Online Checking Account Interest Rates: What You Need to Know

Online Checking Account Interest Rates – Online checking accounts are becoming more popular because they offer convenience, security, and often higher interest rates than traditional banks. But how do you find the best online checking account for your needs? And what are the pros and cons of earning interest on your checking balance? In this article, we will answer these questions and more.

What are online checking accounts?

Online checking accounts are bank accounts that you can open and manage entirely online, without visiting a physical branch. You can access your account through a website or a mobile app, and use features such as mobile check deposit, bill pay, peer-to-peer payments, and budgeting tools. Online checking accounts are usually offered by online-only banks, credit unions, or nonbank financial institutions.

How do online checking accounts earn interest?

Many online checking accounts earn interest on your balance, which means you get paid for keeping money in your account. The interest rate, also known as the annual percentage yield (APY), varies depending on the bank and the account. According to the latest FDIC data, the average APY on interest-bearing checking accounts is 0.07% as of Sept. 18, 2023. A checking account has to earn more than that amount to be considered high interest. Many of the checking accounts on our list have APYs between 1.00% and 2.00%, with some earning up to 5.00%.

To earn interest on your online checking account, you may have to meet certain requirements, such as maintaining a minimum balance, making several debit card transactions, enrolling in direct deposit, or using online banking services. Some online checking accounts also have tiered interest rates, which means you earn higher rates for higher balances.

What are the benefits of online checking accounts with high interest rates?

Online checking accounts with high interest rates have several advantages over traditional checking accounts:

You can earn more money from your checking balance, which can help you reach your savings goals faster or offset inflation.
You can enjoy the convenience and flexibility of banking online, without sacrificing the security and reliability of FDIC or NCUA insurance.
You can avoid or minimize fees that are common with brick-and-mortar banks, such as monthly maintenance fees, overdraft fees, or ATM fees.
You can access a range of features and services that can help you manage your money better, such as cash-back rewards, budgeting tools, free checks, or free wire transfers.

What are the drawbacks of online checking accounts with high interest rates?

Online checking accounts with high interest rates also have some potential disadvantages that you should be aware of:

You may have to meet certain criteria to qualify for the highest interest rates, which may not suit your spending or saving habits.
You may have limited access to physical branches or ATMs, which can make it harder to deposit or withdraw cash.
You may have less personal interaction with customer service representatives, which can affect your satisfaction or trust.
You may face technical issues or glitches with the website or app, which can disrupt your banking experience.

How to choose the best online checking account with high interest rates?

To find the best online checking account with high interest rates for your needs, you should consider several factors, such as:

The interest rate and how it compares to other options
The minimum balance and other requirements to earn the highest rate
The fees associated with the account
The ATM network and availability of surcharge-free or reimbursed transactions
The customer service options and quality
The features and benefits offered by the account
The security and reputation of the bank

You can use online tools such as Bankrate, NerdWallet, or Forbes to compare different online checking accounts based on these criteria. You can also read customer reviews and ratings to get a sense of the pros and cons of each account.

How to compare online checking accounts with high-interest rates

Many online tools can help you compare different online checking accounts based on various criteria, such as interest rate, fees, ATM network, customer service, and features. For example, you can use Bankrate, NerdWallet^2, or Forbes. To find and filter online checking accounts that suit your needs and preferences. You can also read customer reviews and ratings to get a sense of the pros and cons of each account.

When comparing online checking accounts with high interest rates, you should pay attention to the following factors:

The interest rate and how it compares to other options. Look for accounts that offer a competitive APY on your balance, and check if the rate is variable or fixed.
The minimum balance and other requirements to earn the highest rate. Some accounts may require you to maintain a certain balance, make several debit card transactions, enroll in direct deposit, or use online banking services to qualify for the highest rate. Make sure you can meet these requirements without changing your spending or saving habits too much.
The fees associated with the account. Avoid accounts that charge monthly maintenance fees, overdraft fees, or ATM fees, or look for ways to waive or minimize them. Some accounts may also charge fees for foreign transactions, wire transfers, paper statements, or other services.
The ATM network and availability of surcharge-free or reimbursed transactions. Since your account will be online, you may need to use ATMs more often to deposit or withdraw cash. Look for accounts that offer access to a large network of fee-free ATMs, or reimburse you for ATM fees charged by other banks.
The customer service options and quality. Look for accounts that offer 24/7 customer support via phone, email, chat, or social media. You may also want to check the response time, the availability of live agents, and the customer satisfaction ratings of each account.
The features and benefits offered by the account. Look for accounts that offer additional perks such as cash-back rewards, budgeting tools, free checks, free wire transfers, fraud protection, or identity theft monitoring.

