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Technically, once a check clears, it can’t be reversed, meaning the payer cannot get the funds back. The only exception to this is if the check payer can prove that identity theft or fraud has occurred, in which case they may indeed get their money back.

When discussing the ins and outs of check clearing and potential reversals, it can be helpful to understand how checking accounts work, typical clearance times, and exceptions to the rule. Read on to learn more.

What Is a Check Deposit Reversal?

A check deposit reversal can refer to several ways that a bank takes back money that was previously deposited into a checking and savings account. This can happen when a check is returned due to a stop payment notification, insufficient funds, or bank fraud.

When a check reversal takes place, it can result in a negative bank account balance, which can trigger overdraft or NSF fees. The account holder needs to take steps to resolve a check deposit reversal and see if they can secure the funds they were expecting and, if necessary, bring their account back from a negative balance.

reverses the original deposit, often resulting in a negative balance or a returned check fee, and leaves the account holder to resolve the issue with the check’s maker or the bank.

How Long Does It Take for a Check to Clear?

It typically takes between two and five business days for a check to clear once it’s deposited in a checking and savings account, but some banks will process it more quickly. In general, the first $275 is made available in one’s account the next business day after a check is deposited, and then the rest of the check will be made available in the next four days.

If one or more checks total more than $6,725 for deposit in a single day, it could take up to seven to nine business days (or sometimes longer) for the full amount to clear because the bank will want to ensure the check will clear before processing it.

The time it takes for a check to clear can depend on several factors, including the relationship the account holder has with the bank, the amount of money already in their account, and the amount that the check is for. Also, if you, say, mobile deposit a check after the cutoff time on a Friday night, it may not begin processing until the next Monday morning, slowing the process down a bit.

Note that check clearance rules apply to paper checks only. If you receive money or pay bills electronically by an ACH payment, a different set of guidelines will apply.

How to Know If Your Check Cleared

In order to know for certain that a check has cleared, look at your bank account information on your financial institution’s website or app to see if the funds are pending or available. You might also contact the bank and ask them to see if the check bounced.

You might also inquire about whether your financial institution offers tools that can help you track checks and alert you when they clear. You may also benefit from other options, including a budget planner app, debt payoff planner, and credit monitoring.

Recommended: What Is an Outstanding Check?

Understanding the Check Clearing Process

When a check gets deposited, there are a few steps involved in processing and clearing it. First, the bank makes a request to take the funds out of the check payer’s account. Typically, the bank actually deposits funds into the payee’s account first as pending, as long as the check is not flagged as risky or there’s another reason that it might not clear.

In the event that the funds aren’t available in the payer’s account, the check “bounces.” In that case, the funds are then withdrawn from the payee’s account, and, if the account winds up with a negative balance, fees can be applied.

How Long Can a Bank Hold a Check?

The length of time that a bank will hold a check depends on a few factors, including the amount of the check, the bank the check is coming from, the relationship of the payee to the bank, and more. If both the payer and the payee use the same bank, the clearing time will be shorter. Usually it takes two business days for a check to clear, but it may take up to seven days or possibly longer.

The time that it takes for a check to bounce varies depending on the bank’s size and technology. Larger banks with more technological capabilities will know more quickly if a check has bounced. It will take longer for a smaller bank to process bounced checks.

Incidentally, the amount of time a check is good for is typically six months, or 180 days, after it’s written.

Factors That Affect Hold Times

In certain cases, a “risky” check may take up to seven business days (or sometimes longer) to clear. The following reasons can cause this to happen:

•   Insufficient funds in the account

•   Checks larger than $6,725 or multiple checks totaling more than $6,725 deposited in a single day

•   Accounts younger than 30 days

•   Repeated overdrafts associated with the account

•   Checks from international banks

Personal Checks vs Government-Issued Checks

While it takes between two and five business days for personal checks to clear, banks are required by law to make funds available from government checks and U.S. Treasury checks within one business day (meaning by the next business day).

