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What are the Benefits of a Dividend-Bearing Checking Account?

Posted on May 23, 2023

A dividend-bearing checking account can be a powerful financial tool to help your money grow. These accounts allow your money to accrue interest or dividends while still accessing your funds in an account you can use day-to-day.

What is a dividend-bearing checking account?

A dividend-bearing checking account is an account that accrues interest/dividends at a set rate. Traditional checking accounts are designed to hold funds for everyday expenses and do not earn interest/dividends. 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. A checking account that earns dividends blends the best of these two accounts by offering an attractive rate, or annual percentage yield (APY), while allowing for greater accessibility of funds.

What are the benefits of a dividend-bearing checking account? 

There are several key advantages to opening a dividend-bearing checking account: 

Accessibility of funds. Unlike a savings account, the funds in a dividend checking account can be accessed at any time via debit card, paper checks, automatic electronic payments, and online bill payments. 

Dividends. Dividends 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 dividend checking accounts tend to be nominal or non-existent.

Banking benefits. A dividend 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. 

What are the disadvantages of a dividend-bearing checking account? 

Dividend checking accounts do have some disadvantages compared to a traditional checking account. 

You’ll need to maintain a minimum account balance to earn the dividend on your funds, often incurring a fee for accounts that dip below the minimum requirement. Some dividend checking accounts require a minimum amount of monthly debit card transactions, which may present a challenge depending on your spending habits. 

Why would a consumer choose a dividend-bearing checking account over a savings account?

As mentioned, dividend checking accounts offer the key features of checking accounts and savings accounts; however, unlike a savings account (which does not allow the account holder to withdraw funds as needed) you can access these funds in your checking account at any time, providing greater flexibility and making these accounts an excellent option for an individual who is seeking to grow their money without tying it up. 

If you’re ready to start putting your money to work with a dividend-bearing checking account, an Ultimate Checking Account with Notre Dame FCU offers up to 5.25% APY (up to 5.50% APY for non-profits) with no monthly fees, no transaction limits, and no deposit fees. Stop by your nearest branch or call 800-522-6611 to start earning today.

Bank May 23, 2023

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