What is the 100 Envelope Challenge?

100 Envelope Challenge Explained

Saving money can be daunting. But what if you could make it seem less like a chore and more like a game? That’s the idea behind TikTok’s viral 100 Envelope Challenge. With this popular money-saving hack, you set aside a predetermined dollar amount in different envelopes each day for 100 days. By the end of the challenge, you’ll have saved over $5,000.

One of the appeals of the 100 Envelope Challenge is that you visually see your progress as you fill up each envelope, which can make the process of saving more tangible and fun. And like many savings challenges, this money game can help you save a sizable sum in a short period of time.

That said, the 100 Envelope Challenge may not be realistic for everyone. Here’s a closer look at how it works, its pros and cons, plus some other fun saving strategies to consider.

Key Points

•   The 100 Envelope Challenge is a savings technique where participants set aside increasing amounts of money daily for 100 days, aiming to save over $5,000.

•   Participants can choose to fill envelopes in numeric order or randomly, providing flexibility in their savings approach tailored to individual preferences.

•   The challenge encourages financial discipline and provides a visual representation of progress, motivating individuals to stay committed to their savings goals.

•   While the challenge is simple to start, it may pose difficulties for those with tight budgets, as it requires consistent cash contributions over the designated period.

•   Alternatives to the challenge include shorter savings plans, like the 30-Day Savings Challenge or digital methods such as rounding up spare change from transactions.

What Is the 100 Envelope Challenge?

The 100 Envelope Challenge, also known as the 100-Day Money Challenge, is a savings technique that involves setting aside a specific amount of money each day for 100 days. The goal is to accumulate $5,050 in just over three months.

The concept is simple: You start with 100 envelopes and number them from 1 to 100. On day 1 of the challenge, you put $1 into envelope #1. On day 2, you put $2 into envelope #2. On day 3, you put $3 in envelope #3. You continue this pattern, increasing the amount by $1 each day until you reach the 100th day, when you deposit $100.

There are also variations on the game. For example, instead of stuffing envelopes in chronological order, you can shuffle the envelopes, put them in a bucket or basket, and then randomly pick one each day. This allows you to alternate between low and high cash amounts throughout the challenge.

If your budget is tight, and saving $5,050 in 100 days isn’t feasible, you can do the 100 Envelope Challenge over 100 weeks, rather than 100 days. You’ll still get to $5,050 — it will just take longer.

And if you’re not a fan of cash, you can do the challenge digitally. Simply download a free “100 Envelope Challenge” printable (widely available online). You then check off the “envelopes” in order (or use an online number generator to pick a random number each day). Once you’ve selected your envelope number, you transfer that amount to your savings account. If you open a high-yield savings account, you’ll have the added advantage of earning competitive interest on your cash.

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

No account or monthly fees. No minimum balance.

9x the national average savings account rate.

Up to $2M of additional FDIC insurance.

Sort savings into Vaults, auto save with Roundups.


How to Do The 100 Envelope Challenge

Here’s a step-by-step guide to the original 100 Envelope Challenge.

1. Assemble Your Supplies

You’ll need 100 plain envelopes and a marker or pen to set up the challenge. If you don’t normally carry cash, you’ll also want to hit the ATM and withdraw some money to cover you for the first week. You’ll likely make multiple trips as you make your way through the challenge — and your paychecks get deposited.

Recommended: How to Avoid ATM Fees

2. Prep Your Envelopes

Label each envelope with number, starting with #1 and ending with #100. You’ll also want to find a safe place to keep your envelopes, such as a box, drawer, or safe. The idea is to keep them accessible but still secure.

3. Start Stuffing

Each day, pick out an envelope in chronological order (or, as an alternative, you can choose randomly) and place the corresponding amount of cash inside.

4. Stay Consistent

The key to any money-saving challenge is consistency, so do your best to stick to the rules as closely as you can. If you miss a few days, don’t give up — simply dust yourself off and get back on track. Or consider switching to a weekly or biweekly schedule to make the challenge more manageable.

5. Put Your Savings to Good Use

When you reach the finish line, it’s time to put your envelope cash to good use. For example, you might use your $5,050 to start your emergency fund (if you don’t already have one), pay off credit card debt, or fund something fun like a vacation. Or you might use the money to get started on a larger, long-term goal, like a home down payment, kid’s college fund, or retirement savings.

How Much Money Is Involved in the 100 Envelope Challenge?

By the end of the 100 Envelope Challenge, you will have saved a total of $5,050. You get to this amount by progressively increasing your daily (or, if you prefer, biweekly or weekly) deposit, starting with $1 and ending with $100. While the amounts may seem small at first, they add up over time, demonstrating the power of consistent saving.

Recommended: 15 Creative Ways to Save Money

Pros and Cons of the 100 Envelope Challenge

The 100 Envelope Challenge comes with both pros and cons. Here are some to consider before you decide to jump in on the trend.

Pros of the 100 Envelope Challenge

•   Easy to start: You don’t need to comb through bank statements and set up spreadsheets to start this savings plan. All you need to get going are envelopes and some cash.

•   Visual progress: The envelopes provide a visual representation of your progress. Watching them stack up can motivate you to keep going.

•   Builds discipline: The challenge encourages regular saving habits, helping to build discipline and financial responsibility.

•   Flexible: You can adjust the challenge to fit your budget, preferences, and savings goals.

