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While a bank’s size is determined primarily by the assets it holds, the size of a bank may also influence the range of services and products it offers. Small banks may offer a more personalized customer experience, while big banks may be more comprehensive, offering an array of deposit accounts, loans, insurance, financial planning and wealth management.

When choosing a bank, and understanding how different banks operate, size is only one consideration, however. Whether the institution is a regional or national bank is another factor that can determine whether it’s a good fit for your needs.

Are Small Banks Safer Than Large Banks?

The Federal Deposit Insurance Corporation (FDIC) is an independent agency that helps protect most banks and their customers by insuring deposits in the very rare case of a bank failure. The size of a bank doesn’t affect its eligibility for FDIC insurance. The money you have on deposit with an FDIC member bank is fully protected up to $250,000, per depositor, per insured bank, per account ownership category. For those who want to keep a considerable amount of money on deposit, it can be wise to look for those banks that participate in programs that extend the FDIC insurance to cover millions.

Also important: Although it’s the customers’ money that’s covered by the FDIC, the agency is funded by premiums paid by the banks and from earnings on investments in U.S. Treasury securities. Customers do not pay for this insurance; they are automatically covered when they open an FDIC-insured account.

Recommended: APY Calculator

Types of Banks

When considering the benefits and drawbacks of different types of banks, it’s important to weigh the size as well as whether the bank is regional or national in scope. You may also want to consider whether a given institution is an online bank (i.e. as a digital bank, without brick-and-mortar branches) or if it provides online services and physical locations.

Small Banks

The criteria that determine a bank’s size can vary widely depending on the source.

According to the FDIC’s definition, small banks are banks with assets of less than $1.609 billion for either of the two calendar years prior to December 31, 2024. That might not seem all that small, but it’s a fraction of the trillions of dollars in assets that some larger banks maintain.

Small banks can also be defined as commercial banks of modest size. A commercial bank is simply a bank that accepts deposits, offers checking and savings accounts, and makes loans to customers.

Midsize and Large Banks

Midsize banks have assets that generally fall between $10 billion and $100 billion. Banks with assets north of $100 billion are considered large banks.

Community Banks

Community banks can be small or midsize institutions. They are smaller than regional banks, and like regional banks they may offer specific products that cater to local businesses (e.g. agricultural loans).

Regional Banks

Regional banks are generally larger than community banks, but they are also anchored in a specific geographic area and may have a niche focus.

National Banks

A national bank is a commercial bank that’s chartered by the U.S. Treasury’s Office of the Comptroller of the Currency (OCC). As part of the national network of U.S. banks, a national bank has a defined role in the country’s banking system, including an ongoing relationship with its local Federal Reserve Bank.

The important thing to understand if you’re inquiring into the merits of one bank versus another is that the size, products, services, features, and focus of an institution can overlap in various ways.

Other Types of Financial Institutions

The above only covers some of the most common types of banks. Here are some others.

•   Savings and loan associations are financial institutions that are primarily focused on helping customers get residential mortgages.

•   Niche banks focus on a particular audience, such as medical professionals, farmers, or the LGBTQ+ community.

•   Mutual savings banks are a kind of credit union that originally served low-income communities and focused on providing mortgages.

•   Community Development Financial Institution (CDFI) banks. Many people may wonder what a CDFI is. These are financial institutions that aim to create economic opportunity for individuals and small businesses, quality affordable housing, and essential community services.

•   Online banks are the same as traditional banks in many ways, but they provide services online rather than via bricks-and-mortar branches.

•   Neobanks are fintech businesses that operate in similar ways to an online bank. They may partner with FDIC-member banks or other financial institutions to offer accounts and banking services through an app or online. Neobanks, however, do not have bank charters and technically aren’t banks.

You may notice that some of the organizations mentioned above are defined as thrifts or credit unions. When comparing credit unions vs. banks, the main difference to note is how they operate.

Credit unions operate on a membership basis; there are usually specific requirements to join. A credit union is member-owned while a bank is not. Both can offer deposit accounts and loans, though credit unions return profits back to members in the form of higher rates for savers and lower rates for borrowers.

How Small Banks Differ From Large Banks

When looking at big banks vs. small banks, there are a number of things that set them apart beyond the scope of their assets. Understanding the main differences can help if you’re on the fence about whether to open an account at a large bank or bank locally instead.

Here are some of the most notable ways big banks and small banks differ.

Tips for Choosing a Bank

There are a number of things to consider when picking a bank or switching banks to make sure you find the right fit. If you’re hunting for a new bank, here are some of the most important questions to ask:

•   What kind of banking products and services do I need? And what kind of banking products and services are offered?

•   Do I feel comfortable and banking online-only, or will I need branch banking services from time to time?

•   How much can I expect to pay in fees for an account?

•   What kind of interest rates do deposit accounts earn? Are high-yield savings accounts offered?

•   Is there a minimum deposit requirement or a minimum balance requirement?

•   How large is the ATM network? Are there any fee refunds for using out-of-network or foreign ATMs?

•   When is customer support available and how can I reach them?

•   Are the online and in-app features state-of-the-art?

