People often use the terms “pending offer” and “contingent offer” interchangeably, but there is actually a difference when you are talking about real estate.
When a property is said to be contingent, that means the seller accepted an offer that is contingent on particular conditions requested by the buyer. These conditions could involve anything from an inspection to financing.
If, however, you see a house on the market switch to pending, there’s a different status involved. The seller has accepted an offer, and all contingencies have either been waived or addressed.
Yes, the distinction may be subtle. However, the bottom line is, neither status actually means a property is sold. If you have found your dream home and it says “contingent” or “pending,” there is still a chance you could snag it.
Contingent Offers vs. Pending Offers
Here’s a closer look at the difference between contingent and pending offers.
What is a Contingent Offer?
When a home’s status switches to contingent, it means contingencies stand in the way before the deal is done. If closing on a home is a race, then buyers still have miles ahead of them when they enter the contingency process.
There are many types of contingencies buyers can include in their offer that make it easier for them to back out of a real estate deal, but these are some of the most common:
• Financing contingency. The buyers put some money or the promise of a mortgage behind their offer, right? This condition ensures that if the buyers aren’t approved for a mortgage, they’re not on the hook for finding cash to buy the property.
Some buyers choose to have a preapproval letter in hand to make the financing contingency move faster.
• Inspection contingency. A home inspector is paid to search the property top to bottom to uncover any issues. With a home inspection report in hand, buyers can ask the sellers to solve the issues or give them a credit against the purchase price of the home.
With this contingency, buyers can also walk away from a deal based on the findings of the inspection. Alternatively, if both parties don’t come to an agreement on repairs or credits, they can terminate the deal.
• Appraisal contingency. In order to secure financing for a home, it must be professionally appraised for the value of the offer or more. If the home appraises for less than the offer, the buyer can either make up the difference in cash, negotiate with the seller for a lower offer, or walk away from the deal.
• Home sale contingency. If buyers need to sell their existing home to help finance the purchase of a new home, they may include a home sale contingency in the offer. That means if an offer on their home falls through, they’re no longer on the hook to buy the home they made an offer on.
Contingencies are in place to protect buyers and sellers in the event of snags throughout the negotiation process.
Prospective buyers can include as many contingencies as they like in an offer, and if the sellers agree, the buyers will need to work through each one before they make it to closing.
For people salivating over a hot property that looks taken, contingencies may signal opportunities for a deal to fall through. If you have your heart set on a home that’s contingent, you can hold out hope. Thanks to contingencies, there’s a chance the existing offer will fall through.
💡 Quick Tip: Don’t overpay for your mortgage. Get a great rate by shopping around for a home loan.
What is a Pending Offer?
Just because a home is pending doesn’t mean the deal is done. A home often enters pending status once buyer contingencies are cleared, but it can also enter pending status immediately if a buyer makes an offer without contingencies.
A pending home sale may still fall through, but the buyer and seller have worked through most of the contingencies. For a pending sale to fall through, there likely has been an unexpected issue with the inspection or financing.
In fact, a pending home is still on the market. The listing agent and seller can choose to continue showing the home and even accept other offers, even if its status is pending. However, this is largely up to the sellers and their agents.
Can Pending and Contingent Homes Take Other Offers?
If a home is contingent and the buyers are still working through the inspection, financing, or selling their current home, a competing buyer can make a backup offer on the property. If the initial offer falls through for any reason, the seller can take the other buyer up on their offer.
It’s up to the sellers whether they will accept a backup offer or not, but if the buyer loves the property, it can’t hurt to ask.
In many markets, a home with pending status means it’s not open to additional offers, but the deal isn’t sealed. It’s not over till it’s over, so the buyers could still back out based on their contingencies, as outlined above.
(A home could be marked “pending, taking backups,” indicating that the seller is still showing the house and accepting backup offers.)
When a home is pending or contingent, it’s not against the law for another buyer to ask for a tour, express interest in the home, or even make a competing offer. But compared with a home that is not under contract, it is less likely that a competing buyer will get the property.
While you may make offers on these properties, buyers don’t get your hopes up. Depending on how close the buyer and seller are to closing, it’s not legally possible for the seller to accept another offer.
Additionally, the closer a home gets to closing, the more complicated competing offers can be. This is when a seasoned real estate agent may come in handy. They will understand the market, process, and legalities better than most first-time buyers do and how to navigate a hot housing market.
Contingent vs. pending: Though some use the words interchangeably, the two statuses are different. A contingent deal may have a long way to go, as buyers firm up financing, await an appraisal, or sell their current home. A pending property is nearer to closing, but the deal still isn’t final.
Buyers eyeing a dream property may hold out hope that contingent or pending deals fall through. In that case, having everything set up for a backup offer could pay off.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
SoFi Mortgages: simple, smart, and so affordable.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
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.
Subprime personal loans provide financing to people with poor credit who cannot qualify for a conventional prime-rate loan. Borrowers who have poor credit have a higher risk of defaulting on loans, so lenders protect themselves by adding charges to the loans. These charges come in the form of higher interest rates, longer term lengths, and higher financing fees.
Read on to learn how subprime personal loans work, the different types of loans, some alternatives to these high-interest loans, and whether they might be an option for you.
Key Points
• Subprime personal loans are designed for individuals with credit scores below 620, providing access to funds.
• Subprime personal loans can give borrowers a lump sum of cash but typically at a high interest rate and with fees to protect lenders.
• Fixed-rate loans offer a consistent interest rate, ensuring stable monthly payments throughout the term.
• Adjustable-rate loans have a variable interest rate after an initial fixed period, leading to uncertain future payments.
