Sep
13
2021
Marginal Propensity to Save: Definition & Formula

A Look at Marginal Propensity to Save (MPS)

By | Budgeting & Goals, Financial Independence, money | Comments Off on A Look at Marginal Propensity to Save (MPS)

The marginal propensity to save (MPS) refers to the amount of disposable income a consumer is able to save. It’s used to reflect the proportion someone is willing to save for each additional dollar of their income.

To understand why MPS is important when quantifying fluctuations in savings and income, we’ll go over how to calculate MPS and how to apply it to your budgeting strategy.

What is the Marginal Propensity to Save?

The marginal propensity to save is defined as the portion of an increase in income that goes towards household savings. In other words, it’s the percentage of additional income a household saves instead of spending on goods and services, and it offers insight into the consumption habits of consumers.

MPS is also referred to as leakage, where the savings is an amount (expressed as a percentage that doesn’t go back into the economy via consumption. Typically, the more a household saves, the more likely it indicates that there is a higher income and better equipped to cover their household expenses.

So, theoretically, if a household saves 10%, it means that for every additional dollar they earn, they’ll save 10 cents.

When consumers are more likely to save as their income grows, the chances are higher they’ll become wealthier. Plus, households will also be able to access services and goods that require more money, such as larger homes in higher cost of living areas, elaborate vacations, or luxury vehicles.

How Income Level Affects Marginal Propensity to Save

Given data on household income and household saving, economists can calculate households’ MPS by income level. This calculation is important because MPS is not constant—it varies by income level. Typically, the higher the income, the higher the MPS because as wealth increases so does the ability to satisfy needs and wants, and so each additional dollar is less likely to go toward additional spending. However, the possibility remains that a consumer might alter savings and consumption habits with an increase in pay.

The Multiplier Effect

The MPS plays an important part in regulating the multiplier effect. The multiplier effect looks at the proportional increase or decrease in income that comes from consumption or savings.

For instance, if there is spending at the government level, it’ll have a multiplier effect (much like how a snowball rolls down a hill) on different parts of the economy. This change is due to the fact there is now additional disposable income consumers can spend on consumption and savings.

By understanding what the MPS is, economists can see how increased government spending can influence savings. It’ll also help to determine how consumers’ saving habits will influence the overall economy. The lower the MPS, the more of an impact on changes in government spending there will be.

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Calculating the Marginal Propensity to Save

Calculating the MPS involves dividing the change in savings by a change in disposable income.

The following formula is used to calculate the MPS:

MPS = change in savings / change in disposable income

The savings represented by the value of the MPS will change if income changes by a dollar. Presented on a graph, the MPS is the equivalent of the savings line that’s created by plotting changes in income on the horizontal line (x-axis) and changes in savings on the vertical line (y-axis).

Another important point to note is that MPS will range between zero and one. If the MPS is zero, then it means changes in income doesn’t have an effect on savings (consumers spend all additional income). If MPS is one, then all additional income is saved.

Example

Jasmine successfully negotiated a promotion and annual bonus and received an additional $3,000 with her next paycheck. Jasmine decides she wants to spend this amount on a nice dinner out with friends totaling $150, and a vacation in Mexico for $2,000. The total she spends out of her bonus is $2,150, saving $850.

Using the above MPS formula, the calculation is as follows:

$850 / $3,000 = 0.283 = 28.3%

Therefore, Jasmine saved 28% of her additional income or 28 cents for each additional dollar she earns.

Remember, MPS isn’t constant since various factors in addition to changes in income will influence consumer spending habits. For instance, the time of the year can influence seasonal trends, which can correlate with higher spending.

Applying MPS to Your Budget Strategy

Though it seems like MPS is more for economists, you can apply this tactic to your personal budget.

When it comes to increasing your income, it might be tempting to spend a large portion of it. After all, you might want to celebrate a pay raise or promotion. Or, you might decide to increase your grocery budget, swapping out some of your regular produce for organic varieties.