Cons of the 100 Envelope Challenge

•   Cash-based: The default design relies on using cash, which may not be convenient for everyone.

•   Risk of loss: Keeping cash in envelopes can be risky, since they can potentially get lost or stolen.

•   It’s not all fun and games: Even though it’s a game, you’ll likely need to cut back on spending (and, yes, fun) to come up with the cash you need to stick with the program, especially near the end, when you’re stuffing large sums every day.

•   Not realistic for everyone: If your monthly essential expenses are already close to your monthly income, you might find it difficult to stick with a 100-day Envelope challenge.

Alternatives to the 100 Envelope Challenge

While the 100 Envelope Challenge is a popular savings method, it may not be the right approach for everyone. Here are some alternatives to consider.

•   The 30-Day Savings Challenge: Here, you start with just 30 envelopes, numbered 1 through 30. Each day, you’ll save the amount indicated on the envelope you choose. You could go in order or shuffle the envelopes and randomly select one. At the end, you’ll have saved $465.

•   The Spare Change Challenge: This involves saving the spare change from your everyday transactions. You can do it manually, by dropping your spare change into a jar each day and, once it’s filled, bringing it to the bank. Or you can do it digitally, using an app that automatically rounds up your purchases and transfers that money into savings. Either way, you’ll accumulate savings without much effort

•   No-Spend Challenge: In a no-spend challenge, you commit to not spending money on non-essential items for a set period of time, such as a week or a month. This can help you identify and eliminate unnecessary expenses, allowing you to save more money.

•   Savings Percentage Challenge: In this challenge, you commit to saving a specific percentage of your income each month, such as 10% or 20%. To make it easy, you can set up an automatic transfer from checking to savings for this amount for the same day each month (ideally right after you get paid). This can help you save consistently and build your savings over time.

Recommended: 52 Week Savings Challenge (2024 Edition)

The Takeaway

The 100 Envelope Challenge is a simple yet effective way to save money and build financial discipline. By following the steps and sticking with the program, you can reach your savings goal and have a tangible reminder of your progress along the way.

If socking away $5,050 in a little over three months feels too challenging, however, you might want to try one of the many other ways to gamify saving. The best approach to boosting the balance in your savings account is the one you’ll stick with.

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


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

FAQ

Can I save $5,000 in 3 months with 100 envelopes?

Yes, it’s possible to save around $5,000 in three months with the 100 Envelope Challenge. The challenge is designed to be completed over 100 days, which is a little over three months.

How it works: You gather 100 envelopes and number them from 1 to 100. Each day you fill up one envelope with the amount of cash to match the number on the envelope.You can fill up the envelopes in order or pick them at random. After you’ve filled up all the envelopes, you’ll have a total of $5,050 saved.

How long does it take to complete the 100 envelope challenge?

The 100 Envelope Challenge is designed to be completed over 100 days. Each day, you deposit a specific amount of money into an envelope, starting with $1 on day #1, and increasing by $1 each day until you reach $100 on day #100. By then, you’ll have saved $5,050.

You can also choose to do the 100 Envelope Challenge over 100 weeks, filling each envelope according to the week number. In this version, you’ll save $5,050 in a little less than two years.

What are other money saving challenges besides the 100 envelope challenge?

There are several other money-saving challenges that you can try besides the 100 Envelope Challenge. Some popular alternatives include:

•   30-day Savings Challenge Here, you start with 30 envelopes, numbered 1 through 30. Each day, you put cash into an envelope, basing the amount on the number written on the envelope you choose. At the end, you’ll have saved $465.

•   No-Spend Challenge With this approach, you commit to not spending any money on non-essentials for a set time period, say a week or a month. This can boost your bank account and highlight how much you spend on unnecessary purchases.

•   Savings Percentage Challenge In this challenge, you commit to saving a specific percentage of your income each month, such as 10% or 20%. If you set up an automatic transfer, you can build your savings without even thinking about it.


Photo credit: iStock/solidcolours

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

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

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

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

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

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

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


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

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

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How Long Does It Take a Mobile Deposit to Clear?

How Long Does It Take a Mobile Deposit to Clear?

Mobile deposits to your account usually take around one business day to clear. This can make it a fast and convenient method to get funds into your bank account.

If you are experiencing delays, there could be an easy explanation for why that’s happening. Read on to learn more about how mobile deposits work and how to avoid delays in their clearing.

Key Points

•   Mobile deposits generally take about one business day to clear, providing a quick way to access funds in a bank account.

•   Delays in the mobile deposit process can occur due to factors such as improper endorsement, unclear images, or entering incorrect amounts.

•   Ensuring that all required signatures and details are correctly filled out on the check is crucial for a successful mobile deposit.

•   Large checks, duplicate submissions, and deposits made after cutoff times can also extend the clearing process for mobile deposits.

•   It is important to retain the physical check until confirmation of clearance has been received from the bank to avoid issues with bad checks.

How Long Does a Mobile Check Take to Deposit?

Once the account holder uploads their check to the mobile app, the funds usually do not become immediately available (as is the case with depositing cash). It typically takes one business day for the funds to clear and become available for use.

In some cases, it can take a few days for the bank to verify the check. The amount of the check can impact this timeline, as can the rules and processes each bank has surrounding mobile deposits.

