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Fed Meeting Preview and Deposit Rate Forecast - March 15, 2023History of the High Yield Reward Checking Account
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BY Ken Tumin
What is the first bank to offer a high yield reward checking account? According to this Northern Colorado Business Report article, it was City National Bank in 1997. City National Bank is a small community bank located in Taylor, Texas. The bank worked with BancVue to develop a product with the goal of customer retention and to give it an edge over the larger banks.
BancVue used this experience to create the high yield reward checking product that could be rolled out to other banks. The stats showing the benefits to banks of these reward checking accounts apparently comes from City National Bank. Before rolling it out, BancVue worked with 10 other banks to perfect the software. It then rolled it out nationwide on October 2005.
In addition to the history, the article provides some insights into these reward checking accounts. It looks like BancVue helps the banks decide on things like yield, required number of debit card transactions and the maximum balance. The BancVue CEO was quoted as saying that the lowest rate that works with this model is around 4%, but they often encourage the banks to offer a higher rate. The CEO also mentioned that BancVue is working on three other products, and according to the CEO, "it's going to blow the doors off of reward checking."
It's interesting to note that City National Bank has maintained the 4.03% APY since I can remember. The 4.03% APY is earned on all balances without a cap. I wonder when BancVue decided to encourage banks to increase the rate to around 6%. Perhaps it was in 2006 when 5-percent-plus online savings accounts started to become common.
For more information and discussion on these reward checking accounts, please see my reward checking news and overview post. To find a reward checking account, please see my list of reward checking accounts around the nation and the best checking account post.
BancVue used this experience to create the high yield reward checking product that could be rolled out to other banks. The stats showing the benefits to banks of these reward checking accounts apparently comes from City National Bank. Before rolling it out, BancVue worked with 10 other banks to perfect the software. It then rolled it out nationwide on October 2005.
In addition to the history, the article provides some insights into these reward checking accounts. It looks like BancVue helps the banks decide on things like yield, required number of debit card transactions and the maximum balance. The BancVue CEO was quoted as saying that the lowest rate that works with this model is around 4%, but they often encourage the banks to offer a higher rate. The CEO also mentioned that BancVue is working on three other products, and according to the CEO, "it's going to blow the doors off of reward checking."
It's interesting to note that City National Bank has maintained the 4.03% APY since I can remember. The 4.03% APY is earned on all balances without a cap. I wonder when BancVue decided to encourage banks to increase the rate to around 6%. Perhaps it was in 2006 when 5-percent-plus online savings accounts started to become common.
For more information and discussion on these reward checking accounts, please see my reward checking news and overview post. To find a reward checking account, please see my list of reward checking accounts around the nation and the best checking account post.
I have been trying to use my local credit union debit card more often to get in the habit, but I'm having a hard time reaching the requirements in the course of my regular monthly spending. If it comes to me having to do it, I will have to get creative by using it for small gas purchases etc. It is going to take me a concerned effort.
I just wanted to share my way of reaching 10 debit card transactions requirement. It takes me 20 minutes online and one day per statement cycle.
I go to pay my tuition online. And make 10 consequent transactions in one day. All transactions must be different in amounts. So I pay like this: $0.05, $0.06, $0.07, ... etc until I reach ten transactions.
I understand that it will not be useful for everyone but maybe you can find a website where you make regular payments and the amounts are not subject to minimal transactions amounts. Perhaps cell phone providers or cable companies. So far my university tuition account worked well. Hope it was helpful.
P.S. I actually have two %6.01 - accounts. Therefore I have to do 20 transactions per months!
http://www.fatwallet.com/forums/messageview.php?catid=52&threadid=765803&start=0
For many years, banks were barred from paying interest on checking accounts. Very few actually wanted to, of course, and one of those was Citizen's Bank and Trust in Park Ridge, Il. They had a scheme wherein you put a good bit of money into your checking account and then every check you wrote was a "loan." You were charged interest for the time between your check and the next deposit to "pay off the loan." This actually worked quite well. I did this for several years until my local bank was able to pay interest, which in the early days was about the same. Now, of course bank interest on checking accounts is pathetic (0.05% at Wachovia) and the only way to go now is with a rewards checking account.