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 between a traditional checking account and a savings account — you can write checks and use a debit card like a regular checking account, but the bank pays you interest on the money you keep in it, the way a savings account does.

NOW accounts were created in the 1970s when federal law prohibited banks from paying interest on checking accounts. They became less common after that law changed in 2011, but some banks and credit unions still offer them. The interest rate is typically low — often less than 0.5% annually — but it is real money you earn just by keeping your balance there.

The tradeoff is that NOW accounts usually come with higher minimum balance requirements than standard checking accounts, and some charge monthly fees if your balance drops below that minimum. You need to compare the interest you would earn against the fees you might pay to know whether a NOW account makes sense for your situation.

Key Takeaways

  • A NOW account lets you write checks and use a debit card while earning interest on your balance, unlike a regular checking account.
  • Interest rates on NOW accounts are typically below 0.5% per year, so the earnings are modest but real.
  • Most NOW accounts require a minimum balance — often $500 to $2,500 — and charge a monthly fee if you fall below it.
  • You should compare the annual interest you would earn against any monthly fees to determine whether a NOW account is worth opening.

How interest works on a NOW account

The bank calculates interest based on your average daily balance — the total amount in the account divided by the number of days in the month. Interest is usually compounded daily and deposited monthly, meaning you earn interest on the interest from previous months.

Because interest rates are low, the actual dollar amount you earn is small. On a $5,000 balance at 0.25% annual interest, you would earn about $12.50 per year. On a $10,000 balance at 0.40%, you would earn roughly $40 per year. The larger your balance and the higher the rate, the more you earn, but most people do not hold large enough balances in checking accounts for this to be significant.

Some banks offer tiered interest rates, meaning the rate increases as your balance grows. A bank might pay 0.10% on balances under $5,000 and 0.35% on balances above $25,000. Read the account disclosure carefully to see how the rate structure works at the institution you are considering.

Minimum balance requirements and fees

NOW accounts typically require you to maintain a minimum balance to avoid a monthly fee. Common minimums range from $500 to $2,500, though some institutions set them higher. If your balance drops below the minimum on any day of the month, you may be charged a fee — often $5 to $15 per month.

Some banks waive the fee if you set up direct deposit or maintain a linked savings account with a certain balance. Others waive it if you use your debit card a certain number of times per month. The conditions vary by bank, so ask about fee waivers before you open the account.

The fee structure matters more than the interest rate for most people. If you pay $10 per month in fees but earn only $5 per month in interest, you are losing $5 monthly. A regular checking account with no monthly fee would be the better choice.

NOW accounts versus high-yield savings accounts

If your goal is to earn interest on money you are not spending when ready, a high-yield savings account usually makes more sense than a NOW account. High-yield savings accounts currently pay 4% to 5% annually — roughly 10 times what a NOW account pays — and most have no monthly fees or minimum balance requirements.

The downside is that you cannot write checks on a savings account or use a debit card. You have to transfer money to your checking account before you spend it. For money you plan to use within a few days or weeks, this is inconvenient. For money you plan to keep for months, it is worth the small friction.

A practical approach is to keep a regular checking account for daily spending and a high-yield savings account for money you want to earn interest on. A NOW account sits in the middle — it earns interest but at a rate that does not compete with savings accounts, and it requires a higher minimum balance than most checking accounts. It is rarely the best choice for either purpose.

Where to find NOW accounts

Credit unions are more likely to offer NOW accounts than large banks. If you belong to a credit union, ask whether they offer them and what the interest rate, minimum balance, and fee structure are. Some regional banks and smaller institutions also offer NOW accounts, though you may have to call or visit in person to learn the details.

Large national banks like Chase, Bank of America, and Wells Fargo rarely advertise NOW accounts anymore, though some still offer them. If you bank with one of these institutions, you can ask a representative whether a NOW account is available to you.

Online banks typically do not offer NOW accounts because they focus on high-yield savings products instead. If you are looking for an account that earns interest, an online bank's savings account will almost certainly pay more than a NOW account at any brick-and-mortar bank.

Comparing NOW accounts to your current checking account

Before opening a NOW account, calculate whether the interest you would earn exceeds the fees you would pay. Write down the minimum balance requirement, the monthly fee (if any), the annual interest rate, and any fee waivers that explore to you.

Then estimate your typical balance. If you usually keep $3,000 in checking, multiply that by the annual interest rate to see how much you would earn per year. Subtract any monthly fees multiplied by 12. If the result is positive, a NOW account might be worth it. If it is negative or close to zero, stick with a regular checking account.

Also consider whether you would actually maintain the minimum balance. If you are living paycheck to paycheck and your balance fluctuates, you might trigger the fee several months per year, which would wipe out any interest earnings. A NOW account works best for people who consistently keep a substantial balance in their checking account.

Frequently Asked Questions

Can I write checks on a NOW account?

Yes. A NOW account functions as a checking account — you receive a checkbook and can write checks just as you would on a regular checking account. The difference is that the bank pays you interest on the balance instead of paying nothing.

What happens if my balance drops below the minimum?

Most banks charge a monthly fee, typically $5 to $15, if your balance falls below the minimum on any day of the month. Some institutions waive the fee if you meet other conditions, such as setting up direct deposit or maintaining a linked savings account. Check your account agreement to see what applies to you.

Is the interest rate may provide to stay the same?

No. Banks can change interest rates at any time. Most NOW accounts have variable rates that move up and down with market conditions. Your bank will notify you of rate changes, but you have no may provide the rate will remain what it was when you opened the account.

Should I open a NOW account or a high-yield savings account?

If you need to write checks and use a debit card regularly, a NOW account makes sense. If the money is sitting idle and you do not need when ready access to it, a high-yield savings account pays much more interest — typically 4% to 5% versus 0.25% to 0.5% — and usually has no fees or minimum balance.

Do NOW accounts have FDIC protection?

Yes, if the bank is FDIC-insured. Your NOW account balance is covered up to $250,000 per depositor per bank, the same as any other deposit account. If you bank at a credit union, the account is covered by the National Credit Union Share Insurance Fund (NCUSIF) up to the same limit.