nursery for your child, and stock up on diapers, bottles, clothes, toys, and so much more.
As you’re setting up your new life with a baby, it can feel like buying everything brand-new is the only option, but that can be costly. You might consider taking advantage of used or gifted items so as not to deplete your bank account.
You can buy a lot of items secondhand at a lower cost through online marketplaces or used goods and consignment stores. Or you might see what “freecycle” networks in your area have available at no charge. That’s one way to save money daily.
And if you have friends, family, or neighbors that already have children, they may be looking to unload some of the gear their children no longer use. Families with older kids are often happy to pass on items such as clothes, cribs, playpens, toys, and books. You might check Nextdoor.com and other community sites, which can be a good resource for local families seeking to offload these items.
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2. Don’t Live Without a Safety Net
As a parent, you have a host of new responsibilities, and expenses you never imagined may pop up. So consider these moves:
• An emergency fund becomes even more important when you have a child or one is on the way. You’re now responsible for all of their needs, and there may be unplanned costs that pop up along the way. Or, if you were to endure a job loss, you’d need to continue to provide for your child.
• Saving for an emergency is a process, and it’s okay to start small — even just $25 a week will add up over time. Some people opt to store their emergency fund in a high-yield savings account or checking account. Earning interest that way will help your money grow faster.
• Review your health insurance. You may want to opt for a different plan now that you have a child. An addition to the family is usually a qualifying life event (QLE) that can allow you to make changes regarding your plan outside of the usual open enrollment period.
• Consider life insurance and disability insurance if you don’t already have it or, if you do, see if you want to update your coverage. When a little one is depending on you, you probably want to protect their future if you weren’t able to earn your usual income. Maybe you can only afford a modest policy at this moment. That can be fine; it’s a start and something you can revisit later as you grow your wealth.
3. Keep a Budget
With a baby on board, you likely have a host of new expenses, from the life insurance mentioned above to daycare to toys (and more toys). Making a budget can help you prepare to pay for the extra expenses.
The word “budget” can conjure up fear, but it’s really just a helpful set of financial guardrails that help you balance how much you have coming in and how much is going out towards expenditures and savings.
• You might try the popular 50/30/20 budget rule which says that 50% of your take-home pay should go toward needs, 30% toward wants, and 20% toward savings.
• You could check with your financial institution to see what kinds of tools they provide for tracking your money. This can be a great resource as you work to improve your money management and hit your goals.
• To make a budget, you might also see what apps or websites offer products that could work for you. Check with trusted friends to see what they may recommend.
4. Don’t Put Off Retirement Savings
Another financial mistake new parents: Learning to pay yourself first isn’t easy for a lot of parents to do, but it’s vital. (For instance, while you can borrow money for college expenses for your child, you can’t likely borrow for your retirement.)
For retirement saving, one way to start is by enrolling in your company’s 401(k) plan if one is offered. Some employers will match your contribution, up to a certain percentage, and you’ll be able to have your contribution taken directly from your paycheck.
If your employer doesn’t offer a 401(k), you could open an individual retirement account, or IRA, instead. Getting in the habit of saving at least a little for your own future can be important as your focus shifts to your new addition.
It’s never too early to start saving for retirement.
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5. Start Savings for Your Child’s College
Saving for your children’s tuition can be an important step for many new parents. That’s because the sooner you start, the better. Your money will have that much more time to grow. College is a big-ticket expense, with estimates of tuition in 18 years being calculated as follows:
• $25,039 per year for a public college
• $48,380 per year for a private college
While a standard savings account may seem like the easy choice, there are other options designed to help you or grandparents save for a child’s education.
• With an education savings plan, a tax-deferred investment account is used to save for the child’s future qualified higher education expenses, like tuition, fees, room and board, computers, and textbooks. Funds used for qualified expenses are not subject to federal income tax.
• With a prepaid tuition plan, an account holder purchases units or credits at participating colleges and universities for future tuition and fees at current prices for the beneficiary. Money in this fund is guaranteed to rise at the same rate as tuition. Most of the plans have residency requirements for the saver and/or beneficiary.
