A High Interest Checking Account allows you to earn money on your checking balance, helping it grow faster than a traditional bank account. These accounts typically come with higher interest rates than savings accounts but require you to meet transaction and minimum balance requirements. They can also offer a variety of features, such as free online banking and mobile access, ATM fee reimbursements and e-statements. You can find these accounts with a variety of banks and financial institutions, including national banks, regional and local banks, credit unions and some online-only companies.
You should compare the terms and conditions of each to find a high-yield checking account that fits your spending habits and finances. Consider how many transactions you do each month, how often you deposit and withdraw funds, whether you need to maintain a minimum or average monthly balance, and other important factors before making an opening decision.
The best high-yield checking accounts offer a competitive interest rate, which can be as much as 1% or more. However, you should note that this is only available when the Federal Reserve nudges interest rates upward, and once it stops, your rates may drop as well. It’s also worth knowing that most financial institutions will limit how much of your total balance can qualify for the highest APY. For example, only the first $5,000 of your balance might earn a higher rate, with any amount above that earning less.
A high-yield checking account can also benefit you if you make lots of debit card purchases each month and prefer to use electronic bill pay and direct deposits. In addition, a checking account with a competitive APY can help you get more out of your savings and other investments.
You should also note that there are a few ways the banks and credit unions who offer these accounts can profit from having you as a customer. For instance, the requirement that you make many debit card transactions enables them to collect fees from credit-card issuers. And requiring you to have direct deposits and use online bill pay reduces the cost of handling paper checks, which saves them money.
Finally, the financial institution will also gain revenue by charging fees for overdraft protection and assessing a fee when you withdraw cash from an out-of-network ATM. All of these costs can eat into any earnings you earn on your checking account, so be sure to keep track of them carefully when choosing an account.