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Key takeaways
- High-yield checking accounts pay higher-than-average interest rates, typically above 0.07% APY, while still giving you everyday access to your money through debit cards and withdrawals.
- You may need to meet certain requirements to earn the highest rates – like making a minimum number of debit card purchases each month or setting up direct deposit.
- These accounts can help you earn interest on money you’re actively using, but watch out for fees and balance requirements that might cancel out your earnings.
- Compare the effort required to earn high rates against the actual interest you’ll make on your typical balance to decide if it’s worth it
Who doesn’t want to grow their bank account balance? If that sounds like you, consider a high-interest checking account. These accounts offer higher-than-average interest rates so you can earn money on your balance over time – all while keeping your cash accessible for everyday spending. In this guide, we’ll cover how high-interest checking accounts work, the requirements to earn those rates, fees to watch out for, and how to decide if this type of account is right for you.
What is a high-interest checking account?
A high-interest checking account is a type of checking account with a higher-than-average interest rate. With it, you can deposit and withdraw cash while earning interest on your balance.
Interest rates are listed as a percentage, like 1.00% APY, which stands for annual percentage yield. While the average checking account APY is just 0.07%, high-yield options offer better rates while still giving you convenient access to your money.
How does a high-interest checking account work?
A high-yield checking account combines the everyday convenience of a regular checking account with the ability to earn interest on your balance. You get full access to your money through a debit card, ATM withdrawals, and bill payments – while earning a percentage on whatever you keep in the account.
When you earn interest, the bank pays you a percentage of your account balance. A “high-interest” checking account earns a higher rate than the current average of 0.07%.
Each financial institution sets its own rates, and some offer tiered APYs based on your balance. For example, you might earn 3.00% on balances up to $10,000, but only 0.25% on balances over $10,000.
Other names for high-interest checking accounts
Depending on the financial institution, you may find alternative terms for high-interest checking accounts. For instance, some accounts are called high-yield checking accounts, high-rate checking accounts, or rewards checking accounts.
These terms are generally interchangeable – they can all refer to a checking account that offers a higher interest rate than a standard one. Rewards checking accounts may have other perks, like cash-back rewards on a debit card or reimbursement for out-of-network ATM fees.
APY (Annual Percentage Yield)
APY is the amount of money an account earns in one year. This includes compound interest. A higher APY means a higher interest payment.
Requirements and qualifications to earn high rates
To earn the highest advertised rates on a high-yield checking account, you may need to meet a few monthly requirements. Financial institutions use these requirements to make sure you’re actively using the account for your everyday needs.
- Debit card transactions: You might need to make a certain number of purchases with your debit card each month.
- Direct deposits: Some accounts require you to set up qualifying direct deposits, like your paycheck.
- Balance requirements: You may need to keep a minimum amount of money in your account to earn the highest rate.
- Paperless statements: Enrolling in electronic statements could also be a requirement.
If you don’t meet these requirements in a given month, you typically won’t lose your account. Instead, you might earn a lower interest rate for that statement cycle or face a monthly maintenance fee. Review the details before you open an account so you know exactly what to expect.
How much does a high-interest checking account cost?
High-interest checking accounts may have higher fees. Potential bank fees and costs include:
- A minimum opening deposit
- Monthly maintenance fees
- Overdraft fees
- ATM fees
- Foreign transaction fees
- Minimum balance requirements
Review all fees and balance requirements carefully before opening an account. If avoiding fees is your priority, consider an online-only financial institution that typically charges fewer fees than traditional banks.
High-interest savings vs. high-interest checking
High-interest savings accounts work similarly by paying you a percentage of your balance. The average savings account earns 0.39% APY compared to 0.07% for checking, though high-yield versions of both often exceed these averages.
Interest-earning savings accounts are typically more common. Checking accounts tend to be more active, with money frequently being deposited and withdrawn. Savings accounts are designed for slow, long-term growth with fewer withdrawals.
High-yield account rates often fluctuate. The percentage of interest you earn when you sign up could change at any time.
Here are some differences between a high-interest checking account and a high-interest savings account.
| Checking | Savings | |
|---|---|---|
| Purpose | Spending | Saving |
| Average interest rate | 0.07% | 0.39% |
| Withdrawal limits | Unlimited | Varies by bank |
| Convenience | Debit card, ATM, online bill payment, app | ATM, app |
Did you know?
Our high-yield savings account has an APY up to 3.75%.1 You can also grow your savings with the Automatic Savings feature.
Pros and cons of high-interest checking accounts
High-interest checking accounts can help you grow your balance and may encourage you to spend less to maximize interest earnings. However, there are several drawbacks to consider:
- High balance requirements: Some accounts require large opening deposits and ongoing minimums to earn the advertised rate
- Variable rates: The interest you earn when you open an account can usually change at any time
- Hidden fees: Monthly maintenance charges and other costs can surprise you if you don’t review the fine print upfront
How to choose a high-yield checking account
Finding the right high-yield checking account comes down to your personal financial habits. Here are a few steps you can take to evaluate your options:
- Review the requirements: Look honestly at your spending habits. If an account requires 15 debit card purchases a month and you mostly use a credit card, you might struggle to earn the higher rate.
- Compare fees to potential earnings: Calculate how much interest you can realistically earn on your typical balance. If the monthly maintenance fees cost more than your interest earnings, you might want to look for a fee-free option instead.
- Check accessibility: Make sure the financial institution offers a convenient ATM network and a user-friendly mobile app so you can easily manage your money on the go.
- Watch for promotional periods: Some accounts offer a high introductory rate that drops after a few months. Read the details so you aren’t caught off guard by sudden rate changes.
Taking the time to compare these features can help you find an account that fits seamlessly into your everyday life and helps you move forward on your financial journey.
Is a high-yield checking account right for you?
High-interest checking accounts work best when you maintain a steady balance and can easily meet the monthly requirements. Before opening one, calculate whether the interest you’ll earn outweighs any fees you might pay.
Making high-yield checking work for your finances
High-yield checking accounts can be a smart way to earn interest on money you’re already using for daily expenses. The key is finding an account where the requirements match your natural spending habits and the fees don’t cancel out your earnings.
Take time to review the fine print, compare your options, and choose an account that fits seamlessly into your financial routine. For more options, learn about the four must-know types of bank accounts.
Frequently asked questions about high-yield checking accounts
Are high-yield checking accounts worth it?
High-yield checking accounts can be worth it if you can consistently meet the monthly requirements and avoid fees. Earning interest on money you’re already using for daily expenses is a smart way to make your money work harder.
What's considered a good interest rate for a checking account?
A good rate is anything significantly higher than the national average of 0.07% APY. High-yield options typically offer rates several times higher than standard checking accounts.
How much interest can I actually earn with a high-yield checking account?
Your earnings depend on your daily balance and the account’s APY. You can calculate your expected interest based on your typical balance – for example, $5,000 at 2% APY would earn $100 per year before fees.
Can I lose money in a high-yield checking account?
As long as your account is held at an FDIC-insured financial institution, your deposits are protected up to the maximum allowed by law. However, you could lose money if the monthly fees you pay add up to more than the interest you earn.
How often do high-yield checking account rates change?
Rates on these accounts are usually variable, which means they can change at any time based on broader economic conditions. Your financial institution typically notifies you if your rate goes up or down.