Advertising Disclosure


Popular Posts

Only Place to Find 2%+ Bank Rates is Reward Checking - Will It Last?

POSTED ON BY

As online banks and credit unions lower their savings account and CD rates, finding a yield in a bank account of at least 2% is a challenge. That’s even the case if you’re willing to lock into a long-term CD. You may be able to find some local CD deals with 2% yields, but only a few lucky savers who live in the right areas will qualify.

If you don’t want to lock into a long-term CD, rates are even lower. Most online savings account rates are now hovering around 1.00%.

Unfortunately, I’m seeing no signs that falling deposit rates will end soon. Other conservative places for cash are paying even less. Brokered CD rates, Treasury yields and money market fund yields are now below 1.00%.

Over 1,100 accounts listed in our Reward Checking table

If you want a bank account with a yield of at least 2%, the only place to find yields this high is the high-yield reward checking account. These checking accounts offer a high rate (1% to 5%) on balances up to a certain cap ($5k to $50k) if monthly activity requirements are met (5 to 20 debit card purchases per month, plus a few others).

For savers with large cash holdings in CDs and savings accounts, they probably won’t be able to completely replace their CDs and savings accounts with reward checking accounts. However, reward checking can at least be used to supplement your savings accounts and CDs which can provide a boost to your overall interest income during this new period of zero rates.

How Reward Checking Can Offer Higher Rates

Banks and credit unions are able to offer higher rates on reward checking accounts due to two account features:

First, the balance tiers and monthly requirements limit the overall average interest rate that the bank pays out. From a bank’s perspective, it’s the average interest rate paid on the bank’s total deposits that matters. The reward checking balance cap limits the amount of high-yield deposits. The monthly requirements will result in a certain percentage of reward checking customers not qualifying for the high rate. Consequently, the average interest rate paid by the bank is reduced.

The second account feature that allows higher rates on reward checking is the debit card usage requirements. When you make a purchase with a debit card, the merchant pays an interchange fee of 1% to 3% of the amount of the purchase. Part of that interchange fee is paid to the bank. So if the bank receives 1% on every debit card purchase, a $100 purchase that you make with your debit card results in the bank earning $1 from the interchange fee. If the average customer makes $1,000 of debit card purchases a month, the bank may earn $10 a month of fees from those purchases. Those fees can be used by the bank to help pay for the high interest rate.

More debit card usage also increases the chance of overdrafts and overdraft fees. That’s another fee that can help pay for the high interest rate.

Banks may attribute other features like e-statements that help the bank afford to pay the high rates, but these features that reduce cost are unlikely to give banks an edge over online-only banks. Brick-and-mortar banks and credit unions will always have more overhead costs than online-only banks. Thus, the account features described above are the important ones that allow the bank to maintain a higher reward checking rate than online savings account rates.

The value of these features in allowing the bank to pay a higher rate will vary based on the ratio of “dedicated savers” to “average savers”. An average saver will maintain a balance that’s much lower than the cap, will sometimes miss the monthly requirements, will occasionally be hit with overdraft fees and will make debit card purchases that total many hundreds of dollars during the month. A dedicated saver will keep a balance close to the cap, will never miss monthly requirements, will never have an overdraft fee and will make debit card purchases that total less than $100 per month (they’ll use a cash back credit card for most of their purchases). The higher the ratio of “dedicated savers” to “average savers”, the higher the overall average rate the bank pays out, and that will lower the profitability of the account and force the bank to lower the rate, lower the cap, limit accounts to only one per customer, and/or increase the monthly requirements.

Banks may also try to lower the “dedicated saver/average saver” ratio by limiting accounts to their local market areas. We have seen many cases when a bank will launch a reward checking account that’s available nationwide or in multiple states and then restrict it to only their state or local metro area. dedicated savers are more likely than average savers to open a reward checking account online at an out-of-state institution. Also, dedicated savers are more likely to open multiple reward checking accounts to maximize their interest earnings.

If more dedicated savers start moving to reward checking, that will result in some banks making cuts to their rates and caps. Some banks may lower rates so that the reward checking accounts are no longer an alternative to online savings accounts. Other banks may decide to end their accounts or stop accepting new accounts.

Even though not all reward checking accounts may survive, history over the last 14 years has shown that many have survived with rates and balance caps that make them a reasonable alternative or supplement to online savings accounts.

