Best Interest Earning Checking Accounts

Checking accounts are a staple of personal finance, providing a convenient and accessible way to store and manage money. However, not all checking accounts are created equal, and some offer much higher interest rates than others. Interest earning checking accounts, also known as high-yield checking accounts, offer a way to earn a return on your checking account balance while still enjoying the convenience of traditional checking account features. In this guide, we will explore the features of the best interest earning checking accounts, the pros and cons of these accounts, and how to choose the right one for your needs.

What are interest earning checking accounts?

Interest earning checking accounts, also known as high-yield checking accounts, are checking accounts that pay interest on the balance held in the account. These accounts typically offer higher interest rates than traditional checking accounts, which typically do not pay any interest on account balances. Interest earning checking accounts are designed to provide the convenience of a traditional checking account, such as the ability to write checks, make debit card purchases, and withdraw cash from ATMs, while also providing a way to earn a return on the balance held in the account. The interest rates offered on these accounts can vary widely, so it’s important to compare different account options to find the best deal.

Common features of the best interest earning checking accounts

The best interest earning checking accounts typically offer a range of features designed to make it easy to manage your money while also earning a competitive interest rate. Some common features of these accounts include:

1. High Interest Rates: Interest earning checking accounts typically offer higher interest rates than traditional checking accounts. The exact interest rate offered can vary widely, so it’s important to compare rates across different account options.
2. Low or No Fees: The best interest earning checking accounts typically have low or no fees, such as monthly maintenance fees or ATM fees. This can help you avoid unnecessary charges and maximize the amount of interest you earn.
3. Easy Access to Funds: Interest earning checking accounts should offer easy access to your funds, typically through the use of a debit card or ATM card. Some accounts may also offer online banking or mobile apps, which can make it easy to manage your account on-the-go.
4. FDIC Insurance: FDIC insurance is important for any bank account, including interest earning checking accounts. FDIC insurance protects your funds in the event that the bank fails, up to a certain amount (currently $250,000 per depositor, per bank).
5. No Minimum Balance Requirements: The best interest earning checking accounts typically do not have minimum balance requirements, which can make it easier to earn interest on your account balance.
6. Overdraft Protection: Overdraft protection is a feature that can help prevent you from overdrawing your account and incurring expensive overdraft fees. Some interest earning checking accounts may offer overdraft protection as a feature.

Benefits of interest earning checking accounts

There are several benefits of interest earning checking accounts that make them an attractive option for many people:

1. Earn Interest on Your Money: The primary benefit of an interest earning checking account is the ability to earn interest on the balance held in the account. This can help you grow your savings over time, and make your money work harder for you.
2. Convenient Access to Funds: Interest earning checking accounts typically offer the same features and services as traditional checking accounts, including access to a debit card, ATM withdrawals, online banking, and bill pay. This makes it easy to manage your money and access your funds whenever you need them.
3. Low or No Fees: Many interest earning checking accounts have low or no fees, which can help you avoid unnecessary charges and keep more of your money in your pocket.
4. FDIC Insurance: Interest earning checking accounts are typically FDIC insured, which means that your funds are protected in the event that the bank fails.
5. No Minimum Balance Requirements: Some interest earning checking accounts do not have minimum balance requirements, which can make it easier to earn interest on your account balance.

Downsides of interest earning checking accounts

While interest earning checking accounts can be a great way to earn interest on your money, there are also some potential downsides to consider:

1. Lower Interest Rates: While interest earning checking accounts offer higher interest rates than traditional checking accounts, the rates may still be lower than other savings options like CDs or high-yield savings accounts.
2. Fees: Some interest earning checking accounts may have fees, especially if you do not meet certain requirements such as maintaining a minimum balance or making a certain number of transactions each month. These fees can eat into your interest earnings and reduce the overall value of the account.
3. Limited Transactions: Some interest earning checking accounts may have limits on the number of transactions you can make each month, which can be inconvenient if you need to use your account frequently.
4. Limited Availability: Not all banks offer interest earning checking accounts, so you may need to do some research to find one that meets your needs.
5. Account Requirements: Some interest earning checking accounts may require you to meet certain criteria, such as setting up direct deposit or maintaining a minimum balance, in order to earn interest or avoid fees.

