As you plan those summer barbecues, pool days or dinners, Discover’s bonus categories for the third quarter of 2024 can be a big help.
From July 1 through Sept. 30, 2024, holders of eligible cards like the Discover it® Cash Back and Discover it® Student Cash Back can earn 5% back at grocery stores and Walmart on up to $1,500 in combined spending for the quarter. (Activation is required; other purchases will earn 1% back.)
Here’s what you need to know to make the most of these spending categories.
Discover bonus rewards categories for 2024
Q1 (Jan. 1–March 31)
Restaurants.
Drugstores.
Q2 (April 1–June 30)
Gas stations/EV charging stations.
Home improvement stores.
Public transit.
Q3 (July 1–Sept. 30)
Grocery stores.
Q4 (Oct. 1–Dec. 31)
TBD (In 2023: Amazon, Target).
A closer look at Discover’s Q3 bonus categories
For the third quarter of 2024, here’s what will qualify:
Grocery stores
Eligible grocery store purchases that earn the bonus rate include those made at supermarkets, meat lockers, bakeries, small grocery stores and grocery delivery services. Purchases that won’t qualify for this rate include those made at Target, convenience stores, wholesale clubs and discount stores.
Walmart
During this quarter, you can also earn the bonus rate on purchases made at Walmart, whether in store or online, at Walmart discount stores, Walmart Supercenter stores, Walmart Neighborhood Market stores, curbside pickup, Walmart+ and Walmart gas stations. Purchases using Walmart Pay with your eligible Discover card will also qualify for the bonus rewards.
Purchases made through an individual merchant or a standalone store within physical Walmart locations might not be eligible, however. Other purchases that won’t qualify include Sam’s Club purchases, purchases made through affiliates of Walmart.com, and purchases made outside the U.S. Terms apply.
Maximizing Discover’s Q3 bonus categories for 2024
You can make the most of the bonus categories above by checking off the items on this list:
Activate the bonus categories by logging into your Discover account.
Use your Discover card whenever you shop at the grocery store or at Walmart in-store or online.
Keep track of the amount spent to know whether you’ve reached the $1,500 spending limit. An automated tracker available when you log into your Discover account can help.
Considering the Discover it® Cash Back?
The Discover it® Cash Back card is ideal if you can keep track of the quarterly changing bonus categories, remember to activate them and pay off your credit card bill in full every month. Otherwise, the card’s interest rate will outweigh the value of its rewards.
The card’s features include:
Annual fee:$0.
APR:0% intro APR for 15 months on purchases and balance transfers, and then the ongoing APR of 18.24%-28.24% Variable APR.
Sign-up bonus: INTRO OFFER: Unlimited Cashback Match for all new cardmembers – only from Discover. Discover will automatically match all the cash back you’ve earned at the end of your first year! There’s no minimum spending or maximum rewards. You could turn $150 cash back into $300.
As you plan those summer barbecues, pool days or dinners, Discover’s bonus categories for the third quarter of 2024 can be a big help.
From July 1 through Sept. 30, 2024, holders of eligible cards like the Discover it® Cash Back and Discover it® Student Cash Back can earn 5% back at grocery stores and Walmart on up to $1,500 in combined spending for the quarter. (Activation is required; other purchases will earn 1% back.)
Here’s what you need to know to make the most of these spending categories.
Discover bonus rewards categories for 2024
Q1 (Jan. 1–March 31)
Restaurants.
Drugstores.
Q2 (April 1–June 30)
Gas stations/EV charging stations.
Home improvement stores.
Public transit.
Q3 (July 1–Sept. 30)
Grocery stores.
Q4 (Oct. 1–Dec. 31)
TBD (In 2023: Amazon, Target).
A closer look at Discover’s Q3 bonus categories
For the third quarter of 2024, here’s what will qualify:
Grocery stores
Eligible grocery store purchases that earn the bonus rate include those made at supermarkets, meat lockers, bakeries, small grocery stores and grocery delivery services. Purchases that won’t qualify for this rate include those made at Target, convenience stores, wholesale clubs and discount stores.
Walmart
During this quarter, you can also earn the bonus rate on purchases made at Walmart, whether in store or online, at Walmart discount stores, Walmart Supercenter stores, Walmart Neighborhood Market stores, curbside pickup, Walmart+ and Walmart gas stations. Purchases using Walmart Pay with your eligible Discover card will also qualify for the bonus rewards.
Purchases made through an individual merchant or a standalone store within physical Walmart locations might not be eligible, however. Other purchases that won’t qualify include Sam’s Club purchases, purchases made through affiliates of Walmart.com, and purchases made outside the U.S. Terms apply.
Maximizing Discover’s Q3 bonus categories for 2024
You can make the most of the bonus categories above by checking off the items on this list:
Activate the bonus categories by logging into your Discover account.
Use your Discover card whenever you shop at the grocery store or at Walmart in-store or online.
Keep track of the amount spent to know whether you’ve reached the $1,500 spending limit. An automated tracker available when you log into your Discover account can help.
Considering the Discover it® Cash Back?
The Discover it® Cash Back card is ideal if you can keep track of the quarterly changing bonus categories, remember to activate them and pay off your credit card bill in full every month. Otherwise, the card’s interest rate will outweigh the value of its rewards.
The card’s features include:
Annual fee:$0.
APR:0% intro APR for 15 months on purchases and balance transfers, and then the ongoing APR of 18.24%-28.24% Variable APR.
Sign-up bonus: INTRO OFFER: Unlimited Cashback Match for all new cardmembers – only from Discover. Discover will automatically match all the cash back you’ve earned at the end of your first year! There’s no minimum spending or maximum rewards. You could turn $150 cash back into $300.
This post may contain affiliate links, which helps us to continue providing relevant content and we receive a small commission at no cost to you. As an Amazon Associate, I earn from qualifying purchases. Please read the full disclosure here.
Welcome to the 30 Day Money Challenge!
Today, you will learn how to make your money work for you. You don’t have to be a millionaire before knowing these things, but it’s important for everyone who wants financial stability.
Remember these keywords: saving and investing? This is where they come into play for long term success.
It’s not too late to make the right financial decisions.
But, finances are complicated and intimidating for most people so it can be hard to get started.
The 30 Day Money Challenge is here to help with that.
This 30 day financial challenge will help you create a strategy that can save, spend less, and make more by the end of this month!
Are you ready to dig into this month-long money challenge?
What is the 30 Day Money Challenge?
A money challenge is a plan for how to make your finances work better.
It can be as simple as spending less or eating out less, or something more complicated like saving up for retirement or buying a house.
During this month’s timeframe, you will dig into all areas of your finances to make sure you are on track to reach your money goals.
If you do not have financial goals, then we will make sure you do at the end of this money challenge.
I’ve seen a lot of spending challenges out there that are basically just a saving money chart telling you how much money to save each day to save $1000 or $500 in one month, but they don’t tell you how to save the money. That is where the rubber meets the road and this challenge will motivate you to improve your money habits.
Overall, you will learn more about your finances than you did previously.
Why a Money Challenge is Important
A 30 day challenge is a great way to get yourself motivated and focused on saving money and improving your money management.
The goal is not enough, you need the why behind it in order to see your savings grow.
This can be as simple as:
– Setting up a direct deposit from your paycheck to an account you control and only spending what’s in that account.
– Spending less on impulse buys.
– Cutting back on luxury items to save money.
– Living more in cash and less in credit card debt.
You can also take knowledge in knowing the number of our readers who have taken the challenge to improve their money management skills.
3 Steps to Start the Money Challenge
The 30 Day Money Challenge is a simple process that starts with 3 steps.
Your reward for participating in the challenge is pretty appealing, but the process can be hard for some.
So, know these steps before you start the challenge.
1. Pick a Time
While there is no good time to start, you need to find a time when you have the highest probability of success.
Starting the money challenge during the holidays will leave you defeated. Maybe starting as a New Year’s Resolution. Or during a quieter time throughout the year.
You need to find the “right” time because you will have to dedicate at least 10-30 minutes per day. However, the longer you put it off, the less likely you are to start.
2. Be Prepared
More than likely, you will be ripping off the band-aid on some old money failures and defeats. This is common.
You have to be mentally prepared to overcome these negative feelings towards money in order to find that breakthrough moment.
3. Accountability
Find someone to keep you accountable during the challenge.
There will be points when you want to accept defeat and run back to your old money ways. It’s great to create a support system for managing money wisely.
If those old money habits didn’t serve you well before, then how will they serve you moving forward.
You need to keep your eye on the prize!
Thirty Days of Money Challenges
A 30-day money challenge is a popular type of personal finance experiment in which participants take a pledge to review their finances and overcome any obstacles that are preventing them from long term financial stability.
