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If you’re often surprised (and not in a good way) when you open up your credit card and bank statements and see how much money you spent, you are not alone. In this scenario, there could be a simple solution: a personal cash flow statement.

Creating a personal cash flow statement can give you a clear picture of your monthly cash inflow (money you earn) and your monthly cash outflow (money you spend). Armed with that intel, you can determine if you have a positive or negative net cash flow.

The process is relatively simple. It involves doing some basic math calculations with a month or two worth of bank statements and bills. Once you have your personal financial statement, you’ll know where you stand and likely be better able to budget your money.

What Is a Personal Cash Flow Statement?

“Cash flow” is a term commonly used by businesses to detail the amount of money flowing in and out of a company. Companies can use cash flow statements to determine how well the business is generating income to pay its debts and operating expenses.

Just like the ones used by companies, tracking your own cash flow can provide you with a snapshot of your financial condition.

You might learn, for example, that you have less leftover at the end of each month than you thought or that you are indeed operating at a shortfall.

Once you have the numbers down in black and white, you can then make any needed changes, such as cutting your expenses to save money, increasing income, and making sure that your spending is in line with your goals.

So, how do you set up one of these cash flow statements? You may find a personal cash flow statement template or a personal cash flow statement example online, but what follows will explain how and why to create one.

How to Build a Personal Cash Flow Statement

Here are the steps to take to build a personal cash flow statement.

Listing All Your Sources of Income

A good first step when creating a personal cash flow statement is to get out all of your pay stubs, bank statements, credit card statements, and bills or review them online.

•   Next, list any and all sources of income — the inflow, such as salaries, anything you make from side hustles, interest from savings accounts, income from a rental property, dividends from investments, and capital gains from the sale of financial securities like stocks and bonds.

•   You might want to avoid listing money in accounts that aren’t available for spending. For example, you may not want to list dividends and capital gains from investment accounts if they are being automatically reinvested or those that are part of a retirement account from which you aren’t actively taking withdrawals.

•   Since income can vary from one month to the next, you might choose to tally inflow for the last three or six months in order to come up with an average.

Once you’ve collected and listed all of your income for the month, you can then calculate the total inflow.

Listing All of Your Expenses

Now that you know how much money is coming in each month, you’ll want to use those same statements and bills, as well as any for debts (such as mortgage, auto loan, or student loans) to list how much was spent during the month.

•   Again, if your spending tends to fluctuate quite a bit from month to month you may want to track it for several months and come up with an average.

•   To create a complete picture of how much of your money is flowing out each month, you’ll want to include necessities like food and gas, and also discretionary expenses, such as trips to the nail salon or your monthly streaming services.

•   Remember to include infrequent expenses such as birthday gifts for loved ones, annual insurance premiums, and the like.

•   Once you’ve compiled all of your expenses, you can calculate the total and come up with your total outflow for the month.

Determining Your Net Cash Flow

To calculate your cash flow, all you need to do is subtract your monthly outflow from your monthly inflow. The result is your net cash flow.

•   A positive number means you have a surplus, while a negative means you have a deficit in your budget.

•   A positive cash flow is desirable, of course, since it can provide more flexibility. You can decide how to best use the surplus. There are a variety of options. You could choose to save for an upcoming expense, make additional contributions to your retirement fund, create or add to an emergency fund, or, if your savings are in good shape, consider splurging on something fun.

•   A negative cash flow can signal that you are living a more expensive life than your income can support. Some people refer to this as not living within your means. In the future, maintaining this habit could lead to additional debt.

•   When creating personal cash flow statements, it’s also possible to have net neutral cash flow (all money coming in and going out is fairly equal).

In this case, you may still want to jigger things around if you are not already putting the annual maximum into your retirement fund and/or you don’t have a comfortable emergency cash cushion.

The Difference Between a Personal Cash Flow Statement and a Budget

A personal cash flow statement provides a comprehensive look at what is currently coming in and going out of your bank accounts each month. You might think of a cash flow statement telling you where you are, financially speaking.

Whichever budget method you use, on the other hand, helps you to get where you want to go by giving you a spending plan that is based on your income and expenses. A budget can provide you with some general spending guidelines, such as how much you should spend on groceries, entertainment, and clothing each month so that you don’t exceed your income — and end up with a negative net flow.