However, there are benefits to saving some of the extra money. Perhaps you have a financial goal you can use it towards, like saving for a down payment on a house. Or you want to start investing and with this boost in income, you now have the means to do so.

If you haven’t yet decided what you’re saving for, just getting into the habit of saving will get you on the right track. Plus, you’ll learn how to budget effectively, no matter which type of budgeting technique you use.

Let’s say you want to be able to set aside 20% of each paycheck towards investments and a larger emergency fund. You received a $1,000 bonus from work this month and want to make sure you’re not tempted to spend it all.

Using the above formula, you want to have an MPS of 30%, or 0.3. That means with that bonus, you want to be able to save $300, allowing you to put $800 of it towards other areas in your budget. Once you have this number, you can take proactive steps to save that money. Automatically transferring $300 to a separate savings account is a good start.

Considering your income may fluctuate, you’ll probably want to revisit this formula on occasion to make sure you’re on track. Plus, it’s likely your spending habits will also change—such as spending more during the holidays—so if you need to spend more, then you can adjust your savings rate temporarily. At the end of the day, it’s all about being aware of where your money is going.

Recommended: 39 Ways to Earn Passive Income Streams

The Takeaway

Marginal propensity to save may seem like a term that doesn’t relate to your budget since it’s normally used to help economists. However, thinking about it in simple terms such as a savings rate is more helpful. That way, you can use it to apply it towards your savings goals and budgeting tactics as your income changes.

Saving money is half the battle: making sure your money is working for you is the other half. Opening a checking and savings account with SoFi can earn you more than the national interest average, squeezing even more value from your hard-earned dollars.

Check rates offered by SoFi Checking and Savings®.

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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.

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

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Apr
09
2021
What is a cashback credit card?

What is a Cashback Credit Card?

By | Credit | Comments Off on What is a Cashback Credit Card?

Some things in life sound too good to be true, and getting cash back for purchases may seem like one of those deals. But an increasing number of credit cards, called cashback cards, offer clients money back when they charge what they buy.

Many people are familiar with the concept of credit card rewards, when lenders give clients a little something back—points, airline miles—as an incentive for using their card.

In the case of cashback cards, that reward is, well, cash.

How Does a Cash Back Credit Card Program Work?

Cashback credit cards reward clients based on their spending, providing a credit that is a small percentage of the total purchase.

If a cashback card provides 1% back, for instance, the cardholder would generally earn 1 cent on every dollar spent, or $1 for every $100 they charge to their card. If, over the course of the year, a person charges $10,000 in purchases to their cashback credit card, they’d earn $100 in cash back for that time period.

Unlike sale items, when an item is discounted at the time of purchase—meaning, of course, the shopper pays a cheaper price—cashback cards work more like a rebate. The customer buys something at the posted rate and gets money back at a later date.

The average American had a credit card balance of $5,315 in 2020, according to Experian. Assuming that full balance is eligible for cash back, it would earn $53.15 with a credit card providing 1% cash back and $106.30 for one giving 2% cash back.

Do All Cashback Credit Cards Work the Same Way?

Yes and no. While all cashback cards typically use the same model—money back based on a percentage of total purchases—the differences are typically in the details.

Things like the rate of cashback earnings, interest rate, the process for redeeming cash back, and so on vary by card and lender. Some lenders may even offer several cashback credit card products with different rates and benefits.

As such, before signing up for a cashback credit card, it’s smart to spend some time researching and comparing cashback cards to find the one that best suits your needs.

What to Look for in a Cashback Card

There are a number of considerations when choosing a cashback credit card that will determine just how profitable the card will be for a specific person.

Because people have different spending habits and financial preferences, the best type of credit card will ultimately depend on the individual. Here are some things to consider.

Rate of Cash Back

Not all cashback credit cards offer the same rate of return, so it’s best to comparison-shop. Though differences in percentages may sound negligible, getting 2% instead of 1% means double the cash back—and those small amounts can add up over time.

Some credit cards also provide different rates of cash back depending on the spending category or how much money the cardholder charges in a year. For example, some credit cards may provide a higher percentage on expenditures such as gas, travel, or groceries and a different rate for other types of purchases.

