The annual percentage rate (APR) of your credit card has a big impact on how much it costs you to carry a credit card balance. In some cases — if you have a variable interest rate or are late making payments, for example — your APR can change, causing your credit card interest rate to increase or decrease.
Understanding when and how these changes might occur can help you choose the right credit card and control how much you spend on interest. Here’s a look at what can impact your credit card’s APR.
What Is Credit Card APR?
A credit card’s APR, or annual percentage rate, is the interest rate you’ll pay on the money you borrow, stated as an annual rate. Your credit card APR will tell you how much a credit card costs you in terms of interest on the balance you carry. However, it won’t tell you anything about other fees and other credit card charges you may incur.
Credit cards will typically have a separate APR for credit card purchase interest charges, balance transfers, and cash advances. The APR you receive when you open a credit card will depend on a benchmark interest rate as well as factors like your creditworthiness, as determined by your credit score.
However, the definition of APR will vary depending on what type of loan product you’re talking about. In contrast to credit cards, the APR on other types of loans is determined by interest rates, the length of the loan, and lender fees.
What Can Cause Your Credit Card’s APR to Increase?
There are a number of reasons that credit card APR can increase. Your credit card company can increase your APR on new transactions as long as they give you 45 days’ notice. The company is not allowed to increase your APR during the first year after your account is opened.
Further, there are only certain cases in which your card company can raise rate on existing balances, including when:
• An introductory rate expires
• You have a variable rate card (most credit cards have a variable rate) and the benchmark interest rate rises
• You’re 60 days late making your minimum payment
• You have completed or don’t comply with the terms of a workout agreement, which has renegotiated the terms of your agreement for a period of time
Your credit card will have either a fixed or variable credit card interest rate. If you have a credit card with a variable rate, that rate is largely based on a benchmark interest rate. The benchmark that many credit card companies use is what’s known as the prime rate. And when the prime rate rises, your APR will rise, too.
The prime rate could rise due to a change in the federal funds rate, which is the Federal Reserve’s recommendation for what banks should be charging when they make overnight loans to help each other meet federal reserve requirements.
One rule of thumb states that the prime rate is equal to the federal funds rate plus three.
Late Payments
Your credit card interest rate may also increase if you’re 60 or more days behind on paying your credit card minimum. This is what’s known as a penalty APR. Not only may this rate apply to your overdue balance, it may also raise interest payments on future purchases.
End of Introductory APR Offer
Some cards offer 0% APR on purchases or balance transfers for an introductory period. During that time, you won’t pay any interest on balances that you carry from month to month. However, once the introductory period is over, your APR will jump to the regular purchase interest rate, which will apply to any remaining balance on your account.
High Credit Card Balance
If you carry a growing credit card balance from month to month, or you’ve hit your credit limit and are unable to make payments, your card company may decide to raise your APR on new transactions.
Failure to Meet the Terms of a Workout Agreement
If you had trouble paying off your credit card debt in the past, you may have renegotiated the terms of your agreement, which is known as a workout agreement. When you successfully complete it, your card company may return your APR to what it was prior to the arrangement, which may have temporarily reduced your interest rate. On the other hand, if you fail to comply with the agreement, your card company may also decide to raise rates.
Recent Cash Advance
As mentioned above, credit card companies often typically set different APRs for purchases, balance transfers, and cash advances. If you’ve recently taken out a cash advance, you may have triggered the cash advance APR. This APR might be higher than the APR offered to you for regular credit card charges.
There aren’t as many triggers that will send your credit card APR lower, but here’s a couple to be aware of.
Prime Rate Falls
Once again, changes in the prime rate have a big impact on your APR. If the prime rate falls, your rate may also go down if you have a variable rate (as most credit cards do).
Negotiating for a Lower Rate
If you’d rather not sit around waiting for the prime rate to go down (or if it’s on an upward trajectory), one of the best ways to lower your credit card APR is by simply asking. Negotiating for lower rates and fees is one of the important credit card rules to know. (You can also negotiate on other things, such as credit card spending limits.)
You can improve your odds in this negotiation by arming yourself with some key information. First, get familiar with your credit score and make sure that it’s as high as possible. You may build your score by paying down debts and making sure to correct any errors on your credit report.
