What Is a High-Yield Checking Account?

Rising interest rates can make acquiring a loan or a mortgage more challenging, but there are also ways to benefit from them. Many financial institutions offer checking accounts with better interest rates than traditional checking accounts, provided you meet specific requirements. Before you open a new bank account, this is what you should know about the best high-yield checking account options and what to look for in an account.

A financial advisor can help you put together a strategic financial plan for high-yield investments based on your risk tolerance.

What Is a High-Yield Checking Account?

Usually, the only difference between a high-yield checking account and a standard checking account is the interest earned. Both accounts allow you to deposit and access your money, but a high-yield account has a better annual percentage yield (APY) than the average checking account. Therefore, a high-yield checking account will pay you a profitable percentage of your bank balance.

Most accounts pay the offered interest rate up to a specific balance maximum. After the account balance passes a set threshold, such as $10,000 or $25,000, the APY diminishes. For example, a checking account may pay 3% interest on $10,000 and 0.2% interest for any balance above that. However, you can put excess funds in another account, such as an interest-bearing savings account.

High-Yield Checking vs. High-Yield Savings

High-yield checking accounts and high-yield savings accounts have higher interest rates than traditional bank accounts. However, high-yield savings accounts offer even better rates than high-yield checking accounts. They offer customers higher returns because savings accounts have features that encourage deposits but not withdrawals. Savings accounts often limit how many transfers or withdrawals you can make per month, while checking accounts have no limits.

Conversely, high-yield checking accounts might penalize customers who don’t maintain a high enough account balance or don’t conduct enough monthly transactions. As a result, it is a good idea to use your high-yield checking account for direct deposits and expenditures, and your high-yield savings account to steadily build a higher balance that you don’t dip into.

Financial institutions intend their customers to use savings accounts to accumulate wealth without touching it much. Therefore, savings accounts reward customers who let their money sit and accumulate more interest. You are likely to benefit from a high-yield savings account if you are disciplined enough to set aside a specific amount of money for savings every month.

Pros of High-Yield Checking Account

A woman reviews offerings for high-yield checking accounts.

If you open a high-yield checking account, you can expect to reap these common benefits.

A significantly higher APY than conventional checking accounts
Generous interest with the freedom to deposit and withdraw cash
Obtain higher rates of return based on your average account balance

Cons of a High-Yield Checking Account

Before you put your money into a high-yield checking account, these are a few common disadvantages to keep in mind.

Excessive balance requirements can block interest earnings
Low account activity may diminish earned interest or cancel the account
Only offered by specific financial institutions
Fees may apply for too few transactions or insufficient average balances

How to Select a High-Yield Checking Account

Since multiple banks and institutions offer high-yield checking accounts, it’s a good idea to do some research before committing to one. By comparing interest rates, transaction requirements and account balance standards, you can choose the account that fits your financial habits.

Searching on the Internet will help you find the best high-yield checking accounts, especially since online banks have some of the best offers. The lack of physical locations reduces expenses for online banks, allowing them to offer customers better rates.

Remember that the accounts with the best interest rates may not be the most profitable. For example, bank fees incurred from account minimums or ATM withdrawals can nullify most, if not all, the interest your account earns. Therefore, understanding account activity needed to avoid fees is crucial to selecting a high-yield checking account.

Best High-Yield Checking Accounts

After a review of over 100 high-yield checking accounts, here are five top accounts to consider:

Consumers Credit Union Rewards Checking. With credit unions, the gains paid from your accounts are called dividends instead of interest. Consumers Credit Union Rewards Checking pays the best rates for balances up to $10,000. However, your account must satisfy specific requirements to receive the top-tier APY of 5.00%. Otherwise, you will earn the account’s middle- or bottom-tier interest rate.

The bottom tier APY requires you to choose the electronic option for bank statements and documents, use your debit card for twelve or more transactions monthly and receive at least $500 in deposits each month. To achieve the middle tier, you must also spend at least $500 with your Consumers Credit Union Visa credit card. Finally, to get to the high tier and receive the prized 5.00% APY, you must spend $1,000 monthly with your CCU Visa card.