•   Will a teller or bank officer be available if I need to consult with someone, person to person?

•   Does the bank support the community in any way?

Whether you’re considering a big bank or a small bank, check to see if it’s FDIC-insured. Again, FDIC insurance covers deposits up to $250,000 per depositor, per account ownership category, per bank in the rare event of a bank failure. And some banks participate in programs that extend that coverage to millions.

Recommended: Passive Income Ideas

The Takeaway

Whether to keep your money at a big bank or a small bank is a matter of personal preference. Some people appreciate the accessibility, state-of-the-art tech features, and full array of products and services of a big bank. Others may prefer the more personalized experience they find at a small local bank. Finding the right banking partner can be an important step in achieving financial security.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible 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.

FAQ

How is a small bank different from a large bank?

Small banks can differ from large banks in a number of ways, including assets, products and services offered, geographic footprint, and cost. The most common metric used to measure bank size involves assessing its assets according to FDIC guidelines.

Should I switch to a local bank?

Switching to a local bank could make sense if you want to bank close to home and enjoy having a personal relationship with the bank’s staff. When comparing local banks, consider the types of accounts and services offered, the fees you’ll pay, how you’ll be able to access your money, and customer support.

What is an advantage of local community banks?

Local community banks can offer numerous advantages, starting with personalized service. A local bank may be less costly than a larger bank and have lower employee turnover. You can also bank closer to home and may find that the financial institution offers special products and programs tailored to the local community.

About the author

Rebecca Lake

Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. 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.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

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 every 31 calendar days.

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 the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, 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 the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit 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, Wise, 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 Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details 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.

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

SOBNK-Q125-040

Sometimes, a financial account like a checking account will sit dormant, or unused, for an extended period, and an inactivity fee will be charged. Usually, a bank, credit union, or other financial institution will start to assess an inactivity fee after six months of no activity in the account. However, some banks may wait up to a year before applying inactivity fees to the account.

To better understand and steer clear of this annoying fee, read on. Below, we’ll explore how inactivity fees work, including how much they cost and how to avoid or reverse these fees.

What Is an Inactive Account Fee?

Banks or other financial institutions apply inactivity fees or dormancy fees when financial accounts just sit, without money going in (deposits) or out (withdrawals). Perhaps the account holder isn’t conducting any kind of activity at all; not even checking the balance for a stretch of time.

Financial institutions can apply these inactivity fees to all sorts of accounts, like brokerage or trading accounts, checking accounts, and savings accounts. These fees are a way for banks to recoup some of the costs they incur when maintaining dormant accounts and can trigger the account holder to reactivate the account.

Recommended: What Happens if a Direct Deposit Goes to a Closed Account?

How Do Inactive Account Fees Work?

Here’s a look at the sequence of events that can lead to inactivity fees:

1.    No transactions occur within the account. Let’s say you opened a high-yield savings account to fund your next vacation. But life got in the way, and you forgot about it for six months, leaving it inactive. Keep in mind, the definition of inactivity may vary by the financial institution. So, while some banks may only require you to conduct a balance verification to keep the account active, others may require, say, a bank deposit or a withdrawal, to keep the account active.

2.    The account is flagged for inactivity. Since money isn’t flowing in or out of the account, the financial institution flags the account. After this happens, some financial institutions may send a notification to the account holder before they begin charging a fee. The notice allows the account holder to take action before fees begin racking up. But other banks may not send a notification before they begin charging you inactivity fees. That means you are responsible for keeping tabs on your accounts so you can ensure they are active and up-to-date.

3.    The financial institutions begin charging inactivity fees to the account. Usually, the financial institutions will begin charging an inactivity fee between several months to a year after the last transaction took place within the account.

If these fees go unnoticed for a few years, the account will be deemed a dormant bank account. Every state has a different timeline for determining when accounts are dormant. For example, California, Connecticut, and Illinois considered accounts dormant after three years of inactivity. On the other hand, an account requires five years of inactivity in Delaware, Georgia, and Wisconsin to move to the dormant category.

Once the account is considered dormant, the financial institution will reach out to let you know that if you don’t attend to the account, it must be closed and transferred to the state — a process called escheatment. But, even if your account funds end up with the state, the situation isn’t hopeless. There are several ways to find a lost bank account and hopefully retrieve any unclaimed money.

How Much Do Inactive Account Fees Cost?

 
Inactive account fees can range between $10 to $20 per month, depending on the bank.

 
Remember, not all banks charge inactivity fees. However, if your account does have inactivity or dormancy fees, guidelines must be outlined in the terms and conditions of the account. Check the fine print or contact your financial institution to learn the details of these and other monthly maintenance fees.

Why Do Banks Have Inactive Account Fees?

One of the primary reasons banks why charge inactivity fees is that states govern accounts considered inactive and abandoned. Usually, an account that has had no activity for three to five years is considered abandoned in the eyes of the government.

Depending on the state’s laws, the financial institution may have to turn over the funds to the Office of the State treasurer if the account is deemed abandoned. At this point, the Office of The State Treasure is tasked with finding the rightful owner of the unclaimed asset.

