Which type of bank account typically offers the least (if any) interest?

Which type of bank account typically offers the least (if any) interest?

A. Certificate of deposit

B. Checking account.

C. Savings account

D. Money market account

Answer: B. Checking account.

Sweep accounts normally provide the smallest interest rate among all the various types of bank accounts. This is because checking accounts are meant to be utilized for everyday activities and easy requests of money instead of as a savings or investment kind of account.

The role played by a checking account therefore mainly entails facilitating the account holder’s financial transactions as they go about their daily business. These accounts are easy to withdraw, deposit and transfer money in and out of with the possibility of no withdrawal, deposit or transfer restrictions. These usually include debit card facilities, online banking and check-writing facilities. This is mainly so because due to the great liquidity of funds in checking accounts coupled with the various operating expenses that are incurred to sustain these services, most banks often pay negligible or even no interest on these accounts.

For example, as of 2024, so many big banks in the United States have checking accounts that bear a 0.01% or lower and in extreme situations where it is 0% APY (annual percentage yield). Savings accounts on the other hand might promise 0. Money market accounts could be between 1% to 2%, money markets with their average of 5% to 1% APY and certificates of deposit (CDs), which would be between 2% to 4% APY depending on the term of the investment.

However, it is crucial to state that there are banks that have higher interest rates for checking accounts; however, these accounts are usually associated with certain conditions including the prescribed minimum balance that should be maintained and a required number of debit card transactions during the month. Nevertheless, they are more the exception than the rule.

Knowledge of the fact that rates on checking accounts are usually low can assist people in finding better places to store their money if it’s not needed for short-term use, or for saving and investments.