Direct deposit is one of the common requirements for high-yield reward checking accounts. For some people direct deposit can be more worrisome than the debit card usage requirement. The self-employed may not have direct deposit. Some people may have direct deposit, but they may not be able to split the direct deposits to more than one institution. This can make it impossible for them to use direct deposit on more than one reward checking account.
Fortunately, you can substitute an ACH transfer for direct deposit at most reward checking accounts. Typically, the ACH transfer will have to be initiated at another bank. This is one reason why a hub account at an internet bank can be useful. Using the internet bank's ACH bank-to-bank transfer service, you can set up monthly ACH transfers into or out of your reward checking account. You set it up once, and you never have to worry about it again. And unlike some direct deposit systems, it's easy to change. So if the reward checking rate plummets and you want to close the account, you can easily end the automatic ACH transfers.
These ACH transfers can also come in handy if you want to keep a reward checking account open. If a reward checking account has a drop in rates but you think it may become useful again sometime in the future, you may not want to close it. However, if you let any account become idle for too long, you may start to incur a monthly inactivity fee. The monthly automatic ACH transfers can prevent this.
In my recent post Best Internet Banks to Use as Your Hub Account, I described the ACH transfer features that make for a good hub account. Ally Bank and WTDirect are two internet banks that have many of these features. Many popular internet banks like ING Direct and Dollar Savings Direct lack several of these features.
Banks do not always make it apparent if an ACH transfer can replace direct deposit. Banks will often prefer direct deposit over an ACH transfer since the direct deposit increases the chance you'll be using the account as your primary checking account. Also, direct deposit can make it harder for you to switch banks since direct deposit can be a hassle to change.
In the case of Danversbank, the listed requirements make it clear that an ACH transfer can replace direct deposit. Here's how they list this it:
sign up for direct deposit or receive a recurring ACH.
Often, it's less clear. Here's how NavyArmy FCU describes the requirement:
set up one direct deposit or authorize one automatic payment from your account
An example of an automatic payment would be a utility bill. This is typically done by giving the utility company your bank's checking account numbers and setting up recurring payments. An ACH transfer from an internet bank will very likely meet this requirement.
Finally, here's ViewPoint Bank's requirement for their Absolute Checking Account:
Receive direct deposit OR make one online bill payment per month
In this case it's not obvious if an ACH transfer can replace a direct deposit. In most cases I've found that an ACH transfer will count. However, it's always a good idea to verify this with the bank. A reader just informed me that he received this verification at ViewPoint:
I questioned them on this when I opened my account a few weeks ago and they said as long as it was an ACH incoming transfer, it should work. I set it up to happen each month automatically and today called them to double check that what I’d done had worked, and they have told me (verbally) that I’m OK.
At the end of a statement cycle, banks will often email you the number of times that you have met each of the requirements. This is another way to confirm that an ACH transfer counts.
Automatic ACH transfers make it much easier to open multiple reward checking accounts. Banks may prefer a direct deposit, but they rarely will require only true direct deposit. So don't let direct deposit hold you back from opening a reward checking account.
Finding the Best Reward Checking Account
Please refer to the reward checking section of DepositAccounts.com to find reward checking accounts in your state or that are available nationwide.