I last reviewed the 5 best reward checking accounts in July. Since that time, 2 of the 5 banks have fallen off the list. I thought it would be useful to update the list with the ones that still have best rates available nationwide. I also thought it would be interesting to take a look at the size of these banks in terms of deposits and how the deposits have grown since the banks started to offer reward checking.
For those not familiar with reward checking, these checking accounts offer customers a high yield for up to a certain balance ($25K is common) if you meet certain monthly requirements which typically include around 10 debit card purchases, direct deposit/ACH transaction and e-statements. Many also offer ATM fee refunds if you meet the monthly requirements. Most are free checking accounts even if you don't meet the monthly requirements.
Can these high-yield reward checking accounts last? I first started reporting on them in 2006, so they have some history. New regulations that affect overdrafts and debit card fees will likely provide some headwinds as I mentioned in yesterday's post on the Future of High-Yield Reward Checking Accounts.
In this short list of reward checking accounts, I decided to include only those which have the best rates that apply to balances of at least $25,000. Some offer 4% but the maximum balance for this yield is only $10K or $15K.
The ones listed are available nationwide as of 9/8/10. Banks and credit unions often change their policies and restrict these to their local market areas. So some of these institutions may fall of this list.
The Two That Have Fallen Off the List
Restricting new accounts to their local market areas is why 2 of the 5 banks fell off my July list. The first to fall off the list was ViewPoint Bank which restricted the account to just Texas residents. It's still paying 4.00% APY on balances up to $50K. However, they recently announced this balance cap will fall to $25K effective November 1st. The second to fall was Randolph Bank & Trust Company. It's still paying a very nice 4.75% APY on balances up to $25K. Like ViewPoint, it restricted new accounts to residents of its home state, North Carolina.
The Original Three
I'm glad to report that as of 9/08/2010 three out of the five institutions on my July list have kept their accounts the same, and they all appear to be available nationwide. These 3 are Danversbank, South Division Credit Union and Westfield Bank FSB. Only Danversbank and South Division CU still have a 4% APY for up to $25K. Westfield Bank's reward checking is only 3.50% APY for up to $25K. Here's a summary of these three institutions:
- Danversbank - 4.01% APY for up to $25K as of 9/8/10. First post was over 3 years ago so it has quite a bit of history. Readers have reported an easy account opening process. Danversbank is based in Massachusetts and is a sizable bank with $2 billion in deposits as of June 2010. They have grown substantially in the last 3 years. In June 2007, they had only $973M in deposits. Of course, other factors likely contributed to the growth besides the reward checking account.
- South Division Credit Union - 4.01% APY for up to $25K as of 9/8/10. This Illinois credit union is on the nationwide list since its field of membership makes it easy for anyone in the U.S. to join. However, it's a small credit union which primarily serves an area in the Chicago suburbs. My first post on this reward checking account was in November 2009. The rate has remained the same since then. The credit union only has $53.9M in deposits as of June 2010. Deposits have actually fallen in the last year. In June 2009 deposits were $54.6M.
- Westfield Bank FSB - 3.50% APY up to $25K as of 9/8/10. This is also fairly new on my list. My first post was last May. One advantage of this bank is that they are listed on CheckingFinder which makes the online application process easy. It's a small bank with 3 branches in Ohio. As of June 2010, the bank had $352M in deposits. This is actually down from $360M in March 2010.
Two New Banks
The two new banks added to the list have rates between 3.50% and 3.00% APY. I'm afraid 3.00% APY is the new competitive yield for reward checking accounts these days. Anything you can find above that is a great deal.
- Coulee Bank - 3.33% APY for up to $25K as of 9/8/10. My first post was over 3 years ago so this bank has a long history of top rates. There's an online application at the bank's website. Coulee is a small bank based in Wisconsin with 4 branches and just under $200M in deposits. It has grown its deposits quite a bit in the last 3 years. In June 2007, it had only $113M in deposits.
- HCSB Bank - 3.26% APY for up to $25K as of 9/8/10. This is not the giant international bank HSBC. HCSB used to have the name Hill Country State Bank. It's a small bank with 7 branches in West Texas and in the Texas Hill Country. Their reward checking history is short. My first post was in February 2010. The good news is they've held steady with both the rate and the nationwide availability. There are online applications at both the bank's website and at CheckingFinder. They have $310M in deposits as of June 2010. This has grown almost 9% in the last 6 months.
You might notice that all of the above banks have a balance cap of $25K. I decided to include one more bank with a nationwide reward checking account with a higher balance cap. The downside is a lower rate.
- The Bank of Fayetteville - 2.75% APY for up to $50K as of 9/8/10. My first post was in February 2008 so it does have a fairly long history. At that time the top yield was 5.01% APY so the rate has fallen more than others (probably due to the $50K cap). It has an online application at both the bank's website and at CheckingFinder. The CheckingFinder application is more of a complete online application with electronic funding. It's interesting to note the bank's deposits haven't grown that much over the last 2 and half years. As of June 2010, it had almost $340M in deposits which is only about 11% higher than the $305M in deposits it had in December 2007. This shows that reward checking remains fairly unknown in the mainstream.
As you can see, you have to sacrifice quite a bit of yield for double the balance cap. How much yield would you be willing to sacrifice? If you don't mind multiple reward checking accounts, you probably don't want to sacrifice much yield. In yesterday's poll, 77% of the 35 people who responded said it takes a yield of at least 3.00% for a $25K balance to make reward checking worthwhile.
If you want rates higher than what's listed here, you'll have to look within your state. You can use the filter in our reward checking table to view what's available in your state. There are still 11 institutions that offer 5.00% APY or above. All of them are local deals.