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

What Factors Might Cause Mobile Deposit Delays?

As briefly noted, certain factors can slow down the mobile deposit process. Knowing how to avoid these delays with future deposits can help speed up the timeline.

Here are a few factors that can slow down deposits (or stop them all together if not fixed):

•   Not endorsing a check before depositing it. Before cashing a check by using a mobile app, it’s vital to always endorse the check before taking the photo of it or the bank won’t be able to accept it.

Along with a signature, it’s also common to need to include a bank account number on the back of the check or to write “for mobile deposit only” under the signature.

•   Forgetting to get both payee signatures. If a check has two people listed on it, both of them will need to endorse the check with their signatures for it to be eligible for a deposit.

•   Uploading blurry images. A steady hand comes in handy as banks need a clear image to complete a mobile deposit. It helps to take a photo of the check on a plain, dark background and in good lighting so the picture is very crisp and clear.

Many banking apps have an auto-capture function that helps to automate the photo-taking process.

•   Adding mismatched amounts. In addition to uploading a photo of the check, the mobile banking app will require the user to manually enter the check amount. That amount needs to match the amount on the check exactly, or your deposit may be delayed.

•   Not indicating a payee. The check uploader needs to make sure their name is on the “Pay to the Order of” line. If this section is blank or doesn’t say the correct name, the check won’t be deposited. Take some time to review that the entire check is filled out correctly.

•   Making a duplicate deposit. Tech glitches occasionally happen, but trying to deposit the same check twice to your bank account can cause confusion. If someone uploads a check for the first time and receives a duplicate error message, they can contact their bank to work through the issue with their checking account.

•   Depositing after the cutoff time. Your banking app will likely tell you what the cutoff time is for mobile deposits to be processed. For example, if you are making a mobile deposit at 10:15pm on a Monday night and the app says the processing cutoff time is 10pm, your deposit probably won’t be available on Tuesday. Rather, it will probably be available on Wednesday, one full business day later.

•   The amount of the check. Checks for large denominations, whether deposited to checking or savings accounts, often take longer to clear than a check that is for a smaller amount. It can require more time to verify that the check is good. You may find that checks in amounts over $5,525 take more time to become available.

•   Receiving a bad check. Just as, when deposited the old-fashioned way, checks can bounce, so too can mobile deposits be returned for insufficient funds in the check issuer’s account or other reasons. It’s always wise to hold onto the physical check and wait for a confirmation from your bank that the check has cleared. If the check doesn’t clear, you will need to contact the issuer about the problem.

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 4.00% APY on savings balances.

Up to 2-day-early paycheck.

Up to $2M of additional
FDIC insurance.


The Takeaway

Mobile deposits typically clear in one business day. And by following a couple of quick checkpoints, you can likely avoid any hitches that could cause a delay. Because in today’s impatient world, there’s usually no need to wait very long to get access to your money.

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


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

FAQ

Are mobile check deposits available immediately?

It usually takes around one business day for deposits to go through. Following instructions from the bank carefully regarding uploads can help you avoid delays.

How long does it take for a mobile deposit to go in?

It usually takes a business day for a mobile deposit to show up in a bank account, but this can be delayed if the check is for a large amount, is deposited after a bank’s cutoff time, or has issues with the way in which it was submitted.

Why is my mobile deposit taking so long?

Mobile deposit delays can be caused by a variety of factors such as using a blurry photo of the check, entering information incorrectly, or not endorsing the check properly. Double-check all key details before submitting the deposit to speed up the timeline.


Photo credit: iStock/RyanJLane

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


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

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

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

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

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

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

*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.

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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How Do I Check My Credit Score Without Paying?

How Do I Check My Credit Score?

If you’ve ever wanted to check your credit score and do so without dinging your score or paying a cent, guess what? It’s possible. You can get that important three-digit number from a number of sources. In fact, your bank or credit card company may provide just what you are looking for.

Why is your credit report intel such a gift? Because keeping tabs on your credit scores can help you spot potentially fraudulent activities or discrepancies. It can also help you monitor your progress if you’re working hard to establish your credit or have a stellar financial profile. Higher scores may well unlock lower loan rates and other benefits.

Key Points

•   Checking a credit score can be done for free through various channels, including banks, credit card companies, and credit counselors.

•   Understanding the components of a credit score is crucial, as factors like payment history and credit utilization significantly impact the overall score.

•   Monitoring credit scores helps identify discrepancies or fraudulent activities, providing an opportunity to address issues promptly.

•   Regularly reviewing credit scores can help individuals gauge their financial health and make informed decisions about loans or credit products.

•   Experts recommend checking credit scores at least once a year, or more frequently when preparing for significant financial decisions or suspecting fraud.

What Is a Credit Score?

A credit score is a three-digit number that lenders and creditors use to assess your creditworthiness. In other words, it helps lenders decide the probability of you repaying a loan or a line of credit in a timely manner based on your past behavior.

Credit scores are usually broken down into two types: custom and generic scores, and this may explain why you have different credit scores depending on where you check.

While different algorithms are used, your credit score usually reflects such factors as how much money you have borrowed, whether you manage it well and pay it back on time, the length of time you’ve been borrowing money, and what kinds of credit lines you have used (you’ll learn more about this below).

•  What are known as generic credit scores are the ones reported by the three major credit bureaus, Experian, Equifax, and Transunion. They utilize Information from lenders and businesses to come up with their figures.

