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What is A High-Yield Checking Account, And Who Offers Them?

Faith Boluwatife
Faith Boluwatife
Faith is an enthusiastic freelancer and regular contributor for a number of finance and insurance blogs where she writes valuable pieces to educate individuals on finance and other options. As a skilled writer, Faith has created content for diverse industries – if it exists, she’s likely written about it.

DollarGeek's goal is to help you make the best financial decisions. To help us do this, many or all of the products featured here are from our partners. However, this doesn’t influence our evaluations or ratings.

Table of Contents

A high-yield checking account offers more than just the opportunity to save and transact with your money at will. In this article, we will explore everything you need to know about high-yield checking accounts, including their features, pros and cons, and how you can open one.

Takeaway Points

  • High-yield checking accounts are special types of checking accounts that offer higher interest rates and other certain features compared to conventional checking accounts.
  • High-yield checking accounts often have activity requirements for earning high interest rates.
  • Depending on the provider, high-yield checking accounts have methods for waiving account maintenance fees. Hence, it is possible to actively use a high-yield checking account while paying little or nothing as maintenance fee.
  • It is important to compare important features of high-yield checking accounts, such as interest rates and maintenance fees, before settling for one.
  • High-yield checking accounts are a great option for people looking to earn higher returns on their checking accounts.

What is a High-Yield Checking Account?

Do you know, statistics reveal that only 7% of Americans do not have bank accounts? The remaining 93% own one bank account or the other, with checking accounts remaining a popular type of account owned by almost everyone

A checking account is a type of bank account for depositing and withdrawing money, and writing checks to pay for goods and services.

Checking accounts can allow you to perform transactions through several means, such as electronic (online and mobile) banking options, ATM transactions, and conventional over-the-counter deposits and withdrawals.

A high-yield checking account is a special type of checking account that offers higher interest rates compared to what is offered by the traditional checking accounts already described.

These high-yield accounts are designed to help you earn more on the money you keep in your checking account, since conventional checking accounts offer very low-interest rates.

How Does a High-Yield Checking Account Work?

High-yield checking accounts are offered by banks and credit unions. Nowadays, you can easily open a high-yield checking account online, although you may also visit the banking facility in person.

Once you open an account, you can use the account to perform transactions like withdrawing and depositing, paying bills, making purchases using cards, transfers, and check withdrawals.

High-yield checking account providers may offer different interest rates to their clients. You may need to meet certain requirements, such as maintaining a minimum balance or hitting a certain number of transactions per month, to benefit from higher interest rates.

The interest rate offered by a high-yield account would vary depending on the financial institution providing the account, the specific type of account, and other factors such as how much you have deposited in the account per time.

While conventional savings accounts can offer you interest rates around 0.55 to 1%, you will find high-yield checking accounts offering annual percentage yield (APY) of up to 4.5% or even more, while many others offer APY around 2.5% to 4.0%.

It is important to note that interest rates can change over time and can be affected by factors such as the Federal Reserve’s interest rate or the overall economic condition at the time. Nevertheless, banks and other account providers like to offer competitive rates to their clients.

High-yield checking accounts may also provide you with special features and may have certain other requirements or restrictions you must meet. For example, you may be able to elude paying maintenance fees and transaction charges if you do not exceed a certain transaction limit per month.

However, charges may still apply when you utilize other services and features provided by the bank, such as requesting overdrafts and bank statements or ATM charges.

Top High-Yield Checking Accounts

When it comes to high-yield checking account providers, you have several options to choose from! Based on our findings and customer reviews, we have made a compilation of some of the best account providers in the United States.

Alongside the mentions, we have provided other information like APY, minimum required balance, and available bonuses.

La Capitol Federal Checking Union

Nationwide, this checking account most likely gives the highest interest rate. You can get up to 4.25% in interest paid into your account, although the account is best for customers with minimal funds available due to its limited balance threshold.

