A preferred checking account is a standard checking account with added perks that banks use to attract customers who meet certain requirements

A preferred checking account is a tiered product. You get the basic checking features—a debit card, check writing, online transfers—but the bank adds benefits like higher interest rates, waived fees, or cash back on debit purchases. The catch is that you usually have to meet conditions to keep those perks: maintain a minimum balance, set up direct deposit, or use the debit card a certain number of times per month.

Banks call them different things. Chase calls theirs "Preferred Checking." Bank of America uses "Preferred Rewards." Credit unions might call it a "Premium Checking" or "Select Checking" account. The structure is the same: you may have access to for better terms than a basic account, but only if you hold up your end of the deal.

The main difference between a preferred account and a standard one is what you pay and what you earn. A standard checking account might charge you $12 a month if you don't keep $500 in it. A preferred account might waive that fee entirely if you maintain $2,500, or if you receive two direct deposits a month. Some preferred accounts pay interest on your balance—usually a small amount, but more than a standard account pays.

Key Takeaways

  • Preferred checking accounts offer fee waivers, interest payments, or cash back rewards, but only if you meet the bank's requirements each month.
  • Common requirements include maintaining a minimum balance, setting up direct deposit, or using your debit card a set number of times monthly.
  • If you stop meeting the requirements, the account typically reverts to a standard checking account with standard fees and no interest.
  • The actual value depends on whether you naturally meet the requirements—if you have to change your behavior to may have access to, the benefits may not be worth it.

What requirements you typically need to meet

Banks set different thresholds, but the most common requirements fall into a few categories. A minimum balance requirement means you have to keep a certain amount in the account at all times—often $1,500 to $5,000, depending on the bank and the account tier. If your balance drops below that, you lose the perks and may be charged a monthly fee.

Direct deposit is another frequent requirement. The bank wants to see that your paycheck or government benefits hit your account regularly. Some accounts require just one direct deposit per month; others want two or more. A few banks will accept transfers from another account as a substitute, but most specifically want direct deposit from an employer or benefits provider.

Debit card usage is a third common condition. You might need to make 10 or 15 debit card purchases per month to keep the account in preferred status. Some banks count PIN transactions only; others count both PIN and signature transactions. A few count ATM withdrawals as well.

Some banks combine these. You might need $2,000 in the account and one direct deposit and 10 debit transactions per month. If you meet all three, you get the full benefit package. If you miss one, you drop to standard checking.

How the benefits actually work

The most common benefit is a monthly fee waiver. A standard checking account at the same bank might charge $12 or $15 per month for maintenance. A preferred account waives that fee entirely if you meet the requirements. Over a year, that saves you $144 to $180.

Some preferred accounts pay interest on your balance. The rate is usually very low—often 0.01% to 0.05% annually—but it is more than a standard account pays (which is usually nothing). On a $5,000 balance at 0.05%, you would earn about $2.50 per year. It is not substantial, but it is real money.

Cash back on debit card purchases is less common but does exist at some banks and credit unions. You might earn 0.5% to 1% back on debit transactions. Again, the amount is small, but it adds up if you use your debit card regularly.

A few preferred accounts offer perks like higher limits on ATM withdrawals, priority customer service, or discounts on other products like credit cards or loans. Read the specific account terms to see what your bank actually offers.

When a preferred account makes sense for you

A preferred checking account is worth opening if you already meet the requirements naturally. If you receive a paycheck via direct deposit and regularly use your debit card, you are already doing what the bank asks. The fee waiver or interest payment is then a genuine benefit with no extra effort on your part.

It is not worth opening if you would have to change your behavior to may have access to. If you rarely use debit cards and prefer to pay with cash or credit, forcing yourself to make 15 debit transactions per month just to keep the account in preferred status defeats the purpose. You would be spending time and effort to earn a few dollars in benefits.

