Who needs a high-yield checking account?

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A high-yield checking account can be a fine financial tool and banking instrument for people with healthy cash holdings who want to earn more than a zero return and can meet the other requirements of these types of accounts.

That's according to Chris DesBarres, co-owner of Help Unlimited, a daily money management service in Winston-Salem, N.C., who says an account that allows check writing and earns interest can be appropriate for just about anyone.

"There's no reason to leave money on the table," he says.

Interest rates on these accounts ranged from 0.2 percent to 6.17 percent, with the average being 1.64 percent, according to Bankrate's 2013 High-Yield Checking Survey. The most common annual percentage yields, or APYs, were 1 percent, 1.5 percent and 1.75 percent rather than the 2.01 percent in last year's survey.

Consumers should remember that the APY is higher than the nominal rate due to the effect of compounding, which means a bit more interest is earned each period and is added to the principal.

Minimum balance or no branches

The downside is that high-yielding checking accounts typically have strict requirements or other drawbacks compared to basic checking accounts that don't earn interest.

Explore 2013's high-yield checking survey

According to Bankrate's 2013 High-Yield Checking Survey, accounts require on average a balance cap of $17,102, compared to last year's $19,118, though the range extends from none to $25,000. And, they often require the use of other banking services.

Accounts offered by online banks have fewer rules but lack the convenience of neighborhood branches. Instead, the account management typically must be performed through a website, telephone call, mobile device or traditional ATM. Fees for other-bank ATM transactions may be refunded, DesBarres says.

The ability to meet the minimum balance requirement is a key determinant of whether someone should have a high-yield checking account, DesBarres says. Beyond that, this type of account is most appropriate for people who can and should keep more cash on hand to meet daily expenses or who want to avoid riskier investments. Seniors living on a fixed income would be one example of a group for whom these accounts might make sense, he says.

"It's an appropriate vehicle for folks who have cash on hand, want to be earning a little something and are able to meet the requirements," DesBarres says.

More needs, more products

A large part of the appeal is getting an interest rate that's more than zero, even if it's still not very attractive, says Justin Krane, president of Krane Financial Solutions, a financial planning firm in Los Angeles.


"People feel taken advantage of," Krane says. "The banks are paying them nothing, and it's time for them to take more control of their finances. A simple way to do that is through getting a better rate."

Kathryn Black, an executive with Bank of America in Charlotte, N.C., says high-yield checking accounts that require an extensive banking relationship are appropriate for "mass-affluent consumers," typically people who have complex financial needs, established credit and other assets, such as stocks or real estate. These customers can consolidate their financial lives at one institution and get perks such as a bonus interest rate on a checking account.

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