SoFi has been one of the most important business partners of The White Coat Investor for the last 5-6 years. Despite that, not a single one only one of the 1500+ blog posts on this site has ever been dedicated to SoFi.
SoFi was founded the same year as The White Coat Investor, and we've grown up together. Well, one of us grew up. The other one is still being run off a dining room table in Utah. But it has been fun to watch them expand and offer new products over the years.
They usually bring them to me and see if I think my audience would be interested. I think I've turned down more products than I have actually helped them market, but we've still worked together on several lines of business.
Sofi Student Loan Refinancing
The one most of you know is what SoFi is most famous for, student loan refinancing. I have had a number of discussions over the years with SoFi about their student loan refinancing products.
I distinctly remember one conversation where I was sitting across the table from the CFO trying to convince him they needed to offer a product to residents to refinance their private loans. There was a lot of hesitation as he wondered how he could ever find investors willing to loan money knowing they weren't going to get any significant interest payments for years, but eventually, they came out with perhaps the best loan refinancing product available to residents.
Sofi Mortgage
I've also included SoFi mortgage on my doctor mortgage page. It's not technically a doctor mortgage, but it has been helpful to a lot of readers, particularly in California. Like most doctor mortgages, it has no PMI for jumbo loans. It would probably be even more popular with readers except it requires a 10% down payment rather than the more typical 0-5%.
I even have an affiliate agreement with them for their personal loan product, although I don't really publicize that one. Doctors are too debt-numb as it is, so I try not to float out a personal loan as the solution to their financial issues until they've at least worked their way through other options. But as personal loans go, it's a pretty good product with relatively low rates and fees. Certainly, there are doctors who would find it helpful in certain short term situations and I occasionally point people there.
Sofi Wealth Management
They have a wealth management and financial planning service which is pretty unique too, being FREE and all (at least for a while). I've been encouraging them to hire some doctor specific advisors to work there.
SoFi has lots of other products too — refinancing of student loans and mortgages, term life insurance, a money-tracking app, a low cost investing service, and even four new ETFs they're coming out with.
Perhaps the reason I have never dedicated a post to SoFi despite having thousands of my readers who have used their services is that I have never personally used a single SoFi product. Well, that moment has finally come.
Introducing SoFi Bank
SoFi came out with a fancy new type of banking account that they call SoFi Bank. They market it as a “cash management account” Finally, they've come out with a solution to a problem I actually have.
Solving My Problem
What's my problem? My problem is that I leave tens of thousands of dollars in checking in order to avoid bouncing payments and checks. I have true first world cash flow problems and sometimes the easiest way around them is to just leave an extra buffer in the old checking accounts. I basically never have less than $15K in our main checking account and sometimes ten times that much.
What's the big deal? Well, my USAA checking account pays 0.01%. That's right. 1 basis point. Why do they even bother? Our business checking account at a local credit union pays between 0.1-0.25%. Sure, that's 10-25X what I'm making at USAA, but it's still pretty pathetic, and I tend to leave even more money in that account. Yes, I get all the usual things you can get pretty much anywhere in a checking account these days–ATM fees are waived and overdraft protection, but the opportunity cost of that money sitting there is a big deal.
So what does a SoFi Bank account pay? As of this writing it pays an APY of 2.25%. That's 200X what my current checking account is paying. In fact, it's better than my current savings account at Ally Bank (APY of 2.20% today). [Update: As of 7/1/2020, accounts with monthly deposits of $500 or more will earn a 0.25% APY. All other accounts will earn a 0.01% APY. Accounts opened prior to June 9, 2020, will continue to earn a 0.25% APY regardless of deposit activity.] Even a Vanguard money market fund is only paying slightly better (2.35-2.45% today on taxable MMFs and 1.33-1.45% today on municipal MMFs). The difference between having an average of $50K in an account paying 2.25% instead of 0.01% is $1,125 per year instead of $5 per year. Too bad I can't get a business SoFi Bank account yet.
