Interest Bearing Checking Accounts
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People who sign up for interest bearing checking accounts usually do so because it makes them feel like they are putting their money to work. These types of accounts do exactly what the name implies; they accrue interest on whatever the available balance is. At first glance, choosing such an option seems to be the obvious choice because everyone wants an opportunity to earn money without having to do anything but use a checking account. As a word of caution, however, a person should make sure he knows all the facts and does thorough research on the benefits and the pitfalls before committing to the idea. While interest bearing checking accounts certainly do have pluses in their favor, sometimes an individual would do better to stay with a traditional personal bank account.
Naturally, people are intrigued by the idea of interest bearing checking accounts, but often, many do not understand that outside factors can directly affect the money sitting in the bank. The biggest factor that can change rates and percentages is the economy. During times of recession or depression, the percentage rates that banks offer is dramatically lower than previous times. By the same token, during booming periods of growth, a person may be able to secure higher than normal rates. While knowing from one year to the next what the rate may be is impossible, preparing for the eventuality that these percentages will change is, for the consumer, a smart way to be aware of what could happen to his money.
Usually, interest bearing checking accounts require that the holder maintain a minimum monthly balance. These minimum amounts will vary depending on what bank a person decides to store his money with; naturally, some will be higher than others, sometimes even drastically so. Before opening an account, a person needs to evaluate his usual pattern of deposits and withdrawals. If he finds that his balance fluctuates wildly, due to deposited paychecks or having bills withdrawn frequently, it might be in his best interest to pursue a different banking option. If the balance dips below the minimum required, then the holder accrues maintenance fees. If enough fees are incurred throughout the lifetime of the individual, these extra charges may very well negate whatever interest has been earned from the principal amount. Admittedly, many, who have no wish other than to stash a large sum of cash in the bank, may be unconcerned and undeterred by this.
Just as with minimum balances, another area where interest bearing checking accounts tend to differ from traditional ones is in the amount required as an initial deposit. These amounts can vary, of course, between banks but are most certainly higher than a standard checking account. And unfortunately, there is a correlation between the percentage rates and the required initial deposit. While interest bearing checking accounts are seeing much lower interest rates than in previous years, they are also seeing a rise in the amount of the initial deposit. Both of these factors, coupled together, are making some leery of entering into such a commitment at this time. Many do not have large sums of readily available cash, and for those who do, quite a few are loathe to go through the extra trouble if the payoff is not substantial enough.
For those who do decide to go ahead with opening interest bearing checking accounts, there is an interesting option to think about. They no longer have to go to the corner bank in order to conduct their business because now web-based banks are offering the same service with the ease of Internet technology. While some may be unnerved by the fact that they cannot see an actual teller across the desk from them while conducting business, all sources seem to indicate that these banks are perfectly secure, and are perhaps even more so than traditional ones. Not only is the money that is deposited still insured by the FDIC, but extra encryption also prevents hackers and thieves from accessing private and personal information. The added security is extremely desirable in an age where identity theft is rampant and so potentially destructive. Another one of the benefits of going with an online-only bank is that interest rates tend to be higher for these particular accounts, meaning a person will have more success, even in a downturned economy. If people decide to open accounts that accrue interest through the Internet, however, they still need to use good judgment and compare different web banks' offers, deciding which one will best fit their needs.
There are many different ways for a person to put his money to work. A person can open a money market account, put money into a CD, or invest in the stock market. These are all great ways to see a return on one's money. Many choose to open interest bearing checking accounts because doing so meets their financial needs and brings the promise of extra cash. It is important to remember, however, that this particular kind of "investing," unlike other forms, is unlikely to ever make an average citizen a millionaire. A person should "Labour not to be rich: cease from thine own wisdom" (Proverbs 23:4). This is the best way to avoid disappointment, because profits, if there are any, will most likely be modest. However, should a person decide that this is the option for him, he will still have the conveniences of regular checking, and the added bonus of free money.
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