Do Checking Accounts Pay Interest?

interest checking account

Last Updated on 06/02/2017 by GS Staff

Q:

Do checking accounts pay interest?

A:

 Yes, many banks offer interest-bearing checking accounts, but not all. The interest you receive on these accounts is typically minimal, but every little bit helps.

You should take a close look at the account requirements and fees associated with an interest-bearing checking account. It is not unusual for banks to have minimum balance requirements or other conditions and fees.

The requirements to open and maintain an interest-bearing checking account tend to be stricter than non-interest checking accounts. Let’s take a look at some of the fees and requirements that a bank might issue on an account.

Minimum Balance Requirements

You should take a close look at the minimum balance requirement set by the bank before opening an account. Many interest-bearing checking accounts require a minimum balance to receive the interest. Additionally, you may be issued a fee if you do not maintain a certain balance. Typically, account minimum balance requirements can range from being minimal to a few thousands dollars. People who intend to maintain a high account balance at all times may have more flexibility in finding an account since the minimum account balance is not a factor.

Fees

It is always smart to review the fees associated with an interest-bearing checking account. Here are some common fees that might be issued on an interest checking account:

  • ATM Fee – A fee can be charged for using an ATM not connected to your bank. This may even include a fee for completing a balance inquiry at an ATM not affiliated with your bank. Additionally, if you travel outside of the country and use an ATM, you may be charged an international ATM fee.
  • Account Maintenance Fee – Banks can issue annual or monthly account maintenance fees for the bank to maintain your account. Sometimes the fee is waived for meeting certain requirements set by the bank. For example, the bank may waive the fee if the account balance is zero or if it meets a minimum balance requirement.
  • Minimum Balance Fee – If your account does not meet the bank’s minimum balance requirement, the bank may charge a fee until the balance goes back above the minimum.
  • Lost Debit Card Fee – Lose your debit card and you might be out a few bucks to replace the card.
  • Overdraft Fee – Many of us have accidentally took too much out of our checking account and have felt the repercussions of the overdraft fee. These fees are typically $25 to $35 per item. You can obtain some pretty hefty fees at some banks if you do not catch the overdrafts in a timely manner.
  • Paper Statement Fee – If you opt to receive a mailed statement, the bank may charge you a fee to mail these statements. You can avoid this fee by signing up for paperless online statements at many banks.
  • Stop Payment Fee – In some instances a transaction needs to be stopped before it is processed. Banks can charge a fee to have this payment stopped.
  • Returned Deposit Fee – Banks can charge a fee if you deposit a check and there are not enough funds in the account that the check came from. Once you are issued this fee, you can then call the person who wrote you the check and thank them.  You can expect about a $12 to $15 fee for this one.

Final Notes

You should take all of the above requirements and fees into consideration before opening an interest-bearing checking account. It can be maddening to open an account thinking there are no strings attached, to later find out you are paying significant fees on a monthly basis. The account with the highest interest rate is not always the best account  when you factor in all the conditions and fees. The benefit of the high interest rate can be wiped out with just one fee issued per month. Take your time and do some research to find the best account for your needs.