Creating a budget can also be a good opportunity to check in with your financial goals.

For example:

•   Are you on track for saving for retirement?

•   Are you interested in tackling the credit card debt that has been spiraling due to high interest rates?

•   Do you want to amp up your emergency fund, separate from your usual checking and savings account?

•   How are you progressing on paying off your student loans?

Whatever your goal, a well-crafted budget could serve as a roadmap to help you get there.

Recommended: 4 Smart Ways to Pay Off Student Loans

Using Your Personal Financial Statement to Create a Simple Budget

Because a cash flow statement provides a comprehensive look at your overall spending habits, it can be a great jumping off point to set up a simple budget.

When you’re ready to create a budget, there are a variety of resources:

•   Break out a pencil and paper or buy a journal for this purpose

•   Use an app that’s part of your bank’s suite of tools

•   Download an app that isn’t connected to your financial institution but offers budgeting services

•   Try out spreadsheet templates and printable worksheets.

A good first step in creating a budget is to organize all of your monthly expenses into categories.

Spending categories typically include necessities, such as rent or mortgage, transportation (like car expenses or public transportation costs), food, cell phone, healthcare/insurance, life insurance, childcare, and any debts (credit cards/loans).

You’ll also need to list non-essential spending, such as cable travel, streaming services, concert and movie tickets, restaurants, clothing, etc.

You may also want to include monthly contributions to a retirement plan and personal savings into the expense category as well.

And, if you don’t have emergency savings in place, put that on the spending list as well, so you can start saving towards that every month. How big an emergency fund do you need? Use an emergency fund calculator, and aim to cover at least three to six months’ of living expenses.

Once you have a sense of your monthly earnings and spending, you may want to see how your numbers line up with general budgeting guidelines. Financial counselors sometimes recommend the 50/30/20 budget rule, which looks like this:

•   50% of money goes towards necessities such as a home, car, cell phone, or utility bills.

•   30% goes towards your wants, such as entertainment and dining out.

•   20% goes towards your savings goals, such as a retirement plan, a downpayment on a home, emergency fund, or investments.

Improving Your Net Cash Flow

If your net cash flow is not where you want it to be or, worse, dipping into negative territory, a budget can help bring these numbers into balance.

The key is to look closely at each one of your spending categories and see if you can find some ways to trim back.

•   One of the easiest ways to change your spending habits can be to cut some nonessential expenditures. If you’re paying for cable but mostly watch streaming services, for example, you could score some real savings by getting rid of that service and its bill.

•   Not taking as many weekend getaways and cooking more often instead of getting takeout could add up to a big difference. If you tend to be a compulsive or impulsive shopper, you might take steps to understand your triggers, change your behavior, and rein in the outflow of money.

•   Living on a budget may also require looking at the bigger picture and finding places for more significant savings. For example, maybe rent eats up 50% of your income, and it’d be better to move to a less costly apartment. Or you might want to consider trading in an expensive car lease for a less pricey or pre-owned model.There may also be opportunities to lower some of your recurring expenses by finding a better deal or negotiating with your service providers.

You may also want to look into any ways you might be able to change the other side of the equation — the inflow of funds.

•   One option could be asking for a raise.

•   Another could be training for a higher-paying field.

•   Or you might find an additional income stream (making more money is a key benefit of a side hustle).

The Takeaway

One of the most important steps towards achieving financial wellness is cash flow management — i.e., making sure that your cash outflow is not exceeding your cash inflow.

Creating a simple cash flow statement can show you exactly where you and your money stand. It can also help you create a budget that can give you greater control over your finances and achieving your goals.

If you need help tracking your spending, banking with SoFi may be a good option for you.

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

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy 3.60% APY on SoFi Checking and Savings with eligible direct deposit.

FAQ

How do you create a personal cash flow statement?

To create a personal cash flow statement, gather information on how much you typically take in (income) after taxes per month and how much your outflow (spending and saving) is. That captures the amount you spend on necessities, like housing and food, as well as wants and debt payments. When you subtract the outflow from the income, you’ll see where your cash flow stands.