The goal is to teach people how quickly they can change the trajectory of their personal finances before they snowball into a serious money problem.
Day 1 – Get Organized
If you don’t have an understanding of how many accounts you have, credit cards you have open, or debt payments that are due, then you must get your personal finances organized.
Start here to learn how to organize personal finances.
Day 2 – Understand your Income
If you do not know how much do I make a year, then you must figure that out first.
It is impossible to manage money if you do not know how much money is coming in.
Also, consider all types of income sources – earned, passive or investment.
Day 3 – Understand your Expenses
Understand where your paycheck is going. When you understand how much of your money is going to things like rent, utilities, and mortgage, you can make better decisions about spending.
This is not the time for “this-is-where-I-hope-my-spending-goes;” this is the true reality of how you spend money.
Day 4 – Pay Yourself First
This is a must for long-term success. Every time you get paid, you need to pay yourself first. Put a percentage of your paycheck into savings each month before anything else is spent on non-essential items.
We suggest starting with at least 5% of your income. Even better, you want to start with 20% of your income.
You must cut your fun spending until you can save money first.
When saving becomes an automatic habit, start investing through high yield accounts like IRAs and 401(K)s.
Day 5 – Automate your Emergency Savings
Set up a transfer to put $50 into your Emergency Fund every time you get paid.
Learn how much you need in your emergency fund. Remember, the goal is never to use your emergency fund, but you always want one – just in case!
Day 6 – Create Money Goals
Figure out what your financial goals are and how much they will cost over time, then come up with a strategy to achieve them.
You need to make a plan to reach your money goals.
If you skip this step, you may be lucky and still reach your goals. But, you can find better prosperity but writing out those money goals and maybe even using a vision board.
Learn how to create smart financial goals.
Day 7 – Budget Time
Crazy! I know. Most people would think that creating a budget would need to be first. But, it isn’t. You need to figure out days 1-6 first before you dig into budgeting.
Begin tracking your expenses on paper or online as soon as possible. Here are the best budgeting apps available.
The goal with the budget is to focus on saving first, then your expenses. you must spend less than you make.
Day 8 – Make More Money
Come up with ways to generate more income. Period. You need to make your money work for you.
You need to learn how to make your income work for you by creating streams of income outside of your primary work or “earned” income.
Theoretically, if multiple streams of revenue exist at your full-time job, you can work fewer hours than necessary.
Ways to Make Money:
Day 9 – Enough with Debt
Debt will hold you back. Period.
You need to recognize that paying off your debt is the best thing you can do for your finances. However, during this 30 day financial challenge, it is not the time to focus on paying off debt.
Calculate the total amount of debt (except mortgage).
Put down getting out of debt as one of your money goals and the timeframe to make it happen.
For now, don’t take on more debt, and make sure you’re paying the minimum on your credit card balance.
Day 10 – Understand Investing
Investing is a way of giving your money the opportunity to work for you. In other words, you are using what you have now in order to make more out of what you have in the future.
This is the first step to earning investment income that will fund your lifestyle.
Typically, most people associate investing in the stock market. Many people invest with their 401ks or IRAs. However, you can invest your personal income as well.
What if you could earn a return on that opportunity cost? For example, what if you invested the $10 in your wallet and it grew to be $20?
Learn how to start investing.
Trade and Travel 2.0
Learn to trade stocks with confidence.
Whether you want to:
Retire in peace without financial anxiety
Pay your bills without taking on a side hustle
Quit your 9-5 and do what you love
Or just make more than your current income….
Making $1,000 every.single.day is NOT a pie-in-the-sky goal.
It’s been done over and over again, and the 30,000 students that Teri has helped to be financially independent and fulfill their financial dreams are my witnesses…
Day 11 – Control Excess Spending
Every time you spend money, it is an opportunity cost to your future self. You are trading away your future self’s money to buy something today.
Is that what you want?
More than likely, no.
Learn how to drastically cut expenses.
Day 12 – Autopay your Bills
Consider setting up an autopay feature for your bills. It can help you avoid late fees and will have a steadier flow of money coming in.
This will help you to make sure you have the cash flow available to meet your expenses.
Day 13 – Avoid Fees
One of the best ways to save money is by avoiding fees.
If you have a credit card, consider switching to one with no annual fee or an introductory offer that expires after one year.
Check your bank and credit card statements for any fees you may not be aware of.
If there is a fee, call the company and negotiate to have it removed or reduced.
Day 14 – Automate Retirement Contributions
You should automatically make a certain percentage of your salary go to a 401k or other savings account, and the other percentage goes to your checking account for spending money.
This is something your human resources department can help you set up.
Day 15 – Increase your Retirement Contributions
Now, that you have automated your retirement contribution, you want to increase you much your contribution each year until you are maxed out by IRS limits.
Start to increase your retirement contributions by 1%.
Set a five-year goal to fully max your retirement contributions!
Halfway Point!!
You’re halfway through the 30 day money challenge!
Keep up the good work and keep reaching for your goals.
You’ve made it this far, so just imagine what you’ll be able to do in another month of working hard towards saving more money.
Day 16 – Communication
Don’t think money has to be a taboo topic. In fact, you need to be comfortable talking about money.
The key is to be on the same page with key family members about where money should go. This is something that we struggled with our marriage and had to overcome. Thankfully, we did and we made way more progress than previously.
Day 17: Invest in yourself
I know you’re probably tired of hearing about investing in yourself, but it’s important. Investing means putting money into something that will make more money back. You might not think this applies to you, but it really can! You might not have a big budget for investing in stocks or mutual funds right now, so let’s talk about something you do spend money on every day: you.
You only learn by growing.
Day 18 – Start Reading About Personal FInance
This isn’t something that you do once or twice. Make it a goal to read books on money or personal finances each month.
Importantly, make sure you are reading books, regardless of what aspect they look at money. It is never too late to pick up new tricks or ideas.
Plus learning from others’ money stories is powerful.
Day 19 – Free Fun
Participating in only free activities for 30 days, and refusing to spend a single penny, we created a guide to make that happen for you.
101+ Things to Do with No Money
After writing that post, we discovered this is one of the best money saving ideas out there. This guide not only teaches you how to save money but also teaches about where you want to spend money and the importance of living a purposeful life.
Day 20 – Review Insurance
You need to make sure you are properly covered with insurance as well as not paying too much money for your policies.
There are all of the types of insurance you need to review:
This is something you should do once a year.
Day 21 – Waste Less Food
You need to learn to save money by wasting less food.
This doesn’t mean you have to make homemade meals every night of the week! The goal is not to throw food away – that is hard earned cash going right down the trash.
Ways to Save Money on Groceries:
Day 22 – Buy Second Hand
Consider second-hand stores and consignment sales as options for buying used items. Thrift stores are also great to save money on clothes and other household items.
The same is true for buying cars, baby equipment, kids clothes, etc. Plus you protect our world.
Day 23 – Save Money
So, this day is all about saving money and I think that it’s the most important one of them all because if you’re not saving your money, then what are you doing with it? You’re throwing it away.
So today, I want to talk about two different types of saving money – physical and mental. The first one is all about physically saving your money. This is the easiest one because it doesn’t require any effort on your part to do so, but it’s also very important as well.
The second type of saving money is mental saving. This is all about saving your money because you know that something better will come along soon and it gives you hope for the future!
So, I think these two types of savings are both really important.
Day 24 – Give Back
This is the time to give back to others, donate money to charities, and put small contributions into charity.
By hoarding money, you are not learning the principles of helping others just like you have been helped along the way.
Day 25 – Renegoite Interest Rates
Right now, we are not starting to pay off debt. We are looking for ways to save on higher interest payments.
Make calls to renegotiate your interest rates on your debt. If the credit card company says no, then look at a zero interest transfer.
Just no more debt.
Day 26 – Avoid Scarity Mindset
You have to believe in yourself that you are capable of achieving great things and that includes success money.
However, we get caught in this trap of hoarding materialistic items in order to make up for the dollars in our bank account or money that was wasted in buying them.
If you don’t believe how poverty mentality overwhelms your life, then read this story of reclaiming your home with decluttering.
Day 27 – Cut Out What you Don’t Need
If you are not using something, sell it or give it away to someone who can use it more than you do!
You’ll save money and make room in your budget for the things that matter.
We learned a lot when we started to own less stuff.
Day 28 – Prepare for a No Spend Challenge
If you have not been able to keep your spending in check, this is an excellent opportunity for you to try out a no spend challenge once this challenge finishes.
A no spend challenge will help you to review your budget and see what areas of spending need more attention in order to increase savings or pay down debt.
Also, it will help you focus on what area are important to spend money.
Day 29 – Reward Yourself
This is the biggest lesson I learned when paying off debt and trying to increase our savings percentage. I became unable to spend money. I would feel guilty about spending money.