• A Coverdell Education Savings Account may also be worth looking into. In general, the beneficiary can receive tax-free distributions to pay for qualified education expenses. Contributions to a Coverdell account are limited to $2,000 per year, per beneficiary. The IRS sets no specific limits for 529s.
6. Make the Most of Tax Breaks
Another bit of financial advice for parents is that when you have a child, you may be eligible for certain tax benefits.
• The Child and Dependent Care Credit: If your child is in daycare or preschool or you pay for another kind of caregiving, you may be eligible to claim this credit, which varies based on your income. Typically, you can get a credit of between 20% and 35% of qualifying expenses up to $3,000 for one dependent or $6,000 for two or more.
• The Child Tax Credit: This allows parents to get a tax credit of up to $2,000 per child under the age of 17. Other qualifying dependents up to age 24 may provide a credit of $500 each.
• The Earned Income Tax Credit: Lower-income parents may be able to claim this credit, which varies with income and number of children. The Internal Revenue Service (IRS) offers a calculator to check eligibility.
• Adoption Tax Credit: This offers tax incentives to cover the cost incurred if you adopted a child. In 2024, the maximum credit was $16,810 per qualifying child.
You might consult a tax professional to see which of these you can claim.
7. Teach Your Kids About Money
If kids aren’t taught the basics of financial literacy at a young age, they may struggle to make a budget, avoid credit card debt, or save money when they’re older. You can help your children learn what it means to manage money in these ways:
• Kids often love to play store, so go ahead and join in. By exchanging goods for money, they’re already beginning to understand the basic principles of commerce.
• As they get older, you may want to give them an allowance in exchange for chores or homework completion.
• You could even have them make a budget with their earnings, and encourage them to spend, save, and donate.
• You could open a checking account with them, once they are old enough, and teach them how it works.
• You might give them a gift card or prepaid debit card and coach them on sensible spending.
Can You Ever Be Fully Financially Ready for Parenthood?
It’s probably not possible to be fully financially ready for parenthood or for adult life in general. Part of each person’s financial journey is learning how to plan for the unexpected and navigate curveballs. That might mean financing a child’s dance lessons or speech therapy. You might wind up moving to what you consider a better school district and paying more for your mortgage and taxes.
That’s why embracing some of the guidelines above, such as making a budget, stocking an emergency fund with cash (perhaps sending some money there via direct deposit), and saving for the future can be so important.
The Takeaway
Being a new parent is a joyful time but also a challenging one. One priority not to lose track of is your financial health, especially since you are now providing for a little one and their future. By budgeting and spending wisely, saving for the future, and knowing which tax credits you may be able to claim, you can help yourself get on the path to financial security for your family.
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FAQ
How can you plan financially for parenthood?
Planning financially for parenthood can involve updating your budget, allocating funds to the right insurance policies and long-term goals (such as your child’s education and your own retirement), and creating an emergency fund, if you don’t already have one. Also educate yourself on any tax credits you might qualify for once you become a parent.
What are the biggest unforeseen expenses of parenthood?
Some of the unforeseen expenses of parenthood include your child’s medical, dental, and mental health costs; academic support (such as tutors and prep classes); hobbies (taking tae kwon do classes, perhaps, or traveling with their soccer club); and funding any family travel and vacations.
How much does a child cost per year?
The cost of raising a child per year can vary widely, depending on such factors as medical needs and whether they are attending public or private school. That said, recent studies suggest the current average figure is around $15,000 to $17,500 per year per child.
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Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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.
Short-term financial goals are generally things you want to achieve within one to three years. They can be “one and done” in nature (say, “Save enough money for a Caribbean vacation”), or they might be incremental steps to much larger financial goals, such as beginning to save for a child’s college tuition).
Setting financial goals can be an important step toward achieving them. After all, it’s probably not enough to simply hope your dreams become reality. Making a plan can significantly increase the likelihood that you’ll meet the goal. It will focus you on what you want to attain and help guide you toward getting there.