Also make sure to highlight your history with the company. Credit cards want to hold on to long-standing customers with a good history of paying their bills on time.
If your credit card company rejects your first attempt at negotiation, don’t be afraid to ask again or to speak to a manager who may have more power to make decisions about your account.
The Takeaway
Your APR can have a huge impact on how much it will cost you to carry credit card debt. As you choose a credit card, it’s important to shop around for the card that offers as low as possible an interest rate.
Still, your APR may rise at some point — especially if the prime rate increases or a low introductory offer expires. However, that doesn’t mean you’re stuck with the new rate. You can always try to negotiate with your card company to see if they can lower your rate.
Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.
FAQ
How can I lower my APR on my credit card?
You can try to lower the APR on your credit card by negotiating with your lender. Increase your odds of success by ensuring you have a history of paying your bills on time and a strong credit score.
How does the prime rate affect my credit card APR?
If you have a variable APR, when the prime rate rises, so too will your APR. When the prime rate falls, your APR falls as well.
Can the APR on a credit card change?
Yes, the APR on a credit card can change for a variety of reasons. This can include a shift in the prime rate, the expiration of a low introductory offer, or being 60 days late on paying your credit card minimum.
Photo credit: iStock/tolgart
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 .
A checking account can be a convenient place to store your cash and manage daily transactions, but, like most financial products, it has its pros and cons. On the plus side: You can usually make as many transfers in and out of the account as you like (including by swiping, tapping, and waving your debit card to make purchases). Also, your funds are likely to be insured.
But, on the negative side, you probably won’t earn much or any interest for parking your money in a checking account, and you may be hit with an array of fees that nibble away at your funds.
Here, take a closer look at checking account pros and cons so you can determine how to get the right financial product to suit your needs.
What Is a Checking Account?
Simply put, a checking account is a safe place to stash funds and enable the flow of money in (what you earn and receive) and out (what you spend).
Whether held at a brick-and-mortar bank, an online financial institution, or a credit union, a checking account is often the hub of a person’s financial life. Your pay can be seamlessly direct deposited, if you like.
For your everyday spending, you might schedule automatic payments for your mortgage and utilities, write a check when paying for a doctor’s appointment, and tap your debit card when treating yourself to a wine-tasting with friends on the weekend.
Get up to $300 when you bank with SoFi.
No account or overdraft fees. No minimum balance.
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Pros of Checking Accounts
Here’s a closer look at the pros and cons of a checking account, starting with the upsides.
Security
Yes, you could stuff your money under the proverbial mattress, but with a checking account, you have a secure spot for it, where it can’t get lost, taken, or damaged. If your bank is insured by the FDIC (Federal Deposit Insurance Corporation) or, in the case of a credit union, the NCUA (National Credit Union Administration), your account will typically be covered up to $250,000 per depositor.
In the very rare event of a bank failure, you would be protected from loss up to those limits. (Note: Some institutions offer even more than $250,000 in insurance.)
Easy Access to Cash
Checking accounts allow you to access your money quickly and easily, whether you need to pay for a meal or something unexpected, like a school donation. Setting up direct deposit allows your paychecks to be transferred directly into your checking or savings account, with some banks offering access to cash up to two days early. That’s significantly simpler than what past generations had to do, such as queuing up at the bank to deposit a paycheck at lunchtime.
You can then tap your funds by using your checking account’s debit card, writing checks, snagging some cash from the ATM, or making a transfer.
Pay Bills Conveniently
Having a checking account means you can get your bills taken care of without much effort. You might set up recurring payments to a car loan, for instance, or use a digital payment app to send money to your roommate, a friend, or your yoga teacher. You can also typically move funds quickly via wire transfer, which can be especially useful for international transactions, and other methods as well.
Debit Card for Purchases
When you open a checking account, you’re usually provided with a debit card that’s linked to the account. Similar to a credit card, you can typically use your debit card to pay in person or online for anything from this week’s groceries to a cool new pair of shades to a matcha latte.
Unlike a credit card, however, debit cards pull funds directly from your checking account. They usually only let you dip into funds you actually have on deposit, which can help you keep spending in check and stay on budget, not to mention avoid credit card debt.
