Traditional vs. Premium Checking: Pros and Cons

In the modern financial world, a checking account has become a staple for everyday transactions, making managing your money easier. Checking accounts are used for deposits, like when you get a paycheck from your employer, and withdrawals, like when you take cash out at an ATM. However, the right checking account can offer more than just convenient day-to-day transactions.

If you want to optimize your finances, a premium checking account offers added bonuses and perks beyond a standard account. Let’s look at the differences between traditional and premium checking accounts and consider some of the pros and cons.

What is a premium checking account?

Premium checking accounts are similar in structure to traditional checking accounts, but they offer some elevated features.

Elements of a premium account may include:

• Ability to earn interest on account balances (and higher interest rates on associated accounts)
• Reduced or waived fees on things like out-of-network ATM transactions, money orders, and cashier’s checks
• No additional costs for account maintenance
• Lower interest rates on loans
• Liability protection for debit card transactions

Depending on the bank, a premium account may include bonuses like extended customer service access, free safety deposit box rentals, and better credit card rewards.

To open a premium account, though, certain requirements apply, like maintaining a minimum balance, and meeting ongoing direct deposit minimums.

Advantages of a premium checking account

A premium checking account can help you earn interest on your balance and keep monthly fees low. Let’s consider some of the key perks of a premium checking account.

Reduced or waived fees

With a premium checking account, certain fees may be waived, saving you money. Common examples include reduced costs for wire transfers or cashier’s checks and waived fees for overdrafts, out-of-network ATM use, or foreign transactions.

Comparing traditional checking account fees

Traditional checking accounts may charge foreign transaction fees for international purchases and may apply fees for withdrawals made at out-of-network ATMs. These costs can add up, especially if these activities occur regularly.

Possibility of earning interest

A valuable perk of premium checking accounts is the ability to earn interest on the account balance. Especially considering the minimum balance requirements, interest can add up quickly and offset some costs of maintaining the account.

Traditional checking accounts and interest

Most standard checking accounts are not interest-bearing accounts, and if they do accrue interest, the rates tend to be low. If you meet the minimum balance requirements, it could be beneficial to use a premium account to earn more for no extra effort.

Increased transaction limits

A premium checking account may allow you to transfer large sums of money in single transaction or offer increased monthly transaction limits compared to standard accounts.

Comparing transaction limits to traditional checking accounts

While there’s typically no limit on the number of transactions you can make on a given day or month, there may be limits on the total dollar amounts of those transactions. If you would like to have fewer limitations on your account transactions, a premium account may be a better option.

Disadvantages of a premium checking account

Generally, the bonus offers and perks of premium checking accounts can offset maintenance costs and minimum balance requirements, but there are a few drawbacks to consider.

Balance-dependent bonuses

Though some premium account perks are immediately available to account holders, others may be on a tiered system and only available to those who maintain higher account balances. Review terms and conditions to understand which perks are available at different balance amounts.

How traditional checking accounts compare

Perks and services associated with traditional accounts tend to be straightforward and not dependent on account balances or tiered systems. This simpler approach doesn’t require high account balances to secure additional benefits.

Uncertain interest rates

While the interest earned on premium checking account balances is a perk compared with non-interest-bearing checking accounts, you’re not guaranteed a competitive rate. This is especially true considered against high-yield savings accounts (HYSAs), which tend to have higher interest rates.

Traditional checking accounts and interest rates

Most traditional accounts don’t offer interest on balances, regardless of how much money is in the account. Low or noncompetitive interest rates may not bring the most returns, but they may be better than no return.

 The bottom line

Premium checking accounts offer perks and benefits to account holders beyond those of traditional accounts. With reduced and waived fees and interest-earning potential, it may be worthwhile to investigate whether a premium checking account is right for you.

Disclaimer: Article content is intended for information only. It may not reflect the publisher nor employees’ views. Consult a financial professional before making financial decisions. Publishers or platforms may be compensated for access to third party websites.

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Name: Sonakshi Murze
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