When it comes to responsible financial management, making your money work for you through tools such as earning interest is a powerful strategy. However, with the variety of financial products out there and various needs, it is common to wonder where and how to find such interest-bearing accounts. For example, do checking accounts earn interest?
Let’s look at the types of checking accounts that offer interest as well as review some tips for selecting the best interest-bearing checking account for your personal needs.
What Are Interest-Bearing Checking Accounts?
An interest checking account or interest-bearing checking account is simply an account that operates like every other checking account while also earning interest. Checking accounts that earn interest may express the interest rate they offer either as an interest rate calculated on a current balance or as an annual percentage rate (APY).
Types of Interest-Bearing Checking Accounts
Although they are not as common as checking accounts that do not earn interest, interest-bearing checking accounts are not impossible to find. In fact, two common types of interest checking accounts are available in the financial market today: high-interest checking accounts and rewards checking accounts.
High-Interest Checking Accounts
Because of low interest rates, most banks these days do not offer interest on their standard checking accounts. They may, however, offer high-interest or high-yield checking accounts in addition to standard accounts. These interest-bearing checking accounts pay either a fixed APY or a tiered interest rate based on your balances. However, to maximize the interest paid, high-yield checking accounts generally require users to meet certain income or balance requirements or perform certain actions, such as set up direct deposit or make a certain number of transactions each month.
Rewards Checking Accounts
Although not technically the same as an interest-bearing checking account, rewards checking accounts can function in a similar way by allowing users to earn and accumulate rewards, including cash and other gifts, based on their use of theh checking account. Common rewards checking accounts, for example, include the use of debit or credit cards that offer cash back for up to 5% of purchases or the opportunity to trade in purchase points for gift cards at an even higher rate.
Comparing Interest Rates Across Banks and Credit Unions
If you are interested in opening an interest-bearing checking account, it’s important to start by comparing the interest rates offered by various banks and credit unions to find the offer that works best for your situation.
HRCCU Interest Rates
To stay updated on current interest rates at HRCCU for checking accounts, please visit https://www.hrccu.org/banking/checking-savings/.
How to Choose the Best Checking Account for You
When you are shopping around for a checking account, it is important to look at more than just interest. Other factors that are unique to your life, such as how you use your money and how much money you can afford to keep as a checking account balance, should affect which account you ultimately choose. In general, you need to pay attention to the account features that fit your financial goals. This may include features such as low minimum balances, access to direct deposit, or ATMs near your work or home.
Checking vs. Savings Accounts: Which Is Better for Earning Interest?
Interest-bearing checking accounts are generally not the most powerful way to make your money work for you. Think about it this way: active checking account balances can vary greatly daily and weekly because users constantly receive pay checks, pay bills, and make debit card purchases. This may lead to low or no interest payments during some months.
Instead, if your goal is to make money through interest, putting money in a high-interest savings account, such as a money market account or certificate of deposit (CDs), is a better option. Savings accounts earn higher interest rates than checking accounts because the balances in savings accounts typically remain fixed for longer periods.
Key Differences Between Checking and Savings Accounts
Although most checking accounts don’t earn interest, they do offer you the ability to easily complete day-to-day transactions, such as paying bills and accessing cash at an ATM. On the other hand, if you want to meet longer-term financial goals, such as saving for a home or vacation, savings accounts are a better choice. Savings accounts are not used for daily purchases, so their balances remain relatively fixed, which is why they offer higher returns on interest.
Opening a Checking Account at HRCCU
Whether you are looking for an easy checking account solution or want the flexibility of earning interest with your checking account, Hudson Valley Community Credit Union (HRCCU) has a solution that can help. Our checking account options include a standard (non-interest-bearing) account and a premier checking account that earns interest when members maintain a minimum balance. Call or stop by one of our branches today to learn more about HRCCU’s checking account options and get started with your membership today.
