High-Yield Checking Accounts: A surprising financial opportunity.

Last week we explained the benefits of having a high-yield savings account, but what about your checking account: have you heard of a high-yield checking account? Thanks to today’s competitive high interest rate environment, they are becoming increasingly available as financial institutions look  to bolster the amount funds they have on deposit. And they are exactly what they sound like – a checking account that pays interest.

Let’s be clear – high-yield checking accounts generally don’t offer rates as high as savings or certificates accounts; those accounts are designed and intended to accumulate and maintain your funds. Checking accounts are structured so that they offer accessibility to spend or disperse those funds. Since money flows in and out of most checking accounts, they are typically not primary sources of deposits for the financial institution, and thus the opportunity to earn interest from them is limited.

Historically, most people probably cannot remember a time when they could earn interest on a checking account: money went in, money went out, and often there was a charge for the privilege, or at least a required minimum balance. A checking account was not a tool in a portfolio, it was a financial convenience, a service provided by financial institutions, and mostly distinguishable by the amount of its fees and charges. They did not earn money for the account holder – the best consumers could usually hope for was getting a free one for maintaining required minimums. Apart from new accounts offering a cash reward for a (usually hefty) minimum deposit maintained for a designated period, money left in a checking account sat there until it was spent, gathering dust.

Not anymore. Now you can turn dust into dollars with a high-yield checking account. If you have a checking account and it is not earning at least 2% you are losing money.

Here are the top five reasons why you should add a high-yield checking account to your portfolio:

1. Higher interest rates. The big advantage high-yield checking accounts have over traditional checking accounts is that they earn money instead of cost money.
2. Liquidity. The primary reason to maintain a checking account is to have easily accessible funds for everyday living expenses and emergencies.
3. Low or no minimums and fees. Unlike cash-back checking accounts which come with minimum monthly transaction requirements and limits on cash back received (please read the fine print), high-yield checking accounts offer most of today’s free checking account incentives, including low or no minimum balances, no monthly fees, and no minimum ATM or point-of-sale transactions to keep your account free from fees. For most financial institutions the only requirement is a monthly direct deposit minimum. At Lafayette Federal, you can open a high-yield checking account with as little as $5 and maintain it with just $500 a month in qualified direct deposits to receive a premium rate of 2.02% APY. That’s it.
4. Conveniences that saves you money & time. The best high-yield accounts offer the conveniences of the best standard accounts: free ATM access at branch and network locations, and free online bill pay. These features save you money, which is as good as earning money.
5. Safety and Security. If your financial institution is insured by NCUA or FDIC, the funds in your high-yield accounts are insured up to $250,000.