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Free checking and interest checking: What do they mean?

May 13, 2020 • 4 min read

What we'll cover

  • The definition of a free checking account

  • The details on an interest checking account

  • The similarities and differences between both

Being smart with your money means avoiding unnecessary fees. So, it makes sense to look for a checking account that doesn’t nickel and dime you for standard services — and even better, one that actually pays you interest on your balance. But does that mean you have to choose between an account with fewer fees versus an interest checking account?

The answer: Not at all! The two are not mutually exclusive, so you can find accounts that charge minimal to no fees and also earn interest.

Let’s take a look at what it means for a checking account to be free or to pay interest — or to combine the best of both worlds and do it all.

What is "free" checking?

Even if you see the word “free” when looking into checking accounts, it’s important to familiarize yourself with any fees associated with opening or maintaining an account. That’s because free doesn’t necessarily mean there are no fees, and you certainly don’t want to be surprised by any maintenance or service charges.

Here are some items you might want to look for when examining a checking account:

  • No minimum balance requirements

  • No minimum opening deposit

  • No charge for ATM withdrawals or debit card

  • Mobile and online access

  • Unlimited check writing

  • No charge for direct deposit and ACH transactions

Some banks may require you to meet certain criteria to qualify for their “free” checking account. For example, you may need to commit to having your paycheck direct-deposited. Or you may be required to open more than one account at the same institution.

If you meet the criteria and like the bank, no problem. Just be sure you don’t have to jump through too many hoops to get the terms you need. A straightforward bank shouldn’t make avoiding fees too much work.

What is interest checking?

Interest-bearing checking accounts work like other bank deposit accounts you’re familiar with, like savings or money market accounts. You put money in the account, and the bank pays interest on your balance periodically according to their terms and conditions.

While checking accounts generally don’t offer the highest APYs (annual percentage yields) , you can still expect to earn a little something on your balance. After all, if you know anything about compound interest, you know you don’t want to miss out on its potential. You can check out bank comparison sites like to find competitive rates on interest checking accounts.

Pro tip: If you’re concerned about earning more interest than a checking account can pay, consider linking your checking account to a savings account with a higher APY, or opening both accounts together. That way you can transfer the extra cash you don’t need in your checking to your savings (where it will likely earn more interest) and vice versa. Just remember that transfers out of a savings account are limited, so stay within that range.

Get a checking account that does it all.

Here’s some good news: You don’t need to pick between free or interest checking. You can find checking accounts that offer competitive rates and no maintenance fees. But your checking account shopping doesn’t have to stop there. You can find free, interest earning accounts that offer even more special features and benefits, too.

The best checking accounts are up on new technologies — like voice-activated transactions and balance alerts — and committed to improving typical offerings. Extra perks might include:

  • Free standard checks

  • Free online bill pay and people pay options

  • Overdraft protection options

  • No charge for ATMs

  • Alexa skills or other smart-device-compatible tech

  • Remote check deposit

Pro tip: If you’re searching for a checking account that’s not only free, but also earns interest, be sure to take a look at online-only checking accounts. Online banks don’t have the overhead of traditional banks and can pass that savings on to you in the form of great rates. They also tend to offer more seamless online access and updated services. And opening a checking account online is quick and easy.

Signing up for a free checking account can be a smart money move. And finding a checking account that pays interest on your balance will make your money work even harder for you. But combining both features and opening a checking account that’s free and pays interest on your balance is the savviest move of all.

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