Rewards
Some checking accounts come with rewards that can be a nice perk. For example, when you open an account, you might get a sign-up bonus. Who doesn’t like free money? Or your debit card may carry rewards, similar to those of a credit card, such as cash back.
Cons of Checking Accounts
Given that checking accounts are designed for customers’ everyday, short-term money needs, they have some limitations, as well. Here are a few potential downsides to consider.
Low or No Interest Earned
While your money is sitting in your checking account, it is probably earning very low, if any, interest. For instance, as of mid-April 2024, the average checking account interest rate was a meager 0.08% (that’s eight-hundredths of a percent). Translated into dollars and cents, that means that if you kept $5,000 in your checking account for a year, you would only earn $4 in simple interest.
That said, there are high-yield and premium checking accounts available that pay heftier interest rates. These may come with minimum deposit and balance requirements. Online-only banks frequently offer these accounts without those barriers, however, and with interest rates that are several times higher than the national average.
Potential Overdraft and Other Fees
Sooner or later, many people will try to transfer more money out of their checking account than they actually have on deposit. It could be a simple math error, or they might have forgotten about that on-the-fly payment they made to contribute to a friend’s baby shower gift.
Not having enough money in your checking account can lead to overdraft fees. The average charge currently stands at a steep $25 to $35. (Worth noting: There are signs of this decreasing due to government and consumer advocacy pressure.) Also, even if you have overdraft protection — meaning you have linked accounts so that money can be pulled from savings into checking to cover payments, if needed — you may still be charged a fee. However, it’s likely to be lower than an overdraft charge.
Also, check the fine print when signing up for a new checking account: There can be other fees, such as account maintenance and out-of-network ATM fees.
Security Risks
While banks are extremely safe overall, there is always a small possibility of a security risk (such as a hack), though these would typically be covered by the FDIC or NCUA, as mentioned above. Losing or having your debit card stolen and used without your authorization is another concern— and it can be a common one. A card thief could potentially gain access to the funds in your checking account. It’s vital to report the issue within two days of noticing the card is missing. Otherwise, you could be liable up to $500 or more depending on the circumstances.
When a Checking Account Makes Sense
Quite simply, checking accounts make sense for the vast majority of Americans. It typically serves as the hub of one’s daily financial life.
Some people, though, are unbanked, meaning they have not (or are not able) to access the usual banking services. If you are seeking a checking account and haven’t been able to secure one, you can try a few other options:
• It might be easier to get an account at a credit union, if you qualify for one based on where you live, your profession, or other factors.
• Your banking history may reveal some issues, such as multiple overdrafts, as tracked by ChexSystems (a kind of reporting agency for the banking industry). In this situation, you might qualify for a second-chance account. This kind of account may have higher fees and/or minimum balance requirements, but it can be a good way to show that you can handle an account responsibly. In some cases, a second-chance account can be a stepping stone to a standard checking account.
When Other Accounts May Be Better
There are some situations in which another kind of account could be better than a checking account. A few scenarios to consider:
• If you are hoping to park your money for a while and earn interest vs. spend it, a savings account can be a good bet. Some savings accounts have limits on how many transactions can occur per month (check the fine print). Whether or not that applies, you will likely earn a higher interest rate than you would with a checking account. For instance, the current average interest rate for a savings account is 0.46% vs. 0.08% for checking.
• For those who want their money to earn still more money, a high-yield savings account can offer still more earning potential. At the time of publication, some online-only banks were offering rates in the range of 4.5%.
• A CD (or certificate of deposit) can be another way to earn a higher return on money you keep in a bank. However, these don’t offer the accessibility of a checking account. You agree to keep your funds on deposit in return for the bank guaranteeing a certain interest rate.
• For those who want spending power without a checking account, prepaid debit cards can deliver. You load funds onto them and can then spend or pay bills with them. They are typically backed by a major network, like Visa or Mastercard.
• One other option is to use digital payment services, such as Venmo and PayPal. These can allow you to move funds to shop and otherwise spend, without a bank account.