•  Conversely, individual lenders may create custom credit scores to determine your likelihood of repayment. These scores include credit reporting from the three credit bureaus and other data. This type of credit score is often meant to determine your creditworthiness with regard to a specific type of lending (like a mortgage) or a particular lender.

Examples of custom scores are FICO® scores and VantageScore®; these companies have their own guidelines to determine your credit score. Worth noting: FICO scores are the ones that many lenders and creditors use when they evaluate a candidate for credit.

💡 Quick Tip: An online bank account with SoFi can help your money earn more — up to 4.00% APY, with no minimum balance required.

What Your Credit Score Means

fico ranges

Now, here’s how to understand the number itself. Credit scores typically range between 300 and 850. Usually, the higher your credit score, the less risky you are perceived in the eyes of lenders. That may mean you get a better (lower) interest rate on loans, among other perks.

A bad credit score can result in your paying more to borrow money or even being declined.

The FICO ranges look like this:

•  Poor: 300-579

•  Fair: 580-669

•  Good: 670-739

•  Very good: 740-799

•  Exceptional: 800-850.

Credit Score vs. Credit Report

Here’s one important distinction to be aware of: Your credit score and credit report are two very different things, even though they may sound similar.

•  Your credit score is the three-digit number that reflects your creditworthiness; that is, how likely you are to manage a line of credit or loan well and pay it back on time.

•  Your credit report, however, is a record of your credit activity and history. It will reflect how much you’ve borrowed, how promptly you have paid, and more details. Typically, negative information on your record can go back seven years.

Both of these sources of information can help lenders (say, for a mortgage, car loan, or new credit card) evaluate how well you have handled credit in the past and how well you might do so in the future.

Check out our Money Management Guide.

This article is from SoFi’s guide on how to manage your money, where you can learn basic money management tips and strategies.


money management guide for beginners

How Do I Check My Credit Score for Free?

Next, here’s how to find out your credit score for free.

•  Check with your bank. Most banks provide customers with their FICO number or another credit score for free. Your bank is the hub for so many aspects of your financial life, it’s likely they will help you out by allowing you to view your score at no charge.

•  Ask Experian. You can get your free FICO score from Experian.

•  Ask your credit card company or lender. You might be able to view your credit score by logging into your account. If not, your creditor or lender can point you in the right direction to access your score.

•  Ask a credit counselor. Often, credit counselors can help you scratch that “How can I check my credit score for free?” itch. To find one in your neck of the woods, you can visit the nonprofit National Foundation for Credit Counseling, or NFCC.

•  Sign up for a free money management app. Lots of choices are out there if you are looking for a money tracker app that lets you view your accounts, budget, and optimize spending. Many offer a free credit score.

You can get free credit reports but not credit scores from AnnualCreditReport.com. It’s a good idea to check your credit reports at least once a year.

Recommended: Track your credit score for free with SoFi.

How Are Credit Scores Determined?

how credit scores are determined

Knowing what contributes to your credit score can help you get yours into the desired range. Here are some of the key factors that influence a FICO score:

•  35%: Payment history, or the timeliness of past payments

•  30%: Amounts owed, or how much credit you have used, especially vs. your available credit. (This can include your credit utilization ratio, which is the percentage of credit you’re using versus your limit. Ratios of 30% is often considered the limit of what you want to use, and many believe that 10% is a more financially prudent number.)

•  15%: Length of credit history; a longer credit history tends to be positive. How long you’ve had accounts and how frequently you have used them can matter.

•  10%: New credit, or whether you’ve opened a number of accounts recently. Doing so can make you look like more of a risk to a lender.

•  10%: Credit mix, or what kinds of accounts you’ve had, such as a home loan, retail accounts, car loans, and so forth. There isn’t a specific assortment you need, but this is a variable that will be factored into your score.

Learn more about credit here:

Can I Check My Own Credit Score Without Affecting It?

You may have heard that a credit score check can lower your number. In some cases, it can. Typically, this happens when what is known as a hard pull or hard inquiry happens, which is when a potential lender or other entity reviews your credit details.

But when you check your own credit score, it won’t affect those digits. Pulling your score is referred to as a soft inquiry, and you can do so without affecting your credit score. At the very least, you should review your numbers before applying for any financing like a home or auto loan or a new credit card.

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

What Credit Checks Can Hurt My Score?

You may wonder when credit checks can hurt your score. When you apply for new credit, the lender or creditor will conduct what’s known as a hard inquiry. This can indeed impact your score. For every new hard inquiry, your credit score may drop up to five points.

When a potential lender looks into your file, it indicates that you may plan to take on more debt. Hence, the score drops. If you have several hard inquiries back to back, your credit score may decrease more than a few points. Some hard inquiries that could affect your credit include:

•  Applying for a mortgage, auto loan, or personal loan

•  Submitting a new utility application

•  Applying for a new credit card

•  Requesting a credit limit increase

•  Renting an apartment.

Take note, though: Credit bureaus consider rate shopping a financially responsible move and treat it differently than a standard hard inquiry.

When you’re rate shopping, FICO considers all inquiries when applying for student loans, auto loans, or mortgages a single inquiry as long as applications are submitted within a 45-day window. However, some lenders use the older FICO model, which has only a 14-day window for application submissions. If you are looking for a loan, keep these time frames in mind so your research doesn’t wind up decreasing your credit score.