Reward Checking Accounts with a Long History of High Rates

I’ve come up with a list of nationally-available reward checking accounts that have been offering 2%+ rates on balances of at least $15k for many years, including at least part of the 2008-2015 zero rate years. The credit unions and banks offering these accounts have a proven track record of being able to maintain the high rates even during the zero rate years. Of course, there’s no guarantee they will be able to continue in this new zero rate environment.

Lake Michigan Credit Union Max Checking

APYMINMAXINSTITUTIONPRODUCTDETAILS
3.00%$1$15kLake Michigan Credit UnionMax Checking
Rates as of September 19, 2020.

Lake Michigan Credit Union (LMCU) has been offering a reward checking account that it calls Max Checking since 2007. From 2007 to 2011, the rate fell from 5.00% to 3.00% APY on balances up to $15k. Since 2011, both the 3.00% APY and the $15k balance cap have held steady for an amazing run of almost nine years.

There is no monthly service fee. The monthly requirements to qualify for the top rate include:

  • At least 10 debit card purchases per month.
  • Direct deposit into any LMCU account.
  • Minimum 4 logins to home banking each month.
  • Sign up to receive eStatement and eNotices.

People in any state can join LMCU. A donation ($5 minimum) to the Amyotrophic Lateral Sclerosis (ALS) Association, West Michigan Chapter, qualifies for LMCU membership eligibility. The donation process is included in LMCU’s online application.

As the 23rd largest credit union in the nation with $6.86 billion in assets, LMCU is one of the largest credit unions that offers a reward checking account.

Evansville Teachers Federal Credit Union Vertical Checking

APYMINMAXINSTITUTIONPRODUCTDETAILS
3.30%-$20kEvansville Teachers Federal Credit UnionVertical Checking (Qualifying)
Rates as of September 19, 2020.

Evansville Teachers Federal Credit Union (ETFCU) added the Vertical Checking account to its product line in late 2014, earning 3.00% APY on qualifying balances up to $15k. In July 2019, the rate was increased to 3.30% APY, and the balance cap was raised to $20k.

There is no monthly service fee. The monthly requirements to qualify for the top rate include:

  • Have at least 15 debit card purchases.
  • Have at least one Direct Deposit.
  • Have at least one Online or Mobile Banking login.
  • Be enrolled and receive eStatements.

ETFCU’s name would suggest that only teachers in the Indiana city of Evansville are eligible to join. In fact, ETFCU’s field of membership provides a way to join for virtually anyone in the country. The third option on the first page of the online application reads,

I am not eligible through my employer, an organization, or a member of my family or household. I am willing to donate $5 to the Mater Dei Friends & Alumni Association in order to become eligible for membership.

One might also think that ETFCU would be a small credit union. That’s not the case. It has assets of $1.85 billion and almost 600 employees.

Signature Federal Credit Union High-Yield Checking

APYMINMAXINSTITUTIONPRODUCTDETAILS
2.00%-$20kSignature Federal Credit UnionHigh Yield Checking
Rates as of September 19, 2020.

Signature Federal Credit Union (Signature FCU) High-Yield Checking account (formerly called Choice Checking) has been earning 3.00% APY on qualifying balances since it was introduced in April 2015, but the balance cap has increased from $15k to $20k.

There is no minimum balance requirement. The monthly requirements to qualify for the top rate include:

  • At least 10 debit card purchases each month
  • Direct Deposit(s) totaling at least $1k each month
  • Enroll and receive e-statements

Headquartered in Alexandria, Virginia, Signature FCU’s field of membership provides a way to join for people in any state. The fifth option on the online application reads,

Still need another way to join? By selecting this option Signature FCU will enroll you into American Consumer Council (ACC), at no cost to you, therefore making you eligible for membership.

Signature FCU isn’t a large credit union with assets of $319 million and 55 employees.

Market USA Federal Credit Union VIP Checking

APYMINMAXINSTITUTIONPRODUCTDETAILS
3.01*%-$15kMarket USA Federal Credit UnionVIP Checking Platinum Tier
OTHER TIERS: 0.01% $15k+
2.01*%-$15kMarket USA Federal Credit UnionVIP Checking Gold Tier
OTHER TIERS: 0.01% $15k+
Rates as of September 19, 2020.

Market USA Federal Credit Union (Market USA) has been offering a reward checking account since 2009. It’s called VIP Checking, and when I first posted on it in 2009, the yield was 4.00% on balances up to $50k. In early 2011, it became a two-tier account with the second tier offering a higher rate when at least three bill payments per month were done. In late 2011, the top yield fell to 2.00%, and in 2013, the balance cap fell from $50k to $15k. The yield held until August 2017 when it increased to 3.00% APY.

