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Reward Checking Accounts - When Are They Worth It?

Tuesday, October 19, 2010 - 2:32 PM
I think I've just come up for air...

Reward checking accounts seem very attractive. However, what do we really make when we're spending so much?

At $5K and 3% APY, you earn $12.50 a month. But when the requirement is 12 debit transactions (or 10), at a dollar or so each, your efforts wipe out your earnings. Even for those with $10K in the bank, the debit transactions need to be under $2 (average) in order to make out with the smallest of gains.

So do I keep my rewards checking account? Should I look at it as my bank paying for my things? Or, should I look at it as money earned is money earned?

These banks are making money off our transactions, more than they're giving back. Why should we help them? With so many folks here with 8 or so accounts - are they debiting under a $1 per transaction all the time? Or, am I the first to realize that this hustle may not be worth the effort?
4
bemsonbemson2 posts since
Jul 29, 2010
Rep Points: 11
1. Tuesday, October 19, 2010 - 5:06 PM
You can do all the math and stuff to justify RCA or dismiss it.  It is your call.  Only you know whether it is worth it or not and at what APR you would drop it.

The threshold used to be 4% for me but I am still considering whether to drop the Danvers (3%, $100K) account...
4
51hh51hh1,476 posts since
Jan 16, 2010
Rep Points: 6,425
2. Tuesday, October 19, 2010 - 5:18 PM
You don't necessarily have to spend more when you have reward checking accounts. You just have to plan your shopping so that you meet the reward checking requirements. It does take some work.

With new regulation, stores may start to give discounts if you pay with cash instead of a credit card. This might also include debit cards if you make signature-based purchases instead of PIN based. This is currently rare.

I've done a few posts which compare reward checking accounts with alternative savings methods:
4
Ken TuminKen Tumin5,467 posts since
Nov 29, 2009
Rep Points: 124,995
3. Tuesday, October 19, 2010 - 6:01 PM
I see it as the bank(s) paying my grocery expenses every month, thus, I can put more money into my savings (i.e., RCAs).

Here's hoping to be off RCAs almost entirely very soon and keeping just one with the best APR since I plan on making a down payment for a mortgage.
1
darkdreamer4udarkdreamer4u174 posts since
Jun 11, 2010
Rep Points: 632
4. Tuesday, October 19, 2010 - 6:21 PM
I seldom make a purchase that I wouldn't normally make. So the return on investment does increase by the amount of interest earned. I am earning 5% or more on ALL 11 ( @25k or more each) of my RCAs. Thats just over $1100.00 per month. so, for me , it's a no brainer as i cant do any better elsewhere.  

For those who spend just to make the debit count - you are right ---the return diminishes rapidly.

I split my grocery purchases, in fact i split all my purchases, and make multiple payments on many of my regular monthly bills.

Thus, my only cost is my time. I am retired and have more time than money - so my time is a real cheap commodity.
3
pdxmalepdxmale91 posts since
Jul 11, 2010
Rep Points: 270
5. Wednesday, October 20, 2010 - 9:48 AM
Pdxmale, how are you making 5% or more on 11 accounts?  The highest rate I can get is 4.75% (Randolph Bank in NC), so I have 2 accounts there and one at another bank for a smaller return.  Do you happen to live somewhere with incredible rates or am I missing something?
1
RebeccaRebecca1 posts since
Oct 20, 2010
Rep Points: 5
6. Wednesday, October 20, 2010 - 9:56 AM
Probably quite a few of formerly nationwide available RCA's that have gone local only and therefore kept their rates high while grandfathering in early adopters. I have a couple of those as well.
1
darkdreamer4udarkdreamer4u174 posts since
Jun 11, 2010
Rep Points: 632
7. Wednesday, October 20, 2010 - 10:55 AM
Pdxmale, how are you making 5% or more on 11 accounts?  The highest rate I can get is 4.75% (Randolph Bank in NC), so I have 2 accounts there and one at another bank for a smaller return.  Do you happen to live somewhere with incredible rates or am I missing something?
 

Pdxmale outlined his list of 5% RCAs previously already.  The basic message was it required some "creativity" for some, travel for some, and some were grandfathered (now have more restrictions such as locality, limited membership, etc.).  His list was also diversified so that if one goes down, he still has ten:-)

I think that he deserves the title of "Mr. RCA." :D
2
51hh51hh1,476 posts since
Jan 16, 2010
Rep Points: 6,425
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