Guide to Deposit Interest Rates

Guide to Deposit Interest Rates

A deposit account — such as a savings account or interest-bearing checking account — can be an attractive place to park your cash. It’s safe, allows relatively quick access, and even helps you earn a little bit of money, thanks to what’s known as the deposit interest rate.

The deposit interest rate is the amount of interest that a bank or other financial institution will pay you when you make a deposit. (You may also hear it referred to by such terms as simply the interest rate or the APY, for annual percentage yield.) Understanding deposit interest rates can help you choose among banking products and find the one that best suits your needs. Learn more here.

What Is a Deposit Interest Rate?

When you put money into a deposit account, your bank or financial institution will pay you interest. Why? Banks make money by using a portion of the money that’s deposited with them to make loans to other customers, perhaps as a mortgage, business loan, or personal loan.

The bank pays you interest for the privilege of lending out your money. They will then charge a higher interest rate on the loans they make, which is how the bank turns a profit.

Incidentally, just because a bank is loaning out your money doesn’t mean your cash won’t be there when you need it. Banks typically carry a cash reserve to cover withdrawals their customers need to make.

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*Earn up to 4.00% Annual Percentage Yield (APY) on SoFi Savings with a 0.20% APY Boost (added to the 3.80% APY as of 7/10/25) for up to 6 months. Open a new SoFi Checking & Savings account and enroll in SoFi Plus by 8/12/25. Rates variable, subject to change. Terms apply here. SoFi Bank, N.A. Member FDIC.

How Does a Deposit Interest Rate Work?

Deposit interest rates in banking are expressed as percentages. The amount of interest you earn will be based on how much cash you’ve deposited in your account, also known as your principal.

The interest rate you’re offered will vary by account. For example, a simple savings account may offer a relatively low interest rate, while a high-yield savings account or a money market account may offer a higher rate.

Your interest rate will also be determined in part by the federal funds rate. That rate is the amount the Federal Reserve suggests banks charge to lend each other money overnight.

Recommended: How Does a High Yield Savings Account Work?

How Is Deposit Interest Rate Calculated?

Wondering how interest rates are calculated? It usually is done in one of two ways: as simple interest or compounding interest.

Simple interest is a matter of multiplying the principal by the interest rate. As the name suggests, it is easier to calculate. However, most banks will use compounding to calculate interest rates. Compounding interest essentially allows you to earn a return on your returns, which can help your money grow exponentially. So your principal earns interest, and that amount of interest is added to the principal. Then the interest rate gets calculated again at a certain interval based on that pumped-up principal. This keeps happening, helping your savings grow. Interest can compound at various rates, such as continuously, monthly, or annually, depending on the product and financial institution.

Ways Deposit Interest Rates Are Applied by Institutions

Financial institutions can apply interest rates in a variety of ways. First, they can be fixed or variable. A fixed interest rate guarantees that you will receive an interest payment equal to a certain percentage of your principal. This percentage won’t change over the life of the account. So if your interest rate on your money is set at, say, 2%, that is what you will get, period.

A variable interest rate, on the other hand, may change according to shifts in a benchmark interest rate, such as the federal funds rate. As the benchmark rises, so too will the interest rate. What if the benchmark drops? That means you’re paid less interest.

Additionally, some deposit accounts will offer higher interest rates for larger balances. A certificate of deposit, or CD, may offer you better interest rates if you agree to park your cash in the account for a longer term.

Here’s how to do the math on a couple of examples of deposit interest rates. If you’re a bank customer with $10,000 to deposit, here are two scenarios:

•   Bank 1 is a bricks-and-mortar bank offering 0.01% interest. (Remember, one percentage point is one-hundredth of a whole.) If you deposit your $10,000 for one year, you’ll earn: 10,000 x 0.0001 = 1. At the end of 365 days, you will have the principal plus the interest, or $10,001.

•   Bank 2 is an online bank offering 1.0% interest. If you deposit the same $10,000 for a year, you’ll earn: 10,000 x 0.01 = 100. You’ll have $10,100 at year’s end.

Types of Deposit Interest Rate Accounts

There are a variety of different deposit account types that you might encounter. Here are four of which you should be aware. We’ll explain how each one works.

1. Savings Accounts

Savings accounts are designed specifically as a place for you to put cash you might need in the short-term. For example, you might keep your emergency fund in a savings account, since you’d need quick access to cash if your car’s transmission failed or you had to cover an unexpected medical bill.

