A NOW account is a checking account that pays interest on your balance
A NOW account — Negotiable Order of Withdrawal — is a bank account that combines features of a savings account and a checking account. You can write checks or use a debit card to spend money, but the bank also pays you interest on whatever balance sits in the account. The interest rate is typically low, often less than 1 percent, but it is higher than a regular non-interest checking account would pay you.
NOW accounts were created in the 1970s when federal law prohibited banks from paying interest on checking accounts. They were a workaround: technically a savings product that happened to let you withdraw money by check. That legal restriction ended in 2011, so NOW accounts are no longer the only way to earn interest while keeping your money accessible. But they still exist, and some people use them because the structure fits how they manage money.
The main trade-off is that NOW accounts usually require a higher minimum balance than a regular checking account — often $500 to $2,500 — and the interest rate is modest. If your balance drops below the minimum, the bank may charge a monthly fee or stop paying interest. You get the convenience of a checking account and a small return on your money, but not the higher rates you would find in a dedicated savings account.
Key Takeaways
- A NOW account lets you write checks and use a debit card while earning interest on your balance, unlike a standard checking account.
- Most NOW accounts require a minimum balance of $500 to $2,500 to earn interest or avoid monthly fees.
- Interest rates on NOW accounts are typically under 1 percent and lower than what you would earn in a money market or savings account.
- NOW accounts are less common than they were before 2011, when banks became legally allowed to pay interest on regular checking accounts.
How interest accrual works on a NOW account
The bank calculates interest based on your average daily balance over a month. If you keep $1,000 in the account for the full month and the rate is 0.5 percent annually, you would earn roughly $0.42 that month. The interest is usually credited to your account once a month, on a set date. Some banks compound the interest daily, meaning they calculate it on your balance plus any interest already earned, which gives you a slightly higher return.
The interest rate itself varies by bank and changes over time. Banks set their own rates and can lower them without notice. If you are considering a NOW account primarily for the interest, check the current rate at your bank — it may be so low that the convenience of having one account is the real benefit, not the earnings.
Minimum balance requirements and fees
Most NOW accounts have a minimum balance requirement, which is the lowest amount you must keep in the account to avoid a fee or to earn interest. This minimum might be $500, $1,000, $2,500, or higher depending on the bank. If your balance falls below that threshold even for one day, you may lose interest for that month or be charged a monthly maintenance fee of $5 to $15.
Some banks offer tiered NOW accounts, where a higher minimum balance gets you a higher interest rate. For example, a bank might pay 0.25 percent on balances of $500 to $2,499, and 0.50 percent on balances of $2,500 or more. This structure rewards customers who keep more money in the account.
Check your bank's fee schedule before opening a NOW account. The monthly fee can quickly outweigh the interest you earn, especially if your balance is modest or fluctuates.
NOW accounts versus regular checking accounts
A regular checking account typically pays no interest, has no minimum balance requirement, and charges no monthly fee. You can write checks and use a debit card freely. The trade-off is that your money earns nothing while it sits there.
A NOW account pays interest but requires you to maintain a minimum balance and may charge a fee if you fall below it. You get the same checking and debit card access, but with the added complexity of watching a balance threshold. For someone who keeps a steady amount of money in their checking account anyway, a NOW account can be a way to earn a small return on that money at no extra effort. For someone whose balance varies month to month, the minimum balance requirement becomes a burden.
NOW accounts versus savings and money market accounts
A savings account typically pays higher interest than a NOW account — often 4 to 5 percent at online banks, though rates change — but you cannot write checks or use a debit card to spend directly from it. You have to transfer money to a checking account first. A money market account is a hybrid: it pays interest closer to savings rates, allows a limited number of checks per month, and usually requires a higher minimum balance than either a NOW or savings account.
If your goal is to earn the highest return on money you do not spend regularly, a savings account is usually better than a NOW account. If you need to access your money frequently by check or card, a NOW account gives you that access plus a small interest payment. The choice depends on how you actually use the money.
Where to find NOW accounts today
NOW accounts are offered by traditional banks and credit unions, though they are less common than they were in the 1980s and 1990s. Many online banks do not offer them at all, preferring to keep checking and savings as separate products. If you want a NOW account, start by asking your current bank whether they offer one and what the rate, minimum balance, and fees are.
Credit unions sometimes offer NOW accounts as part of their standard product lineup. If you are a member, ask what rates and minimums they have. You can also search your bank's website for "NOW account" or "interest-bearing checking" to see what is available.
When a NOW account makes sense
A NOW account works best if you keep a steady balance in your checking account and want that money to earn something, even if it is a small amount. If you regularly maintain $2,000 or more in checking and would otherwise leave it earning zero interest, a NOW account at 0.5 percent will give you a modest return with no extra work.
A NOW account does not make sense if your balance fluctuates below the minimum, if you have only a small amount to keep in checking, or if you can easily move money between a checking account and a higher-yield savings account. In those cases, a regular checking account paired with a savings account will serve you better.
Frequently Asked Questions
Can I write checks on a NOW account?
Yes. That is the core feature of a NOW account — it gives you checking access while paying interest. You can write checks, use a debit card, and set up automatic payments just like a regular checking account.
What happens if my balance drops below the minimum?
That depends on your bank. You might lose interest for that month, be charged a monthly fee, or both. Some banks waive the fee if you bring the balance back above the minimum by a certain date. Check your account agreement to see what your bank does.
Is a NOW account FDIC insured?
Yes, if it is held at a bank. Deposits in NOW accounts are covered by FDIC insurance up to $250,000 per depositor, per bank. Credit union NOW accounts are covered by NCUA insurance up to the same limit.
How often is interest paid on a NOW account?
Interest is usually credited once a month, on a date set by your bank. Some banks credit it on the last day of the month; others use a different schedule. Check your account statement or bank website to see when your interest posts.
Can I get a NOW account online?
Most online banks do not offer NOW accounts. They typically separate checking and savings products. If you want a NOW account, you will likely need to open it at a traditional bank or credit union, though many of those banks let you open accounts online.