Since banks do not want to hand over funds, they may charge an inactivity fee as a way to keep the account active. Thus, the financial institution won’t have to give the account to the state, keeping the money right where it is.

Additionally, inactive accounts cost financial institutions money. So, to encourage the account holder to start using the account, they charge inactivity fees. While some financial institutions send inactivity notices, others may not. Therefore, if your account has been inactive for a long time, you may only notice the fee once your bank account is depleted. At this point, the financial institution may choose to close the account.

Recommended: Can You Reopen a Closed Bank Account?

Can You Reverse an Inactive Account Fee?

It never hurts to call your bank and request a reversal of inactivity fees. However, if the financial institution is unwilling or unable to reverse the fees, you may want to compare different account options to find a type of deposit account that better suits your needs.

Make sure to compare all fees and any interest rates that might be earned to identify the right account for your needs.

Tips to Avoid Inactive Account Fees

Inactive account fees are a nuisance. Fortunately, there are several ways you can avoid them entirely. Here’s how:

•   Set up recurring deposits or withdrawals. Establishing a direct deposit into your account or regular transfer out of your account can help keep it active and avoid inactive account fees.

•   Review accounts regularly. Checking your financial accounts and spending habits regularly can help you keep tabs on your money and also decide if keeping a specific account open is worth it.

•   Keep contact information up-to-date. If your account becomes inactive, some banks may attempt to contact you before charging you an inactive account fee. If you have the wrong information on file, you may never receive a heads-up about the additional fee.

•   Move money to another account. If you don’t want to maintain an account, it’s best to move the money to an account you actively manage. Then close the account once the money has been transferred. That way, you’ll dodge fees and streamline your financial life.

The Takeaway

When you don’t use an account, your financial institution could begin assessing an inactivity fee. You can avoid these charges by keeping watch of your bank accounts and setting up automatic deposits or withdrawals. If you discover you’re not using your account, you can empty and close it, so you don’t have to worry about extra fees.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible 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.

FAQ

Can a bank shut your account down if you have an inactive account fee?

Yes. If there has been no activity on your account for a while (the timeframe varies by financial institution), your bank generally has the right to close your account. Plus, it’s not required that they notify you of the closure.

Are inactivity fees the same as dormancy fees?

Yes, inactive and dormancy fees are the same. They both refer to fees that are applied to an account when it’s inactive for an extended time.

Besides inactivity fees, what other fees do banks often charge?

ATM fees, maintenance fees, overdraft fees, and paper statement fees are just a few fees banks levy on their bank accounts. Before you open an account, make sure you understand the type of fees that accompany your account, so there are no surprises down the road.

About the author

Ashley Kilroy

Ashley Kilroy is a seasoned personal finance writer with 15 years of experience simplifying complex concepts for individuals seeking financial security. Her expertise has shined through in well-known publications like Rolling Stone, Forbes, SmartAsset, and Money Talks News. Read full bio.

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. 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.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

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 every 31 calendar days.

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 the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, 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 the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit 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, Wise, 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 Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details 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.

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/.
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.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

SOBNK-Q125-015

P2P payments, aka peer-to-peer transfers, are a popular tech-powered way to send money to and receive money from other people. With a money transfer app or perhaps one from your financial institution, you can send a friend your half of the dinner bill, gas money, or other payments, quickly and easily from your mobile device. Chances are, you can also buy items (say, on Instagram or a website) using one of these apps.

To move money via P2P, all you need to do is to download a transfer app, like Venmo or PayPal, and connect your bank account, debit card, or credit card to it. Or your financial institution may offer app options you can enable. Either way, once you are set up, you are just a few clicks away from being able to send money.

What Is a P2P Payment?

With a P2P payment, you can send money to a friend with just a few clicks on your mobile device. This replaces the need to get cash at an ATM or write out a personal check, options that aren’t always quick or convenient.

For traditional P2P apps, both parties need to have an account with the transfer service in order to make the transaction. For example, if you want to use Venmo to repay a friend for the salad they bought you at lunchtime, that person would also need to have a Venmo account to receive that payment.

Typically, a P2P account is attached to your online bank account. Some P2P platforms, however, allow customers to link their P2P accounts to a debit card or even a credit card, though it may involve additional fees.

Recommended: How to Transfer Money From One Bank to Another

Understanding How P2P Transfers Work

Here’s a closer look at what goes on when you use a P2P payment app.

Overview of the P2P Transfer Process

Say that you want to send money P2P to your sister for your mother’s birthday present. Depending on the type of P2P service you use, you’ll follow some variation of these basic steps.

•   Creating a P2P account. You will need to download a P2P app and then sign up for an account. In order to send money to your sister, you’ll both need to have an account with the same money transfer service.

•   Linking your bank account to your P2P account. Some P2P services have the ability to hold funds, but they generally must be linked to a primary bank account (such as your checking account), credit card, or debit card in order to be fully operational. This is how the account will pull any funds needed to make a payment.

To link your checking account, you may need your checking and routing number (which appear at the bottom of a check). Some P2P transfer services may only need your bank log-in information. Others may allow you to set up extra verification measures.