That is not the type of life you want. You must be comfortable spending money (especially if you are a thrifty person).
Pick rewards to match your smart financial goals. Keep motivated with those rewards.
Day 30 – Stay on Track
Proper money management does not end just because the end of the 30 day challenge is over. This is a lifelong skill to master and perfect.
Keep focused by not going over budget limits and being honest about where you really stand financially today as opposed to where you want it to be in the future.
You can stay on track if you have a deep desire to continue.
30 Day Money Saving Challenge
This one is just about saving money. Period.
Each day, you save money to reach your goal.
For many people, the 30 day money saving challenge will make sure you are on track with your goals and objectives.
At the minimum, you should be able to save $500 in 30 days. But, you need to decide what you want to save in a month.
The challenge is open to everyone, so this might be the perfect opportunity for you!
What is the 30 Day Money saving Challenge?
The 30 day money saving challenge is saving a set amount of money during the month.
Keep in mind, not everyone will be able to save this much in 30 days and that’s perfectly okay.
You need to make it work with your budget.
Another option for the 30 Day Money Challenge is committing to give up one or more expenses for the whole month. For instance, pick ten things that cost you money and give them up for 30 days.
How to get started with the 30 day savings challenge
The 30 day savings challenge is a simple but effective way to get started saving money.
You can choose any of these methods:
Take the amount you want to save and divide by 30. That is how much to save daily.
Determine the amount to save and take that immediately when you are paid.
It is easy to go in order or skip around depending on what amount you want to save each day.
Keep change hidden in jars and watch it add up over time, then put the money away every day and see where they rank at the end of the month.
Give up a certain expense and save that money.
Try a modified version of the 100 day challenge.
You can find plenty of money saving challenge printable or PDF in our resource library.
Want more easy money saving challenges?
Are you in for this 30 Day Money Reset Challenge?
This is only a 30 day money challenge because it’s a short period of time to gain a win. That is what you need to keep up the motivation as well as have a strong kickstart to your finances.
In order to build wealth through their finances, these are 30 smart moves that require no time on some days.
Don’t lose momentum. If you miss a day, then jump back into the challenge the next day.
The key to success for 2021 is to take control of your finances.
Photo Credit:
www.rakuten.com
The Shopping Trick to Save Hundreds of Dollars
Personally, I love to shop online from the convenience of my own home and have packages delivered to my house. Plus you can get paid to shop online!! The process is super simple.
Just head here to get an Rakuten/Ebates account, click on the retailer you are shopping online, and then complete your checkout process as normal.
Already a Rakuten / Ebtaes member? Make sure you have the Extension Buttonfor automatic savings!
Photo Credit:
www.asktrim.com
Perfect for the person who hates to hassle with canceling subscriptions and checking spending. Trim is a virtual personal assistant that constantly works to save users money.
Trim adds value in such ways as canceling old subscriptions, setting spending alerts, checking how much users spent on ride-sharing apps the previous month, and automatically fighting fees.
Photo Credit:
ibotta.com
Ibotta can be used for grocery stores, drugstores or online shopping. Once you accrue $20 in your account, you can transfer it to PayPal or venmo or buy gift cards to selected retailers.
Just for signing up, they will give you a bonus when you use use this link. Ibotta rocks at bonus categories and offers. This is where your cash back can really add up fast.
Photo Credit:
checkout51.com
Checkout 51 can be used for grocery stores or drugstores. Their offers are valid each week from Thursday-Wednesday. With new offers released each Thursday.
One of my favorite offers is the “Pick your own offer” – it is a selection of 5 fruits of veggies to redeem for extra cents cash back. Once your account balance is over $20, they will mail you a check.
Know someone else that needs this, too? Then, please share!!
Did the post resonate with you?
More importantly, did I answer the questions you have about this topic? Let me know in the comments if I can help in some other way!
Your comments are not just welcomed; they’re an integral part of our community. Let’s continue the conversation and explore how these ideas align with your journey towards Money Bliss.
Checks seem a pretty mundane bit of banking, but when they say “Do not convert to ACH,” that means the payer doesn’t want the funds transferred electronically. Rather, they are requesting manual processing.
Here, learn more about the implications of these five little words on a check.
ACH System 101
First, understand what ACH is. It stands for Automated Clearing House, which is an electronic system that transfers funds throughout the United States. This network allows individuals and businesses to move money from one financial institution to another, quickly and securely.
Every time you set up automatic bill pay or receive your paycheck by direct deposit or write an eCheck, that’s ACH at work. Apps such as PayPal and Venmo also use the ACH network to send and receive money.
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How Does ACH Work?
ACH transfers are initiated by either making a withdrawal or deposit into an account. You can send money to another account on a one-time basis — such as through an ACH debit to a utilities company or transferring money to a friend for your share of a restaurant meal — or opt into recurring payments. For example, some companies allow you to make automatic payments, such as for subscription services. In either case, you give permission for the receiver to initiate a withdrawal from your account.
You can also get money via an ACH credit. This happens when people receive a direct deposit of their paycheck or Social Security.
Once you or someone else initiates a transfer, the request will be processed first by your financial institution, usually by the next business day. You may be able to expedite the request, as well as schedule a transfer for a future date.
Typically, ACH transfers are faster than other types of transactions, though a potential downside is that it’s only available for transfers within the U.S. (That’s one of the distinctions between an ACH vs. wire transfer, incidentally; the latter has global reach.)
What Is Check Conversion?
Check conversion refers to the process of transforming a check payment into an electronic payment. This usually happens at one of these three points:
• Point of Purchase (POP), meaning when a purchase is made, say, at a store
• Accounts Receivable Conversion (ARC), when a business receives a check by mail and then processes it electronically
• Back Office Conversion (BOC), or when a check is processed electronically after acceptance at, say, the office of a retail location
What Does Conversion to ACH Mean?
ACH conversion describes the fact that a paper check will be converted to a payment that’s processed through the ACH network. In other words, even though a paper check was written and used as payment, it will become an electronic ACH transfer.
Recommended: How to Cash a Check with No Fees
Why Might a Check Be Converted to ACH?
The main reason why a check may be converted is to save time and money when processing payments. Plus, converting a check payment to ACH could be more efficient, as it can help financial institutions detect potential bank fraud earlier, make fewer mistakes, and even result in fewer returned payments. The service of ACH transfers is typically free to consumers.
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Can a Check Be Converted to ACH?
A check can be converted to ACH in many cases (unless it says “do not convert to ACH”) to help it move swiftly and securely; there’s no check to get lost or be forged, for instance.
How the conversion usually happens: When the check gets deposited in a checking account, the payment details are captured from the check. Then, the check itself will be stored securely by the financial institution — unless you have the physical check and are making a mobile deposit. If the check is converted in person, then the original check will be voided and given back to the payer.
If the check was converted for ACH, it will typically appear on a bank statement as a direct payment (or withdrawal) in the same section as ATM withdrawals or other forms of electronic payments. It could also appear as a check payment — some banks include a scanned image of the check or include the payment details.
Recommended: How Much are the Average ATM Fees?
What Does It Mean When a Check Says ‘Do Not Convert to ACH’?
When a check says “do not convert to ACH,” it means that the payer does not want to make a payment electronically. Instead, the payment needs to be processed manually from one financial institution to another through the check collection system.
More specifically, it means the financial institution will contact the other financial institution to request the funds, which are then delivered through a local clearinghouse exchange or other form organization like the Federal Reserve Bank.
It’s rare to receive a check that says this on it, but if you do, there’s not much to be done to alter the payer’s request.
What Is the Benefit to the Drawee if a Check Says ‘Do Not Convert to ACH’?
Checks that say “Do not convert to ACH” may sometimes be printed when a payer is issuing multiple checks; for example, if a class action suit is being paid out. In this case, perhaps the check issuer does not want the much faster electronic processing of their checks. Perhaps it suits them to have a slower payment process.
What Is the Difference Between ACH and a Check?
The difference between ACH and check payments is the network by which they’re processed. ACH payments are processed electronically through the ACH network, whereas non-converted paper checks are processed manually. In many cases, ACH transfers are processed faster than paper checks, since you may have to wait for a check to clear.
The Takeaway
When it comes to getting paid, converting a check to ACH is most likely the fastest, safest way. Unfortunately, there’s not much you can do if the check you receive says “Do not convert to ACH,” however rare they may be. You’ll probably need to deposit it and allow the extra time required for it to become available cash.
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FAQ
Can an ACH payment be declined?
Yes, an ACH payment may be declined or rejected for a few reasons, the most common one being that the payer doesn’t have enough funds in their account for the transfer. Other reasons include the account was closed by the time the transfer took place, the funds have been frozen, or the payer has stopped the payment request.