Checking Account Features To Consider
If you are looking for a checking account, you may want to focus on these three considerations:
ATM Access and Fees
Since accessibility is a key selling point of checking accounts, you likely want your money to be within easy and affordable reach. Check out a financial institution’s network of ATMs and make sure they are near your usual haunts. Also see what the charges are for using an out-of-network bank: Certain banks (especially online-only ones) may waive those usual out-of-network fees that can ding you for an average of $4.73 a pop as of 2023.
Online/Mobile Banking
Today, it’s par for the course for financial institutions to provide online banking features, but some provide more robust, user-friendly digital services and offer them for free. As you consider your options, you might look for a bank that helps you save automatically. A round-up function that nudges purchases up to the next whole dollar amount and adds the extra money to your savings can be valuable.
Also helpful are dashboards that allow you to see your money (earnings, spending, and savings) and credit score at a glance, for no extra charge. This feature can help you budget better.
Overdraft Protection
As mentioned above, many people have those “oops” moments and overdraw their accounts. Some banks will give you free overdraft protection up to a certain sum. For instance, they might cover up to $50 of your overdraft without charging you the standard fees. This can be a valuable feature when you are deciding which financial partner is right for you.
The Takeaway
For many people, a checking account can be a reliable hub for their personal finance needs. You can store your earnings securely and still easily access your money to pay bills and fund daily purchases. However, there can be fees involved, and these accounts typically earn little or no interest. So, when shopping around for a checking account, it can be wise to look for one that offers a minimum of surcharges and a competitive interest rate.
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 checking accounts free?
Some are. You can often find free checking accounts from traditional and online-only banks as well as credit unions. While these accounts may be billed as “free,” keep in mind that some fees may apply, say, if you overdraft your account.
What happens if my checking is overdrawn?
If your checking account is overdrawn, that means you have drawn more money than you have in your account. By linking a checking and savings account, you may be able to have funds automatically transferred from savings into checking to cover the shortfall. Your bank may charge you a fee, whether they cover the shortfall through overdraft protection or not.
Can I have multiple checking accounts?
There is usually no limit on how many checking accounts you can have. It can be convenient to have one for, say, your salary and your living expenses and another for a side hustle and related expenses.
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.
1SoFi Bank is a member FDIC and does not provide more than $250,000 of FDIC insurance per depositor per legal category of account ownership, as described in the FDIC’s regulations. Any additional FDIC insurance is provided by banks in the SoFi Insured Deposit Program. Deposits may be insured up to $2M through participation in the program. See full terms at SoFi.com/banking/fdic/terms. See list of participating banks at SoFi.com/banking/fdic/receivingbanks.
Checks seem a pretty mundane bit of banking, but when they say “Do not convert to ACH,” that means the payer doesn’t want the funds transferred electronically. Rather, they are requesting manual processing.
Here, learn more about the implications of these five little words on a check.
ACH System 101
First, understand what ACH is. It stands for Automated Clearing House, which is an electronic system that transfers funds throughout the United States. This network allows individuals and businesses to move money from one financial institution to another, quickly and securely.
Every time you set up automatic bill pay or receive your paycheck by direct deposit or write an eCheck, that’s ACH at work. Apps such as PayPal and Venmo also use the ACH network to send and receive money.
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How Does ACH Work?
ACH transfers are initiated by either making a withdrawal or deposit into an account. You can send money to another account on a one-time basis — such as through an ACH debit to a utilities company or transferring money to a friend for your share of a restaurant meal — or opt into recurring payments. For example, some companies allow you to make automatic payments, such as for subscription services. In either case, you give permission for the receiver to initiate a withdrawal from your account.
You can also get money via an ACH credit. This happens when people receive a direct deposit of their paycheck or Social Security.
Once you or someone else initiates a transfer, the request will be processed first by your financial institution, usually by the next business day. You may be able to expedite the request, as well as schedule a transfer for a future date.
Typically, ACH transfers are faster than other types of transactions, though a potential downside is that it’s only available for transfers within the U.S. (That’s one of the distinctions between an ACH vs. wire transfer, incidentally; the latter has global reach.)
What Is Check Conversion?
