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For Top Rates, Can Credit Unions Compete?Reward Checking Account Rates Fall
POSTED ON BY Ken Tumin
With the new month there have been several banks and credit unions that have cut the yields on their reward checking accounts. MidWest America FCU's 7.01% reward checking account was one of these. The yield was cut to 6.31% APY. The 7% yield had a good run. It had lasted for most of this year, and 6.31% APY remains the top yield in both my list of nationwide reward checking accounts and my list of reward checking accounts by state. There are still a few with 6% yields, but the numbers of these are going down.
The average yield remains around 5% APY, so reward checking is still a viable way of earning 100 basis points or more over the top online savings accounts yields (4% APY).
For those questioning how these institutions can afford to pay these high rates, it's important to remember the two important features of these accounts:
The results from the poll that I started on the left sidebar at my reward checking website don't bode well for instutitions hoping to rely on debit card fees. Out of 95 of those who responded, 58 said they spend under $100 a month on debit card purchases. That's not going to help the institutions pay the high yields. However, I doubt this is respresentative of the Average Joes. I would guess that the average reward checking customers spend far more than $100 a month with their debit cards. Let's hope that these reward checking accounts can attract enough Average Joes that the institutions can continue the high yields.
To find reward checking accounts from institutions near you or to learn more about these accounts, please refer to my High Yield Checking website. I now have 262 reward checking accounts listed. If you find the rate of an account has changed, please leave a comment in the post reviewing the account (links to the posts are on the right side of the table). I'll update the post with the rate. The tables are updated once or twice a week.
The average yield remains around 5% APY, so reward checking is still a viable way of earning 100 basis points or more over the top online savings accounts yields (4% APY).
For those questioning how these institutions can afford to pay these high rates, it's important to remember the two important features of these accounts:
- Balance cap that's typically $25K. This is the maximum balance that earns the top yield.
- Requirement of around 10 debit card purchases a month to qualify for the top yield.
The results from the poll that I started on the left sidebar at my reward checking website don't bode well for instutitions hoping to rely on debit card fees. Out of 95 of those who responded, 58 said they spend under $100 a month on debit card purchases. That's not going to help the institutions pay the high yields. However, I doubt this is respresentative of the Average Joes. I would guess that the average reward checking customers spend far more than $100 a month with their debit cards. Let's hope that these reward checking accounts can attract enough Average Joes that the institutions can continue the high yields.
To find reward checking accounts from institutions near you or to learn more about these accounts, please refer to my High Yield Checking website. I now have 262 reward checking accounts listed. If you find the rate of an account has changed, please leave a comment in the post reviewing the account (links to the posts are on the right side of the table). I'll update the post with the rate. The tables are updated once or twice a week.
I think what's going to happen is that banks who want to keep the Rewards Checking feature going is to simply change the terms. The transactions will have to be greater than perhaps $5.00 to count.
Time will tell.
I know a lot of them require it being a signature based purchase, so obviously it also has to do with the transaction being processed as "credit" rather than "debit."
I remember back when Bank of America started the "Keep the Change" program, many of us did lots of few cent transactions and I believe the consensus was that BoA would still generate a lot of fees from these small cent transactions.
PS - I've had a rewards account with Charter Bank in NM for most of the past year. They've remained constant at 6% for up to $25K... But starting in October, they are raising the required number of monthly debit card purchases from 10 (now) to 13 (new). Still, they don't seem to enforce any $ minimum amount on the card purchases.
I think what's going to happen is that banks who want to keep the Rewards Checking feature going is to simply change the terms. The transactions will have to be greater than perhaps $5.00 to count.
This seems to violate FDIC policy. See FDIC Bulletin Number: CHIRO-05-2007