What does “ineligible for conversion” mean on a check?
If a check says “ineligible for conversion,” it means the check can’t be converted to an ACH payment. This may be due to the paper the check was printed on. The payee needs to either cash or deposit the actual check at a local branch.
Why would a bank reject a check?
There are several reasons a bank would reject a check, including:
• You don’t have an account at the bank where you want to cash the check
• You don’t have proper identification to show to the bank
• The amount may be too large for the financial institution to process
• The check is void (for example, the check is old and the payment is no longer valid)
• The signature on the check doesn’t match what the bank has on file
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.
SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.
As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.60% 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 Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.
The rule of thumb has been that your rent should account for no more than 30% of your gross income, but that percentage isn’t right for everyone. Figuring out your “magic number” can require a little thought.
Individual circumstances matter: Maybe you have a heavy monthly student loan payment while your best friend has none. That means they can likely afford a higher rent than you can at the moment. Also, economic and social forces are shaping how big a bite rent takes out of a paycheck. According to the most recent U.S. Census Bureau data, almost one-third of Americans are spending more than 30% of their income on housing costs, an increase of almost 5 million households vs. three years earlier. That 30% just may not be realistic anymore.
Keep reading for detailed information on how much to spend on rent and how to budget for it.
How Much You Should Spend Depends on Your Situation
Whether you rent or own, housing is typically the largest expense the average U.S. consumer must pay for every month.
Determining how much you can afford is really a matter of monthly budgeting and striking a balance. You can look at your take-home pay and then consider how much you are spending on all of your monthly expenses.
You’ll want to account for the necessities, like housing, utilities, health care, debt payments, food, and clothing, as well as some discretionary expenses, such as entertainment and travel. Ideally, you will also be saving and have some wiggle room when paying your bills to cover unexpected expenses that can crop up.
As noted above, each person’s situation will be unique. One person might have a high salary but steep debt payments (student and car loans and a credit card balance to contend with). Another might earn less but be debt-free and therefore able to allocate more toward rent.
Where and how you live also makes a difference. In America’s biggest cities, it’s common for renters to pay a larger share of their income for housing. For example, one recent Moody’s Analytics report found that 57% of those in the New York metro area pay more than 30% of their income toward rent and 36.6% of those in Miami are in the same (very pricey) boat. When compared to the person who lives in, say, a small city in the Midwest or South, there’s likely a major price gap.
💡 Quick Tip: Did you know online banking can help you get paid sooner? Feel the magic of payday up to two days earlier when you set up direct deposit with SoFi.
Figuring Out How Much You Should Spend on Rent
There are several ways to come up with solid guidelines for how much to pay in rent based on your particular situation.
Use a Budgeting Rule
You’ve already learned about the rule of thumb — one that’s been around for decades — which puts the ideal housing costs at 30% of your after-tax income, no matter how much you earn.
That rather broad guideline dates back to the Brooke Amendment, which capped public housing rents at 25% of an individual’s income in 1969. Congress raised the cap to 30% in 1981, and eventually it became the go-to guide for determining “cost burden” — the amount of income a family could spend and still have enough left for other expenses — even those who aren’t in low-income households.
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Another perhaps more useful approach is the 50/30/20 budget method, which was made popular by Sen. Elizabeth Warren’s book All Your Worth: The Ultimate Lifetime Money Plan.
The 50/30/20 budgeting method suggests dividing your after-tax income into three main categories, putting 50% toward needs (essential costs like housing, transportation, groceries, utilities, etc.), 30% toward wants, and 20% toward savings.
Following those guidelines, your rent would qualify as a need. But it remains up to you to decide how much of that 50% you want to — or feel you have to — spend on housing. If you live in a major city or tech hub, your rent may be high enough that you have to make adjustments to other essentials in your budget and/or borrow from other categories (say, cutting back on those wants, such as dinners out).
Factor in Costs
Another way to look at your rent budget is to remember that your housing costs are more than just your monthly payment to the landlord. If you only do your financial projections using that single expense, you could wind up with a too tight budget.
It can be valuable to consider all the facets of your rent: There may be a security deposit, moving costs if you are heading to a new place, utilities like electricity and wifi, as well as the cost of furniture if you are a first-time renter. Remember to add in any parking costs related to a rental, as well as renter’s insurance.
Develop a budget that acknowledges these expenses. Will you have to dip into savings for that security deposit? Will some expenses have to go on your credit card? Making these calculations can give you a better bead on your housing costs and may lead you to a new and improved budget.
Look at Other Ways to Save
There are other moves you can make to free up funds for rent if your monthly costs are running high. A few ideas:
• Consider getting a roommate. That can cut your housing costs dramatically and can be a good option if you feel you are living paycheck to paycheck.
• Look for less expensive locations. These may just be a few blocks or a zip code away from your ideal area, but they can make a major difference in your cost of living. For instance, if you can live 20 minutes further away from your workplace, you might reap significant savings on your rent.
• Check with providers about monthly charges and interest rates. Sometimes, you may get lucky and find that your wireless provider can lower your bill or your credit card can take your annual percentage rate, or APR, down a notch.
• Look for other ways to economize on non-rent expenses. Join a warehouse club and split the bounty with a friend or two to save on food costs. Minimize the number of streaming services you have. Cut back on rideshares and take public transportation; check out free music and other cultural offerings in your town.
💡 Quick Tip: When you feel the urge to buy something that isn’t in your budget, try the 30-day rule. Make a note of the item in your calendar for 30 days into the future. When the date rolls around, there’s a good chance the “gotta have it” feeling will have subsided.
The Takeaway
One common guideline says that 30% of your income (before taxes) can be allotted to rent. But everyone’s financial situation is different. Some people live in cities that are pricey; other people have student and car loans that must be paid. By using budget guidelines, you can determine the right figure for your circumstances.
Having the right banking partner may also help you budget better.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.60% APY on SoFi Checking and Savings.
FAQ
Is 30% on rent unrealistic? Is it too much?
Spending 30% of your gross income is a popular guideline, but only you can determine if it works for you. For some people, 30% will be too much, given their other expenses. For others, such as those in major cities, 30% may be a desirably low number.
How much of my salary should I spend on rent?
The usual guideline is to spend no more than 30% of your pretax salary on rent, but some people may find that they must spend more than that. Currently, about one third of all renters spend more than that figure.
Am I overspending on rent?
Some ways to tell that you are overspending on rent would be if you are living paycheck to paycheck, if you are not able to pay down your debts, and if you are not able to save money. If you are in this situation, it can be wise to take a holistic look at your budget, including rent, and see where you can find a better balance, which might include lowering your rent.
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.
SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.
As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.60% 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 Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.
Interest rates remain at a 23-year-high, and they’re likely to stay that way for longer than anticipated.
The Federal Reserve met earlier this week and, unlike some earlier expectations, decided to hold rates steady. While the Fed typically meets every 6.5 weeks (8 times a year), they’re expected to maintain this stance for several upcoming meetings.
This shift comes as a surprise. Back in January, analysts and investors predicted a decrease in rates by now. Discussions even centered on whether the drop would happen in Q2 vs. Q3.
Nobody is talking about that anymore.
Inflation hasn’t cooled as much as hoped. As of March, the consumer price index stood at 3.5 percent, well above the Fed’s target 2 percent. (April’s CPI data will become available on May 15).
The Fed released a statement on Wednesday citing “a lack of further progress toward the Committee’s two percent inflation objective” in their decision to hold rates steady.
Until inflation drops, interest rates are likely to stay high.
High interest rates are keeping both homeowners and renters in a bind.
Homeowners Handcuffs vs. Tenant Trifecta
The rapid rise in interest rates is creating a logjam in the housing market.
The national average 30-year fixed rate on a mortgage is 7.75 percent, according to USA Today.
Around 70 percent of homeowners have mortgage interest rates that are more than 3 percentage points below the current rate.
This creates a golden handcuffs scenario — a “lock-in effect” due to the financial penalty that comes from selling.
While this might sound like a ‘champagne problem’ — a problem of abundance — the reality is that many homeowners are reluctant to change jobs, relocate for work or family, or make other moves that would be beneficial to their lives.
The result? A 57 percent plunge in existing home sales last year, according to a report from the Federal Housing Finance Agency.
This drop in supply is one reason why nationwide home prices rose 5 percent last year.
Rising home prices makes life tougher for renters, who feel increasingly shut out of the housing market.
Any renter who aspires to own a home faces a tough trifecta: high interest rates, high home prices, and low inventory.
It’s the opposite side of the coin. Both renters and homeowners face a problem that stems from the same source: a constrained housing market.
Househack. Buy a duplex, triplex, or 4-plex, which will offset some of the high housing costs you face.