• Proper management of subprime loan payments can improve credit scores, while missed payments can harm them.
What Is a Subprime Personal Loan?
A subprime personal loan is a loan that caters to borrowers with subprime credit, who are considered to be at a high risk of default. Credit scores typically run from 300 to 850 (that’s the range for the most popular FICO Score). According to the Consumer Financial Protection Bureau, a subprime credit score is below 620. A subprime lender will usually charge a higher interest rate and fees to cover the cost of their risk.
There are fairly rigid credit score requirements for a personal loan. The Consumer Financial Protection Bureau lists five credit score levels; the first column shows what type of loan someone will qualify for.
Credit Level
Credit Score
Deep subprime
Below 580
Subprime
580–619
Near-prime
620–659
Prime
660–719
Super-prime
720 and above
Whether they are new to accessing credit or have not managed credit well in the past, a borrower with a FICO® score below 620 will find it difficult to secure a loan from a traditional lender. Many online lending platforms allow consumers to search a network of subprime personal loan lenders to find the best deal. Borrowers submit a loan application online to prequalify.
In general, subprime loans have certain characteristics. They may require a larger down payment for a mortgage or auto loan. For example, someone with a fair credit score who takes out a car loan may have to pay 5% down, whereas someone with poor credit might have to put 10% down. A subprime loan, however, may come with an adjustable interest rate or a fixed interest rate, and the term may vary from several months to several years.
Types of Subprime Loans
There are three main types of subprime loans: interest-only, fixed-rate, and adjustable-rate.
Interest-Only Subprime Loan
An example of an interest-only loan is an adjustable-rate mortgage where the borrower pays only the interest for the first few years before beginning to cover some of the principal. If interest rates have gone up at the end of this period, the payments can become much higher and more difficult to afford.
Pros of Interest-Only Subprime Loan
Cons of Interest-Only Subprime Loan
Initial monthly payments are lower
The borrower is often not aware that interest rates could skyrocket in the future
An interest-only loan can be paid off faster than a traditional loan
Borrowers may rely on having more income in the future to meet the higher payments
Flexibility: Borrowers can use extra cash to pay off the principal earlier
In the case of a mortgage, if housing prices fall, the mortgage debt may exceed the value of the home
Fixed-Rate Subprime Loan
Fixed-rate subprime loans allow the borrower to lock into a fixed interest rate for the life of the loan. The monthly payments don’t change, so there are no surprises for the borrower. However, the terms of these loans are longer, and borrowers pay more interest over the life of the loan.
Pros of Fixed-Rate Subprime Loan
Cons of Fixed-Rate Subprime Loan
Interest rates are the same for the life of the loan
Long repayment period (30 years or more), so the borrower pays more for the loan
Monthly payments don’t change
No flexibility
Adjustable-Rate Subprime Loan
Interest rates on an adjustable-rate subprime loan are fixed for an initial period. After that, the interest rate will become variable, and your monthly payments will go up and down with market interest rates.
Pros of Adjustable-Rate Subprime Loan
Cons of Adjustable-Rate Subprime Loan
Interest rate is fixed for an initial period
Once the initial period is over, the interest rate can increase
Interest rates can be low initially, so the borrower has cash that can be invested elsewhere
Budgeting is difficult because future payments are uncertain
Pros of Subprime Personal Loan
The pros of a subprime personal loan can be summed up as “perceived affordability” for those who can’t qualify for prime personal loans.
Adjustable Interest Rate
Adjustable interest rates are a double-edged sword. On the one hand, subprime loans with an adjustable rate are attractive because the initial rate is low. This frees up cash that savvy borrowers can use to earn money elsewhere or pay off the loan principal sooner. However, once the initial period is over, the rate can skyrocket with market rates.
May Enjoy Flexibility of Funding
The lump sum a personal loan provides can usually be applied to help the borrower’s finances in a variety of ways, from financing a wedding to paying off a major car repair or dental bill. Also, if the rate is fixed and gets locked in as interest rates climb, this can benefit the borrower, keeping monthly costs low and having some wiggle room in one’s budget to pay down debt.
Cons of Subprime Personal Loans
The perceived affordability of subprime personal loans comes with trade-offs.
Higher Interest Rate
Subprime loans have significantly higher interest rates than prime loans. That means a subprime borrower can pay much more in interest over the life of their loan.
For example, the average personal loan rate for a borrower with a credit score of 720 to 850 in January 2025 was 11.30%, while the rates were 20.28% for those with credit scores between 300 and 629. So if you are a subprime borrower and see offers saying rates can range from, say, 8.00% to 35.99%, expect that you may qualify for APRs at the higher end.
Also note that an adjustable rate loan may have a low initial interest rate, but higher rates can increase your monthly payments substantially. How economic fluctuations will impact your loan can be hard to predict.
Higher Fees
Subprime personal loan lenders charge higher fees to subprime borrowers to cover the cost of potential default.
Pros of Subprime Personal Loan
Cons of Subprime Personal Loan
Flexibility from adjustable interest rates
Higher interest rates
Access to cash when needed
Higher fees
What Credit Score Is Required for a Subprime Personal Loan?
According to the Consumer Financial Protection Bureau, credit scores of 619 and below qualify for a subprime personal loan. Here are the typical ranges of credit scores, which span from 300 to 850:
• Under 580: Poor
• 580-669: Fair
• 670-739: Good
• 740-799: Very good
• 800 or more: Exceptional or excellent
The average credit score in the U.S. at the end of 2024 was 717.
