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As Rates Fall, the Appeal of High-Yield Reward Checking Grows

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After yesterday’s Fed rate cut (the third since July), I’m afraid savers should expect more rate cuts on their online savings accounts. As those rates fall, high-yield reward checking accounts are looking more attractive as an alternative for your liquid funds. There are still options to earn 2.40% on savings accounts, but as those rates fall, the 3%+ rates currently available on reward checking accounts will become more appealing.

Below is a table of reward checking accounts that currently earn at least 3.00% APY on balances of at least $25k. All are currently nationally available. For a full list of high-yield reward checking accounts including Kasasa Cash Accounts, please refer to our reward checking table.

APYMINMAXINSTITUTIONPRODUCTDETAILS
1.32%-$25kHeritage BankeCentive Account
1.00*%-$15kOrion Federal Credit UnionPremium Checking
OTHER TIERS: 0.01% $250k+ | 0.05% $100k - $250k | 0.25% $15k - $100k
0.25*%-$30kDover Federal Credit UnionKasasa Cash
OTHER TIERS: 0.05% $30k+
Rates as of September 19, 2020.

As of 10/31/2019, TAB Bank offers the highest rate. Its Kasasa Cash Account earns 4.00% APY for balances up to $50k when monthly qualifications are met. The rate and balance cap have held up since we began tracking this account in April of this year.

For savers looking to maximize interest, there’s more to consider than just the rate of a reward checking account. You have to make sure the monthly activity requirements to qualify for the high rate are not too difficult. Also, you have to make sure the balance that qualifies for the top rate (the cap) is high enough to be worth your time. A reward checking account with a 4% APY may not be worthwhile if the cap is only $5k. Such a cap will limit your annual interest to about $200. On the other hand, a 4% APY may be worthwhile if the cap is $50k. That increases your annual earnings to at least $2,000.

Another thing to consider with reward checking is that both the rates and the caps can fall. We’ve seen this since I began reporting on reward checking in 2006. In 2007 I reported on reward checking accounts with yields over 6% without balance caps. As rates started to fall, banks lowered reward checking rates and introduced balance caps. For example, First Arkansas Bank and Trust offered a reward checking account in 2007 with a 6.06% APY on all balances. In 2008, the yield fell to 4.44% and a balance cap was introduced that limited the 4.44% to balances of up to $50k. Both the yield and the cap continued to fall as interest rates fell. In 2009, the bank stopped accepting out-of-state applications.

Even though reward checking rates and caps should be expected to fall when interest rates fall, reward checking accounts have shown the ability to offer higher rates than online savings accounts over the long run. For example, in October 2014 when the federal funds rate was still near zero, the top reward checking yield for balances up to at least $25k was 1.76% (at ABCO FCU). The top yield on an online savings account was 1.25% (at UFB Direct). This required a $25k minimum balance. The top yield on a no-minimum online savings account was 1.05% (at MySavingsDirect). Ally Bank’s Online Savings account had a 0.90% APY at that time.

Are you using a reward checking account as an alternative to online savings accounts? How long have you had reward checking accounts? And what rates and balance caps do you require?

Related Pages: reward checking accounts, nationwide deals
Comments
RichReg
  |     |   Comment #2
First Foundation is now the leader....but who knows if that will last either?
https://firstfoundationinc.com/personal-banking/bank/online-savings
DanR
  |     |   Comment #3
Unless I'm missing something, Mutual Bank at 2.44% is still higher...

https://www.mymutualbank.com/leader-money-market
Watcher
  |     |   Comment #5
@DanR I highly doubt this rate is in existence. Here is their disclosure for the Leader MM - I will bet you it is an old page that they forgot to refresh and this account does not even show up as one of their products on the main page.

"Your rate is refreshed to match the Fed Funds Rate on the 15th of every month."

"DISCLOSURE

*Annual Percentage Yield accurate as of 4/24/19. 2.44% APY on balances up to $250,000."
RichReg
  |     |   Comment #10
Right on, Watcher. A rep @ Mutual just confirmed that the 'Leader' Money Market ended months ago. Can't even navigate to that page from their main website which, evidently, is being removed anyway due to their merger with North Easton Savings. Prolly why they didn't care about correcting it...
bwrensch
  |     |   Comment #23
TAB Reward Checking requires at least $5 per transaction to count towards the 15 transactions required each month.
Cracker
  |     |   Comment #7
They're more work than they're worth. I can get a better return using rewards credit cards. I have a Capital One Savor One card which pays 3% back on restaurant purchases and a card from Bank of America which pays 3% back on all online purchases. The rewards checking accounts also have balance caps on the amount which can earn the higher rate and most require 10 or more signature debit transactions per month to qualify. Too much work and if you **** up, you're out the money for that month.
Bob
  |     |   Comment #14
3% on rewards card is not the same. You would have to buy 25K and upwards to get a similar amount of cashback.
Sue
  |     |   Comment #11
Any RCA with interest rate of 2-3% is not cost effective, waste of time running around to fulfill the requirement. Get reward CC for 1-3% on all purchase and relax.
verblic
  |     |   Comment #12
which is why most people put all spending on a credit card while only doing tiny transactions on the rewards checking. But I'll agree it's a waste of time with the Fed on a mission to destroy all savings. When rewards checking first came out they paid 6% like savings accounts used to, now it won't be long until they are a 0% alternative to savings accounts hit with negative rates. The only way to win is not to play
Bob
  |     |   Comment #15
So essentially a free $1600 on 40K is a waste of time? Reward cards are great but you would have spend a ridiculous amount to match RCA.
Predatory Depositor
  |     |   Comment #27
If an RCA is paying 4% on $40,000, you're not getting a "free" $1,600.