If you live in an area that lacks multiunits, buy a single-family home and retrofit a portion of it into an autonomous dwelling. Convert the basement or garage into a separate unit. Build an accessory dwelling unit (ADU), which in some regions is called a casita, in-law suite or granny flat.
This holds a dual benefit: you contribute to the solution (creating more supply), while also collecting income to offset your housing costs.
This email won’t cover everything, but a few days ago, I did a YouTube livestream in which I answered a question from a VIP List subscriber who wants to househack. This person calculated that their out-of-pocket housing costs would come to $300 per month. They asked for feedback. Here’s what I said. [Starts at 8 min, 15 seconds]
If you’re a homeowner feeling trapped:
Feeling trapped in your home but the desire to move is strong? Let’s break it down.
First, how urgent is the move? Is it a non-negotiable career or family situation? (These are big reasons to move). Or is it more about wanting a bigger space? (This can potentially wait.)
If moving is crucial, consider becoming an accidental landlord. Here’s the idea:
Hold your current home and rent it out.
Find a rental place in your new city as you save for a downpayment on your next home. (Bonus: reduced transaction costs; higher likelihood of buying after rates decline, which eliminates the cost and hassle of a refi).
Don’t sweat squeezing every last dollar out of your accidental rental. This isn’t a dedicated investment property; avoid the “comparison trap” if you chat with experienced rental investors.
Focus on finding a good tenant who takes care of the place. The rental income should primarily help cover your costs, not maximize your profits.
The profit-maximizing properties are bought with that intention. This is a holding, not an acquisition.
Ramp and Brex are both financial technology companies that aim to help business owners track and manage company spending with software tools and financial products, including corporate credit cards.
Business owners can issue unlimited virtual and physical credit cards with both Brex and Ramp. Then, they can limit spending on those individual cards, create budgets, automatically categorize expenses and prompt users to upload receipts.
The key differences? Brex’s eligibility criteria focus on venture-backed startups, enterprise companies and businesses with annual revenue in the millions. It’s best for businesses that fall into those buckets and want a linked Brex business account for banking.
Ramp serves a broader group of small businesses, but they’ll have to do their banking elsewhere.
Looking for a business credit card?
See our overall favorites, or choose your business type to find the best options for you.
See Options
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Ramp vs. Brex: Comparison at a glance
Business entities that can qualify
Corporations, LLCs, limited partnerships and nonprofits.
Corporations, LLCs and limited partnerships. Nonprofits may be approved on a case-by-case basis.
Bank balance and revenue requirements to qualify
At least $75,000 in cash.
For daily repayments: More than $1 million per year in revenue, more than 50 employees or equity investment.
For monthly repayments: Accelerator or venture funding, at least $100,000 in angel investment and at least $50,000 in cash. Enterprise companies need at least $400,000 per month in revenue.
Personal guarantee
Not required.
Not required.
Annual fee
Credit card rewards
1.5% cash back on all spending.
7 points per dollar spent on rideshares and taxis.
4 points per dollar on travel booked through the Brex portal.
3 points per dollar on restaurants.
2 points per dollar on software.
1 point per dollar on all other purchases.
Rewards rates may vary for certain customers.
Customer support
Phone support available daily from 7 a.m. to 10 p.m. ET. Support request form available.
Live chat and phone available 24/7.
Do you have less than $50,000 cash on hand? Look at the BILL Divvy corporate card instead. That card works similarly to Ramp and Brex — it’s linked to expense management software, you’ll have to pay off your balance at the end of each statement period and it offers some rewards on your spending — but you may be able to qualify with as little as $20,000 in the bank.
Ramp card pros and cons
Pros
No annual fee or foreign transaction fees.
Simple, straightforward rewards.
No personal guarantee or credit check.
Direct integrations with popular tools and card-level spending controls and alerts.
Cons
Balance must be paid in full each month.
Not available to sole proprietors or unincorporated businesses.
Where Ramp wins against Brex
Available to a wider variety of entrepreneurs
Ramp is available to most incorporated or registered companies, provided they have at least $75,000 in the bank. While that still leaves out a large number of business owners — the majority of entrepreneurs in the U.S. are sole proprietors — it’s much more inclusive then Brex, which requires venture or angel investment or annual revenue in the millions.
Flat-rate cash back
Flat-rate cash-back business credit cards offer two key advantages: You don’t have to worry about making purchases through a specific portal to maximize rewards, and you’ll get money back on all your spending, regardless of whether it falls into certain bonus categories. Ramp’s rewards structure beats Brex’s in terms of simplicity, especially if your business doesn’t spend much on travel.
Brex card pros and cons
Pros
No annual fee or foreign transaction fees.
New cardholder bonus offer.
Bonus categories with high rewards rates.
No personal guarantee.
Cons
Complicated rewards structure.
High capital requirement for approval.
Daily repayment may be required.
Not available to most small businesses.
Where Brex wins against Ramp
Cash management account included
Alongside its business credit card and spending management software, customers get access to the Brex business account. This is a business cash management account that offers no monthly fee, unlimited transactions and a high annual percentage yield (APY) on cash invested in money market funds (uninvested cash doesn’t earn interest).
All these features make Brex a good choice for startups with venture investment sitting in the bank. Expanded Federal Deposit Insurance Corp. (FDIC) insurance protects up to $1 million in uninvested cash, and you can earn returns on the rest.
Rewards on travel spending
If your business spends significant amounts on travel and hospitality expenses and you’re willing to book flights and hotels through Brex’s portal, then Brex is likely to offer much more lucrative rewards than Ramp. Its rewards rates are up there with traditional business travel credit cards — including up to 3x points on restaurants, 4x on travel portal purchases and 7x on rideshares.
Traditional business credit cards vs. Ramp and Brex
In some instances, corporate cards like Ramp and Brex won’t make sense for your business. Instead, you should consider a traditional business credit card if:
Your business is a sole proprietorship. Corporate credit cards aren’t available to sole proprietors.
Your business doesn’t meet Ramp and Brex’s minimum account balance requirements. Traditional business credit cards focus on your personal credit history — not your bank account balance — when evaluating your application for a card.
You want the option to pay off large purchases over several months. Corporate credit cards don’t let you carry a balance from one statement period to the next, and some may require you to make payments as often as every day.
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Annual fee
$0
Annual fee
$150
Annual fee
$0
Regular APR
18.49%-24.49% Variable APR
Intro APR
0% intro APR on Purchases for 12 months
Intro APR
N/A
Intro APR
0% intro APR on purchases for 12 months from the date of account opening
Recommended credit score
690850good – excellent
Recommended credit score
720850excellent
Recommended credit score
690850good – excellent
Ramp vs. Brex: Which one is right for your business?
For most small-business owners, Ramp is more likely to be a fit simply because it’s easier to qualify for. The card’s flat-rate cash back offers simple rewards on all your business spending. Plus, you’ll have access to powerful software that you can use to monitor and control expenses across the company.
If your business is a venture-backed startup, however, Brex is worth a look. That’s especially true if your team frequently travels for business, since you’ll be eligible for extra-high rewards rates when you use the Brex card on travel bookings, restaurants and rideshares. You’ll be supported by similar expense management software, too.
An irrevocable letter of credit (or ILOC) is a written agreement between a buyer (often an importer) and a bank. As part of the agreement, the bank agrees to pay the seller (typically an exporter) as soon as certain conditions of the transaction are met. These letters help reduce a seller’s concern that an unknown buyer won’t pay for the goods they receive. It also helps eliminate a buyer’s concern that an unknown seller won’t send the goods the buyer has paid for.
Irrevocable letters of credit are often found in international trade, though they can be used in other types of financial arrangements to ensure that a seller will be paid, even if the buyer fails to uphold their end of the bargain.
Key Points
• An irrevocable letter of credit is a written agreement between a bank and a buyer to guarantee payment, ensuring that the seller will be paid even if the buyer fails to fulfill their obligations.
• Irrevocable letters of credit cannot be canceled or modified in any way without the explicit agreement of all parties involved.
• Irrevocable letters of credit are commonly used in international transactions but can be used in other situations as well.
• Alternatives to irrevocable letters of credit include trade credit insurance and standard letters of credit, which offer different levels of flexibility and protection.
What Is an Irrevocable Letter of Credit?
Simply defined, an irrevocable letter of credit represents an agreement between a bank and a buyer involved in a financial transaction. The bank guarantees payment will be made to the seller according to the terms of the agreement. Since the letter is irrevocable, that means it cannot be changed without the consent and agreement of all parties involved.
Irrevocable letters of credit can also be referred to as standby letters of credit. Once an irrevocable letter of credit is issued, all parties are contractually bound by it. This means that even if the buyer in a transaction doesn’t pay, the bank is obligated to make payment to the seller to satisfy the agreement.
