High-Yield Reward Checking Account at an Iowa Bank (State Bank of Toledo)


Update 5/16/11: The top rate has fallen to 1.51% APY. See bottom of post for the rate history.

State Bank of Toledo is offering a reward checking account called Hometown Reward Checking. It offers 1.51% APY for balances up to $25,000 (0.50% for above) and up to $25 of ATM fee refunds per month if you meet the typical reward checking requirements: 1) 10 check card transactions per month, 2) one direct deposit or ACH auto debit per month, and 3) receive electronic statements. If you don't meet these requirements, the rate falls to 0.15% APY. There are no monthly service charges regardless of meeting these requirements. It requires a minimum opening deposit of $100, but no there's no minimum balance requirement.

You can apply online without a branch visit. After you submit the application online, they'll send you a signature card that must be signed and notarized. I was also told you can be in any state to apply.

NOTE: A reader advised me that you must contact State Bank of Toledo if you want to wire funds. One cannot just use State Bank of Toledo's routing number. They have a correspondence bank (a banker's bank) in Madison, Wisconsin. (1/3/08)

The bank is located in Toledo, Iowa which is between Des Moines and Cedar Rapids. It has been FDIC insured since 1934 (FDIC Certificate # 4514). The bank has a 3 out of 5 star rating (performing) at Bankrate.com based on 12/31/06 financial data.

For other reward checking accounts in other parts of the country, please see my best checking account post.

Rate History:

  • 05/16/11: 1.51% APY up to $25K; 0.50% over; 0.15% base
  • 12/30/10: 2.01% APY up to $25K
  • 01/19/10: 2.51% APY up to $25K; 1.00% over; 0.25% base
  • 09/09/09: 2.51% APY
  • 10/15/08: 3.01% APY
  • 03/21/08: 4.01% APY
  • 12/14/07: 5.01% APY for up to $70K (Please see this post for more details)
  • 06/21/07: 6.01% APY for all balances
Related Pages: State Bank of Toledo, Cedar Rapids, checking account, reward checking account

  |     |   Comment #1
Yay! Finally I don't have to drive 600 miles to open a checking account that pays 6.01%! Of course, there is no way to know how long this offer will last as they can change the rate at any time after opening the account, but lets just hope it'll stay above ING electric or SalemFive, and that it has a decent internet banking. :)
  |     |   Comment #2
Thanks for the great post. I found out some additional information from a CSR there:
1. They do a hard pull.
2. They have on-line bill-pay.
3. The statement period is from the 16th through the 15th, so take that into consideration for check card transactions, etc.
4. Their toll-free number is 1-877-484-5725.
Banking Guy
  |     |   Comment #3
Thanks for providing more details.
  |     |   Comment #4
how long is the rate valid?
do they charge for checks?
do they do pod w/poa?
what is the minimum or limit ofd $ to earn the 6% apy?

3 stars vs 5 stars rateing? should one be concerened putting money with them
  |     |   Comment #5
They do POD accounts. At least when I filled out the on-line application, it gave me the option of doing a POD account. As a POD ups your FDIC Insurance by $100k for each qualified beneficiary, I do not see the risk in making a deposit up to FDIC limits. I added my folks and my sister as POD beneficiaries. That'll more than cover me as I do not have $300k in deposits to make.
Banking Guy
  |     |   Comment #6
Thanks David for the info.

Before I called this bank on June 21st, I had sent them an email. They finally responded on June 29th. It confirms what I was told on the phone. The customer rep apologized for the delay and said that they're overwhelmed by the number of emails from all over the US. Here's the rest of the email response:

There is no limit on the amount you may deposit into this account. It takes $100 deposit to open the account but once it is opened you may have as little or as much as you like as a balance. It is possible to apply from anywhere in the U.S. for this account. Please apply online and fill out the application completely.
  |     |   Comment #7
I received my account number on Tuesday. You have to notarize a couple of pieces of paper. The welcome package was very clear. It also included wiring instructions. They have gone out of their way to do what they feel is necessary to allow out-of state folks to open the account. Its a little amusing, as they don't have a space to notarize the standard account application so they include a separate slip of paper that they ask you to notarize. Theoretically, they could attach that slip of paper to ANYTHING. Of course, that is precisely why a separate slip of paper could not hold up in court. But they must figure if you'll go through the trouble of finding a notary, you must be who you say you are.
Banking Guy
  |     |   Comment #8
Thanks David for the update. That notarize process is kind of funny. I wonder why some banks think they need it while many don't. One thing good about it is the extra hassle may discourage some out-of-state folks from signing up which may prevent the bank from getting too overwhelmed and being forced to offer it only to locals.
Mike Toreno
  |     |   Comment #9
You get free use of their community room! You just have to put down a $50 deposit, which you get back if you don't tear it up.

What I'm concerned about is, do they know what they're doing? Yes, we are safe due to FDIC, but from the link to Bankrate they don't have a great rating, and they could get money into this account that amounts to who knows, 1/3 of the amount they already have on deposit?

It seems to me like gambling; I guess one factor in these rewards checking deals is the bank is hoping you don't meet the requirements and so they will only have to pay 0.25%. This is a gamble they're going to lose, because you have a bunch of rate-chasing fanatics (including me) who keep track of all these requirements and are expert at making sure they get met. So can they invest this much new money profitably and safely? And then what happens if they drop the rate and it all goes flying out again? Will they have to be taken over by the FDIC? I don't want to take down a little bank and maybe harm the community where they are. I have an account at BOA where I get 5.37%, and I have the FNBO Direct account paying 6% (for now). So I don't need the 6.01% if it's going to harm them.
Banking Guy
  |     |   Comment #10
I guess it is questionable about how successful these reward checking accounts will be in terms of profitability for the banks. The vendors pushing these systems are making claims (example here). It probably has more chance on being successful if they do limit it to locals and limit the balances eligible for the high yield. If you have enough non-saving fanatics to counter us saving fanatics, perhaps it'll be okay for the banks.
Mike Toreno
  |     |   Comment #11
I took a look at the link to the vendor, and it was interesting. They didn't say anything about depending on people to **** up and miss out on the interest, and if that's not a factor in the calculation, that's great.

If the Bank of Toledo has a plan for what to do with the money, the cost savings the vendor talks about ARE going to happen. They are hardly going to have to worry at all about costs, because these are going to be large, low-cost accounts.

No teller-assisted transactions, no mailings, a few electronic transactions, maybe some checks that will just be put in the clearing system, but the checks will probably be pretty large and few in number because the foreign customers will probably write their small checks on their local banks.

But I can see these people easily getting in another $10 million or $20 million or more (maybe much more) as a result of this. 200 people putting in $100,000 each, that's $20 million right there, and that's over 25% of their total deposits as of March 31.
  |     |   Comment #12
I'm in for this account. For the people who have experience already with this account, a few questions.
1. This was asked before but I didn't see an answer, was there any charge for checks?
2. For automatic ACH, I assume that there wouldn't be any upper limit ie. $10 which is the minimum for most bank would meet the requirement? anyone has actual experience?
3. Anyone has any experience with the bank's online billpay. Is it similar to Salem Five whereas the money does not get debited until the vendor is paid not when you schedule it or is it debited as soon as you schedule the transactions?
4. Just curious though what is with the 10 debit transactions? Do banks get some fees ie. revenue out of this from vendors? I guess I still don't see the financial picture ie. profits for these types of account despite evidence to the contrary of banks jumping in like lemmings every day.
  |     |   Comment #13
Dont you remember the lawsuit Circuit City and many other vendors brought against Visa/MC and all the Mega banks about 2-3 years ago over Debit Cards?

For most credit card transaction merchants pay a % of the charge. On Debit cards they pay a processing fee plus % of the charges. The Visa/MC and banks stand on this was that it was converting a check from paper to electronic and granteing that the check was good and court up held this notion.

So for example BOA makes more money if you use your debit card over your BOA issued credit card for the same transaction. It ends up being about 35 cents more plus the consumer get no float on the money either.
  |     |   Comment #14
They charge for checks. Not sure how many I am getting, but for duplicate checks the printing charge was $8.72. Not unreasonable.