There are no monthly maintenance fees. The monthly requirements to qualify for the top rate of the Platinum Tier include:

  • At least 12 debit card purchases (minimum $5)
  • At least $250 in direct deposits
  • At least three bill payments
  • Be enrolled in eStatements

The Gold Tier has a lower rate but does not require the three bill payments.

Headquartered in Laurel, Maryland, Market USA’s field of membership provides a way for people in any state to join. The fifth eligibility option listed in the online application reads,

Join Through the Market USA Cares Foundation

When you select this option, another checkbox appears:

My initial deposit will be at least $10; $5 of which will be a foundation (charity) donation.

Market USA is also not a large credit union with only $114 million in assets and 43 employees.

Main Street Bank Free Kasasa Cash/Saver

Michigan-based Main Street Bank ’s Free Kasasa Cash account was added to the product line in 2015, with an initial 2.25% APY on qualifying balances up to $25k. This increased to 3.00% APY on qualifying balances up to $30k in February 2019. The Bank quickly responded to this new zero rate environment when in mid-March, it lowered the rate to 2.00% APY and reduced the balance cap from $30k to $15k.

Even though the balance cap is now only $15k, there is an additional option for those with larger balances. The Bank offers a companion account called Kasasa Saver. The Kasasa Saver account linked to the Kasasa Cash earns 1.75% APY on qualifying balances up to $100k.

There are no monthly maintenance fees. The monthly requirements to qualify for the top rates of the Free Kasasa Cash and the optional Kasasa Saver account include:

  • At least 10 debit card purchases
  • At least 1 direct deposit, ACH payment, or bill pay transaction
  • Be enrolled in and log into online banking
  • Be enrolled in and agree to receive eStatements

Headquartered in Bingham Farms, Michigan, Main Street Bank offers its services and product through its online application to any U.S. Citizen, 18-years or older.

Main Street Bank is a small bank with $277 million in assets and 95 employees.

Axos Bank Rewards Checking

APYMINMAXINSTITUTIONPRODUCTDETAILS
1.25%-$150kAxos BankRewards Checking - 3 Qualifications
Rates as of September 19, 2020.

Axos Bank’s Rewards Checking has never had a 2% APY, but it has a long history of maintaining 1.25% APY, and its balance cap far exceeds the caps of other reward checking accounts. For these reasons, I thought it made sense to include this account in this post.

Axos Bank is also different from the other institutions mentioned in this post. Unlike the other institutions, Axos Bank has always been an online-only bank, and it’s one of the oldest existing online banks: it was established 20 years ago on July 4, 2000 as Bank of Internet USA. In 2011, the official bank name changed to Bofi Federal Bank, but the Bank of Internet USA brand continued. Then in 2018, the name changed to Axos Bank.

The Rewards Checking account was first launched in July 2011, and the top rate has remained the same at 1.25% APY. Maintaining this rate during the last zero rate environment was an accomplishment, and it’s a hopeful sign that Axos Bank may be able to maintain this 1.25% APY in this new zero rate environment. During the period of rising rates in 2017 and 2018, Axos Bank still maintained the 1.25% APY. Online savings accounts at other banks became much more attractive as their yields increased to over 2.00%. However, now that online savings accounts appear to be headed to 1.00% and under, this Rewards Checking with a 1.25% APY is once again a good alternative to online savings accounts.

Even though the rate has held since 2011, the balance cap has not. The Rewards Checking was launched in 2011 without a balance cap. All balances could qualify for the 1.25% APY. That changed in early 2013 when a $150k balance cap was added. Only balances up to $150k can now qualify for the 1.25% APY. According to the account disclosure, “All daily collected balances greater than $150,000 will not earn interest.”

Most reward checking accounts are all or nothing when it comes to the rate. If you don’t meet all of the monthly requirements, you only earn the tiny base rate. For the Axos Bank Rewards Checking, you can qualify for one third, two thirds or all of the 1.25% APY. Meeting each of the three requirements adds 0.4166% to the rate. These three tiers and their monthly requirements are as follows:

  • Receive monthly direct deposits totaling $1,000 or more: 0.4166%
  • Use the Axos Visa® Debit Card for a total of 10 purchases per month (min $3 per transaction): 0.4166%
  • Use the Axos Visa® Debit Card 5 more times, a total of 15 purchases per month (min $3 per transaction): 0.4166%

If all three of the above requirements are met during the month, the customer will qualify for the full 1.25% APY. The account has no maintenance fees.

