High yield checking accounts do exist, giving you high interest rates on your checking account, but you must meet the requirements.
In today’s low interest rate environment, you’re probably used to get next to nothing in interest on your checking accounts and maybe even some savings accounts. High yield checking accounts level the playing field.
What is a High Yield Checking Account?
As the name suggests, a high yield checking account is a checking account that pays high interest rates. On average, you will find banks paying at least 2% APY, which is unheard of on a standard checking account. Now, high yield accounts often come with strict requirements, so make sure you are aware of them.
What to Look For in a High Yield Checking Account
Before you jump at the chance to earn 2%, 3%, or even 4% on your checking account, know what the account requires, such as:
- Is there a minimum balance requirement? You may need to meet this requirement to obtain the higher APY.
- Do you have to make a certain number of non-pin transactions? High-yield checking accounts often come with a debit card. You may be required to use it to ear the high APY.
- Do you need direct deposit? Some banks require a certain number of direct deposits or a certain dollar amount direct-deposited each month.
- Do you need to set up auto pay on your bills? Some banks require you to pay a specific number of bills or have recurring transactions each month.
- Is there a balance cap? Banks may stop paying the high APY after a certain balance. It may be $500, $5,000, or $20,000, each bank differs.
Pros
- You may earn higher interest rates than you can earn on any other basic checking or savings account.
- Your money may be insured as long as you choose an FDIC insured bank.
- You may be eligible for ATM reimbursements if you use an out-of-network ATM.
Cons
- You have to meet the bank’s requirements in order to get the higher APY.
- You may be forced to use your debit card more than you’re used to just to get the higher APY.
- Some benefits may only be for a limited time just to get you to become a customer.
Costs
Many banks offering high interest bank accounts don’t charge service fees, but some may. Read the fine print to see if you need to keep a certain balance to avoid the service fee.
Most banks with high yield checking accounts make money on ATM fees. If you choose a bank that doesn’t reimburse you for non-network ATMs, the bank makes between $2 to $4 on every non-network ATM transaction you make. If the bank requires a large number of debit transactions per month, that fee could add up pretty quickly.
Banks that Offer High Yield Checking Accounts
- Consumers Credit Union Rewards Checking – Up to 5.09% APY on balances up to $10,000, unlimited ATM fee reimbursement, no service fees, and no minimum balance required
- Redneck Bank Rewards Checkin’ – Earn up to 2.25% APY on balances up to $10,000, no minimum balance required, and no monthly service charge
- One American Bank Kasasa Cash – Earn up to 3.5% APY on balances up to $10,000, up to $25 in ATM reimbursements, and no monthly service fee
High yield checking may be right for you if you already make a lot of debit card transactions and have $10,000 or less to keep in a checking account. Read the fine print carefully, as many banks have tiered interest rates, knocking down your high APY to a much lower percentage if you don’t meet all of the requirements.