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Reward Checking Account Rates Fall

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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:
  • 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.
Hopefully, the Average Joe who opens these accounts will make $1,000 or more in monthly debit card purchases. Since the financial institutions earn around 1.5% from the merchants off of each debit card purchase, this can help pay for the high interest. Also, the Average Joe is unlikely to maintain the maximum balance. One credit union sent me a few bits of data on their reward checking account usage, and the average reward checking balance was only about $6,500.

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.
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