Certified checks and cashier’s checks are both types of checks that are typically made available within one day of deposit. A certified check is a check where the money is taken out of a checking account, ensuring that the funds are available in the payer’s account. Generally a certified check is required for making larger transfers. With a cashier’s check, the money is taken out of the bank’s account, also ensuring that the funds are available.

Note: If depositing a certified or cashier’s check, determine whether you need to use a special deposit slip for next-day availability. Some banks follow this procedure.

Cases of Fraud

Scams and fraud involving checks can occur. With scams, like overpayment scams, the account holder is responsible for repaying any funds owed and fees if they have deposited a check that didn’t clear. And if an account holder writes a check to a scammer and it has cleared, that money likely cannot be recouped.

Worth noting: If a person knowingly deposits a bad check, there can be legal consequences.

But with fraudulent checks, there’s hope: If, say, your checks were stolen from you and/or identity theft is involved in their use, alert your bank immediately, request a stop payment, dispute any transactions that have taken place, and request a credit. You may have to file additional paperwork relating to the incident, but you may be able to get your money back. The same holds true if you believe you received a fake or counterfeit check: Contact your bank and appropriate authorities.

Recommended: Finding Your Bank Routing Number

What to Do If a Deposited Check Is Reversed?

If a deposited check is reversed, contact your bank to find out what happened, and reach out to the check issuer to request a new form of payment.

Also stay alert to your account balance. If you have written checks against the amount you thought was available and/or have autopay set up, you could wind up with unpaid bills and penalties. Overdraft protection may help you avoid this scenario.

The Takeaway

Check deposits can be reversed in some situations (such as a check that bounces or one that is suspected of being fraudulent). That’s why it’s important to understand the process for depositing checks and having them clear. Many checks clear in a day or two, but some can take up to seven days or longer, so it can be wise to pay attention to when funds actually become available to stay in control of your finances.

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

FAQ

How can a check clear and then bounce?

If a bank doesn’t see any red flags that a check might bounce, they may go ahead and transfer funds into the payee’s account. However, it may turn out during their processing that funds weren’t available from the payer, so then the check bounces.

Can a bank reverse a check deposit?

Technically, a cleared check cannot be reversed. But if a check bounces, the bank can remove funds they had deposited into the payee’s account.

Can you dispute a cleared check?

If identity theft has occurred or if a check is fraudulent, then a cleared check can be disputed. If the bank finds the evidence to be believable, the funds may be returned to the account.

Can I redeposit a check that was returned?

You can redeposit a check that was returned for non-sufficient funds if you feel reassured that the check will now clear.

How can I protect myself from fraudulent checks?

A fake check can be poorly printed, use thin or shiny paper, have smooth instead of perforated edges, and have mismatched or incorrect bank name and address information. Also be wary of checks that overpay you or ones you were not expecting.

Photo credit: iStock/sturti

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

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

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/.
^Early access to direct deposit funds is based on the timing in which we receive notice of impending payment from the Federal Reserve, which is typically up to two days before the scheduled payment date, but may vary.

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SOBNK-Q425-035

Overdraft and non-sufficient funds (NSF) fees have a lot in common. Both fees are triggered when there’s not enough money in an account to cover a transaction, except with overdrafts, the transaction usually goes through, and with NSF, it’s canceled.

Both of these bank fees can be avoided with a bit of focus and practice. Read on to learn the details.

What Are Overdraft Fees and How Do They Work?

Here’s the meaning of an overdraft fee: When a bank account balance is negative (meaning transactions exceed deposits), the account holder is often charged an overdraft fee. The transaction goes through, but the account holder owes the bank the cost of the transaction to bring the account back to zero, as well as the overdraft fee set by the bank.

Typically, overdraft fees will continue with each transaction until an account’s balance is out of the red. That means if an account holder is unaware of the overdraft and goes on using the card without making a deposit, they could be hit with a fee for each charge, no matter how small.

Overdraft policies vary from bank to bank, but typically they kick in when a debit card or checking account transaction exceeds the amount held in a bank account.

