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How Do Interest Bearing Check Accounts Work?

The interest bearing check account works by earning a profit out of the available balance maintained on your account. Just like any other account, the higher your balance, the higher then is the income that you'll harvest out of the interest rate. On the other hand, maintaining a balance that is lower than that of the set level of the bank will mean penalties and charges. This differentiates interest bearing check account from other types of bank accounts.

Checking account is an investment of greater liquidity. Unlike investing in the money market, interest rate usually is lower on the check account because of the liquidity. This type of account allows the depositor or account holder to issue checks as part of the privileges. At the same time, the bank always encourages the account holder to maintain a good outstanding balance in order to harvest the fruit on this kind of investment.

Interest bearing check account is most favorable to individuals with thousand of dollars on their pocket. The advantages are two fold. First, maintaining a high balance is equivalent to a higher interest earning. Second, the money can be moved at anytime the account holder wants to do it. The account is so liquid and the bank cannot impose such fees or penalties despite of abrupt withdrawals.

Two percent or less interest rate is what you can earn from an interest bearing check account these days. Too low to imagine but you cannot find a bank that could offer you way beyond that rate. 3% is unimaginable even with the time deposit account these days. And the surprising thing is that banks are imposing maximum balance limitations other than the minimum balance requirements. In other words, however big your money is, you will be restricted to deposit them all under a single interest bearing check account. The main reason for that is again liquidity. The bank finds it as a loss for them if the money is not bounded with maturity dates, minimum withdrawal amount, and transaction charges for sudden withdrawals. The banks on this case also want to play safe and avoid any single cents of loss as much as possible.

If your goal is to make money from your on-hand cash, investing them in interest bearing check account is not a good option. But if you are a company who wants to handle compensation and benefits or a very manageable payment method with your suppliers and clients, then this is the right account for you.

Parking your money to the place well suited for you needs and requirements should always be the foundation of you investment decisions. There are many other important things to consider when opening an account like of this interest bearing check account. Holding a check that is always ready to be pulled-out from you briefcase will mean a lot of convenience if you are a businessman looking for a fast and reliable transfer of money. Your clients can be happy after receiving the check from your but they could also be sad and might even file a lawsuit against your bouncing checks. Overall, know your responsibility at the early stage and the banks ruling as well on this interest bearing check account.