Some of the highlights include:

  • 4.25% APY on balances up to $3,000. 2.67% APY from $3,000 to $10,000. 0.1% APY on balances above $10,000.
  • 15 debit card transactions monthly
  • No direct deposit or ACH required
  • No bill payments required
  • Up to $25 in ATM fee reimbursement monthly

Consumers Credit Union

The high-yield checking account offered by the Consumers Credit Union offers a higher balance threshold and a competitive interest rate. Some of its highlights include:

  • 4.09% APY on balances up to $10,000. 0.20% APY for balances between $10,000 and $25,000, while balances above $25,000 will earn 0.10% APY
  • Up to 12 debit card transactions monthly
  • One direct deposit, ACH deposit, or mobile deposit is required monthly. There is also a monthly threshold of $500 required monthly.
  • No bill payments required
  • No monthly maintenance fees
  • If you’ve not otherwise qualified, you can join Consumers by paying a one-time membership fee of $5 to the Consumers Cooperative Association and holding at least $5 in a member savings account.

Liberty Federal Credit Union

The high-yield checking account offered by Liberty Federal Credit Union provides a proper mix of high APYs and a generous opening balance for those who want to set up a direct deposit.

Membership extends beyond Liberty Federal Credit Union members or teachers. You can donate $5 to the MaterDei Friends & Alumni Association and keep it in a savings account to join. But, the minimum to open a Vertical Checking account is $25.

Some of its highlights include:

  • 3.30% APY for account balances up to $20,000. Balances beyond this threshold have no interest paid.
  • 15 debit card transactions monthly
  • No direct deposit or ACH required
  • No bill payments required
  • Up to $15 in ATM fees reimbursed monthly if qualifications are met
  • No monthly maintenance fee

Lake Michigan Credit Union

The Lake Michigan Credit Union provides access to a Max Checking account that allows you to open a low number of monthly required debit card transactions. The APY on the account is also impressive, so you get a good mix of benefits here.

Residents of the lower Michigan peninsula, as well as all Florida residents, are automatically eligible for membership in the Lake Michigan Credit Union. However, others can join by donating $5 to the ALS Foundation and maintaining $5 or more in their savings accounts.

Some highlights available with the account include:

  • 3.00% APY for accounts with balances up to $15,000. Any balance above that doesn’t get any APY
  • 10 debit card transactions monthly
  • No bill payments or ACH required
  • At least one direct deposit required monthly
  • At least four online banking logins monthly
  • Must be enrolled in e-bank statements

Presidential Bank Advantage Checking Account

While it doesn’t have the highest APY on the list, the high-yield checking account available on Presidential Bank comes with a higher balance than most options. It also does well with account requirements, allowing you to enjoy optimal freedom.

Some highlights you get with this account include:

  • 2.25% APY for balances up to $25,000. 1.00% APY on balances beyond this amount
  • 7 or more electronic withdrawals monthly. This can be by ATM, ACH, debit card, or bill payments
  • At least $500 monthly in direct deposits
  • You need to write up to three paper checks monthly. This will come at no charge, but will incur a $3 charge per check after. If the qualification isn’t met, you only get 0.10% APY
  • Up to $8 in monthly ATM fee disbursements
  • No maintenance fees for accounts with at least $500
  • You need at least $500 to open these accounts

Note that some of these banks we have mentioned may have special requirements that should be met to receive interest.

Pros and Cons of High-Yield Checking Accounts

Pros

  • Higher Interest Rates: The average annual return for a savings account is just 0.30% APY. If you save your money in a high-checking account that offers 3.0% APY, that is ten times more than the national interest average on savings accounts per year. Interestingly, you mostly do not have to perform any special stunts to earn these high interest rates other than the activity requirements, which are bank transactions and procedures you should be able to meet up with.
  • Little or No Bank Charges/Maintenance Fees: High-yield checking accounts typically charge very low fees, if they charge any fee at all. Even when fees are charged, they can be waived if you meet certain requirements or do not exceed specified transaction limits.
  • Convenient Banking Option: With online and mobile banking options, high-yield accounts are easy to use for any kind of transaction. The online and mobile features provided can also let you track your transactions over time, perform speedy transactions, or even perform other tasks like budgeting.

Cons

  • Activity Requirements: High-yield checking accounts come with activity requirements that must be met to qualify for higher interest rates. If you do not meet these requirements, you may end up with a lower interest rate or none.
  • Balance Limits: Other than activity requirements, some high-yield checking accounts also come with balance limits. This could be the minimum amount you must deposit at the point of opening the account, the minimum amount that must be in your account for APYs to apply, or limits for which interest rates would be lower or no longer apply. For example, some providers apply lower interest rates when you have funds above a particular figure, or interests will not be added for figures above their benchmark.
  • Limited Availability: Not all banks and credit unions offer high-yield checking accounts, and not all high-yield checking account providers are insured. This may limit your options and make it harder to find a provider that meets your needs.
  • Some Account Providers may not be FDIC-Insured: Not all high-yield checking account providers are FDIC-insured, and this could mean the loss of all savings during unfortunate events despite the high interest rates promised. Nevertheless, it is possible to find account providers that are FDIC-insured for up to $250,000 per individual.