How to choose the best interest earning checking accounts

Here are some key factors to consider when choosing the best interest earning checking account for your needs:

1. Interest Rate: The interest rate is one of the most important factors to consider when choosing an interest earning checking account. Look for an account that offers a competitive interest rate, but be sure to read the fine print to understand any requirements or restrictions that may apply.
2. Fees: Look for an interest earning checking account with low or no fees. Some accounts may have monthly maintenance fees, ATM fees, or other charges that can eat into your interest earnings. Make sure to read the account terms carefully to understand the fee structure and any requirements for avoiding fees.
3. Minimum Balance Requirements: Some interest earning checking accounts require you to maintain a minimum balance in order to earn interest or avoid fees. Make sure to choose an account with a minimum balance requirement that you can comfortably meet.
4. ATM Access: Check to see if the interest earning checking account offers free ATM access. If the bank doesn’t have many ATMs in your area, make sure that the bank is part of a network that allows you to withdraw money without incurring fees.
5. Online Banking: Many interest earning checking accounts offer online banking, which can make it easier to manage your money, pay bills, and deposit checks. Look for an account with a user-friendly online banking platform that meets your needs.
6. Mobile Banking: In addition to online banking, many interest earning checking accounts also offer mobile banking apps. Make sure the bank’s mobile app is compatible with your smartphone and offers the features you need, such as mobile check deposit.
7. Customer Service: Look for a bank with a strong customer service track record. Consider reading online reviews or asking for recommendations from friends or family members to get a sense of how responsive and helpful the bank’s customer service team is.

By considering these factors and comparing the terms of different interest earning checking accounts, you can find an account that best meets your needs and helps you maximize your savings.

How do interest earning checking accounts work?

Interest earning checking accounts work similarly to traditional checking accounts, but with the added benefit of earning interest on your deposited funds.

When you deposit money into an interest earning checking account, the bank will use those funds to make loans and investments. In exchange for allowing the bank to use your money, you will earn interest on your account balance. The interest rate may be fixed or variable, depending on the account terms.

Unlike traditional checking accounts, which typically do not pay interest, interest earning checking accounts may have requirements or restrictions that must be met in order to earn interest. For example, the account may require a minimum balance, a certain number of transactions per month, or other conditions.

Interest earning checking accounts may also come with fees, such as monthly maintenance fees, ATM fees, or overdraft fees. It’s important to read the account terms carefully and understand any fees or restrictions that may apply.

Overall, interest earning checking accounts can be a good option for individuals who want to earn some interest on their checking account balance, while still having easy access to their money for day-to-day expenses.

Types of interest earning checking accounts

There are several types of interest earning checking accounts available, each with its own features and benefits. Here are some common types of interest earning checking accounts:

1. Basic interest checking: These accounts offer a low interest rate and may have minimum balance requirements or other restrictions.
2. High-yield checking: These accounts offer a higher interest rate than basic interest checking, but may also have higher balance requirements or other conditions.
3. Rewards checking: These accounts offer rewards such as cash back or other incentives in addition to earning interest.
4. Relationship checking: These accounts are typically offered to customers who have other accounts or relationships with the bank, such as a savings account or mortgage. They may offer higher interest rates or other benefits.
5. Online checking: These accounts are offered by online banks and may have higher interest rates and lower fees than traditional brick-and-mortar banks.

It’s important to consider the features and requirements of each type of interest earning checking account before choosing one that best fits your needs and preferences.

Pros and cons of interest earning checking accounts

Pros:

1. Earn interest on your account balance: One of the main advantages of interest earning checking accounts is that they allow you to earn interest on the money you have in your account.
2. Easy access to your money: Interest earning checking accounts provide easy access to your money through check-writing, ATM withdrawals, and online banking.
3. Potential for rewards: Some interest earning checking accounts offer rewards, such as cash back or other incentives, in addition to earning interest.
4. No need to switch banks: If you already have a checking account, you may be able to upgrade to an interest earning account without having to switch banks.

Cons:

1. May have requirements or restrictions: Interest earning checking accounts may require you to maintain a minimum balance, make a certain number of transactions per month, or meet other conditions in order to earn interest.
2. Fees: Some interest earning checking accounts may have fees, such as monthly maintenance fees, ATM fees, or overdraft fees.
3. Lower interest rates than other accounts: While interest earning checking accounts can offer higher interest rates than traditional checking accounts, they may offer lower rates than other types of accounts, such as savings accounts or CDs.
4. Limited access to physical branches: Some interest earning checking accounts are offered by online banks, which may have limited or no physical branch locations.