Tiered cashback cards may provide a higher (or even lower) rate when annual purchases exceed various thresholds.

Some credit cards also offer higher introductory cashback rates.

How a person chooses to redeem cash back may also determine the final payout. A travel rewards card, for example, may provide a higher rate of return for cardholders who redeem the money they earn on flights, and a lesser amount for those who redeem their rewards on statement credits or other purchases.

It can be difficult to tell at a glance how much the cashback percentage rate may actually net an individual, especially when considering categorized and tiered rewards. But when comparison-shopping for a cashback credit card, it is worth crunching some numbers to get an idea.

One way to estimate how much in cashback rewards a card will actually end up earning is to apply the posted cashback rates to previous credit card statements or to the spending allocations within an individual’s annual budget.

Annual Fees

Though some cashback credit cards have no annual fee, others do. It’s a good idea to factor in any annual fee when estimating the cashback rewards based on your spending habits. Calculating the returns on fee vs. no-fee cards can help to assess whether it’s worth shelling out extra.

If a bank charges $99 for a cashback card earning 2%, the bank fees would essentially cancel out the $100 in cash back earned on the first $5,000 in annual spending.

Someone who charged $7,500 annually would net $51 with the 2% cashback card, and $75 with a no-fee 1% cashback card. But if they charged $20,000 annually, the $99/2% cashback credit card would net $301, while the no-fee card would only earn $200 in cash back.

APR

The nearly half of Americans who carry a balance on their credit cards each month will want to pay close attention to a credit card’s annual percentage rate. This is the amount of interest cardholders will have to pay if they do not pay off their credit card balance in full each month.

The average credit card APR was 14.65% in late 2020, according to the Federal Reserve—a rate that can quickly cancel out any cashback benefits.

Recommended: What is a Good APR?

Redemption Terms

A good question to ask a lender before signing up for a cashback credit card is “Where can I get cash back?” The terms of redemption can vary across credit card products.

In some cases, cardholders may see an annual one-time credit for the full amount earned. Other cards allow cardholders to redeem their cash back at any time.

Tips for Getting the Most Out of a Cashback Card

While signing up for—and using—a cashback credit card is the first step to getting money back on everyday purchases, there are some ways to optimize the returns.

Pay Off Your (Whole) Credit Card Bill on Time

With few exceptions, credit card charges are not subject to interest until after the statement payment due date. But after that payment becomes due, extra interest and fees can quickly add up—erasing any cashback benefits.

Optimize Redemptions

When it comes to redeeming cash back, it’s worth seeking the biggest bang for your buck.

If a card offers different rates of cash back depending on how rewards are redeemed, being strategic when cashing out can result in a greater windfall.

Consider Extra Fees

Though a cashback credit card can make it tempting to charge everything you buy, that’s not always the most cost-effective strategy.

Though it’s generally an exception, some merchants impose surcharges for using a credit card or may provide discounts for paying in cash. In such cases, it’s a good idea to crunch the numbers to ensure the extra fees don’t actually cost more than the cashback reward.

The Takeaway

Free money may be hard to come by—but not if you use a cashback credit card. When choosing a card, It’s best to look at the rate of cash back, any annual fee a card may charge, and the APR if you carry a balance.

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1See Rewards Details at SoFi.com/card/rewards.


*See Pricing, Terms & Conditions at SoFi.com/card/terms

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

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

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Mar
25
2021
grocery and product in bag mobile

How to Make a Monthly Budget

By | Budgeting & Goals | No Comments

Some good news about budgeting: According to a 2020 Debt.com survey, as many as 80 percent of Americans are now doing some form of budgeting. The top reasons for using a budget, according to the survey, include increasing wealth and savings and managing debt.

While not everyone loves the idea of budgeting, taking a moment to assess and prioritize your spending can yield some real rewards. Even a basic monthly budget can help you reach your financial goals, whether it’s to have a financial cushion, put a downpayment on a new home, go on your dream vacation, or all of the above.

