Do Checking Accounts Earn Interest?

What we’ll cover

• When looking for a checking account that earns interest, you’ll want to consider a number of factors
• Your full balance may not earn interest in your checking account, so you may want to consider a savings account, too   

If you’re looking for a checking account, your list of must-haves could include things like a large no-fee ATM network, few (if any) account fees and FDIC account insurance. It wouldn’t be surprising if earning interest isn’t high on your list (or on it at all) because, well, those rates can be non-existent or low.    

But this doesn’t mean you should give up the search for a checking account that could offer more than a place for your money to hang out. 

Do checking accounts earn interest?

If you’ve looked at the APY for a few checking accounts and were underwhelmed by their rate of return, we get it; you’ve probably seen rates measured in hundredths or tenths of a percent.

But let’s take a tiny (ha!) step back before deciding it’s not worth looking into.

If you have a checking account, earning some interest could be better than earning none at all. Plus, if there’s a minimum balance involved, a chunk of your money will always have to sit in your checking account. With an interest-bearing checking account, that minimum balance could at least make a little money. 

Is there such a thing as a high-yield checking account?

Low interest rates are not necessarily the full story when it comes to finding a checking account with interest.

Just like high-yield savings accounts offer APYs that are higher than a traditional savings account’s, high-yield checking accounts offer APYs that are higher than ones you may see with traditional checking accounts. 

Where can I open an interest checking account?

You could find interest and high-yield checking accounts at online banks and credit unions. If you’re considering a credit union and wondering about insurance, see if it’s NCUA-insured. 

Do I need an interest checking account? Seems similar to a savings account.

These two accounts can seem like the same thing; they both let you put money in, earn some interest and take money out. 

But dig into withdrawals, and you could see an important difference pop up.

With a regular or interest checking account, you could probably withdraw money today, tomorrow the day after that and the day after that. 

Savings accounts, on the other hand, could limit the number of withdrawals you could make every month.

You may also wonder about where money market accounts, which are sort of a cross between an interest-bearing checking account and a savings account, fit into this. Money market accounts offer interest and checks (like an interest checking account) but could have monthly withdrawal limits (like a savings account).  We dig into them a little more in our guide to savings accounts. 

How does an interest-bearing checking account work?

A checking account with interest works a lot like a checking account without interest.

• Both let you deposit and withdraw money regularly. 
• They could both include features that could help you put your finances on autopilot . 
• Your interest-bearing checking account could also come with an ATM or debit card.

A checking account with interest, however, has the added feature of – obviously – earning interest.

What sort of requirements do interest checking accounts have?

To earn checking account interest, you may have to meet a higher minimum balance to avoid fees than you would with a zero-interest checking account. 

You may also have do a few things to qualify for the higher APY, like have paychecks directly deposited into your interest checking account and use the account’s debit card a few times per statement period. (This means it has to settle and be recorded by the time your statement closes.) 

Should I put all of my money into an interest checking account?

It can be pretty exciting to find a checking account that earns interest and has the other features you like. Should you put all of your money in there? Excellent question.

Checking accounts aren’t considered great places to hold cash. The typically low rates we mentioned earlier are one reason, and a financial or tax advisor could probably provide a few others. 

Plus: There could be a cap on how much of your money could earn interest in your checking account. You could, for example, earn interest on up to $10,000. Anything over that might earn interest at a lower, and less appealing, rate.   

This is where other opportunities may come in.

Once you know the limit of how much of your checking account balance could really earn interest, and have enough to cover the minimum balance, recurring bills and maybe a little padding for just-in-case withdrawals, you could be ready to explore other types of accounts. 

Two to consider: 

• Savings accounts offer relatively simple access and could have higher APYs than checking accounts. You could use them to hold your emergency fund or saving for near-term goals. 
• Certificates of deposit could have even higher APYs. They offer less access than a savings account – regular deposits and withdrawals aren’t an option and you could pay a penalty for exiting too early. But the higher APY and hands-off incentive could help you save for short-term goals.

Plus, there are accounts that could help with longer-term goals, like retirement. If you think we’re talking about an IRA in addition to a 401(k), you’re partly right; we’re also thinking about investing in other ways, too. 

So to recap: Yes, you can earn interest with a checking account. And a little bit of research could point you to other accounts and ways to put your money to work.