High-yield checking: how to make your spending money pay you back

Using a high-yield checking account as your primary bill-paying account can earn you money on your day to day balance.

You're a frugal, financially savvy customer. You care about your money. You're probably the kind of person who picks up pennies when you see them lying in the gutter.

If your paycheck is still being deposited to a regular checking account at your local bank, though, you're leaving more than a few pennies lying on the ground.

High-yield checking account

You could be using an online high-yield checking account, and getting a hefty interest rate on your deposits. Some high-yield checking accounts offer rates even higher than a CD or a high-interest savings account, as long as you play by the bank's rules. Whether you're stacking up thousands of dollars to pay your mortgage at the end of the month or just using the account for your weekly spending money, why not earn as much interest as you can?

Large businesses know that the interest earned by holding large sums of money in a high-interest account for even a few days makes a difference to their bottom line. You may not see huge rewards at first. But like picking up pennies, using a rewards checking account will add a little something to your money every month. That little something is more money, and it's worth picking up.

What does the bank require?

High-yield checking accounts pay a premium interest rate for customers who fulfill certain conditions. These are often the same kinds of conditions a regular bank might set to waive their monthly fees:

• Maintain a minimum balance
• Use direct deposit
• Receive electronic statements
• Use online bill pay instead of writing checks
• Make a minimum number of "signature based" transactions per month (those transactions net the bank a convenience fee from the retailer).

By banking in a way that reduces costs to the bank, you not only avoid paying a monthly fee, you can earn a competitive interest rate on par with what you'd get from a high-interest savings account.

There really is no catch to these accounts: if you use your checking account and your debit card regularly, you'll simply be picking up a sweet interest rate, without needing to do much of anything. It really is like finding money just lying on the ground.

Be sure you can live with the bank's requirements for the account. You'll want to choose an account that fits your own financial situation. If you're self-employed, for example, you don't want a checking account that requires direct deposit from your employer. If you tend to keep only small amounts of cash in checking, steer clear of an account with a high minimum balance requirement.

If you use an online bank, be certain that the deposits are held by a parent bank that is FDIC-insured.

Small amounts matter

Is getting an extra percentage point or two of interest on your checking account really worth changing banks over? Quite likely yes! Putting all your bank accounts to work for you by choosing the highest available interest rates will boost your income. The effect is slight at first, but every little bit adds up. It's a step towards financial security, and it's free!

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