How Do I Choose the Best Interest-Bearing Accounts?

B. Miller
B. Miller
Checking accounts sometimes have lower interest rates than savings accounts.
Checking accounts sometimes have lower interest rates than savings accounts.

Putting your money in interest-bearing accounts can be a great way to earn a little additional income. It is important to choose the best interest-bearing accounts for your needs, though, to ensure you earn as much as possible, and don't end up actually losing money in the end. This can generally be determined with a few simple considerations, such as the amount of money you have to deposit, whether or not you need to maintain easy access to that money, and what the fees are that may be associated with the account. Understanding this fine print ahead of time will ensure you choose the best interest-bearing accounts.

Standard savings accounts have few restrictions but generally pay a low interest rate.
Standard savings accounts have few restrictions but generally pay a low interest rate.

Checking, savings, and investment accounts may all be potential interest-bearing accounts. To choose the best checking account that also bears interest, it is important to consider a few factors. These are the amount of money that must be maintained in the account to avoid a monthly fee, as well as any other fees such as a charge to write checks or use an ATM. It is incredibly rare to find an interest-bearing checking account that doesn't require a minimum amount to be maintained in the account, and often a fairly high amount. If it doesn't, it will probably require a monthly fee, or high ATM or check fees.

Do the math and determine the amount of money that will stay in the account and gain interest, compared with any monthly fees that will need to be paid.
Do the math and determine the amount of money that will stay in the account and gain interest, compared with any monthly fees that will need to be paid.

The best interest-bearing accounts are those that contribute to income, not detract from it. It is necessary to do the math and determine the amount of money that will stay in the account each month and gain interest, compared to any monthly fees. If the fees are higher than the potential interest earnings, then look elsewhere, or just stick with a free checking account. Choosing the best interest-bearing accounts for savings and investment accounts is a bit of an easier process.

Certificate of deposit accounts -- commonly called CDs -- require letting a bank hold a certain amount of money over a period of months or years, and the payoff is high interest rates.
Certificate of deposit accounts -- commonly called CDs -- require letting a bank hold a certain amount of money over a period of months or years, and the payoff is high interest rates.

Standard savings accounts generally have a very low minimum account balance, but with a correspondingly low interest rate. The money can be accessed at any time, however. Investment savings accounts such as money market accounts or certificates of deposit (CDs) typically offer higher interest rates, but with more restrictions.

Money market accounts generally require a higher initial investment and, by extension, a higher minimum account balance to avoid penalties and fees. CDs may be opened with a relatively small investment, but then the money cannot be touched without penalty for at least a few months, up to a few years, depending on the type of the CD. Choosing the best interest-bearing accounts is entirely based on an individual's financial goals and needs, so it is important to be informed.

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    • Checking accounts sometimes have lower interest rates than savings accounts.
      Checking accounts sometimes have lower interest rates than savings accounts.
    • Standard savings accounts have few restrictions but generally pay a low interest rate.
      Standard savings accounts have few restrictions but generally pay a low interest rate.
    • Do the math and determine the amount of money that will stay in the account and gain interest, compared with any monthly fees that will need to be paid.
      Do the math and determine the amount of money that will stay in the account and gain interest, compared with any monthly fees that will need to be paid.
    • Certificate of deposit accounts -- commonly called CDs -- require letting a bank hold a certain amount of money over a period of months or years, and the payoff is high interest rates.
      Certificate of deposit accounts -- commonly called CDs -- require letting a bank hold a certain amount of money over a period of months or years, and the payoff is high interest rates.