When one wish to save some money that he/she earns by hard work, what immediately comes to the mind is to start an account in a nearby bank and deposit the sum in it. But the term ‘deposit’ encompasses a much broader meaning these days. It is possible now to deposit the money in a variety of accounts, each with its own schemes, interest rates and other advantages. One such deposit scheme is the interest earning checking accounts, which gives interest to the money deposited over a period of time.
Before seeing in detail what interest earning checking accounts are, let us have a look at the basic term involved – the checking account. Checking accounts are the American counterparts for demand accounts. It is called current account in UK and a cheque account in New Zealand. Against such an account, the customer can draw checks that are payable on demand. That is, it facilitates cashless payments by means of direct debit, bank draft, electronic fund transfer and checks. In such a way, a checking account is the most frequently used financial tool in a common man’s life.
Interest earning checking accounts are those checking accounts that pay the customer an interest over the deposit. They are sometimes referred to as NOW accounts or Negotiable Order of Withdrawal account, in order to differentiate it from the old ‘standard’ checking accounts which are prohibited under a rule passed in the 1930s from paying interests on the sum deposited.
Choosing the right interest earning checking accounts is in one way, beating the bank in their own game. While deciding on an interest earning checking account, one should be rational enough to see if the particular account is good enough for his/her financial needs. In order to do so, the customer should ideally understand his/her checking needs. The right interest earning checking accounts cost you less money while serving your needs completely.
Generally, interest earning checking accounts – contrary to other checking accounts – mandate the customer to maintain a higher minimum balance. With many of the banks, even though the starting amount required to open an account may be less, the minimum balance will be many hundred dollars higher than the initial amount. Hence one should be clear on the minimum balance that he/she is comfortable with and see if the earning interest is worth the deposit.
But practically and honestly, interest earning checking accounts are not a suitable savings vehicle. It ideally suits for those looking for checking needs primarily and at the same time wants to keep oneself away from spending all those that is present in the account. For those hell bent on savings, it is better to look for other productive savings options available with the banks than starting an interest earning checking account.