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A Guide to Interest Bearing Checking Accounts

A Guide to Interest Bearing Checking Accounts

Interest bearing checking accounts can be an effective tool for your finances.  While they certainly aren’t for everyone, it is important to understand the basics of interest bearing checking accounts, including the negatives.  Once you have some insight into what these accounts do and are for, you can decide if it is something that should seriously be considered.

Interest bearing checking accounts, which can be seen under other names such as high yield interest rewards checking accounts, offer a certain percentage with some limitations.  However, the interest gained is nice while it allows you to earn interest on your money.

As a bridge between simple checking accounts and investments, such accounts can be very useful.  After all, you are able to transfer your money, write checks, and use a debit card, all while you are earning interest. 

The negative aspects of checking accounts that earn interest are common limitations.  One of the common pitfalls is a minimum balance.  If you drop below the minimum balance, you may not be entitled to the high interest rate, which could be lowered or eliminated.  Sometimes these minimum balance requirements are rather high, relatively speaking.

Other limitations also exist.  For instance, it is common to see a limit to the number of transfers that you can make with the account.  This may put a strain depending on how active you need this account to be.  Other disadvantages, such as a maximum limit or bounced check fees, may be applicable.  For the latter example, it is a good idea to see if an overdraft line of credit is able to be used.

Interest bearing checking accounts are commonly seen in two types.  The first is the normal, plain account that allows you to gain interest while receiving checking features.  There are also reward checking accounts that pay more interest, that come with higher qualifications.

If you are interested in these types of accounts, interest bearing checking accounts are commonly available.  You can check with your local or online bank to see what is available.  You could also do some research online to see what the best current rates are, of course noting the requirements to receive the rate listed.

Requirements once you are involved in this type of checking account can vary.  However, there are some general guidelines that are seen.  For instance, it is very common for direct deposit or auto debit to be required to qualify.  Electronic statements, as opposed to mailed paper statements are also typically seen.  A number of debit card transactions may be given, such as 10 non ATM transactions in order to qualify.

An interest bearing checking account can give you the liquidity you need while offering a decent interest rate on your money.  For some this could be a practical and convenient way to manage their money.  For others, the limitations and requirements are too much, and other forms of investments may be much simpler and productive.  When you look at specifics, make sure you understand all requirements and limitations and then weigh what is best for your financial situation.

Photo courtesy of Joe Shlabotnik.

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