Recommended: How Student Loans Affect Your Credit Score

Why You Should Check Your Credit Scores

Monitoring your credit scores is important, and to do it for free is that much better. Here are some of the most important reasons to review your numbers:

•  You can spot discrepancies or potential fraud. Out-of-the-ordinary activities will reveal themselves when you keep tabs on your credit scores. You can immediately spot red flags when something seems unusual (say, a score drops 40 points for no reason). This way, you can act right away, work toward getting your score back on track, or file a dispute if you detect fraud.

•  You can gain insight into your financial situation. Understanding your credit scores can help you determine if you’ve been tracking your spending and debt vs. your income well.

It might also reveal if it could be a good time to purchase a home or refinance your mortgage. For example, if a score is less than ideal, you may want to hold off on making big moves until you work on your score. The delay may help you qualify for more favorable terms and interest rates.

•  You can better compare financial products. Lenders have different criteria and credit score requirements to qualify for specific products. So knowing your credit scores can help you determine if applying for a particular product is worth it or if you should explore other options.

•  You can pinpoint ways to positively impact your scores. If your score isn’t where you’d like it to be, don’t just assume the answer to “Am I bad with money?” is yes and stagnate. Instead, you might use it as motivation to build your financial literacy.

Having a handle on a credit score as well as the factors used to calculate it can help you optimize it. Some resources and websites may offer simulations so you can see how changing certain factors will alter your credit score. Then you can summon some financial discipline and work to improve your money habits as necessary.

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 4.00% APY on savings balances.

Up to 2-day-early paycheck.

Up to $2M of additional
FDIC insurance.


How Often Should You Check Your Credit Scores?

Financial experts usually recommend checking your credit score and credit report at least once a year. If you have reason to believe you are vulnerable to fraud (say, your credentials were involved in a data breach) or you are gearing up to apply for a loan, you may want to check more often.

The Takeaway

There are several free ways to access your credit scores, such as through your bank, a lender, a credit monitoring website, or a credit counselor. Accessing your score regularly can help you ensure there is no fraudulent activity while also making progress toward your financial goals. It can also help you optimize your scores so you can enjoy the best possible rates on credit as well as other benefits.

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 are some resources available to help me improve my financial literacy?

To improve your financial literacy, you might want to start with your bank. They likely have a library of content about financial topics and tools for improving your financial health. In addition, there are plenty of well-regarded books and podcasts on the topic.

How can I involve my family in developing good financial habits?

To involve your family in developing good financial habits, you might have family meetings and share information about the household budget and how you are managing the money. You could then set short-term goals they can have input on and participate in achieving, such as cutting the food or entertainment budget or finding ways to save for a family vacation.

How can I stay motivated to continue developing good financial habits over time?

There are several ways you can stay motivated and keep developing good money habits. Try surrounding yourself with like-minded people or those that share a specific goal, such as paying off student debt, to support one another and share ideas. Use apps to simplify your financial life and perhaps boost your financial health (say, with a roundup function). Reward yourself within reason when you do a good job meeting a financial goal, like adding to your emergency fund for several months.


Photo credit: iStock/Anchiy

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


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

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

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

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

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

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

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

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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

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What Are Premium Checking Accounts?

What Is a Premium Checking Account?

Checking accounts are one of the hubs of most people’s financial lives, and there are many options available. If you’re curious about premium checking accounts, which typically offer many extra perks, you’re in the right place.

In this guide, you’ll learn about some of the pros of premium checking accounts, such as higher interest rates and ATM-fee reimbursements. You’ll also find out about the potential downsides, like the need to maintain a high balance. Read on for details, so you can decide if a premium checking account is right for you.

Key Points

•   Premium checking accounts offer benefits such as higher interest rates, waived fees, and dedicated customer service, appealing to those who maintain high balances.

•   These accounts usually require account holders to meet minimum balance requirements, often ranging from $10,000 to $15,000, to avoid fees or earn interest.

•   Potential downsides include lower interest rates compared to savings accounts and tiered benefits that necessitate maintaining even higher balances for maximum rewards.

•   Many financial institutions allow customers to meet balance requirements across multiple accounts, facilitating easier qualification for premium checking accounts.

•   Evaluating whether a premium checking account aligns with individual financial goals is crucial, as alternatives like high-yield savings accounts may provide similar benefits without high balance demands.

What Does Premium Checking Mean?

What is a premium checking account? It’s a type of checking account in which account holders are rewarded for meeting high balance requirements or paying higher monthly fees. These rewards may include higher interest rates, fee-free ATMs, free checks, and more.

In some cases, a bank may offer you these perks if you open multiple types of accounts at the same institution — an example would be having both premium checking and savings accounts at a bank. Another common model for premium checking accounts is that the more you keep on deposit, the more incentives you may receive.

💡 Quick Tip: Feel ‘phew’ on payday — up to two days earlier! Sign up for an online bank account and set up direct deposit to get paid faster.

What Are the Benefits of a Premium Checking Account?

Those who qualify for a premium checking account may be rewarded with the following benefits:

•   Lower fees for other financial products within the same financial institution

•   Dedicated customer service

•   Higher APYs, or annual percentage yields

•   Free or low-cost wire transfers

•   ATM fee reimbursements

•   Free checks.

