Have you heard of premium checking accounts? To sum it up, they’re simply a bank’s top-tier publicly advertised deposit accounts. If you’re a higher-net-worth individual, you probably have access to other unadvertised accounts through your bank’s investment division. Still, if you’re just looking for an everyday checking account and comparing various banks’ offerings, you’ve probably run across these premium accounts.
Each has a minimum balance requirement to avoid paying a monthly service charge. The question is, Are you better off leaving less money in your bank or signing up for a premium checking account?
Start with These Questions About Premium Checking Accounts
There’s no one-size-fits-all answer, but here are some questions to ask:
- How often do you use ATMs? One of the big perks that come with premium checking accounts are fee-free ATM transactions at company ATMs. In most cases, however, at non-bank-owned ATMs you still have to pay the ATM owner’s fees. If you don’t use ATMs regularly, this perk may not be important to you.
- Does your balance fluctuate? The fee-free offerings often include some number of free overdraft balance transfers and stop-payment requests. If you’re able to meet the minimum balance requirements of these top-tier accounts, chances are high that you’re not using overdraft protection anyway. And for most people, stop-payment requests aren’t a normal occurrence.
- How much do you care about getting interest on your account? Calling these accounts interest-bearing looks impressive in an advertisement, but it’s barely worth considering. Sure, nobody will turn down free money, but Chase, for example, currently offers an APY of 0.01%. On a $50,000 balance, that works out to $5 per year.
- Does the account offer rewards points? You might receive rewards points in conjunction with the credit card you hold at the bank. Not all banks offer rewards, but you can factor them into your decision.
Is It Worth It?
If you look at premium checking with the eyes of an investor, probably not. Without going outside of your bank, you could earn nearly 1% on a one-year certificate of deposit (CD) or nearly 1.7% interest on a five-year CD. Money market accounts yield slightly less but are comparable to CDs.
Outside of banking, bonds and dividend- (or distribution-) paying stocks, exchange-traded funds and master limited partnerships yield anywhere from 1% to 10% or potentially more, depending on your risk tolerance. If you have $15,000 to $75,000 to keep in a checking account to meet the minimum balance requirements, that money could work harder for you in other financial products. On the other hand, many of these accounts will credit you for money you keep in linked investment accounts within that banking family, so you may be able to accomplish both at the same time. For example, if you have a checking account and a three-month average combined balance of $20,000 or more in a checking and/or Merrill Edge and Merrill Lynch account, you can join Bank of America’s preferred rewards program.
What’s more, you still have to keep some money in a checking account to pay bills. If you or your family use bank services regularly, a premium checking account will likely save you money in ATM fees. Premium accounts might also get you slightly lower loan rates or perks from the bank’s investment division.
The Bottom Line
Although premium accounts have a minimum balance requirement that make them look like a product for the wealthy, they are available to anyone who can’t maintain the minimum balance but is willing to pay the monthly fee. Keeping a five-figure balance in your checking account for a long period of time to avoid a monthly fee probably isn’t a good financial strategy. In the end it depends how much you’re using your bank’s other services. (For more, see Top Premium Checking Accounts of 2018 .)