When the transaction goes through, the bank has a few choices:

•   If the account holder has opted for a tool like overdraft protection, they may be shielded from overdraft fees up to a certain amount (bank policies vary as to how much).

•   If the account is typically in good standing, or if the account holder has never overdrafted before, the bank may choose to waive overdraft fees in this instance (or you might be able to request this and see if you can avoid overdraft fees).

•   If the account holder has a history of overdrafting, or their account is relatively new, the bank may choose to charge the overdraft fee.

When You Could Get Hit With an Overdraft Fee

It’s not just debit card purchases that can set off an overdraft fee. If the account holder doesn’t have enough cash in their checking account, any of the following transactions could lead to an overdraft fee:

•   ATM withdrawals

•   Checks

•   Autopay bill payments or withdrawals

•   Transfers between bank accounts

As mentioned above, once an account holder overdraws, the bank may continue to charge subsequent overdraft fees on the account until the account balance is restored through a deposit. It’s worth noting that not all banks will always assess a fee, however. If you are shopping for a new financial institution, you might look for a bank that doesn’t charge fees.

What Is the Average Cost of an Overdraft Fee?

The average overdraft fee is currently $26.77, but it can be as high as $35 or so, which can add up quickly when someone isn’t paying attention to their checking account balance. It’s worth noting that some consumer activists and lawmakers call for capping these fees at a lower figure, which would benefit consumers.

Recommended: Can a Cleared Check Be Reversed?

What Are Non-Sufficient Funds (NSF) Fees and How Do They Work?

On the surface, it’s hard to tell the difference between overdraft and NSF fees. Both fees occur when an account doesn’t have enough cash to cover a transaction.

However, here’s the meaning of an NSF fee: The account holder is charged when an account doesn’t have enough money to cover a transaction and the transaction is canceled or rejected.

An account holder might trigger what are known as NSF charges instead of an overdraft fee if they:

•   Opt out of or never signed up for overdraft protection

•   Already exceeded the bank or credit union’s overdraft protection limit

•   Write a check that’s more than the balance of the account

When You Could Get Hit With an NSF Fee

NSF fee policies vary by banking institution, but an account holder is more likely to be charged in the following situations:

•   Check writing. When someone writes a check for more than the account’s balance, the check bounces, and the transaction won’t go through. The account holder will be charged an NSF fee by their bank, and they may be charged an additional fee by the bank or entity that tried to cash the check.

•   ACH payments. An ACH payment, or Automated Clearing House Network payment, can be an easy way to transfer money or pay someone, but if the transferring bank doesn’t cover ACH payments, the transaction could be canceled and the NSF fee charged. Examples of ACH payments can include automated loan debits and mobile payment apps.

What Is the Average Cost of an NSF Fee?

The average NSF fee is currently $16.82, but some banks may charge considerably higher. It can be a wise move to familiarize yourself with your bank’s fee structure so you understand how much damage NSF fees could cause. You might also see if you can find a fee-free checking account.

Key Differences Between Overdraft and NSF Fees

NSF and overdraft fees are commonly lumped together as general bank fees, but they are not the same. Here’s the difference between overdraft and NSF fees:

5 Ways to Avoid Overdraft and NSF Fees for Good

Overdraft and NSF fees are frustrating for many people because they fall into the category of bank fees you should avoid — and you can easily do so with a few simple practices.

1. Setting Up Email and Text Alerts

Many banks and credit unions offer email and text bank alerts that account holders can set up to notify them of low balances. For example, an account holder could set up an alert when their checking account balance falls below a certain amount.

With enough notice, account holders have time to transfer money into the account to cover upcoming charges or auto-debits.

2. Utilizing Direct Deposit

Setting up direct deposit with an employer means paychecks go directly to a bank account on payday. It’s a nearly immediate payment, opposed to, say, waiting for a check by mail then depositing it at the bank. This could save someone from overdraft fees, especially if paychecks and major bills occur at regular intervals.

