A high-yield checking account is a secure place to deposit, store, and withdraw money, but with an enhanced interest rate vs. other similar accounts. Typically, money in a checking account doesn’t earn any interest — or maybe a nominal fraction of a percent.
With a high-yield checking account, there’s the potential to turn your regular deposit account into a passive income machine. While it’s unlikely to make you rich, a high-yield checking account can help pad your pockets with a few extra interest dollars, which can add up over time.
However, these accounts can come with certain conditions that may or may not make them the right choice for you. Here’s what you need to know.
Key Points
• High-yield checking accounts offer significantly higher interest rates compared to traditional checking accounts, potentially reaching up to 5.00% APY.
• These accounts can transform regular checking into a source of passive income, though they won’t make you rich.
• To avoid monthly fees and earn interest, account holders may need to meet specific requirements such as maintaining a minimum balance or making a certain number of transactions.
• Online banks frequently offer these accounts with fewer fees and conditions compared to traditional banks.
• Despite the potential for higher returns, the interest rates on these accounts generally do not compare to those possible through investments in stocks and bonds.
How High-Yield Checking Accounts Work
High-yield checking accounts, as their name implies, are checking accounts that offer a high “yield,” or interest rate, on the balance held in the account.
Whereas the national average for an interest-bearing checking account is about 0.07% APY (annual percentage yield) per the FDIC, a high-yield account might offer 3% to 5% APY or even higher — which still might not make you a fortune, but is a significant upgrade and on a par with some savings accounts.
High-yield checking accounts make it possible to create a passive income stream, albeit a small one, just by holding money in your checking account (which you likely already do). A high-yield checking account can augment interest earnings from other financial products you may hold, such as a high-interest savings account or investments like high-yield bonds.
However, there can be account minimums to contend with or potential fees.
Does a High-Yield Checking Account Come With Fees?
Although some high-yield checking accounts come with monthly maintenance fees that could easily eclipse whatever interest you stand to earn, these fees can commonly be waived so long as you maintain a certain minimum monthly balance or meet other requirements. These may include making a certain number of debit card transactions or receiving a certain threshold in direct-deposit income each month.
These days, there are even some free high-yield checking accounts — usually offered through online banks — but the level of interest you’ll earn may depend on your ability to meet the same kind of transaction minimums we just mentioned. (If you don’t meet the requirements, you might not earn any interest at all.)
So, in short, while you might not have to pay for your high-yield checking account, you’ll likely need to perform the basic minimum monthly transaction requirements in order to glean the full benefits of the account.
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Top 3 Pros of a High-Yield Checking Account
High-yield checking accounts can be very beneficial — here’s how.
1. More Earnings
These accounts offer an opportunity for interest earnings simply by holding a checking account. In some cases, the interest rate may rival that of certain kinds of savings accounts.
2. Motivation to Keep More in Your Account
These high-yield checking accounts can incentivize account holders to keep a higher minimum balance due to interest-earning requirements — which can help you generate a cash cushion.
3. Availability
These accounts are becoming increasingly available, especially thanks to the proliferation of online-only banks. You likely don’t need to invest much time and energy in research when looking for one.
Cons of a High-Yield Checking Account
On the other side of the coin (pun totally intended), high-yield checking accounts can have their drawbacks.
Transaction Requirements
These high-yield accounts may come with transaction requirements to secure interest earnings. If the account holder doesn’t meet them, little or no interest will be earned. These obligations might suit your money style, or they might prove to be a major hassle.
Modest Interest (If We’re Honest)
Many interest-bearing accounts generate just a fraction of a percentage in interest. Even the highest-yield checking accounts currently only offer about 5.00% APY. Yes, every little bit helps but this certainly isn’t enough money to retire on.
Additional Fees
In some cases, high-yield checking accounts may come with fees. Waiving them may require holding a significant minimum monthly balance — which can be challenging for individuals and families living paycheck to paycheck.
Here, you can review the pros and cons again in table format:
| Pros of High-Yield Checking Accounts | Cons of High-Yield Checking Accounts |
|---|---|
| Potential to earn interest on checking, which normally offers little or no earning potential | May have many monthly transaction minimums to meet in order to qualify for interest earnings |
| Can incentivize account holders to keep more money in their accounts | May have fees that can only be waived by maintaining a significant minimum monthly balance or meeting minimum transaction requirements |
| Are increasingly available — and increasingly fee-free — from online banks | Even the best high-yield checking accounts typically offer far less than the average return on stocks and bonds (though when FDIC-insured, these checking accounts can be a safer investment vehicle) |
Recommended: What Is a Certificate of Deposit (CD)?