These can be attractive ways to encourage customer loyalty, as many financial institutions work to find new ways to enhance their clients’ experience.

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 4.00% APY on savings balances.

Up to 2-day-early paycheck.

Up to $2M of additional
FDIC insurance.


Pros and Cons of a Premium Bank Account

Opening a premium bank account might be valuable if you can take advantage of all the benefits offered. That being said, there are some downsides, too. Meeting certain requirements can make this type of account inaccessible to some. Let’s take a closer look at the benefits and the downsides.

Pros

Here are the potential upsides of premium checking accounts:

•   Higher APYs: Premium checking accounts typically come with higher APYs compared to basic checking accounts (which may not accrue any interest at all). That enhanced interest rate means your money earns more money.

•   Waived or lowered fees: In most cases, premium checking accounts will waive fees such as those for out-of-network ATMs, money orders, cashier’s checks, and wire transfers. Depending on the bank and what other accounts you have with them, you may even get lowered or waived fees on exchange rates for ATM withdrawals outside the U.S.

•   Discounted rates on other financial products: It’ll depend on your relationship with the bank (and what other accounts you have in addition to a premium checking account), you could receive lower rates for personal loans or mortgages compared to other customers.

•   Higher transaction limits: You may be able to make larger daily ATM withdrawals, transfers, or debit card purchases.

Cons

Next, consider the possible downsides of a premium checking account:

•   Rates may not be as high as you think: Although you could receive a higher interest rate compared to other types of checking accounts, it may not be as high as what you could get with savings or money market accounts.

•   More stringent requirements: You’ll typically need to maintain a higher minimum balance in your account in order to avoid monthly maintenance fees or to earn interest. For instance, many banks require anywhere from $10,000 to $15,000 or more in your premium checking account. The good news is that the balance requirements may be the total across all your accounts with the same financial institution.

•   Benefits may be tiered: While it varies from bank to bank, you may have to “level up” to an even higher minimum balance to access the best interest rates and other perks.

How Can I Qualify for a Premium Checking Account?

In most cases, all you need to do is to have a minimum amount on deposit in order to open a premium checking account. Some may even require you to open other financial products or allow you to meet the minimum deposit requirements across a number of qualifying accounts.

Some major banks, like Chase and Bank of America, will allow you to meet minimum deposit requirements across different accounts as long as they’re linked.

Recommended: How to Automate Your Personal Finances

Additional Features of a Premium Checking Account

You may want to consider whether having that much money in a checking account is a worthwhile move for you. Consider the following points:

•   Is earning interest a priority for you? If you’re after a checking account that earns a higher amount in interest, a premium checking account may be for you. Keep in mind though that if you may not earn as much as you think you will. For instance, if a bank currently offers a 0.04% APY, on a $50,000 balance, you’re only earning $20 per year or so (how often interest compounds will make somewhat of a difference).

•   How often do you use ATMs? Many premium checking accounts offer more ATM transactions and even waive fees for third-party ATM fees. For those who use ATMs frequently, especially out-of-network ATMs, this perk may not be worth it.

•   Do these perks sync up with your financial goals? Premium checking can be part of a deeper relationship with your bank (often called relationship banking) that offers holistic support for your finances. This includes benefits like discounted rates on other financial products — say, a home loan. If you’re willing to keep all your finances at one bank, a premium checking account might be a good fit and open other doors for you.

Are Premium Checking Accounts Worth It?

To decide if a premium checking account is right for you, consider these points:

•   It can be a smart idea to compare premium accounts to standard checking accounts. You may be able to get many of the same benefits, such as free checks or equivalent interest rates, without stashing as much cash as premium accounts require.

•   Getting a high-yield savings account could be a good option if you want to earn a higher interest rate but can’t meet the large minimum balance criteria required of premium checking accounts.

•   If you want to keep all your banking (including investments and loans, for instance) with the same financial institution and can maintain a high balance across your qualifying accounts, premium checking could be well worth it. This is especially true if you’ll use all the perks like free checks and ATM reimbursements.

By thinking about your financial goals and how you like to bank, you may decide that premium checking is the right move for you.

The Takeaway

Premium checking accounts can be a valuable option for some bank customers. If you can maintain the high balance and can use the rewards offered, it may be a good fit.

For others, a high-yield checking without the high minimum requirements might be a better option. It’s up to you to decide what fits your financial style best.

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

Is a premium checking account worth it?

A premium checking account may be worth it depending on whether you can afford to meet the higher than usual minimum balance amount and whether you’ll be able to take advantage of all the perks. If you can, it may be a good fit.

What are the benefits of a premium bank account?

Some of the key benefits of a premium bank account is a higher interest rate, waived out-of-network ATM fees, discounted rates on loan products, and overdraft protection. Some may even offer free financial and investing advice.

What does a premium bank account mean?

A premium bank account is a type of account offering extra perks once you meet a minimum balance requirement.


Photo credit: iStock/Charday Penn

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


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

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

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

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

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

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

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

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

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green background with pink dollar sign

What Are Liquid Assets and How Do They Work?

Liquid assets are any assets that can be easily and quickly converted into cash. In fact, people often refer to liquid assets as cash or cash equivalents, because they know that the asset can be exchanged for actual cash without losing value.

Here’s a closer look at the topic and how liquid assets can contribute to your financial wellbeing.

