Can You Collect Interest On Money In A Checking Account?

Can you collect interest on money in a checking account? Individuals generally cannot collect interest on checking accounts. For-profit businesses, in most cases, also cannot collect interested in checking accounts. Not-for-profit businesses, however can collect interest in checking accounts.

When asked if a person can collect interest on money in a checking account, Mrs. Gwen Evans, a banking professional with ten years experience in the profession, answered, "It depends on who you are." She went on to explain, "Individuals generally cannot collect interest on checking accounts. For-profit businesses, in most cases, also cannot collect interested in checking accounts. Not-for-profit businesses, however can collect interest in checking accounts."


Mrs. Evans did mention a few exceptions, "There are specialized checking accounts that carry interest. For example, lawyers are required to use a special type of checking account by the State Bar Associations that carries interest, but the lawyers do not keep the interest. It goes to the Bar Association instead."




Mrs. Gwen Evans, a bank officer or 10 years, also explained, "Some business checking accounts can earn a credit like an interest rate, but the accrued amount offsets the service charges by that amount." Therefore, it is more of an discount or reward than an interest payment.

As far as personal accounts are concerned, some banks do offer checking accounts that pay interest. This type of account allows the bank customer to "demand" money at any time, unlike a term deposit, which cannot be accessed for a predetermined period, which can be anywhere from three months to years.


A Negotiable Order of Withdrawal account, a deposit account, on which checks may be written, does pay interest. Made available on a national scale in 1981, these accounts typically pay a relatively small return, although some banks offer high-interest NOW accounts in order to attract depositors. However, you should not run off to switch banks just yet. This interest-bearing checking account however is little more than an attempt to attract customers.

Information on the Bankrate website (Bankrate.com) states, "Interest Bearing Accounts offer so many fees and require higher minimum balances, so most people will spend more on having an interest-bearing account than a non-interest bearing account." It also states, "The average monthly service fee for interest-bearing accounts rose 3 percent to $10.77, but is just $6.21 on non-interest accounts." Therefore, uunless your checking account has a high interest rate (which is likely to be only an introductory rate good for a predetermined amount of time), the balances in NOW (Negotiable Order of Withdrawal) accounts should be kept at the minimum necessary to provide needed funds without incurring service charges.

Although a checking account that pays interest may appear more attractive than a checking account that does not, it is important to look at fees for both types of checking accounts. Often these accounts that offer interest, charge higher fees than regular checking accounts. Therefore, it would be wise to investigate rates and durations the rates will last thoroughly, or you could end up paying more in fees than you earn in interest. In the end, it is clear that though you may be able to get an interest-bearing checking account, it probably makes more sense to use savings accounts or investments to accumulate interest.

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