•   Searching for a user to transfer funds to. To send money to your sister, you’ll need to find her on the P2P platform. You can typically search by username, email address, or a phone number. In most cases you will be able to add her account as a contact or “friend” in your account.

•   Initiating a transfer. The next step in how a P2P payment works is getting the money moving. Your sister can request a payment from you, or you can initiate the payment yourself. This requires choosing the option to send funds, entering a dollar amount, and then clicking submit. If you’ve enabled additional security measures on your account, you may need to enter a PIN that gets texted to you as well.

You may be prompted to choose whether you are making a purchase or sending money to a friend or family member. This can impact whether fees get assessed and what kind of protection you receive for the transaction.

You may have the option to add a description or “memo” to your transaction. Some P2P services may require this information so that they can charge a fee for business-related transactions. Others offer the option to act as a personal ledger should you need it in the future.

•   Waiting for the transfer to complete. Now the funds are in motion via a P2P bank transfer. When money is sent from one customer to another, it moves in the form of an electronic package safeguarded with multiple layers of data encryption. This makes it hard for hackers to access the data (like your bank account number) within the transfer while it is in motion. Similarly, data encryption keeps your money and account information safe. Once the data set reaches its destination, it is decoded and deposited as currency.

•   Transferring the funds into the payee’s bank account. When a P2P transfer is completed, the funds may be deposited directly into your sister’s bank account. Or they may go into an account created for her by the P2P service. Funds received into P2P user accounts can then be transferred into a person’s bank accounts at little to no cost. (You are likely to pay a fee if you want the funds transferred ASAP versus in a couple of days.)

Your sister will likely receive some combination of email, text, and/or in-app notifications that the funds have arrived. If she decides to leave the money in her P2P account, she can use that account balance the next time she needs to pay someone or purchase something from a business that accepts P2P transactions.

How Long Do P2P Transfers Take?

The general rule of thumb for P2P transfer services is to allow one to three business days for a transfer to complete (although some seem instantaneous; timing varies). That’s because standard bank transfers use the ACH (or Automated Clearing House) system, which can take a day or two to complete.

When it comes time to move funds from the app to, say, a checking account, some apps may not charge a fee; others may assess a charge of 0.5% to 1.75% of the overall transfer amount.

Are P2P Money Transfers Safe?

You may wonder if mobile payment apps are safe. Any time your bank account, credit, or debit card information is online, there is a chance that someone can get a hold of it, and P2Ps are no different. While all major money transfer companies encrypt your financial information, no P2P system can say it’s totally impervious to hacks and scams.

There are also additional measures you can take to make sure that your account remains secure. For example, you may be able to set up two-factor authentication, which might involve typing in a unique pin number that is texted to your phone for each transaction. Or you might elect to receive notifications each time there’s a transaction posted on your account, enabling you to spot financial fraud right away if it were to happen.

You may also want to take care when you type in a recipient’s email address, phone number, or name. A typo could lead to the money going to the wrong person.

How Do Peer-to-Peer Transfer Companies Make Money?

P2P transactions are largely offered for free to consumers, which may beg the question of how the companies that offer these services stay in business. Here are two major ways that P2P money transfer apps may generate income.

Account Fees

Typically, you can make P2P payments from a linked bank account or straight from the P2P account for free. If you want an instant transfer or you are transferring money using a credit card or from depositing checks into your P2P account, there may be a fee involved.

Business Fees

P2P platforms aren’t just for consumers — they are used by businesses as well. Compared to the free transactions that standard user profiles offer, business profiles are generally subject to a seller transaction fee for each customer purchase made with a P2P money transfer app. Venmo, for instance, charges a fee of 1.9%, plus 10 cents for each transaction.

What Are the Benefits of P2P Money Transfers?

There are three main benefits to using online money transfer services.

•   They’re fast. Depending on the service, P2P money transfers can happen very quickly. They can take anywhere from just a few seconds to a couple of business days.

•   They’re cheap. When exchanging money between friends and family, P2P money transfers are often free. There may be a small fee, however, if you want an instant bank transfer, are using a credit card instead of a bank account, are making a transfer above a certain dollar amount, are conducting a high volume of transfers, or are using the service for a business transaction.

•   They’re easy. P2P transfers eliminate the need to make trips to the ATM or a local bank branch to get cash. They also eliminate the need to get out your checkbook, write a check, and then mail it to someone. For a P2P transfer, all you likely need is a mobile device, the app, and cell service or wifi.

Alternatives to P2P Money Transfers

What if a P2P money transfer isn’t available or doesn’t suit your needs? Try these options instead to move money.

Sending a Check

You can go old-school and write a paper check. You fill out the necessary details and hand or mail the check to the person you are paying. Typically, no fee is involved, although you may have to pay for a new checkbook when you run low and order more checks.

Money Orders

Money orders are in some ways similar to a check, but you don’t write them from a bank account. Instead, you purchase them (essentially pre-paying for the amount you are sending) at the post office, businesses like Western Union or Moneygram, or from certain retailers.