The account comes with all the usual stuff you like to see in a checking account –no fees, free ATMs, automatic bill pay, free checks, mobile deposit, super easy sign-up (literally took me 2 minutes to open and fund an account), easy connections to your other accounts, a nice little app, the ability to transfer money instantly to other SoFi Bank users, and FDIC protection up to $1.5 Million. Other than the pain of changing checking accounts, what's not to like?
Criticisms of SoFi Bank
There have been a few criticisms about SoFi Bank accounts. Some of it is in the fine print and some of it is just due to the nature of the product.
# 1 No Separation of Savings from Checking
Some people criticize that combining your checking and savings account will cause you to spend more money. I always find arguments like that to be patronizing and kind of dumb. If your financial discipline is so low that a tiny barrier like having to transfer money from savings to checking before you can spend it is going to be your salvation, well, you've probably got bigger financial problems than where you do your banking.
# 2 Low Withdrawal/Peer to Peer Transfer Limits
This one could be a little annoying to high-income professionals considering SoFi Money. SoFi has some limits in place to help protect your account from fraud. You can only withdraw $1000 per day from an ATM.
That doesn't seem too bad since my limit at USAA was $10 less! But when I wanted to buy a boat with $20 bills, I could call USAA and have them raise the limit temporarily. Whether SoFi will allow me to do that, I don't know. If this is a big deal for you, plan ahead.
Perhaps a bigger deal is you can only do peer to peer transfers of $1000/day ($3,000/month.) I send friends larger amounts than that all the time with PayPal or Venmo, so that could potentially be a problem. But since I don't yet have any friends with SoFi Bank, I guess I would still need PayPay/Venmo anyway. You can read more about the limits here.
# 3 No Wire Transfers
You apparently can't do wire transfers. I wasn't planning on ditching all of my other bank accounts for a SoFi Bank account, but this sort of a thing needs to be solved if SoFi Bank wants people to use them as a one-stop solution. They tell me it is on the list to be accomplished in the third quarter of 2019.
# 4 No Bank Charter
SoFi Bank isn't a bank. It doesn't have a bank charter. It is what is being referred to as a “neobank.” There are at least a half dozen of these out there now and the way it works is they basically sweep their cash to 6 other banks. That has its pluses and minuses.
The main plus is that you get a much higher FDIC insurance limit — you get six $250K limits for $1.5M. I suppose it is also possible that you may not have some consumer protections that exist for true banks when things go wrong, but I don't know enough about banking to say whether that matters or not. There aren't any bank branches either, but that's the case for most of the banks I use anyway. Neither USAA or Ally has branches.
# 5 Where's the Money Coming From?
If SoFi Bank isn't charging you any fees and it is paying you a pretty good interest rate, that money has to come from somewhere. Some might complain that SoFi tries to sell you all of their other financial services. Honestly, that's not any different from any other bank out there. However, it does seem like there are a lot more “ads” for other services than I am used to. Are they collecting information on you in order to know what to try to sell you next? I'm sure they are. Welcome to the Age of Big Data.
# 6 Rate Drops After 3 Months Unless Direct Deposit Set Up
The 2.25% rate is technically only good for three months before it drops to half that. Half that rate is still awfully good for a checking account, but most importantly, this one is pretty easy to get around. All you have to do is set up a direct deposit of at least $3K/month. That shouldn't be too hard to do if you're really going to use this as your checking account.
[Update after publication: This requirement is now gone.]
# 7 No Cash Deposits
You can't deposit cash into your SoFi Bank account. Not a big deal for me. It's been years since I deposited cash. I didn't even know I could deposit cash into my USAA checking account. Of course, I have to drive 16 hours round trip for me to do so. Welcome to the digital age. This is one reason I have a local credit union account I almost never use.
# 8 Can't Export Data to Other Software
I hope you like the SoFi Bank App, because you're not going to be able to export your data to Mint, Personal Capital, You Need a Budget, Every Dollar or other popular budgeting apps.
[Update after publication: See comments below, but users have been able to use both Mint and Personal Capital with their SoFi Bank account.]
# 9 1% Currency Exchange Fee
If you want to use your debit card internationally, you'll pay a 1% fee on all transactions. I'm sure there are some debit cards out there that don't charge that sort of a fee, but most do. No big deal for me.
