While searching for a checking account, consider a traditional and high-yield checking account. Both kinds of accounts have advantages and disadvantages, so before choosing an online checking account, consider your financial goals and priorities.
To help you make an informed decision, they’ll look at the differences between traditional and high-yield checking accounts in this piece.
Traditional Checking Accounts
A traditional checking account is an account that allows you to deposit and withdraw funds, pay bills, and make purchases using a debit card. You can access your money through a physical branch, ATM, or online account. Traditional checking accounts typically offer low or no interest rates, meaning you won’t earn much money on your balance.
Advantages of Traditional Checking Accounts
The main advantage of a traditional checking account is that they are widely available and easy to use. For example, you can find traditional checking accounts at most banks and credit unions, which offer convenient access to your funds. Additionally, traditional checking accounts usually have no minimum balance requirement so you can open an account with just a few dollars.
Disadvantages of Traditional Checking Accounts
The most significant disadvantage of a traditional checking account is the low or no interest rates. This means that your money will earn little, if any, interest over time. Some traditional checking accounts charge monthly, ATM, and other fees that can add up quickly.
High-Yield Checking Accounts
A high-yield checking account is a checking account that offers a higher interest rate than traditional checking accounts. High-yield checking accounts typically need a higher minimum balance than traditional checking accounts and may have more restrictions on how you can access your funds.
Advantages of High-Yield Checking Accounts
The main advantage of a high-yield checking account is the higher interest rate. This means your money will earn more over time, which can help you reach your financial aim faster. Additionally, some high-yield checking accounts offer other perks, such as cashback rewards and ATM fee reimbursements.
For example, the cash management account that SoFi offers a high-yield checking option with no account fees and no ATM fees at over 55,000 ATMs worldwide, making it an attractive option for students looking for a convenient and rewarding banking experience.
Disadvantages of High-Yield Checking Accounts
The biggest disadvantage of a high-yield checking account is the higher minimum balance requirement. You must keep more money in your account to avoid fees or earn interest. Additionally, high-yield checking accounts may have more restrictions on how you can access your funds, such as limits on ATM withdrawals or check writing.
Choosing the Right Checking Account
When choosing between a traditional checking account and a high-yield one, it’s important to consider your financial goals and priorities.
For example, if you value convenience and accessibility, a traditional checking account might be your best option. On the other hand, if you want to earn more interest on your balance and are willing to meet the minimum balance requirement, a high-yield checking account might be a better choice.
Online checking accounts are a relatively new option offering many of the same features as traditional and high-yield checking accounts. Online checking accounts are typically offered by online-only banks and credit unions and can be accessed through a website or mobile app.
Such checking accounts provide the convenience of managing your account from anywhere with an internet connection and often have lower fees and higher interest rates. Consider your preferences and financial aims carefully when deciding which type of checking account to choose.