Typically, you will pay a small fee. For example, the United States Post Office will issue domestic money orders up to and including $1,000. Those that are for amounts up to $500 will be assessed a $2.35 fee; for ones that are $500.01 to $1,000, $3.40 will be charged. Once you have a money order, you can either give it to the recipient in person or mail it. You can also typically track a money order to see when it’s cashed.

Using Online Bill Payment Services

Many financial institutions offer ways for their customers to pay bills electronically. A key feature of mobile banking, this service can be a simple way to send funds from your checking account, regardless of where you are or what time it is. You may be able to set up recurring payments as well for bills you receive regularly.

Wire Transfers

Wire transfers are another way to send funds electronically using a network of financial institutions and transfer agencies that operate globally. Typically, you will access a wire transfer via your bank, its website, or its app. You’ll need to have your payee’s banking details and will likely pay a fee to wire money.

For instance, domestic wire transfers can charge a fee of anywhere from $0 to $50 (depending on whether they are incoming or outgoing), and they can often be processed in a few hours or within a day. International wire transfers can cost more (with both the sender and recipient possibly paying fees, typically $35 to $50 for the sender) and can take longer, typically two days. Certain banks may offer free wire transfers, perhaps only for certain types of accounts (such as premium ones), so if this is an important feature for you, it can be worthwhile to do your research.

Recommended: What Is an E-Check (Electronic Check)?

The Takeaway

Peer-to-peer (or P2P) payment apps facilitate mobile money transactions. You can use them in place of cash or writing a check when you want to give friends or family money, whether it’s to cover your portion of a dinner bill or split the cost of a vacation rental. Some businesses also accept this form of payment.

All you need to make a P2P transfer is a mobile device, an internet connection, and your P2P app, which you must link to your credit card or bank account.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible 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.

FAQ

How much time does a P2P transfer take?

P2P accounts can take just a few seconds or a few days to move funds. Then, if the person who has money in the P2P app wants to transfer their cash to a bank account, that can also take between hours and a couple of days. Often, you may be charged a fee if you want the money moved ASAP.

Is P2P digital money?

P2P, or peer-to-peer-payments, are a digital way of moving funds from one person to another. Once the transfer is complete, the recipient has money they can use to pay for purchases or transfer into a bank account.

What’s an example of a P2P payment?

An example of a P2P payment would be to use a P2P app such as PayPal or Venmo to send funds to a friend you owe money. Or you might send a payment to a service provider or retailer using P2P apps as well.

Do banks use P2P?

Many banks offer their own version of P2P apps. For example, you might be able to almost instantly send funds from your account to a friend, a retailer, or a service provider by using a bank’s app.

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. 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.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

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 every 31 calendar days.

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 the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, 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 the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit 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, Wise, 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 Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details 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.

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

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.

SOBNK-Q125-023

A mobile wallet can be a great way to pay for things as you go through your day without having to carry an actual, potentially cumbersome, wallet with you. Instead, an app holds digital versions of your credit, debit, loyalty, and ID cards, allowing you easy access when needed.

But you may wonder which of the mobile wallet options are best, how safe these transactions are, and whether it wouldn’t just be better to slip your debit card in your pocket on most days.

Read on to learn more.

What Is a Mobile Wallet?

A mobile wallet is just what it sounds like: It’s a virtual wallet that lives on your mobile device (aka your cell phone). It can store credit cards and charge cards, as well as debit, loyalty, and store card information. This allows you to quickly and easily pay for goods and services with your smartphone, smartwatch, or another mobile device. No more digging through your bag or backpack for your “real” wallet and fishing out cash or the right piece of plastic.

Mobile wallets (sometimes called digital wallets) can go a step further, too. You can also stash insurance cards, ID, coupons, concert tickets, boarding passes, and hotel key card information in them. Some digital wallets also enable you to send money to friends, as well as receive payments.

You may also be able to use your mobile wallet instead of a physical card at some ATMs for contactless withdrawals.

How Does a Mobile Wallet Work?

Here’s how a mobile wallet works:

•   You install the app and type in your personal and payment information, which is securely stored. (Unique identifying numbers are used to store your details vs. your actual card or account information.)

•   When you are ready to make a payment with the mobile wallet, a technology called NFC (near-field communication) typically kicks in. This allows the two devices (your mobile wallet and the vendor’s reader) to communicate. Typically, you will wave your device over the merchant’s terminal or tap your device against it.

•   As the two devices communicate, your transaction will likely go through. Funds will transfer, and you will usually be pinged with a confirmation.

Recommended: How to Deposit Cash at an ATM

What Is the Best Mobile Wallet App?

The major mobile wallets are:

•   Apple Pay

•   Google Pay

•   Samsung Pay

These may come already installed on mobile devices. Although they differ in layout, these mobile wallet apps have the same basic function that allows you to pay with a phone tap.

Other ways to make payments on the go include mobile wallets you can download from app stores, including wallets from banks, PayPal, and merchants such as Walmart, and Starbucks.

Deciding which mobile wallet is best will largely depend upon your own personal needs, which options are compatible with your device, how you like to manage your money, and what your financial goals are. A couple of points to keep in mind:

•   When choosing a mobile wallet app, be aware that a mobile wallet offered by your credit card company may only be accepted at certain retailers.