3. Linking to a Savings Account for Overdraft Protection

Linking your checking account to a high-yield savings account (or any savings account, for that matter) can be a good way to dodge overdraft and NSF fees. By connecting two accounts, you know that if you pay out more than is in your checking account, it won’t go into negative territory. Instead, funds will seamlessly be transferred from your savings account. Check the fine print with your bank to see if there are limits on how much can be covered in this way.

4. Checking Finances Regularly

While automation can help, nothing beats a regular check-in for managing your bank account. Consider reviewing account balances at least once a week. It can help you keep those numbers in mind when a large transaction or purchase comes up.

5. Utilizing a Budgeting App

Keeping a budget is an important part of financial wellness. Not only does it involve knowing the balance of bank accounts, but it can also prevent people from overspending or making unnecessary purchases that can send an account into overdraft. Some budgeting apps come with alerts to notify users when account balances are low. One good resource: Your financial institution. See what it offers.

Recommended: Is Overdraft Protection Worth It?

The Takeaway

Both overdraft and non-sufficient funds (NSF) fees occur when your bank balance drops below zero into negative territory. The key difference is that with overdraft fees, the transaction is typically completed, while with NSF fees, the transaction is usually rejected. You might look for a bank which doesn’t charge overdraft fees up to a limit to minimize the impact of these charges and take steps to always keep your account with a positive balance.

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

FAQ

Can a bank charge you both an overdraft fee and an NSF fee for the same transaction?

No, typically you will either pay an overdraft fee (if the payment was completed) or an NSF fee (if the payment was denied) for a transaction. You should not be assessed both fees for a single bank transaction.

Do all banks charge overdraft and NSF fees?

No, not all banks charge overdraft and NSF fees. It can be a good move to do an online search to see which financial institutions have reduced or eliminated these fees when choosing your banking partner.

What should you do if you’ve been charged an overdraft or NSF fee unfairly?

If you feel you have been unfairly charged an overdraft or NSF fee, contact your bank’s customer service department and politely request that the fee be waived, asking to speak with a supervisor if needed. If that isn’t successful, you might reach out to the Consumer Financial Protection Bureau (CFPB) or the Office of the Comptroller of the Currency (OCC) for assistance.

How does overdraft protection work?

Overdraft protection typically works by linking your checking account to another source of funding, such as a savings account or line of credit. This backup source can automatically transfer funds to cover transactions when your checking account isn’t sufficient. In this way, you avoid having checks bounce or purchases declined. There can be a fee for overdraft protection; check with your bank.

Can an NSF fee hurt your credit score?

NSF fees are not reported to the credit bureaus, so they do not directly affect your credit score. However, if they lead to carrying a debt that gets turned over to a collections agency, that could have a significant negative impact on your credit score.

Photo credit: iStock/Ivan Pantic

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

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

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/.
^Early access to direct deposit funds is based on the timing in which we receive notice of impending payment from the Federal Reserve, which is typically up to two days before the scheduled payment date, but may vary.

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

SOBNK-Q425-032

The Consumer Price Index (CPI) is a monthly measure of how the aggregate costs of consumer goods and services in the United States are changing. Economists use CPI to help them understand whether the economy is in a period of inflation or deflation, and individuals can use it to get a sense of where prices might be headed.

What Is the Consumer Price Index (CPI)?

The CPI measures the change of the weighted-average prices paid by urban consumers for select goods and services, according to the Bureau of Labor Statistics (BLS). In other words, the metric tracks the rise and fall of prices over a given period of time.

Definition and Significance

As mentioned, “CPI” is short for Consumer Price Index, and it’s an often-cited economic indicator.

The BLS produces indexes that cover two populations: CPI-U covers all urban consumers, representing more than 90% of the population. And CPI-W represents urban wage earners and clerical workers, representing approximately 30% of the population. The CPI excludes people who live in rural areas, the military, and imprisoned people.

💡 Quick Tip: How do you decide if a certain trading platform or app is right for you? Ideally, the investment platform you choose offers can help you work towards your investment goals or strategy, e.g., an easy-to-use interface, data analysis, educational tools.

