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Rate Cuts Hit the Nation's Best Reward Checking Account


I'm afraid reward checking accounts are not immune to this recent rate cutting. I just learned that First Arkansas Bank & Trust will be cutting their 6.06% APY next week on its FirstNet Checking. The new yield will be 4.44% APY (4.35% interest rate) and will take effect next Thursday (2/7/08). Also, they're adding a cap of $50,000 for new applicants. Balances over that will only earn 1.76% APY. Those who have already opened this account will get grandfathered in until June 1st. At that time the new cap will be applied to everyone.

This is not yet shown on their website. A reader commented about this change (thanks!), and I just called the bank for the details. The above details are based on my conversation with the banking representative.

I first reported on this reward checking account on December 2007. The three features that made it the best reward checking in the nation were a 6.06% APY, no balance cap and open to people in any state. Before this bank, State Bank of Toledo had the best one with similar rates and terms. But that ended last December, after 6 months of offering 6.01% APY, State Bank of Toledo dropped the yield to 5.01% APY (see post).

Even though the 4.44% APY sounds low, in another few months, it'll likely look much better as rates continue to decline. The bank may prefer to implement infrequent large rate cuts rather than a bunch of small ones. State Bank of Toledo may be the same way. So if you already have an account at one of these banks, I wouldn't recommend closing them. There are no minimum balance requirements. Just keep them open in case they do become competitive again in the future.

My theory is that banks that have a $25K cap on what can earn the top yield will be able to maintain a higher yield. Charter Bank's reward checking account (which is open to all) has a $25K cap, and it's still at 6.01% APY (see post). Provident Credit Union (that has easy membership) has a $25K cap and its reward checking account is at 5.51% APY with a $25K cap. Provident CU did lower the yield at the end of December from 6.01% APY, but the drop wasn't as bad as the drop at State Bank of Toledo.

I think it's clear that reward checking accounts will suffer just like the online savings accounts as the Fed continues to cut rates. Hopefully, they at least can offer rates 1% over the average online savings account rate. Without that margin, it's much harder to justify the extra hoops required to earn the high yield. If you have a different criteria, please leave a comment.

Other High Yield Reward Checking Accounts

Please see my reward checking overview for general information and a history of these reward checking accounts. For other reward checking accounts please see my list of reward checking accounts around the nation and the best checking account post.

  Tags: FAB&T, checking account, reward checking account

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Comment #1 by Anonymous posted on
Bank of Choice's Reward Checking in Colorado was at 6.03% APY. I just got off the phone it is down to 5.5% APY with a $35000.00 cap. Still not too bad

1st Southwest Bank in Colorado still has 6.01% APY with a $25000.00 cap.

Comment #2 by Anonymous posted on
What a hassle. I haven't even got my debit card yet, and I just sent in a deposit. Well, I'm glad I have a few checks, because the money is coming right back out of this account.

Comment #3 by Rassi (anonymous) posted on
Just got set up with them, and sent in my 2nd deposit. Glad I'll be grandfathered in until June. Will have to keep my eyes open until then.

Comment #4 by glxpass (anonymous) posted on
Effective 2/5, FABaT implemented the rate change from 6.06% APY, uncapped to 4.44% APY. New customers have a 50K cap for the 4.44%. Balances over 50K earn 1.76% APY.

Existing FirstNet account holders as of 2/5 also earn the 4.44% APY, but have no cap, at least until June.

Comment #5 by Banking Guy (anonymous) posted on
Banking Guy
Thanks for the info. Hope they can keep this rate for several months. Perhaps if rates continue to decline, this 4.44% APY won't look too bad.

Comment #6 by Anonymous posted on
I signed up when it was still 6.01 and should have been grandfathered into keeping that rate until June, but just received my April statement and they gave me only the 4.44 percent. I just contacted customer service...waiting to hear back from them. If they don't correct this, I'm moving.