Earn More Interest With Online Checking

If you're looking for a checking account that earns interest, you might be a little disappointed with your local banks interest rates. After all, you'd have to have an insane amount of money to notice a return of 1% interest! In order to benefit the most with an interest earning checking account, you will want to compare rates of online banks.

Online banks have lower overhead costs than the traditional, bricks-and-mortar banking institution. With lower expenses, they are able to pass on those savings through higher interest checking and savings account offers for account holders.

While the local bank or credit union may offer interest earning checking accounts ranging between .5% and 2.5%, a 100% online bank may have interest earning checking accounts as high as 4%. It pays to spend time researching and comparing the various interest rates for checking accounts before choosing one.

Checking Account Fees

One drawback of any checking account that earns interest, online or off, is that it is far more likely to charge the account holder a monthly maintenance fee than a non-interest earning checking account. There are exceptions to this rule, though, and the majority of checking accounts that do charge a monthly maintenance fee will waive it if you maintain a minimum balance. The minimum balance requirement will vary from one banking institution to another, but could range between $500 and $5000.

When using an online checking account, most will offer an ATM card to make it easier to access your money. While many online banks do not charge fee's for ATM use at other banks, keep in mind that the local banks often charge a fee when using another institution's ATM card. (Some online checking accounts will literally refund your ATM fees up to a certain amount each month, though, which makes this a negligible concern.)

A New Way to Bank

While many households have started to take advantage of online savings accounts to earn higher interest than their local bank's savings accounts, making the move to an online checking account may be a little more difficult for some. For people used to writing checks to pay for everything, you may find an online checking account with online checks and bill payment an entirely new way to handle your finances. New isn't necessarily bad, though! For example, with ING's Electric Orange online interest earning checking account, you can log into your account via the internet, write a “check” online, and hit send. ING will print the check and mail it to the address you specified on your behalf. Not only do you not have to buy checks, but ING pays the postage to mail the check to your creditors for you.

Some online checking accounts allow you to make deposits at local ATM's in addition to direct deposit or mailing checks or money orders to fund your account.

Depositing money into an online checking account is a challenge for some people who are used to hitting their bank's drive through on the way home from work. If you have cash that you want to deposit, you either have to deposit it into another account and transfer the money (or write and mail a check); or buy and send a money order to your online bank. Most people keep a local bank to make it easier to deposit and transfer money you have on hand. For your payroll checks, it's as easy as setting up a direct deposit.

The adjustments you make to your banking habits in order to use an online checking account are rewarded with higher interest rates and lower fees. As mentioned, interest earning checking accounts are more likely to charge monthly maintenance fees – but with a bit of research you can find online, interest earning checking accounts without fees (or at the very least, an account that waives the fee for having a minimum balance).