The most common reason cited for not budgeting in Debt.com’s survey was making too little money. But the truth is that you don’t have to make a lot to benefit from having a budget. Indeed, budgeting can be particularly helpful when money is tight.

Whether you’re brand new to budgeting or looking to improve your budgeting skills, read on. Below are some simple steps that can help you keep better tabs on your cash flow and improve your financial life.

Gathering All of Your Financial Information

While estimating your income and monthly costs can work in a pinch, to make your budget as complete (and accurate) as possible, you’ll want to start by gathering up at least three months worth of financial documents and receipts.

Here are some documents that may be helpful:

•   Pay stubs
•   Bank statements
•   Credit card statements
•   Rent/Mortgage bill
•   HOA
•   Electricity bill
•   Water bill
•   Internet bill
•   Cable bill
•   Childcare/School Tuition statements
•   Monthly public transportation passes
•   Recurring healthcare costs like deductibles or prescriptions
•   Student loan statements
•   Insurance statements

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Figuring Out Your Monthly Take-Home Income

Although you may be able to rattle off your annual income without thinking, when creating a budget you’ll want to look more closely at your pay stub to determine your take-home pay. That’s how much is left after all of the deductions (such as federal, state, and local taxes, retirement savings, and insurance) are taken out.

If you’re self-employed, you’ll need to subtract your self-employment income tax before calculating your net monthly income.

Determining your take-home pay is important because if you use your annual income to make your budget, you might end up thinking that you have more money available to you every month than actually shows up in your checking account.

If you’re budgeting with another person, you’ll also want to tally up that person’s take-home pay as well. It’s a good idea to also include any additional household income, such as that from investments or social security.
All together, these will give you a good idea of how much actual cash you have to budget with each month.

Tallying Up Monthly Expenses

Once you’ve nailed down how much money you’re bringing in each month, it’s time to look at how much money you’re sending out into the world each month. This is where all the paperwork you gathered can really come in handy.

A simple way to start is to write down how much you’re paying for all your fixed (or recurring) monthly bills, such as rent/mortgage, car payments, insurance, health care expenses, utilities, subscriptions.

Once you’ve got your regular bills accounted for, you can look at variable expenses, such as groceries, entertainment, and other discretionary expenses. With variable expenses, it’s helpful to look back at your bank statement, as well as receipts from the previous few weeks or months, and calculate an average.

If you tend not to save receipts, it can be useful to actually track your spending (by carrying a notebook, using a app, or collecting receipts and recording them later) for a week or more in order to better assess your daily spending.

Below are some sample budget categories and expenses that you may want to include:

Housing
•   Rent
•   Utilities
•   HOA
•   Maintenance costs
•   Home/renter’s insurance

Transportation
•   Gas
•   Tolls
•   Maintenance costs
•   Car Loan
•   Public transportation tickets or passes
•   Taxis or ride shares
•   Parking pass
•   Insurance payments

Children
•   Childcare expenses
•   After-school care costs
•   Tuition
•   Tutoring
•   Babysitting

Education
•   Tuition
•   Books
•   Student loans
•   Student fees

Food
•   Groceries
•   Take-out
•   Eating out

Financial
•   Bank fees
•   Service fees
•   Credit card payments
•   Life insurance
•   Disability insurance
•   Retirement fund
•   Investments
•   Emergency fund

Healthcare
•   Doctor appointment co-pays
•   Prescription costs
•   Over-the-counter medication costs

Entertainment
•   Movie tickets
•   Special events
•   Concerts
•   Streaming media services
•   Books
•   Nonbusiness travel

Pets
•   Pet insurance
•   Food and treats
•   Flea and tick preventative
•   Medications
•   Vet bills

Shopping/Personal Care
•   Clothing
•   Shoes
•   Accessories
•   Toiletries/Cosmetics
•   Haircuts/styling
•   Shaves/Manicures
•   Gym membership

When it comes to expenses that only occur in certain months, such as tuition for summer camp, you can divide the total by 12 in order to figure out how much you should be saving each month to cover these seasonal costs.