How to open an online checking account with high-interest rates

Opening an online checking account with high-interest rates is usually a simple and fast process. You can apply online through the bank’s website or app, and complete the application in a few minutes. Here are the steps involved in opening an online checking account with high-interest rates:

Choose the account that best suits your needs and preferences. Compare different online checking accounts with high-interest rates using online tools such as Bankrate, NerdWallet, or Forbes, and read customer reviews and ratings to get a sense of the pros and cons of each account.
Gather the documents and information required. You will need to provide some personal information such as your name, address, date of birth, social security number, and email address. You may also need to provide some identification documents such as your driver’s license, passport, or state ID card. Some banks may also ask for proof of income or employment, such as your pay stubs, tax returns, or bank statements.
Fill out the application form online. You will need to enter your personal information, choose your account type and features, agree to the terms and conditions, and consent to a credit check if required. You may also need to answer some security questions or verify your identity using a code sent to your phone or email.
Fund your account. You will need to deposit some money into your new account to activate it. You can fund your account using various methods such as transferring money from another bank account, using a debit card or credit card, mailing a check, or using a mobile check deposit.
Set up your online banking access. You will need to create a username and password for your online banking account and set up security features such as biometric login, two-factor authentication, or security questions. You can also download the bank’s app on your smartphone or tablet for easy access.
Enjoy your new account. You can start using your new online checking account with high-interest rates right away. You can also set up direct deposit for your income sources, enroll in bill pay for your recurring expenses, link your other bank accounts for easy transfers, order checks if needed, and customize your account settings.

How to maximize your earnings from online checking accounts with high-interest rates

To make the most of your online checking account with high-interest rates, you should follow some strategies that can help you earn more interest on your balance, save on fees, and take advantage of the features and benefits offered by the account. Here are some tips on how to maximize your earnings from online checking accounts with high-interest rates:

Meet the requirements to earn the highest rate. Make sure you meet the minimum balance and other requirements that qualify you for the highest interest rate on your account. For example, you may need to make a certain number of debit card transactions, enroll in direct deposit, or use online banking services every month. If you fail to meet these requirements, you may earn a lower rate or no interest at all.
Transfer excess funds to a high-yield savings account. If you have more money in your checking account than you need for your daily expenses, you may want to transfer some of it to a high-yield savings account that offers a higher interest rate. This way, you can earn more interest on your savings while keeping enough money in your checking account to avoid fees and meet the requirements for the highest rate.
Use cash-back rewards or other perks. Some online checking accounts with high-interest rates offer cash-back rewards or other perks that can help you save or earn more money. For example, you may get cash back on certain purchases, free wire transfers, free checks, budgeting tools, or fraud protection. You should use these features and benefits as much as possible to maximize your earnings from your account.
Avoid fees. Fees can eat into your earnings from your online checking account with high interest rates. You should avoid or minimize fees such as monthly maintenance fees, overdraft fees, or ATM fees by meeting the criteria to waive them, using fee-free ATMs, or getting reimbursed for ATM fees. You should also avoid fees for foreign transactions, wire transfers, paper statements, or other services by using alternative methods or opting out of them.
Monitor your account regularly. You should check your online checking account with high-interest rates regularly to make sure it is working properly and earning the highest rate possible. You should also review your transactions, statements, and alerts to spot any errors, fraud, or unauthorized activity. If you notice any issues, you should contact the bank’s customer service as soon as possible to resolve them.

In conclusion, online checking accounts with high-interest rates can be a great way to earn more from your money while enjoying the convenience and flexibility of banking online. However, they also have some drawbacks that you should weigh carefully before opening an account. By doing your research and comparing different options, you can find the best online checking account with high-interest rates for your needs.

Frequently Asked Questions (FAQ): Online Checking Account Interest Rates: What You Need to Know

What Is a Good Interest Rate For a Checking Account?

A good interest rate for a checking account can vary based on the bank and the type of account. As of August 2023, the national average checking account interest rate is 0.07% APY. However, many online banks offer interest rates that are significantly higher than the national average.

Here are some banks that offer competitive interest rates for checking accounts:

SoFi Bank: SoFi Checking and Savings, APY: 4.40%, Monthly Fee: $0
Discover: Discover Cashback Debit, APY: 1.00%, Monthly Fee: $0
CIT Bank: checking account, APY: 0.10%, Monthly Fee: $0
Axis Bank: Rewards Checking, APY: 0.70%, Monthly Fee: $0
Quontic: High Interest Checking, APY: 1.10%, Monthly Fee: $0

Note that these rates can change and it’s always a good idea to check with the bank for the most current rates. Also, some banks may require you to meet certain conditions to earn these rates, such as maintaining a minimum balance or making a certain number of transactions each month. It’s important to understand these conditions to ensure you’re getting the best possible rate.

Do You Earn Interest From a Savings or Checking Account?

Savings Accounts: These are primarily used for saving and growing your money. They are known for earning interest. In savings accounts, interest can be compounded either daily, monthly, or quarterly, and you earn interest on the interest earned up to that point. The more frequently interest is added to your balance, the faster your savings will grow. The national average savings rate is 0.45%.

Checking Accounts: These are generally used for everyday spending. While checking accounts may pay interest, they typically pay less than savings accounts. Some checking accounts are referred to as interest checking accounts and do earn interest. However, traditionally, most checking accounts earn little to no interest.

It’s important to note that the specific interest rates and conditions can vary based on the bank and the type of account. Some banks may require you to meet certain conditions to earn these rates, such as maintaining a minimum balance or making a certain number of transactions each month. It’s always a good idea to check with the bank for the most current rates and conditions.