It might seem strange that you can get a higher rate in a checking account than in a long-term CD. Of course these are not regular checking accounts. They're reward checking accounts that have monthly debit card usage requirements and balance caps that limit how much can qualify for the high rate. If you can live with these limitations, you can still find accounts that pay 3% and above.
It's very difficult to find CDs with yields of 3%. The highest CD yield that's available nationwide is 2.50% APY. This is a special 7-year CD that's offered from Patelco Credit Union as of 7/27/2012. The highest CD yield from an internet bank is 2.25% APY. That's a 10-year CD from Discover Bank as of 7/27/2012.
For reward checking accounts, the highest yield for a $25K balance that's available nationwide is 2.52% APY at ABCO Federal Credit Union as of 7/27/2012. However, there are still many local deals that offer 3% and over.
The nice thing about reward checking accounts is that you don't have to worry about early withdrawal penalties. You're free to move your money if you find a better deal or if some emergency pops up.
The important downside with reward checking is that there's no guarantee about the rate or the balance cap. Both can fall, and as we have seen in the last couple of years, they can have big drops. One example this year occurred at Pasadena Service FCU in California. In one rate cut in April its reward checking yield fell from 3.01% to 1.50%.
With these pros and cons in mind, below are a few reward checking accounts that still offer at least 3.00% APY on balances of up to $25K. All are local deals, but I listed ones that are available to fairly large populated areas:
Rates and balance caps are accurate as of 7/27/2012:
- Coppermark Bank's Free High-Interest Checking still pays 4.00% APY on up to $25K. This is only one of two reward checking accounts in the nation that pay 4% on balances up to $25K. The other one is at a credit union which has a narrow field of membership. I first reported on Coppermark Bank in April 2009. The top rate hasn't changed since then. Its monthly requirement of 16 debit card purchases per month is a little tougher than most other reward checking accounts. Branches are located in the Oklahoma City and Dallas metro areas. When I last checked with the bank, I was told any resident of Texas or Oklahoma can open an account. However, a branch visit is required.
- Old Florida National Bank's Optimum Checking pays 3.04% APY up to $25K. My first review of this account was in December 2009, and the rate and balance cap have held since that time. Branches are located in the Orlando metro area.
- Centera Bank's Reward Checking pays 3.01% APY on up to $25K. I just did an updated review of this account in June. The account has remained competitive since I first reported on it in 2009. There's an online application currently open to Kansas residents.
- Nassau Educators FCU's Go Green Checking is paying 3.00% APY on up to $25K. My first review of this account was in December 2008. Membership is open to anyone who resides in the large New York counties of Nassau and Suffolk.
- Del-One Federal Credit Union's Better Life Checking pays 3.00% APY on up to $25K. This is a fairly new account that we have been tracking since November 2011. As I described in my review, membership in the credit union is open to Delaware residents.
- University of Iowa Community Credit Union's Rewards Checking pays 3.00% APY on up to $25K. The account yield just fell from 3.25% to 3.00% on July 1st. However, the rate has held up well since my 2008 review. Credit union membership is open to residents of several Iowa counties.
To find the highest reward checking rates in your area, please refer to our reward checking rate table. This can also be used to find accounts available nationwide. If you're new to these tables, my rate table guide should be useful.
If you're new to reward checking, my blog post, 10 Common Traits of High-Yield Reward Checking, should be useful.