What Is an Interest Checking Account?

Interest checking accounts are a unique type of checking account that offers an annual percentage yield (APY). Unlike regular checking accounts, which typically do not pay interest, these accounts allow your money to earn a return while still being easily accessible for daily transactions. However, the interest rates are usually modest, averaging around 0.06% according to FDIC data. Some online-only banks may offer higher APYs ranging from 0.10% to 0.25%.

Pros and Cons of Interest Checking Accounts

Pros

• Money earns interest: Your cash can earn a bit of interest while it’s in the account.
• Cash is easily accessible: Money in an interest checking account can be accessed through external transfers, debit card transactions, and ATM withdrawals.
• Money is safe: Up to $250,000 of your money is guaranteed by the government per account ownership category when your bank or credit union is insured by the Federal Deposit Insurance Corporation (FDIC) or National Credit Union Administration (NCUA).

Cons

• Higher monthly fees: Interest checking accounts may have higher monthly maintenance fees than accounts that don’t earn interest. However, you may be able to have these fees waived by maintaining a certain account balance.
• Yields are generally still low: While interest checking accounts offer you some return, it’s not going to make you rich. High-yield savings accounts, certificates of deposit (CDs), or investment accounts could provide a better return for savings.

How to Get an Interest Checking Account

You can find interest checking accounts at major banks, credit unions, and online banks. For example, Wells Fargo offers Prime Checking with an APY of 0.05% on balances up to $99,999 and 0.10% on balances over $100,000. The monthly account fee for Prime Checking is $25 unless you maintain a balance over $20,000. Ally Bank, an online-only bank, offers 0.25% APY on its checking account with no monthly fees or balance requirements.

Steps to Find the Best Interest Checking Account

1. Shop around: Search “interest checking” in a web browser to bring up results for interest checking accounts available at different banks and credit unions.
2. Compare APYs, terms, and fees: Review account terms and costs to find the best fit for your needs. Consider that the account with the highest APY may not always be the best if there are high fees and you need to maintain a high balance to have them waived.
3. Review qualification requirements: After selecting an account, review the application requirements. For example, if you’re looking at an account at a credit union, find out what’s required to become a credit union member.
4. Open an account: To open a bank account, financial institutions usually ask for your name, Social Security number or taxpayer identification number, address, and government-issued ID. You may also need to provide cash or an external account number to fund your new account.

Should You Get a Checking Account That Pays Interest?

Ultimately, interest earned is just one factor to consider when shopping around for a new bank account. Minimum balance requirements, banking features, customer service, availability of ATMs, and maintenance fees are other important aspects to compare one account to the next when choosing where to put your money.

An account with a high APY may not make sense if the monthly fee eats into the money earned. And if you have extra money you don’t need to use often, consider opening a tiered savings account or high-yield savings account for those funds instead. These accounts are designed for you to stack cash for longer-term goals and provide a higher return while your money is parked.

Contact O1ne Mortgage for Your Mortgage Needs

At O1ne Mortgage, we understand the importance of making informed financial decisions. Whether you’re looking to open an interest checking account or need expert advice on mortgage services, we’re here to help. Call us today at 213-732-3074 to speak with one of our experienced loan officers. Let us help you navigate your financial journey with confidence and ease.