Axos Bank has grown to become a sizable bank with $11.55 billion in assets and more than 1,000 employees.

Reward Checking Accounts That Are Not Nationally Available

A reward checking account will have a better chance of sustaining a high rate and balance cap if there are eligibility limitations. Banks and credit unions that limit applications to their local areas or credit unions that limit membership to certain employee groups will probably attract a higher percentage of average savers than dedicated savers. As I mentioned above, dedicated savers are more likely than average savers to open a reward checking account online at an out-of-state institution.

Here are two reward checking accounts with a long track record of top rates that are not nationally available.

Southwest Airlines Federal Credit Union LUV Reward Checking

APYMINMAXINSTITUTIONPRODUCTDETAILS
4.00%-$25kSouthwest Airlines Federal Credit UnionLUV Reward Checking
Rates as of September 19, 2020.

This reward checking account from Southwest Airlines Federal Credit Union has an amazing history. For more than ten years, the LUV Reward Checking account has offered 4.00% APY on qualified balances up to $25k. DA started tracking the LUV Reward Checking account in January 2010, and I did my first review of this account in June 2010. The Credit Union was able to maintain both the 4.00% APY and $25k balance cap all through the first zero rate period. The only rate that did fall was the rate that applies to the portion of the balance above $25k. In 2010, this rate was 1.00%. It’s now 0.25%.

There is no monthly service charge. The monthly requirements to qualify for the top rate include:

  • At least a combined total of 15 debit card purchases or credit card purchases with a minimum transaction amount of $5
  • At least 1 direct deposit or ACH payment transaction
  • Be enrolled in and agree to receive e-Statements

Note, members have the option to use a credit card instead of a debit card to meet the monthly requirements. SWA FCU’s Basic Platinum Credit Card can be used instead of the debit card which should appeal to those who view credit cards as more secure than debit cards.

Headquartered in Dallas, Texas, SWA FCU’s field of membership is primarily employer based. According to the SWA FCU’s membership eligibility page, they “have over 150 Select Employee Groups”, which of course includes Southwest Airlines. And like most any credit union, you can also be eligible to join if you have an immediate family member who is a SWA FCU member.

For the last ten years, I’ve been hoping SWA FCU would expand its membership, but it appears content on maintaining its limited membership. That has probably prevented the credit union from growing large as it remains a sub-billion-dollar credit union. It has total assets of $589 million and just over 100 employees.

Iowa State Bank Kasasa Cash

APYMINMAXINSTITUTIONPRODUCTDETAILS
3.00%-$25kIowa State Bank (13953)Kasasa Cash
1.15*%-$10kIowa State Bank (13953)Kasasa Saver
OTHER TIERS: 0.30% $10k+
Rates as of September 19, 2020.

Iowa State Bank Kasasa Cash account has maintained a 3.25% APY since June 2014. There have been a few changes since that time. When Iowa State Bank first launched the account, it was available nationwide. That changed in early 2015 when the Bank limited new applications to their local area. Another change happened in 2015 that improved the account. In July 2015, the balance cap was increased from $10k to $25k. Since that time the account has earned 3.25% APY on qualified balances up to $25k.

Just like all Kasasa Cash accounts, it’s a free account with no monthly service fee. The monthly requirements to qualify for the top rate include:

  • Have at least 10 debit card purchases
  • Have at least 1 direct deposit, or Automatic Payment
  • Be enrolled and agree to receive eStatements

There’s also a companion Kasasa Saver account that has a history as long as the Kasasa Cash account. Unfortunately, both the rate and balance cap have been disappointing.

Headquartered in Hull, Iowa, Iowa State Bank no longer includes an online application for its Kasasa products, and in fact, there is little information about account opening on their website. According to a CSR, a branch visit is now required to open a Kasasa account, and new customers must be Iowa residents and live within an hour drive from one of their branches in Northwest Iowa.

Iowa State Bank is a small bank with $646 million in assets and 85 employees.

Finding a Reward Checking Account

As I mentioned at the start, a high-yield reward checking account will probably not be able to replace your CDs and online savings accounts. The balance caps of reward checking accounts make it difficult for those with large cash savings. It may be possible if you’re willing to maintain multiple reward checking accounts, but the debit card usage requirements make that difficult.

Nevertheless, reward checking can at least boost your interest income from your cash savings. As shown above, there are many examples of reward checking accounts with rates that have exceeded online savings account rates for many years. There’s no guarantee that these rates will last in this new zero rate environment, but the long history of many of these accounts is encouraging.

