A high yield checking account is one which offers interest rates that are higher than the average market rate. For an equivalent sum of money deposited into such an account, the interest earned will be much higher than that which can be earned in savings or checking accounts that bear regular interest rates.
High yield checking account holders benefit in a large way since the high interest rates are akin to free monies.
It does not come easy though; before you can start enjoying interest rates as high as six percent you have to satisfy a certain number of minimum preconditions. These include a commitment to making a certain number of debit card, online banking, bill pay or direct deposit transactions monthly. It is these preconditions that make one eligible to enjoy the benefits of the reward checking rate. Failure to comply with these requirements means that your money may attract a lower interest rate. It is therefore advisable to consider your financial obligations before deciding to open such an account. See whether you will be required to maintain a minimum deposit and also consider whether you often have sudden financial commitments that require money immediately.
1Advantages of Opening a High Yield Checking Account
- Zero ATM Fees
For many banks that offer high yield checking accounts, customers enjoy the benefit of not having to pay transaction fees for ATM services. Customers are offered the ability to make use of any ATM service free of charge and this in the overall perspective serves to make their banking activities much more convenient and easier.
- Free Checks
Some of the banks that have high yield checking accounts welcome new customers to sign up by offering them free checks. This offer lasts for a considerable period but some banks are known to extend it indefinitely.
- Insured by the FDIC
That most of the banks that offer these accounts are FDIC-insured is quite a comforting assurance since customers are at least guaranteed of getting their monies back in the event that the financial institution goes under. It is imperative that before opening such an account you should confirm your desired bank’s financial credibility through the FDIC website at http://www2.fdic.gov/idasp/main_bankfind.asp.
- No-cost Postage Paid Envelopes
Even for customers that live in remote areas or in locations that lack banks with high yield checking account services, making deposits is quite easy given that these amounts just have to be mailed to the banks in free postage paid envelopes.
- Depositing Checks from Home
While it might sound kind of unsafe to send money in envelopes through the mail service, it is definitely much more reassuring to know that checks can be deposited in a similar fashion. All that you have to do is place your check in the postage paid pre-addressed envelope and dispatch it.
- Higher Quality of Customer Service
Whether it is at a credit union or a small community bank, a high yield checking account gives you the opportunity to relate with your banker much more than would be possible if it were a regular checking account. In most cases account holders get to know their bankers quite well given that they deal with the same person each time.
- Full Access to Your Money
By far one of the greatest advantages of owning a high yield checking account is the fact that many banks with such facilities allow you access to most, if not all, of your money without levying any penalties.
2Risks/Drawbacks of Opening a High Yield Checking Account
- Potential Difficulties in Making Cash Deposits
As pointed out earlier, it is definitely very easy to make check deposits by making use of the provided pre-addressed postage paid envelopes. However, making cash deposits tends to be a tad more complicated and the two options available are clearly not as convenient as many would like. First you have the option of driving to the bank to make a deposit – a difficult proposition if your bank account is in another far-flung city or state. Alternatively, you can open a local checking account, deposit money in it, and then proceed to write yourself a check before mailing it to your high yield checking account.
- Inconveniencing Delays Thanks to Depositing Via Mail
This observation is actually an extension of the above drawback with regards to one making deposits through the mail. This is very inconvenient considering that one has to wait for the post office service to deliver the mail to the bank and then wait further as the bank processes the deposit. On average, you will have to wait for three to ten days from the time you drop your envelope into the mailbox up to when it finally arrives at the bank; this is certainly very awkward especially when you don’t have the luxury of time.
- Coping with the Monthly Requirements
For most banks that offer this type of account, holders are required to satisfy certain criteria each month which may involve the completion of up to ten debit card transactions or making a minimum of one direct deposit or indeed making five bill pay online transactions. These conditions must be met if the promised interest rate is to be granted. On the brighter side, this requirement is not so much of a drawback if your high yield checking account also serves as your main checking account.
- Issuance of Electronic Statements Instead of Paper Ones
Receiving electronic statements is not a problem for most people who have taken to the use of computers and the internet but it may present a problem for some of the people who are not particularly enthusiastic about abandoning the conventional way of doing things - in this case receiving paper statements. It may take some amount of convincing to assure them that their monies are still safe at the bank.