Here are some common short-term financial goals you may want to adopt plus intel on how to achieve them.
Key Points
• Short-term financial goals are things you want to achieve within the next couple of years, such as paying off credit card debt or saving for a vacation or wedding.
• Building an emergency fund is an important short-term financial goal to cover unexpected expenses and avoid relying on high-interest credit cards.
• Budgeting can help you track your spending, prioritize your expenses, and work towards short-term financial goals.
• Paying down credit card debt is crucial as high-interest rates can hinder progress towards other financial goals.
• Contributing to your retirement fund, even in the short term, can have long-term benefits due to the power of compounding interest or dividends.
What Are Short-Term Financial Goals?
Short-term financial goals are typically objectives you want to attain within the next couple of years, unlike long-term financial goals (retirement, paying off a mortgage). Some examples of short-term financial goals include:
• Paying off credit card debt
• Saving for a vacation
• Saving for a wedding
• Stashing away money in an emergency fund.
Of course, goals will vary with your unique situation and . You might be totally focused on getting together enough money for the down payment on a new car, while your best friend might want to pay off their $10K in credit card debt.
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6 Short-Term Financial Goals
Take a closer look at some of the most common short-term financial goals.
1. Build an Emergency Fund
Often, a short-term financial goal involves saving for an emergency fund. This kind of fund usually contains enough cash to cover three to six months’ (or more in some cases) worth of living expenses. The idea is that, just in case something unexpected comes up — such as job loss or a major car repair — you can afford your bills without resorting to high-interest forms of funding, such as credit cards.
Not only can an emergency fund keep you out of debt, it can provide peace of mind. Knowing that it’s in place and that it’s growing can be an important form of financial security. Some tips:
• You can build an emergency fund by putting some money towards it every month. Consider setting up a recurring automatic transfer to send whatever you can spare (even $20 per paycheck) to the fund.
• It can be wise to set up a separate savings account for your emergency fund so you won’t be tempted to spend it. Look for a high-yield savings account to help your money grow faster.
• To build your emergency fund more quickly, funnel a large payment, such as tax refund or bonus, right into this account. A money windfall can really help plump up your savings.
Getting a sense of how much you are actually earning, spending, and saving each month is a critical step in working towards both short-term and long-term financial goals.
You can do this by tracking your income and expenses for a couple of months, to see what is flowing into and out of your checking account.
This will help you make a budget that helps keep your finances on track to meet your daily expenses and short-term savings goals. A few ways to accomplish this:
• Review and test-drive a couple of budgeting techniques. One popular method is the 50/30/20 budget rule, which can guide you to put 50% of your take-home pay towards needs, 30% toward wants, and 20% toward saving. See if one type of budget clicks for you.
• You might use a budgeting app to help you connect your accounts, categorize where your money is going, and see at a glance how you are progressing toward your short-term financial goals. A good place to start: See what kinds of financial insights tools your bank provides. You may find just what you are looking for.
• Consider third-party budgeting apps. You might search online or ask trusted friends if they are using one that they would recommend.
Once you see where your money is actually going, you may discover some surprises (such as $200 a month on lunches out) and also find places where you can easily cut back. You might decide to bring lunch from home a few more days per week, for example. Or you might want to cut back on streaming services or ditch the gym membership and work out at home.
This money you free up can then be redirected towards your savings goals, like creating an emergency fund, buying a house, or funding your retirement.
3. Pay Down Credit Card Debt
Another important financial goal example is paying down credit card debt. If you carry a balance, you may want to make paying it off one of your top short-term financial goals. The reason: Credit card debt is typically high-interest debt. The average annual percentage rate, or APR, charged by credit cards was above 20% in mid-2024, according to the Federal Reserve Bank of St. Louis. That means that items you buy with a credit card could potentially cost you a hefty amount more than if you pay with cash.