DA currently has over 1,100 accounts listed in the high-yield reward checking account table. By default, the table will show all accounts that are both nationally available and those offered by institutions with branches in your metro area. To view only those with branches in your area, uncheck the “web only” box. To view all credit unions, including those with employer-based membership (like SWA FCU), click the “Advanced options” link on the right side of the filter box and then click “Select All”. You may also need to select “Any” in the “Modify or Expand Region” option that’s above the filter box. This will include credit unions that don’t have branches in your area.

Post Publication Edits

7/1/2020: Replaced "serious" with "dedicated" for the saver descriptions.

Related Pages: reward checking accounts
Comments


#1 - This comment has been removed for violating our comment policy.
51hh
  |     |   Comment #3
Great summary with a lot of precious information (hidden gems), probably the best article around on RCAs.

GD: fully agreed. But think of it this way: (1) interest rate for other products (e.g., high-yield savings, CDs, money market) are being lowered, while the RCA rate is universally higher and more steady, (2) paradigm change in lifestyle when staying at home is a norm. Why not spend some time monthly doing the mental exercise of fulfilling RCA requirements?

Of course just input, to each her/his own.:)
#4 - This comment has been removed for violating our comment policy.
Fan_of_website
  |     |   Comment #5
Excellent and informative article. And speaking of excellence, I would suggest one change; refer to the competent savers as "excellent savers" rather than "serious savers". The term 'serious' can have both negative and positive connotations, and a word that implies a uniformly positive outcome might be slightly more appropriate. Your post, for example, is excellent, but I would not typically refer to it as a "serious article". Hope you don't mind the nitpicking.
darkdreamer4u
  |     |   Comment #8
I'd go even a step further and say: determined or dedicated saver. It doesn't necessarily mean you're an excellent saver if you're able to fulfill the monthly requirements on a consistent basis - you might be a very mediocre saver in other aspects of your life and waste money left and right and thus, are not excelling at saving at all. But if you fulfill your monthly requirements regularly, I'd say you're certainly a dedicated or determined saver because that's what it requires:-)
Ken Tumin
  |     |   Comment #28
@Fan_of_website, good point about "serious" as a poor description of savers. I liked @darkdreamer4u's suggestion of the use of "dedicated saver". So I replaced "serious" with "dedicated". Thanks!
deplorable_1
  |     |   Comment #6
Nice timely informative article on RCA's. It would be interesting to hear what methods people use to do the required debit card transactions and if they could be done from a computer or could be automated in some way. I have seen a few 4-5% RCA's over the years with low 10-12/mo. debit card requirements and high $20,000 or more limits.
milty
  |     |   Comment #27
D1#6: I used to do business with a local CU where my CU-CC required 3 transactions per month in order to get maybe a 1/4% more rate on some of my accounts. Used to go to those self checkout lines and buy 3 cans of cat food, 1 transaction per can. I was relieved when that need finally ended, what a hassle.
111
  |     |   Comment #29
Milty -

Even after putting a couple RCAs in suspended animation due to rate drops, I still have several "active" ones left. With one exception, I fulfill their requirements online from my PC with my rear comfortably stuck in my desk chair. As of right now, 80% of my payment and ACH transactions for July are done.

That's why I don't have to eat cat food.
P_D
  |     |   Comment #7
I agree, good article with good analysis.

"For savers with large cash holdings in CDs and savings accounts, they probably won’t be able to completely replace their CDs and savings accounts with reward checking accounts."

This is the key for me. I really can't see any use for RCAs in my case except for maybe the fun of it as a hobby. I’d have to have 10 typical RCA accounts, do 1,440 debit card transactions and 120 direct deposits every year to store $250k in an RCA. I typically do about 25 credit card transactions in a busy month. So I am about 1,140 charges short of where I would need to be. And I don’t have even one direct deposit of pay checks, pensions or government checks per year let alone 120. Are there creative ways to do the debit card charges and direct deposits? Maybe for some accounts, I assume others not. I’m pretty sure I can figure out a way to (legally) game the system and make it work, I have some ideas how it can be done without even investigating it. No, standing in front of a line of shoppers at checkout and asking the cashier to do multiple charges 1,440 times is not one of them. That’s not an option for me.

$250k is a lot of money for most people and I’m one of them. But even so it’s only a fraction of the portfolio I have to manage. And that’s with working 10 of these accounts (if I could even find 10 of them that I’d be able to successfully game). That’s a lot of work to set up let alone manage. Not a sensible use of the time I have allocated to managing my investments for that amount of money even with 10 accounts.