Having an irrevocable letter of credit in place is a form of risk management. The seller is guaranteed payment from the bank, which can help to reduce concerns about the buyer failing to pay. And it ensures that the seller will follow through on their obligations by providing whatever is being purchased through the agreement. In simpler terms, a standby letter of credit or irrevocable letter of credit is a sign of good faith on the part of everyone involved in a transaction. 💡 Quick Tip: Banish bank fees. Open a new bank account with SoFi and you’ll pay no overdraft, minimum balance, or any monthly fees.
How Does an Irrevocable Letter of Credit Work?
An irrevocable letter of credit establishes a contractual agreement between a buyer, a seller, and their respective banks. It effectively creates a safeguard for both the buyer and the seller, in that:
• Buyers are not required to forward payment until the seller provides the goods or services that have been purchased.
• Sellers can collect payment for goods and services, as long as the conditions outlined in the letter of credit are met.
The bank issuing the letter of credit acts as a go-between for both sides, guaranteeing payment to the seller even if the buyer doesn’t pay. Assuming the buyer does fulfill their obligations, they would then make payment back to the bank. In a sense, this allows the buyer to borrow from the bank without formally establishing credit in the form of a loan or credit line. (Check with your financial institution to learn what fees may be involved.)
Before an irrevocable letter of credit is issued, the bank will first verify the buyer’s creditworthiness. Assuming the bank is reassured that the buyer will, in fact, repay what’s owed to complete the purchase, it will then establish the irrevocable letter of credit to facilitate the transaction between the buyer and seller. Irrevocable letters of credit are communicated and sent through the SWIFT banking system.
Recommended: How Do Banks Make Money?
Irrevocable Letter of Credit Specifications
The exact details included in an irrevocable letter of credit can depend on the situation in which it’s being used. The conditions that are set for the completion of the transaction will also matter. But generally, you can expect an irrevocable letter of credit to include:
• Buyer’s name and banking information (that is, their bank account number and other details)
• Seller’s name and banking information
• Name of the intermediary bank issuing the letter of credit
• Amount of credit that’s being issued
• Date that the letter of credit is issued and the date it will expire
An irrevocable letter of credit will also detail the conditions that must be met by both the buyer and seller in order for the contract to be valid. For example, the seller may need to provide written verification that the goods or services referenced in the agreement have been provided before payment can be issued. The letter of credit must be signed by an authorized bank representative. It may need to be printed on bank letterhead to be valid.
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Do I Need an Irrevocable Letter of Credit?
You may need an irrevocable letter of credit if you’re doing business with someone in a foreign country. You may also require one if you are conducting a transaction with a new company or individual (one with which you don’t yet have an established relationship).
Irrevocable letters of credit can help to mitigate some of the risk that goes along with international transactions. These letters ensure that if you’re the seller, you get paid for any products or services you’re providing. They also protect you if you’re the buyer, promising that products or services are delivered to you.
An irrevocable letter of credit could also come in handy if you’re still working on building credit for your business and you’re the buyer in a transaction. The bank will pay the money to the seller; you’ll then repay the bank. Payment may be required in a lump sum from your business bank account or another source. Or the bank may also offer the option of repaying it in installments over time. Repaying your obligation could help to raise your business’s creditworthiness in the bank’s eyes. This may make it easier to take out other loans or lines of credit later. 💡 Quick Tip: Most savings accounts only earn a fraction of a percentage in interest. Not at SoFi. Our high-yield savings account can help you make meaningful progress towards your financial goals.
Alternatives to Irrevocable Letters of Credit
An irrevocable letter of credit is not the only way to do business when engaging in international transactions. You may also consider trade credit insurance or another type of letter of credit instead.
Trade Credit Insurance
Trade credit insurance, also referred to as accounts receivable insurance or AR insurance, is used to insure businesses against financial losses resulting from unpaid debts. You can use trade credit insurance to cover all transactions or limit them to ones where you believe there may be a heightened risk of loss, such as transactions involving foreign businesses.
A trade credit insurance policy protects your business in the event that the other party to a financial agreement defaults. It can insulate your accounts receivable against losses if an unpaid account turns into a bad debt. Purchasing trade credit insurance may be an easier way to manage risk for your business overall, as it’s less involved than an irrevocable letter of credit.
Recommended: Business Loan vs Personal Loan: Which is Right for You?
Letters of Credit
A letter of credit guarantees payment from the buyer’s bank to the seller’s bank in a financial transaction. Like an irrevocable letter of credit, it establishes certain conditions that must be met in order for the transaction to be completed. But unlike an irrevocable letter of credit, a standard letter of credit can be revoked or modified.
You might opt for this kind of letter of credit if you’re doing business with someone you don’t know and you want reassurance that the transaction will be completed smoothly. A regular letter of credit may also be preferable if you’d like the option to modify or cancel the agreement.
The Takeaway
An irrevocable letter of credit is something you may need to use from time to time if you run a business and regularly deal with international transactions. It adds a layer of protection to buying and selling, as a bank is saying it will cover the transaction. An ILOC, as it’s sometimes known, can provide reassurance when working with a new business or establishing your company overseas. The letter cannot be changed, so you’re getting solid peace of mind.
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FAQ
What is the difference between a letter of credit and an irrevocable letter of credit?
A letter of credit and irrevocable letter of credit are largely the same, in terms of what they’re designed to and in what situations they can be used. The main difference is that unless a letter of credit specifies that it is irrevocable, it can be changed or modified by the parties involved.
What is the cost of an irrevocable letter of credit?
You generally need to pay a transaction fee for an irrevocable letter of credit. The fee is typically a small percentage of the transaction amount. The rate will vary from bank to bank.
Does an irrevocable letter of credit expire?
Yes, an irrevocable letter of credit will typically state the date by which the seller must submit the necessary paperwork in order to receive payment.
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Want to make extra money? Here are 21 ways to get paid to answer questions from home. Making extra money has become easier than ever, and answering questions online is a flexible way to earn cash. There are websites and apps where you can share what you know about different topics to make money. It’s…
Want to make extra money? Here are 21 ways to get paid to answer questions from home.
Making extra money has become easier than ever, and answering questions online is a flexible way to earn cash.
There are websites and apps where you can share what you know about different topics to make money. It’s a convenient way to make some extra cash on the side, and you can do it whenever it fits into your schedule.
Plus, you get to answer all kinds of interesting questions, from easy surveys to giving expert advice.
I have been getting paid to answer questions for years, through many of the ways listed below, so I know that these are real!
21 Ways To Get Paid To Answer Questions
Below are 21 ways to get paid to answer questions:
1. JustAnswer
Are you good at fixing cars or know why cats behave the way that they do? If you have knowledge in a specific area, JustAnswer might be your route to earning extra cash. On JustAnswer, individuals and professionals like you get paid to share their expertise and help others with their questions on your own schedule.
On JustAnswer, there are different types of experts like mechanics, doctors, lawyers, veterinarians, home experts, appraisers, consultants, computer and tech experts, and more. They have many categories with questions that need to be answered.
When someone has a question, they can go to JustAnswer and pay a fee. Then, JustAnswer finds an expert who knows about the topic to answer their question (these are typically detailed answers with insight).
JustAnswer says that if you’re qualified and answer questions online, your earning potential could be between $2,000 and $7,000 every month.
To become an expert on JustAnswer, you apply online. In this application process, they check your credentials to make sure you’re qualified as well as do a background check. Once approved, the JustAnswer team gives you a quick meeting to show you how to use the platform. It usually takes about a week to get verified after you apply.
You can get paid through direct deposit, PayPal, or Venmo.
2. User Interviews
At User Interviews, you can make between $50 and $100 an hour simply by participating in market research studies.
Big companies such as Macy’s, Home Depot, Spotify, Trip Advisor, Pinterest, and Amazon use User Interviews to hear what people think about their new products, apps, and websites.
You don’t just fill out surveys; these studies involve interacting with interviewers. They’ll ask questions, and your honest feedback can influence products and services.
Every month, User Interviews launches over 2,000 new studies. Last year, they paid over 87,000 participants.
I did a user interview and earned $400 for just one hour of work. It was easy – all done online with a video call. They wanted my thoughts on a new feature for a website.
Please click here to learn more about User Interviews.
3. Become a blogger
Starting a blog can be a fun way to share what you know and make money. Blogging means writing articles, or “blog posts” that get put on a website. You can write about lots of topics, like travel, food, or helping others with your expert advice.
When you blog, you can make money such as by:
Ads – You can put ads on your site. When people visit your blog and see or click the ads, you get paid.
Affiliate marketing – This is when you talk about products and give a referral link. When someone buys the product using your link, you earn a commission.
Selling products – Create things like ebooks or courses. When people buy them, you make money.
