It used to be easy to find reward checking accounts with top yields of at least 3% for balances up to $25,000. These are now rare. In the entire nation, we only have 16 reward checking accounts with top yields of at least 3% for balances up to $25,000. None of these are easily available nationwide.
Seven of these 16 reward checking accounts are from credit unions which have limited membership. The best deal continues to be at Southwest Airlines Federal Credit Union which offers 4% APY on balances up to $25,000. As you might expect, membership is primarily limited to Southwest Airline employees (and other Select Employee Groups).
Nine of these 16 reward checking accounts are from community banks that are primarily located in sparsely populated areas of the country. For example, the three best bank reward checking accounts are at banks in Iowa.
There is one exception to these nine banks. Old Florida National Bank has several branches in the Orlando metro area (which is the 26th largest metro area in the U.S.). Its rewards checking account is called Optimum Checking, and it has been paying 3.04% APY for balances up to $25,000 for the last four years (rate as of 6/14/2013). My first review of this account was in December 2009.
One nice thing about this bank is that they allow people from any state to open this reward checking account. However, they require new customers to open accounts at a branch. They do not open accounts by mail. So if you are vacationing in Florida, you may want to stop at one of the bank’s branches to open this account. Please note that small banks often change their policies on account qualifications. So make sure to check with the bank for the latest policies.
Please refer to my Optimum Checking Account review for more details about this account. One important detail to note about this account is that you don’t want your balance to go above $25,000. If your balance exceeds $25,000, your entire balance will earn only 0.50% even if you meet all of the monthly requirements. For the vast majority of reward checking accounts (including those powered by BancVue), only the portion of the balance above the cap will earn the lower rate.
It’s hard to get too excited about reward checking accounts. Like savings accounts, there’s no guarantee how long the high rates will last. We have seen rates plummet at several banks and credit unions. Reward checking accounts also have another risk. The balance cap can also fall. There have been many reward checking accounts with balance caps that have fallen from $25,000 to $15,000 or $10,000. So instead of the top rate applying to balances up to $25K, the top rate applies to balances of only $15K or $10K.
One thing that can kill a reward checking account is a bank acquisition. A large bank acquires a small bank with a reward checking account, and the large bank decides to stop offering the reward checking account. Currently, there’s no indication that Old Florida National Bank is near that type of acquisition. In November, the bank did announce that it was acquiring the smaller New Traditions National Bank. I don’t see this as affecting the reward checking account.
Another thing that can kill a reward checking account is when a bank is having financial problems. There have been some cases in which the FDIC has ordered banks considered 'less than well capitalized' to lower their reward checking rates. One case last year impacted a Florida bank. Old Florida National Bank appears to be in good financial shape. We’re giving it a 4 star rating (out of 5) based on March 2013 data. Its Texas ratio is 12.54% (above average). Please refer to our financial overview of the bank for more details.
To find reward checking accounts in other areas of the nation, please refer to the reward checking section of DepositAccounts.com. To learn more about reward checking, please refer to this reward checking overview.