That's all I could come up with. If you are okay with those downsides, a SoFi Bank account is a great way to make some extra money and reduce some of the hassles in your life. All you have to do is overcome the inertia to just leave things as they are because it is a pain to change things like direct deposit and automatic payments.
If you do decide to try out SoFi Bank, please use our affiliate link as it helps support this site.
Note that upon initial publication of this post, there was an additional $25 sign-up bonus (which was honored for those who signed up quickly) but that deal is no longer available.
Sign-up for a SoFi Bank account today
What do you think? How would you like to earn interest on your checking account? Have you tried a neobank like SoFi Bank? What did you like or dislike about it? Comment below!
I tried to get a mortgage with sofi but they are not as competitive as local credit unions so i wouldn’t recommend them for mortgage. A couple of years prior I had my student loans refinanced by them and had a great experience.
Competitiveness in the mortgage market is highly variable by the person, date, and the location. I wouldn’t make a blanket statement to avoid any company based on one person’s head to head rate comparisons. Obviously anyone shopping around should look at more than one lender and most of the time go with the lowest rate/fees.
Another great post. Vanguard has an awesome product JUST like this. However, they do not publicize it very much AT ALL. Basically, you can pay your bills with money sitting in the Vanguard treasury money market account. It is super convenient the way they link with bill pay. UNFORTUNATELY I received a letter about a month ago that they are discontinuing this WONDERFUL service. They said in the letter it is not consistent with their mission, yada, yada, yada… This is just what I need. I think Fidelity has something similar to this, and if you use their credit card you get 2 percent deposited into your account. It has been my experience over the decades that deals this good usually end after awhile. It is really underestimated how much money you can make when the interest starts in real time as your paycheck is direct deposited. In a high interest rate environment this would be less valuable, but in today’s world I like this concept a lot. I think I am going to do it and have yet another article to send to my clients to save them money. I don’t see this topic written about very much in the books, blogs, etc….I like these type of automatic processes where the astute saver essentially gets free money for others that are tardy. I have had some large checks that the recipient has taken time to cash, all the while I am earning NOTHING on the idle cash. I do suspect that the $1,125 is a lot higher for this reason. Thank you for this post, I think I might just do it, but I have to study Fidelity cash management first which has been on my to do list. BTW, the Vanguard product did charge me $5 per month but that amount was well worth it for this amazing underutilized product that they had. Jim, how long have you been using it? Do you think it is too good to be true with changes in store after we move all of our information to them? That has happened a lot to me over the years. Finally, Capital One is excellent for international travel because there is no fee on the conversion to U.S. dollars. There is no foreign transaction charge. I have checked the conversion rate on the date I use the card and the rate they give you for conversion from international currency is the spot market rate that day. Also for international travel, I like the Rick Steve’s books. You might consider doing a book review or even having an affiliate deal with him. He is a frugal international travel with books that give you many tips.
Obviously the rate could change in the future. How likely for it to drop dramatically any time soon? Seems unlikely to me.
I’ve also used both Capital One cards and Rick Steve’s books in Europe.
Just did my research on Fidelity. Their rate is 0.37 percent. Guess I have my answer!
Foot note 1 on the SoFi website says “interest rates are variable and subject to change at any time at our discretion.” I am not saying this is a teaser rate, but I have had the experience with other companies that sometimes the rate gets lowered after all the data is in the system. Still, the deal is good enough to give it a try, and I think I will. Thanks again! All the good info is in the footnotes.
Completely agree with this writeup and exactly the reason I consolidated other back accounts into a SoFI Money account. The excess paycheck that does not cover monthly expenses all goes here.
As a side note if you have TMobile they just started a similar product. You earn 4% on the first $3k and 1% beyond. To start I just threw $3k in there 🙂
Thanks again for a great summary of SoFi. We have two mortgages and 2 student refinances with them and they continue to expand and offer great products and services.
