By BankingMyWay.com Staff
Many people keep a large percentage of money in their checking accounts so that the funds are readily available for bills and everyday expenses.

However, just because you don’t have all your money wrapped up in investments or a savings account doesn’t mean that it can’t work for you. Interest-bearing checking accounts with high rates can help you earn money on the cash you use most.

The Better Option: Online Accounts

APY (Annual Percentage Yield) is the compounded interest you earn on a checking account through a bank (online or traditional). Across the board, the best way to get the highest APY for an interest-bearing checking account is to use an online banking web site. Online banks typically offer much higher rates than traditional banks (an average 5.0% APY versus anywhere from 0.15% to 0.97% nationally for traditional franchise brick and mortar establishments). Because these institutions lack physical locations and generally have fewer employees, they save on operating costs, thus making much higher rates possible.

Pros and Cons of Online Checking Accounts

Standard interest-bearing checking accounts also typically require a minimum balance, whereas most online sites do offer “no-minimum” accounts that still earn an impressive APY. You can also avoid monthly service fees and ATM fees with an online service. However, there are some drawbacks, in that transfers to other accounts typically take much longer (three to five days instead of one to two) and you don’t have immediate access to a real person if you need assistance.

Something to keep in mind as well is that the process of online banking is conducted in a very do-it-yourself manner. The web pages are secured and encrypted to keep your information safe, but you are still at a small risk when you enter your personal data online, even with data-scrambling technology. If you aren’t familiar with online banks, you can review sites like ING Direct (Stock Quote: ING), Emigrant Direct and Fidelity for tutorials of the process.

Maximize a Traditional Account with Direct Deposit

Particularly if you’re a person who prefers traditional bank accounts, you can sign up for direct deposit to increase your APY. In addition to a better rate, you might also qualify for rewards programs or cash back incentives. Simply call your local bank and ask for details. Even if there isn’t a program in place, many banks will work with you to keep you as a customer.

Don’t Succumb to Ever-Changing Rates

Although it pays to shop around, you don’t have to drive yourself nuts trying to find the best rate each month. Rates change daily and the idea is to find one that you’re comfortable with when you’re ready to make a move. Keep in mind that there may always be a better deal out there, but you’ll be fine as long as the rate you’re receiving is competitive.

— For more ways to save, spend, invest and borrow, visit MainStreet.com.