Key Points

•   Liquid assets are easily convertible to cash, allowing quick access to funds without significant loss in value, essential for financial flexibility during emergencies.

•   Common examples of liquid assets include cash in bank accounts, stocks, bonds, mutual funds, and money market funds, which can be readily sold for cash.

•   Non-liquid assets, such as real estate and collectibles, require more time and effort to convert into cash, often leading to potential value loss during the process.

•   Maintaining liquid assets is important for calculating net worth, applying for loans, and ensuring a business can handle emergencies or market fluctuations effectively.

•   Building liquid assets involves creating an emergency fund with three to six months’ worth of expenses, allowing for better financial security and investment opportunities.

What Makes an Asset Liquid?

Liquidity means that you can readily access an asset as cash. While you might own any number of valuable assets (e.g., your home, retirement accounts, collectibles) and these can be considered part of your overall net worth, only liquid assets can generate cash quickly, when circumstances demand it. If you needed cash quickly, you likely would not be able to sell your home overnight to get money.

For an asset to be considered liquid, it must be traded on a well-established market with a large number of buyers and sellers. It also must be relatively easy to transfer ownership. Think: stocks, bonds, mutual funds and other marketable securities.

Generally, you can sell stocks and obtain cash readily. By contrast, you probably couldn’t sell your vintage watch collection that fast, and even if you could, there are a number of factors that might influence how much cash value you might obtain from the sale.

Worth noting: Although liquid assets (aka cash and cash equivalents) pose very little risk of loss, they also have little or no capacity for growth.

What Investments Are Considered Liquid Assets?

As you can see, the primary advantage of liquid assets is that they can be converted to cash in a short period of time. For example, stock trades must be settled within two days, according to Securities and Exchange Commission rules. Here, you’ll learn more about what are considered liquid assets.

Examples of Liquid Assets

Here are some specifics about what a liquid asset is.

•   Money in the bank. Cash in a checking and savings account is a liquid asset.

•   Stocks. Stocks are often considered liquid assets because they can be converted into cash when you sell them. Keep in mind, though, that the most liquid stocks might be the ones that many people want to buy and sell. You may have a more difficult time liquidating stocks that are in lower demand.

•   U.S. Treasuries and bonds. These instruments are relatively easy to buy and sell, and these processes are usually done in high volume. They have a wide range of maturity dates, which helps you to figure out when you want to liquidate them. Because U.S. Treasuries are often considered relatively safe and dependable, the interest rates are somewhat lower and could be a good fit for investors who are looking to mitigate risk.

•   Mutual funds. Mutual funds are pooled investment vehicles that hold a diversified basket of stocks, bonds, or other investments.

◦   Open-end mutual funds are considered more liquid than closed-end funds because they have no limit on the number of shares they can generate. Also, investors can sell their shares back to the fund at any time.

◦   Closed-end mutual funds, on the other hand, are less common. These funds raise capital from investors via an IPO; after that, the number of shares are fixed, and no new shares are created. Instead, closed-end funds shares can only be bought and sold on an exchange, and thus are considered less liquid than open-end fund shares because they’re more subject to market demand.

•   Exchange-traded funds and index funds. Like mutual funds, exchange-traded funds (ETFs) and index funds allow individuals to invest in a diversified basket of investments. ETFs are traded like stocks, throughout the day on the open market, which makes them somewhat more liquid than index funds, which only trade at the end of the day.

•   Money market assets. There are two main types of money market assets:

◦   A money market fund is a type of mutual fund that invests in high-quality short-term debt, cash, and cash equivalents. It’s considered low-risk and offers low yields. It is therefore thought of as a relatively safe vs. risky investment. You can cash in your chips at any time, making money-market funds a liquid investment.

◦   Money market funds are different from money market accounts, which are a type of savings account that’s insured by the Federal Deposit Insurance Corporation (FDIC).

•   Certificates of deposit. If you have money in a certificate of deposit or CD, this might be considered semi-liquid because your money isn’t available until the official withdrawal date. You can withdraw money if you need it, but if you’re doing so before the maturity date, you’ll likely pay a penalty.

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What Assets Are Considered Non-Liquid?

There are, of course, many assets that are not easy to liquidate quickly. These assets typically take a relatively long time to sell or for the deal to close. You’ll get your money, but most likely not right away, and there may be time or costs associated with the conversion to cash that could impact the final amount. That’s why assets like these are considered illiquid or non-liquid assets.

Examples of Non-Liquid Assets

•   Collectibles. Items like jewelry and artwork, as well as hobby collections like stamps and baseball cards, may be hard to value and difficult to sell.

•   Employee stock options. While employee stock options can be a valuable form of compensation, they may also be highly non-liquid. That’s because employees must typically remain with a company for years before their options vest, they exercise them, and they finally own the stock.

•   Land and real estate. These investments often require negotiation and contracts that can tie up real estate transactions for weeks, if not months.

•   Private equity. There are often strict restrictions about when you can sell shares if you’ve invested in private equity assets such as venture capital funds.

Liquid Assets in Business

If you’re running a business, accounts receivable — the money you’re owed from clients — are often considered to be a liquid asset, because you can typically expect to be paid within one or two months of billing.

Any inventory you have on hand, such as office furniture or a product you’re selling, can also be considered liquid, because you could sell them for cash if need be. The liquid assets on your company balance sheet usually list cash first, followed by other assets that are considered liquid, in order of liquidity.

