Are High Interest Checking Accounts Worth It?

Are High Interest Checking Accounts Worth It?


A high interest checking account is also known as a high-yielding or premium checking account. This type of checking account is designed to pay account holders a higher interest rate or annual percentage yield (APY). This interest rate is usually a lot higher than the average interest rate that a bank offers for savings or for standard checking accounts.

While premium checking accounts provide investors with a greater return on the dollar; they are harder to maintain. Many people want to know if a high APY checking account is worth having. The following information will answer that question.

High Balances and Premium Checking Accounts

Premium checking accounts have a higher standard balance. An account holder will have to keep a larger amount of money within this type of account to keep from paying fees. Each banking or financial institution will determine that amount. Typically, a high yield checking account holder will be required to keep their account open with at least $10,000 or more. Otherwise, they will be charged a high interest fee that will cut into their principal amount. This fee will also be determined by the financial institution representing the account.

There are Limits to High Yielding Checking Accounts

High yielding checking accounts have limits. These limits are necessary for keeping interest rates at a good level. The maximum account balances for a high yield checking accounts is $25,000. Some financial institutions will allow account holders to go over this amount. Other institutions will establish a lower standard.

This type of interest-bearing account will be hard for many people to maintain. They will need to maintain a high balance just to keep it in good standing. Some people can afford to keep a checking account of $10,000 or more. A lot of other people cannot. A person’s financial situation will dictate if this type of account is suited for their situation.

Keep in mind that account users who have a lot of money can open-up multiple high interest accounts for checking. Having multiple high APY checking accounts will allow holders to earn premium interest from different types of accounts. For example, if a person invests $100,000 into 4 different financial institutions at 4% interest, they could earn up to $4,000 a year. Once again, this is not a lot of money, but you get the idea. As with most other types of investing strategies; the more you spread your wealth, the greater the return.

Interest Rates for Premium Checking Accounts

Premium checking accounts typically have a high interest rate that lies between 1% and 4%. This is a high rate of interest on this type of account. If a person invests up to the standard maximum of $25,000 at 4%; they could earn up to $1,000 a year. If they a person invests $10,000 at 4%, they could earn up to $400 per year. This isn’t a lot of money but for a high interest account for checking. Still, this is a good return on an investment account.

Are high APY checking accounts worth it?

The simple answer is that a high interest checking account is best suited for people with money. People who do not make a lot of money won’t benefit much from this type of account. The reason being is that they will probably have to withdraw some type of money to cover living expenses or to pay a debt.

A high APY checking account is also impractical for people who need constant use of their money. If you constantly invest or use your money for business purposes, this account type is not for you.

However, if you can put your money into this type of checking account and leave it alone; you can use the interest payments as a form of residual income. That interest might not be a lot, but it is better than having nothing at all.


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