High interest checking accounts

Posted on Sunday, July 3rd 2011 12:47 pm by menj in Offbeat

Have you observed that banks are really increasing advertising about their high interest rates for checking and savings accounts? Why are they doing this? How are they able to do it?

Banks make profit in the economic system by bringing in loans. The sum of money that banks can lend is immediately affected by the reserve prerequisite set by the Federal Reserve. The reserve requirement is currently 3 percent to 10 percent of a bank’s total deposits. This amount of money can be held either in hard cash or in the bank’s reserve fund with the Fed. To see how this bears upon the economy, think of it like this. When a bank gets a alluvial of $100, bearing a reserve requirement of 10 percent, the bank can then lend out $90. That $90 comes back into the economy, purchasing trade goods or services, and usually winds up deposited in another bank. That bank can then lend out $81 of that $90 deposit, and that $81 enters the economy to buy goods or services and in the end is posited into another bank that continues to loan out a per centum of it.

While the cost to loan individual money goes down for a bank, the bank can bring down your interest on a charge card or financing for a home. As is true on the banking side, since banks are acquiring a break recently on the cost to lend, they don’t need as much interest from the customer to cover up the spread. They could either hang on to the additional revenue for themselves or propose an incentive to the customer by providing a higher interest rate on free checking and savings accounts. This benefits current clients and lures new customers in. Since banking has become so competing, most banks follow suit so they will not be left out.

The banks do put conditions on some of these account statements that you need to be aware of. You may have limits on withdrawals, number of checks you write, and you may have to have a minimal number of dealings per month. The main reason the banks have stipulations is simple; its all geared in their favor. Limiting withdrawals keeps more of your money in the bank that they use to invest and loan and make more money for, well, the bank. Constraining the number of checks you compose saves the bank money because it costs them further to process paper. And, it also forces you to use your debit card more. And that is why they have a minimum number of transactions, so you use the debit card more. By using the debit card or credit card, merchants are paying up a fee to the bank for every transaction. Put differently, never mind how you slice it, the banks are making money. It then adds up to try to get more or less of that money back in a high interest checking accounts or savings accounts.

There may be penalties for not complying with these conditions. Most of the requirements banks have are not overly constraining. At the end of the day, higher interest rates for checking and savings accounts are a great chance to gain some base in this economic system.

    19 Comments

    Comments

    Here are 19 Responses.

    • thinkthought says:

      July 19th, 2012 at 10:33 pm

      I’m a teenager saving for college and I’m looking to start a savings account of my own. Which savings accounts require a very low minimum balance?

    • sean says:

      July 21st, 2012 at 5:40 am

      I am looking to switch banks. I have been able to save a good amount of money and would like to find a high interest rate savings account or both checking and savings. I have read some bad reviews about online savings accounts like amex, discover, and some others. I have noticed that they are the ones with the best interest though. So can you tell me your experience or what is out there that would be great. Thanks.

    • Samuro says:

      July 23rd, 2012 at 2:53 am

      What bank is offering the highest interest rates on savings accounts right now? Also, is this a good time to start a savings account or would it be better to wait a couple years? Are interest rates predicted to rise sharply in the next couple years?

    • baldy eire says:

      July 23rd, 2012 at 3:45 am

      are interest rates of checking accounts higher then those of a savings account

    • Shay H says:

      August 1st, 2012 at 3:37 am

      I want to open a new checking account and allow interest to accrue. What banks are providing the highest interest rates now ?

      Thanks

    • supernerd567 says:

      August 1st, 2012 at 4:28 am

      I need help figuring this out!

      I want to start saving some money because my husband and I are wanting to start a family in the next couple of years.
      I want to open up an account that lets me save money, but since I do not make tons of money I need to be able to get my money if I NEED it! I am not planning on taking money out of the account all of the time……but when I do start my family I want to use the money for all of the baby needs, and so on.
      So, I need an account where I can save my money, but I also need to have a access to it if I need it!!! I DO NOT want one of those accounts that lets you only take out 1000 per time..for example!

