Updated on 02.17.12

Get a Checking Account That Offers Interest (48/365)

Trent Hamm

Interest rates are a funny thing. While interest is always a good thing to earn, predicting the exact rate you’ll get is far from an exact science.

Get a Checking Account That Offers Interest (48/365)

When I first wrote 365 Ways to Live Cheap in 2007 and early 2008, many checking accounts – even entry-level ones – offered interest. I myself had a checking account that received something around 1.5% interest at the time.

As the book went to press, interest rates were dropping and checking accounts were the first to really see interest rate drops. I discussed the issue with my editor and we made the decision to suggest looking for a 1% interest rate, as it had been easy to find such accounts for years.

Today, a 1% interest rate on a checking account is a pretty good deal. They can be found, but they’re often available from local banks and are prone to change. In fact, I’d suggest that a 0.5% interest rate on a checking account, given the current state of interest rates, is something to be happy with.

Why is that so important?

Well, let’s say you maintain an average balance of $2,000 in your checking account throughout the year. Just for keeping that account open, the bank gives you $10 over the course of the year. You don’t have to do anything to get that ten dollars. Just keep your account open with that average balance and you’re good.

Now, that seems like a relatively small amount, but the key thing is that you don’t have to do anything to collect it. If you choose a bank that offers some form of interest checking, you’ll simply get the money slowly throughout the year simply for having the account open.

Interest on a checking account is a perfect example of what I think of as “effortless money.” It’s one of those things that, once you’ve made an initial decision or take an initial action, it continues to either earn you money or save you money in the future.

For example, if you air seal your home once, you’ll have a smaller energy bill thereafter. Set up your programmable thermostat to cause your furnace or air conditioning to shut off during your workday and at night and you’ll always spend less on energy.

The same is true for interest on an account you naturally use. It’s just money that you get without effort, and that’s the best kind of money.

That’s not to say, of course, that it’s the only factor to consider when choosing a bank. It’s one of many, like the ATM network (discussed yesterday) and other factors we’ll discuss in the next few days.

This post is part of a yearlong series called “365 Ways to Live Cheap (Revisited),” in which I’m revisiting the entries from my book “365 Ways to Live Cheap,” which is available at Amazon and at bookstores everywhere. Images courtesy of Brittany Lynne Photography, the proprietor of which is my “photography intern” for this project.

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  1. Cheryl says:

    We have a checking account that offers interest. Besides keeping the account open, we have to use our debit card 10 times during the month and have at least one direct deposit.

  2. lurker carl says:

    Make sure you jump through all the hoops to keep your accounts accruing interest payments. Stuff like maintaining minimum balances, required ATM usage, direct deposits, etc. Something as simple as changing jobs and having a break in the direct deposit clause will be enough to change an account from interest paying for you to fee generating for the bank. Choose carefully.

    Banks assume their customers are too deeply ingrained into the automatic payments and bill payer website and other ‘conveniences’ to change to a better financial institution.

  3. krantcents says:

    I earn interest on my checking account, but it is practically nothing. Less than a dollar per month.

  4. David says:

    I confess, I am totally baffled as to what that picture is supposed to represent.

  5. Kristin says:

    If you can find an interest rate on a checking account at 1% right now, I’d be completely astounded. It’s hard to find high-yield savings accounts, even ones that are online, that even get percentage. ING Direct’s Electric Orange Checking account only gives you 0.9% if you have a whopping 100k in the account.

  6. Jen says:

    Boring…where is Johanna?

  7. elyn says:

    Okay, I was holding back from saying anything snarky about the photos on this site, but they’ve been wearing me down. Honestly, I get a little depressed now when I click on The Simple Dollar, and a lot of that is the photos. They just have this blah feel that gets to me. But this one? What the what? A number one in the mud? Why???????? It is both perplexing AND depressing.

  8. Steve says:

    All else being equal, of course it’s better to earn interest on your checking account. But all else is rarely equal. Every interest bearing checking account I’ve ever seen has had more restrictions, requirements, or fees than the no-interest account at the same bank.

  9. Kai says:

    I think the numbers are taped to a wall with old paint.
    I’m equally baffled as to what that is to represent.

  10. Tristan says:

    Seriously, I can appreciate that you want to improve your quantity of posts, and bring in new readers (these are good “Googleable” topics after all) but you’re really alienating your readers by offering the same stuff we’ve been hearing for 5 years.

  11. Tom says:

    Bah I don’t mind the picture, or the article either for that matter(what interesting insight about the discussion with the editor, and the follow-up that even now a 0.5% interest rate on a regular checking account would be something to brag about). The picture has depth-of-field, interesting color contrast, and unique composition of the subject. It is certainly not the perfect picture, but its not wretched either.

  12. Kai says:

    It’s an okay photo of a number stuck to a wall. What we all can’t figure out is what on earth the subject is supposed to indicate. Especially given the same photo with a different number on the next post.
    Is this the best she could come up with to theoretically represent 1% interest? (My guess since the other post has a 3).

  13. Tom says:

    Yeah, Kai, I think we can infer that you’re correct about the interest rate. I’m willing to bet the photographer was working out of the printed copy of the book rather than Trent’s posts. So maybe she took this picture without any future knowledge of what Trent was going to say here.

    This is going to sound dumb, but as much as I don’t mind the 1, I really didn’t like the 3 at all. Perhaps because it seems like a lazy attempt at a series of alike photos, or the 3 is ambiguous enough that when you turn it on its side, it looks like a letter instead of a number. That picture came across more as an attempt at seeming artful rather than having an artful element to it.

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