Forget Checking Accounts That Pay Interest: Earn Up to $360 a Year by Putting Money Here Instead

Checking accounts that pay interest, also known as interest-bearing checking accounts, are popular offerings from online banks hoping to attract new customers. But this is a perk that sounds better on paper than it actually is.

If you want to earn a significant profit on your checking account funds, there's one bank offering an interesting alternative that doesn't require you to just sit on your cash. But whether it's right for you depends on how you manage your money.

Interest-bearing checking accounts: Expectations vs. reality

The idea behind interest-bearing checking accounts is a nice one: You earn interest on your checking account funds while still keeping that cash accessible. You can write checks and use your debit card to withdraw funds, and there are no monthly withdrawal limits as there are with some savings accounts.

But checking account interest rates are often far below what you see with the best high-yield savings accounts. Right now, the top savings accounts have rates around 5.00% while many of the best checking accounts still have rates of less than 1.00%. That significantly reduces your earning potential.

If you kept $5,000 in an interest-bearing checking account with a 0.50% interest rate, you'd only make about $25 on that money in a year. Had you kept that money in a high-yield savings account with a 5.00% rate, you could have made over $255, though you might not be able to withdraw those funds from the bank as easily when you need them.

A high-yield savings account is a great alternative to interest-bearing checking accounts for money you don't plan to spend soon. But there's a third option you might want to consider as well.

How to earn up to $360 per year on your checking account funds

Discover® Bank has taken a unique approach with its checking account -- the Discover® Cashback Debit account -- by offering cash back on debit card purchases rather than interest on your balance. More specifically, you can earn 1% back on up to $3,000 in purchases each month. That's up to $30 per month, or $360 per year.

The account has other perks as well, including:

• No monthly maintenance fee
• The option to get your paycheck up to two days early
• Access to over 60,000 fee-free ATMs nationwide

All of this makes the Discover® Cashback Debit account a great fit for those who use their debit cards frequently and want to grow their wealth. But this account has tradeoffs as well.

If you use your debit card for your purchases each month to reap these bonuses, you'll probably use your credit cards less often. This could cost you credit card rewards that could potentially be more valuable than the cash back you're getting on your debit card transactions.

For example, if you go out to dinner and spend $40, that would translate to $0.40 back if you used your Discover® Cashback Debit card to pay the bill. But if you had a dining credit card that paid 5% back on dining, you could've gotten $2 back.

So ultimately, your spending habits will dictate whether this account is a good fit for you. If not, there are plenty of other great checking accounts out there for you to consider.