The Impact a Subprime Personal Loan Has on Your Credit
Taking out a subprime loan will not affect your credit score. When a lender runs a credit check on a potential borrower, it affects the credit score by fewer than five points, but that is the same regardless of the type of loan.
On the other hand, how you manage the payments can impact your score. Making regular payments can build your credit because it contributes positively to your payment history. You may then be able to qualify for a prime-rate loan once you have paid down your debt.
Top 3 Subprime Loans
Here are three subprime lending platforms to consider, drawn from online research conducted in early 2025. Lending platforms allow borrowers to search a network of subprime lenders for the best loan terms.
Upstart.com
Loans are available from $1,000 to $50,000. The subprime personal loans can be used as debt consolidation loans or to finance a wedding, vacation, or medical expense. The origination fee can typically range from 0% to 10% of the loan amount, withheld at the start of the loan term, which is usually between 36 and 60 months. Interest rates as of January 2025 ranged from 7.80% to 35.99% APR (annual percentage rate).
Upstart says that one credit report of 300 can help an applicant qualify, and those who are too new to credit to have a score may still be able to access funds.
OneMain Financial
Loans are available from $1,500 to $20,000. Funds are deposited into the borrower’s bank account the next business day. APRs ranged from 18.00% to 35.99% in January 2025, with terms of 24 to 60 months. Origination fees can be a flat fee of up to $500 or up to 10% of the loan amount.
While they don’t publish a specific minimum credit score to qualify, OneMain Financial says loans are available to those with credit scores in the fair and poor ranges.
PersonalLoans.com
Another approach can be to use a site that aggregates offers from a network of lenders. At PersonalLoans.com, loans can be available from $250 to $35,000. Funds are deposited into the borrower’s bank account within one business day.
Lenders from the site’s network offer APRs up to 35.99%, and loan durations are typically from 90 days to 72 months. Fees will vary, as will credit scores required, but a quick search can provide options for many subprime borrowers.
Getting a Subprime Loan
Subprime personal loan lenders list few requirements. But the process for a subprime loan is generally the same as the steps to apply for a personal loan with good credit.
1. Check your credit score. Look for any errors on your report that could be erased to boost your score. (Checking your own score doesn’t affect your rating.)
2. Compare multiple lenders. Shop around for the best rate and term. Your current bank or credit union might offer good subprime terms to existing account holders.
3. Select a lender. Make sure you understand the interest rate, repayment terms, and fees.
4. Gather your documentation. Scan them ahead of time for quick uploading. Applicants are typically required to show:
a. Proof of identity. Such as a driver’s license or passport.
b. Proof of address. You can use a utility bill, rental agreement, voter registration card, or insurance card for your home or car.
c. Proof of income. Choose from a paycheck, W2 or 1099, tax return, or bank statement showing paycheck deposits.
d. Current monthly expenses. Use a bank statement, and highlight your major monthly bills.
5. Complete the application. Once approved, you’ll need to sign for the loan to receive the funding.
Alternatives to Subprime Personal Loans
Subprime personal loans are not ideal. If you find yourself in the bad credit score range, consider alternatives like borrowing from friends or family, getting a cosigner to help you get a loan or credit card, or selling some of your assets to provide immediate cash.
For the future, try to build your credit by paying debts on time and lowering your debt levels, among other moves. In addition, it can be wise to check your credit report for errors that could be negatively impacting your score. This can have a positive impact on your efforts to access credit across many financial products, from personal loans to mortgages.
The Takeaway
Subprime personal loans are typically offered by online lenders that cater to customers with a low credit rating who cannot qualify for loans with conventional financial institutions. Subprime lenders charge high-interest rates and financing fees to cover the risk of default. You can choose a fixed or adjustable interest rate.
If you build your credit score higher, you may have more options, including personal loans with more favorable rates and terms.
Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.
SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.
FAQ
What credit score do you need to get a subprime personal loan?
According to the Consumer Financial Protection Bureau, credit scores of 619 and below qualify for a subprime personal loan.
What are subprime personal loans?
A subprime personal loan caters to borrowers with subprime credit. That means they are considered at a high risk of default, so a lender will likely charge them a higher interest rate and fees to cover the cost of their risk.
What are the requirements for subprime personal loans?
To obtain a loan, borrowers must submit a loan application online and provide financial documents to show they can manage the payments.
Photo credit: iStock/shapecharge
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
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 .
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Third Party Trademarks: Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.
You can sometimes reopen a closed bank account depending on the bank’s policies and the reasons for the closure. Accounts that you closed or that were closed due to inactive status tend to be easier to reopen than those that were terminated due to problems like frequent overdrafts. This guide will help you navigate having a closed bank account that you’d like to reopen.
Key Points
• Bank accounts can be closed by the owner or the bank for various reasons, including dissatisfaction, relocation, or financial issues.
• Closed accounts might be reopened depending on the bank’s policies and the reasons for closure.
• Dormant accounts require reactivation, which can often be resolved by making a transaction.
• Accounts closed due to excessive overdrafts may be reopened after settling outstanding balances.
• Fraudulent activities leading to account closure generally prevent reopening with the same bank.
Why Might You Need to Close a Bank Account?
Account holders may decide to close a bank account for a variety of reasons, including the following:
• No longer needing the account
• Moving to a new location
• Lack of convenience
• Dissatisfaction with the account
• Issues meeting minimum requirements
Here’s more about each.
No Longer Needing the Account
Sometimes, you simply might not need a bank account anymore. For example, if you’d set up a separate savings account to save enough money for a down payment on a house or for a vacation, after you’ve accomplished those goals, you might decide that you don’t need multiple bank accounts anymore.