Is a High-Interest Checking Account Worth It?
Whether or not a high-interest checking account is worth it will probably depend on a couple of key factors.
• First of all, how high is the interest rate? If it’s just a fraction of a percentage above the norm, it may not be worth it. But if it’s a multiple of the standard rate, it might be a good way for your money to make money.
• Next, what fees or minimum requirements are involved? If your money would make $10 more in interest per year in a high-yield account but you need to tie up funds that could be working harder elsewhere, then it’s probably not a money-wise move.
Factors to Look For in a High-Yield Checking Account
If you’re shopping for a high-yield checking account, consider these factors:
Interest Rate
Of course, you will likely want to shop around and see what are the highest rates available for a checking account. Currently, the highest rates are 5.00% or slightly higher.
Minimum Balance
With this kind of checking account, you may be required to make a specific size of deposit to open the account. You may also need to keep a certain balance in order to earn the high interest rate or to avoid fees. If that’s the case, make sure you can meet that number.
Fees
In addition, when opening a checking account, be sure you understand what fees might be charged. These can include maintenance, overdraft, ATM, and foreign transaction fees, among others. You’ll probably want to avoid being charged fees so that they don’t eat away at the interest you are earning. Online banks may be more likely to waive such fees.
How to Qualify for High-Yield Checking Accounts
In order to qualify for a high-yield checking account — and actually get the benefits — you’ll need to be able to fulfill whatever that account specifies as far as transaction requirements or minimum opening deposits.
In addition, if your banking history is marked by overdrafts and other negative factors, this may be reported by ChexSystems, which is kind of like a credit score bureau but for banking. If you have many negative factors (unpaid fees, say, or many overdrafts), you may not be able to qualify for a high-yield checking account — or other types of deposit accounts, either. (If your ChexSystems report contains errors, you can always dispute false information with ChexSystems online.)
How to Open a High-Yield Checking Account
Now that you know what it is, you may wonder how to open a high-yield checking account. The process is similar to opening any other type of account. You’ll be asked to provide:
• Basic personal information, such as your name and address
• Proof of address (such as a utility bill)
• Government-issued photo ID
• Your Social Security number or other taxpayer identification number
In addition, your chosen bank may also require a certain minimum opening deposit, which you’ll need to provide to activate the account. The bank will offer specific details as far as what documentation is required and how to deliver it.
High-Yield Checking Accounts vs High-Yield Savings Accounts
If you are comparing high-interest checking and high-yield savings accounts, you will likely want to consider the following points:
• A high-interest checking account does generate money on your deposit, but it may come with minimum transaction or balance requirements. These could be difficult for some people to meet.
• A high-interest savings account can offer good earning power, but the number of transactions you are allowed could be limited. Although Regulation D, which limits savings accounts to six transactions a month, was largely suspended since the pandemic, some financial institutions may still apply this rule and charge fees if you conduct more transfers.
Depending on your needs, one of these may be a better option than the other. Also, it is likely to be easier to find a solid interest rate with a high-yield savings account than with the checking variety. In other words, many high-interest checking accounts don’t offer all that much earning power.
Opening a Checking and Savings Account With SoFi
A high-yield checking account is a great way to augment whatever passive income you might earn from savings accounts, investments, and other holdings. Some interest is better than none, after all — every little bit of interest earned counts.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
FAQ
Is a high-yield checking account worth it?
This all depends on whether or not you can meet any minimum monthly transaction requirements. If you can fairly easily do so, a high-yield checking account is an easy way to earn passive income just by keeping an active bank account. But if you can’t, you might not earn any interest at all — or even pay additional fees for the account.
What is the difference between a high-yield checking and savings account?
A high-yield checking account is designed to be the hub of your financial life and typically doesn’t have any limits on the number of transactions you may make; savings accounts may restrict this. However, this kind of checking account likely pays less interest than a high-yield savings account, which may do a better job of helping you generate passive income.
Can you withdraw money from a high-yield savings account?
Yes, you can withdraw money from a high-yield savings account. However, there may be restrictions on how many transactions you can make per month. Going over that number could result in fees or the account being converted to a checking account.
What bank has the highest checking interest rate?
Currently, some of the banks offering the highest checking interest rates are Axos Bank, Presidential Bank, Heritage Bank, and Quontic Bank.
Can you ever lose your money with a high-yield savings account?
A high-yield savings account is typically a very safe place to keep your money, especially if it’s FDIC- or NCUA-insured. The risk of losing money is extremely low.
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SoFi members with direct deposit activity can earn 4.20% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.
As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.20% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
Interest rates are variable and subject to change at any time. These rates are current as of 10/31/2024. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.
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