Check conversion refers to the process of transforming a check payment into an electronic payment. This usually happens at one of these three points:
• Point of Purchase (POP), meaning when a purchase is made, say, at a store
• Accounts Receivable Conversion (ARC), when a business receives a check by mail and then processes it electronically
• Back Office Conversion (BOC), or when a check is processed electronically after acceptance at, say, the office of a retail location
What Does Conversion to ACH Mean?
ACH conversion describes the fact that a paper check will be converted to a payment that’s processed through the ACH network. In other words, even though a paper check was written and used as payment, it will become an electronic ACH transfer.
The main reason why a check may be converted is to save time and money when processing payments. Plus, converting a check payment to ACH could be more efficient, as it can help financial institutions detect potential bank fraud earlier, make fewer mistakes, and even result in fewer returned payments. The service of ACH transfers is typically free to consumers.
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.
Can a Check Be Converted to ACH?
A check can be converted to ACH in many cases (unless it says “do not convert to ACH”) to help it move swiftly and securely; there’s no check to get lost or be forged, for instance.
How the conversion usually happens: When the check gets deposited in a checking account, the payment details are captured from the check. Then, the check itself will be stored securely by the financial institution — unless you have the physical check and are making a mobile deposit. If the check is converted in person, then the original check will be voided and given back to the payer.
If the check was converted for ACH, it will typically appear on a bank statement as a direct payment (or withdrawal) in the same section as ATM withdrawals or other forms of electronic payments. It could also appear as a check payment — some banks include a scanned image of the check or include the payment details.
What Does It Mean When a Check Says ‘Do Not Convert to ACH’?
When a check says “do not convert to ACH,” it means that the payer does not want to make a payment electronically. Instead, the payment needs to be processed manually from one financial institution to another through the check collection system.
More specifically, it means the financial institution will contact the other financial institution to request the funds, which are then delivered through a local clearinghouse exchange or other form organization like the Federal Reserve Bank.
It’s rare to receive a check that says this on it, but if you do, there’s not much to be done to alter the payer’s request.
What Is the Benefit to the Drawee if a Check Says ‘Do Not Convert to ACH’?
Checks that say “Do not convert to ACH” may sometimes be printed when a payer is issuing multiple checks; for example, if a class action suit is being paid out. In this case, perhaps the check issuer does not want the much faster electronic processing of their checks. Perhaps it suits them to have a slower payment process.
What Is the Difference Between ACH and a Check?
The difference between ACH and check payments is the network by which they’re processed. ACH payments are processed electronically through the ACH network, whereas non-converted paper checks are processed manually. In many cases, ACH transfers are processed faster than paper checks, since you may have to wait for a check to clear.
The Takeaway
When it comes to getting paid, converting a check to ACH is most likely the fastest, safest way. Unfortunately, there’s not much you can do if the check you receive says “Do not convert to ACH,” however rare they may be. You’ll probably need to deposit it and allow the extra time required for it to become available cash.
Most of us love the conveniences of banking today, and if you want to make a good thing even better, why not check out your options?
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 an ACH payment be declined?
Yes, an ACH payment may be declined or rejected for a few reasons, the most common one being that the payer doesn’t have enough funds in their account for the transfer. Other reasons include the account was closed by the time the transfer took place, the funds have been frozen, or the payer has stopped the payment request.
What does “ineligible for conversion” mean on a check?
If a check says “ineligible for conversion,” it means the check can’t be converted to an ACH payment. This may be due to the paper the check was printed on. The payee needs to either cash or deposit the actual check at a local branch.
Why would a bank reject a check?
There are several reasons a bank would reject a check, including:
• You don’t have an account at the bank where you want to cash the check
• You don’t have proper identification to show to the bank
• The amount may be too large for the financial institution to process
• The check is void (for example, the check is old and the payment is no longer valid)
• The signature on the check doesn’t match what the bank has on file
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.
*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.
A variable-rate certificate of deposit (CD) is a financial product that locks up your money for a set period of time (or term) and has a fluctuating interest rate. This varying rate of return is what sets it apart from traditional CDs, which pay a fixed rate, meaning you know exactly how much money your money will earn.