Compare the preferred account to a standard account at the same bank and to accounts at other banks. A standard checking account at Bank A might charge $12 per month but have no requirements. A preferred account at Bank A might waive that fee but require $2,500 in the account. A standard account at Bank B might charge nothing and have no requirements at all. In that case, Bank B's standard account is the better choice.

The math also depends on your balance. If you keep $10,000 in the account, a preferred account that pays 0.05% interest earns you $5 per year. If you keep $500, it earns you 25 cents. The larger your balance, the more interest you earn, though the rate is still small.

What happens if you stop meeting the requirements

If your balance drops below the minimum, or you miss a month of direct deposits, or you do not make enough debit transactions, the account typically reverts to standard checking. You lose the fee waiver and any interest payments. You may be charged the monthly maintenance fee going forward.

Some banks give you a grace period—one month where you do not meet the requirements but do not lose the perks. Others switch you when ready. Check your account agreement to see how your bank handles this.

You can usually switch back to preferred status the next month if you meet the requirements again. There is no penalty for dropping and regaining preferred status. However, if you know you cannot consistently meet the requirements, a standard account with no requirements might be less stressful.

Preferred accounts versus other checking options

A high-yield checking account is different from a preferred account. High-yield accounts pay significantly higher interest rates—sometimes 4% to 5% annually—but they also have strict requirements, usually a very high minimum balance ($25,000 or more) or a large number of debit transactions (25 or more per month). They are designed for people who move a lot of money through their account or who can maintain a very large balance.

A money market account is a hybrid between a checking account and a savings account. It pays higher interest than either, but it limits how many withdrawals you can make per month and usually requires a higher minimum balance. It is not designed for everyday spending.

A basic checking account has no minimum balance and no requirements, but it may charge a monthly fee or offer no interest. It is the simplest option if you want to avoid conditions.

A student or senior checking account is a standard account with fee waivers for people in specific age groups. It does not require a minimum balance or direct deposit, but it is only open to students or people over 55 or 62, depending on the bank.

How to learn about a preferred account is right for you

Start by looking at your own behavior. Do you receive a paycheck via direct deposit? How often do you use your debit card? How much do you typically keep in checking? Write down the answers.

Then look at the preferred account requirements at your current bank or a bank you are considering. Compare them to your actual behavior. If you meet the requirements without changing anything, the account is worth opening. If you would have to change your habits, calculate whether the benefits (fee waiver plus interest) are worth the effort.

Also check whether your current bank offers a standard account with no monthly fee and no minimum balance. If it does, and you do not naturally meet the preferred account requirements, the standard account may be the better choice. You save the effort of tracking requirements and the risk of accidentally dropping to a lower tier.

Frequently Asked Questions

Can I have both a preferred and a standard checking account at the same bank?

Most banks allow you to open multiple checking accounts. You could have a preferred account for your paycheck and a standard account for savings or a specific purpose. However, some banks limit the number of accounts you can open in a certain time period, so check their policy first.

What happens to my debit card if my account drops from preferred to standard?

Your debit card stays active. The card itself does not change. You just lose the perks associated with the preferred account and may start being charged a monthly fee. You can switch back to preferred status the next month if you meet the requirements again.

Do I earn interest on a preferred checking account every month?

Interest accrues daily but is usually paid monthly. The amount depends on your balance and the bank's interest rate. Most preferred accounts pay very little interest—often less than $5 per year on a typical balance—so do not expect it to be a major source of income.

Can I lose my preferred status if I use my credit card instead of my debit card?

Yes, if your bank requires a certain number of debit card transactions per month and you do not meet that number, you can lose preferred status. Credit card purchases do not count toward the requirement. Check your account terms to see exactly what transactions count.

Is there a fee to open a preferred checking account?

Most banks do not charge a fee to open a preferred checking account. However, some may require an initial deposit—often $25 to $100—which you can withdraw when ready after opening. Read the account terms before you open to confirm there are no hidden fees.