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How Do High Yield Checking Accounts Work? What's the Catch?

High yield checking accounts are attractive bank investments because they do not carry monthly service charges. These accounts also have the potential to earn high interests monthly if monthly requirements are met. These interest rates are much higher than regular bank accounts and require account holders to maintain only small amounts in balances. Besides the higher interest rates, high yield checking accounts also reward its account holders with ATM free reimbursements when the clients use ATMS of other banks.

Typical rewards of high yield checking accounts include a top rate of 2.50% for balances allowed up to $25,000. There is also a much lower rate of 0.25% for the portion of the balance over the balance cap. It only charges a small base rate of 0.05% if monthly requirements are not met, and the ATM fee refunds could be given in a prescribed number of times per month.

Maintaining these kinds of accounts requires clients to make at least 10 to 15 debit card purchases in a month, making at least one direct deposit, paying bill payments online and using the bank's online banking program at least once. These requirements should be met by the client monthly in order to continuously be able to avail of the above benefits from their high yield checking accounts. However, the accounts stay free of monthly charges even such monthly requirements are not met.

One of the good features of high yield checking accounts come from its debit card requirement that offer lots of rewards when used for purchases. These accounts usually offer 1% cash back on the total amount of purchases, giving account holders steady savings while spending for their needs. This makes investing in such accounts more attractive to account holders than the usual account types that does not have these features and provide smaller interest earnings.

At a glance, high yield checking accounts might not be that profitable for the bank. However, when looked into deeper, the bank earns from account holders that do not maintain the maximum balance. Most of the depositors also tend to maintain smaller balances to leave more of their resources as cash on hand. The bank earns from those who spend big in their debit card payments and use such earnings to help pay for rewards who maintain maximum balances.

If one wants to open high yield checking accounts, it is best to do such at the soonest time possible. Most banks limit the availability of such accounts and it is rare for a bank to make it available nationwide. Potential clients should also note of the availability of high yield checking accounts in their state or area, as these accounts could also be implemented location-based.

High yield checking accounts, because of their higher interest rates and many rewards, could be a feasible financial investment for those who want to earn more from their savings. It could be ideal for those who are keen on saving and for spenders as well when they go out and buy their daily necessities. However, depositors should always take into consideration of the details of what the banks offer and give time to read the fine print in order to invest their hard-earned money safely and bring a good return to in entrusting their savings.