When interest rates are high, a variable-rate CD can help pump up your returns, but the opposite holds true, too. Depending on your financial goals, style, and comfort level, a variable-rate CD may or may not be a good option for you.
What Is a Variable-Rate Certificate of Deposit?
A variable-rate certificate of deposit, or CD, is a financial product that you can purchase from a banking institution, broker, or credit union. All types of CDs are a savings account that have fixed investing terms. That means they hold your money for a certain amount of time, be it six months or several years.
You pick a term that suits you best. During that time, your money earns interest, but you are not supposed to withdraw any funds early or you are likely to be assessed a penalty fee. (No-penalty CDs are sometimes available but usually with lower interest rates.) When the term ends, your CD is said to have matured, and you may withdraw the funds plus interest or roll them over into a new CD. Usually the total amount of interest is also received at the end of the investment term.
More specifically:
• Traditional CDs pay a consistent rate of interest that you are informed of at the start of the term.
• With variable-rate CDs, however, the interest rate fluctuates throughout the term.
This means, you, the investor can potentially earn more on your deposit when interest rates go up. Or you could earn less if interest rates go down. Several market factors influence interest rates. These include the prime rate, treasury bills, a market index, and the consumer price index (CPI).
One last note: CDs are insured. Certificates of deposit are time deposits protected by the Federal Deposit Insurance Corporation (FDIC). If the bank holding the CD were to fail, you’d be insured up to $250,000 per depositor, per account ownership category (such as single, joint, or a trust account), per insured institution.
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.
Special Considerations of a Variable-Rate CD
Here are a few key things to consider when looking into investing in variable-rate CDs. This type of CD is generally most profitable if purchased when interest rates are low, because it’s more likely that the interest rate will increase during the investment term. For this reason, there is a higher demand for these CDs when interest rates are low.
There are four main factors that influence interest rates. These are:
• Consumer Price Index (CPI): The federal government uses the Consumer Price Index to calculate changes in the amount that consumers pay for certain products and services. Whatever the current CPI is can affect how interest rates fluctuate.
• Market Index Levels: Another factor that affects interest rates is the performance of investment portfolios, such as major market indices. Some indices that are often analyzed include the S&P 500, the Dow Jones Industrial Average, and the Nasdaq Composite Index.
• Prime Rate: The prime rate is the interest rate that banks charge customers who have the highest credit ratings. These customers are the least likely to default on loans, so they get the best interest rates.
• Treasury Bill Yields: The U.S. Treasury sells Treasury bonds in order to raise money, and they also pay interest on those bonds. The interest rate associated with Treasury bonds depends on the amount and time period of the bond.
It’s worth noting that, during times of high inflation, CDs may not be your best option. If inflation surges, even a variable-rate CD may not be able to keep pace. At the end of your term, you may find that your investment has lost ground versus inflation.
Another factor to consider before you lock in on a variable-rate CD is the fee for early withdrawals. Some variable-rate CDs have higher fees than others. If there’s a good chance you may end up withdrawing funds early, before a CD’s maturity date, you should check those penalties and make sure they aren’t too steep.
💡 Quick Tip: Want to save more, spend smarter? Let your bank manage the basics. It’s surprisingly easy, and secure, when you open an online bank account.
Pros of a Variable-Rate CD
All CDs are known to be very safe investments since they are federally insured up to $250,000, as noted above. In addition to that security, there are several benefits to investing in variable-rate CDs.
High Yield on Investments
Variable-rate CDs are secure, insured accounts that can provide a higher rate of return than other types of savings accounts. For instance, when you buy a fixed-rate CD, you might miss out on the opportunity to earn a higher interest rate if the market ticks upward. Variable-rate CDs, however, can respond to market conditions. If you buy a variable-rate CD when interest rates are low, you can potentially earn more as rates increase.
Profitable When Interest Rates Are Low
When interest rates are low, demand for variable-rate CDs increases, as does the profit potential. That’s because it is more likely that interest rates will increase after you purchase one. The interest rate can tick upwards and earn you more money on your money.
Lower Withdrawal Fee
Generally, variable-rate CDs come with lower penalties on early withdrawals than other types of CDs.
While there are several reasons variable-rate CDs make good investments, they do come with a few downsides to consider before you invest.
