Best Interest-Bearing Checking Accounts in 2024
Best Interest-Bearing Checking Accounts in 2024
While typical checking accounts don’t accumulate interest, interest-bearing checking accounts blend the functionalities of traditional checking with the ability to earn interest.
In this comprehensive guide, we delve into the workings of interest-bearing checking accounts and essential considerations if you’re considering opening one.
What Is an Interest-Bearing Checking Account?
Also known as an interest checking account, an interest-bearing checking account is a type of bank account that allows you to deposit and withdraw funds like a traditional checking account and earns interest on the balance maintained in the account.
Unlike standard checking accounts that typically do not offer interest, interest-bearing checking accounts allow you to earn a small amount of interest on the money you keep in the account. The interest rate is usually lower than what you would earn in a savings account but can still provide a modest return on your deposited funds.
These accounts often have particular requirements, such as maintaining a minimum balance or meeting specific transaction criteria, to qualify for earning interest.
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How Does an Interest-Bearing Checking Account Work?
An interest-bearing checking account is much like a traditional account you may already be used to. You can deposit and withdraw funds anytime, make purchases with a debit card, and visit ATMs to retrieve cash.
Unlike a traditional checking account, however, an interest account will also earn interest, usually a percentage of your total balance. Depending on the bank or financial institution you choose, your interest may be calculated daily, monthly, or quarterly and likely credited to your account every month.
How Much Money Can You Earn in an Interest Checking Account?
Interest rates can change at any time, but we’ve analyzed 10 interest checking accounts to give you an idea of the amount of interest you can earn with a $20,000 deposit over one year.
As you’ll see, earnings can vary tremendously, so it is worth it to shop around for a high-yield checking account with a higher interest rate.
What Fees Come with an Interest-Bearing Checking Account?
While an interest-bearing checking account can allow you to earn interest on the money in your account, you should also be on the lookout for the following fees.
Monthly Maintenance Fees
Checking account monthly maintenance fees are charges imposed by banks or financial institutions to cover the cost of maintaining and servicing the account. These fees are typically assessed on a monthly basis and can vary depending on the bank and the type of account.
Some banks waive these fees if certain conditions are met, such as maintaining a minimum balance, setting up direct deposit, or fulfilling other requirements outlined by the bank. Monthly maintenance fees can range from a few dollars to upwards of $20 or more, but they can often be avoided with careful account management or by choosing a fee-free checking account option.
ATM Fees
ATM fees for checking accounts are charges incurred when using an ATM that does not belong to your bank’s network. These fees can include:
- Out-of-network ATM fees: Charged by your bank for using an ATM outside of their network.
- Surcharge fees: Charged by the ATM owner for using their machine.
- Foreign ATM fees: Additional charges for using an ATM located in a different country.
These fees can vary depending on your bank’s policies and the ATM you use, typically ranging from $2 to $5 per transaction. Some banks may reimburse a certain amount of these fees each month or offer access to a large network of fee-free ATMs.
Overdraft Fees
Overdraft fees are charges imposed by a bank when you spend more money than you have available in your checking account, resulting in a negative balance.
When a transaction exceeds your account balance, the bank may cover it temporarily but charge you an overdraft fee, typically ranging from $25 to $35 per transaction. These fees can accumulate if multiple transactions are processed while your account is overdrawn.
Banks may offer overdraft protection programs to help mitigate these fees, such as linking your checking account to a savings account or a line of credit.
Pros and Cons of Interest-Bearing Checking Accounts
Just like any other financial products, interest-bearing checking accounts come with these benefits and drawbacks you should consider.
Pros
- Earn interest: Unlike traditional checking accounts, interest checking accounts allow you to accrue interest on your balance.
- Accessible funds: Since interest-bearing checking accounts are designed for everyday use, you can withdraw money from them whenever necessary.
- Money is protected: If you choose a reputable bank or credit union, you can expect $250,000 of your money to be insured by the Federal Deposit Insurance Corporation (FDIC) or National Credit Union Administration (NCUA).
- Potential perks: Some interest checking accounts come with perks, such as rewards and early direct deposit.
- Many options: If you do your research, you’ll be able to find several interest checking accounts and zero in on the right one for your needs.
Cons
- Lower interest: While interest checking accounts accrue interest, rates are usually below what you may earn with savings accounts.
- Monthly maintenance fees: You might have to pay monthly service fees in exchange for the perk of earning interest.
- High minimum balance requirements: Some banks require you to always keep a lot of money in your account to keep your account open and earning interest.
Compare Interest-Bearing Accounts
If you’re interested in interest-bearing checking accounts, here are several options you might want to explore.
Capital One 360 Checking
Capital One 360 Checking offers fee-free online checking accounts with no minimum balance requirements or overdraft fees, making it an attractive option for cost-conscious individuals.
With features like a large ATM network and the ability to deposit cash at select locations, it provides convenient money management solutions.
Pros include no monthly fees, easy cash deposits, and the opportunity to earn interest on balances. However, its limited physical footprint and some additional fees are cons to consider.
Overall, Capital One 360 Checking suits those comfortable with online banking and seeking flexibility in managing their finances without monthly fees or balance requirements.
Grasshopper Bank
For small businesses, the Grasshopper Bank Innovator Business Checking account offers no-fee checking accounts, accessible online with a $100 minimum deposit. Its digital platform suits those comfortable with online banking, providing FDIC insurance and competitive APY on balances.
Pros include easy online opening, unlimited transfers, and rewards on purchases via Visa debit cards. However, it lacks physical branches and savings or CD accounts.
Grasshopper ensures security with FDIC protection and offers a user-friendly experience via its website and mobile app. Customer support is available by phone, email, or live chat.
