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Understanding Premium Checking Accounts with O1ne Mortgage

When it comes to banking, a premium checking account offers more than the average account, featuring perks, earning interest, and conveying exclusivity. But is a premium checking account right for you? A premium checking account includes special, high-tier features, higher minimum balance requirements, and sometimes higher monthly fees. Here’s a closer look at what premium checking accounts offer and how to decide if you can benefit.

What Is a Premium Checking Account?

Premium checking accounts are special accounts offered by banks and credit unions to meet the needs of customers who maintain high balances, have multiple accounts, and use a lot of banking services. Generally, you must maintain a minimum balance of $15,000 or more to qualify. Many banks combine all balances in your eligible deposit and investment accounts to reach the required total. Some even allow combining balances of immediate family members who live with you.

In return for maintaining a minimum balance, monthly maintenance fees are generally waived, and you can access special features that standard checking accounts don’t have. While features can vary, premium checking accounts usually offer:

• Interest: Standard checking accounts don’t earn interest, but premium checking accounts do. The average annual percentage yield (APY) depends on the bank and may vary based on your balance.
• Discounts on other banking services: Premium checking accounts often waive fees on linked accounts, non-bank ATM use, wire transfers, stop payments, money orders, cashier’s checks, safe deposit box rentals, and foreign currency exchange fees.
• Loans at reduced interest rates: Premium checking customers may qualify for lower interest rates on loans, such as a 1.25% interest rate discount on a home equity line of credit or a 0.25% interest rate discount on a new auto loan.
• Higher limits on money movement: Restrictions on amounts you can transfer or withdraw are usually lower with premium checking accounts. For instance, you may have higher limits for Zelle transfers, ATM withdrawals, and debit card purchases than standard accounts.
• Investment advice and tools: You may get discounts on investment advice, tools, or trades for linked investment accounts, complimentary financial planning, commission-free trading, or access to financial advisors and discounted advisory fees.

Pros and Cons of Premium Checking Accounts

Premium checking accounts have both benefits and downsides.

Pros of Premium Checking Accounts

• Earn interest: Since standard checking accounts rarely earn interest, the interest-earning aspect of premium checking accounts is a plus.
• Fewer fees: If you frequently use bank services such as purchasing money orders, exchanging foreign currency, or making wire transfers, a premium checking account can eliminate those fees.
• Lower cost of borrowing: When you need a mortgage or other loan, a premium checking account offering lower loan interest rates helps reduce your cost of borrowing.
• Financial and investing services: Discounts on investing fees or trades, plus free financial and investment advice, can help maximize your money.

Cons of Premium Checking Accounts

• High minimum balance requirements: Depending on the bank, you’ll likely need to maintain a minimum balance of $15,000 or more to open a premium checking account. This might not be realistic for you, even combining multiple account balances.
• Interest may be low: Checking and traditional savings accounts typically offer low interest rates, even on premium accounts. You may be more likely to receive a better rate with an online high-yield checking account or high-yield savings account.
• High maintenance fees: If your balance dips below the minimum required, monthly maintenance fees may kick in for your premium checking account and any linked accounts. This can add up if you have several accounts.

Is a Premium Checking Account Worth It?

Premium checking accounts may be worthwhile for some people, but they’re not for everyone. Do you already have large balances in multiple checking and savings accounts at one bank? Do you frequently use bank services such as exchanging foreign currency or purchasing money orders? If so, a premium checking account could save you money on maintenance and service fees, while also earning interest.

However, maintaining a high average monthly balance may not be attainable for most people. Dipping below the minimum could trigger fees, reducing any savings or earnings from the account.

If a premium checking account isn’t quite right for you, consider these options:

Reward Checking Account

Like rewards credit cards, reward checking accounts offer perks such as cash back, welcome bonuses, waived fees, or high APYs. For example, Discover’s reward checking account offers 1% cash back on up to $3,000 in qualifying debit card purchases per month. To earn rewards, you must meet the bank’s criteria, such as making a certain number of debit card purchases per month or maintaining a minimum account balance.

Interest-Bearing Checking Account

Unlike standard checking accounts, interest-bearing checking accounts earn interest—but it’s typically minimal. As of September 18, 2023, interest-bearing checking accounts earned an average APY of 0.07%, although online-only banks may offer higher APYs. Interest checking accounts may also require a higher minimum balance or higher fees than regular checking accounts.

High-Yield Checking Account

High-yield checking accounts earn higher interest than other types of checking accounts. You can currently find high-yield checking accounts offering APYs of 1%, 3%, or more; online-only banks often offer the highest interest rates. APYs may vary based on your checking account balance. Earning the highest APY could require meeting certain criteria, such as maintaining a minimum balance, having a minimum number of debit card transactions per month, using online banking and e-statements, or having at least one direct deposit per month.

How to Open a Premium Checking Account

You can generally open a premium checking account online or make an appointment to visit a physical bank in person. Check the bank’s website for the information you’ll need. Most banks require:

• Government-issued photo identification, such as a passport, driver’s license, or state or military ID card
• Social Security number or taxpayer identification number
• Proof of your address (such as a mortgage statement or utility bill)
• Birthdate
• Contact information

You must also make an initial deposit meeting the bank’s requirements for its premium checking account. If you already have an account with the bank, the process is even simpler. For example, you can switch your existing Wells Fargo checking account to one of their premium checking accounts over the phone. The bank will confirm that the combined balance of your qualifying existing accounts surpasses the minimum requirement; if not, you’ll need to make a deposit.

The Bottom Line

Compare fees, APYs, services offered, and convenience to find the checking account that best fits your needs, whether that’s a premium checking account or something else. Checking accounts don’t affect your credit score; however, unpaid bank fees sent to collections could have a negative impact. Set up account alerts and check your balance regularly to avoid potential problems and fees. You can also sign up for free credit monitoring from Experian to keep tabs on your credit report and get alerts to important changes that could affect your credit score.

For any mortgage-related needs, call O1ne Mortgage at 213-732-3074. We’re here to help you navigate your financial journey with confidence.

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