Moving to a New Location
If you’re moving to a new community that doesn’t have a branch of your financial institution nearby, you may decide to close your bank account and open a new one that’s more readily accessible in your new town. Moving doesn’t create a problem when someone banks solely online, but it can lead someone to switch banks if they prefer in-person options.
Lack of Convenience
Another potential reason someone might switch banks is due to a lack of convenience, such as a bank’s hours being incompatible with their schedule or the bank not having a widespread enough network of ATMs so they wind up paying many ATM fees. When banking becomes inconvenient through a certain financial institution, that could spur someone to seek a more practical solution.
Dissatisfaction With the Account
Whether it’s poor customer service, a lack of desired services, or fees that are too high, customers sometimes close their accounts and go elsewhere because they aren’t satisfied with their current financial institution. If, for instance, you see an offer for a savings account that earns more interest and charges lower fees, you might decide to make a switch.
Issues Meeting Minimum Requirements
If a bank requires you to maintain a certain balance to keep the account open or to avoid hefty fees, an account holder may opt to close the account if they’re struggling to meet those requirements. By closing a savings account with a minimum balance that’s just out of reach, for instance, someone could avoid incurring fees each month when they don’t make the minimum balance requirement.
Is It Bad When a Bank Closes Your Account?
Whether it’s bad when a bank closes your account depends on why the bank closed it — and situations can vary. According to the governmental agency, the Office of the Comptroller of the Currency , banks typically can close accounts for nearly any reason without providing notice.
That being said, common reasons why a bank may close an account can include:
• Low or no activity: Banks may place an account in a dormant status after a certain period elapses with no transactions. With a dormant account, it’s not technically closed, but the account owner is no longer able to make transactions. How long it might take for an account to go dormant depends on both state laws and a particular bank’s policies.
After an account has been dormant for a period of time, a traditional or online bank may close the account and, if you can’t be reached, forward the funds to the proper state government, labeling them as “unclaimed property.” At this point, you’d need to submit a claim to your state’s treasury office to obtain that money.
• Suspicious activity: A bank will close an account if it has proven the account to be involved in fraudulent activity. When the bank initially suspects fraudulent behavior (whether the account holder was the perpetrator or the victim), the bank will likely freeze the account to investigate. Red flags can include large transactions, frequent account activity (especially if that activity is new or different), and transfers to overseas accounts.
• Excessive overdrafts: If an account holder regularly spends more from an account than what’s available, this leads to negative balances and bounced checks. A bank can charge overdraft fees and require that the account holder bring in sufficient funds to return the account back to the minimum balance required. If that happens frequently or if funds are not restored, however, the bank may close the account.
Worth noting: If your bank account is closed due to a negative balance or suspicion of fraudulent activity, this may make it difficult for you to open a new bank account. Those issues will be on your record with ChexSystems, an industry reporting agency. You might need to explore what are known as second chance checking accounts in order to open a bank account again.
Get up to $300 when you bank with SoFi.
No account or overdraft fees. No minimum balance.
Up to 3.80% APY on savings balances.
Up to 2-day-early paycheck.
Up to $3M of additional FDIC insurance.
Do You Get Your Money If a Bank Closes Your Account?
By law, a bank must refund to you any money in a closed account after subtracting fees that are due. Typically, a check will be sent to the account holder. There is a possibility that the bank might move the money into a different type of account.
If the bank cannot reach you about this matter, your funds could be sent to the state as unclaimed money.
How Long Do Banks Keep Closed Accounts?
For deposit accounts of $100 or more, a bank must retain records for at least five years. However, this doesn’t necessarily mean that you can reopen the account within that time frame.
You’ll learn more about how you might reopen a closed account below.
Can You Reopen a Closed Bank Account?
There isn’t a simple yes/no answer to “Can a closed bank account be reopened?” You may be able to reopen a closed bank account in some situations. It will depend, however, on why the account was closed and your financial institution’s policies.
Usually, it’s a wise move to contact the bank, find out why your account has been closed, and see if it’s possible to use it again. You might be able to reactivate a dormant account simply by making a withdrawal or depositing funds (see below for more details). But if a bank account has been closed due to, say, suspicions of fraud, you may not be able to reinstate it.
Next, you’ll learn the steps involved if you do try to reopen a closed bank account.
How Do You Reopen a Closed Bank Account?
If you’ve closed your account (rather than a bank doing so), you can typically submit a request to reopen, say, your checking account. This can be done online, over the phone, or by visiting a branch in person, with the exact process varying depending on the specific financial institution.
Another option you have in this situation is to simply open a new bank account, whether at your previous financial institution or at another one of your choice. When choosing your account, it’s worth exploring the different types of savings accounts you might consider.
On the other hand, if your bank account gets closed by a bank, whether or not you can reopen it largely depends on the reason for the closure as well as your bank’s policies.
In general, the first step in reinstating a troubled account is to talk to your financial institution about why your account was frozen, put into dormant status, or closed. Ask what you need to do to address the issues. You can also review your account agreement. If you believe that a bank wrongfully closed your account, you can file a written complaint .
Here’s guidance on how to reopen a closed bank account in three scenarios.
Reopening a Dormant/Inactive Account
This is one of the simplest issues to address. If you receive a notification that your account is considered inactive or dormant, contact your bank to find out how to make it active again. The bank may allow you to make a deposit to the old account, or they may have you open a new bank account.
Reopening an Account After Closure Due to Excessive Overdraft
Financial institutions need to monitor their levels of risk. If they close a bank account for excessive overdrafts, the account holder would likely need to talk to the bank to see if they are willing to reopen the old account or if they’d allow them to open a new one. Different banks will have different policies. You may be required to pay off your negative balance, sometimes within a specified timeframe, before you can reopen your account.
