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Bankrate's Spring 2006 Checking Account Survey and My Recommendations


Another survey of checking accounts from major banks continues to show increasing fees and balance requirements. Another issue repeated from last fall's survey (see post) was the bad deal with interest checking accounts. The good news is that the average yield on interest checking accounts is now the highest it has been in three years. The bad news is that the yield is only 0.32%. As the article recommends, yields from the average interest checking account rarely make up for the additional fees and balance requirements.

How much money sits in your checking account?

The article referenced a survey by Forrester Research. The survey included households with more than $10K in liquid assets. 52% of those households held more than half of those assets in a checking account. If that money were in high yield money market accounts, an additional $200/year or more in interest could be made.

In my opinion, the best choice for a high yield money market is at GMAC Bank's Money Market Savings Account, which is currently paying 4.70% APY for balances over $500. Unlike EmigrantDirect or ING Direct, this GMAC MMA offers limited check writing. It also electronically links to your checking accounts, and unlike HSBC, the transfers are fast.

Local checking accounts

It can still be useful to have a local checking account. Online banks do have some disadvantages. A local free checking account may be the best choice. Last month Washington Mutual introduced a new free checking account with many perks (see post). Compass Bank's Free Checking Account is also a decent deal especially with a signup bonus (see post). Another Free checking account bonus from a major bank is at Wells Fargo, but this bonus ends after April.


Although it may not be local, you may want to consider USAA Bank for a checking account. There's no signup bonus, but the checking account has many perks with no monthly fees. The account has many online features like an ACH transfering system that makes it useful for those who don't live near a branch. Refer to this post for more info.

High yield checking accounts

If you find yourself writing a lot of high dollar checks, a money market account which limits check writing to 3 a month may not be a good choice by itself. With a high dollar balance, you would lose out with the typical checking accounts which earn little or no interest. The Bankrate article mentions that internet banks offer checking accounts with average yields of 1.96%. Here's a list of internet interest checking accounts with yields over 3%. I've limited it to those with balance requirements under $10K.
  • 4.37% (up to $25K) - Presidential Internet Checking Plus, Min's: $1.5K to open, $1K to avoid monthly fees, Req's: Direct Deposit
  • 4.03% (up to $25K) - City National Bank's Reward Checking, Min's: $100 to open, no balance req's, Req's: Direct Deposit, 10 Visa check card POS transactions Perks: free checks, ATM fee rebates
  • 3.20% (up to $25K) - Bank of Internet Freedom Checking, Min's: $100 to open, $1K to avoid $4/mo fee, Perks: ATM fee rebates (up to $7/mo)
  • 3.10% (up to $10K) - AmericanBank e-Checking, Min's: $100 to open, $1K to avoid $5/mo fee, Perks: ATM fee rebates (up to $6/mo)
  • 3.01% - EverBank FreeNet Checking, Min's: $1.5K to open, no balance req's w/o bill pay, $1.5K otherwise, Perks: 5.51% APY 3-mo promo, ATM fee rebates (up to $6/mo)
  • 3.00% - ebank ePremium Checking, Min's: $100 to open, $2.5K to avoid $10/mo fee, Perks: ATM fee rebates, free checks
latex_salesman   |     |   Comment #1
I am still looking for some place to park my $$ after the HSBC 4.80% Special expires.... :o(
Steve Holt
Steve Holt   |     |   Comment #2
Even though it isn't FDIC insured readers should consider Vanguard money market funds. Their prime money market fund is currently paying 4.50%. Only $3000 to open, unlimited check writing (check must be above $250) and they give you the checks for free.
easy e
easy e   |     |   Comment #3
I have to agree with you, GMAC Bank is the best of the high yield money market account.
Banking Guy
Banking Guy   |     |   Comment #4
Steve, that's a good point about Vanguard money market fund. They also have tax-free funds with current yields as high as 3.32%. For those in the 35% tax bracket, that's equivalent to a 5.10% taxable fund. Another benefit of Vanguard, Fidelity or other brokerages is that you can use these money market funds as a core account for your stock and bond mutual funds. Looks like the one disadvantage is not being able to write low value checks.
Steve Holt
Steve Holt   |     |   Comment #5
After using online banks for several years I find that I like Vanguards money market accounts much better. Several reasons:

1. like you said they offer taxable and tax free money markets. Whichever rate will net me a higher return that's what account my money is in.

2. because this is a "checking account" you don't have to move money into your regular local low paying checking account and lose a couple days of interest. In fact when you invest this money from the money market account elsewhere you gain a day or two of double interest before the check actually clears.

3. the $250 check minimum has not been a problem for me. Just keep it in mind. If you do need less than $250 out of the account then just transfer that money into your local checking account. I have found the money will be in your local account the next business day.

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