Maximizing Your Money: Is a High Yield Checking Account Right for You?

When it comes to checking accounts at your local bank or credit union, savvy millennials and Gen Z savers should be aware that all accounts are not created equally. Checking accounts are a necessity, but they typically don’t offer interest. If you’re looking to maximize your money and make smart financial choices, a high yield checking account might be something to consider.

What is a High Yield Checking Account?

A high rate checking account, also commonly referred to as a high yield checking account, works much like a regular checking account at your local credit union or bank, except you get a better rate of return. Having a high yield checking account offers the benefits of a savings account by maximizing your money with competitive interest rates, while still offering easy access to your money by using a debit card, writing checks, or withdrawing money from ATMs, like your regular checking account.

Why Consider a High Yield Checking Account?

The simple answer is that you can maximize your money, so it works harder for you in a high yield checking account. This option is risk-free and is definitely a smart move for younger generations when opening their first bank accounts. Here are some of the benefits of a high yield checking account.

• Interest Rates Will Rise Again – Even when interest rates may seem low, the rates earned on high rate checking accounts are always higher than a basic checking account. This is great news for millennials and Gen Z consumers who can open a high rate checking account now and will be set up and ready to maximize earnings when interest rates rise again.
• Higher Returns on Your Money – Savvy millennials can maximize their money by earning interest with a checking account with a high annual percentage yield (APY). The APY refers to the yearly amount of interest your money is earning, and it is represented as a percentage. The APY considers how often interest is compounded and applied to your checking account. Compound interest helps achieve your financial goals because interest is earned on your principal balance and the interest added to your account, meaning that a higher APY earns more interest for you to save or invest.
• Easy to Use – High yield checking accounts operate like your regular checking account, so there are no major changes needed by you to reap the benefits of the increased interest rate as long as you meet any account requirements.

Evaluating Your Financial Lifestyle  

While a high yield checking account can be a tool to help maximize your money, it is important to assess your personal spending habits as well as your financial goals to ensure it is a good fit for your lifestyle.
 

Millennials and Gen Z both can benefit from high yield checking accounts when they have their paychecks directly deposited in the account and maintain a moderate monthly balance. This gives them easy access to their money with the benefit of a good return. Check your local credit union for high yield checking accounts with the best rates and liquidity.

Consider these five questions when choosing between a high rate checking account and a regular checking account.

1. Do I meet the account requirements? 
2. Is the interest rate better than other options?
3. Is there easy access to in-network ATMs and a local branch? 
4. What are the fees for this account? 
5. How often do I need to access my money? 

• Maintaining a set minimum daily balance
• Direct deposit of paycheck each month 
• Enrollment in the institution’s online banking system
• Performing a minimum amount of debit card transactions each month

Please check with your financial institution for specific requirements to ensure you can qualify for a high yield checking account.

Comparing High Yield Checking Accounts with Other Banking Options

In addition to a high rate checking account, savvy consumers should also consider other choices for your current lifestyle from your credit union such as these alternatives.

High Yield Checking Account vs Other Banking Options

• Certificate of Deposit – Also known as CDs, this option can offer a higher return than a high rate checking account, depending on the term selected. The earnings are substantial, but the downside is that money cannot be accessed for the entire term, which can be anywhere from six months to five years. Early withdraw means payment penalties.
• Money Market Account – A combination of the benefits of checking and savings accounts, a money market account allows you to write checks and make debit card purchases while earning interest. The downside of a money market account, though, is that they often limit the number of transactions per month and may charge a fee for more account activity, which can be limiting for the younger demographic who needs readily available access to their money. 
• High Rate Savings Accounts – Those who want to save for the long term may consider a high rate savings account. These savings accounts pay a high APY, but not-so-easy access to funds is the downfall. Some accounts allow you to use an ATM for limited withdrawals, but it typically takes several days for the money from this type of account to be available.

Tips for Maximizing Your Account

• Choose a bank or credit union that is FDIC and NCUA insured
• Be aware of monthly fees that can add up including ATM charges and monthly service fees
• Ensure you meet all requirements, or you could end up paying more fees and receiving less interest each month
• Consider utilizing popular budgeting apps to help keep your finances in line to maximize your high rate checking account profits

High-yield checking accounts are like a secret weapon for savvy savers: you get the best of both worlds with higher interest rates and the ease of everyday banking. Just remember, they’re not a one-size-fits-all solution. Think about factors like minimum balance requirements, potential monthly fees, and your transaction needs. Chatting with a financial advisor is a wise step to see if this aligns with your financial goals. After all, picking the right financial tools is key to boosting your financial health, and it’s definitely worth exploring for long-term financial growth.