Reopening an Account Closed for Suspicious or Fraudulent Activities
If a bank believes that a customer is engaged in fraudulent behavior (rather than being a victim of it), then it may be difficult to reopen an account or to open a new one with the institution. Contact the financial institution, and be prepared to demonstrate how any activity in your account that appeared suspicious was, in fact, not fraudulent or not your fault.
How to Prevent Bank Account Closures
In order to avoid your bank account being closed, it’s a good idea to:
• Use it regularly so it doesn’t go dormant.
• Set up alerts for a low balance. That way, you can remedy a situation which could lead to closure due to your overdrafting.
• Review communication from your bank. You might get a notice that your account has issues, but if you don’t read it, you can’t take steps to prevent closure.
Whether or not you can reopen a closed bank account largely depends on why it was closed in the first place. Sometimes, an account holder in good standing decides to close a bank account and later changes their mind. In that case, the financial institution will almost certainly allow them to have an account there again. Other times, the bank closed the account, perhaps because of excessive overdrafts, suspicious activity, or lack of use. In those instances, talk to the financial institution to see what steps you need to take.
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 3.80% APY on SoFi Checking and Savings.
FAQ
Can a bank close your account?
Yes, it can. According to a governmental agency that oversees financial transactions, banks can close accounts for virtually any reason without notice.
Is it bad when a bank closes your account?
Whether it’s bad depends upon the reason why the bank closes your account. Sometimes, a bank account is closed because of inactivity. Other times, it can be a more concerning situation, one that can make it harder to open an account in the future. For instance, the bank may have flagged the account for suspicious or fraudulent activity. Another reason why a bank may close an account is excessive overdrafts.
Can you reopen a closed account?
Whether you can reopen a closed account depends on who closed the account (you or the bank), the reasons why the account was closed, and the bank’s policies. Talk to your financial institution to find out what steps you would need to take in order to reopen your account.
How do I prevent my bank account from being closed?
To prevent your bank account from getting closed, use the account regularly and set up low balance alerts so you can avoid overdrafting. If your account is troubled, talk to your financial institution. Explore what solutions might exist to keep your account open and return it to good standing. It might also be beneficial to brush up on your financial habits and the basics, such as how savings accounts work.
Will a direct deposit reopen a closed account?
No. If an account is closed, the direct deposit funds will have nowhere to be deposited and so the transaction will not go through. To address this situation, talk to your bank about reopening the account and let the payer know that there is an issue with the account tied to your direct deposit.
About the author
Kelly Boyer Sagert
Kelly Boyer Sagert is a full-time freelance writer who specializes in SEO-optimized blog and website copy: both B2B and B2C for companies ranging from one-person shops to Fortune 500 companies. Read full bio.
SoFi members with Eligible Direct Deposit activity can earn 3.80% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. 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 during a 30-day Evaluation Period (as defined below).
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 3.80% APY, we encourage you to check your APY Details page the day after your Eligible Direct Deposit arrives. If your APY is not showing as 3.80%, 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 3.80% APY from the date you contact SoFi for the rest of the current 30-day Evaluation Period. You will also be eligible for 3.80% APY 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, 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 members with Eligible Direct Deposit are eligible for other SoFi Plus benefits.
As an alternative to Direct Deposit, SoFi members with Qualifying Deposits can earn 3.80% 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 Eligible 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 an Eligible Direct Deposit or receipt of $5,000 in Qualifying Deposits to your account, you will begin earning 3.80% 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 Eligible 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 Eligible 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 Eligible 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 Eligible Direct Deposit or Qualifying Deposits until SoFi Bank recognizes Eligible Direct Deposit activity or receives $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Eligible Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Eligible Direct Deposit.
Separately, SoFi members who enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days can also earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. For additional details, see the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.
Members without either Eligible Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, or who do not enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days, will earn 1.00% 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 1/24/25. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
This content is provided for informational and educational purposes only and should not be construed as financial advice.
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.
After making a deposit to a bank account, in many cases, not all of the money is immediately available for use. This temporary delay in the availability of funds is called a “hold.” Typically, a deposit hold will only last one to two business days. Sometimes, however, deposited funds may be held for as long as seven business days. This might be the case if your account is new, the deposit is for a high amount, or the bank has a reason to suspect a check will not clear. Hold times are governed by federal law. In addition, each financial institution has its own policies on hold times.
While these policies are in place for the bank’s protection as well as your own, it can be frustrating when you can’t spend your own money, which may lead you to wonder how to remove a hold on a bank account.
Key Points
• A balance hold on a bank account temporarily restricts access to deposited funds, typically lasting one to seven business days depending on various factors.
• Financial institutions implement holds to protect themselves from potential losses and to investigate suspected fraud, ensuring that checks clear before funds are accessible.
• It is possible to manage a hold by reviewing the bank’s policies, contacting the bank directly, or simply waiting for the hold to expire.
• To prevent holds, individuals can utilize direct deposit, request certified checks for large deposits, and make in-person deposits rather than relying on ATMs or mobile apps.
• Holds are governed by federal regulations, with specific timeframes established for the availability of funds based on the type and amount of deposit made.
What Is a Hold on a Bank Account?
When a financial institution puts restrictions on an account holder’s ability to withdraw or otherwise use their funds, this is what’s called a “hold.” A hold on a deposit into your checking account typically lasts a relatively short amount of time, perhaps a day or two.
