Because free checking accounts are such a ubiquitous banking product, they can come with limitations. Basic checking packages come with the convenience of debit card options, online access and quick turnaround of deposits and withdrawals, but many bear little to no interest at all.
Though many people can find the investment solution they’re seeking in a savings account, CD or money market, there’s no reason to pass up on checking as a way to save while you spend, especially when it gives you the chance to earn big interest and go about day-to-day transactions.
That’s where a high-yield checking account comes into the picture. High interest checking accounts allow you to benefit from the qualities of a regular saving account, with the added benefit of higher interest rates akin to a premier deposit account (like a long-term certificate of deposit).
High yield checking accounts can be found with 2-to-3-percent interest rates, sometimes higher, making them an ideal choice for anybody proactive with their personal finances. Like any banking decision, there are many decisions and options to consider if high interest checking is the right account for you.
High Yield Checking: The Highs and Lows
Some benefits of high interest checking accounts:
- Superior interest rates. The average interest rate among high-yield checking accounts offered by banks and credit unions in the U.S. is over 2.05% APY. At other financial institutions featured on Go Banking Rates, interest rates from 3-6% APY are common for other high interest checking accounts.
- A wise investment. For consumers who keep a consistent, large balance in their checking account, higher interest rates mean more earnings in the long run. Customers who deposit a higher balance have a greater earning potential, while maintaining access to their funds.
- Accessibility. Most high-yield checking accounts are like their standard checking counterparts in that they’re free to open in most situations.
Drawbacks of high-yield checking to keep in mind:
- Restrictions. In spite of high yield checking benefits, they have a number of requirements the customer must fulfill. Many banks charge penalty fees or drop their high interest rates if a minimum amount of debit transactions (usually 10) aren’t completed each month — or, if other monthly criteria for direct deposit and automatic bill pay aren’t met.
- Balance caps. High yield only goes so high. Deposits above a maximum balance amount don’t often receive premium yields. With the most common balance cap at $25,000, depositors with higher account balances shouldn’t expect to earn more interest. Balance caps may vary from bank to bank.
Consumers should gauge the amount of money they intend to keep in a high-yield checking account to avoid penalties and lowered interest rates. Getting the most benefit out of a premium checking account means making sure that it’s the right investment for your own financial outlook.
Getting on board a high interest checking account with a certified credit union makes sense, too — these financial not-for-profits operate with the goal of making their members top priority, offering them incentives and higher interest rates that a conventional bank might not.