Expect to Use Your Debit Card 13 Times a Month — on Average — to Earn the Highest APYs, Best Rewards

Many traditional banks aren’t offering much of an opportunity to earn high APYs right now. Some consumers are turning to high-yield and rewards checking accounts to try to squeeze a little more value from their banking relationships.

However, the requirements to earn the highest APYs and best cashback rewards can often be onerous — or even risky for some consumers. DepositAccounts researchers reviewed 73 high-yield and rewards checking accounts from banks and credit unions, finding that 65% of these accounts have two or more main eligibility requirements.

Key findings

• On average, 13 debit card purchases are required monthly with the 74% of high-yield and rewards checking accounts that require customers to make a certain number of purchases to receive high APYs or better rewards.
• Some accounts have other or additional requirements, including:
  • 55% of accounts require direct deposit
  • 29% of accounts require customers to do their banking online
  • 8% of accounts require customers to pay bills online
• When examining the main requirements — debit card use, direct deposit, online banking and online bill pay — we discovered:
  • Nearly two-thirds (65%) of accounts demand at least two requirements
  • Just 1% of accounts require all four
  • 15% of accounts don’t require any

Know the number of required monthly debit card purchases

Choosing a checking account with a higher APY or other rewards is smart, but you should understand what’s required of you. The accounts in our study required customers to use their debit cards 13 times a month on average, or about three times a week.

Credit unions seem to have slightly more stringent requirements than banks when it comes to monthly debit card purchases, with accounts from Premier Members, Ideal and Partner Colorado requiring 20 or more.

Here are some other comparisons of the banks and credit unions we reviewed:

• Banks ranged from seven to 18 required monthly debit card purchases
• Credit unions ranged from eight to 25 required monthly debit card purchases
• 79% of credit unions require monthly debits, while just 65% of banks do

You might be wondering why banks and credit unions would be incentivizing people to swipe their debit cards at stores or use them online. In short, it’s because they make money each time you do.

“When you make a purchase with a debit card, the merchant pays an interchange fee of around 2% on the amount of the purchase,” said Ken Tumin, founder of DepositAccounts. “A significant part of that interchange fee is paid to the bank where the debit card was issued.”

Know the other requirements to earn highest APYs, best rewards

Although reaching a set number of monthly debit card purchases is the most common requirement to earn the highest APYs and best rewards, there are others. Account specifics vary by financial institution and can change periodically. However, this study focused on four key areas:

• Debit card purchases
• Direct deposit
• Online banking
• Online bill pay

Researchers found that 65% of accounts required customers to meet two or more of these qualifications.

Only one of the 73 accounts — FREE Checking from Great Lakes Credit Union — has four requirements, with a debit card purchase minimum of 15. Though it has a decent APY of 2.50% on balances of up to $10,000, it’s not the highest in the study. America’s Credit Union’s Affinity Basic checking account is offering a 3.00% APY on the first $1,000, and doesn’t require any of the four criteria. That’s why it pays to shop around and dig into the details.

Downsides to debit cards

Debit cards can be a convenient tool at times. However, making a lot of purchases may not always be in your favor. Here’s why:

You may be on the hook for fraudulent charges

The primary security risk with a debit card is unauthorized charges. “The longer it takes the consumer to report the unauthorized charges, the more liability the consumer assumes for those charges,” Tumin said. And it can be up to the full amount taken if it’s 60 days after your bank statement. Meanwhile, most credit cards offer zero liability against unauthorized charges.

You could be leaving rewards on the table

While using your debit card may help you earn a higher APY from your checking account, you have the potential to earn more through credit cards that have cashback rewards. “This is possible since banks generally receive a higher percentage of interchange fees from credit cards than from debit cards,” Tumin said. They can then pass on some of those earnings to customers in the form of cashback bonuses.

You don’t get help with credit-building

If you’re someone with a limited credit history, credit card activity — not purchases made on debit cards — is what gets reported to the credit bureaus. Over time with good payment behavior, your credit file will grow and your credit score will improve.

It’s worth noting that some institutions let you enjoy credit card perks while still earning a respectable APY on your bank accounts, but it will take some checking account research.

“There are a few high-yield rewards checking accounts with activity requirements that involve credit card purchases instead of debit card purchases,” Tumin said. “This can give checking account customers the benefits of both the high interest rates on the checking account and extra protection and rewards of credit cards.”

Methodology

Analysts reviewed the terms of 73 high-yield and rewards checking accounts captured in the DepositAccounts database. The data is as of Sept. 10, 2020.