What’s the difference between interest earning checking accounts and regular checking accounts

Interest-earning checking accounts, also known as high-yield checking accounts, are checking accounts that pay interest on the balance you have in the account. Regular checking accounts, on the other hand, typically do not pay any interest on the balance.

The interest rate offered on an interest-earning checking account is typically higher than the interest rate on a traditional savings account, but lower than the interest rate on a certificate of deposit (CD). However, interest-earning checking accounts may have certain requirements that need to be met in order to earn interest, such as maintaining a minimum balance or making a certain number of debit card transactions each month.

In general, interest-earning checking accounts are a good option for people who maintain a higher balance in their checking account and want to earn some interest on their money. Regular checking accounts, on the other hand, are a good option for people who may not maintain a high balance in their checking account and prioritize low fees and easy access to their funds over earning interest.

How to compare the best interest earning checking accounts

When comparing the best interest earning checking accounts, here are some factors to consider:

1. Interest rate: Look for an account with a competitive interest rate, as this will determine how much interest you earn on your account balance.
2. Minimum balance requirements: Some interest earning checking accounts require you to maintain a certain minimum balance in order to earn interest. Make sure you can meet these requirements without incurring fees.
3. Fees: Check for any fees associated with the account, such as monthly maintenance fees, ATM fees, or overdraft fees.
4. Access to ATMs: Look for an account with access to a large network of fee-free ATMs, so you can easily withdraw cash when needed.
5. Online banking features: Check for online banking features, such as mobile deposit and bill pay, that make it easy to manage your account from anywhere.
6. Customer service: Look for an account with good customer service and support, in case you need assistance with your account.
7. Rewards: Some interest earning checking accounts offer rewards, such as cash back or other incentives, in addition to earning interest. Consider whether these rewards are worth any potential fees or other requirements.

By carefully comparing these factors among different interest earning checking accounts, you can find the account that best fits your financial needs and goals.

How many interest earning checking accounts can I get?

There’s no limit to the number of interest earning checking accounts you can have, but it’s important to keep in mind that each account may have different requirements and restrictions. Some accounts may require you to maintain a minimum balance to avoid fees, while others may limit the number of transactions you can make per month.

Having multiple interest earning checking accounts can be beneficial if you want to diversify your funds or take advantage of different interest rates and rewards offered by different banks. However, it’s important to keep track of the requirements and fees associated with each account to avoid any potential penalties.

What are common fees associated with interest earning checking accounts?

Here are some common fees associated with interest earning checking accounts:

1. Monthly maintenance fees: Some banks charge a monthly maintenance fee for their interest earning checking accounts. These fees can range from a few dollars to several dollars per month, and may be waived if you maintain a minimum balance or meet other requirements.
2. ATM fees: Some banks charge fees for using out-of-network ATMs to withdraw cash or check your account balance. These fees can range from a few dollars to several dollars per transaction.
3. Overdraft fees: If you overdraw your account balance, meaning you spend more money than you have in your account, you may be charged an overdraft fee. These fees can range from $10 to $40 per transaction.
4. Non-sufficient funds (NSF) fees: If you try to make a purchase or payment with insufficient funds in your account, you may be charged a non-sufficient funds fee. These fees can also range from $10 to $40 per transaction.
5. Stop payment fees: If you need to stop payment on a check or electronic payment, some banks may charge a stop payment fee. These fees can range from $15 to $35 per transaction.
6. Wire transfer fees: Some banks may charge a fee for incoming or outgoing wire transfers. These fees can range from $20 to $50 per transfer.

It’s important to carefully review the fees associated with each interest earning checking account you’re considering, so you can choose an account that fits your financial needs and goals while minimizing any potential fees.

