Words like dividends can feel intimidating, we know. For that reason, we created a breakdown on the meaning, purpose and benefits of a dividend-bearing checking account to make those daunting words feel less... well, daunting!
What does it mean?
For starters, what is a dividend-bearing checking account? In simple terms, it's a combination of the two most common account types - checking and savings. Dividend-bearing checking accounts allow you to do your normal day-to-day transactions while also offering interest on the account balance at the end of each statement.
Even though its name carries the word ‘dividend,’ these accounts have nothing to do with the dividend that companies pay. Rather, the term dividend here means a bonus or extra money that you get in the form of interest.
And the purpose?
Traditional checking accounts do not earn interest/dividends since they’re designed to hold funds for everyday expenses. Savings accounts do earn interest, but accessibility of funds is limited because these accounts are designed and intended to be used for long-term savings rather than everyday transactions. A checking account that earns interest blends the best of these two accounts by offering an attractive rate, or annual percentage yield (APY), while allowing for greater accessibility of funds over a savings account.
Of course there are benefits!
There are several key advantages to opening an interest/dividend checking account:
- Accessibility of funds. Unlike a savings account, the funds in an interest checking account can be accessed at any time via debit card, paper checks, automatic electronic payments and online bill payments.
- Dividends/Interest. Interest will accrue on the account balance and be paid out periodically.
- Security. Most dividend checking accounts at credit unions are backed by the National Credit Union Administration (NCUA).
- Low or no fees. Maintenance fees on interest checking accounts tend to be nominal. Some financial institutions do not charge any fees on these accounts at all with qualifying conditions.
- Banking benefits. A dividend-bearing checking account often provides the account holder with access to other benefits, including online banking, overdraft protection, access to mobile banking apps, automatic payroll deductions and more.
An interest-bearing checking account can be the perfect place to grow your money without tying up your funds.
Are you ready to go Beyond traditional checking? Take advantage of our Beyond Checking's 3% bonus rate - one of the best in the industry! Earn dividends at a competitive rate and enjoy all the conveniences that come with our checking accounts. Learn more here!