Low Interest Rates
Although a variable-rate CD provides the opportunity to snag higher interest rates, it also creates a significant risk of earning a lower rate if market rates go down. If you buy a variable-rate CD when interest rates are low with the hopes that they will increase, there is no guarantee that this will happen. This means they will continue to earn a low interest rate for some or all of the duration of the CD term. In this case, you may have lost out on the possibility of earning a higher return elsewhere.
Paying Extra for “Bump-Up” Feature
Although interest rates can increase or decrease with most variable-rate CDs, there are some that have a “bump-up” feature. This allows for a one-time rate boost (or possibly a few rate hikes) during the CD’s term, but you may well have to pay extra for this “bump-up.” This is because the initial interest rate is typically lower than it would be on a fixed-rate CD.
Inflation Can Outpace Your Rate and Wipe Away Profit
There is a chance that inflation will increase during the term of a variable-rate CD, as noted above. If this happens, inflation could end up being higher than the interest rate you’re earning. That could effectively cancel out your earnings.
Variable-Rate CD: Real World Example
All this talk of varying interest rates can be hard to get a handle on without a concrete example. So consider the following:
• A CD that has a three-year term and a guaranteed repayment of the principal deposit.
• The starting rate is 4.00%.
• During the term of the investment, the rate drops from 4.00% down to 2.00%.
• To determine the amount of interest you’d receive, you’d take the difference between the initial rate and the final rate, which is 2.00%.
• So at the end of the term, the investor would receive their initial deposit plus 2.00% interest. That’s half what it was when you started.
Obviously, you, the CD account owner, would be happier if the reverse were true, which it could be!
What Happens if I Redeem a CD Before It Matures?
Most CDs have fees for early withdrawal; these typically involve losing interest that’s been earned and occasionally a bit of the principal. (Generally speaking, you don’t receive earned interest until a CD matures.)
However, some variable-rate CDs do offer early withdrawals with no penalties for fees. These CDs usually have a lower interest rate, so you are paying for this flexibility.
CDs provide a safe place for your money to grow for a specific period of time. Most of them have fixed interest rates, but variable-rate ones are also often available. These can come with some risks. Time things right, and you could earn a healthy return on your investment. But if rates don’t head in a positive direction, you may not even be able to keep up with inflation.
CDs aren’t the only game in town for earning interest. Also consider the kind of interest you can earn from checking and savings accounts.
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 variable-rate CDs issued by the government?
Variable-rate CDs are not issued by the government, but the FDIC, an independent agency of the federal government, insures them up to $250,000 per depositor, per account ownership category, per insured institution.
What determines the rate on a variable-rate CD?
Several factors can affect the interest rate of variable-rate CDs. These include the prime rate, market indices, treasury bills, and the consumer price index.
Do CDs have fixed interest rates?
Many CDs have fixed interest rates, but variable-rate CDs have interest rates that fluctuate throughout their term. It’s up to you which type you invest in.
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.
*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.
An ACH debit block is a fraud protection tool: Companies can opt into it to prevent any ACH debits and credits from their bank account. If you suspect that your business is a victim of fraud, an ACH debit block is an easy way to protect your money until you’ve resolved the issue. It can also be a good general practice to discourage unauthorized debits.
Learn more about ACH debit blocks, how they work, and their alternatives.
How ACH Debit Block Works
First, understand some of the basic concepts related to this process, such as the ACH system in general and debit blocks.
What Is ACH?
ACH (Automated Clearing House) is a common payment method that works like a digital check, transferring money from one bank account into another. A common example of an ACH transfer is a direct deposit from an employer into an employee’s checking account.
As an individual consumer, you may also make ACH payments. For example, you might be using ACH when you utilize peer-to-peer payment apps like Venmo, pay your bills online, digitally file and pay your income taxes, or transfer money over to an investment account.
What Is a Debit Block?
Businesses use ACH payments as well, to collect funds and pay expenses. But these can be a target for criminal activity. Scammers can try to pull funds out of your bank account without your approval. If you want to prevent money from leaving a business account via ACH because of this potential risk, an ACH debit block might be a good move.