Not only does your savings account allow you to earn interest, it is also one of the safest places you can put your money. That’s because the Federal Deposit Insurance Corporation (FDIC) guarantees your money, up to $250,000, per depositor, per account category, per insured institution, as it does with the deposit accounts below. That means in the rare case that your bank fails, you will still have access to your money.

You can deposit cash at an ATM, in person, or through mobile deposits. You can deposit checks or cash into the account, too. When you make a deposit, your funds may not be immediately available for use. Check with your bank to understand their rules around fund availability.

2. Interest-Bearing Checking Accounts

Many checking accounts have very low fees and don’t pay interest. As a result, it doesn’t make sense to keep a lot of money in this type of account. In fact, you may want to keep just enough to pay your bills.

Interest-bearing checking accounts are an exception. They allow you to collect interest on your account, which could be a nice perk. After all, you may well have your paycheck deposited there by setting up direct deposit, which can make your funds available quickly. Whatever remains in your account after paying your bills could be earning you some interest.

However, these accounts may be more complicated and expensive, with higher fees and minimum balance requirements. It’s important to make sure that the expense of holding the account doesn’t outweigh the interest paid.

💡 Quick Tip: If your checking account doesn’t offer decent rates, why not apply for an online checking account with SoFi to earn 0.50% APY. That’s 7x the national checking account average.

3. Certificates of Deposit

A certificate of deposit, or CD, is a product offered by financial institutions that offers a higher interest rate if you agree to keep your funds in place for a period of time. Typically, the length of time is from six months to a few years, but it could be anywhere from one month to 20 years. The longer the period, the higher the interest rate you will probably be offered.

Here’s the rub: If you find that you need the money in the CD before the account matures (meaning the agreed-to time period passes), you’ll likely have to pay early withdrawal penalties. That said, it is possible to get CD’s with no-penalties, but you may have to compromise, such as by accepting lower interest rates.

4. Money Market Accounts

Money market accounts, on the other hand, pay interest and allow for withdrawals. They often pay higher interest rates than traditional savings accounts. However, in return, these accounts may require you to make higher initial deposits and they may have minimum balances, which could be $10,000 or more.

Like checking accounts, money market accounts can offer checks and debit cards, though they may limit the number of transactions you may make per month.

The Takeaway

There are a number of different deposit accounts that offer a deposit interest rate, ranging from checking and savings accounts to CDs and money market accounts. The interest rates will likely vary. For example, with CDs, the rates may depend on factors such as account minimums or term of deposit. Understanding these kinds of “fine print” differences will help you find the right match for your needs, whether your goal is the highest possible interest or having enhanced access to your funds.

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

Do you get interest when you deposit money?

When you deposit money in an interest-bearing deposit account, you will start to earn interest. In other words, your money makes money.

Which deposits pay more interest?

The amount of interest you earn will depend on your interest rate and the amount of money in the account. The more money you deposit and the higher the interest rate, the more interest you will earn. Also, online banks typically pay interest rates than bricks-and-mortar banks.

Do all banks have deposit interest rates?

Banks that offer interest-bearing deposit accounts will always offer a deposit interest rate.


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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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Average Credit Card Processing Fees in America in 2022

Average Credit Card Processing Fees and Costs in America

Average credit card processing fees can range anywhere from 1.5% to 3.5%. While a few percentage points may seem low, these fees can add up and impact your business’ bottom line.

Whether you’re a merchant who runs your own business or someone with a side hustle, if you accept credit card payments, fees are likely going to eat into your gross profit. Read on to learn more about credit card processing fees and how you can reduce them.

What Is a Credit Card Processing Fee?

A credit card processing fee describes all of the fees charged to accept credit cards as a form of payment. These, which are incurred by merchants that accept credit card payments, can include interchange fees, payment processor fees, and assessment fees.

Processing fees can run over 3% of a total transaction. Rates can vary based on the size and location of a business, as well as the types of transactions and cards that are accepted.

Generally, businesses bake credit card transaction fees into their pricing in the form of credit card merchant fees. However, some businesses may provide a discount if a customer pays with cash. Others may set a minimum payment amount they’ll accept by card. Understanding how credit cards work can give insight into why some businesses don’t accept credit card payments.