Your profit is the difference between 4% and the percentage you can get without the RCA in a similar liquid account.

So in other words, if you're currently getting 2.5% in your Northern Bank account, for example, your profit is only 1.5%, or $600 a year, $50 a month.

So the question becomes, is it worth the effort for $50 a month. I think it's a slam dunk that it's better than 12,500 steps a day every day for most people, but beyond that it's a personal judgment.
51hh
  |     |   Comment #16
There are ways to do debit card transactions of RCAs without wasting any cash back on credit cards; just needs to design innovatively; and reap full benefits on both.
moneysaver
  |     |   Comment #26
I have no trouble meeting the monthly requirements of multiple RCA accounts each and every month, and I don't go out of my way one little bit to do so. Just use my RCA debit cards for all my routine purchases during the month and pretty much never use cash -- restaurants, fast food, grocery shopping, drug stores, gas stations, Amazon purchases and other online shopping, etc etc.

I only use credit cards for very large ticket items where my cash back card features make sense. And I don't use cash for almost anything. And it's worked out just fine for years now, and typically nets me about $150 per month in interest earnings from my 3 active RCA accounts.
And I NEVER have the need to try to cheat the RCA system by resorting to serial 50 cent or $1 gift card top ups or gas purchases -- which are the kind of behaviors that cause banks to impose minimum purchase requirements and similar measures against people not willing to use the cards as intended.
kcfield
  |     |   Comment #13
It is not just a matter of comparative yields. Before someone decides to use high interest checking in lieu of a CD or savings account, they should be sure that they have the discipline: a) not to touch the principal they intend to save; and b) to add to this principal amount over time (as they would have done with a traditional CD or savings account). The easy liquidity of checking accounts makes it easy to spend more than intended.
SDguy
  |     |   Comment #22
Folks RCAs are easy, 15-$5 transactions at Walmart, cashback even counts too and a transaction in/out with Tab Bank. 8-$0.50 transactions to Amazon gift card balance with direct deposit to Orion.
Right...
  |     |   Comment #25
No thanks. I have much better and more enjoyable ways to spend time in my retirement.
Wrong...
  |     |   Comment #29
I agree with Right...

Having to juggle all those reward checking accounts and small transactions is ridiculous! Are you folks really that hard up for a few dollars?! Or maybe it's just some kind of weird addiction you guys have....

I already know the answer. LOL!
Heat Mizer
  |     |   Comment #37
Totally agree with SDguy. RCAs are easy. I have two at the moment - Orion and Heritage. I'm already done for the month of November and will earn 4% on $30,000 and 3.33% on $25,000. I use the card for purchases I would make anyway - not wasting money. Grocery store self checkouts are your friends :)
111
  |     |   Comment #39
I remember several years ago when the old FatWallet site was still up, a guy was speculating on whether a single grape would or would not register 1 cent on a self-serve grocery store checkout scanner - for RCA purposes, of course. That was a bridge too far for me.

But in the past I did use the scanner method. One thing to remember is not to scan 2 of the same item consecutively. Some scanner software will assume that's an error and disallow the 2nd transaction, and some debit cards will do the same (looking just at the amount). But the sequence Ramen noodle packet, banana, Ramen, banana, etc., will work fine.

These days I make the transactions a little larger and do most from home. I'm done with November as well, except for one bank where I do spread them out more.
51hh
  |     |   Comment #43
FWF also developed a smart automated algorithm to do multiple debit card transactions much faster. But I am manual-kind of guy:D
6479ct
  |     |   Comment #45
111 comment #39
HA! Now that I have picked my self up off of the floor, I have to say, that "...a single grape..." doubled me over laughing!

Once, when I was at Home Depot, I saw this guy at the self checkout scanning Carpenter Pencils (Less than $1 ea., maybe $0.10 ea.?). That gave me a good chuckle for the day!

Awesome, Man!

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