Financial institutions use the information in Federal Regulation CC to create their own holds policies. These policies usually provide information on the timing of funds availability based on the type of deposit being made, when it was made during a business day, and the amount of the deposit.
Why Banks Place Holds on Money
Overall, a bank uses a hold to protect the institution from possible loss if the funds don’t clear from the institution where the money is being drawn. Basically, the bank wants to ensure that a check is legitimate and that it won’t bounce.
Financial institutions may also place holds if they suspect fraud and are investigating. This can in turn protect the account holder.
How Long Holds Last
The length of a hold depends on a number of factors, with deposits potentially clearing on the same day or in up to seven days.
When it comes to a check deposit, the Federal Reserve requires that the first $225 must be made available to the account holder on the next business day (which doesn’t include weekends or bank holidays). Typically, a bank will make the balance of the check available by the second business day. However, there are some occasions where hold times can be as long as seven business days. This can happen if the check amount exceeds $5,525 or your account has been open for less than 30 days. Other reasons your deposited funds may be on hold for an extended period of time include:
• An older check
• A check that’s being redeposited
• Deposits where an involved party has a history of overdrafts
• Instances where there’s suspicion of fraud
Meanwhile, official checks like cashier’s checks, certified checks and government checks should clear on the day of deposit.
How to Remove a Hold on a Bank Account
As for how to manage or remove a legal hold on bank account deposits, you do have a few options, including reviewing your bank’s policy or contacting your bank. You could also simply wait it out. Here’s more on each of your possible options.
Wait It Out
If you’re not in a hurry to spend or transfer the funds being held, you can simply wait until the hold is taken off, given holds usually only last a matter of days. Keep in mind, however, that those days are business days — if there’s a bank holiday or a weekend coming up, your wait is bound to be longer.
Review Your Bank Policy
A notice of funds availability must be included on pre-printed deposit slips, but Regulation CC notes that it only needs to state that deposits may not immediately be available for withdrawal. So if you’d like to learn more specific information about the length of holds, you can often find your bank’s policies online or by contacting them. This information is also typically provided to you when you first open your account.
Armed with this information, you may be better able to plead your case with the bank to lift the hold — especially if you find out the hold is outside the norms.
Contact Your Bank
If deposited funds are being held for a longer period than you expected, it’s a good idea to call, email or stop by a branch of your bank to ask about specifics of its hold policy. You can ask your bank to provide an explanation for the hold or sometimes even to release the hold. Keep in mind, however, that it can be difficult to get a bank to remove a hold. And since all banks have them, you can’t switch banks to avoid them either.
Get up to $300 when you bank with SoFi.
No account or overdraft fees. No minimum balance.
Up to 3.80% APY on savings balances.
Up to 2-day-early paycheck.
Up to $3M of additional FDIC insurance.
How to Prevent Holds
Rather than worry about how to remove a hold on a bank account, it might be helpful to take proactive steps to prevent a hold in the first place. Read on for some suggestions for reducing or eliminating hold lengths in a variety of situations.
For Paychecks
If your employer offers it, sign up for direct deposit. This means that your paycheck will be electronically transferred through the Automated Clearing House (ACH), and these deposits usually clear more quickly — often becoming available the next business day. Plus, many financial institutions make paychecks that are electronically deposited immediately available.
For Large Deposits
If you know that you’re owed a large sum of money, ask for it to be paid by certified check, cashier’s check, or a form of government check (such as a money order purchased at the United States Post Office). These types of official checks typically clear quickly, usually by the next day. As another option, you could ask for the funds to be wire transferred.
For Deposits in Person
Making your deposits in person is a good way to prevent delays in funds availability. Doing so through an ATM or through an app, on the other hand, can result in longer holds.
This strategy doesn’t help to remove a hold on bank account funds, but it can help to prevent an overdraft due to a hold: Deposit funds that may come with a longer hold into an account that you don’t use regularly to pay expenses, such as your savings account. (Note that when funds are being held, you can’t transfer money to another bank from that deposit until it’s cleared.)
When Using Your Debit Card
When you use your debit card to make a purchase or a reservation, the merchant may place a temporary hold on some of the funds in your checking account. This is done as a safeguard to make sure you’ll have sufficient funds to cover the full payment. This can come up when you’re filling up at a gas station or reserving a hotel room or rental car. If you foresee the hold being an issue, consider paying with a method other than your debit card (such as a credit card) or transfer additional funds into your checking account to act as a buffer. It can also be helpful in this scenario if you’ve linked bank accounts.
The Takeaway
Financial institutions create hold policies for funds deposited into bank accounts under the guidance of the Federal Reserve. Holds generally are placed for two reasons: to ensure that funds are cleared and to protect the account holder when fraud is suspected. How long a hold lasts depends on a variety of factors, including the type of deposit, when the deposit was made, the age of the account, and a bank’s specific policies.
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 3.80% APY on SoFi Checking and Savings.
FAQ
Why is the bank holding my deposit?
In general, financial institutions place holds for two main reasons: First, they want to make sure that a deposit will clear as a way to protect themselves and, second, sometimes they’ll place a hold on funds because they suspect fraud and are taking actions to protect the account holder.
What can I do if my deposit is placed on hold?
You can check your bank’s hold policies (usually given to you when the account was opened and/or available on the bank’s website) to see if you can wait it out. Or, you can contact the financial institution for more information about your situation and to request for the hold to be lifted.
How long do I have to wait before my deposit is released?
In general, the first $225 of a non-cash deposit must be made available on the next business day. The next $226 to $5,524 must be available in two business days, and amounts over $5,525 must typically be made available on the seventh business day. There are exceptions in either direction though, and keep in mind that these estimated time frames only apply to weekdays, not weekends or bank holidays.