With no monthly fees and convenient access, Grasshopper’s Innovator Business Checking serves businesses seeking simplicity and growth opportunities. Opening an account requires basic business information, and setup takes under 10 minutes online.
SoFi Money
In today’s banking landscape, selecting the right account is crucial for managing finances effectively. The SoFi Checking and Savings account is unique because it allows you to manage everyday spending and savings in one place.
SoFi Checking and Savings stands out as an online option offering no fees, competitive interest rates, and bonuses for direct deposit. Ideal for those seeking alternatives to traditional banking, it simplifies money management with no monthly fees and fee-free overdraft coverage.
Although lacking branch banking, SoFi provides comprehensive online and mobile access, including cash withdrawals at over 55,000 ATMs. With a straightforward setup requiring no minimum balance, it offers a user-friendly interface and extensive fee transparency.
Quontic Bank
If you’re seeking fee-friendly online banking without branch access, Quontic Bank offers adaptable digital banking with competitive features.
Offering no monthly or overdraft fees and a vast surcharge-free ATM network, Quontic stands out with several of its checking accounts, including its interest account.
While lacking branch banking, Quontic provides convenient online and mobile access, ideal for those comfortable with digital banking. Quontic’s high-interest checking accounts offer competitive rates with no minimum balance requirements.
Opening an account is straightforward, requiring basic information and an initial deposit from another bank. Quontic’s user-friendly website and transparent fee structure enhance the banking experience.
Axos Bank
The Axos Bank Rewards Checking Account offers a competitive APY, although eligibility for the highest rate is based on meeting certain requirements.
With unlimited ATM fee reimbursements, no monthly maintenance or overdraft fees, and no minimum balance requirements, it presents a compelling option.
However, qualification criteria for the maximum APY can be complex. Despite this, the account provides convenient access to funds through various deposit and withdrawal methods.
Ideal for those who make regular direct deposits and use their debit cards frequently, it stands out for its attractive APY and fee structure, making it a solid choice for many banking needs.
How to Open an Interest-Bearing Checking Account
It’s pretty easy and straightforward to open an interest checking account. Once you find an account that meets your needs, follow these steps:
- Gather your information: Make sure you have a government-issued ID, like a driver’s license or passport, proof of address in the form of a utility bill, and your Social Security number on hand.
- Complete the application: Depending on the financial institution, you can complete the application online or in person at a local branch.
- Pay the opening deposit: In most cases, you’ll have to make a minimum deposit to open your account.
What Happens After You Open Your Account?
After you open an interest-bearing checking account, keep the following in mind:
Balance Conditions
Since your bank may impose fees for account maintenance or other services if the balance falls below this minimum threshold, you’ll want to monitor your balance to ensure it doesn’t fall below that threshold. If the account balance remains above the minimum requirement, the bank may waive these fees and even offer interest on the balance as a reward for keeping funds deposited.
Transaction Limits
Be aware of any transaction limits imposed on your account, such as the number of withdrawals or transfers allowed per statement cycle. Exceeding these limits could result in fees or restrictions.
Monthly Maintenance Fees
If your account charges monthly maintenance fees, understand what they are. You may be able to meet certain requirements to have the fees waived. If you can’t meet those requirements, you’ll need to budget for them accordingly.
ATM Fees
Sometimes, you must stick to in-network ATMs to avoid ATM fees. If this is the case with your account, familiarize yourself with the in-network ATMs in your area.
Special Benefits
Depending on your chosen account, you may qualify for perks like early direct deposit or rewards. Get to know any special benefits that apply to you to take full advantage of them.
Savings Account
If you don’t have a savings account, you may want to open one, so you have somewhere to park your emergency fund and save for other financial goals. An interest checking account is not a replacement for a savings account.
Interest Rate Changes
Interest rates on checking accounts can fluctuate based on market conditions or bank policies. Stay updated on any changes to your account’s interest rate to maximize your earnings.
Account Monitoring
Regularly monitor your account activity for unauthorized transactions or errors. Promptly report any suspicious activity to your bank to prevent potential losses.
Account Upgrades
As your financial needs evolve, consider upgrading your account or exploring additional banking products offered by your institution. This could include transitioning to a higher-tier checking account or opening investment accounts for long-term savings goals.
Financial Education
Take advantage of educational resources provided by your bank to improve your financial literacy and make informed decisions about managing your money. Many banks offer online articles, seminars, or workshops on topics such as budgeting, saving, and investing.
Building Credit
Consider establishing or improving your credit history by using your checking account responsibly and making timely payments on any associated credit products, such as overdraft protection or credit cards.
By staying proactive and informed, you can make the most of your interest-bearing checking account and achieve your financial goals effectively.
Methodology
We reviewed more than 50 checking accounts from top traditional banks, credit unions, and neobanks.
We chose the best interest-bearing checking accounts by looking at interest rates offered over time. We also chose our list based on low fees, no fees for certain transactions, the ability to waive fees, accessibility (including ATMs), minimum opening deposit requirements, and customer service availability.
This rigorous approach ensures that our recommendations are founded on a detailed and holistic analysis, identifying the best-suited checking accounts for our audience.
Visit our Deposit Product Ratings Methodology page for an in-depth look at how we choose the products we feature on our pages.
Interest Checking FAQ
No, most traditional checking accounts don’t accrue interest. You’ll have to look for an interest-bearing checking account to earn interest.
An interest-bearing checking account usually pays a very low interest rate. You’ll be able to earn more with a savings account or money market account.
Some banks and credit unions offer interest-bearing checking accounts. U.S. Bank and Capital One are two options to consider.
In most cases, interest checking accounts are insured by the FDIC or NCUA. This can give you the peace of mind knowing your funds will be protected if the bank or credit union fails.