What is the importance of a personal cash flow statement?

A personal cash flow statement is an important way to track your personal spending and see where pain points may be. It will also reveal if you are going into debt or if you have surplus funds you can put towards future goals. Also, a personal cash flow statement can be an important factor in establishing your budget.

What is the difference between a personal balance sheet and a cash flow statement?

A personal balance sheet captures your assets (money in the bank and real estate, for instance) and liabilities (your credit card balance and any loans), which allows you to determine your net worth. A cash flow statement, on the other hand, tracks your spending versus your income, to see whether you are operating with a deficit, a surplus, or if you are breaking even.

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Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 11/12/25. 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

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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.

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

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Writing a check to yourself is one way to withdraw money from your bank account or transfer funds from one account to another. While there are other, more high-tech methods for making these transactions, writing a check to yourself is an easy option.

But it’s not the best choice for every situation. Sometimes, it’s more efficient to move funds electronically or visit an ATM to make a withdrawal. Here’s when writing a check to yourself makes sense, and how to do it.

How to Write a Check

If you don’t often use your checkbook, you may be wondering how to write a check. First, be sure to use a pen (that way, the information can’t be erased) and choose blue or black ink. Then, for every check you write, fill in each of the following details:

•  The date

•  Pay to the order of (the person or company the check is for)

•  The amount the check is for in numbers

•  The amount written out

•  Memo (this is optional—you can use it to note what the check is for—or leave it blank)

•  Your signature

Recommended: Ordering Checks – A Complete Guide

How to Write a Check to Yourself

The only difference when you write a check to yourself, versus a check to someone else, is that you put your own name on the “Pay to the order of” line. Then, just like you do for every other check you write, you’ll add the date, the dollar amount written in numbers, the dollar amount written in words, an optional memo, and finally, your signature.

Be sure to record the amount the check is for in the check register that comes with your checks when you order them (you should keep this in your checkbook along with the checks themselves). In the register, write down the date, the check number, the name of the person the check is for and/or what it’s for, and the amount. This will help you balance your checkbook so you know how much money is in your account.

Why Would You Write a Check to Yourself?

Writing a check to yourself is the low-tech way of transferring money from one bank account to another, or withdrawing money from your bank account. Here is when it can make sense to write a check to yourself.

•  Making a transfer. If you’re closing one bank account and opening another, you can move funds by writing a check to yourself. You can also write yourself a check to deposit funds from one account into another at the same bank. Or, if you have accounts at different banks, you can transfer money by writing yourself a check from one bank and depositing it in the other.

•  Getting cash from your bank account. If you want to withdraw money from the bank, you can simply write yourself a check, take it to the teller at the bank, and cash it. Just be sure to endorse the check by signing it on the back.

Examples of When You Would Write a Check to Yourself

If you have money in different bank accounts and need to consolidate your funds in order to make a large purchase, you could write a check to yourself. For example, if you’re remodeling and need to transfer $20,000 from your home equity line of credit (in one institution) to your bank account (in a different institution), you can write a check to yourself to transfer the money.

Recommended: Does Net Worth Include Home Equity

When Writing a Check to Yourself Doesn’t Make Sense

Writing a check to yourself isn’t always the best, most efficient option for transferring funds or obtaining cash. Online banking, electronic transfers, and ATMs are typically faster and easier ways to get transactions done.

Transferring Money Within the Same Bank

If you have two accounts at the same bank and you want to move money from one account to the other, it’s much quicker and more convenient to transfer your money through online banking. Writing yourself a check to do this is a hassle.

Recommended: How Many Bank Accounts Should I Have?

Getting cash out of your account

If you need to withdraw cash from your account, using an ATM can be faster and easier. If you write a check to yourself, you will need to visit the bank and go through a teller in order to cash the check and get your money. Just make sure to use an ATM within your bank’s network to help avoid ATM fees.

Risks and Concerns of Writing a Check to Yourself

When writing a check to yourself, never make the check out to “Cash.” Instead, always put your own name on the “Pay to the order of” line. This helps protect you. Otherwise, if a check is made out to “Cash,” and the check is lost or stolen, anyone can cash it.