What’s more, because the interest on credit card debt can be so costly, it can make achieving any other financial goals much more difficult. Here’s how you might work toward paying off your credit card debt:
• You could try the debt avalanche method, which involves paying the minimum on all but your highest-rate debt. You then put all available extra funds toward the card with the highest interest debt. When that one is paid off, you would roll the extra payment to the card with the next-highest interest rate, and so on. By knocking out your highest-interest debt first, you may be able to save a chunk of money.
• Another option for paying off debt is the debt snowball method. With this technique, you pay the minimum on all cards, but use extra money to pay off the debt with the smallest balance. When that’s paid off, you move to the next smallest debt and so on. This can give you a sense of accomplishment as you get rid of debt which in turn can help keep you motivated.
• You might consider consolidating your debt by taking out a personal loan to pay off all of your cards. These usually offer a lump sum of cash to be paid off in two to seven years at a lower interest rate than credit cards. Having only one payment each month can help simplify the payoff process.
If you feel your debt burden is too great to be resolved with these options, you might want to speak to a certified credit counselor for advice.
4. Pay Off Student Loans
Student loans can be a drag on your monthly budget. Paying down student loans, and eventually getting rid of these loans, can free up cash that will make it easier to save for retirement and other goals.
One strategy that might help is refinancing your student loans into a new loan with a lower interest rate. You can check your balances and interest rates across your federal and private loans, and then plug them into a student loan refinancing calculator to see if refinancing offers an advantage.
Keep in mind, however, that if you refinance federal student loans with a private loan, you will lose access to such benefits as deferment and forgiveness. Also, if you refinance your loans into one with a longer term, you could wind up paying more in interest over the life of the loan.
Also note that not all refinancing options are created equal. There are bad actors out there who might promise to get rid of all your debt but will only damage your credit score. If you do refinance your student loans, you’ll want to make sure you’re working with a reputable lender.
5. Focus on Your Retirement Fund
Yes, saving for retirement is typically a long-term goal, but if you’re not yet saving for retirement, a great short-term financial goal may be to start doing so. Or, if you’re putting in very little each month, you may want to work on upping the amount. Here are a couple of specific ideas:
• If your employer offers a 401(k) and gives matching funds, for example, it’s normally wise to contribute at least up to your employer’s match. You can then start increasing your contributions bit by bit each year.
• If you don’t have access to a 401(k), consider an individual retirement account, or IRA. You may be able to set up an IRA online and start funding your retirement there. (Keep in mind that there are limits to how much you can contribute to a retirement plan per year that will depend on your age and other factors.)
While retirement is a long-term vs. short-term financial goal, taking advantage of this savings vehicle can reduce your taxes starting this year. Here’s why: Money you put into a retirement fund likely offers tax advantages, such as lowering your taxable income.
Even more importantly, starting early can pay off dramatically down the line. Thanks to the power of compounding returns (when the money you invest earns returns, and that then gets reinvested and earns returns as well), monthly contributions to a retirement fund can net significant gains over time.
6. Begin to Build Wealth
If you already have an emergency fund, you may want to start thinking about what you are hoping to buy or achieve within the next several years, and also building your wealth in general. As you save money, think about where to keep it to help it grow. The power of compounding returns, as mentioned above, or compounding interest in the case of a bank account, can really help in this pursuit.
• For financial goals you want to reach in the next few months or years, consider putting this money in an online bank account that offers a high interest rate vs. a traditional savings account, but allows access when you need it. Options may include a HYSA (high-yield savings account, often found at online banks) or a money market account.
• For longer-term savings, you may want to look into opening a brokerage account. This is an investment account that allows you to buy and sell investments like stocks, bonds, and mutual funds. A taxable brokerage account does not offer the same tax incentives as a 401(k) or an IRA, but it is probably much more flexible in terms of when the money can be accessed.
Just keep in mind that there’s risk here: These funds will not be insured as accounts at a bank or credit union usually are. Bank or credit union accounts are typically insured by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA) up to $250,000 per depositor, per account ownership category, per insured institution.
