Reward checking has been helpful in this awful interest rate environment by providing savers a way to get a little higher yield on their liquid money. Rates have held up better than internet savings accounts, but there's the question of whether this can continue. It seems like we are seeing more rate and balance cap cuts lately. Perhaps it's due to the new regulation that affect overdrafts. It may also be that more savers are turning to reward checking accounts with CD rates so low. Banks can only handle so many deposits, and it's worse in today's environment with the reduced loan demand.
The higher number of rate and balance cap cuts can be seen in my September short list of the best nationwide reward checking accounts. So it's time for a new list. Three institutions have fallen off the old list. Two of the institutions made large rate cuts, and one has started to restrict new accounts to its market area. The largest rate cut was at South Division Credit Union. It slashed its reward checking yield from 4.00% to 2.00%. The other institution to cut rates wasn't this bad, but it was large enough to knock it off the short list. HCSB Bank just recently cut its reward checking yield from 3.26% to 2.78%. Finally, Westfield Bank changed its policy for new accounts. It's now primarily limited to Ohio residents.
Three New Banks Added to the List
So I'm adding three banks to my short list. To be on this list I used to require that the balance cap be at least $25K. I'm lowering this to $20K.
- Beacon Federal Bank - 4.00% APY up to $20K as of 11/2/2010. [ Update 11/07/2010: Beacon Federal's online application includes the reward checking account for selection only for certain zip codes which appear to be in their market areas. ] Its reward checking account just started a few months ago. My first review was in September. There are some other downsides in addition to the $20K balance cap. This includes the requirement of 15 debit card purchases a month, only one account allowed per social security number and no ATM fee reimbursements (It's part of Allpoint network). Also, a reader noted there's a hard credit inquiry when you apply. If the rate is your main concern, these downsides may help them maintain the 4.00% APY.
- Cattaraugus County Bank - 3.25% APY up to $25K as of 11/2/2010. [ Update 11/9/10: The bank is now restricting new accounts to its market area in parts of New York State. ] My first review of this account was in July 2009, and the rate has remained the same since then. I just learned in October that you can apply online from any state. It's a small bank in western New York with only $164 million in assets so I wouldn't be surprised if they start to restrict new accounts to their market area before too long.
- Southern Community Bank & Trust - 3.00% APY up to $25K as of 11/02/2010. I had a little trouble deciding on the third bank to include since there are four with 3% yields. I decided on this bank since it only requires 10 debit card purchases a month (some of the others require 15). Also, Southern Community Bank was the largest of the four with over $1 billion in deposits. Hopefully, that will make it easier for them keep the account nationally available. My first review of the account was in February 2008 so it has quite a bit of history. They also offer the nationally available internet savings account, the Ready Saver Account.
Two From the Old List
Two of the five banks that were my September list remain. One of these two was on my original list in July.
- Danversbank - 3.01% APY for up to $25K as of 11/02/2010. There was disappointment when Danversbank cut its rate from 4.01% to 3.01% in October, but before that cut, the yield had remained at 4.01% since April 2008. That's a good sign that they may intend to keep the 3.01% APY for a while. As you can see, they have a long history with this account. First post was over 3 years ago. 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.
- Coulee Bank - 3.03% APY for up to $25K as of 11/02/2010. I added this bank in September. The rate just recently went down, but only by 30 basis points. 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.
I also mentioned this bank as an honorable mention in September. It's the only nationwide reward checking account with a $50K cap and a decent rate. The rate is little lower than the others, but you may want to sacrifice the rate in return for double the cap.
- 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.
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 a few institutions that offer 5.00% APY or above. All of them are local deals.