Recommended: What Is the Difference Between Transunion and Equifax

Other Ways to Move Your Money

There are several other ways to move money that are more convenient than writing a check to yourself. This includes wire transfers, ACH transfers, electronic funds transfers, and electronic banking.

Wire Transfer

Often, when people use the term “wire transfer,” they’re referring to any electronic transfer of funds, but the technical definition involves an electronic transfer from one bank or credit union to another. To make a wire transfer, you’ll pay a fee, usually between $5 and $50, and need to provide the recipient’s bank account information.

Recommended: What Credit Score is Needed to Buy a Car

ACH or Electronic Fund Transfer

An ACH is an electronic funds transfer across banks and credit unions. If you have direct deposit for your paychecks, for instance, that money is transferred to your bank account through ACH (which stands for Automated Clearing House). You can use ACH to transfer money from an account at one bank to an account at another. The transaction is often free, but check with your bank to make sure.

Electronic Banking

Online banking will allow you to move your money from one account to another within the same bank. All you need to do is log into your online account and use the “transfer” feature.

The Takeaway

Writing a check to yourself is one way to transfer money or obtain cash, but there are many methods for doing these things that are often more convenient, such as online banking or electronic transfers. Exploring all the options can help you decide what makes the most sense for you.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

See exactly how your money comes and goes at a glance.

FAQ

Can you legally write a check to yourself?

Yes, it is legal to write a check to yourself, as long as you’re not writing the check for more money than you have in the bank. It would be illegal to write a check for more funds than you have and then try to cash it.

Can I write a large check to myself?

Yes, you can write a large check to yourself if you have enough funds in your account to cover the amount. Never write checks for more money than you have in your bank account.

Can you write your own check and cash it?

Yes, you can write your own check and cash it at your bank or at any other location that offers this service.

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*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

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

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

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Banking can be a complex thing, but understanding what’s known as the simple deposit multiplier doesn’t have to be. The simple deposit multiplier is the multiple by which a bank can lend out funds based on the reserve requirements. It ensures the bank maintains the minimum amount of money on hand to keep bank operations up and running. It also gives the bank the opportunity to boost the economy.

What Is a Deposit Multiplier?

Also called the deposit expansion multiplier or simple deposit multiplier, a deposit multiplier is the maximum amount of money banks can create based on reserved units. To put it another way, it’s the multiple that banks use to know how much they can lend out vs. money kept on hand (say, in checking accounts) according to the existing reserve requirement. The deposit multiplier is typically a percentage of the amount deposited at a bank.

Why does the deposit multiplier concept matter? It plays a key role in the fractional reserve banking system, or FRB. This system involves the stipulation that banks must keep a certain amount of money on hand in reserves to conduct their day-to-day business. More specifically, the U.S. central bank, the Federal Reserve, mandates that banks hold a certain amount of money, known as required reserves, to make sure there is enough month for withdrawals from depositors. Any excess money that remains after the bank fulfills its daily operations can be loaned to borrowers (say, for mortgages). The amount that can be used for loans is determined by the deposit multiplier.

By accepting deposits and then making loans, banks have the ability to increase and decrease the money supply. When a financial institution lends out money in excess of its required reserves to businesses and consumers, it can amplify the money supply. That’s why the deposit multiplier metric matters; it’s a key way that the Federal Reserve and central banks can control the money supply as part of an overall monetary policy.

Recommended: How Long Does It Take For a Direct Deposit to Go Through?

How Does a Deposit Multiplier Work?

Here’s how a deposit multiplier works: When the account holder puts money in any of the different kinds of deposit accounts offered, the bank holds a percentage of it. This percentage is called the reserve requirement, which is set by the Federal Reserve. It helps ensure that the bank keeps an adequate amount of cash reserves available to meet the needs of withdrawal requests.

Keeping money accessible on demand can be critical. This protects against people trying to withdraw cash in keeping with fund availability rules and finding that their money is unavailable, which could be a deeply problematic and distressing experience.

A deposit multiplier is the multiple that allows banks to lend out money that’s deposited in the bank. This is the maximum amount of money the bank can lend out according to the value of its reserves. It is typically expressed as a percentage. You’ll learn more about that in a moment.