I started Making Sense of Cents in 2011. Since then, it’s helped me make over $5,000,000. I started it just to share my money journey, without even knowing that websites could make money.
And, I get paid to answer questions all the time! Many of the articles that I write have been inspired by questions that I have personally been asked by my readers. Readers will send me questions via email every day, and many times I will turn these questions into a new blog post.
You can learn more about starting a blog at How To Start A Blog FREE Course. Over 80,000 people have taken this course already. Join for free, and I’ll teach you what you need to know from setting up your blog to making money and getting readers.
There are other ways similar to this that you can get paid to answer questions too, such as by starting a YouTube channel.
4. Swagbucks
Swagbucks is a well-known rewards site where you earn money for doing surveys and other tasks. It began in 2008, and every day they give out 7,000 gift cards to their members. Yes, each day!
I’ve used Swagbucks to get Amazon gift cards and PayPal cash without much work. I’ve earned over 110 gift cards from them over the years.
When I logged into Swagbucks, I had 26 surveys to choose from. Each one took less than an hour and paid less than $10. For instance, one asked about my dining preferences, like how I find new places to eat and what kinds of food I like when I go out.
Another positive of Swagbucks is that payouts are easy to get and have a low minimum threshold.
Please click here to learn more about Swagbucks.
5. Freecash
Freecash is an online platform where you can earn extra cash. It teams up with businesses that need consumers to check out their products.
You sign up and do tasks like trying out apps, playing fun games, or answering surveys. Many times, you will be asked to answer questions and give your review on an app.
The amount you earn with Freecash varies. If you spend some time on it every day, you might make around $10 daily. Some users spend more time and report earning hundreds monthly, with a few reaching a thousand or more each month as well.
Click here to sign up for Freecash.
6. American Consumer Opinion
American Consumer Opinion is a free paid online survey company I really like. They pay you for each survey you do. You can make between $1 and $50 per survey, depending on how long it is.
American Consumer Opinion has paid over $30,146,855 to people who take surveys, with over 20 million surveys completed. They’re one of the most popular survey sites online.
You can sign up for American Consumer Opinion here.
7. InboxDollars
InboxDollars is a website where you can earn money by doing things like taking surveys, playing games, watching videos, shopping online, and more.
Most surveys on InboxDollars pay between $0.50 and $5.00 and take 3 to 25 minutes. If you meet certain criteria, you could even earn $10, $20, or more per survey.
By signing up through my link, you will receive a free $5 bonus! Sign up for InboxDollars here.
8. Survey Junkie
Survey Junkie is a platform where you can make money by sharing your opinion. If you take three surveys every day, you can earn up to $40 a month. It’s a simple way to add some extra cash to your wallet just by answering questions.
To make the most out of Survey Junkie, act fast when new surveys come out. Surveys have limited spots and can fill up quickly. Fill in your surveys honestly to avoid disqualification. Plus, by taking a quick tour of the site, you can snag some extra points.
Please click here to sign up for Survey Junkie.
9. Branded Surveys
Earning extra cash with Branded Surveys is both easy and rewarding. When you sign up, which is totally free, you can start taking surveys that pay you between $0.50 and $5.00 each.
Branded Surveys is a free survey company where you can earn cash and gift cards like Amazon and iTunes. They have over 2 million members and have paid out over $24,000,000 to their members. If you join today, you’ll get a free 100-point sign-up bonus.
There are many different payment options as well, such as gift cards and PayPal cash.
You can sign up for Branded Surveys here.
10. Prime Opinion
Prime Opinion is a survey platform that lets you make money by sharing your thoughts in online surveys. It’s easy to use and rewards you with PayPal cash or gift cards for your opinions, all without leaving home.
When I logged in recently, I had over 40 different available surveys that I could take, ranging from just a few minutes to around an hour.
There are many payout options too, such as Visa cards, PayPal cash, and gift cards.
Please click here to join Prime Opinion and get up to a $5 free bonus.
11. Five Surveys
Five Surveys is a paid online survey site that is easy to use, and you can get paid to answer questions online. Once you complete five surveys, you can claim $5. So, you get paid $1 per survey no matter how short or long it is, as long as you complete it.
Once you’ve earned, withdrawing your money from Five Surveys is easy and you can pick from multiple methods to receive your funds, whether you prefer direct payment or redeeming rewards like gift cards for popular retailers.
Please click here to sign up for Five Surveys.
12. Chegg
Have you ever thought about making money while helping others with their homework?
Chegg is an option you might want to consider. Chegg is a platform where students ask for help on their schoolwork, and experts like you provide answers.
The payment on Chegg can vary. They have a system where you earn more based on the number of questions you answer.
13. HelpOwl
HelpOwl is a site where you can earn points for helping others with their questions.
You can get 1,000 points for your first accepted answer. For any answers after that, you can get 100 points. Plus, each time your answer is marked as helpful, you can get an extra 10 points. Manuals get you even more points (but are much more detailed).
Your points can be redeemed for Amazon and Walmart gift cards.
14. PrestoExperts
PrestoExperts is a site where you can share your expertise and get paid for helping others. It doesn’t matter where you are, as you can answer questions from your computer or phone.
If you are knowledgeable about topics like law, health, or even tutoring, you could be in demand. There are over 600 different categories that questions are asked about, so there is probably a topic that you can answer.
15. Studypool
Studypool is an online platform where you can earn money by helping students with their questions. If you’re an expert in a particular subject, you can make cash by giving students the answers and explanations they need.
Once you’re approved, you can start answering questions. You decide how much your help is worth and can set your own prices.
Tutors at Studypool get paid for each question they answer. But, the site does keep a commission. This commission can be between 15% and 30%, depending on how active you are on the platform.
16. BestMark
BestMark is a top mystery shopping company that I have personally used.
This is my favorite mystery shopping company, and it’s the one I’ve used for all my mystery shopping. I’ve done over 50 mystery shops with them, and I have been paid to answer many questions through their site.
BestMark has mystery shopping jobs at places like restaurants, beauty stores, clothing stores, electronic stores (like Best Buy), car dealerships, movie theaters, retail stores, phone calls (for example, where you call the store to evaluate their customer service over the phone), entertainment attractions (like go-kart tracks and theme parks), and banks.
Businesses use mystery shopping to check and improve their customer service and products. They hire mystery shoppers to act like regular customers, visit their places, and give detailed feedback. Your job is to observe, interact, and share your thoughts on the entire experience.
17. Premium.Chat
If you have a website or social media account with followers, then Premium.Chat gives you a way to earn money by sharing your expertise through texting. Whether you’re a coach, tutor, entertainer, social media influencer, model, teacher, or any kind of advisor, this platform may work for you.
You can earn money by text chatting and charging per minute (from $1.00 to $5.99) or up to $50 for a single chat. You can also get paid for video calls.
The platform manages billing and payments, so you can just focus on chatting. You’ll receive payments via direct deposit or PayPal on the 10th of each month for the previous month’s chats.
18. BetterHelp therapist
BetterHelp is a top online therapy platform where you can offer text therapy and schedule video sessions and make a full-time income.
There are over 33,000 therapists on this platform, and they are always looking for more therapists.
As a BetterHelp therapist, you can earn around $100,000 per year for working 40 hours a week. You also get a monthly health insurance stipend of $450 to $650, bonuses for high performance, and other benefits. They ask for at least 3 years of experience in therapy for adults, couples, or teens.
19. Maven
Maven is a site where you can earn money by sharing your expertise. If you’re someone with a wealth of knowledge in a specific field, Maven can be your platform to make money by answering questions.
Maven is an online course platform where you can create a course that answers questions. There are courses on all different kinds of subjects on Maven, such as AI, design, engineering, marketing, business, leadership, and more.
20. Weegy
Weegy is a question-and-answer site where anyone can ask a question and earn money by answering questions anywhere, anytime and from your desktop computer, tablet, or smartphone.
With Weegy, you can earn around 20 cents for each question you answer, on average. The amount may vary based on how accurate and detailed your answer is.
21. Online tutor
An online tutor is someone who helps another person learn more about a specific subject, such as math, grammar, science, physics, geography, and more.
As a tutor, you could spend 30 minutes teaching a lesson, a few minutes answering questions online, or having a one-on-one video lesson with a student.
You may get paid to help answer questions as a tutor for high school students, college students, or even elementary students. Many people need tutors!
I recommend reading 11 Best Places To Find Online Tutoring Jobs (Make $100+ an hour) to learn more.
Frequently Asked Questions
Below are answers to common questions about how to get paid to answer questions.
Can I get paid for answering questions?
Yes, you can get paid for answering questions. Websites like JustAnswer pay experts from different fields to answer users’ questions. If you’re knowledgeable in a specific area, you could earn money by helping others. There are other ways to get paid to answer questions as well, such as by creating an online course or starting a blog.
