Five Top Reward Checking Accounts That Are Over Two Years Old

It has been over two years since we saw the first surge of reward checking accounts. Have they lived up to expectations? I reviewed my old posts and picked 5 nationwide reward checking accounts that are still offering very competitive rates.

I first started reporting on reward checking accounts in 2006, but in 2007, the number of reward checking accounts really started to grow. Reward checking didn't seem that great back then when many internet savings accounts were paying over 5%. Even State Bank of Toledo's 6% reward checking didn't seem that great when FNBO Direct had a 6% 5-month promotion on its internet savings account. Also, there were concerns about the longevity of reward checking. Was it a teaser type of product? Can the high rates last?

After over two years, reward checking rates have held up better than internet savings account rates. For example, back in 2007, both FNBO Direct and HSBC Direct had 6% promotional rates. After those expired, the rates were still competitive at over 5% APY. Currently, FNBO Direct is paying 1.40% APY and HSBC Advance (formerly HSBC Direct) is paying 1.20% APY. You can see their rate history in this this post.

Most reward checking accounts that began in 2007 paid 6% APY for balances up to $25K. Rates have fallen, but many continue to pay at least 4% APY. That's a lot better than the "high yield" internet savings accounts. Reward checking is actually holding up better than I had anticipated. However, rate drops are not the only concern for reward checking customers.

In addition to rate cuts, banks can also reduce the balance that qualifies for the top rate. Another common issue are banks that are reducing the availability of their accounts. Many banks started offering their accounts nationwide, but then they cut back to just their local area. Fortunately, most banks have grandfathered in out-of-state people who joined when the account was still nationwide.

How can reward checking accounts continue to pay so much better rates? Their debit card usage requirements have a lot to do with it. I described this in my post on the math behind reward checking.

Below is a quick review of five reward checking accounts that can be opened nationwide that are paying at least 4% APY. Note this is as of today (2/15/2010). As I described above, rates and availability often change.

1. Consumers Credit Union's rewards checking account pays 4.09% APY for balances up to $25K as of 2/15/2010. My first review of this account was in August 2007 when the yield was 6.01%. The credit union is based in Illinois, but you can be eligible to join the credit union via the Consumers Cooperative Association.
2. First New England FCU's reward checking account pays 4.10% APY for balances up to $15K as of 2/15/2010. When I first reviewed this account in January 2008, it was paying 6% on balances up to $25K. This is one example of a balance cap cut. Like Consumers CU, you can be eligible to join via an association membership.
3. Danversbank's reward checking account pays 4.01% APY on balances up to $25K as of 2/15/2010. My first review of this one is almost 3 years old. At that time the yield was 6.01% for balances up to $100K. The bank was nice when it cut the balance cap by grandfathering in those who had opened the account before 2008.
4. Capital Bank's reward checking account pays 4.01% APY on balances up to $25K. However, I just noticed that they're going to be reducing the balance cap to $10K starting on March 18th. This is another old one that I first reported on in April 2007. It started out with a 5.01% APY which was below average back in 2007.
5. Southern Community Bank and Trust's reward checking account pays 4.00% APY for balances up to $25K as of 2/15/2010. I first reported on this just over two years ago. They reduced the yield in 2008 from 6% to 4%, and they haven't made another cut since then.

To find more nationwide reward checking accounts and reward checking accounts in your local area, please refer to the reward checking section of DepositAccounts.com.