Reward Checking Accounts and the Changing Rates and Balance Caps

This interest rate environment has hit all deposit accounts hard, and reward checking accounts are no exception. In addition to rate cuts, we are also seeing banks reducing the availability of their reward checking accounts and reducing the balance caps.

For the last month we had two banks offering nationally available reward checking accounts with a 3.01% APY for balances up to $25K. It’s now down to one. First National Bank in Ohio just recently restricted its online application to residents of Ohio. That leaves Danversbank as the only institution offering 3.01% APY for up to $25K that’s open to anyone in the US.

Two credit unions with easy membership qualifications still offer around 4.00% APY, but the balance caps are below $25K. Consumers Credit Union in Illinois is paying 4.09% APY for balances up to $10K. Lake Michigan Credit Union is still offering 4.00% APY for balances up to $15K.

Most nationally available reward checking accounts with $25K balance caps now have yields between 2.51% and 2.00%.

It used to be easy to find a reward checking account with a top rate that applied to balances up to $50K. That balance cap has become very rare. For nationally available reward checking accounts, only North Country Savings Bank has a $50K balance cap. The current yield is only 1.75% APY.

So if you’re looking for reward checking accounts, you’ll have to decide what is more important to you. Do you prefer a higher rate with a smaller balance cap or a larger balance cap with a lower rate?

Of course the more savings you have, the more appealing will be the larger balance caps. However, if you don’t mind having multiple reward checking accounts, you might still prefer the higher rates with the lower caps.

Poll: Best rate and balance cap combination?

So the poll for today is asking which do you prefer? I’ve included four choices. The first three are the best nationally available reward checking accounts for balance caps of $10K, $25K and $50K.

The fourth option is for those who don’t like reward checking accounts with small balance caps and monthly debit card usage requirements. A high-interest savings account has always been an easy alternative to reward checking. I chose Salem Five Direct’s savings account for this fourth option. You can currently get a higher rate at Tennessee Commerce Bank, but this savings account promotion requires that you also open a checking account. Salem Five Direct doesn’t require a checking account. Also, its 1.25% APY is guaranteed to last until April 1, 2012 (new accounts must be opened by June 1st).

Reward Checking Overview

If you’re new to reward checking, my post on the 10 common traits of high-yield reward checking accounts should be useful. There are still many local deals that are better than what’s available nationwide. You can find these in our reward checking account rate table. Be sure to use the "Filter Accounts" button above the table to compare accounts in your state.