Glossary for interest earning checking accounts

Here are some common terms you may encounter when dealing with interest earning checking accounts:

1. Interest rate: The percentage rate that a bank pays on the balance in an interest earning checking account.
2. Annual Percentage Yield (APY): The effective interest rate that takes into account the compounding of interest over a year.
3. Minimum balance requirement: The minimum amount of money that you need to keep in your account to avoid fees or qualify for certain benefits, such as interest earnings or ATM fee waivers.
4. Monthly maintenance fee: The fee charged by a bank for maintaining an interest earning checking account.
5. Overdraft fee: The fee charged when you overdraw your account balance, meaning you spend more money than you have in your account.
6. Non-sufficient funds (NSF) fee: The fee charged when you attempt to make a purchase or payment with insufficient funds in your account.
7. ATM fee: The fee charged for using an ATM that is not affiliated with your bank.
8. Debit card: A payment card that allows you to make purchases or withdraw cash from your interest earning checking account.
9. Electronic funds transfer (EFT): The transfer of money from one bank account to another through electronic means.
10. Direct deposit: The automatic deposit of funds into your interest earning checking account, such as your paycheck or government benefits.
11. Bill pay: The ability to pay bills electronically through your interest earning checking account.
12. Mobile banking: The ability to access and manage your account using a mobile device, such as a smartphone or tablet.

How to get the most out of interest earning checking accounts

To get the most out of your interest earning checking account, here are some tips to keep in mind:

1. Choose an account with a high APY: Look for an interest earning checking account with a high APY to maximize your earnings. Compare rates and fees from different banks to find the best option for you.
2. Meet the minimum balance requirement: Keep your account balance above the minimum required balance to avoid fees and qualify for interest earnings.
3. Use direct deposit: Set up direct deposit for your paycheck or government benefits to ensure a consistent flow of funds into your account.
4. Use bill pay: Take advantage of bill pay services to automate your payments and avoid missing due dates, which can lead to late fees and damage to your credit score.
5. Avoid overdrafts and NSF fees: Keep track of your account balance and avoid spending more than you have in your account to avoid costly overdraft and NSF fees.
6. Use ATM fee waivers: Some banks offer ATM fee waivers if you use ATMs that are part of their network. Make sure to take advantage of this benefit if it’s available to you.
7. Monitor your account regularly: Check your account activity regularly to spot any unauthorized transactions or errors. Report any suspicious activity to your bank right away.

By following these tips, you can make the most of your interest earning checking account and potentially earn more money on your balance while avoiding fees and other charges.

What are the requirements to get interest earning checking accounts?

The requirements to get an interest earning checking account may vary depending on the bank or financial institution you choose. However, there are some common requirements that you may need to meet, such as:

1. Minimum balance requirement: Many banks require you to maintain a minimum balance in your account to qualify for interest earnings and avoid fees.
2. Monthly deposit requirement: Some banks require you to make a certain number of deposits or have a certain amount of money direct deposited into your account each month to qualify for interest earnings.
3. Credit check: Some banks may perform a credit check as part of their account opening process to assess your creditworthiness.
4. Identification: You’ll typically need to provide a government-issued ID, such as a driver’s license or passport, to open an interest earning checking account.
5. Proof of address: You may also need to provide proof of your current address, such as a utility bill or lease agreement.
6. Age requirement: Some banks may require you to be a certain age, typically 18 or older, to open an interest earning checking account.

How to apply for interest earning checking accounts

To apply for an interest earning checking account, follow these general steps:

1. Research different banks and financial institutions: Look for institutions that offer interest earning checking accounts and compare their features and fees.
2. Check the eligibility requirements: Review the requirements to ensure that you meet them.
3. Gather your information and documentation: Collect your personal information, identification, proof of address, and any other documents required by the bank.
4. Fill out the application: Fill out the application form provided by the bank. You may be able to do this online, in person, or over the phone.
5. Fund your account: Once your application is approved, fund your account by making a deposit.
6. Review and sign the agreement: Carefully read the terms and conditions of the account agreement, and sign it if you agree to the terms.
7. Activate your account: Follow the bank’s instructions to activate your account, such as setting up online banking or ordering checks.

It’s important to note that the application process may vary by bank or financial institution. Some may require additional steps, such as a credit check or a background check, before approving your application. Be sure to carefully review the requirements and application process before applying.

