More Banks Offering Reward Checking But Is It Still Useful for Savers?
As I reported in August, the company that started reward checking, BancVue, has been trying to expand its Kasasa brand. This is its national brand of free checking and savings accounts. One type of Kasasa account is the Kasasa Cash account which is the name of the high-yield reward checking account. In addition to attracting checking account customers, BancVue is also trying to get more community banks and credit unions to offer Kasasa accounts. That's good news for savers. The more banks and credit unions offering these accounts, the more competition there will be which should put upward pressure on deposit rates.
I regularly search BancVue's Kasasa website for any new banks and credit unions. I am finding some new ones, but one common trend with the new Kasasa Cash accounts is lower balance caps. This is the maximum balance that qualifies for the top interest rate. The portion of the balance over this cap typically earns only a small interest rate (like 0.25%). The $10K balance cap is becoming much more popular. In addition, I'm seeing $5K balance caps.
When reward checking accounts first became popular in 2007, a $25K balance cap was most common. That was large enough for many savers to make a reward checking account a good alternative to an internet savings account, at least for some of their liquid savings. With smaller balance caps, the question has to be asked again.
To decide if a reward checking account is a good alternative to an internet savings account, calculate how much more interest you can make from the reward checking account as compared to an internet savings account. That's what I did for a few cases below. I compared two reward checking accounts, one paying 3% APY and another paying 2% APY. I compared these with an internet savings account paying 1%. I then determined the extra interest earned from the reward checking account for different balance caps ranging from $5,000 to $50,000.
Extra Money from 3.00% Reward Checking Over a 1.00% Savings Account
- $5K balance = +$100/yr or +$8/mo
- $10K balance = +$200/yr or +$17/mo
- $15K balance = +$300/yr or +$25/mo
- $25K balance = +$500/yr or +$42/mo
- $50K balance = +$1,000/yr or +$83/mo
Extra Money from 2.00% Reward Checking Over a 1.00% Savings Account
- $5K balance = +$50/yr or +$4/mo
- $10K balance = +$100/yr or +$8/mo
- $15K balance = +$150/yr or +$12.5/mo
- $25K balance = +$250/yr or +$21/mo
- $50K balance = +$500/yr or +$42/mo
Based on these examples, you can determine if the extra money you'll get from a reward checking account makes it worthwhile. Is the extra $200 per year from a 3.00% reward checking account with a $10K balance cap worth your time? It's an extra account to worry about with monthly requirements that typically include at least 10 debit card purchases.
How much extra per month does it take for reward checking to be worthwhile for you?
Even though many reward checking accounts may not be worth it as a replacement for internet savings accounts, you may still want to make a reward checking account your primary checking account. The Kasasa Cash accounts are free checking accounts with no monthly service fees or minimum balance requirements. If you want a free checking account from your local community bank or credit union, a Kasasa Cash account is a good choice that easily beats the megabank 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, please refer to my post 10 Common Traits of High-Yield Reward Checking.