How long can a bank put your account on hold?
A bank deposit hold can last anywhere from one to seven business days. In general, however, holds last for less than five days. The exact length of a hold will depend on a number of factors, including the type of deposit, the age of your account, and the bank’s policies.
Why is my bank account on hold?
A specific deposit may be on hold due to the bank enforcing its holds policy to ensure that the deposit clears, or there is concern about fraud. If the entire account is frozen, contact your financial institution for specifics. Note that if you have concerns about identity theft or other forms of fraudulent activity on your bank accounts, you can consider a credit freeze or credit lock to protect yourself while the situation is being resolved.
About the author
Kelly Boyer Sagert
Kelly Boyer Sagert is a full-time freelance writer who specializes in SEO-optimized blog and website copy: both B2B and B2C for companies ranging from one-person shops to Fortune 500 companies. Read full bio.
*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.
SoFi members with Eligible Direct Deposit activity can earn 3.80% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. 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 during a 30-day Evaluation Period (as defined below).
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 3.80% APY, we encourage you to check your APY Details page the day after your Eligible Direct Deposit arrives. If your APY is not showing as 3.80%, 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 3.80% APY from the date you contact SoFi for the rest of the current 30-day Evaluation Period. You will also be eligible for 3.80% APY 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, 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 members with Eligible Direct Deposit are eligible for other SoFi Plus benefits.
As an alternative to Direct Deposit, SoFi members with Qualifying Deposits can earn 3.80% 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 Eligible 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 an Eligible Direct Deposit or receipt of $5,000 in Qualifying Deposits to your account, you will begin earning 3.80% 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 Eligible 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 Eligible 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 Eligible 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 Eligible Direct Deposit or Qualifying Deposits until SoFi Bank recognizes Eligible Direct Deposit activity or receives $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Eligible Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Eligible Direct Deposit.
Separately, SoFi members who enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days can also earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. For additional details, see the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.
Members without either Eligible Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, or who do not enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days, will earn 1.00% 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 1/24/25. There is no minimum balance requirement. Additional information can be found at http://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.
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.
It is possible to overdraft a savings account, which is when your balance drops below zero. This could happen if you forgot to deposit a check into the account and then transferred funds out, for instance. Or maybe you moved more money out of the savings account into your checking than you actually had. These and other glitches can leave you with a negative balance in your savings.
Consequences of Overdrawing a Savings Account
An overdraft occurs when there is a withdrawal from your account that results in the balance being below zero — sometimes called a negative balance. There are several ways this can happen. Maybe an automatic withdrawal was processed or you wrote a check against your savings account and you didn’t have enough in the account to cover the transaction.
When the negative balance kicks in, a couple of different things could happen next. Much depends on your particular financial institution and the terms you agreed to when you opened the savings account.
Among the possibilities:
• You may be charged an overdraft fee: If you signed an agreement to opt into overdraft coverage, your financial institution will allow you to overdraft on your account, typically for a fee. (That is, they will authorize the transaction and allow for it to be completed, extending you a loan.) The amount of the fee will differ depending on your account and your bank. Some financial institutions may even charge you every day and/or for additional withdrawals while your account has a negative balance. Considering that the average overdraft fee is about $35, this cost can really add up.
• Your transaction is declined: Your financial institution may decline the transaction if you don’t have overdraft protection. In this case, the transaction won’t go through. In addition, you could face a non-sufficient funds fee, or NSF fee. In many cases this amount is similar to an overdraft fee.
• You have a linked account, and the linked account is used to cover the cost. This usually happens when you overdraw a checking account, and a linked savings account covers the difference. However, you may be able to link your savings account to another account (typically at the same financial institution) as a backup. If an account goes down to zero or below, then money would be withdrawn from the backup account to complete the transaction. In many cases, this service is free, though that depends on your bank.
Understanding Overdraft Protection and Fees
Financial institutions offer overdraft protection programs to help ensure your transactions proceed smoothly in case you reach a negative balance. These programs vary somewhat. Options may include linking a checking and savings account together — funds will be transferred automatically for the negative balance. Or the bank might allow the transaction to go through, and you’ll be charged a fee until you make up for the difference.
Federal regulations require banks to allow account holders to opt into overdraft protection for ATM and debit cards for point-of-sale transactions (or purchases). If you don’t opt in, you won’t be able to overdraft — your bank will deny the transaction. In this case, you won’t be charged any bank fees. However, this may not apply to recurring payments, bank transfers, or checks.
As we mentioned, your financial institution may charge you a fee for each transaction that involves overdraft protection, though banks typically have a maximum amount they’ll charge per day. For example, if you transferred $1,200 for your rent payment out of your savings, and you only had $1,000 in your account, you’ll have a negative balance. This results in a $200 overdraft (if you have coverage), plus you’ll pay about a $35 overdraft fee. If you don’t get paid until a week later to make up the difference, your account will continue to have a negative balance. Let’s say your bank ends up charging you a daily fee which adds up to an extra $10 for that week (this is just an example — it depends on the bank), totaling $45 in fees. And even if your bank denies the transaction, you may still have to pay the NSF fee, which could be about $35.
As you can see, overdrafting on your savings account can get expensive. That’s why it’s a smart idea to rectify the situation as soon as possible and prevent it from happening in the future.
Steps if You Have Overdrawn on Your Account
If you’ve overdrawn on your savings account, here’s how to get out of the negative-balance zone.