Real Life Examples of a Deposit Multiplier

To understand a deposit multiplier, it’s wise to understand a few basic banking concepts.

•   For banks, deposits are liabilities, because it is money owned by the account holder, and loans are assets for banks, because that money belongs to the financial institution and must be repaid.

•   Banks also have reserves, which are deposits in the bank or in the Federal Reserve. Reserves are cash available to the bank.

◦   There is also an amount the bank must keep on hand, known as required reserves.

◦   Excess reserves is the term used to describe when the bank has more reserves than is required; these funds can in turn be lent out.

Now, if someone makes a $1,000 deposit, the bank’s liabilities and reserves would increase by $1,000. If the required reserve ratio is 10%, that means must keep $100 on hold and available, but the other 90%, or $900, may be lent. This allows the bank to expand the economy and profit.

To see how the simple deposit multiplier works, consider an example in which a deposit of $10,000 was made and the required reserve ratio is 5%, meaning $500 has to stay on hand.

The deposit multiplier formula is: 1 / reserve ratio.

So with a required reserve ratio of 20%, the deposit multiplier is five. That means that for every dollar in the bank’s reserves, the financial institution can boost the money supply by up to $5. If the reserve ratio was 5%, the deposit multiplier would be 20, and the bank could build the money supply by $20 for each dollar held in reserve. As you see, the lower the reserve ratio is, the higher the deposit multiplier is and the more it can lend out.

Recommended: Benefits of Using Mobile Deposit

How Do You Find the Simple Deposit Multiplier?

The simple deposit multiplier is a ratio between bank reserves and bank deposits. It’s important for maintaining the money supply of the economy and the banking system.

As noted above, this figure is calculated by dividing 1 by the required reserve ratio. For example, if the required reserve ratio is 10%, this means the deposit multiplier is 10. For banks, this means that for every $10 deposited, a total of $1 must be kept in reserves, and the bank can increase the money supply by $10 for each dollar it’s holding.

Deposit Multiplier and the Economy

The Federal Reserve, which is the U.S. central bank, uses the deposit multiplier as one of its monetary tools to control the supply of money in the economy. Usually the money that is deposited in a bank is unlikely to stay in the bank. The money that a consumer deposits in a bank is lent out to another consumer in the form of a loan. The deposit multiplier measures this change in checkable deposits as bank reserves change.

Banks are creating money by expanding the amount of reserves into a larger amount of deposits. If the bank decides to keep a small amount of deposits as reserves that means more money is sent to other banks and more deposits are created at these other banks. If a bank decides to keep a larger sum of deposits as reserves, that means less money or new deposits are made in other banks or circulated among consumers.

When money is loaned out to a consumer, at some point that loan will be repaid and deposited back into the banking system. If there is a required reserve ratio of 10%, then 10% of that new deposit will remain in the bank and the rest can be loaned out into the economy. This cycle fuels economic growth, not to mention profit for the bank.

Recommended: How to Deposit Cash in an ATM

Deposit Multiplier vs Money Multiplier

While these two terms sound quite similar and are closely connected, they are not quite interchangeable. Consider the differences between a deposit multiplier vs. money multiplier.

•   The deposit multiplier is the maximum amount of money banks can create by lending funds. Some deposited money must remain on hand according to the required reserve ratio, but the rest can be used to grow the economy as indicated by this figure. The deposit multiplier is calculated as one divided by the reserve ratio.

•   The money multiplier is the increase in the bank’s money supply. It measures the change in money supply created through bank lending and is usually lower than the deposit multiplier since banks don’t lend all of their reserves.

Recommended: Guide to Maxing Out Your 401(k)

The Takeaway

The deposit multiplier is a tool used by financial institutions. It expresses the maximum amount of money a bank can create based on its cash held in reserves. The figure is calculated as one divided by the required reserve ratio; the lower the reserve ratio is, the higher the deposit multiplier is and the more a bank can lend out. The deposit multiplier can help to optimize an economy’s money supply, which is why this metric is used by central banks all over the world.

If you are a personal banking client, you probably aren’t too focused on the deposit multiplier. You likely want convenience, high interest rates, and low fees. If so, check out what SoFi offers.

