Most people think of a checking account as a place for their paycheck to land and their everyday purchases to come out of. But what if the money sitting in your checking account could also earn a competitive return?
That's the idea behind high-yield checking.
A high-yield checking account combines many of the everyday features of a traditional checking account with the opportunity to earn a higher annual percentage yield (APY) when certain requirements are met.
Here's how it works — and what to look for when deciding whether high-yield checking makes sense for you.
What Is a High-Yield Checking Account?
A high-yield checking account is an interest-earning checking account that generally offers a higher APY than a standard checking account.
Unlike a certificate of deposit (CD), where funds may need to remain deposited for a set period, a checking account is designed for everyday use. You can typically use a debit card, receive direct deposits, pay bills and access your money while potentially earning interest on your balance.
That combination can make high-yield checking an attractive option for money you already keep available for everyday expenses.
How Does High-Yield Checking Work?
High-yield checking accounts often require you to complete certain activities each month to earn the higher APY.
These requirements vary by financial institution but may include things such as:
- Receiving a certain amount in direct deposits
- Making a minimum number of debit card purchases
- Enrolling in online or mobile banking
- Receiving electronic statements
If you meet the account's qualifications, you earn the higher APY on eligible balances.
That's why it's important to look beyond the advertised rate and understand exactly what you need to do to earn it.
Why Would a Credit Union Pay More on Checking?
Financial institutions want checking accounts to be actively used.
Features such as direct deposit, debit card purchases and digital banking often indicate that a member is using the account as their primary checking account.
Some high-yield checking accounts reward that activity by paying a higher rate on qualifying balances.
In other words, you may be able to earn more on money you're already keeping in checking simply by using the account for everyday banking.
How Much Difference Can a Higher APY Make?
Consider $10,000 sitting in a checking account that earns little or no interest.
Now compare that with $10,000 earning a competitive APY.
While a checking account isn't intended to replace your long-term savings or retirement strategy, earning interest on money you already keep accessible can help you get more value from your everyday account.
The key question becomes:
If you're going to keep money in checking anyway, could that money be working harder for you?
What Should You Look for in High-Yield Checking?
The advertised APY is important, but it shouldn't be the only thing you consider.
Before opening an account, look at the qualification requirements, balance limits, monthly fees, minimum balances and what happens if you don't meet the monthly requirements.
Most importantly, consider whether the qualifications fit the way you already bank.
An account requiring behaviors you already use — such as direct deposit, debit card purchases and online banking — may be much easier to maintain.
High-Yield Checking at Community Focus
Community Focus Federal Credit Union offers a High Yield Checking Account earning 4.50% APY* on qualifying balances up to $10,000.
To qualify for the higher APY, members need to meet the account's monthly requirements:
- Receive at least $1,000 in direct deposits
- Complete at least 10 debit card transactions
- Use Online Banking
- Enroll in e-Statements
For someone who already receives their paycheck through direct deposit, regularly uses a debit card and banks digitally, those may be activities they're already doing each month.
Is High-Yield Checking Right for You?
High-yield checking may be worth considering if you maintain money in your checking account and can comfortably meet the account's monthly qualifications.
It may be especially useful for someone who wants to keep their money easily accessible while having an opportunity to earn more on qualifying balances.
The important thing is to choose an account based on how you actually manage your money, not simply the advertised rate.
Make Your Checking Account Work Harder
Your checking account is one of the financial products you probably use most often. It holds your paycheck, pays your bills and supports your everyday spending.
It can potentially do more.
If you're already using direct deposit, a debit card and digital banking, Community Focus High Yield Checking could give your everyday money an opportunity to earn more.