The Online billpay is very good. Its free (no longer need 3 bills paid per month) and you can schedule the payments for the date they are due for merchants like visa and mc banks that take electronic payments. Also give you the option of receiving bills electronically. Nice interface. Same as first internet bank of indiana.
Banking Guy
  |     |   Comment #15
David, Thanks for the update.

It has been about a month since I first posted on it, and it remains open to all. So that's a good sign.
  |     |   Comment #16
In order to receive the 6.01% rate, you must make a minimum of 10 debit card purchases per month. My purchases are always made with credit cards that pay cashback.

Does anyone have any ideas on how to meet this requirement via automated means? (i.e. online)
  |     |   Comment #17
My checks arrived yesterday. 100 duplicate checks for $8.72. Not the cheapest nor most expensive. But given that I write less than a dozen checks a year, I can live with the expense.

Please don't bother with the account if you are not going to use the debit card. Speaking of which, I have yet to receive my card as it takes 2-4 weeks to receive it after sending them the written application, which they received first week of July. However, they are giving me the reward rate in my second month even though I won't meet the requirements since I don't have a card yet.

You can't link external accounts from within the site so you must push/pull from an external account. They quickly credit the deposits. Am loving this bank.
  |     |   Comment #18
Debit card received on 7/30 (3 weeks to the day from when they received the application and initial deposit).

The rumor on FatWallet is that they are going to STOP permitting POD and beneficiary accounts (and this will apply to existing accounts as of the end of September). This will limit the FDIC insurance to 100k unless you are married. Haven't received any official notice yet, so its just a rumor for now. :)
  |     |   Comment #19
No longer a rumor. :( I received my letter this weekend advising that POD status will be eliminated 9/1, and that therefore, the FDIC Insurance will rever back to the limits for an individual or joint account dependingon how it was opened. Obviously, they were receiving deposits that were too large for their tastes. At least they did not cap the balance that can earn the higher rate. Hopefully that won't happen next.
  |     |   Comment #20
By the way, the account is indeed open to those who live outside of Iowa, and you don't need a branch visit to open the account. You basically submit the application on line and then they mail you all of the paperwork, require a couple of notarizations and a few weeks later you get your debit card. I suggest opening with a small deposit until you get your card as it is possible to get the card without sufficient time to use it and its not worth the stress. The bank is great. Customer service is very friendly. And the rate at least for now, continues to be 6.01!
Banking Guy
  |     |   Comment #21
Thanks David for all the info. Please keep us posted on any changes.

Glad to see this bank is still going strong with this checking account after 3 months since my first report on them.

It'll be interesting to see how these reward checking accounts will change their rates after the Fed rate cut. If they can at least maintain 50 basis points above the top online savings account rates, it'll be worth the hassles.
  |     |   Comment #22
what kind of notarizations do they require? is this requirement for online only or for local visit also?
  |     |   Comment #23
Now down to 3.01%
  |     |   Comment #24
Opened account when rate was 6 and moved all my savings there - when rate finally dropped to 3, moved out as I could getter better rates elsewhere. Too bad, because I liked the bank and its staff was always very friendly.
  |     |   Comment #25
As of 9/09 the new rate is 2.51%

Also according to the bank website one of the 3 conditions is that you: "Receive Electronic Statement". Well after applying I found out that you "receive" your statement by *logging into* the website once a month or you don't meet the conditions. Unlike the 1st two conditions this one is strictly a "gotcha" clause. The only "benefit" to them of this clause is that they know that sooner or later you'll forget and then they can legally steal ~$130 from you for every month that you would have otherwise qualified and have $70k in there. Yes, I know all the Rewards Checking acts have this sleazy policy but this bank pretends it doesn't and then you get the bad news after you apply.
Banking Guy
  |     |   Comment #26
Thanks for the info. Not all banks require logging in to meet the e-statements requirement. Several banks do explicitly include the "logging into account" as one of the requirements in addition to receiving e-statements. If they're going to have the "logging in" requirement, State Bank of Toledo should state both. Otherwise, it is misleading in my opinion.
  |     |   Comment #27
$25K, $70K, at 2.51% few would even care.
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