1. Money

Interest Checking

Basics and Pitfalls of Interest Checking Accounts

By

Interest checking accounts allow you to earn interest on easily accessible cash. They’re like a mix between checking accounts and savings accounts. Let’s look at the basics of interest checking accounts and some of the major providers.

Why Interest Checking Accounts?

What’s so great about these accounts? Traditionally you had a tradeoff between easy access (via a checkbook or debit card) and higher interest earnings. With interest checking accounts, you get the best of both worlds - you can write checks, use a debit card, make ACH transfers, and earn a competitive return on your cash.

Interest Checking Pitfalls

Some interest checking accounts have restrictions. Make sure you know what they are before opening the account. Start by understanding your needs - what do you need an interest checking account for and how are you going to use it?

Some common pitfalls to watch for:

  • Limited number of transfers in the account per month
  • Minimum balance requirements
  • Bounced check fees (see if they offer an overdraft line of credit)

Types of Interest Checking Accounts

There are two major types of interest checking accounts. The first type is a plain-vanilla account that pays interest and offers checking features. The next type is a reward checking account. Reward checking accounts generally have more restrictions and are harder to qualify for - but they pay more interest.

Basic Interest Checking Providers

For plain-vanilla interest checking accounts, you might start with the banks below. We’ve reviewed and summarized their interest checking offers:

Reward Checking Accounts

"Reward" interest checking accounts are harder to find and qualify for. Sometimes you have to visit the bank in person to open an account, but they generally pay a very competitive annual percentage yield (APY) - even higher than long term CDs in some cases.

Related Video
Jameson Hsu on Online Gaming and Advertising
  1. About.com
  2. Money
  3. Banking / Loans
  4. Checking Accounts
  5. Interest Checking - Basics and Pitfalls of Interest Checking Accounts

©2014 About.com. All rights reserved.