by Charlotte Wood
(last updated August 18, 2017)
Until I worked at a bank during high school I had no idea that your checking account could earn interest just like your savings account. Hooray for earning interest on your regular spending money! While it's a great new banking innovation and serves as a big draw to customers, there are a few caveats surrounding interest checking that need to be kept in mind.
Interest checking is most definitely an excellent banking perk; who wouldn't want to earn extra money on funds that aren't specifically set aside for savings? Another plus to interest checking is the fact that the interest rates for these kind of accounts are significantly higher than the half a percent typical for traditional savings accounts. Also, the interest checking accounts I've come across are tiered so that the higher balance you have, the higher interest rate your money earns. So if everyone would like interest checking why then doesn't everyone have it? The way banks weed out those who have interest checking is through fees and balance requirements.
The bank where I worked had a balance requirement for their interest checking or a pretty high monthly fee. This worked well because those with high balances who could really afford the monthly fee didn't have to pay it while those who had a harder time paying the extra didn't qualify for the exemption. In my experience, interest checking follows those with money (successful home investors for example).
Interest checking is definitely a splendid idea, but because it's such a splendid idea, banks have to weed out its users. If you do decide to open up an interest bearing checking account, try and make sure you qualify for the account. Whether it's free after a certain balance level or you really do need to maintain a specific balance, make sure you can fulfill those requirements because if not, you could get yourself into more trouble than the 2.5 percent interest is worth. Earning extra money on your spending money is a most wonderful idea, but do be careful about the conditions of the account and the other obligations involved. If you can't afford it or don't meet the recommended (or requisite) conditions, then don't try and go for an account that's better suited for your finances.
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