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.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy 3.60% APY on SoFi Checking and Savings with eligible direct deposit.

FAQ

How do you use a deposit multiplier?

The deposit multiplier is used to determine the amount of money that can be created with the funds in a bank’s money supply.

How are deposit levels calculated?

In banking, the loan-to-deposit ratio (LDR) is calculated by dividing the bank’s total amount of loans but the sum of deposits over a specific time period. Loans are considered assets, by the way, since the money is the bank’s, while deposits are deemed liabilities, since they belong to the account holder.

What is the formula for a simple deposit multiplier?

To find the deposit multiplier, you divide one by the required reserve ratio. So if the reserve ratio is 5%, the deposit multiplier is 20. If the reserve ratio is 10%, the deposit multiplier is 10.

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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 11/12/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

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

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

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

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

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

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Canceling a credit card might seem like a good idea if you’re trying to get debt under control or you want to consolidate your cards. But closing a credit account may do more harm than good and damage your credit standing. Before you take action, here’s what you need to know — and other strategies you may want to consider instead.

Understanding the Impact of Credit Utilization Ratio

In order to understand why canceling a credit card can hurt your credit score, you need to know about something called the credit utilization ratio. This is the ratio of your total credit to your total debt.

Another way to think of it is how much of your available credit you’re using. For instance, if you have two credit cards with a total line of credit of $20,000 and you use $5,000 of that, you have a credit card utilization ratio of 25%. In addition to credit cards, your credit utilization ratio can include things like loans, such as a mortgage, car loan, and personal loan.

Your credit utilization ratio directly affects your credit score. In fact, it accounts for 30% of your FICO score. Your credit utilization ratio is the second-most important factor in your credit score (payment history is number one). Ideally, lenders like to see a person’s credit utilization ratio below 30%.

When you cancel a credit card, you reduce your available credit. This can cause your credit utilization ratio to jump up — especially if you owe money on other credit cards — and can negatively impact your credit score.

Reasons to Cancel a Credit Card

There are several factors that may be motivating you to want to cancel a credit card, including:

•   Too much debt. Perhaps having the card on hand is causing you to overspend and take on even more debt. If canceling the card will help you manage your finances better and get your debt under control, it can be a good option.

•   A high annual fee. If the card’s fee is high and you aren’t taking advantage of any of the perks like travel rewards to offset it, you may want to find a card that’s a better fit.

•   Too many cards. If multiple credit cards are causing you to stress out and miss payments, fewer cards might help lighten the load. (A budget planner app can help you spot upcoming bills and manage bill paying.)

How to Cancel a Credit Card

If, after considering the pros and cons, you’ve decided to go ahead and cancel the credit card, here’s how to do it:

1.    Pay off the remaining balance on the card, or transfer the balance to another credit card.

2.    Contact the credit card company, preferably by phone. Some credit card companies allow customers to cancel online, but most will require a call. Keep in mind the company wants to hold onto customers, which could mean that they will try to entice you with offers or deals. You have the right to cancel at any time.

3.    Consider sending written confirmation to make things official. Send a letter to the credit card company informing them that you have canceled the same credit card account. Post it via certified mail to ensure the company receives the letter with confirmed receipt.

4.    Cut up the card. Shredding or destroying the card helps prevent fraud.

5.    Look at credit reports for changes to your credit score. The canceled account should be reflected in your credit score within several weeks. AnnualCreditReport.com offers a free copy of your credit report once a year.

Keep in mind that you can also track your credit score with a money tracker app. It helps you stay up to date with any changes that affect your score, allows you to connect all your bank accounts, and lets you monitor your spending habits and savings all in one place.

Can Closing a Credit Card Impact Your Credit History?

Closing a credit card can affect the length of your credit history. That’s important because credit history is one of the factors used to help determine your credit score. In general, creditors want to know that you’ve had credit accounts over a period of time, so the longer the relationship, the better.

Recommended: 10 Credit Card Rules You Should Know

How to Downgrade Your Credit Card

If you’re considering canceling your credit card because of high fees or a high interest rate, you might want to downgrade the card instead. By downgrading, you can swap your current credit card for one with a lower fee or lower interest rate.