Types of Credit Card Processing Fees and Costs

Credit card processing fees actually combine several fees. When talking about credit card processing fees, merchants are generally talking about the following:

•   Interchange fees

•   Assessment fees

•   Payment processor fees

Some of these fees, like payment processor fees, can vary depending on the credit card processor a merchant chooses. Others, like interchange fees, are set by the credit card companies and depend on the cards used.

Recommended: Charge Cards Advantages and Disadvantages

Interchange Fees

Interchange fees are collected by credit card issuers from the merchant when a credit card or debit card is used. Interchange rates vary depending on:

•   The type of card used

•   The type of business

•   The amount of the transaction.

Interchange rates can also vary depending on whether the payment was made online or in store.

Generally, interchange rates are presented as a percentage of the sale, plus a flat fee. For example:

•   If Hailey buys $50 worth of groceries with XYZ card, the grocer would have a set interchange rate based on XYZ card, which may be slightly different than ABC card.

•   XYZ card may have a 1.15% interchange rate, plus a flat fee of $0.30. That would mean that, from Hailey’s transaction, the store would owe $0.88 as an interchange fee.

Assessment Fees

An assessment fee is levied by the credit card network (the brand name on the card a cardholder uses, such as MasterCard or American Express). This fee may vary depending on whether the card is a credit card or debit card, as well as on the volume of transactions a business makes. There also may be larger international fees.

Unlike the interchange fee, an assessment fee is standard across transactions. It is also generally lower in amount than an interchange fee.

Card Processor Fees

Payment processor fees go to the payment processor, which facilitates the transaction. The card processor is the intermediary that communicates between the card issuer and the merchant bank. It may also include the point of sale (POS) system and provide the devices to take credit card payments.

The merchant does have some control over the amount of these fees. Credit card processing fees vary depending on the payment model selected. Costs could include per-transaction fees, a monthly service fee, and equipment rental fees.

Average Card Processing Fees in 2024

As mentioned above, card processing fees in 2024 depend on several factors, including whether payments are primarily processed in person or online. That said, average credit card processing fee ranges are provided below for the major credit card networks:

Average Credit Card Processing Fees By Network

Network Processing Fee Range
Visa 1.4% – 2.5% interchange; 0.14% assessment fees
Mastercard 1.5% – 2.6% interchange; 0.1375% assessment fees
Discover 1.55% – 2.5% interchange; 0.14% assessment fees
American Express 2.3% – 3.5% interchange; 0.165% assessment fees

In addition, there can typically be a per-use charge (say, 10 to 22 cents) which varies depending on, say, whether the transaction was in-person or online or over the phone.

Note that American Express is considered a bit differently than other credit card companies. Unlike the other three credit card companies in the table above, American Express is a closed-loop network. This means that it is not backed by another financial institution, which gives it more control over its practices and charges. American Express calls the fees it charges “discount fees,” which operate similarly to interchange fees.

If you do have an American Express card, this wouldn’t have any impact on things like your credit card limit or credit card minimum payment, but it may affect where your card is accepted due to generally higher fees.

Recommended: What Is a Credit Card Minimum Payment?

Factors That Determine Interchange Fees

Adding to merchant confusion, interchange fees vary depending not only on the merchant, but also depending on what sort of credit card is used in a transaction. Interchange fees are usually between 1% and 3.5% of the overall sale, but the actual percentage varies on a host of factors that are discussed below.

Credit Card Type

Credit card type plays a role in determining the amount of the interchange fee — even if all cards fall under the same brand. In general, debit cards have lower interchange rates than credit cards, which are unsecured debt.

Part of how a rate is assigned is based on risk level. For a merchant bank, a debit card can be less risky because the money is already accounted for within your account. (This is also why the process of how to apply for a credit card is more involved than it is for a debit card.)

Merchant Category Code

Shopping at a supermarket? Then you may be paying a different interchange rate than you would at the hardware store or dry cleaners. Every merchant has a category code, and those merchants within the same category will have the same fees.

Method of Processing

How a payment is processed will also affect the rate of interchange fees. Card companies assess the risk of the transaction, considering the potential for fraud, chargebacks, and other things that may go awry.

For this reason, they may assign different interchange rates based on whether a purchase was completed online, in person, or even whether the purchase was made via swipe or tapping technology.

Network

Each credit card network sets its own fees based on the type of merchant. While the majority of the fee goes to the bank that issued your card, a small amount will go to the card network itself. This money will then be used to fund credit card rewards, perks, and protections offered by the card — all key parts of what a credit card is.

