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More Reward Checking Rate Cuts and Restrictions


Two major changes have occurred to two popular 5% reward checking accounts this week. First, Union State Bank has started to restrict new accounts to only residents of Kansas and Missouri. They had been offering this account nationwide. At least the top rate remains at 5.01% APY for balances up to $25K (see post).

The other major change occurred at Malvern Federal Savings Bank. They slashed the top rate from 5.01% to 3.50% APY. The 5.01% was especially nice considering the higher-than-average balance cap of $35K. Malvern also had been offering the account nationwide, but they changed this policy in April. Now it's restricted to residents of Delaware, Maryland, New Jersey, New York, Pennsylvania, West Virginia and Ohio (see post).

Update 6/13/09: Another bank changed the nationwide availability of its reward checking account. Focus Bank's reward checking is now only available to residents of AR and MO (see post).

Banks continue to cut rates and balance caps and reduce availability of these reward checking accounts. I've also noticed more banks limiting the number accounts allowed per customer. As I described in my post on the math behind reward checking, debit card usage is a critical feature that allows reward checking to pay higher interest rates. Banks need to make sure they have a high percentage of "Average Joes" who spend a lot with their debit cards and keep a balance far below the caps. With more people saving now and keeping their savings at banks, this is making it more difficult for reward checking accounts to maintain the high rates. Nevertheless, reward checking still provide rates on average much higher than online savings accounts. The average rate on my list of 401 reward checking accounts is 3.93% APY (see stats). Note, I'll be updating my reward checking website with these recent changes over the weekend.

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  |     |   Comment #1
Since you are tracking these rates closely, can you see if the rate cuts from Reward Checking are more rapid than those from online savings accounts? If so, the difference between 3.5% and 5%+ rates can be qualified as teaser rates although they say it's not a teaser rate. When you calculate the average for Reward Checking, you should probably only include accounts that aged a little more and went past the initial teaser period. I think it would be interesting to see Reward Checking vs Online Savings but include accounts that have gone 12 months after launch.
Banking Guy
  |     |   Comment #2
One thing I forgot to mention concerning the reward checking stats is that I have average rates of accounts that started in 2007, 2008 and 2009 (actually, when I first posted on them). This does show lower rates for the more mature accounts. The average rate for those I first posted on in 2007 is 3.60% vs 4.21% for 2009. For 2008, the average rate is in the middle with 3.93%.
  |     |   Comment #3
Rates cut happened on Patelco Health Saving Account. It was always 5.12% and I loved it. Now they offer 0.50% for deposit below $2,000, 1.00% below $3,500 and only 2.02% above $3,501.


Very dissapointed...

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