• Deposit funds: Once you’ve overdrafted, make a deposit into that account as soon as possible. Doing so can prevent you from being hit with multiple overdraft fees, especially if you know you need to make more withdrawals in the next day or so.
• Ask to have the fee waived: If this is the first time you’ve had a negative balance, you can contact your financial institution to request to have the fee waived. If you’ve been a loyal customer and have remained in good standing with your accounts up until now, the bank may not charge you.
• Pay the overdraft fee: If your bank rejects your request to have the fee waived, it’s best to pay it as soon as possible. You can typically do that by making a deposit into the overdrawn account. While your bank likely won’t take drastic measures like closing your account, be aware that letting a bank account sit with a negative balance could wind up hurting your credit score if the matter gets sent to a collection agency.
• Settle payment with the payee: If your payment didn’t go through, then you’ll need to contact the person or company you owe and make arrangements for alternative payment. Depending on the type of payment, you could face a late or returned payment fee, which you’ll also need to pay.
Tips for Avoiding Overdraft Fees
There are ways to avoid overdraft fees. Here are some methods that can help.
1. Sign Up for Text or Email Alerts for Low Balance
Many banks allow you to sign up for email or text alerts when your savings account reaches a certain threshold. By doing so, you have time to deposit additional funds so you won’t risk your bank account going to zero or a negative balance.
2. Check Your Bank Account Regularly and Review Statements
Logging into your bank account online or through your banking app allows you to quickly see your balance and any upcoming transactions. By keeping on top of your account, you’ll typically be able to see if you’ll need to have more funds on hand, and you’ll have time to make those deposits. You may find that checking your account balances a few times a week is a helpful habit.
3. Review and Compare Automatic Payment Dates to Withdraw Dates
Looking at when money actually gets withdrawn from your account will help you plan better. For instance, if you know you’ll have a few withdrawals totaling $600 on the 15th of each month, you can plan to make sure you have that much in the account then. (Having a buffer is nice, too, if you can swing it.)
4. Revisit Your Budget
Reviewing your budget occasionally will help you see whether you’re overspending in certain areas. If so, working to cut back on expenses can prevent overdrafts. This is especially important during times when basic living expenses can creep up and require budget recalibration.
5. Build an Emergency Fund
You’ve probably heard the advice that it’s wise to have a rainy-day fund with enough cash in it to cover a few or several months’ worth of expenses. Having this kind of buffer will help when unexpected circumstances arise. These situations could range from a big medical bill to your laptop dying to being laid off. Aim to keep your emergency fund in a separate account, far from your everyday accounts, so you’re not tempted to spend it.
6. Consider Overdraft Protection and Coverage
Check into what your financial institution offers in terms of overdraft protection or coverage, and see if it makes sense for you. This may involve opening what is essentially a line of credit, so proceed carefully and find out what it will cost you. Make sure you understand what your responsibilities are, including fees and when a withdrawal from a linked account may occur.
The Takeaway
Overdrafting on your savings account can happen, and it can result in fees. There are several smart tactics that you can use to avoid this scenario — and ways to cope if your balance does wind up in negative territory. Planning ahead for these kinds of money-crunch situations is a wise idea as life is full of unexpected expenses.
Choosing a bank account that covers you for a certain amount of overdrafts and/or one low to no monthly or minimum-balance account fees is another option you may want to explore as part of your money management strategy.
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 3.80% APY on SoFi Checking and Savings.
FAQ
Can I overdraft my savings account at the ATM?
It depends on whether or not you have opted into overdraft coverage. Banks are required to allow account holders to opt into overdraft protection for ATM and debit cards for point-of-sale transactions . If you don’t opt in, you won’t be able to overdraft. Your bank will deny the transaction and you won’t be charged a fee. If you do opt in, the bank will allow the transaction and charge you an overdraft fee, which is typically about $35.
Can you go negative in a savings account?
Yes, you can go negative in a savings account. This might happen if you write a check for more than you have in the savings account, for instance. If the bank allows the transaction to go through, you end up with a negative balance in your savings account. In this case, if you’ve signed up for your bank’s overdraft coverage, you will be charged an overdraft fee, which is typically around $35. You may owe additional fees as well if you don’t put money into the account right away.
About the author
Sarah Li Cain
Sarah Li Cain, AFC is a finance and small business writer with over a decade of experience. Her work has been featured in numerous publications, including Kiplinger, Fortune, CNBC Select, U.S. News & World Report, and Redbook. Read full bio.
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.
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.
3.80% APY
SoFi members with Eligible Direct Deposit activity can earn 3.80% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. 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 during a 30-day Evaluation Period (as defined below).
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 3.80% APY, we encourage you to check your APY Details page the day after your Eligible Direct Deposit arrives. If your APY is not showing as 3.80%, 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 3.80% APY from the date you contact SoFi for the rest of the current 30-day Evaluation Period. You will also be eligible for 3.80% APY 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, 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 members with Eligible Direct Deposit are eligible for other SoFi Plus benefits.
As an alternative to Direct Deposit, SoFi members with Qualifying Deposits can earn 3.80% 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 Eligible 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 an Eligible Direct Deposit or receipt of $5,000 in Qualifying Deposits to your account, you will begin earning 3.80% 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 Eligible 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 Eligible 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 Eligible 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 Eligible Direct Deposit or Qualifying Deposits until SoFi Bank recognizes Eligible Direct Deposit activity or receives $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Eligible Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Eligible Direct Deposit.
Separately, SoFi members who enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days can also earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. For additional details, see the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.
Members without either Eligible Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, or who do not enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days, will earn 1.00% 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 1/24/25. There is no minimum balance requirement. Additional information can be found at http://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.