Once you have a list of all your monthly expenses, you may be alerted to trends you might not have noticed before (like $75 a month on morning coffees).

You’ll also be able to add it all up to see what your overall average monthly spending is. Ideally, this number is less than the amount of take-home pay you calculated above.

Planning and Creating a Budget

Now that you’ve got a grip on how much money you have coming in, and how much is going out, it’s time to actually create a plan for how you want to spend your money–in other words a budget–rather than spending haphazardly.

You can create a budget using pen and paper or a spreadsheet on your computer. There are also a number of budgeting apps, such as SoFi Relay, that can simplify the process.

There are several different ways to approach spending targets and savings goals in your budget.

One commonly recommended guideline it the 50/20/30 budget, which breaks up your spending and saving like this:

•  50 percent on “needs” or essential expenses (such as housing, utilities, auto payments, insurance, repairs, healthcare, childcare, minimum payments on debts, and education).
•  30 percent on “wants” or discretionary expenses (e.g., shopping, entertainment, personal care, travel).
•  20 percent towards savings (such as an emergency fund, paying more than the minimum on debts, retirement, and other savings).

These percentages are guidelines, however, and you may decide to re-jigger them based on your financial situation, current expenses, and goals.

If the cost of housing is high in your area, for example, you may need to allot more to the “needs” bucket. Or, if you have a big expense or a trip you want to take in six months, you may want to bump up savings, at least temporarily.

If you find that your spending is currently higher than your income, or doesn’t allow for monthly savings or debt reduction, you may need to find places where you can cut back.

It’s often simplest to do this in the “wants” category. For example, you might decide you can cook more and eat out less often, ditch that pricy cable bill, use the library instead of buying digital and audio books, or cut back on clothing purchases.

Once you’ve set up your spending and saving targets, you’ll want to track your progress, either by manually tracking your spending or using an app. Along the way, you may find that you have to adjust your spending to stay better aligned with your budget, or you might find that you need to adjust your budget to make it work better for you.

The Takeaway

A budget can help you achieve your financial goals, whether it’s knocking down debt, saving up for something fun, or funding your retirement.

While the process may sound intimidating, budgeting is really just a matter of figuring out what your current income and expenses are, seeing how they line up (or don’t), and then deciding how you may want to shift your spending in order to reach your goals.

It can also be helpful to remember that even if you have a budget, it will only be useful if you periodically track and update it to reflect any changes in your income, expenses, or financial goals.

If you need help tracking your spending, a checking and savings account with SoFi might be a great choice for you. With SoFi Checking and Savings, you can easily see your weekly spending (and make sure you’re on track with your budget) in your dashboard in the app.

Ready to take your budget to the next level? Find out more about how SoFi Checking and Savings can help you track your spending and budget effectively.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2022 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
SoFi Money® is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member
FINRA / SIPC . SoFi Securities LLC is an affiliate of SoFi Bank, N.A. SoFi Money Debit Card issued by The Bancorp Bank.
SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

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

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.

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

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

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

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

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

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

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Feb
24
2021
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What is Binance (BNB) Crypto? BNB Price & How to Buy BNB

By | Growing Wealth, invest, Investing | Comments Off on What is Binance (BNB) Crypto? BNB Price & How to Buy BNB

Binance (BNB) is a cryptocurrency token that was created to be used as a medium of exchange on Binance, one of the world’s largest cryptocurrency exchanges.

Traders who hold BNB tokens get discounts when using BNB to pay for trading fees on Binance. As of 2020, BNB users received a 6.25% rebate on trading fees. Binance Coin also serves as the native token for Binance’s decentralized exchange (DEX).

What Is Binance?