The time I have for investments is better spent creating financial models for my personal use and devising strategies to maximize my portfolio as a whole and that is how I use it.

As a matter of fact, I have been doing just that in the past few weeks and come up with a strategy to make some maneuvers in my deposit accounts that I didn’t think were possible. If successful I’ll be locking in a return so high, I could not do better with RCAs anyway...and won’t need to spend the time it takes to deal with them.

I can see the attraction to RCAs for some situations. But they make no sense for me.
kcfield
  |     |   Comment #10
Yes. RCAs are a bit "high maintenance" given the monthly debit card usage requirements, balance caps, and financial institution "big brother" monitoring of debit card purchases; not to mention that increasing debit card purchases reduces the amount one would earn with reward credit cards (e.g., I get back 2% cash back unlimited into my investment account with Fidelity Visa and 5% cash back for gas with Pen Fed). In my view, the RCA hoops and disadvantages make it more of a fun financial date rather than financial marriage material.
51hh
  |     |   Comment #11
P_D: To address your question on meeting the debit card transactions requirement: It is admittedly a disadvantage (con) for RCAs, it feels like a trade of laborious chore for a higher rate. But for people with some time on their hands as well as with some innovation in their mind, it is a good trade.


The principle here is non-interfering; counterexample is the grocery store, like you said, never go in a line to do multiple debit card transactions for obvious reasons - it annoys both the people in line as well as the clerk and yourself.
 
Examples to use debit card: self-serve gas station with no lines, utility (phone, internet, electricity, heating oil, A/C maintenance, etc.) that allows online payments, anywhere with auto-payment machine. An even smarter way is to use it in parallel with cashback credit cards, which still allows cash-back without any reduction. The art/hint here is to use P2P type of payment without any fees. I had better stop here for your imagination and innovation.

Good luck.
#12 - This comment has been removed for violating our comment policy.
milty
  |     |   Comment #26
PD#7: You expressed my view on RCAs exactly. The amount I have to invest vs the number of RCA accounts required + the account_hoops make it easier for me to just continue working in my retirement years :-) So, what is this deposit account strategy you speak of?
Cracker
  |     |   Comment #32
Same here. I can't be bothered doing so much work for so little reward. I see no fun in it whatsoever. As of now, I'm converting my maturing CDs to No Penalty accounts or cashing them in and placing the funds in a liquid account.

Ironically, Ally is paying more in their savings account than for a No Penalty CD. I had one mature recently and with the renewal bonus I'm getting 1.0% on it. Their savings account pays 1.1%. I'm debating on whether or not to close it and put the funds in savings. As sure as I do, the rates will drop. At these current rates, I'm not tying my money up for any length of time. If I'm going to have to endure low rates, then I want to have immediate access to my funds if I need them.
Shelby
  |     |   Comment #9
Agree...for a small percentage of savers, RCA's may have a place in their investment portfolio. However, they also make no sense to me and also viewed as more of "a hobby." As Ken stated above,"The credit unions and banks offering these accounts have a proven track record of being able to maintain the high rates even during the zero rate years. Of course, there’s no guarantee they will be able to continue in this new zero rate environment." Hardly worth my while since there is no rate guarantee, as well as no guarantee they won't drop like a brick any day....
#14 - This comment has been removed for violating our comment policy.
#17 - This comment has been removed for violating our comment policy.
enduser
  |     |   Comment #18
Great article Ken! Those debit card requirements kill it for me. I have never had a debit card, nor will I ever consider using one. Funds come out of your account immediately, and they are full of security holes.

Online checking accounts are always trying to push then on you when an account is opened. I always decline them and if I'm forced to accept one like at Citi Bank I never activate it and shred it instead. It is very hard to get your money back when fraud occurs or a bad purchase since they already have your money. I will only use credit cards with no fees, and that offer rewards for gift cards or cash back.
Ally6770
  |     |   Comment #19
Another great thing about Lake Michigan Credit Unions Max checking is that you can also use their cash back credit card for the 10 debits each month. If you charge, your groceries, electric, gas, hair cuts, etc you can get your 10 credit card debits easily. Also using the debit card 10 times a month is not hard. If I don't have by 10 by the 3rd week of the month I go through the express lane at the grocery store and put one item through at a time. Rarely are my debits over $1. Plus if you use your debit card it will be counted when you use it as a pin or as a signature transaction. You can change from debit card to credit card each month. But you must use what you chose for the whole month. Another thing about Lake Michigan is during the virus stay at home we were given the 3% interest for 2 months and not have to do any debits.
Fan_of_website
  |     |   Comment #20
The value of an RCA depends on the time required to earn the higher rate and the perceived benefit of the extra money earned. As others have mentioned, transactions can be performed online (e.g., multiple payments of small amounts towards a utility bill) with relatively little effort. I can do 10 such transactions in about 5 minutes.