Been using sofi money for a few months now. I got started with sofi based on loan refinancing recommendations from whitecoat investor website. After a few months they came out with sofi money and i was highly attracted to the high interest rate. Like you, why would I keep a majority of my money in a lower rate savings interest. Ive been pretty happy with sofi products enough so that i have used the sofi invest product as well. Free trades on stocks and etfs, awesome. Stinks i cant see sofi in mint, but looks like sofi is rolling out their own similar product. Im keen to try it out. Ive used mint religiously for the past few years but looks like they are losing connections to major banks.
I signed up! Only pain point is that I had to lift my Experian credit freeze. However, other than that it was so smooth. I’ll pilot it personally before I advocate it for my clients. Thanks Jim. I have not seen a product like this other than the Vanguard product that I mentioned above that they recently discontinued.
I personally had two very poor experiences with Sofi mortgage and could not ward people off strongly enough if care about your house closing in a competitive market. The first time was a vacation house worth 60% of my annual income and they just could get things done quickly enough. They were very slow to respond to emails and impossible to get on the phone. The house fell through on inspection so I let it go. I tried again with a new primary residence worth about 200% of my annual income because their rates were so competitive. These both should have been shoe in easy to process since I was putting 30-40% down. I had the same poor experience the second time. There were problems with the app to a certain degree but mostly just with follow up and follow through. I found the rep (they don’t really have brokers in the traditional sense) assigned to me to be rude, snarky, unresponsive and generally a pain in the ass. I actually complained to his supervisor and was basically told he was a golden child because he was their top producer. The whole thing sucked. Their emphasis is clearly on growing their business to provide positive metrics to their investors without regard to the customer other than rates. In the end I went with a local broker who pulled stings and got the deal done start to finish in a few days.
Can anyone comment on their “free” wealth management product?
Haven’t used it personally, but it seems pretty similar to Betterment and with a CFP on call. Doesn’t hurt to try it.
WCI review on it here (although this proves the “no dedicated sofi posts” from the intro wrong, we know who pays the bills!):
https://www.whitecoatinvestor.com/sofi-wealth-management/
Oh, you’re right. I forgot about that one. Open mouth, insert foot. Better go back and amend that before anyone else notices (I love this medium.)
Thanks for the link.
They currently do not allow joint accounts. That should be your #10 criticism. Their FAQ says it’s in beta testing, though.
Joint checking accounts are available now to the general public. My wife and I had one for the past couple months. We just had to sign up through the SoFi phone app. The approval process to transition from a single account to a “beta” joint account was pretty quick for us.
Thanks for sharing your experience.
My neighborhood bank has been offering 3% on the first $20k checking for the past 2 years. Love it.
3% is great. A $20K limit is not. That’s like this new Alliant Credit Card I have. Sure, it pays 2.5% back, but I can’t put my taxes on it because they won’t give me a high enough credit limit.
I know!
Alliant is very frustrating. They’ve got one of the highest % cash back cards, but they’re VERY conservative with credit limits.
Whenever I ask for a credit limit increase, they tell me I’ve got to wait another 6 months, and then make a backhanded comment about my credit history being too short.
They started me out at $10k and then begrudgingly raised me to $15k when I realized my high balances were negatively affecting my credit score. This was despite fully paying off the card each month. Frankly, it would be a more useful card if I had a $30-50k limit. Then, as you mentioned, I could use it to pay taxes.
My colleague does this with the same card. Somehow she wrangled a $30k limit out of them.
Yea, I kind of doubt I’ll ever be able to use it for taxes. We’re trying it out this month for everything else.
Where do you get 3$?
Where does it say that the 2.25% is dependent on direct deposit? I cannot find that on their site or in their terms.
I can’t remember exactly where I saw that. Feel free to confirm that with them. But what’s the point of a checking account you aren’t making regular deposits into? That’s the whole point. If you just need a savings account, you can get similar rates elsewhere.
Well right now I am testing them out to see how I like the account and if there are any issues before I make it my main checking account and switch direct deposit over. So if there is a timeframe necessary to set up direct deposit I would want to know. But I have not seen that stipulation anywhere.
Just got an email from them:
No Mint support is a deal breaker for me….
I think that needs to be updated/corrected.
I use Personal Capital didn’t have any trouble integrating to the SoFi money account.
Done.
Grumble. Now I have to give it real consideration. Changing checking accounts is painful.
