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What Is a High-Yield Checking Account?

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What we’ll cover:

  • With a high-yield checking account, you have the potential to earn more interest on your account balance
  • Some banks will expect you to complete a few qualifying activities before you could snag that high APY as advertised
  • Common qualifying activities include: setting up direct deposits, maintaining a minimum balance or making a certain number of debit-card transactions
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When you hear the words “high yield,” what’s the first thing that comes to mind? 

If you said a high-yield savings account or high-yield certificate of deposit, you’d definitely score some points with us! 

What you probably didn’t think of right away are checking accounts. And that’s fair – after all, a basic checking account usually pays little or no interest. It’s typically not what you might consider “high yield.”

But did you know there are high-yield checking accounts that could help you earn a more competitive APY on your balance? This could mean more cash in your pocket. 

If you’re not too familiar with these accounts, read on. We’ll go over how a high-yield checking account works. Once you’re caught up on the basics, you can decide whether it’s right for you. 

What is a high-yield checking account? 

You can probably put two and two together from its name: A high-yield checking account can offer a higher APY than a standard checking account, which typically pays low or no interest. 

In other words, with a high-yield checking account, you have the potential to earn more interest on your account balance. 

Just how much higher is the APY? That will depend on your bank. 

If you take a quick look online at some of the high-yield checking account offers available, you’ll likely find that the APY can run anywhere between 1% to 4%. Not too shabby, right? Especially when you compare that to the FDIC’s national average deposit rates: 0.03% for interest checking and 0.06% for savings accounts (note: rates as of October 18, 2021).  

Now, before you rush off to open an account, it’s important to take a moment and look over the terms and conditions of a high-yield checking account. Some banks will expect you to complete a few qualifying activities before you could snag that high APY as advertised. Banks may also put a limit on how much you could earn at the highest APY (more on this later).  

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How does a high-yield checking account work?

It’s actually pretty similar to a regular checking account. With a high-yield checking account you could write checks, deposit money and make purchases with a debit card that’s linked to your account. 

Your money is also FDIC-insured , as long as you open an account at a FDIC member bank. This means that your deposits are protected up to a certain dollar amount. The standard insurance is $250,000 per depositor, per insured bank, for each account ownership category. (Check out our FDIC insurance article to learn more.)

High-yield checking account requirements

To get the highest APY as advertised by the bank, you’ll likely have to complete some qualifying activities. Common examples include:

  • Setting up direct deposits
  • Maintaining a minimum balance
  • Making a certain number of debit-card transactions
  • Signing up for electronic statements

Each bank will have its own set of “qualifiers,” so definitely talk to a bank representative to confirm what you’ll need to check off. 

If you fall short of completing the qualifying transactions, you’ll likely lose the competitive rate for the month or get hit with fees (or both). Ouch! This is why it’s important to understand the requirements and stay on top of them. 

APY earnings

Another key detail to pay attention to is the APY structure. Some banks will only apply the advertised APY rate to your account balance up to a certain dollar amount. Then, a lower APY may be applied to the dollar amount that goes over. 

For example, a bank may advertise an APY of up to 4%. But they may have a rule where they’ll only apply the 4% APY to a balance of up to $10,000. Then, a lower APY may be applied to any amount over $10,000. 

Is a high-yield checking account worth it?

All this talk about qualifying activities and APY rules may have you wondering: Is a high-yield checking account worth it? 

A high-yield checking account can be a good way to help you earn more on your balance compared to a standard checking account – as long as you’re able to meet all the requirements to get the top APY, and the account fees are low. 

Remember, high fees can eat into your earnings, leaving you with less to spend. The good news is there are high-yield checking accounts that come with no monthly fees and provide ATM fee reimbursements, which could help sweeten the deal. 

What about those APY limits? Even if the top APY will only be applied, say, up to the first $10,000 in your account, that can still make a difference! 

Take a look at this basic hypothetical example: 

  • If you keep $10,000 in a standard checking account that earns an APY of 0.06% (compounded daily), you’ll earn $6 over 12 months.
  • If you put that $10,000 in a high-yield checking account that earns an APY of 2% (compounded daily), you’ll earn $200 over 12 months. 

Sure, interest earnings alone may not change your life overnight. But you could put that extra money towards your other financial goals.

Bottom line: It’s a good idea to do some comparative shopping and see if there’s an offer out there that makes sense for you and how you bank. If you typically keep a large balance in your checking account, going with the high-yield route might be worth your while if you can avoid fees and stay on top of the qualifying activities to snag the competitive APY. 

This article is for informational purposes only and is not a substitute for individualized professional advice. Articles on this site were commissioned and approved by Marcus by Goldman Sachs®, but may not reflect the institutional opinions of The Goldman Sachs Group, Inc., Goldman Sachs Bank USA or any of their affiliates, subsidiaries or divisions.