How to Compare Interest Bearing Checking Accounts

Written by , August 1, 2012

How to Compare Interest Bearing Checking AccountsAs an increasing number of consumers become better educated about the banking services they need, and demand more from their local banks, these banks have been forced to offer better products to their customers.

One very popular product has been the interest-bearing checking account. In contrast to the checking accounts of a generation ago – which paid no interest and may have even charged a fee for maintaining the account – many of today’s consumers insist that their checking account pay them interest. With so many banks offering different types of interest-bearing checking accounts, what’s the best way for you to compare them?

Here’s some banking advice and tips on how to compare interest bearing checking accounts.

  • Compare Interest Rates. Not surprisingly, the first point of comparison should be the interest rate that a particular account pays. But don’t compare these interest rates without the proper context. You know the amount you’ll open the account with, and you can probably anticipate how large of a balance you’ll maintain in the account on an ongoing basis. These are the balance levels where you should focus your interest rate comparison. A bank that offers high interest rates on large balances, but very mediocre rates on lower balances, won’t be a good match for you if your balances are going to be at the lower end of the scale.
  • Compare Minimum Balance Requirements. Many interest-bearing checking accounts have a minimum balance obligation. If you fail to meet this balance requirement in a particular month you might have to forfeit some or all of the interest you’ve earned in that month, or might even be hit with a fee for the low balance. Be confident you’ll meet the obligations of any account you’re considering.
  • Compare Fees. Compare every fee that can be charged for a particular account. In addition to the low balance fees we mentioned above, there might also be fees for too many withdrawals in a given period, receiving paper statements each month (as opposed to electronic or online statements) or for using an online bill pay service.
  • Consider Other Account Features. While the interest paying component of a checking account will be your primary consideration, don’t forget to look at the other available account features. For example, if a particular account offers a high level of ATM fee reimbursements, and this feature could end up saving you several dollars a month in fees that you’d otherwise pay, then such an account might be best for you even if it offers a slightly lower interest rate than its competitors.
  • Consider Other Banking Products. Some banks look to boost their business by offering preferential terms to existing customers who open other types of accounts. For example, you might be able to get a better interest rate on a bank issued credit card if you are also an interest checking customer. Again, take these savings into consideration when you compare the total benefits of one account over another.

Take the time to be confident that the new interest bearing checking account you choose is one that you’re likely to stay with. While it’s theoretically easy to move your account to a new bank if you discover you’re paying a bit too much or have selected the wrong account type, in practice many people avoid the hassle of switching even if it ends up costing them a bit more in fees each month.

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