Downgrading can provide some of the benefits of canceling the card without the negative impact of closing the account.

If downgrading sounds like a good option for you, these strategies can help:

•   Research the credit card issuer. Do they have cards with a low or no annual fee? It may be worth switching to credit card issuers with one of those.

•   Call the credit card company and ask for a downgrade. They may offer to waive the annual fees on your existing card. Or they may downgrade you to a low-interest card with no annual fee.

•   Ask about a partial refund. Some credit card companies will provide a partial refund on the annual fee, depending on when you downgrade. Ask the customer service representative if they can prorate the annual fee or provide any refund.

How to Keep Your Credit Utilization Rate Low

Whether you downgrade a credit card or not, it’s important to improve your credit utilization rate since it counts for 30% of your FICO score. Here’s how to keep yours low.

•   Make more than one credit card payment a month. Making more than two automatic bill payments or one payment per billing cycle can benefit your credit score. That’s because credit card companies report balances towards the end of the billing cycle. Making several payments can reduce your credit utilization ratio when your balance is reported.

•   Keep credit accounts open, if possible. Keeping a card open, even if you rarely use it, increases your credit limit and helps lower your credit utilization rate.

•   Ask for an increase in credit limit. If you have a record of on-time payments, your credit card company may be willing to increase the credit limit for your account. And the more available credit you have, the better your ratio. Call customer service to make the request.

The Takeaway

Canceling a credit card can negatively impact your credit score, so make sure to consider all your options carefully. You can keep the credit account open, which can help with your credit history, and rarely use the card. Or you can downgrade to a card with a lower interest rate and no annual fee. In the end, the decision is yours, but it’s good to know you have choices.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

See exactly how your money comes and goes at a glance.

FAQ

How do I close a credit card without affecting my credit score?

Closing a credit card is likely to have a negative impact on your credit score. Downgrading to a card with a lower interest rate and no annual fee may be a better option.

Is it better to cancel unused credit cards or keep them?

If the credit card has a low interest rate and no annual fee, it can be better for your credit score and your credit history to keep the card.

Does canceling a credit card hurt your credit?

Canceling a credit card can hurt your credit score. However, practicing other good credit habits, like paying your bills on time, can help you gradually get back in good standing.

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Photo credit: iStock/Doucefleur

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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.

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 .

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

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

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Bank transaction deposits are monetary deposits made into transaction accounts, also often known as checking accounts. Transaction deposits allow a person to have ready access to their money held at a depository financial institution, such as a bank or credit union, without delay or advance notice.

They differ from non-transaction deposits, which are deposits made into non-transaction accounts, such as certificates of deposit (CDs). Non-transaction accounts come with restrictions on when or how often you can access your money. Learn more about transaction deposits and their pros and cons here.

What Are Transaction Deposits?

A transaction deposit (sometimes also called a demand deposit) refers to a deposit made into a transaction account that is readily available for use — meaning you can use the money any time for other transactions.

The most common example of a transaction account is a checking account. This type of account allows account holders to make unlimited deposits, withdrawals, payments, and transfers. In other words, you can use the account as often as you want to get cash, make purchases, pay bills, and/or deposit cash at an ATM.

Savings accounts that allow account holders unlimited access are also considered transaction accounts. Typically, however, savings accounts may come with withdrawal and transfer limits (such as a certain number per month). As a result, they are generally considered non-transaction accounts.

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

Understanding Transaction Deposits

Transaction deposits can be made at a branch of the bank, at an ATM, and by transferring funds from another account. If you set up direct deposit with your employer, these deposits also qualify as transaction deposits.

If you want to access a transaction deposit, you can so for in a number of different ways, including:

•   Withdrawing money at a branch or ATM

•   Transferring the money to another account

•   Writing a check

•   Using auto-pay

•   Making a wire payment

Transaction Deposits vs Non-Transaction Deposits

To better understand transaction deposits, it helps to know the difference between the two main types of deposit accounts: transaction accounts and non-transaction accounts.

Transaction accounts allow account holders easy access to their money. These accounts may earn interest, but typically they do not.

