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Best High Interest Checking Accounts | November 2022

High yield checking accounts provide interest rates that are up to 100x better than the average savings account rate. The catch is you have to meet certain requirements, such as making a minimum amount of transactions every month. However, these requirements are a small price to pay for such a generous annual percentage yield (APY).

Keeping enough money to cover your bills in a checking account and then transferring any surplus to a savings account or a money market account is the traditional model for maximizing the interest you can earn from your bank account. However, there is a better way for those willing to jump through a few hoops to earn a higher interest rate.

We reviewed the best nationally available high-yield checking accounts, and some them offer APYs as high as %.

Supermoney's guide to high-yield checking accounts

Think stashing money in a savings account is a waste of money?

  • The average savings account interest rate is below 0.1%.
  • The inflation rate is around 2%.
  • The savings accounts with the highest interest rates usually max out at 2% APY.

So, yes, you have a point. But don't give up on checking accounts quite yet. If you are looking for a high interest rate on your checking account balance, you should consider high-yield checking accounts. They just might change your mind about the value of saving a chunk of your emergency fund in a checking account.

What Are High-Yield Rewards Checking Accounts?

High-yield rewards checking accounts are a lesser known accounts that can earn up to % returns on your cash. These accounts offer higher returns than savings accounts, CDs, and money market accounts.

What's the catch with high-yield checking?

High returns are only paid on a certain amount: called the balance cap. Balance caps vary by bank or credit union, but are typically below $25,000. There are also certain requirements account holders must meet, such as opting for electronic statements, having a direct deposit, and making a minimum of 10 (or more) debit transactions a month.

The secret is to stay as close to balance cap as possible to maximize the yield of your savings and ensure you meet the account requirements. Any month you do not meet the minimum requirements, you will not receive the higher yields.

How To Use High-Yield Rewards Checking Accounts

High-yield rewards checking accounts provide better returns than savings accounts, regular checking accounts, and CDs. True. There are some hoops you have to jump through and the high yield is usually restricted to $5k to $25k. Still, they generate 2x to 5x the APY of high-interest savings accounts, so the extra effort is well worth it. Although high-yield rewards checking accounts are only an option for relatively small amounts, they provide an excellent place to store your emergency fund or park savings you will need to access soon.

High-Yield Checking Accounts, Emergency Funds, And Cash Drag

Financial advisors agree cash is a terrible investment. Once you calculate inflation, taxes, and the opportunity cost, you are losing money by holding cash in your investment portfolio. However, financial advisors also recommend having an emergency fund with enough cash to cover three to six months worth of household expenses. For the average American household, that means saving anywhere between $13,000 and $26,000 in cash, which is a serious chunk of change for most of us.

High-interest checking accounts provide a perfect solution for the cash drag vs. emergency fund dilemma. By depositing your emergency fund in a high-yield checking account, you have quick access to your savings (the whole point of an emergency fund) while still earning a solid 2.5% to 5% APY. Unlike stocks and bonds, there is no risk involved because your deposits are federally insured up to $250,000.

When done correctly, the savings you put in a high-interest checking account can balance, instead of dragging, your investment portfolio.

Take 2015 for example. It was a bad one for my retirement fund. It wasn't just me. Around 70% of investors lost money in the worst year for the stock market since 2008. My fund is mainly invested in stocks (90%) and bonds (10%) and generated a negative yield of -2.5%.

Ouch.

On the other hand, my emergency fund, which I have parked in a couple of high-yield checking accounts, generated a tidy 3.5% APY.

Follow these guidelines to make the most out of your high-yield checking account

  • Only open as many high-yield checking accounts as you can realistically manage. Consider two or three as a reasonable limit. Remember you need to make 10 or more debit transactions a month and set up automatic payment/direct deposits. The time involved in managing these accounts adds up fast.
  • Make sure one of your checking accounts allows you to transfer funds as direct deposits for free. If not, you may struggle to meet the "direct deposit" requirement. Some financial institutions accept PayPal and other money transfer services as a direct deposit.
  • Never spend money just to meet the minimum requirements. It will negate the interest you are making from the high-yield accounts.
  • Stay as close as possible to the balance cap to maximize your interest returns.

Opening an account during the COVID-19 pandemic

You can open most checking accounts online. For instance, the checking accounts in our list of highest yield checking accounts are available online. However, remember that some institutions may have temporarily closed their branches or curtailed hours to help protect customers and employees from COVID-19.

FAQs on High Interest Checking Accounts

What are high-yield checking accounts?

It's a checking account that has an annual percentage yield (APY) that's much higher than those offered by standard checking accounts, which usually offer no interest at all.

Can a checking account earn interest?

An interest checking account is a checking account that pays interest on the money in your account. Traditionally, checking accounts are not interest-bearing accounts—they're for short-term cash that you'll spend soon.

What are the types of checking accounts?

There are three major categories of interest checking accounts. 1.Standard checking account, typically offered online, that pays interest and offers checking features. 2.Money market account, offered by most banks and credit unions, which technically isn't a checking account. 3.Reward checking accounts, which tend to have more restrictions and are harder to qualify for, but which pay the most interest.

What is a money market checking account?

A money market account is an interest-bearing account at a bank or credit union—not to be confused with a money market mutual fund. They also come with restrictions that make them less flexible than a regular checking account.

What is the average checking account interest rate?

Major banks only give 0.01% APY on most interest checking options. The national average of 0.04% is mostly a reflection of the high interest rates of online banks and smaller regional banks whose account policies tend to be more generous to customers. The high-yield checking accounts in the list above offer interest rates of up to %.

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