Pricing Models for Processing Fees

There are various pricing models for processing fees, and merchants can assess which one works best for them based on how they do business. There are three common models to consider: flat rate pricing, interchange plus pricing, and tiered pricing. Here’s a closer look:

Flat Rate Pricing

Like the name suggests, flat rate pricing provides a fixed rate for all transactions, which is inclusive of processing fees and interchange fees. This can be convenient, as it makes it easy to predict costs. However, it also could mean that your business is overpaying for transactions that have lower interchange rates, such as purchases made with a debit card.

Interchange Plus Pricing

Interchange plus pricing provides a detailed analysis of fees by breaking out interchange fees, assessment fees, and processor fees. This can be great for businesses looking for a level of detail into the fees they’re paying, and it can also help ensure that you’re not overpaying fees. However, some businesses may find this level of detail overwhelming.

Tiered Pricing

With tiered pricing, prices for interchange rates are separated into one of three tiers: qualified, mid-qualified and non-qualified. Tiering is dependent on how payment occurs (for example, in person or online) as well as how the card processing occurs (a payment may be downgraded based on how the card is processed).

While statements can be easier to read with this model, there’s less transparency than with interchange plus pricing. Additionally, because merchants can’t separate interchange fees from processing fees, it can be challenging to see a fee breakdown and understand the costs at a greater level of specificity.

Other Credit Card Processing Fees and Costs

In addition to the credit card processing fees outlined above, you also may pay a monthly subscription fee for processor use. This is independent of the number of transactions and may include customer service, POS equipment, and more. Sometimes, a higher subscription fee may result in a lower fee per payment.

You may also pay a fee for the initial setup when you sign up for a credit card processing company. What’s more, you could owe fees for if a customer disputes a credit card charge, in the instance of any chargebacks, and for non-sufficient funds.

How Often Do Payment Networks Update Their Interchange Fees?

Interchange fees are typically updated twice a year, though some might only do so annually or could refresh their fees more often.

Typically, rates have been rising by a fraction of a percentage point for payments made by credit card. This may not sound like a lot, but this can add up significantly — especially as more consumers are using cards over cash. Just think if your annual percentage rate (APR) on your credit card was to inch up; it’s a similar situation.

Recommended: When Are Credit Card Payments Due

The Takeaway

Credit card processing fees typically amount to between 1.5% and 3.% of a total transaction. Understanding credit card processing fees isn’t only helpful for entrepreneurs and small business owners. It can also help consumers understand why there might be an additional fee charged for certain payments made with cards. It’s all part of being a knowledgeable cardholder and using credit responsibly.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

What is the typical fee for credit card processing?

The typical fee for credit card processing in 2024 is 1.5% to 3.5% for transactions. The rate is dependent on the type of transaction (in general, debit cards cost less to process than credit cards) and the processing system the merchant chooses. The actual percentage per swipe varies based on a host of factors.

Can I avoid credit card processing fees?

There are no ways to entirely avoid credit card processing fees, but there may be ways to make fees more manageable. One common way for businesses to manage credit card processing fees is to bake them into pricing and to offer cash discounts. Another way to potentially avoid credit card processing fees is to accept ACH payment methods for services.

Can the type of credit card determine processing fees?

Yes, the type of credit card is one factor that determines processing fees. For example, different categories of cards, such as reward cards, can have different fees than other cards, like debit cards.


Photo credit: iStock/tdub303

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.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.


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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Tips for Financially Surviving a Layoff

Tips for Financially Surviving a Layoff

Losing your job can be emotionally painful (weren’t you doing a good enough job?) and can throw your finances for a major curveball. How will you pay your bills? How long will this situation last?

Take a deep breath, and arm yourself with knowledge for financially surviving a layoff. Whether you’re going through this situation right now or are worried it might occur, you can likely make adjustments and you can make and tap resources to weather this challenge. It’s a phase to move through but not to define you. Read on to learn:

•   How to budget when laid off

•   How to file for unemployment benefits

•   How to prioritize debt

•   How to bring in income.

Preparing Financially for a Layoff

Unfortunately, layoffs seem to be a part of modern life. In the first nine months of 2023, there were more than 605,000 layoffs, which marked a 198% increase versus the year prior. That’s not heartening, but it’s a way of saying that if you are laid off, you are not alone, and it can also be wise to prepare financially for a layoff if you are currently employed.

