Hold the phone.
You’ve got your savings and checking accounts, but here’s a new one: a high-yield checking account.
We know. Right when it feels like you’ve got everything, the financial institutions go and throw another phrase to the pile.
Curse the sky, the banks, whoever you’d like, but when it comes down to it, you’ve gotta learn this one. We’re sorry, but hey, in the long run, it may help you.
At EXTRA, we’re here to make this process as easy as possible. Let’s dive into it.
Definition of a High-Yield Checking Account
Let’s get down to brass tacks.
By definition, high-yield rewards checking account is an account that builds interest and encourages regular use. Banks offer these cards as attractive options for those looking to make money, but these cards offer higher earnings at a low cost.
Basically, a high-yield checking account has a high APY, or (for those not in the know) an annual percentage yield: the amount you make in a year based on your interest rate.
Is interest good? Duh. Interest makes you money. In this case, there’s a catch. To get your interest, you’ll have to meet a few of the bank’s qualifications. But like most good things, your money should grow over time.
The Best High Yield Checking Accounts
When it comes to banks, the benefits can range. A lot. Below, we’ve broken down your top choices based on the annual percentage yield.
Remember, the APY is the percentage of interest your bank account makes yearly.
- 4.25% APY - La Capitol Federal Credit Union
- 4.09% APY - Consumers Credit Union
- 3.30% APY - Liberty Federal Credit Union
- 3.00% APY - Lake Michigan Credit Union
- 2.25% APY - Presidential Bank
- 2.00% APY - Garden Savings Federal Credit Union
- 1.47% APY - Industrial Bank
High-Yield Checking Account Pros
Spoiler alert: High-yield checking accounts come with a lot of pros. They’re designed to be attractive, so the perks are hot.
Give these benefits an eyeball.
If you’re opening a high-yield account, here’s why. As we said, these accounts earn more based on your balance.
Sometimes coined a “rewards account,” these accounts are designed to get you more money based on what you have.
Let’s look at an example:
Say you have $10,000 in a regular checking account with a .06% interest rate. Hey, good for you for making all that cash, but don’t expect your bank to make you more.
At that rate, you’ll earn an annual interest rate of *drumroll please* $6.
Like, what’s the point?
But now, let’s say you have the same 10k in a high-yield checking account with an interest rate of 2% per year. Got a calculator, anyone?
That’s right, with the same money, you just made $200. Even if that doesn’t sound like a lot, it adds up. Remember, the more you have, the more you’ll earn.
No Minimum Balance Requirements and No Monthly Fees
Don’t worry about upkeep. When your monthly bill rolls around, you’ll breathe fresh air. No matter how low your balance or how much you spend, you won’t be charged per month.
Talk about freedom. Without this financial burden, you’ll be able to make more money, thus, more interest.
Waived or Refunded ATM Fees
Pulling a lot of cash from an ATM? No stress.
High-yield checking accounts typically waive or refund any ATM fees you may incur. Banks waive these fees out of goodwill to keep you satisfied with your card. So next time you find yourself at an ATM, you don’t have to worry about extra fees. How refreshing is that?
High-Yield Checking Account Cons
Do these benefits sound too good to be true? Well… Yes and no.
They are true, but there are some hurdles you might have to jump to meet them. It’ll make sense.
Monthly Debit Card Transactions
Here’s the tricky part: to get your interest, you must make a certain number of purchases. For example, some qualifications look as so.
If you make ten purchases, you earn your 2% monthly interest. If you don’t, you end up with a fractional interest, earning something like .25%.
So, if you want to get the most out of your account, you have to be spending. Before you dive into purchases, hoping to meet your purchase bar, make sure it’s worth the investment. The interest won’t do you much good if you spend more than you’ll earn.
Account Caps and Limits
Though it’d be nice to earn $20,000 on your hot million, banks gotta draw the line somewhere. With high-yield accounts, the perks stop when you reach a certain amount of money.
Most banks draw the line at $25,000. Any money above the balance cap will earn interest at a fractional rate, closer to your typical checking account. In some cases, banks can change their policy.
If you’re looking to open an account, know the account caps and keep an eye on them to get the most for your money.
Limited Banks and Credit Unions
You’ll notice our bank list was missing a few heavy hitters. When it comes to Chase, Wells Fargo, or any other big bank, they don’t have the same incentive to give as many rewards.
The offerings can be a bit more meek. If you’re looking to open an account, you’ll have to weigh whether what the accounts offer against what you’ll need to do to open one. Is it worth switching banks? That’s up to you to decide.
What is a High Yield Savings Account?
Enough about checking. Where does saving fall into the mix?
Now that we know more about these terms, a high-yield savings account may seem like a simple guess. Well, you’d be right.
A high-yield savings account helps you earn increased interest on your savings. These accounts are traditional savings and will help you make more of what you have. Typically, these accounts don’t come with debit cards and will be harder to access. If you’re looking for something to sit on and watch over time, a high-yield savings account may be right for you.
Open Your High-Yield Checking Account; Visit EXTRA
A high-yield checking account may be all you need to maximize your money. With high APYs and low monthly fees, making money with your money has never been easier.
There are cons, sure, but there are to everything. Continue to peruse the high-yield world and decide if an account’s worth it for you. If you want something more hands-off, dive into a high-yield savings account.
Not ready for a relationship with a new card? Stay hip to the latest financial info with our EXTRA Blog. From credit utilization to overdraft fees, we’ll keep you in the know on all those terms you can’t wrap your head around.
Keep exploring, learning, and growing. We’ll be here. EXTRA out.