Non-transaction accounts, such as most savings accounts, money market accounts, and certificates of deposit (CDs) typically earn interest, providing a return on the account holder’s investment. However, deposits made into a non-transaction account (called non-transaction deposits) are not as fully accessible as transaction deposits. Account holders may be limited or restricted from accessing all or some of the money, or they may need to make a request for a withdrawal.

For example, if you open a CD, your money is locked up for a certain period of time. If you want to access the money before the CD matures, you will typically pay a penalty. With many savings and money market accounts, the bank will impose limitations on the number of transactions you can make each month. If you exceed that limit, you may be charged withdrawal fees.

Here’s a look at transaction accounts vs non-transaction accounts:

Transaction Accounts	Non-Transaction Accounts
Unlimited number of transfers or payments to third parties	There may be a limit on the number of withdrawals and transfers of money that are allowed per statement period
Typically not interest-bearing	Typically interest-bearing
Can make an unlimited number of transfers between your own accounts at the same institution	May have penalties for withdrawing too much money or too many times
Payable on demand	May require seven days notice to withdraw funds
No maturity period	May be subject to a maturity period
Examples include checking accounts	Examples include money market deposit accounts, certificates of deposit, and savings accounts

Real-Life Examples of Transaction Deposits

A checking account is an example of a transaction account where transaction deposits are made. The key feature of a transaction account, and the deposits made into it, is that the money is liquid, or readily available. There are no requirements for leaving the money for a set amount of time like there are with a time (or term) deposit account, such as a CD.

Here are some common examples of transaction deposits:

•   Direct deposits from your employer into your account

•   Check or cash deposits made at your bank

•   Mobile deposits

•   An electronic funds transfer (EFT) made into your account

•   Payments from third parties

•   Refunds from vendors

Restrictions of Transaction Deposits

There are some instances, however, where a bank may impose some restrictions or a waiting period on certain deposits made to transaction accounts. This could happen if you deposit a large check that requires verification, or if the account is new and the account holder doesn’t yet have an established history. Once the holding period ends, the funds are fully accessible.

Non-transaction deposits, however, come with far more restrictions. In the past,
The Federal Reserve’s Regulation D restricted withdrawals from money market accounts and savings accounts to six per month. If you went over this limit, the bank would charge you a fee. If you consistently went over this limit, they could convert the account to a regular (non-interest-bearing) account.

However, the Federal Reserve suspended Regulation D in 2020. Banks can now set their own restrictions on savings account transactions, and they can vary from one bank to another. In other words, some financial institutions still limit savings accounts to those six transactions; check with your bank or read the fine print on your account agreement.

Recommended: How Long Does the Direct Deposit Transaction Take?

Advantages of Transaction Deposits

There are a number of advantages that come with transaction deposits. These include:

•   Money is readily available

•   No maturity period

•   No eligibility restrictions

•   No limit on the number of deposits, withdrawals, or transfers the account holder can make

•   No early withdrawal penalties

•   Sometimes interest-bearing

Disadvantages of Transaction Deposits

The main disadvantage of transaction deposits is that the money being deposited will generally earn no, or only a small amount of, interest.

The Takeaway

A transaction deposit is a deposit made to a transaction account, such as a checking account. This type of account is ideal for everyday banking, since you can generally put money in and take money out whenever you like.

Non-transaction deposits are the opposite — they are funds put into non-transaction accounts, which include savings accounts, money market accounts, and CDs. With a non-transaction account, you will face some restrictions in when and how often you can access your money. However, the advantage of non-transaction deposits is that this money will typically earn more interest than a transaction deposit will.

If you’re interested in getting the benefits of both types of accounts in one, consider what SoFi offers.

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.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy 3.60% APY on SoFi Checking and Savings with eligible direct deposit.

FAQ

What is a bank deposit transaction?

A bank deposit transaction is a deposit into a transactional bank account, such as a checking account. It includes direct deposits, transfers, and deposits made at a bank or ATM.

Is a deposit considered a transaction?

Yes, a deposit is considered a transaction. Any money moving into and out of your account is considered a transaction.

What banks offer transaction deposits?

Any bank that offers a checking account is a bank that offers transaction deposits.

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Photo credit: iStock/Prostock-Studio

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 11/12/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

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

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

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

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

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

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

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