Let's take the example of 1,440 transactions for $250K in RCA money. Assume that the average time required for each transaction is 1 minute, so the total time required over one year is 24 hours (1440 minutes).

Assume that you can earn 2% in non-RCA savings accounts ($5,000 in interest per year) vs. 3% in RCAs ($7,500 earned in 1 year). Your 24 hours of work is worth $2,500 in extra RCA money, or about $100 per hour of effort. And this amount may be greater today with savings accounts closer to 1%.

Is it worth it to spend 24 hours (equivalent to three 8-hour work days) to earn $2,500? If your answer is yes, then the RCA is a good option for you. If no, then don't bother. For some, $2,500 might cover 6 months of food expenses. That could be worth 3 days of work.
Fan_of_website
  |     |   Comment #21
It may be helpful to think of RCAs as work for wages and calculate an effective "RCA salary" pay rate per hour. In the example I gave above, this assumes an RCA transaction rate of 1 per minute to generate an income of $100 per hour. However, if it takes you 5 minutes, on average, to perform 1 RCA transaction, then it would take 5 times as long to earn the same money and your RCA "salary" would drop to $20 per hour in this example. Still worth it for some people, but not perhaps for others.

To other posters, what is your estimated RCA salary per hour?
Ally6770
  |     |   Comment #22
You are going to do the transaction anyway. Why would you even figure your time used? Use Lake Michigan credit union and have your normal bills, such as gas, electric and any other automatic bills put on the credit card and also get cash back plus the 3% interest earned.
moneysaver
  |     |   Comment #43
That's the way I look at it as well. I have several RCA accounts. I never do anything extra or different to ensure that I meet the POS requirements. I just do my normal shopping and purchases during the month. And I earn 3-4% on my RCA balances. The only different thing, I suppose, is these days I pretty much never pay in cash for almost anything. That's about it.
Svy
  |     |   Comment #30
Will It Last? With respect to Signature, that question has been answered. It's high yield check account is now at 2%.
Ally6770
  |     |   Comment #33
You just take advantage of accounts as they are offered. I have had a reward checking account for years. Before I went to Lake Michigan in 2009 I had a reward checking account that paid either 6 or 6.5% with 10 debits that could be used for any amount and they paid up to $25,000. My husband was alive then and we had 2 joint accounts. You take advantage of things when you see them. The trick is to make your money work for you. Like now the reward checking account is small part of my financial plan. Thanks to Ken I have 4 large CD's earning from 3.3% to 4.25% and they will not mature for 3 1/2 to 4 years. Another thing to mention when you get a CD with a good rate ask for a 10 year CD. Sometimes you can get them. I have 2 10 year CD's maturing next year in March and one next October. They are earning 3.2 and 3.44. If you do not a large amount of money ladder your CD's and add to them as each matures. You will soon be able to shop for the highest rate no matter how long you have to go.
enduser
  |     |   Comment #31
Signature Federal Credit Union (Signature FCU) High-Yield Checking dropped from 3.00% to - 2.00% APY
That was short lived.
https://www.signaturefcu.org/Products/Accounts/Checking.aspx
gregk
  |     |   Comment #34
No, it wasn't "short lived". Signature FCU had been offering 3% on its RCA for over 5 years.

It's understandable that some FI's are dropping rates on their RCA's now given the events that have been occurring, some of which Accounts (like with Signature's) had been stable for a long period. The environment has greatly changed, and it's not in any sense manipulative or "monkeying around" when a CU adjusts rates in response to such,