You can use the SOFI money with mint. I dont know what people are talking about. It just has a annoying prompt for two factor authentication.
My main gripe with SOFI money is the ridiculous long check hold times and having to scribble more stuff on the back on the check. Im used to same day or next day check deposits so I dont use it for that purpose.
Not having a wire transfers also is painful but I liked they are working on it for Q3 this year.
Foot note number 3 is an important one about the FDIC insurance. The money is not insured until it is swept to the partner bank. So during some points of inflow and outflow there is no FDIC insurance. Perhaps that is why the rate is so high. We are being paid for some risk, perhaps. Here is a good thread with comments that have more explanation. https://www.lendacademy.com/is-sofi-money-the-bank-account-of-the-future/
Just to ask, why not invest in short term treasuries, at least for the time being? Can get a 4 week bond at the same rate. It isnt as efficient as this account, but the rates are the rates, no state/local tax, quick access to money within a month, easy to open treasury direct account, and u can bank anywhere. This is what ive been doing last several months, but genuinely interested in responses, thanks!
If you’re just looking for a good rate, use Prime MMF. The attraction here is the checking account.
Just signed up, another “negative” that I have discovered is that you can only link 3 other accounts. Not a deal breaker but definitely wish I could link more.
I called to ask about deposit limits as this has been an issue for me in the past. I was told I cannot mobile deposit a check greater than $20,000. I was told there is no physical address to mail these checks as well. So you will likely need to use another account to deposit a large check.
That’s annoying. You would think a solution to that would be easy.
They just emailed me that the daily check deposit limit is $25k and the monthly check deposit limit total is $50k.
Thanks for sharing!
Checked in with the SoFi team, they’re not supporting trusts as a beneficiary designation yet. Otherwise, quite happy with the experience so far. I imagine the account will be much further along next year.
Does it work with Quicken?
It apparently does but I haven’t personally tried.
There currently is no method available to download transactions to Quicken, Quickbooks, Moneydance or any other files. Another words, no .QIF files or .CSV files which is essential if you plan to organize all of your accounts, checking, saving, credit cards, loans for tax purposes. However I sent a couple of requests and recently received a encouraging response see below.
Thank you for being a SoFi Money Member!
We received your feedback regarding downloading transactions using different formats. We are always looking to improve our Money product and the features they have. This is a great suggestion and as a valued SoFi Money Member you will be the first to know when our new features are available.
Any word on the ability to download Sofi transactions into a format for use with Quicken?
Re: #9, according to https://www.sofi.com/money/fees/, there’s no foreign transaction or exchange fees.
…did they read this article and adjust accordingly?
Check the Footnote: “Please note, though SoFi doesn’t charge foreign transaction fees, there is a foreign exchange fee of 1% charged by Visa that is not waived.”
Thanks!
Seems SoFi is denying 25 dollar sign up credit via this website link. Anyone have any success getting credit who signed up?
Please email me and we’ll get it fixed. Because if you’re not getting paid I’m not getting paid either. It’s an affiliate deal- win-win-win. If you’re not winning, no one is winning.
Great post. Definitely have me intrigued. If they don’t have a business option yet, who do you currently use for your business checking account?
I have all my personal accounts with Ally but they don’t have a business checking account option. Is it even necessary to have a dedicated “business” account or would it suffice to just open up another personal checking account through SoFi (or Ally) and run everything through that? I’m a sole proprietor without any employees for reference.
I just signed up for Sofi Money today. It’s very easy setup since I already have a refinance loan with them. I was going to pick Ally based on good reviews but decided to go with Sofi due to my existing relationship with them. Thanks for your good review, now I understand a little bit more about their service. I’ll learn more as I familiarize myself with the website and the app.
Not sure why you’re comparing those two things. I have an Ally Bank SAVINGS account that pays 2.20% interest. But the Ally CHECKING account only pays 0.1-0.6%, much less than SoFI Money (2.25%). No real comparison there.
They also offer a rate discount of 0.125 percent if you’re using more than one of their products. I just opened up a Money account with them and I will be refinancing my student loans with them soon with that discount applied.
That’s a cool feature!