•   Merchant wallets will typically only work in that merchant’s store or online. For instance, the Starbucks wallet will only work at Starbucks. Enjoy that latte, but don’t expect to buy new boots at the mall with it.

Setting up and Using a Mobile Wallet

Here’s how to set up most of the major mobile wallet apps:

•   You launch the app (it may be pre-installed on your device), take a photo of your card or enter its information (such as your credit card number), and follow the step-by-step instructions.

•   This process is then repeated for all other cards entered. Generally, even if you load up several credit cards into your mobile wallet, only one of them will be your default payment option. That card will be the one that is used to process a purchase. If you want to use a different card, you may need to change the default card before you make the transaction.

•   Beyond credit and debit cards, the app may also walk you through configuring peer-to-peer payments like Apple Cash or Google Pay fund exchanges. You may also be able to link your PayPal account.

•   You may be able to import retail store rewards cards, as well as museum or library memberships cards, event tickets, and airline boarding passes. This may involve scanning a QR code or selecting the “add to wallet” button in an email or a text message from the issuer.

•   When you are ready to pay for purchases using your mobile wallet, you’ll want to make sure the merchant accepts mobile money. These businesses can typically be identified through a contactless payment indicator (usually a sideways Wi-Fi symbol).

•   To pay, open your digital wallet app if necessary, hold the phone near the wireless reader or tap your device against the terminal. This will authorize the payment. Your phone’s screen will typically confirm the transaction.

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

Are Mobile Wallets Safe?

Overall, mobile wallets are considered to be safe. Here’s why:

•   Unlike credit cards, which can be copied by card-skimming devices, the card information you load into a mobile wallet is encrypted. That means that your actual card or account numbers are never shared with the merchant.

•   Unlike credit cards, which can be copied by card-skimming devices, the card information you load into a mobile wallet is encrypted. That means that your actual card or account numbers are never shared with the merchant.

•   In the case of theft, it’s not possible for anyone to use a mobile device to make a payment without providing the required security credentials.

These safeguards actually make mobile wallets more secure than carrying physical credit cards and cash, which can easily be compromised.

Pros and Cons of Using Mobile Wallets

Is a mobile wallet right for you? Here are some key pros and cons you may want to consider.

Mobile Wallet Pros

Here are some of the upsides of using a mobile wallet.

•   They’re convenient. If you’re out and about without your wallet or bag, you can still make purchases, as well as use your coupons and rewards cards. You may also be able to get cash at an ATM or check a book out of the library, all from your mobile device. What’s more, they often allow for a contactless payment, meaning they can be extra quick and easy.

•   They’re secure. Mobile wallets provide a layer of security you don’t get with cash or using a debit or credit card. Your payment information is saved in one protected, central location. Card numbers are never stored in the app itself but are instead assigned a unique virtual number. This protects your money even if your smartphone is lost or stolen.

•   They can help you track your spending. A mobile wallet can help you track and better manage your spending. All of your transaction information is stored in the app so it’s easy to see how much you’re spending and where each week. You might even wind up using a credit card more responsibly.

Mobile Wallet Cons

There are also some downsides to mobile wallets to be aware of.

•   They’re not accepted everywhere. There are still some industries where cash is the only currency accepted. Even in businesses that do take credit, not all of them accept mobile wallets. To accept a mobile wallet, businesses need to have payment readers that take NFC payments, and not all of them have these terminals. This can cause a problem if a mobile wallet is all you have on hand.

•   Your phone could die. Cell phones often run out of battery and, if you’re without a charger, that handy mobile wallet will no longer exist. That can put a crimp in your shopping plans or become a major problem if you have important documents such as train passes or concert tickets stored in your mobile wallet.

•   You may end up overspending. The use of mobile wallets can be similar to that of using a credit card. Because cash isn’t physically leaving your hands, spending can feel less real, which can be a cause of overspending. If you have spending issues, a mobile wallet can make it easy to spend mindlessly and swipe or tap too often.

4 Tips for Using Your Mobile Wallet

To keep your mobile wallet safe, keep these tips in mind:

1.    Do your research before downloading payment apps. Look for reliable brands/companies, many positive reviews, and a significant number of downloads. Avoid untested apps; they could be a kind of scam and contain spyware or malware.

2.    Know how to remotely lock and locate your phone in case it gets lost or stolen. Check your phone’s device manager capabilities before you find yourself in an emergency situation.

3.    Always have appropriate locking technology. Carrying around a phone that doesn’t lock means you could be risking loss.

4.    Review your credit and debit card statements. Make sure those purchases are yours. While mobile wallets are secure, problems can occasionally arise, and you want to be alert.

The Takeaway

A mobile wallet is a digital way to store credit, debit, ID, and gift cards so that purchases can be made using a mobile smart device rather than a physical card.

Mobile wallets can help simplify your financial life. They allow users to make in-store payments without having to carry cash or physical credit cards. They’re easy to use and have hefty safeguards.

However, they aren’t universally accepted. It’s worth your while to determine whether the retailers you frequent accept them to help determine if a mobile wallet is a good option for you.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible 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.