How the CPI Works

The CPI tracks prices for a basket of goods and services people commonly buy in eight major categories, including:

•   Food and beverage

•   Recreation

•   Apparel

•   Transportation

•   Housing

•   Medical care

•   Education and communication

•   Various services

CPI Formulas

Each month, the BLS contacts retailers, service providers, and rental spaces across the country gathering prices for about 80,000 items. It uses this data to calculate CPI using the following formula:

CPI = Cost of the Market Basket in a Given Year/Cost of the Market Basket in the Base Year.

The result is multiplied by 100 to express CPI as a percentage. The BLS uses the years 1982-1984 as its base year. It set the index level during this period at 100.

Annual CPI Calculation

Here’s an example of the annual CPI calculation, and comparing two different years to get a gist of the differences.

Imagine the cost of a hypothetical basket of goods in 1984.

When you total the price of these goods you get $79. Using the CPI formula above you take $79/$79 x 100 = 100%. This is where the 1984 base rate of 100 comes from.

Now let’s consider the same basket of goods in 2025.

When you total the prices of these goods you get $216. Now, when you plug this into the CPI formula you get $216/$79 x 100 = 273%. You can now tell that from 1984 to 2025 prices for this particular basket of goods have risen by 173%.

Diverse Categories Within CPI

The CPI tracks more than 200 categories of items, and within each category it samples hundreds of specific items at various businesses which serve to represent the thousands of items available to consumers. In addition to these categories, CPI includes government-charged user fees like water, sewage, tolls, and auto registration fees.

It also factors in taxes associated with the price of goods such as sales tax and excise tax. However, it does not include Social Security taxes or income taxes that aren’t directly related to the purchasing of goods and services.

The CPI also does not include the purchase of investments, like stocks and bonds.

The Consumer Price Index (CPI) in Practice

The CPI can be used in a variety of ways, but perhaps most prominently, in economic policy.

Usage in Economic Policy

The CPI is the most common way to measure inflation, the economic trend of rising prices over time, or deflation, the trend of falling prices. The federal government, or the Federal Reserve, more specifically, sets a target inflation rate of 2% annually, and the CPI can help the government understand whether or not its monetary policy is effective in meeting this target.

The Federal Reserve’s Utilization

The Federal Reserve may look at the CPI to gauge whether or not to raise interest rates, which may cool or heat up the economy, accordingly, by increasing the cost of borrowing. As borrowing costs go up, demand for goods or services tends to fall, lowering prices, and putting downward pressure on the CPI.

Implications for Other Government Agencies

Economists also use CPI as a measure of cost of living, the amount of money you need to cover basic expenses, such as housing, food, and health care. This is important because the government may make cost-of-living adjustments to programs such as Social Security benefits. As the cost of living rises, benefit amounts may be adjusted higher to keep up with the rising costs of goods.

Employers may also look at the cost of living to help them set competitive salaries and determine when to raise wages for employees.

CPI’s Influence on Market Sectors

The CPI can also have an influence on market sectors, like the housing markets, financial markets, and even labor markets. As noted, a lot of it is top-down — depending on how the Federal Reserve reads the CPI and decides to change interest rates, if at all.

Raising rates can temper demand in the housing market, as a mortgage can become more expensive. It can also slow down sales for all sorts of businesses, which is reflected in earnings reports and finally, in the stock market. That can then spill into the labor market, and potentially raise unemployment as companies look to cut costs.

All told, the CPI’s influence can run deep in an economy.

CPI Versus Other Economic Indicators

The CPI is only one of many economic indicators, as mentioned. Others include unemployment, and the Producer Price Index (PPI).

CPI vs Unemployment: Understanding the Relationship

As noted, there tends to be a relationship between the CPI and unemployment rate, as the Fed targets 2% inflation, and full employment. As such, it can decide to make changes to monetary policy to try and restore balance or at least get closer to its goals.