Binance is one of the world’s biggest cryptocurrency exchanges. Based in Malta, the exchange was founded in 2017 and follows all standard cryptocurrency regulations. Binance offers a variety of features, including:

•  Crypto-to-crypto trading of many different currency pairs (over 150)
•  Fiat-to-crypto trading
•  The ability to buy crypto with a credit card
•  Futures and leveraged trading for advanced traders
•  The option to choose between a basic interface for beginners or an advanced interface for experienced traders

Binance has one the highest liquidity of any crypto exchange in the world, according to data from CoinMarketCap. That means more crypto can trade hands on the exchange than anywhere else during a given period of time, making Binance a desirable place for day traders who thrive on liquid assets, which makes it easier and faster to execute trades. The exchange also has low fees, so users can make more trades for less cost.

Binance derives its name from a combination of the words “finance” and “binary.” The exchange claims to have high levels of security and is capable of processing about 1.4 million orders each second.

Eleven days before Binance went live, BNB was created through an initial coin offering. While the coin was first issued as an ERC-20 token running on the Ethereum network, these same coins were later swapped with BEP2 BNB coins in April 2019 when the Binance Chain mainnet launched (Binance’s own blockchain network). BNB can be used as “gas” payments–fees paid for computing power–to fuel transactions on the DEX.

Is Binance Coin Worth Buying?

This question might not have a single, objective answer. It depends on the individual. Someone who wants to use Binance’s decentralized exchange (DEX) might think BNB crypto is worth buying. The Binance DEX first went live in April 2019.

Traders who make a lot of trades on Binance on a regular basis might benefit from the discounts that BNB provides. They could wind up saving them a lot of money.

And finally, some cryptocurrency traders might speculate, as opposed to invest, that BNB has a promising future. These people might see BNB as a good coin to hold for some time, in hopes that the price will continue to rise. BNB crypto has risen over 34,000% since inception and over 41,000% since its all-time low.

What is Binance Coin Used For?

As far as different types of cryptocurrencies go, Binance Coin might be one of the most unique. As mentioned, BNB serves two main purposes:

•  To provide discounts to traders who use BNB on Binance, and
•  To function as “gas” for transactions on Binance’s decentralized exchange (DEX).

When someone places a trade on Binance, they are charged a 0.5% trading fee. This fee can either be paid in the form of the cryptocurrency being traded at the time or in the form of Binance Coin. When paid using BNB, a discount is applied.

Beyond that, altcoins like Binance Coin are also used for speculative purposes. Traders buy coins at a low price with the hopes of selling them later at a higher price to make a profit.

How to Buy BNB

Binance Coin can be purchased on the Binance crypto exchange. There are three primary trading pairs:

•  BNB/USDT (Binance-Tether stablecoin)
•  BNB/BTC (Binance-Bitcoin)
•  BNB/BUSD (Binance-U.S. dollar)

While BNB crypto was created by and for Binance, traders can buy BNB tokens on other exchanges as well. As of the time of writing, BNB can be traded on dozens of different exchanges.

Users who already hold some Bitcoin might find it easiest to deposit Bitcoin to an exchange that trades the BNB/BTC pair and then trade their bitcoin for BNB. Those who don’t hold Bitcoin could consider creating an account on Binance and funding it using either a stablecoin like Tether or U.S. dollars directly.

Binance Coin Price

At the time of writing, the BNB price was $40.39 or 0.001076 Bitcoin.

In July 2017, when the coin was first created, the price was closer to $0.10, with the all-time low being $0.096. The all-time high, as of January 2021, was $45.16, reached on Jan. 10, 2021.

BNB is currently ranked as the eleventh largest cryptocurrency, according to CoinMarketCap data, with a market cap of over $5.7 billion. The 24-hour trading volume on Jan. 14, 2021 was $548.3 million.

BNB crypto has a circulating supply of 142,406,561 BNB and a maximum supply of 174,152,673 coins.

Is Binance Better Than Coinbase?

Some users might compare Binance to other prominent exchanges, including Coinbase. The comparison is, however, largely subjective. For those new to crypto seeking ease-of-use and simplicity, Coinbase might be a good option. They allow for purchases and sales of many of the top cryptocurrencies.

Coinbase also has a cold storage, multi-signature feature called “vaults.” Vaults provide a more secure way to hold crypto for the long-term. To access funds held in a vault, a user must verify a withdrawal request from two different email addresses and wait through a 48-hour processing period.

