If you only had checking account at a big traditional bank like Chase, Wells Fargo, Bank Of America then you may think that checking accounts never earn interest. At the same time you may see that even savings accounts of those banks earn very little interest. The national average savings interest paid by banks and credit unions over the last years ranges from 0.07% to 0.13% How much do you expect from a checking account to earn interest?
Some banks like Capital One pay as much as 0.1% APY (Annual Percentage Yield) on checking account balance. This is way better than your current account which earns nothing. This seems like not a big deal but keep in mind, that to earn the interest you don’t have to do anything. Just live your life.
Another point you should understand is that although interest is paid monthly, but it is accumulated daily. Let’s say half of a given month your checking account balance was $10,000 and the rest it was only $1,000. Bank will calculate your interest for balance every day and you’ll get paid the sum.
You may think, that it is not a big deal. Why should I care about it? After all 0.1% of $10,000 is $10, right? However, if interest goes up to 1% and above and years fly by, the pennies are going to keep accumulating. All you have to do is find a good bank and switch to a better checking account.
I am not saying you should run away from your current bank, but you should think about it. Usually banks that have high interest on checking account have even higher interest on savings. They often have better customer support, can give you a signup bonus if you try their account.
Some of these banks are less known than big national banks. For example, Ally Bank is a 25th largest bank in the US, but you may never heard about it.
Banks that pay interest
Here I’ve collected a short list of bank accounts and how much interest they pay.
| Checking Account | Interest |
|---|---|
| Bank Of America Checking | 0% |
| Fidelity Cash Management | 1.19% |
| Capital One 360 Checking | 0.1% |
| Ally Bank Checking | 0.1% |
| Charles Schwab High Yield Checking | 0.25% |
| American Express Rewards Checking | 0.6% |
For example, Fidelity Cash Management account pays 1.19% interest on your balance and offers $100 signup bonus. All you have to do is open new account using promo code Fidelity100 and deposit $50. Why am I so sure? I just got my bonus.
Keeping an eye on interest rates can put you in a more savvy state of mind and open an IRA or just a brokerage account.
If checking account earn interest, then how much money to keep in checking account?