An 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 also pays you interest on the money you keep in it. The interest rate varies by bank and changes over time, but it is typically lower than what you would earn in a dedicated savings account.
NOW accounts became common in the 1980s when federal rules first allowed banks to pay interest on checking accounts. Today they are less common than they used to be, because many banks now offer regular checking accounts with competitive interest rates, and because savings account rates have become more attractive. But they still exist, and they can make sense if you want to earn something on money you need to access by check or debit card.
Key Takeaways
- An NOW account lets you write checks and earn interest at the same time, unlike a standard checking account that pays no interest.
- Interest rates on NOW accounts are typically lower than savings accounts, and they vary by bank and change with market conditions.
- You can withdraw money from an NOW account whenever you need it, just like a regular checking account, with no penalty.
- Some NOW accounts have minimum balance requirements or monthly fees that can offset the interest you earn.
How interest accrues and when you receive it
Interest on an NOW account is calculated based on your average daily balance — the total amount in the account divided by the number of days in the month. The bank applies the stated annual interest rate to that average, then deposits the interest into your account, usually monthly or quarterly depending on the bank's policy.
For example, if your NOW account has an annual interest rate of 0.05% and you maintain an average balance of $10,000 over a month, you would earn roughly $4.17 that month. The actual amount depends on how many days are in the billing period and the exact calculation method your bank uses. You can find this information in your account's terms and conditions or by asking your bank directly.
Interest does not accrue if your balance falls below a required minimum, and some banks stop paying interest entirely if you fall short. Check your account agreement to see whether there is a threshold below which interest stops.
NOW accounts versus regular checking and savings accounts
A regular checking account typically pays no interest at all. You can write unlimited checks, use your debit card, and access your money instantly, but the bank keeps all the interest your balance would have earned. A savings account, by contrast, pays interest but usually limits how many times per month you can withdraw money — federal rules historically capped this at six withdrawals, though that rule has loosened in recent years.
An NOW account sits between these two. You get the checking features (checks, debit card, unlimited withdrawals) but also earn interest like a savings account would. The trade-off is that the interest rate is usually lower than a dedicated savings account, and there may be a monthly fee or minimum balance requirement that eats into your earnings.
| Account Type | Write Checks | Earn Interest | Withdrawal Limits |
|---|---|---|---|
| Regular Checking | Yes | No | None |
| NOW Account | Yes | Yes | None |
| Savings Account | No | Yes | Varies by bank |
Fees and minimum balance requirements
Many NOW accounts charge a monthly maintenance fee, typically between $5 and $15. Some banks waive this fee if you maintain a minimum balance — often $500 to $2,500 — or if you set up direct deposit. A few banks waive the fee if you keep a certain amount in linked savings or investment accounts.
Before opening an NOW account, calculate whether the interest you will earn exceeds the fees you will pay. If you maintain a $1,000 balance and the account pays 0.05% annual interest but charges a $10 monthly fee, you will lose money. The math works better if you keep a larger balance, the interest rate is higher, or the bank does not charge a fee.
Where to find NOW accounts today
Most large national banks still offer NOW accounts, though they are not always advertised prominently. Credit unions often have them as well, sometimes under different names like "share draft accounts." Online banks and smaller regional banks may or may not offer them — many have moved away from NOW accounts in favor of high-yield checking or savings accounts that offer better rates.
If you are interested in an NOW account, start by checking what your current bank offers. If they do not have one, or if the rate and fees are not competitive, compare options at other banks in your area or online. Pay attention to the interest rate, monthly fee, minimum balance requirement, and how often interest is credited to your account.
When an NOW account makes sense for you
An NOW account is most useful if you need to write checks regularly but also want to earn something on your balance. It works well for small business owners, freelancers, or anyone who keeps a moderate amount of money in checking but does not want to move it to a separate savings account just to earn interest.
It makes less sense if you rarely write checks (a regular checking account is simpler), if you keep very little money in checking (the interest will be negligible), or if you have a large balance that would earn more in a high-yield savings account. It also does not make sense if the monthly fee is high relative to the interest rate and your balance.
Frequently Asked Questions
Can I use an NOW account like a regular checking account?
Yes. You can write checks, use a debit card, set up automatic bill payments, and withdraw money at ATMs just like a regular checking account. The only difference is that you also earn interest on your balance.
What is the interest rate on an NOW account?
Interest rates vary by bank and change frequently. As of recent years, most NOW accounts pay between 0.01% and 0.10% annually, though this can be higher or lower depending on market conditions and the bank's policy. Check with your bank for the current rate.
Do I have to keep a minimum balance in an NOW account?
Many NOW accounts require a minimum balance to avoid a monthly fee or to earn interest. The amount varies — some banks require $500, others $2,500 or more. Check your account agreement or ask your bank what the requirement is.
Is the money in an NOW account insured?
Yes, if your bank is FDIC-insured (most are), your NOW account balance is covered up to $250,000 per depositor per bank. Credit union NOW accounts are covered up to $250,000 by the NCUA if the credit union is federally insured.
Should I open an NOW account or a high-yield savings account?
If you need to write checks frequently, an NOW account is the better choice. If you rarely write checks and want the highest interest rate possible, a high-yield savings account usually pays more. Compare the rates, fees, and your own checking habits to decide.