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Ken Tumin founded the Bank Deals Blog in 2005 and has been passionately covering the best deposit deals ever since. He is frequently referenced by The New York Times, The Wall Street Journal, and other publications as a top expert, but he is first and foremost a fellow deal seeker and member of the wonderful community of savers that frequents DepositAccounts.

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Reward Checking Rate Chasing in the Last 3 Years

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Yesterday I reviewed the effectiveness of rating chasing, but I only looked at internet savings and money market accounts. A reader commented that I should have also looked at reward checking accounts. That's a good idea. So in this post my focus is reward checking rate chasing and its effectiveness over the last 3 years. In this post I'll estimate the average 3-year yield that you could have received if you had put your money in the best reward checking accounts.

Compared to savings accounts, there are more complications to consider with reward checking. First, most all reward checking accounts have balance caps. You can only earn the top rate for balances up to a certain level. So an average yield will be very dependent on the balance size. An average yield for a $200K balance will be very different than for a $25K balance.

To keep things simple in this review, I'm assuming a balance of $25,000.

Another complication with reward checking accounts is that banks have often changed their availability. Many reward checking accounts were launched with nationwide availability. As the banks attracted more customers and deposits, many of them have reduced the availability of their accounts to their state or local market area. Fortunately, most banks won't close accounts of out-of-state customers. So if you get in early when the account is offered nationally, you can typically stick with the bank after it limits new accounts to its local market.

For this review, I've only consider reward checking accounts that were available nationwide. I didn't require nationally availability for all 3 years, but only when the account was opened.

There have always been local reward checking accounts that have been better deals than those available nationwide. If you were lucky, you might have been able to have a 3-year average yield higher than what would have been possible with only nationally available accounts.

Just like with the internet savings accounts, I didn't have to switch to many banks to maximize the 3-year average yield. There were two banks that had top reward checking rates in 2009 and 2010. These were Bank of the Sierra and ViewPoint Bank. However, starting in 2011 their rates began to fall, and those rate cuts accelerated in 2012. I found that you could have done very well with just three institutions during those 3 years. Below are the institutions and when the switches should have occurred for the best 3-year average yield:

  • Sep 2009: Bank of the Sierra Reward Checking, 4.51% APY up to $25K
  • Jul 2010: ViewPoint Bank Absolute Checking, 4.00% up to $50K (BotS was 3.09%)
  • Jan 2012: ABCO FCU Premiere Checking, 2.52% up to $25K (ViewPoint was 2.00%)

Average over 3 years: 3.62% APY (for balances up to $25K)

What if you had stuck with Bank of the Sierra or ViewPoint Bank? Both held up fairly well until 2012. So if you held on to your reward checking account at one of these banks, your 3-year average yield would be pretty good. The falling rates this year haven't had enough time to have a big effect. The 3-year average yield at Bank of the Sierra is 2.71%, and the average at ViewPoint Bank is 3.42%. Those will be going down since both banks now have low rates (0.89% at Bank of the Sierra and 1.00% at ViewPoint).

These reward checking averages are much higher than the 3-year average for savings accounts. The best 3-year rate-chasing yield that I calculated yesterday was 1.48%. These reward checking average yields are close to the yields of 5-year CDs opened in 2009. The CD yields ranged from 3.30% to 3.91%.

It's important to note that these reward checking yields are only for balances up to $25K. Also, it's important to note that the reward checking accounts required maintaining debit card purchases and other activity to qualify for these rates. The average yield for larger balances would likely be lower and would require more work since it would require more reward checking accounts.

Finding the Best Reward Checking Accounts

To find the best reward checking accounts today, please refer to our reward checking rate table. This can be used to find accounts available nationwide or in your state. If you're new to these tables, my rate table guide should be useful.

If you're new to reward checking, my blog post, 10 Common Traits of High-Yield Reward Checking, should be useful.



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Comments
4 Comments.
Comment #1 by 51hh posted on
51hh
Great article, thanks Ken.

My RCA rate chasing (forgot the time span, maybe 4 years) started with Danversbank 6%, passed through 5.5%, 5%... now with the majority of my fund is at 4% and some at 3.5%.  I tend to be a little innovative in my rate chasing so that I could get into a lot of sweet "local" RCAs (mostly credit unions). 

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Comment #2 by KenBDG posted on
KenBDG
Thanks. It would have been interesting to see how Danversbank's RCA would have evolved if the bank didn't get acquired by Peoples United.

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Comment #4 by Anonymous posted on
Anonymous
I can get more money as a Walmart greater or a School crossing guard and spend less time than doing this " RCA rate chasing".  Plus, I would get paid for exercising.

4
Comment #5 by Anonymous posted on
Anonymous
it would seem that by now in Oct 2012, I Bonds (2.20% current yield, calculated from the CPI inflation rate) from the US Treasury's Savings Bonds Program.

I understand it is Rewards Checking Apples vs I Bonds Oranges.  I Bonds have an individual purchase max limit per yr (10K $5K by overpaying your Fed Income Taxes & receiving refund as I Bond).  An I Bond can't be redeemed for 12 months, so obvs less liquid than a Rewards Checking "on-demand" "deposit account"

Perhaps a good tactic is to combine both for your Emergency Savings "portfolio".  Keep the bulk in I Bonds, with a minority portion in a Rewards Checking.

Would love to get your take on this idea, Ken.  Cheers

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