Having more liquid assets is desirable because it indicates that a company can pay off debt more easily. When businesses need to determine how cash liquid they are, they often look at the amount of their net liquid assets. When all current debts and liabilities are paid off, whatever remains is considered their liquid assets.

Are Retirement Accounts like IRAs and 401(k)s Liquid Assets?

Retirement accounts, such as individual retirement accounts (IRAs) and 401(k)s are not really liquid until you’ve reached age 59 ½. Withdraw funds from your account before then, and you may face taxes and a 10% early withdrawal penalty.

What’s more, you can hold a variety of assets inside retirement accounts. For example, if you hold a money market fund inside your IRA, that is a liquid asset. But you could also hold real estate, which very much isn’t.

Reasons Why Liquid Assets Matter

Other than the most obvious reason, which is that cash gives you a great deal of flexibility and can be essential in a crisis, liquid assets serve a number of purposes.

•   Calculating net worth: To calculate your net worth, subtract your liabilities (your debt) from your assets (what you own, which can include your liquid assets).

•   Applying for loans: Lenders might look at your liquid assets when you apply for a mortgage, car loan, or home equity loan. If your liquid assets are high, you may get better terms or lower interest rates on your loans. Lenders want to know that if you were to lose your job and/or your income, you would be able to continue to pay back the loan using your liquid assets.

•   Business interests: Having liquid assets on your balance sheet is a signal that your business is prepared for an emergency or a market shift that could require a cash infusion.

Are All Liquid Assets Taxable?

While income is money you earn or receive, an asset is something of value you possess that can be converted to cash at some point in the future. While owning an asset doesn’t make it taxable, converting it to actual cash would, in most cases.

The IRS, or Internal Revenue Service, has many rules around how the proceeds from the sale of assets can be taxed.

The IRS considers taxable income to include gains from stocks, interest from bonds, dividends, alimony, and more. Gains on the sale of a home might be taxed, depending on the amount of the gain and marital status. If you aren’t sure whether income from the sale of an asset is taxable, it might be wise to consult a tax professional.

Is It Smart to Keep Cashing In Liquid Assets?

The point of maintaining a portion of your assets in liquid investments is partly for flexibility and also for diversification. The more access to cash you have, the more prepared you are to navigate a sudden change in circumstances, whether an emergency expense or an investment opportunity.

Having a portion of your portfolio in cash or cash equivalents can also be a hedge against volatility.

Thus, it may be worth keeping a mix of both liquid and non-liquid assets to help you reach your short-term financial goals as well as longer-term ones. And while cashing in liquid assets might be necessary, it’s also prudent to keep some cash on hand in case you need it. You may want to focus on gathering at least three to six months’ worth of expenses in the form of liquid assets as an emergency fund.

How Liquid Are You?

To figure out how liquid you are, make a list of all your monthly expenses, from rent/mortgage on down, including even your streaming service subscription. Then, make a list of all your liquid assets and investments (being careful to pay attention to the definition of liquid assets vs. illiquid assets, as it can be confusing).

Then, total all your monthly expenses, and compare that sum to the liquid assets in your possession.

Does your total savings cover six months’ worth of monthly expenses? If so, congrats! If not, you’re not very liquid. Don’t despair, though. There are ways to build up more liquidity by growing your emergency fund.

Where to Start Building Liquid Assets

As you start to build your liquid assets, first consider saving a cash cushion in the form of an emergency fund, which should be enough to cover any unexpected expenses that might come along.

Envision what you might need in the event of a crisis (e.g., a job loss, divorce, health event, and so on). In terms of how much to save in an emergency fund, aim to accumulate three to six months’ worth of expenses to cover basic bills, repairs, insurance premiums and copays, as well as any other personal or medical expenses.

One good way to build liquidity is to set money aside every week or month. Or you might have a set savings amount auto-deducted from each paycheck. You could keep the funds in a high-yield savings account to help them grow.

From there, you may consider opening a retirement account or a taxable brokerage account where you can invest in potentially more lucrative (but risky) liquid investments, such as stocks, bonds, mutual funds, and ETFs.

The Takeaway

Liquid assets are assets that can be converted into cash relatively easily — typically with little or no loss in value. Liquid assets can include cash in a checking or savings account, money market accounts, or marketable securities like stocks, bonds, mutual funds, and ETFs.

Liquid investments can play a surprisingly important role in your financial wellbeing. Having ready access to cash can help you pay off debt, cover a crisis, or be able to invest in new opportunities.

Having the right banking partner can help you keep your cash secure and earning interest.

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’s the definition of a liquid asset?

A liquid asset is an asset that is readily converted into cash, such as money in the bank, stocks, or a certificate of deposit (although you might owe a penalty when you liquidate it).

What does non-liquid asset mean?

Non-liquid assets are resources that can’t be quickly converted to cash, such as real estate, employee stock options, or collectibles (such as artwork or jewelry) that would have to be sold, which can take time and the price may fluctuate.

Is a 401(k) considered a liquid asset?

Retirement accounts, such as a 401(k) are not really considered liquid until you are over the age of 59 ½. Before that age, you would face a 10% early withdrawal penalty, as well as taxes, meaning you would take a loss on the value.


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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.

*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.

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

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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