Not having a steady income probably means you’ll have to figure out how to pay your bills when laid off. Until you find another stream of income, it’s important to keep your budget in order and learn to live within your means. Being financially prepared means having a clear understanding of what your expenses are so you can stay on track, especially with debt, if you have it. There are also resources you can access that may help with your cash flow during this difficult time.

Steps to Take to Prepare for a Layoff

Here are some smart moves that can help you be prepared and not panic if you do get laid off.

Start an Emergency Fund

A common strategy is to build up an emergency fund prior to an event like job loss. It’s a way of preparing for a layoff before it happens. An emergency or rainy day fund is typically a savings account that you’ve been adding to on a weekly or monthly basis. Having roughly three to six months’ (or more) worth of monthly expenses is helpful. That sum can tide you over at a moment of job loss and give you peace of mind.

•   You may want to automate your savings and have a small amount ($25 can get the ball rolling) transferred from checking to savings every payday. Or have that amount direct-deposited into savings.

•   The emergency fund should only be accessed for emergencies, as its name suggests. (No fair dipping into this kind of savings account when there’s an amazing sale at your favorite store.)

•   If you have the opportunity to contribute more than usual (say, you receive a financial windfall, like a bonus or a tax refund), do boost your emergency savings because you never know when you will need to tap into that account.

Budget, Budget, Budget

If you have an inkling that your company is preparing to lay off some employees or if you lose your job, it’s wise to double-check your weekly budget. This means separating your necessary spending from your discretionary spending.

•   Necessary expenses include things like rent or a mortgage, utilities, food, and health insurance. Don’t forget about minimum debt payments, such as student loan and credit card payments.

•   Discretionary spending may include traveling, dining out, new clothes, and entertainment.

It can be helpful to focus on how much you need to spend each month for necessary expenses (some people refer to this as their monthly “nut.”) Make a list of these basic living expenses and see what they total. Then, pre-layoff, you’ll also see how much you can allocate for activities that you want to do. It’s probably not the best idea to spend every penny each month. You want to have extra money at the end of the month to put toward savings.

If and when a layoff hits, you’ll focus on necessities and minimize your discretionary spending (more details below). You can also tweak your budget when unemployed to, say, cut back on some long-term savings to get you through this moment.

File Unemployment Benefits

If you do lose your job, you may be able to qualify for unemployment benefits. This can get some funds flowing your way to help tide you over.

•   Read the eligibility requirements to see if your situation aligns with the rules for unemployment. The eligibility requirements are likely to vary from state to state and may be determined on a case by case basis; payment amounts will vary as well.

•   If you qualify, filing for unemployment benefits will allow you to receive payments if you are out of a job due to no fault of your own. (There is a possibility that those who are fired because they don’t meet job qualifications may receive funds as well.)

•   Generally, to qualify for unemployment benefits, you should be able and available for work, as well as be looking for employment. Once you’ve determined your eligibility, you can file on your state’s official government office of unemployment compensation website. The site should give you guidance on when to expect benefits.

Ask About Severance Packages

Severance pay can be provided for employees after they are no longer employed at a company. Severance is based on the duration of employment, but your employer is not required to provide severance upon termination.

If you were terminated through no fault of your own, employers may pay, for example, two weeks of salary for each year of employment. Severance may also include health insurance benefits and even services to help you find a new job. These can be very helpful supports when you’ve lost your job.

Use Credit Cards Only for Emergencies

If you become unemployed, it’s wise to stop using credit cards to make purchases. Paying with your credit card creates debt that comes with high interest rates (currently more than 20%). At such high interest rates, debt can really snowball.

Also, when you are out of work, it can be challenging to pay an existing credit card balance. If you manage to pay the minimum balances of your credit card debt rather than paying in full every month, the credit card debt may cost you more over time since you also have to factor in added interest.

If you find yourself in this kind of a bind with credit card debt, take action. Consider a balance transfer credit card that offers no or very low interest rates for a period of time. Or speak with a debt counselor at a nonprofit organization like the National Foundation for Credit Counseling (NFCC).

Make Sure Emergency Funds Are in Order

Emergency funds, as mentioned above, are an important part of a financial plan and can be a lifesaver for someone who is unemployed. If you are in a situation where you unexpectedly don’t have a stream of income until you find another job, you’ll be more at ease if you have built up an emergency fund over time, as mentioned above.

In this case, you can dip into your emergency fund for mandatory expenses to fulfill your short-term needs. If you don’t have emergency funds, unemployment benefits become that much more important. Borrowing from a close friend or a family member might also be an option.