FAQ

How many places support mobile wallets?

While there isn’t a precise tally of how many retailers and other businesses support mobile wallets, a recent study found that there are 1.75 billion registered mobile money accounts globally, indicating significant adoption of and acceptance of this technology.

Do mobile wallets support all debit/credit cards?

Each mobile wallet will have its own policies, but most credit and debit cards from major banks are supported by, say, Google Pay and Apple Pay. Small business credit cards may also be added, especially those from established banks. You may find, though, that prepaid cards are not supported.

Will mobile payments replace cash?

According to a 2024 study by the nonprofit Global System for Mobile Communications, the mobile money industry saw a 23% increase in transaction volume worldwide in 2023, up to 85 billion annually. However, cash isn’t going away any time soon. According to the most recent statistics from the Federal Reserve, cash is the third-most-used payment instrument in the U.S.

Photo credit: iStock/hiphotos35

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. 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.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

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 every 31 calendar days.

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 the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, 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 the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit 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, Wise, 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 Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details 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.

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/.
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.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

SOBNK-Q125-009

There is no one-size-fits-all answer to how many bank accounts you should have. The answer will likely be, “It depends”. Your personal and financial situation and goals will impact whether you have just one or two accounts or several of them with different purposes. For example, a recent college grad who is just entering the workforce will likely need fewer accounts than a self-employed person who is saving for a down payment on a house and their toddler’s future education.

There can indeed be advantages to holding multiple checking accounts or savings accounts, but having more than one or two will definitely require more of your time in terms of money management.

How Many Bank Accounts Do Most People Have?

When it comes to managing your money, many adults have, at a minimum, one checking account and one savings account at the same bank. In the journal Consumer Affairs, one landmark study found that the average American had 5.3 accounts.

That said, for most individuals, especially those who are unmarried, opening just one checking account and one savings account usually covers their basic banking needs.

With just one checking account and one savings account, you eliminate confusion and can simplify your finances. If all of your paycheck goes into your checking account using direct deposit, you can set up recurring automatic transfers into savings for the date after your payment hits.

If you automate your finances in this way, money moves into your savings account and leaves what you know you’ll need in checking until your next paycheck.

It’s also wise to keep in mind that some banks, especially the larger traditional banks vs. online banks, may charge monthly fees for checking accounts or require a minimum deposit. If you bank at one of these bricks-and-mortar financial institutions, having only two accounts can reduce the fees you’ll need to pay.

7 Reasons to Open Multiple Bank Accounts

Although two bank accounts may suit some people just fine, there are many people who may prefer or even need to open additional accounts. Among them may be those who are married or starting a family, those who are planning extended foreign travel, military personnel, freelancers, and/or business owners. For these individuals, there may be benefits to having multiple savings accounts or checking accounts for different financial needs.

1. Large Transactions

While couples do not necessarily need to share all of their finances, there are certain benefits to having a joint account for your household and family. This can be helpful, even if you still have a personal account for your own discretionary spending.

For one thing, this pooled account can help cover large monthly payments such as a mortgage, rent, or other household expenses equally.

Plus, rather than individual savings, you might want a shared savings account for emergencies, like a surprise medical bill or car trouble. Each partner might put a small amount into that fund every month, with a goal of having at least three to six months’ worth of basic living expenses covered. (You can use an online emergency fund calculator to determine what your goal amount should be.)

2. Specific Savings Goals

Having dedicated savings accounts (especially high-yield savings accounts) can also be a smart tactic to encourage you to put away money for future goals, whether that’s travel or saving up for a wedding or baby.

Some couples even prefer a shared account for debt payments (such as student loan debt or credit card debt). However, helping to pay off your partner’s debt is an important financial conversation to have before you start a new bank account for that purpose.

3. Saving for College

Saving for college is another reason parents might open an additional bank account. Can you have more than one bank account for this purpose? Of course, especially if you have more than one child.

Also, even an individual who is currently paying for school might see the benefits in having a separate checking account to manage and keep track of spending on books or other school-related costs. This would be distinct from a checking account for spending on food, clothes, and other everyday expenses.

4. Charity Donations or Family Healthcare

Other reasons people might consider opening additional bank accounts would be for charity donations or offering financial assistance to another family member, such as paying for eldercare. While there’s probably no reason why those monthly expenses can’t also be accounted for in your regular checking or savings account, keeping such things separate can improve some people’s money management.

5. Separating Finances

In some situations, partners may want to open additional accounts to keep some of their finances separate. For instance, in a married couple, you might both agree to put the majority of your paycheck into a joint checking account. However, you could each direct some of your earnings to a separate checking account for discretionary spending. For some couples, this can help keep the peace, since there’s no need to explain how much you chose to spend on new shoes or the latest cell phone model.

Or you might decide to open up different types of savings accounts to put some money into for an upcoming friends’ getaway or a similar goal.

What’s more, if one of you is starting a business (say, selling prints of your travel photos online), it would make sense to open a dedicated account for that, to keep your earnings and work-related expense payments in one place.