Failing to meet the bottom tier standards will cause you to receive 0.01% APY, and the institution will not reimburse you for ATM fees. Therefore, if you don’t plan to have this be your primary checking account, it is probably not worth opening. If, on the other hand, you plan to deposit your paycheck into this account, you could reap the high-tier rate. Balances above $10,000 will only earn 0.20% APY. To keep your balance from sitting above $10,000, you can shift the excess to a savings account or investment account to maximize your gains.

Connexus Credit Union Xtraordinary Checking. Connexus Credit Union provides 1.75% APY on balances up to $25,000 with a few straightforward requirements: opt in to e-statements and perform 15 or more transactions or $400 of card purchases per month. An account that falls short of the requirements will receive no dividends.

Axos Bank Rewards Checking. This checking account provides up to 3.30% APY on balances up to $50,000. Axos Bank rewards the APY in increments that combine for the total 3.30%, provided you meet the requirements, which are as follows:

Implement direct deposits of at least $1,500 to unlock the ability to earn interest and receive your first 0.40% APY.
Use your Axos Bank debit card for at least 10 transactions per month or sign up for Axos Bank’s Personal Finance Manager and enable the Account Aggregation tool to earn another 0.30% APY.
Keep an average daily balance of $2,500 in Axos Invest Managed Portfolios Account for an additional 0.99% APY.
Open an Axos Invest Self Directed Trading Account and have an average daily balance of $2,500 to receive 0.99% APY.
Pay your mortgage, personal loan, or auto loan entirely with your Rewards Checking account for the final 0.60% APY.

Quontic Bank High Interest Checking. This checking account pays 1.10% APY on all balances as long as you use your debit card for ten or more point-of-sale transactions of at least $10 per month. Accounts that don’t meet the requirement earn just 0.01% APY. Unlike other accounts, it does not provide refunds for out-of-network ATM fees, but its extensive network should help you avoid this issue.

Heritage Bank eCentive Account. You can earn 2.02% APY on balances of $100,000 or less and anywhere between 0.89% and 2.02% APY for balances above that limit. To earn the offered APY, your account must receive at least one direct deposit or ACH per month and spend $500 or more in monthly payments or purchases. You must also receive monthly e-statements. Otherwise, your APY will shrink to 0.05% if your account does not meet the standards.

When Is a High-Yield Checking Account Right for You?

A high-yield checking account can be a smart choice if you use your account actively and meet the monthly requirements tied to the higher interest rate. These accounts often reward frequent debit card use, direct deposits or maintaining a minimum balance. If you already rely on one account for your bills, purchases and income, a high-yield checking account can give you added value without changing your routine.

However, not everyone will benefit equally. These accounts usually cap the high interest rate at a certain balance — like $10,000 or $25,000 — so if you regularly hold more than that, you may earn less on the extra funds. In that case, you might consider pairing a high-yield checking account with a high-yield savings account or certificate of deposit (CD) to make better use of any surplus cash.

It’s also important to consider how closely you want to monitor your banking activity. Missing even one requirement in a given month — like a certain number of debit card purchases — could mean forfeiting the high interest rate. If you prefer a set-it-and-forget-it approach to your finances, a more traditional checking or savings account might be a better fit.

Bottom Line

High-yield checking accounts allow you to take advantage of a financial tool that most people use daily or weekly. As long as you follow the specific standards, you can reap a significant benefit from simply depositing money and paying your bills each month. However, some accounts have stringent rules that might prevent you from earning interest if you aren’t aware of them or have a month with fewer transactions. Before opening an account, weigh the pros and cons of a high-yield checking account to see if it’s the right option for you.

Consider consulting a financial advisor for help structuring your bank accounts to maximize your earnings while meeting your financial goals.

Tips for Finding the Best Checking Accounts

A financial advisor could guide you on how specific accounts can help you meet your financial goals. SmartAsset’s free tool matches you with up to three financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Surf the web to find the best checking accounts with the best rates and conditions that appeal to you. Banks are constantly competing for your service, so they aim to make better products. But with so many options to choose from, it can be a challenge. To narrow your search, we published a study on the best banks in the U.S.