CPI vs PPI (Producer Price Index)

The Producer Price Index or PPI measures the average change over time in the selling prices received by domestic producers of goods and services. In simpler terms, this metric measures wholesale prices for the sectors of the economy that produce goods. Like the CPI, the PPI can help analysts estimate inflation, as higher prices will show up on the wholesale level first before they get passed on to consumers at the retail level.

Analyzing and Critiquing the CPI Methodology

The CPI is a useful measure in many ways, but it does have some limitations.

First, it doesn’t apply to all populations in the United States. CPI considers urban populations alone, so it is not necessarily representative of the costs for those who live outside of those areas.

Also, the CPI calculation does not take into account all of the goods and services available to consumers or new technologies not yet considered consumer staples. What’s more, the metric does not provide any contact into what’s causing prices to move up and down, such as social or environmental trends.

CPI’s Broader Impact and Usage

CPI reports are typically issued monthly by the BLS, and are available to anyone who wants to access them online. They give a broad breakdown of the previous month, and compare price changes year-over-year, and month-over-month.

Breaking Down the Monthly CPI Report

The standard CPI report has an introduction that discusses the changes over the previous month, followed by a table that outlines changes in specific price categories over the past year and several months. It further breaks down food, energy, and “all items less food and energy,” providing additional insight for each category.

Anticipating the Next CPI Report

The BLS publishes the date and time of the upcoming CPI report on its website, typically the second week of the month, at 8:30am ET.

Contemporary Relevance of CPI

In recent years, many people have kept a closely-trained eye on the CPI and CPI reports, after prices rose dramatically due to the pandemic in 2020. While there were a variety of reasons as to why prices increased, that bout of inflation — the first serious case of inflation since the 1980s — caught many people off guard, and strained consumers’ budgets. Though it has moderated in the years since, the cost of living has remained a contentious issue in the U.S.

It also led to the Fed increasing interest rates. Inflation, or the increase in the CPI over the past couple of years, peaked at more than 9% during the summer of 2022, and as of late 2025, was back down to around 3%.

Educational Resources and Further Reading on CPI

There are numerous resources and places to learn more about the CPI, especially after all the attention it has garnered in recent years.

Learning More About CPI

A simple internet search will net a cornucopia of results, loaded with information and insight into the CPI. You’re also likely to find opinion pieces and other media discussing the CPI’s shortcomings or strengths — it can be a good idea to consider everything, and formulate your own opinion.

But in terms of learning more about the CPI itself, the BLS publishes a handbook discussing the concepts and methods it uses, which can also be helpful if you’re hoping to bolster your CPI IQ.

CPI-Related Statistics and Where to Find Them

The BLS publishes the CPI, and a whole host of data and statistics related to it. With that in mind, it can be a great place to start when hunting down CPI-related data. There are multiple other sources that utilize the BLS’ data to compile charts, graphs, and more, but typically, it’s all sourced back to the BLS.

The Takeaway

Rising inflation decreases the value of individuals’ cash savings over time. Investing in stocks, bonds and other investments that offer inflation-beating returns may help consumers protect the value of their savings. Understanding CPI, and how it’s moving, can help you devise a strategy for your investment portfolio.

The CPI can be a deep topic, especially when you consider how it intersects and relates to other elements of the economy, such as unemployment and interest rates. And again, the more an investor understands about the underlying machinations of the economy, the more knowledge they’ll have to power their decisions in the market.

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FAQ

What does CPI stand for?

CPI is an acronym that stands for “consumer price index,” and is a monthly measure of how the aggregate cost of goods and services changes over time.

What produces or calculates the CPI?

The CPI is calculated by the Bureau of Labor Statistics (BLS), a government agency. The BLS actually produces several CPI indexes, such as the CPI-U (Consumer Price Index for All Urban Consumers) and CPI-W (Consumer Price Index for Urban Wage Earners and Clerical W, among others.

What categories of goods or services are included in the CPI calculation?

The BLS tracks food and beverage, recreation, apparel, transportation, housing, medical care, education and communication, and other various service costs when compiling the CPI.

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