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Is high interest checking better than a savings or money market account? Consider four factors

Barbara Marquand | guest writer for GoTalkMoney

With savings, money market accounts and CD rates still in the tank, one alternative to consider for boosting earnings is interest-earning checking.

A variety of online banks, smaller community banks and credit unions are marketing interest-bearing checking accounts that actually boast higher yields than many money market and savings accounts.

High checking account interest rates: What's in it for banks?

BancVue, an Austin, Texas, company that works with community banks and credit unions to set up the programs, says customers with high-interest checking keep higher balances and stay with their financial institutions longer than other customers. The company also says the products enable banks and credit unions to distinguish themselves from the big banks and cut costs by encouraging the use of efficient technology, such as online statements and automatic bill-pay services.

But make sure you understand how these checking accounts work before you cash in CDs and transfer money out of savings to open one. All of these deals come with specific requirements and unless they fit your banking behavior, you're better off finding the best rates on CDs, money market and savings accounts and putting you're money there.

Here's what to consider:

1. Look before you leap through the hoops.

To qualify for high-interest checking, you usually must do the following:

• Make 10 to 12 debit card purchases a month.

• Get all of your statements online.

• Use direct deposit and/or automatic bill payment services.

There's no use signing up for the account if you don't think can meet all the qualifications.

2. Compare checking, savings and money market balance requirements.

Many of these high-interest checking accounts limit how much money you can keep in them, and some have minimum balance requirements.

3. Is the bank convenient and worth your business?

Consider more than just the yield before you open an account. How is the bank's customer service? Can you get in touch with a real live human when you have a question? Does the ATM network feature enough convenient locations? Are there any hidden fees?

4. How much longer will these accounts be available?

Still reeling from the recession, banks now are coping with a slew of new regulations that have just gone into effect, including restrictions on credit card practices and checking account overdraft fees, and new rules that are in the process of being written, such as limits on debit card interchange fees. These are the payments merchants make to banks whenever a debit card is used to make a purchase and the transaction is processed over credit card networks. In fact, revenue from those debit card interchange fees are how banks can afford to offer interest on checking accounts.

So be aware that banks may change their offerings drastically in coming months.

The bottom line: read any account agreement carefully before moving money around, and pay attention to the notices your bank sends you. They might contain important information about new terms, requirements or fees.

If high-interest checking isn't right for you, look for the best savings rates online for CDs, money market and savings accounts. In today's low-rate environment and tough economy, you need to get the best bang for your buck, even if the best bang is a small pop.

Disclaimer:This content is not provided or commissioned by American Express. Opinions expressed here are author's alone, not those of American Express, and have not been reviewed, approved or otherwise endorsed by American Express. This site may be compensated through American Express Affiliate Program.

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