How would you like a checking account that pays higher interest rates than CDs and online savings accounts? These checking accounts do exist, and they're called high yield reward checking. This website is intended to help you find those banks and credit unions offering these accounts. To learn about how these reward checking accounts work, see the section below.
This site is maintained by Ken the Bank Deals Guy who also runs the Bank Deals Blog. For questions, send email to bankdeals at gmail dot com.
High yield reward checking accounts are mostly being offered by small banks and credit unions which restrict account opening to local residents. The main directory is divided by state so you can quickly find an institution close to you.
I also have a directory of banks and credit unions which don't have local restrictions. These allow you to sign up for their accounts online or by mail. For the credit unions, you'll have to first qualify for membership. The credit unions that I include in this directory allow you to qualify for membership via some association in which anyone is allowed to join. These associations typically require a small membership fee. However, once you're a member of a credit union, you're free to end your association membership without that affecting your credit union membership. Thus, you don't have to renew the association membership.
Each row in the directory of banks includes the name and link of the bank or credit union offering the reward checking. Next to the name, the yield and the balance cap are included. The right most field is a link to a review of this account and institution at the Bank Deals Blog. The "initial review date" indicates the date that the review was first made. The "updated review date" indicates a change to the original review. Often this is a lower rate. If you place your mouse over the link, you can also see the initial date. These dates are intended to give an idea of how long the bank has been offering the account and how long the rate has been maintained. These dates are not intended to provide 100% accurate history.
A new type of checking account is becoming popular with small banks and credit unions. This checking account is what's called a high yield reward checking account. It basically rewards you with a very high yield if you perform certain monthly banking activities. These typically include:
- around 10 debit card transactions (non ATM). There are typically no dollar requirements per debit card purchase.
- direct deposit or auto debit. Any ACH transfer often satisfies this.
- receive electronic statements. They won't mail you a paper statement.
If you don't meet the above requirements, you won't earn the high yield for that month. Instead you'll earn a base rate which is usually under 1%. You can return to earning the high yield if you meet the requirements for the next month.
Unlike many other checking and money market accounts, reward checking accounts usually lack minimum balance requirements and monthly fees.
The other important catch related to these accounts is that banks limit the amount that can earn the top yield. The most common maximum balance is $25,000. Balances up to $25,000 will earn the top yield, and any balances over this will earn a much smaller yield. On the plus side, reward checking accounts are not tiered accounts that require you to reach a certain balance before you can earn the top yield. Any balance (up to the cap) will earn the full top yield if you meet the monthly requirements.
One more reward offered by most of these accounts is refunds of ATM fees charged when you use another bank's ATM. These refunds are typically done automatically at the end of the statement cycle if you meet the requirements. The refunds are typically limited to around $25 a month.
Most banks and credit unions don't guarantee future rates of these reward checking accounts. Like any liquid account, the rates are variable. Banks claim that these rates are not intended to be teaser rates, but many people have been skeptical.
The debit card usage requirements and the balance caps are the main factors that are suppose to allow these accounts to be profitable for the banks. Banks receive a percentage of each debit card purchase that you make. Also, there have been statistics which show that higher debit card usage help banks make more money on overdraft fees.
At of the end of March 2008, many banks are still offering 6% APY (within their balance caps) after 6 or more months. Several have reduced their rates to between 4% and 5% as the Fed has been cutting rates in the last 6 months. However, most of these reward checking accounts have maintained their lead over most online savings accounts. For those just concerned with high yield, the extra 1% to 3% in interest can make the extra hassles worthwhile.Other Articles and Reward Checking Resources
- History of High Yield Reward Checking
- The Future of Reward Checking?
- Math Behind Reward Checking Accounts
- Reward Checking article at BankRate
- CheckingFinder.com - Online applications for reward checking accounts around the nation
- BancVue website - supplier of reward checking to institutions
- FatWallet thread on Reward Checking Accounts