A NOW account is a checking account that pays you interest on your balance

NOW stands for Negotiable Order of Withdrawal. It is a hybrid account—part checking, part savings—that lets you write checks or use a debit card while earning interest on the money sitting in it. The interest rate is typically lower than a dedicated savings account, but higher than a non-interest-bearing checking account pays (which is usually zero).

Banks and credit unions offer NOW accounts as a middle ground. You get the convenience of unlimited check-writing and card access without moving money between accounts to earn a return. The trade-off is that the interest rate fluctuates with the market, and some institutions set minimum balance requirements to set up the interest feature.

NOW accounts became common in the 1980s when federal regulations first allowed them. Today they are less marketed than they once were—many banks have shifted customers toward money market accounts or high-yield savings accounts instead—but they still exist and can make sense if you need both liquidity and a small return on cash you use regularly.

Key Takeaways

  • A NOW account combines checking account features (checks, debit card, unlimited transactions) with interest payments on your balance.
  • Interest rates on NOW accounts vary by institution and market conditions, and are usually lower than dedicated savings accounts.
  • Many NOW accounts require a minimum balance—often $500 to $2,500—to earn interest, and the rate may drop if you fall below it.
  • You can withdraw money from a NOW account at any time without penalty, making it more liquid than a traditional savings account.
  • NOW accounts are less common than they were 20 years ago, but credit unions often offer them as an alternative to checking-only accounts.

How interest accrues and when you receive it

Interest on a NOW account is calculated daily based on your ending balance. The bank takes the balance at the close of each business day, applies the annual percentage yield (APY) to that amount, and divides by 365 to get the daily interest earned. That daily amount is added to a running total throughout the month.

Most institutions credit the interest to your account monthly, though some do it quarterly. You will see the deposit appear on your statement as "interest paid" or "interest earned." The timing matters: if you withdraw money on the last day of the month, you may not earn interest on that amount for that month, depending on how the bank calculates the average daily balance.

The APY you see advertised is the rate you would earn if the balance stayed constant for a full year. In reality, your balance changes as you deposit paychecks and write checks, so your actual interest earned will be lower. A $1,000 balance earning 0.05% APY generates roughly $0.50 per year, or about $0.04 per month.

Minimum balance requirements and how they affect your account

Many NOW accounts require you to maintain a minimum balance to earn any interest at all. Common minimums range from $500 to $2,500, though some institutions set them higher. If your balance drops below the minimum on any day during the statement period, you may forfeit that month's interest entirely, or the interest rate may drop to zero.

A few institutions use an average daily balance method instead: they add up your balance at the end of each day during the month and divide by the number of days. If your average stays above the minimum, you earn interest even if you dip below it on a single day. This is more forgiving, but less common.

Before opening a NOW account, ask the bank or credit union exactly how they enforce the minimum. Some will waive it if you set up direct deposit of your paycheck. Others will charge a monthly fee if you fall below the minimum instead of straightforward withholding interest. The fee can be $5 to $15 per month, which erases any interest you would have earned.

NOW accounts versus other checking and savings options

A regular non-interest checking account pays no interest and has no minimum balance. You use it for everyday transactions and keep savings elsewhere. A NOW account costs the same (usually free) but pays a small return, so it makes sense if you keep a balance you do not need to touch.

A high-yield savings account typically pays 4 to 5 times more interest than a NOW account, but you cannot write checks or use a debit card—you have to transfer money to checking to spend it. A money market account sits between the two: it pays more interest than a NOW account, allows a limited number of checks per month, and often has a higher minimum balance requirement.

If you rarely carry a balance or write checks, a NOW account adds little value. If you keep $2,000 or more in checking and want a small return without moving money around, it is worth comparing rates at your bank or credit union. The interest earned is modest, but it is better than zero.

How to find and open a NOW account

Not every bank advertises NOW accounts anymore. Start by calling your current bank or credit union and asking if they offer them. If they do, ask for the current APY, the minimum balance requirement, and whether the rate is fixed or variable. Ask also whether they charge a monthly fee if you fall below the minimum.

If your bank does not offer a NOW account, check credit unions in your area. Credit unions are more likely to market them, especially to members who want to keep all their accounts in one place. You can search for credit unions by zip code on the CO-OP or Allpoint networks.

Opening a NOW account is the same process as opening any checking account: you provide identification, Social Security number, and initial deposit. Many banks let you open online in 10 to 15 minutes. Once the account is open, you will receive checks and a debit card within one to two weeks.

What happens to your interest if you close the account

If you close a NOW account mid-month, you will receive interest earned up to the day of closure, prorated. For example, if you close on the 15th of a 30-day month, you earn roughly half that month's interest. The bank will either deposit it into the account before closure or mail you a check.

If your balance falls below the minimum and the bank withholds interest, that interest is lost—you do not earn it later when the balance rises again. This is why it matters to understand the bank's exact rule before you open the account. Some institutions are more lenient than others.

Frequently Asked Questions

Can I write unlimited checks on a NOW account?

Yes. Unlike some savings accounts that limit withdrawals, a NOW account allows unlimited check-writing and debit card use. The account is designed for regular spending, not just savings.

Is the interest rate on a NOW account may provide to stay the same?

No. NOW account rates are variable and change based on market conditions and the bank's policy. Your rate may go up or down, and the bank will notify you of changes before they take effect.

What if I do not meet the minimum balance one month?

Most banks will either withhold that month's interest or charge a monthly fee. Some may do both. A few use average daily balance, which is more forgiving. Check your account agreement or call the bank to confirm their specific rule.

Is a NOW account FDIC insured?

Yes, if it is held at a bank. Deposits up to $250,000 are insured by the FDIC. If it is at a credit union, deposits are insured by the NCUA up to the same limit. The insurance covers both the principal and accrued interest.

Should I move my checking account to a NOW account to earn interest?

Only if you keep a steady balance above the minimum and the interest rate is competitive. For most people, the interest earned is small—often less than $10 per year. If convenience and simplicity matter more to you than a few dollars in interest, a regular checking account may be the better choice.