When enabled, a debit block would impede your company from being able to use the funds in the account in all ACH use cases. It’s important to understand the ramifications of a debit block — and only request one from your bank if your company has alternative methods (or accounts) for making payments.
How Does an ACH Debit Block Work?
An ACH debit block is very straightforward. When this bank fraud management tool is implemented on a bank account, no one will be able to withdraw funds from a business account via ACH.
If you have a debit block on a business account and need to make an ACH payment from that account, you’ll need to take action to make sure it goes through. It’s important to contact your bank to authorize that specific payment before the payment recipient begins the ACH debit process. Otherwise, you will need to make all future payments with paper or electronic checks, debit cards, credit cards, cash, or wire transfers.
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.
Benefits of ACH Debit Block
Here’s a closer look at the advantages of using an ACH debit block.
Reduces Electronic Payment Fraud
One reason to enact an ACH block on a business account is if you suspect your account has been compromised. An ACH debit block can prevent fraudsters from being able to debit money electronically from an account.
Individual consumers who are victims of identity theft can contact their bank, file a police report, report the fraud to the FTC, notify the consumer credit bureaus, and contact their creditors.
Offers an Additional Security Layer
Debit blocks are sometimes a reactive solution. That is, once a business suspects fraud, they can contact their bank to implement an ACH debit block on the account.
However, some companies — those that don’t need to make electronic payments from a specific business account — may prefer to proactively set up a debit block as an additional security layer.
If you do so, just understand that you’ll need to contact your bank every time you want to authorize an electronic payment from your account.
Setting up an ACH debit block is easier than setting up direct deposit. Just call your bank, provide your credentials, and request that they set up a debit block immediately. If you are doing this in response to fraudulent account activity, mention that on the call to determine what additional steps you should take.
Removing the debit block or authorizing a one-time payment will follow the same process. Contact your bank over the phone and explain exactly what you need.
Positive Pay vs ACH Debit Block
While an ACH debit block can be a good way to protect your business checking account, it does have its drawbacks. As an alternative, you may be able to implement positive pay.
Positive pay is an automated service but focused on businesses, not consumers. It’s an ACH filter that allows you to create a list of payees or vendors that will be automatically approved when they initiate an ACH debit from your company’s account. Certain criteria for these funds transfers can also be established. For example, you might put a cap on how much they can debit in a single transaction.
If any other individuals or businesses attempt an ACH withdrawal from your account, you will receive an alert. You can then review the request and approve or deny the ACH transfer.
Worth noting: Because each bank’s offering is different, there might sometimes be an overlap between a debit block and positive pay. Some banks, for example, allow you to review and approve vendor payments when you have an ACH debit block enabled.
ACH debit blocks are a secure way to prevent fraudulent electronic transfers from your company’s bank account. If you suspect that your bank account information has been compromised, contact your bank to initiate an ACH debit block and ask what other fraud prevention resources they can provide.
When thinking about your bank’s security, don’t forget about your personal accounts. SoFi is one great option to keep your money safe.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
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 ACH payments be blocked?
A business can block ACH payments with a feature called ACH debit block. This prevents anyone from electronically withdrawing money from its bank account. You may also be able to set up positive pay, which allows you to approve a list of electronic payments and review all other ACH requests.
How do I stop unauthorized ACH payments?
You can set up an ACH debit block (typically, this is for business accounts) to prevent any electronic withdrawals from an account. If you want to allow expected ACH payments to process uninterrupted, set up positive pay, allowing only approved payments to go through. For your personal accounts, you may be able to set up alerts every time an ACH debit occurs in your account. If you notice any unauthorized activity, report it to your bank immediately.
What happens if an ACH transfer fails?
If the initial ACH transfer is not processed, some companies may attempt it a second time. Ultimately, if the ACH debit from your personal account fails, the business expecting the funds can hold you responsible for additional fees, such as late fees. If a bill continues to go unpaid, the company may send it to a collection agency, which will likely have a negative impact on your credit score.
How long does an ACH payment take to clear?
ACH payments are not immediate. While they can take up to three or four business days to clear, many banks have moved to next-day ACH transactions, which could mean funds are transferred in just one or two business days.
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.
*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.