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*Earn up to 4.00% Annual Percentage Yield (APY) on SoFi Savings with a 0.20% APY Boost (added to the 3.80% APY as of 7/10/25) for up to 6 months. Open a new SoFi Checking & Savings account and enroll in SoFi Plus by 8/12/25. Rates variable, subject to change. Terms apply here. SoFi Bank, N.A. Member FDIC.

Practical Tips for Saving Money After a Job Loss

Saving money after a layoff can certainly be difficult. You don’t have the usual cash infusion to pay your bills and buy groceries. That is why you need to proceed with caution and learn how to economize when you lose your job. Here are strategies for making ends meet during this difficult time.

Get Back on LinkedIn and Start Networking

If you’re job-hunting, Linkedin can be a great tool for networking. The platform is set up so you can find and interact with former colleagues, alumni from your college, and professionals at companies you aspire to work for.

•   Start commenting on people’s Linkedin posts and have conversations with existing connections.

•   Build up your profile so recruiters know your job history, your professional skills, and that you are looking for work. This can lead to job opportunities.

Prioritize and Negotiate Any Debts if Needed

Continuing to pay down debt while unemployed should still be a priority. One strategy to pursue is paying off debt that has the highest interest rate. Debt with higher interest rates cost more, so paying this off first will have you saving money in the long-term.

But “How can I pay down debt if I don’t have income?” you are probably wondering. One answer: Try to negotiate your debt. It can be possible to work with your credit card company to negotiate interest rates, payment amounts, and the terms on your credit card debt.

Avoid Luxuries Temporarily

Being unemployed can be a frightening experience. You no longer have a steady flow of income and may not feel financially prepared to weather short-term expenses. To ease this burden, work to eliminate spending on luxuries. Now might be a good moment to downsize streaming services and other subscriptions.

Also eyeball what expenses you have on the horizon: If you had booked a vacation house or a cruise for a few months down the line, it may make good financial sense to investigate getting a refund. That money could be allocated toward your everyday expenses as you job-hunt.

Look at Investments and Retirement

If you are temporarily out of a job, do your best to keep your hands off your retirement funds. You worked hard to save that money, and it’s there to fund a long-term financial goal. That said, some people do tap their retirement accounts as a last resort when unemployed.

When you withdraw from your retirement account before the age of 59 ½, you will incur a penalty tax. However, there are some cases where you may be able to withdraw funds when unemployed without paying this.

You may be able to set up what’s known as a substantially equal periodic payments (SEPP) over five years or until you hit age 59 ½, whichever is greater. However, if you do receive this kind of distribution, it will likely count as income and may therefore lower any unemployment benefits you may be receiving. Talk with your plan administrator to learn more.

Start a Side Hustle

You might consider starting a side hustle to bring in some extra cash while looking for full-time work. There are many ways to earn more money. You could rent out an extra bedroom in your home or apartment, sell unwanted items, drive for Uber or Lyft, or market your professional skills on online service platforms such as Fiverr or Upwork. These are viable avenues to get some money coming in until you lock down a new job.

The Takeaway

Figuring out how to manage your finances when you are in between jobs can be stressful, but there are ways to prepare and then actions that can help you get by. Building and then tapping an emergency fund, accessing unemployment, and budgeting are some actions to take.

Also make sure your banking partner is making it easy and profitable for you to do business with them.

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

How do you manage the emotional impact of getting laid off?

Getting laid off or fired from your job is a tough challenge. You may feel angry and ashamed. Acknowledge those feelings, and remind yourself that millions of others have navigated this situation. You are not alone. Also, taking action can foster feelings of control and personal agency. Updating your resume, networking, reworking your budget, and engaging in self care rituals (like exercise) may also be positive steps.

How do you recover after being laid off?

Recognize the shock and upsetting feelings that you are likely experiencing. Then, take steps to improve your situation: Seek unemployment benefits, apply for jobs, start a side hustle, cut some expenses, and perhaps volunteer to build new skills and fill free time. These moves can help you move forward from your job loss.

Is it better to be fired or laid off?

In both scenarios, you don’t have a job, but if you are fired, it is typically due to a performance issue. With a layoff, you will likely be able to file for unemployment and you may receive severance pay from your employer. When you are fired, you may or may not be able to receive unemployment funds and you will probably not be eligible for severance.


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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.


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