How Do You Create a Short-Term Financial Goal?
To create a short-term financial goal, identify what you want and how much money you need. Then, looking at your budget and seeing what cash you have available, see how long it will take to save up enough money. For instance, if you want to have $2,400 in a travel fund a year from now, you will need to put $200 a month aside. Check your cash flow and see where you can free up funds (maybe reduce takeout food and fancy coffees, for starters) to meet this goal.
How to Set SMART Financial Goals
In addition to the short-term financial goals examples and guidance above, there’s another way to think about this topic: using the acronym S.M.A.R.T. This system can help you both with identifying and achieving your goals. Here’s what this stands for and how considering your financial aspirations through this lens can be helpful:
• Specific: A goal should identify exactly what you are saving for, whether that’s paying off credit-card debt or buying a used car.
• Measurable: How much is your goal? How much do you need to save? Perhaps your credit card balance is $5,673. That would be your measurable goal.
• Attainable: Make sure your goal is realistic (you may not be able to pay off your entire credit card debt in a month or even a few months) and develop strategies to achieve it, such as working on alternate Saturdays to bring in more money (a benefit of a side hustle).
• Relevant: Check that your goal really matters to you and isn’t just something you’re doing to, say, keep up with your friend group. Do you really need to save towards a potentially budget-busting vacation?
• Time-bound: Set “by when” dates for your goals. This helps to keep you accountable. If you want to save $3,600 for an emergency fund within a year, figure out how you will come up with the $300 per month to put aside.
Using the SMART method can help you crystallize and achieve your short-term financial goals.
Difference Between Short-Term and Long-Term Financial Goals
In discussing short-term financial goals, it’s likely that you might wonder how these differ from long-term goals. Here are a few examples that can help clarify the aspirations above from those that require a longer timeline.
Examples of Long-Term Goals
• Save for retirement
• Pay off a mortgage
• Buy a second home or investment property
• Save for a child’s (or grandchild’s) college education
• Fund a business idea
• Take out life insurance and/or long-term care policies
Of course, long-term goals will vary from person to person. One individual might be focused on being able to retire at age 50 while another might aspire to make a significant charitable contribution.
The Takeaway
Short-term financial goals are the things you want to do with your money within the next few years. Some typical (and important) short-term goals include setting a budget, starting an emergency fund, and paying off debt. In addition, opening a retirement account and otherwise building wealth can be valuable goals, too.
Having the right banking partner can help you reach your near-term money goals. See what SoFi offers.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.00% APY on SoFi Checking and Savings.
SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.
As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.
SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.
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.
Retail banking involves offering financial services to individual consumers rather than businesses or other banks. It encompasses a range of products and services, such as checking and savings accounts, mortgages, personal loans, credit cards, certificates of deposit (CDs), and more.
Retail banking is different from corporate banking, which is the part of the banking industry that serves large companies and corporate customers. Retail banks can be local community banks, online banks, or the divisions of large commercial banks. Credit unions also offer retail banking.
Read on for a closer look at what retail banking is and how it differs from corporate banking.
Key Points
• Retail banking provides financial services directly to individual consumers, including checking and savings accounts, personal loans, and credit cards, rather than to businesses or corporations.
• Various forms of retail banks exist, such as commercial banks, credit unions, online banks, and community banks, each catering to different customer needs.
• Retail banks focus on accessible services, offering features like online banking, investment products, and personalized customer assistance to help individuals manage their finances.
• The distinction between retail and corporate banking lies in their client bases, with retail serving individual consumers and corporate banking focusing on businesses and institutions.
• Retail banking plays a vital role in the economy by facilitating transactions and helping individuals save, manage money, and access credit for their personal financial goals.
What Is Retail Banking?
Retail banking, also known as personal or consumer banking, refers to financial services provided to individuals. This type of banking is designed to serve the general public and to help people and families manage their money, obtain credit, and save for the future.