What's of more interest is whether the ample number of Banks and CU's who have UPPED their RCA rates, or are newly offering these accounts now at the 3% yield despite underlying trends, maintain that rate for the forseeable future. For instance, I established two RCA's at Bank of Denver a month and a half ago at their newly offered 3% rate. If that rate holds only for a few months in the current environment and then drops down to 2%, I might be somewhat annoyed, and wonder what's changed to justify it. It might look like a kind of "bait and switch" maneuver, - offer the 3% to attract funds, and then lower it to what is still a premium level rate given the alternatives, with the hope those funds will stay put for lack of a better place to be transferred to. That said, I haven't seen this occurring in the past with RCA's - a "teaser" offer followed by a pretty immediate drop. We shall see if it happens presently.
Choice
  |     |   Comment #35
How does one spell FRAUD? Reasonable period means?
gregk
  |     |   Comment #36
Fraud? What are you talking about? That's off the wall, and hardly worth responding to. RCA's are variable interest rate arrangements, in which that rate can change any time, up or down, and without notice. Correspondingly, account holders can add or withdraw their funds with the same freedom. One knows all this at the time of account opening in very transparent fashion.
Choice
  |     |   Comment #42
A reasonable time must be reasonable to both parties! An immediate drop is not disclosed and should not drop for a reasonable period and that was not disclosed! Go for it if one likes to be manipulated. FIs like those types of customers
Shelby
  |     |   Comment #37
RCA's appear to be too time consuming for most individuals with large cash positions...but great for those that have small cash positions where every penny counts...
Ally6770
  |     |   Comment #38
Shelby--
RCA's are not an all or nothing position for your savings. It is a good place to keep your emergency fund, or where your money is that you are saving to pay cash for your next automobile, or use it for part of a downpayment for a home, or savings toward a great vacation, new furniture, a remodel of your home etc. You many have several accounts as we used to. I might spend about 5 minutes total each month to get my debits. RCA's, cash back credit cards, and bank promotions should just be one part of a financial plan. We actually build a good share of our home last home and bought all new furnishings including towels dishes, pots and pans, sheets everything in 2010 on sale, or clearance with a 5% cash back on everything credit card that Chase was offering through AARP. My husband and I each had a card and ordered on one card and as things were delivered and checked out we started on the other card. I paid each card in full when it was due. I have used RCA's for years and the 3% one I have now I have now I have had since 2009. The one before that was for years also but when it stopped paying over 6% and stopped offering it we closed it. I would have to get out my tax returns to see how many years we had that account. But it paid double what I am getting now and they eliminated it in 2009. Ken's site was the first site I went to in the 80's when I finally could get dial up where I lived. Best site ever to get information on your CD's, RCA's and bank promotions. Ken's site back then was called Bank Deals.
Hooked
  |     |   Comment #39
Ally6770 - agreed. I am all for cash back credit cards, bank bonuses and other savings/investment vehicles but if someone can tell me (perhaps privately?) which RCAs will qualify Venmo transfers as debit card transactions, I would be very interested.

Happy 4th and be safe, everyone.
Ally6770
  |     |   Comment #41
Don't they charge to use that form of transfer? Why would you pay for something that could be free? The idea of this site is to make your money work for you and not for someone else.
Hooked
  |     |   Comment #44
Ally6770 - you can use Venmo to send money to a friend or family member from your linked bank account or debit card. No charge.
111
  |     |   Comment #45
I'd be very wary regarding whether transactions through Venmo or any of the p2p services would satisfy RCA requirements, even if bank CSRs say they will. I'd test it for the first month with a small balance, so that if these transmissions did not satisfy requirements, little money would be lost.
Hooked
  |     |   Comment #47
Thanks, 111. Looks like RCAs are not for me, but I am totally fine with that.
milty
  |     |   Comment #40
@Shelby#37: I certainly agree. Many banks pay squat in interest on checking and savings, even during the Great Revival (2018/2019), and so every depositor should pursue his/her interest. (I usually keep a minimum in checking to pay bills and move the remainder to higher rate saving accounts, but this has dried up considerably. And I have an aversion to complying with various RCA requirements, but who knows--RCAs may become the only game in town.)
Robb
  |     |   Comment #46
@40 Milty Shows how valuable those add-on CD's were that were being offered the past 12-18 months. Much easier for me to add-on to a set/forget 3.5% CD versus doing 12 debit card transactions each and every month to get a similar rate (when I typically might only do 20-30 per year).. But I get that for those who hold a lot of liquid funds the RCA's are a valid option especially for those who can knock them out in very short order.
Shelby
  |     |   Comment #48
Robb...you are a very intelligent person and planned well like myself and many others to weather the current storm we are in...

The financial institution, product, and APY (Annual Percentage Yield) data displayed on this website is gathered from various sources and may not reflect all of the offers available in your region. Although we strive to provide the most accurate data possible, we cannot guarantee its accuracy. The content displayed is for general information purposes only; always verify account details and availability with the financial institution before opening an account. Contact [email protected] to report inaccurate info or to request offers be included in this website. We are not affiliated with the financial institutions included in this website.