How much do you make on JustAnswer?
On JustAnswer, your earnings can vary widely based on your area of expertise and the complexity of questions you’re answering. The potential pay ranges from $5 to $35 per question, but it greatly depends on how much time and effort you invest.
Which app pays for answering questions?
Swagbucks is an app that rewards you for answering questions and completing surveys. By answering daily polls and trivia, you can accumulate points, which can then be converted into gift cards or cash.
What trivia app pays real money?
Swagbucks has trivia games that can pay real money. There are also other apps made for trivia, where you can earn cash by correctly answering questions on different topics.
Does Quora pay you to answer questions?
Quora doesn’t pay for questions and answers directly, but they do have a program called the Quora Partner Program. If you’re eligible and contribute high-quality content, you can earn money through it.
How To Get Paid To Answer Questions
I hope you enjoyed this article on how to get paid to answer questions.
If you like helping others or sharing what you know, you can earn money for it. Some are a side hustle, and others are a full-time job or business.
Depending on the website or app you use, you might get paid directly, earn points that you can turn into cash or gift cards, or even receive tips. Each place that pays you to answer questions has its own rules and topics, so you can pick the ones that interest you most and match your skills.
I have been earning a full-time income for years by answering questions for others, and I really enjoy it. From mystery shopping to surveys, focus groups, blogging, and more, I have done many of the ways to get paid to answer questions on the list above.
Are you interested in learning how to get paid to answer questions?
When you open an individual retirement account (IRA) or 401(k), you can generally choose from a variety of different types of investments, such as stocks, bonds, options, real estate, and more. You may also be able to put some of the money in a money market account, where it will typically earn a higher annual percentage yield (APY) than in a traditional savings account yet still remain liquid.
While you might choose to keep most of your retirement savings in potentially higher-return investments, it may make sense to keep some of your retirement funds in a money market account, since it is a relatively low-risk place to store cash. Even if the return may be lower than other investments, it’s predictable.
Another reason to have some of your retirement money in a money market account is to serve as a holding place as you sell investments or transfer money between investments.
Unlike a regular money market account, a money market account that is offered as a component of a retirement account is subject to the benefits and restrictions of those accounts. Here’s what else you need to know about retirement accounts that offer a money market component.
What Is a Money Market Account That Can Be Used for Retirement?
While there is no such thing as a “retirement money market account,” some retirement accounts allow you to keep some of your money in a money market within the account. The money market account (MMA) could be within a traditional, rollover, or Roth IRA, a 401(k), or other retirement account, which means those funds are governed by the rules of that account.
If the MMA is a component of a traditional IRA, that means you can contribute pre-tax dollars (up to certain limits), your money can grow tax deferred, and you won’t be able to withdraw funds before age 59 ½ without paying taxes and penalties.
Money held in the money market component is liquid. This is usually where money is held when you first transfer money into your retirement account, or when you sell other investments in your account. You can use the funds in the money market to purchase investments within the retirement account.
Recommended: The Different Between an Investment Portfolio and a Savings Account
What Is a Money Market Fund?
Bear in mind an important distinction: A money market fund, which is technically a type of mutual fund, is different from a money market account. A money market fund is an investment that holds short-term securities (and is not insured by the Federal Deposit Insurance Corporation, or FDIC). For example, these funds may hold government bonds, municipal bonds, corporate bonds, cash and cash equivalents.
A money market account is essentially a type of high-yield savings account and it’s FDIC insured up to $250,000.
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How Does a Money Market Within Your IRA Work?
If you are starting a retirement fund that has a money market component to it, you’ll want to make sure that you understand how these money market accounts work. One major way they differ from regular money market accounts is that they are governed by a retirement plan agreement.
This can place some limits on what you can do with the money. Typically, that will mean that you can’t withdraw the money until you have reached a certain age. But one advantage is that the money in the account will grow tax-free or tax-deferred (depending on what type of retirement account it is in).
For example, a money market account in a Roth IRA would follow different rules than money in a traditional IRA.
• You can deduct contributions to a traditional IRA, but a Roth IRA is funded with after-tax money.
• You can’t withdraw money from a traditional IRA until you’re 59 ½, except under special circumstances.
• Because contributions to a Roth are post tax, you can withdraw your contributions at any time (but not the earnings).
Advantages of a Money Market Account Held Within a Retirement Account
• Since these accounts are held at a bank, they are insured by the FDIC up to $250,000. By contrast, money held in a brokerage account is not FDIC-insured.
• The money market component can be used to store proceeds of the sales of stocks, bonds, or other investments.
• Many money market accounts offer the ability to write checks against the account (just keep in mind that withdrawals are subject to restrictions).
Disadvantages of a Money Market Account Held Within a Retirement Account
• Money market accounts offer a relatively low rate of return compared to what you might be able to earn in the market over time.
• Opening this type of money market account requires opening a retirement account.
• You may not be able to withdraw money until retirement age without paying a penalty.
Money Market Account Within a Retirement Account vs Traditional Money Market Account
The biggest difference between a money market account that is a component of a retirement account vs. a traditional money market account is where they are held. Unlike a regular money market account, the money market component is held inside a retirement account, such as a 401(k) or IRA account.
While you can generally access money in a traditional money market account at any time, early withdrawal from a money market that is part of a retirement account can trigger taxes and penalties.
Recommended: What is an IRA and How Does it Work?
What Should I Know About Money Market Accounts Held Within IRAs?
If you are wondering how to save for retirement, there are a few things to keep in mind before opening a retirement account with a money market component.
The most important is that money put into the money market component is subject to the same conditions as any other money you invest into a retirement account. You generally will not be able to access it without penalty until you retire.
You’ll also want to bear in mind that these are low-risk, generally low-return accounts. The money that you deposit, or money that is automatically transferred, is not going to provide much growth.
In some cases, when you open a retirement account, the funds will be automatically deposited in the money market component. In these instances, be sure to check that the money in that part of your account is then used to purchase the securities you want. Given the relatively low yield of an MMA, you may only want a certain portion of your savings to remain there.
Opening a Money Market Account That Is Part of an IRA
If you want to put some of your retirement savings in a money market account, you likely won’t be able to open the account separately, as you can with a traditional MMA.
Instead, you would open a retirement account with your bank, brokerage firm, or company provider. Depending on your IRA custodian, they may automatically include a retirement money market account as an investment option inside your IRA account.
Does It Make Sense to Put Retirement Funds in a Money Market?
There are many different types of retirement plans, so you’ll want to make sure to choose the options that make the most sense for you. While it might make sense to put some money into the money market component of your 401(k) or IRA, you might not want to put much money in it.
The reason for this is due to the relatively low interest rate that money market accounts pay. In some cases, the interest rate may be lower than the rate of inflation. If so, the money kept in the money market component will lose purchasing power over time.
The one exception to this rule would be retirees who are currently living off of the money in their retirement accounts. These investors already in retirement will often want to keep some of their money in money market accounts so they have to worry less about market volatility.
Alternatives to Money Market Accounts Held Within Retirement Accounts
There are any number of low-risk alternatives to money market accounts within retirement accounts, including vehicles outside a retirement account, such as a high-yield savings account. For similar alternatives within a retirement account, you could consider investing in bonds, bond funds, and other lower risk investment options.
The Takeaway
A money market account is often a component of a retirement account, such as an IRA or 401(k). This type of account has the advantages of being FDIC-insured and fairly liquid. However, it may not earn enough interest to outpace inflation. Many investors will want to keep the money in their retirement accounts in investments that can provide higher rates of return. That said, one advantage to keeping some of your retirement funds in a money market is that it can become part of the low-risk, cash/cash equivalents portion of your portfolio.
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FAQ
Can you keep some of your retirement funds in a money market account?
Yes, some retirement accounts offer a money market component. To keep some of your retirement savings in a money market account, you’ll need to open up an individual retirement account (IRA), 401(k), or other type of retirement account. Many retirement account custodians will include a money market account as one “investment“ option for your account.
What is the difference between an IRA and a money market account?
A standard money market account is similar to a regular savings account. An Individual Retirement Account (IRA) is an account that allows you to save for retirement with tax-free growth or on a tax-deferred basis. An IRA account can be used to invest in a variety of different ways. Many IRAs will have a money market component to them.
What is the difference between a money market account and a 401(k)?
A money market account is similar to a savings account in that the money is liquid and earns interest. A 401(k) is a special tax-advantaged account designed to help people prepare for retirement.
With a 401(k), contributions are typically tax-deductible and the money grows tax-deferred until retirement. By contrast, a money market account is funded with after-tax dollars, and there are no tax benefits associated with these accounts. The only exception is if the money market account is a component of a retirement account. In that case, it is governed by the rules of the retirement account it’s in.
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SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.
As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.60% 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 Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
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