On the other hand, for more active traders seeking a wider variety of tokens to choose from and higher liquidity, Binance could be preferable. At Binance, investors and traders also have the option to use a more advanced interface with detailed charts.

Is Crypto Safe On Binance?

The answer to this question depends on an individual’s definition of “safe” and how much money is in question.

Generally speaking, it might be safe to keep small amounts of crypto on a secure exchange like Binance for a short period of time. Binance boasts some of the strongest security in the industry. For larger balances to be held over longer time-frames, however, holding coins on any exchange is widely regarded as not being very secure.

Over the years, many exchanges have been hacked. This creates the most obvious security risk involved with “hot wallets,” or cryptocurrency wallets that are actively online at all times. Another risk that comes from exchanges is theft. Employees of the company could conspire to steal user funds and blame the event on outside malicious actors.

The Takeaway

Binance (BNB) coins were created to be used on the Binance cryptocurrency exchange. BNB users on BNB can get trading discounts. However, BNB has become more popular in recent years, experiencing a tremendous increase in price, and now, cryptocurrency traders and investors can find it on many other exchanges.

With SoFi Invest®, investors can buy cryptocurrencies like Bitcoin, Ethereum and Litecoin, while following the prices of others like XRP and BNB. They can also invest in stocks or exchange-traded funds (ETFs).

Get started today.


Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments. Limitations apply to trading certain crypto assets and may not be available to residents of all states.

SoFi Invest®

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

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.

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

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Feb
16
2021
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8 Steps to Build Credit Fast

By | Credit, Financial Independence, money | Comments Off on 8 Steps to Build Credit Fast

Your credit score can affect many areas of your life.

A poor credit score can make it harder to buy a car, get a job, purchase a home, rent an apartment, have the utilities turned on, and even get a cell phone.

It can also cost you money, since credit card companies and lenders typically consider your credit score when determining your interest rate.

Fortunately, if your credit is less-than stellar–or you haven’t yet had a chance to establish much, or any, credit history–there are some simple steps you can take to build or boost your score quickly.

While you can’t typically establish exceptional credit overnight, you may be able to improve your credit score in a matter of months by putting a few good credit habits into practice, building a positive payment history, and avoiding credit-damaging mistakes.

Simple Steps to Build Your Credit Faster

Here are some strategies that can help you establish or improve your credit profile ASAP.

1. Understanding What Goes Into Your Score

One of the most commonly used credit scoring models is the FICO® Score .

FICO has five factors it considers when calculating its credit scores.

•  Payment history: 35% of this score is related to your history of payments on credit cards, student loans, mortgages, and other loans. The algorithm looks at the frequency and severity of missed and late payments.
•  Credit utilization: 30% of this score is based on how much of your available credit you are currently using.
•  Length of credit history: The amount of time you’ve had each credit account open makes up 15% of this credit score. That’s why it’s nearly impossible to have perfect credit when you’re new to credit.
•  New credit: 10% of this credit score has to do with opening new credit. (However, opening several new credit accounts at the same time isn’t typically a good way to bump up your score, because that can look like you’re in financial trouble).
•  Credit mix: The final 10% of this credit score is based on the different types of credit you have and how you’ve managed them.

2. Checking Your Credit Report and Disputing any Errors

Credit scores are calculated on the information in your credit reports.

That’s why it’s a good idea to get copies of your credit reports from the three major credit bureaus–Equifax , TransUnion and Experian –and to make sure all the information is accurate.

According to the Consumer Financial Protection Bureau (CFPB), one in five people have an error on at least one of their credit reports.

Everyone is entitled to see their credit reports for free once a year at the government-mandated AnnualCreditReport.com site.

When you get your reports, it’s a good idea to comb through them carefully and to look for any inaccuracies, such as payments marked late when you paid on time, wrong account numbers, incorrect loan balances, or accounts that aren’t yours.

If you find an error in one or all your credit reports, you can reach out to the credit bureaus directly to dispute the information.