Retail banks focus on making banking services easily accessible, either through physical branches, ATMs, and/or online platforms. These banks play a crucial role in the economy by offering checking accounts, high-yield savings accounts, certificates of deposit, loans, and other financial products that help individuals safely store, manage, and grow their money.
Though some retail banks also work with small businesses, retail banking is different from corporate (also known as commercial) banking, which involves working with commercial entities, such as large businesses, governments, and institutions.
Most large-scale banks have retail banking divisions. Credit unions and smaller banks, on the other hand, may be exclusively focused on retail banking.
Retail banking works by offering financial products and services tailored to consumers. These services are designed to help individuals and families manage their finances efficiently, save for the future, and access credit cards and loans. Retail banks make money primarily through interest on loans, fees for services, and charges for various banking products.
Features of Retail Banking
Retail banking offers a hub for all of your basic financial transactions. Here’s a look at some of the products and services they provide.
• Savings and checking accounts: Retail banks offer savings and checking accounts to help individuals manage their money. Savings accounts typically earn interest, while checking accounts provide easy access to funds for day-to-day transactions.
• Consumer loans: Retail banks commonly offer personal loans, auto loans, and home mortgages. These loans can help people finance significant purchases or investments, such as buying a home or car.
• Credit Cards: Retail banks issue credit cards that allow consumers to borrow money up to a certain limit for purchases. These cards often come with rewards, cash back, and other incentives.
• Online and mobile banking: Retail banks typically provide online and mobile banking services, allowing you to manage your accounts, transfer money, pay bills, and access other banking services from your computer or smartphone.
• Investment services: Some retail banks offer investment products like mutual funds, retirement accounts, and brokerage services to help customers build wealth over time.
• Customer service: Retail banks typically emphasize customer service. Many provide personalized financial assistance through branch staff, call centers, and online support.
Types of Retail Banks
Retail banks come in various forms, each catering to different customer needs and preferences. Here’s a look at some of the main types of retail banks.
• Commercial banks: Many people access retail banking through one of the large, commercial banks, which generally offer a retail banking division along with corporate banking services.
• Credit unions:Credit unions are nonprofit financial institutions owned by their members. They often provide similar services to commercial banks but with a focus on serving the financial needs of their members, usually offering lower fees and better interest rates.
• Online banks: Online banks operate exclusively online, without physical branches, though you typically have access to a partner network of ATMs. They often offer higher interest rates on savings accounts and lower fees due to reduced overhead costs.
• Community Banks: Community banks are smaller, locally-focused institutions that prioritize serving the needs of their local communities. They offer personalized customer service and often have a strong understanding of their local markets.
How Is Retail Banking Different From Corporate Banking?
Retail banking and corporate banking represent two different sectors of the banking industry, each serving different customer bases and offering different services.
Retail banking focuses on individual consumers, providing them with products like bank accounts, personal loans, and credit cards. Corporate banking, on the other hand, serves businesses and corporations, offering services like business bank accounts, commercial loans, trade finance, and employer services.
Transactions in retail banking are typically smaller in size and higher in volume compared to corporate banking, which tends to focus on larger, more complex transactions.
If you’re wondering whether you would be better served by retail vs. corporate banking, here’s a snapshot how the two compare.
Retail Banking
Corporate Banking
Client base
Individual consumers
Businesses, institutions, banks, government entities
Products and services
Personal checking/savings accounts, mortgages, personal loans, credit cards
Business checking/saving accounts, business loans, merchant services, global trade services, employee benefits plans
Loan amounts
Lower
Higher
Transaction frequency and amounts
High number of transactions for low amounts
Low volume of transactions for more significant amounts
The Takeaway
Retail banking is the public face of banking that provides banking services directly to individual consumers rather than businesses or other banks. Most of us bank at a retail bank or retail division of a large commercial bank whether we realize it or not.
Whether you use a brick-and-mortar bank, online bank, or credit union, retail banking offers products and services that allow you to manage your money, access credit, save for the future, and work toward your financial goals.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.00% APY on SoFi Checking and Savings.
