Do Checking Accounts Earn Interest?

Traditional checking accounts typically don’t earn much interest, but some banks now offer checking accounts that earn interest at a good rate.

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Updated May 13, 2024
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Most traditional checking accounts earn little interest or no interest at all. That’s because savings accounts are typically the products that earn interest while checking accounts serve as products for everyday money transfers and purchases.

However, some banks offer interest-bearing checking accounts that can help you grow the money you have in your checking balance.

Let’s explore how checking accounts that earn interest work and what banks offer them so you can find the option that fits your needs best.

In this article

Key takeaways

  • Although traditional checking accounts typically earn little or no interest, we recommend using a checking account that offers a good annual percentage yield (APY) rate to help you grow your money.
  • Traditional banks — like Chase, Bank of America, and Wells Fargo — have interest-bearing checking accounts, but they don’t have competitive APY rates.
  • Some of the best checking accounts, including SoFi Checking and Savings1 accounts and Axos Rewards Checking account, provide much higher interest rates compared to traditional banks.

Do checking accounts earn interest?

While not every checking account earns interest, some banks and credit unions offer interesting-bearing checking accounts. The interest rates these banks and credit unions offer can greatly vary. Some may offer a low APY rate of 0.1% or 0.2%.

However, neobanks have been changing the game by offering checking accounts that earn higher interest rates.

SoFi offers a Checking and Savings product that helps you earn up to 0.50% (as of Jan. 30, 2024)23 on your checking balance with direct deposit4.

Explore our list of the best neobanks to find our top recommendations.

How do interest checking accounts work?

An interest checking account works similarly to any interest-bearing account. You put money into the account, and it generates interest according to the account’s terms and conditions.

The reason that checking accounts typically earn lower interest than savings accounts is their intended usage. Checking accounts typically serve as a tool for short-term deposits, debit card purchases, and easy money transfers. They’re accessible accounts that don’t typically have transaction limits like some savings accounts.

For example, a checking account could accrue interest daily and compound that interest each month. That means you might see interest posted to your account by a certain day the following month. If you don’t make any withdrawals, the interest you accrue could then earn more interest, which is called “compound interest.”

Pros and cons of interest-bearing checking accounts

Pros
  • You can earn money on your checking account balance
  • Checking accounts are typically easier to use than savings accounts
Cons
  • APY rates are typically lower than savings accounts
  • Some accounts may require a certain balance to earn the highest APY rate
Account name APY rate Monthly maintenance fee
SoFi Checking and Savings Up to 4.60% APY2 on savings with direct deposit4 $0
Axos Rewards Checking Up to 3.30% APY5 $0
Ally Interest Checking 0.25% (as of May 22, 2024) APY $0

What’s the difference between a checking and a savings account?

Checking account Savings account
Intended use Everyday deposits, purchases, and transactions Specific savings goals and earning interest
Interest Little to none on traditional accounts, but some accounts offer high interest Typically higher than interest checking accounts

Checking accounts are easily accessible bank accounts that let you quickly deposit, transfer, and withdraw money. They’re great for everyday use because they typically allow you to make as many transactions as you need. Some, but not all, checking accounts earn interest.

Savings accounts are designed for storing money for long periods of time, or at least longer periods of time compared to checking accounts. This is partly because some savings accounts have transfer limits, such as up to six withdrawals per month, and partly because most savings accounts earn interest.

In general, checking accounts are better for everyday transactions while savings accounts are better for storing money and earning interest.

Learn more about checking versus savings accounts.

Alternatives to interest-bearing checking accounts

If your main concern is earning interest on your money, there are likely better options than interest-bearing checking accounts. For example, you can use high-yield savings accounts, money market accounts, and CDs as alternatives.

  • High-yield savings accounts: These are savings accounts designed to earn high interest rates on your stored balances. They might not have the flexibility of checking accounts, but they can help grow your money over time. Check out high-yield savings accounts.
  • Money market accounts: These are bank accounts that often pay higher interest rates than standard savings accounts. However, they might limit your number of transactions. Check out the best money market accounts.
  • CDs: A certificate of deposit (CD) is a type of savings account in which money is stored for a certain amount of time. For example, you might have a 6-month, 1-year, or 5-year CD. You typically can’t withdraw any money without a penalty until the end of the agreed-upon time, which is the maturity date. Check out the best CDs.

Interest-bearing checking accounts FAQ

How much interest does a checking account pay?

Interest-bearing checking accounts pay an average of 0.07% APY, according to data from the Federal Deposit Insurance Corporation (FDIC). With that rate, you would only make about $0.70 on a $1,000 balance over the course of a year. Fortunately, you can find high-yield checking accounts with much higher interest rates in our list of the best checking accounts.

Do savings or checking accounts earn more interest?

The FDIC reports that the average interest rate for savings accounts is 0.47%, while for interest checking accounts is only 0.07%. While not all checking accounts accrue interest, most savings accounts do and typically at higher rates. However, interest rates can differ across banks, and a checking account may occasionally have a higher rate than a savings account at another bank.

Where can I find an interest checking account?

Many banks offer interest checking accounts, including Chase, Wells Fargo, and Bank of America. However, you typically won’t find the best checking account APY rates at traditional brick-and-mortar banks. That’s why we recommend checking the best online banks and their offerings before you choose one.

Interest-bearing checking accounts: bottom line

Many checking accounts don’t earn interest, but we recommend using an interest-bearing checking account to help grow your money over time.

That said, savings accounts tend to provide better interest rates than checking accounts. So it may make the most sense to have a checking account for your everyday needs along with a savings account to earn higher interest on the money you set aside.

For our top checking and savings account recommendations, check out our list of the best banks.

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Author Details

Ben Walker, CEPF, CFEI®

Ben Walker, CEPF, CFEI®, is credit cards specialist. For over a decade, he's leveraged credit card points and miles to travel the world. His expertise extends to other areas of personal finance — including loans, insurance, investing, and real estate — and you can find his insights on The Washington Post, Debt.com, Yahoo! Finance, and Fox Business.