Recommended: How to Write a Check

6. Creating Accounts for Your Kids

If you have a child you’d like to gain financial literacy, opening an additional account with them can be a wise idea. You can open a shared account and begin teaching your kid how to put money in the bank, withdraw funds saved, and see how interest is earned.

Since those under age 18 typically can’t have their own account, this can be a good way to instill good financial habits at a young age.

7. Budgeting Is Easier

Deciding which budget is right for you can take some trial and error, and some people find that keeping track of their finances is easier with multiple accounts. For instance, if you follow the 50/30/20 budget rule, you are likely putting 50% of your take-home pay towards the “musts” of life, 30% towards the “wants,” and 20% towards savings.

In this situation, you might find it clearer and more convenient to have two checking accounts from which you pay those two types of bills. You might even name one “musts” and one “wants,” if you like.

Recommended: How Much Money Should You Have After Paying Bills?

How Many Checking Accounts Should You Have?

If you’re thinking about whether to have multiple bank accounts, keep this in mind: There’s no single right or wrong answer. While there is no need to open five new savings accounts to plan for your next five vacations, how many bank accounts you should have can depend on your ability to organize your finances.

Some individuals might find they prefer having at least one or two extra savings accounts for savings goals. These savings goals could be anything from an emergency fund, travel fund, or saving up for a car.

That emergency savings account can be critical to have, by the way, to be prepared for whatever may come your way. Whether you want this account to be a separate fund in a different bank account or part of your overall main savings account, however, is really up to you.

Potential Downsides to Having Multiple Bank Accounts

Before you start opening up additional checking and savings accounts, consider these cons:

•   You risk incurring more bank fees. Some banks will charge you account fees for each and every account you open, which can take a bite out of your funds.

•   You will have to keep track of account rules. In some cases, there are minimum balance requirements, limits on the number of withdrawals, and other guidelines that can take up brain space, not to mention involve potential charges.

•   There can be an increased chance of overdrafting. No one is perfect, and the more accounts you have, the more opportunity there is to forget about some autopayments you had set up and wind up with a negative balance. This in turn can trigger overdraft and NSF (non-sufficient funds) fees.

Why Freelancers and Business Owners May Need Separate Bank Accounts

While large businesses inevitably need their own bank accounts, sometimes smaller enterprises or even individuals with side hustles overlook creating a separate business bank account.

Some banks offer small business accounts, which can be used by freelancers, side hustlers, or small business owners. Basically, you want to make it easy on yourself to track personal and business expenses separately, and having different bank accounts helps take care of a lot of the legwork.

An additional account makes it easy to track business expenses and deductions, like shipping costs for your Etsy account or treats purchased for your dog-walking gig. Plus, with all of your business expenses in one place, you are more prepared for an audit and have a better bookkeeping record, rather than sorting through every transaction and trying to remember if that coffee you had six months ago was for a work meeting or not.

A great benefit of having another savings account for your business or freelance work is that you can set aside money specifically for taxes.

Of course, as a business owner or freelancer, it’s also important to save for tax season, which is why opening a separate business savings account can also come into play. A great benefit of having another savings account for your business or freelance work is that you can set aside money specifically for taxes.

Recommended: Business vs Personal Checking Account: What’s the Difference?

Alternate Money Management Options to Consider

Whether you are looking to open a new checking and savings account with a new bank or taking a broader look at what works best for your financial needs, there are a number of reasons to consider making a change.

A new account could offer you better rates or features, lower fees, or greater interest earnings.

Here, some options:

•   Credit unions are banks that are run as financial co-ops, meaning each member has a small stake in the business. Banking with a credit union usually allows more flexibility and lower fees. As nonprofits, they are designed to serve their members, often paying higher interest rates on deposits as well.

•   Online banks typically offer lower (or no) fees than traditional banks because they don’t have to support physical locations. They often have higher annual percentage yields (APYs) on deposits, too.

The Takeaway

There is no one answer to how many bank accounts you have. Typically, having checking and savings accounts is a wise and convenient move, but many people find they have multiple accounts. This might be to separate different income streams, save for various goals, and to differentiate personal from joint finances when, say, getting married.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible 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.

FAQ

Is it a good idea to have multiple bank accounts?

Whether it’s a good idea to have multiple bank accounts depends upon an individual’s personal and financial situation. A single person with a full-time job may do fine with one checking and one savings account. A married person with a day job and a side hustle, who is saving for a house and putting money aside for a child’s education, may prefer having multiple accounts to help them stay organized.

Is 3 bank accounts too many?

Three bank accounts is not necessarily too many, though it depends on a person’s situation. Having a checking account, a savings account for a down payment on a home, and a savings account for an emergency fund can be a good thing. However, if that number of accounts winds up charging too many fees or risking overdraft for the account holder, then it is possibly too many.

Do too many bank accounts hurt your credit?

Multiple bank accounts should not impact your credit. When you open a bank account, you are not requesting a line of credit, so it should not be reflected on your credit report nor should it lower your credit score.

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. 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.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

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 every 31 calendar days.

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 the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, 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 the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit 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, Wise, 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 Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
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We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/.
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