It has been nice that we’ve seen long-term CD rates rising over the last few months, but this has created a difficult decision for many savers. Should they take advantage of these higher CD rates, or should they keep their money in more liquid accounts? The concern is that you’ll be stuck in a long-term CD as interest rates rise.
One alternative to long-term CDs is high-interest reward checking accounts (If you’re new to these accounts, please refer to this overview of reward checking.) As of 10/23/2013, there are several banks and credit unions which offer reward checking accounts with rates of 2% and above. The best 5-year CD rates are currently just over 2%. With reward checking you can match the best 5-year CD rates without locking in your money. There are downsides. First, all reward checking accounts have balance caps. Most have caps from $10K to $25K. Second, they have monthly activity requirements like debit card usage. Third, there’s no guarantee that the reward checking rate and balance cap will last. Both can fall as we have seen at many banks and credit unions over the last five years.
If you can live with these reward checking downsides, the next step is to find the best reward checking accounts. You can use our reward checking table to find the best that are nationally available or that are in your state. If you’re lucky, you’ll find local reward checking accounts that have higher rates and balance caps than the nationally available ones. If you’re not lucky, you’ll have to settle for the nationally available reward checking accounts.
You can group the nationally available reward checking accounts into two camps: those offered by banks and those offered by all-access credit unions. The best deals are offered by all-access credit unions. These are credit unions in which anyone can join by first joining an association. Sometimes there’s a membership fee to join the association. There’s also concern about the all-access nature of these credit unions (see post).
There aren’t many banks that offer nationally available reward checking accounts. It has been common for banks to start off with a nationally available account but later reduce the availability to just their state or local market area. However, it has been rare for banks to kick out non-locals once they have the accounts opened. So it’s best to avoid waiting too long to open these accounts.
Below are a list of five banks with nationally available reward checking accounts that pay at least 2.00%. Rates, balance caps and nationwide availability status are current as of 10/23/2013.
- Lee Bank - 2.50% (up to $15K) 0.50% ($15K+)
- Security Bank - 2.05% (up to $25K) 0.30% ($25K+)
- Redneck Bank - 2.00% (up to $10K) 0.50% (over $10K)
- AmericaNet Bank - 2.00% (up to $10K) 0.50% ($10K+)
- Evantage Bank - 2.00% (up to $10K) 0.50% ($10K+)
It doesn’t offer a rate close to 2%, but it’s still noteworthy. It’s the Rewards Checking account at Bank of Internet USA. The account has a 1.25% APY for balances up to $150K. This cap is 6x larger than the typical $25K cap which can be a good deal for those with large balances who don’t want to maintain six separate reward checking accounts. Another noteworthy thing about this reward checking account is that the rate has held steady for over two years. So if you had been thinking about a 2- or 3-year CD for a large deposit, this reward checking account can provide a comparable rate without locking in your money.