Interest Bearing Checking Accounts
Interest bearing checking accounts offer the best of both worlds: allowing your deposit to earn interest while allowing you access it anytime that the funds are needed.
Are you looking for the best interest bearing checking accounts for yourself or your company? Whether they are interest bearing business checking accounts or personal accounts, there are lots of banks and financial institutions offering these types of interest bearing accounts with liquidity built-in.
On this site, we will cover what interest bearing checking accounts are, and also a few alternatives offering the same benefits. We will also look into whether interest bearing checking accounts really make the most sense for your needs, after you factor in the costs associated. At the end, you will get a good idea on whether interest bearing checking accounts are right for your needs and how to pick a good one.
Interest Bearing Checking Accounts - What They Are
Federal reserve rules dictate that checking accounts should not be pay any interest. So, technically, the term interest bearing checking account is a misnomer. The more accurate term for it is a Negotiable Order of Withdrawal account, or NOW. Some of the top banks that offer these bank accounts include Bank of America, Chase Bank, ING Direct (Electric Orange) and Wells Fargo bank.
When shopping for the right interest bearing checking accounts, it pays to keep an open mind. Don't be surprised if a bank offers accounts with all the benefits you are looking for in an interest bearing checking account but the account is called by a different name. Let's go over some examples next.
Consider The Alternatives
Some smaller regional banks will offer interest bearing CDs with limited check writing abilities. If you don't intend to write a lot of checks and are looking for a high interest checking account, these accounts may just be the best. They offer high interest CD rates along with some liquidity. The key is to make sure you compare high interest checking acounts as well as other similar offerings like this before you decide.
You can also consider opening interest bearing investment accounts at banks or other financial institutions. For example,brokerage houses like Etrade and Charles Schwab will offer money market accounts that allow the deposits to earn interest, as well as provide the ability for checks to be written on those accounts. If these accounts are offered by FDIC member banks, they could be FDIC insured as well. So if you go this route, make sure you verify with the bank if they are FDIC insured and to what amount before you decide to open the account.
Remember, if your goal is to find the best interest bearing accounts, it is wise to cast your net beyond checking accounts, and think about money market accounts that bear interest, or other types of interest bearing investment accounts at various banks and financial institutions. The key is to find something that offers the right level of liquidity and that will allow you to earn a basic return even after deducting account service fees. This brings us to the next section about comparing interest rates and making sense of your choice.
Compare Interest Rates - They Should Make Sense To You
An interest bearing checking account would make the most sense for an account that is holding several thousand dollars or more and that money needs to be kept liquid for spending at the drop of the hat. Before you decide on opening an interest bearing checking account, consider also the trouble you go through versus the return and benefits you get.
Many people consider interest bearing checking accounts as having too many restrictions and fees associated with them for the interest that you get out of them. In a low interest rate situation that we have today, Bankrate .com finds that less than half of all interest bearing checking accounts pay less than 1 percent in interest. Depending on the returns you expect, this may or may not be worth the trouble at all. In the next section, we will look more closely into the cost versus the benefits.