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You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. An interest-bearing checking account is an option for consumers who are looking to earn interest on the account balance — unlike standard checking accounts. Checking accounts are primarily used for spending rather than saving, so it’s less common to find a checking account that pays interest than one that doesn’t. How do interest checking accounts work
An interest checking account pays interest on the balance of the account, typically monthly. Though savings accounts generally earn higher yields than checking accounts, having an interest-bearing checking account allows you to earn interest on the money in all of your accounts. How interest-bearing accounts differ from other checking accounts
Earning interest is really the only difference between an interest-bearing and regular checking account, though an interest checking account may require a higher balance to avoid a monthly fee. There are exceptions, usually at online banks. found that interest checking accounts have an average monthly fee of $16.35, which was a record. Noninterest checking accounts had an average monthly fee of only $5.08. How do interest checking accounts compare to MMAs
Checking and money market accounts have some similarities, such as check-writing privileges, but they also differ. Before April 2020, most money market accounts were restricted to six certain withdrawals or transfers per monthly statement period. The Federal Reserve has since removed this restriction, but some . Interest checking accounts generally don’t have withdrawal restrictions. Pros of interest checking accounts
Interest-bearing checking accounts allow you to earn interest on the account balance, which regular checking accounts don’t provide. It makes sense to earn interest on all your bank accounts, as long as there are no monthly service fees or if they can be easily avoided with direct deposit or by maintaining a minimum balance. Cons of interest checking accounts
On the downside, interest-bearing checking accounts may: Have higher minimum balance requirements to waive monthly service fees. On average customers needed $505.22 to avoid the monthly service fee on an interest checking account, according to Bankrate’s 2021 fee survey. That’s $343.09 more than the average minimum deposit needed on a noninterest checking account. Have caps on the amount of money that will earn a competitive interest rate. That’s especially true for interest checking accounts that earn a higher yield than the most competitive high-yield savings accounts. Require a certain number of debit card transactions and have a direct deposit to get a very competitive yield. Earn less interest than a high-yield savings account at some online banks. Not offer a competitive annual percentage yield (APY). Bottom line
It’s smart to consider having all of your money in interest-bearing accounts. Earning interest on your checking account can help you add to your account balance, even given the current low-rate environment. To save even more, choose an account that charges no monthly service fee or let’s you avoid the fee by maintaining a minimum monthly balance. Learn more
SHARE: Matthew Goldberg is a consumer banking reporter at Bankrate. Matthew has been in financial services for more than a decade, in banking and insurance. David Schepp is a wealth editor for Bankrate, focusing on deposits and consumer banking content. Related Articles