FAQ
What is an example of retail banking?
An example of retail banking, also known as consumer banking, is when an individual opens a savings account at a local bank. The bank then allows them to deposit funds, withdraw money, and earn interest on their deposits. The same bank might also offer them a checking account for daily transactions, a mortgage to buy a home, and a credit card for everyday purchases. These services are all examples of retail banking, which is aimed at meeting the personal financial needs of individual consumers.
What are the largest retail banks?
The largest banks in the U.S. that offer retail banking include:
• Chase
• Bank of America
• Wells Fargo
• Citibank
• U.S. Bank
• PNC Bank
• Goldman Sachs Bank
• Truist Bank
• Capital One
• TD Bank
Who uses retail banking?
Retail banking is used by individual consumers to manage their personal finances. This includes:
• Students
• Young adults
• Working professionals
• Couples
• Families
• Retirees and seniors
• Small business owners
What are the retail banking products?
Retail banking offers a variety of products and services tailored to the financial needs of individual consumers. These include:
• Savings accounts
• Checking accounts
• Personal loans
• Mortgages
• Credit cards
• Certificates of deposit (CDs)
• Investment products
• Online and mobile banking services
• Debit cards
Photo credit: iStock/Passakorn Prothien
SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.
As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
A payee of a check is the person or business to whom the check is made out and who will receive funds. While checks may not be used as often as they once were, they are still an important way to make payments, and one that can require a bit of knowledge to use properly.
Key Points
• A payee is the individual or business designated to receive funds from a check, clearly indicated on the payee line of the document.
• The payor, or payer, is the person writing the check, and they can also be the payee if they write a check to themselves.
• Payees can receive payments through various methods including cash, credit cards, electronic transfers, and mobile payments, each with distinct advantages.
• Identifying the payee on a check is straightforward, as it appears at the top where it states “pay to the order of.”
• To avoid fraud, individuals should handle checks securely by using a pen, verifying information, and avoiding mailing checks whenever possible.
What Is a Payee?
What is the payee? As briefly noted above, the payee is the individual who receives the payment. When a payment is made via a check, their name is written on the payee line.
A paper check is a form of payment that transfers money from one bank account to another. For a check to be valid, it has to have the recipient’s name (aka the payee), payment amount, and date written on it clearly. Checks can be a very convenient way to make a payment or to give someone a gift. They are also considered to be fairly secure forms of payment as only the person named on the check can cash the check.
It’s also possible to make a payment via an electronic check. The way an electronic check (which can also be called an e-check) works is essentially the same as a paper check minus the paper. It’s possible to send a check digitally and the payment will be transferred via an ACH (automated clearing house) network.
Payee vs Payor: What’s the Difference?
Who is the payee? Here’s the difference:
• The payee is the party receiving the payment when someone writes a check.
• The payor on the other hand is the party who is making the payment. It’s also common to hear the payor referred to as the payer. The individual who writes the check is the payer.
It is possible for the payor and the payee to be the same person. An individual can pay themselves via a check by writing their own name on the payee line. This is commonly done when transferring funds from one account to another or from one bank where the individual has an account to a second bank they have an account at.
What does payee mean? While one meaning is the recipient of a check, that’s not the only way a person or business can be paid. Payees can also receive funds by a variety of different payment methods, such as:
• Cash: Yes, dollar bills (and other denominations) still have a place around the world.
• Credit card: You can swipe, insert, or tap your way to pay for goods or services.
• Money order: These are available for purchase at U.S. post offices and via services like Western Union
• Electronic transfer: Examples of this include when your paycheck is put into your checking account by direct deposit
• Mobile wallet payment: Say you have dinner with a friend, but you pay for it and your friend pays you back via Apple Pay/Apple Cash or a similar app.That’s an example of a mobile payment in action.
All of these payment formats have different advantages and disadvantages. So it’s important to research all options individually to see which one is the most convenient, costs the least, and is the most secure. Sometimes you aren’t given a choice about how to make a payment (such as a landlord having a specific preference for how they want to receive rent payments), but many individuals and vendors accept a handful of different payment methods.