If you see accounts in your name that you never opened, and believe you may be a victim of identity theft, you can report it to the Federal Trade Commission at IdentityTheft.gov or 877-438-4338.

A mistake on one of your credit reports could be pulling down your score. Fixing it can help you quickly repair your credit.

3. Paying Bills on Time Every Time

Payment history is the single most important factor that affects your credit scores.

Not only that, a past due payment can stay on your report for seven years.

Setting up autopay, either through each provider or company, or through your financial institution, can be a great way to ensure you never miss a bill.

If you do miss a payment by a few days, all is not necessarily lost, however.

There is generally a small window of time to make up a missed credit card payment before any damage to your credit happens.

That’s because late payments are typically not reported to credit bureaus until the payment is at least 30 days late.

The key is to get it in as soon as you can.

4. Becoming an Authorized User on a Credit Card

If you have no credit or a low credit score, you may be able to build it up by becoming an authorized user of a credit card that the cardholder uses responsibly.

An authorized user has permission to use an account, but does not have any liability for debts.

If a friend or family member adds you as an authorized user to their account, the card issuer will then typically report you as an authorized user to the credit reporting companies.

In this way, you gain a credit history from the credit usage of your friend or family member.

5. Opening a Secured Credit Card

Some credit card companies offer “secured” credit cards, which allow you to build credit history with little risk to the credit card company.

Here’s how it works: You pay a cash deposit up front that is equal to the limit of the card. For example, if you put down a $500 deposit, you would have a $500 limit on the card.

You can then use it like a regular credit card.

Using the secured card responsibly–being mindful of the amount you’ve charged in relation to the card’s limit–and paying your bills in full and on time will all be reported to the credit bureaus.

6. Using your credit card regularly

One way to build credit is to display a history of responsible borrowing.

For that reason, you may want to place monthly bills and other expenses on your credit card–being sure to pay the bill in full each month by the due date.

7. Keeping Credit Card Balances Low

This can help move the needle on credit utilization, or the amount of debt you have compared to the total amount of credit that is available to you, and is expressed as a percentage.

After payment history, this is typically the second most important factor that influences your score.

The rule of thumb is to use no more than 30% of your total credit at any time. This includes access to all credit lines, as well as the percentage on individual cards.

One way to do this is make multiple payments on your credit card throughout the month.

If you’re able to keep your utilization low, instead of letting it build toward a payment due date, it could quickly benefit your score.

8. Keeping Credit Cards Open

It might seem to make good financial sense to close credit cards you never or seldom use.

But from a credit score perspective, it may not be a wise move.

That’s because closing a credit card means you lose that card’s credit limit when your overall credit utilization is calculated, which can lower your credit score.

A better bet might be to keep the card open and to use it occasionally so the issuer won’t close it.

The Takeaway

A credit score in the good to excellent range could provide you access to the most competitive interest rates for loans and credit cards, and also make it easier to rent an apartment, get a cell phone, and land a new job.

Some ways to improve your score quickly include having active open accounts that you are consistently paying on time, keeping your loan balances low, and disputing any errors on your credit reports.

Building good credit is also a matter of establishing good financial habits, such as tracking your spending (so you don’t come up short at the end of the month), and make sure all of your bills are posted by their due dates.

One move that can help you stay on top of your finances is signing up for SoFi Checking and Savings®.

SoFi Checking and Savings is a checking and savings account that allows you to earn competitive interest, spend, and save–all in one account. And you’ll pay zero account fees to do it.

SoFi Checking and Savings also allows you to track your weekly spending right from the dashboard in the SoFi Checking and Savings app.

You can also use the app to set up all of your bill payments to help ensure that payments are never missed or late.

Check out everything a SoFi Checking and Savings checking and savings account has to offer today!


SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2022 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
SoFi Money® is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member
FINRA / SIPC . SoFi Securities LLC is an affiliate of SoFi Bank, N.A. SoFi Money Debit Card issued by The Bancorp Bank.
SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
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.

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

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

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