    • Jon P says:

      August 3rd, 2012 at 6:02 am

      I have a chase highschool checking account. Do i get interest and if so where can i find the perecentage?

    • Jon P says:

      August 5th, 2012 at 3:18 am

      because when i google investment accounts, it just comes up with savings accounts.

    • jdfan says:

      August 7th, 2012 at 6:29 pm

      Does anyone know of an online banking site that can beat ING Direct’s Electric Orange checking account? Currently their APY is 4%.
      -Thanks!

    • Jeanelle the Retard says:

      August 9th, 2012 at 1:42 pm

      Do I really need a checking and savings account or can I just do an interest checking account with a high apy?

    • jordenkotor says:

      August 10th, 2012 at 6:33 am

      Does anyone know how i could make money independently promoting banking products like checking accounts, savings accounts, IRA’s and CD’s. I’m just looking to offer banking products to my current clients even in an exchange for a referral fee. Any personal bankers outthere willing to work together?

    • nmlpc says:

      September 21st, 2012 at 12:32 pm

      In the USA. NY, NJ area. Anyway, I am 16 and will be getting a job soon and will be working everyday. I plan to save up primarily for a house. Don’t laugh, I am not even joking. I plan to go to Columbia University and have a part time job when I go there, I plan to do 2 years at a community college to get my basics out of the way, and also plan to work then too. My question is, when I become of agein a year and a half, I can basically do everything my parents do at the bank, correct? e.g: having a checking account, be able to use a credit card, etc… If yes, then which bank around NY, NJ would have the best rates for a long term savings account? (I’m sure theres another banking name for “long term”), because basically I want to put 75% of the money I earn into that one high interest savings.

    • encyclopath says:

      October 7th, 2012 at 3:28 pm

      I’m looking to open a new checking account and I want to find the highest possible interest yield, preferably from a larger, more established bank/credit union. Anyone have any suggestions?

    • Agent 47 says:

      October 7th, 2012 at 4:29 pm

      A car drive around a circular track of radius 80m. If the track is flat and has coefficient of static friction 1.0 with the tires, then the maximum speed of the car is 28 m/s. If instead the track was frictionless but banked or inclined at an angle, what bank angle is necessary to allow uniform circular motion at 28m/s?

    • PIE BOY says:

      October 15th, 2012 at 7:39 pm

      I live in Conway, Ar. I saved up a few thousand dollars before college to learn I will not need it since everything ended up paid for. I want to spread 3 thousand into 3 banks. I basically want my money to be idle for the next 4 years. I do not want fees nor a chance for my accounts to become closed after non-use. Right now my idea is to find highest interest saving or checking accounts. I DO want access to it in case a scholarship falls through. So those untouchable investments are out. What is your advice? ALSO, if I find a high interest FDIC approved internet bank, what are some risks?

    • sarah w says:

      October 17th, 2012 at 4:41 am

      How do you transfer money to a Bank of the West card from a small bank?
      The bank is called Rhinebeck savings, and money needs to be transferred to the Bank of the West debit card, how does this work?
      Also checks don’t work for me, I have an american card (bank of the west) but I live in holland where check books dont work here haha. It needs to be wired..
      Thanks so much!

    • Anny says:

      October 25th, 2012 at 4:07 pm

      high rate checking accounts – do online bill-pay transactions count as ‘debits’?

      you know those accounts that require like 12 or 20 ‘debit transactions’ a month to get the high interest rate..

      do you have to actually use the card at stores, or do the online bill payments [like to the power company etc] count in this total?

      thx
      wle

    • John says:

      October 28th, 2012 at 7:00 am

      For example, say you have $5,000 in a 5% interest savings account. Which would be $250 in interest a year. At what amount do you have to pay capital gains tax?

    • Stevalicious says:

      October 30th, 2012 at 9:09 pm

      I want a bank that is internationally recognized because I need to make wires abroad. I need very low/zero fees, internet banking, very good user interface, interest checking account if possible, if not, then high yielding savings account. No minimum deposit.

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