Features to Consider When Choosing a High-Yield Checking Account

There are a few key features you should consider when choosing a high-yield checking account:

Interest rates

Of course, this makes the most important feature to consider, since better interest opportunities are what made you consider a high-yield checking account in the first place. You should go for a provider with a competitive interest rate, especially if you will be keeping a significant balance in the account.

Bank Charges and Maintenance Fees

Most high-yield checking accounts charge little or nothing as transaction charges or monthly maintenance fees. Nevertheless, it is still important to check if such charges exist or if there are ways to waive them. You want to be careful not to end up incurring bank costs that will amount to a huge chunk, if not all, of all your acquired interests.

Activity Requirements

Find out what you must do (or not do) for your preferred interest rates to apply. Do you think you would be able to keep up with those requirements? Also, find out and compare other details like minimum balance requirements before choosing a high-yield checking account.

Other Features

Other than bank charges, interest rates, and activity requirements, there are certain other features you want to look out for that will make banking easier and cost-effective for you.

These include ATM fee refunds, ATM access, electronic banking provisions, customer service, mobile app friendliness, and certain features such as budgeting and money tracking tools that may be offered by the account provider.

Seeing as the features provided by each account provider and the fees charged could have an impact on the money in your account, it is important to carefully check the account agreement of any back and understand all the fees, requirements, and features provided before opening a high-yield account with the bank.

How to Open a High-Yield Checking Account

Now that you have a basic understanding of what a high-yield account is and how it can be beneficial for you, you can go ahead to open a high-yield checking account for yourself by following the steps below:

Step 1: Research and Compare Accounts

It is recommended to survey high-yield checking accounts and their providers to compare some of the features already highlighted above before deciding.

Step 2: Gather the Necessary Documents

Most account providers will require you to provide some personal and financial information when opening an account. This may also require you to provide certain documents like possible means of identification, proof of address, employment, and income information.

Some documents you may therefore need to get ready include your passport or driver’s license, previous bank statements, and documents that could serve as proof of your residential address. The bank or credit union’s website will usually provide information on what is needed to open an account with them.

Step 3: Open the Account

Usually, you would be able to open an account online by yourself or through the mobile app. You should also be able to submit needed documents and complete verifications electronically. However, you may choose to visit a bank branch in person to open your account and make your minimum deposit if required.

Step 4: Activate the Account

To get your account running, you would need to activate it. This could mean setting up your credentials on the mobile app or linking a debit card to the account. Without such a process, you would not be able to transact using the account.

Step 5: Start Using the Account

Once your account is activated, you can begin using it to transact. Some providers may let interest compound daily, while some will only let interest compound monthly or yearly and credit your interest at the end of the month (or year).

Are There Activity Requirements on High-Yield Checking Accounts?

Most account providers have activity requirements that make you eligible for certain interest rates or any interest at all on the money in your high-yield checking account. We have already hinted at what some of the requirements can be, and we have even highlighted the specific activity requirements of some banks.

Activity requirements usually include minimum balance, minimum deposit, minimum monthly withdrawal, mobile app login rate, number of monthly transactions, including debit/credit card purchases, and the total amount available in the account.

The activity requirement on a checking account would vary from bank to bank. Some providers have basic activity requirements, while some appear to have very complex requirements.

However, factors like how much you’d like to save, how long you’d want to save more, and how many transactions you project to carry out per month can guide you on knowing what high-yield checking accounts can be beneficial for you, despite their activity requirements.

To find out specifics about activity requirements of high-yield checking account providers, you should carefully review their terms and conditions and speak to a customer care representative if you need clarification on any subject.

Conclusion

Did you know the Federal Reserve raised interest rates up to seven times in 2022 alone? Considering what better interest opportunities high-yield checking accounts offer plus the juicy Federal Reserve rates, they are a very excellent opportunity to make more on the money you have tucked away with a bank.

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