How to best use interest earning checking accounts

Here are some tips on how to best use interest earning checking accounts:

1. Keep track of your balance: Interest earning checking accounts usually require a minimum balance to earn interest, so make sure to keep enough money in the account to meet the minimum.
2. Avoid fees: Interest earning checking accounts may have fees associated with them, such as monthly maintenance fees or ATM fees. To get the most out of your account, avoid these fees by choosing an account with no fees or by meeting the requirements to waive them.
3. Use direct deposit: Many interest earning checking accounts offer higher interest rates when you set up direct deposit. Consider setting up direct deposit to take advantage of this benefit.
4. Monitor your transactions: Keep an eye on your account activity to avoid overdrafts or other issues that could result in fees.
5. Consider using online banking: Many interest earning checking accounts offer online banking, which can make it easy to monitor your balance and transactions, transfer funds, and pay bills.
6. Use mobile banking: With mobile banking, you can access your account on-the-go, check your balance, deposit checks, and even transfer funds.
7. Don’t forget to redeem rewards: Some interest earning checking accounts offer rewards, such as cash back or points, for using certain features or meeting certain requirements. Make sure to redeem these rewards to get the most out of your account.

Overall, using an interest earning checking account can help you earn money on the funds you already have in your account. By following these tips, you can maximize the benefits of your account and avoid fees.

Alternatives to interest earning checking accounts

There are several alternatives to interest earning checking accounts, depending on your financial needs and goals. Here are a few options to consider:

1. Traditional checking accounts: If you don’t need to earn interest on your checking account balance and prefer an account with no fees, a traditional checking account may be a good fit for you.
2. High-yield savings accounts: These accounts typically offer higher interest rates than interest earning checking accounts, but they may require a higher minimum balance or limit the number of withdrawals you can make each month.
3. Money market accounts: These accounts are similar to high-yield savings accounts, but they may offer check-writing privileges and a debit card. However, they may require a higher minimum balance than a high-yield savings account.
4. Certificates of deposit (CDs): CDs are a type of savings account that offer a fixed interest rate for a specific period of time, typically ranging from 6 months to 5 years. They typically offer higher interest rates than savings or checking accounts, but you may be charged a penalty if you withdraw your funds before the end of the term.
5. Investment accounts: If you’re looking for higher returns on your money and are willing to take on more risk, you may want to consider opening an investment account, such as a brokerage or retirement account.

Ultimately, the best option for you will depend on your financial goals, risk tolerance, and personal preferences. It’s important to research and compare different account options to find the one that best fits your needs.

What’s the average interest on interest earning checking accounts?

The interest rates on interest-earning checking accounts can vary widely depending on the bank or credit union offering the account. Generally, interest rates on these accounts are higher than the interest rates on regular checking accounts but lower than the interest rates on savings accounts or other investment products like CDs.

As of May 2023, the average interest rate on interest-earning checking accounts in the US is around 0.05% APY (Annual Percentage Yield). However, some banks and credit unions offer much higher rates than this average, with rates ranging from 0.01% to 1.00% APY or even higher.

It’s important to note that interest rates on interest-earning checking accounts are variable, which means they can change over time based on market conditions and the bank’s or credit union’s policies. It’s a good idea to regularly check your account’s interest rate and compare it to other options to ensure you’re getting the best rate available.

Are interest earning checking accounts worth it?

Interest earning checking accounts can be worth it for individuals who maintain a high balance in their account and want to earn interest on their money while still having access to their funds through a checking account. However, for individuals who do not maintain a high balance, the interest earned may be minimal and may not justify any fees or requirements associated with the account. It is important to compare the interest rates and fees of interest earning checking accounts with other options such as traditional checking accounts and savings accounts to determine which account will provide the most value for your financial needs.

Should I get interest earning checking accounts?

Whether or not you should get an interest earning checking account depends on your individual financial situation and goals. If you typically maintain a high balance in your checking account and want to earn interest on your money while still having access to it, an interest earning checking account may be a good option for you. However, if you do not typically maintain a high balance in your checking account, the interest earned may not justify any fees or requirements associated with the account. It is important to consider the interest rates, fees, and requirements of interest earning checking accounts and compare them with other options such as traditional checking accounts and savings accounts to determine which account will provide the most value for your financial needs.

The future of interest earning checking accounts

The future of interest earning checking accounts is likely to continue to evolve as technology and customer demands change. We may see an increase in the availability and accessibility of interest earning checking accounts through online and mobile banking platforms. Additionally, we may see an increase in the integration of rewards programs and cashback offers with interest earning checking accounts to incentivize customers to maintain a high balance. As interest rates continue to fluctuate, the interest rates offered by interest earning checking accounts may also fluctuate. It is important for consumers to stay informed and compare the interest rates, fees, and requirements of different interest earning checking accounts to determine which account will provide the most value for their financial needs.

FAQs about the best interest earning checking accounts