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No account or overdraft fees. No minimum balance.
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How to Identify a Payee on a Check
Figuring out who a payee on a check is isn’t hard, especially since all checks follow the same format. If someone is reading a check and wants to know who the payee is, all they have to do is look at the top of the check where it says “pay to the order of.” This part of a check is known as the payee line, and it designates who can cash the check.
The payee can be an individual or a business when paying bills. When filling out a check, it’s important to write the individual or business’s full name (so if it’s Jane Smith Brown, don’t write J.S. Brown). The payee’s name must be spelled correctly, or they may not be able to cash the check.
Fraud can happen with a variety of payment formats, including check. When making a payment via check, it’s important to keep security top of mind to help avoid check fraud (which is notoriously difficult to resolve). These are some tips that can help consumers handle checks safely:
• Fill out the check using a pen so the payee’s name and the payment amount can’t be changed.
• Double-check that the payee’s name and the payment amount is correct.
• Print clearly when filling out a check; cursive writing can lead to mistakes.
• Don’t sign a blank check — ever. If you do, there’s the risk that a thief or the payee could fill in whatever amount they want.
• If possible, don’t send checks by mail since they can be stolen. This is especially true for checks for a large amount of money.
• If you must mail a check, try to use security envelopes, which are the kind that aren’t see-through, so a potential thief can’t tell there is a check inside.
• When mailing a check, mail it via the post office, versus leaving it in a residential mailbox to be picked up.
• If you are concerned about making a mistake when sending a check, you can always choose to do an ACH payment instead. When transferring money via ACH, it’s actually possible to reverse mistakes. Another option could be a wire transfer, which may be reversible if one acts quickly enough.
And what if you are receiving a check? Follow these pointers:
• It’s important to deposit it fairly soon. Otherwise it might get misplaced and expire. How long are checks good for? Typically, they are valid for six months.
• It’s wise to only cash a check from someone the payee is familiar with and that the check is for the correct amount. It’s best not to cash a check that is for more money than is owed. Here’s why: A common form of check fraud is to give someone a check for more money than they owe and then to ask for a refund. The victim sends the refund, only to discover the check they deposited bounced, meaning they have lost money on this transaction.
• You may be able to sign the check over to someone else (say, a friend you owe money to); make sure you follow the correct steps carefully to ensure a smooth transaction.
The Takeaway
Financial terminology isn’t necessarily complicated. Wondering who is the payee of a check? The payee is the individual receiving payment via check, and they are usually the only individual who can cash the check (unless it gets signed over). Making a payment via check is very convenient, but it’s important to keep safety top of mind when making a payment this way, especially if the payor plans to mail the check.
Whether you are receiving or writing checks or do most of your transactions electronically, opening an account with an online bank can simplify your financial life. For instance, with a SoFi Checking and Savings account, you can spend and save in one convenient place and have options like Vaults and Roundups to help your cash grow. You’ll also earn a competitive annual percentage yield (APY), and pay no account fees, which is also part of our better-banking benefits. Another perk? Qualifying accounts with direct deposit can access their paycheck up to two days early.
Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.00% APY on SoFi Checking and Savings.
FAQ
What are payee requests?
If someone comes across a payee request, this is usually because they are filling out a form that is requesting the proper information to pay someone. Information such as their name, address, and bank account and routing numbers may be required, depending on the chosen form of payment.
Can you get scammed by a payee?
It is possible to get scammed by a payee. People can request payment for goods and services and may not deliver on their promise. It’s possible for payees to commit a variety of types of fraud.
Can the payee ever be the one who sends the payment?
In most cases, the payee is not the person to send a payment but rather the recipient of funds. The payor (or payer) is the individual who makes a payment. That said, there are instances when a person might make out a check to themself as a way to, say, transfer funds to a different account. In this case, they are both the payee and the payor.
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SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.
As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.
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