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Reward Checking Rate History – Average APY (%) Rate Trend over Time
High-Yield Reward Checking Rates Are at 5-Year Highs
As shown in the above chart, the average yield of reward checking accounts today is well above the level seen five years ago. Today’s average reward checking yield is based on reward checking accounts from 1,023 banks and credit unions from around the nation. Most reward checking accounts are offered by community banks and credit unions, but a few are also offered by internet banks.
Overview of High-Yield Reward Checking
Reward checking accounts offer significantly higher rates than traditional checking accounts, and in many cases, they also offer higher rates than internet savings accounts. The average high-yield reward checking account is a free checking account with no monthly service charges. You are rewarded with a high interest rate if you satisfy certain monthly requirements. Most also reward you with ATM fee reimbursements if you use ATMs at other banks. Below are the typical rewards:
- High interest rate (2.00% to 4.00%) for balances up to a cap ($15,000 is typical)
- Lower interest rate (i.e. 0.25%) for the portion of the balance over the cap
- Low base rate if requirements are not met (i.e. 0.05%)
- ATM fee refunds up to a certain limit per month
The typical monthly requirements include:
- 10 to 20 debit card purchases
- At least one direct deposit or ACH transaction
- Receiving electronic statements
There are sometimes additional requirements such as logging into online banking at least once a month or performing online bill payments.
The two reward checking features that allow banks to offer higher rates are the balance caps and the debit card usage requirements. The balance caps limit how much interest the bank has to pay out, and the debit card usage requirements brings in revenue to the banks from the interchange fees that merchants pay for each debit card purchase.
Comparing Average Yields
As of March 2018, the average reward checking annual percentage yield (APY) is 1.896%. This exceeds the average from five years ago by 13 basis points, and it exceeds the lowest APY recorded (on June 2014) by 25 basis points.
The average yield of reward checking accounts is the highest yield of all deposit products. As of March 2018, the average APYs for several deposit products are shown below along with comparisons to the reward checking APY:
- Reward Checking: 1.896%
- Standard Checking: 0.148% (175 bps lower)
- Savings Accounts: 0.207% (169 bps lower)
- Money Market Accounts: 0.234% (166 bps lower)
- 1-Year CDs: 0.730% (117 bps lower)
- 5-Year CDs: 1.663% (23 bps lower)
It’s important to note that the reward checking yield only applies to a maximum balance (the current average is $16,906) and it only applies when the customer meets the monthly activity requirements.
High-Yield Reward Checking Account Examples
Many reward checking accounts have yields higher than the average. One example is the reward checking account at the South Dakota-based One American Bank. This nationally-available reward checking account is called Kasasa Cash, and it earns 3.50% APY on qualifying balances up to $10,000. Qualifying balances over $10,000 earn 0.25% APY, and non-qualifying balances earn 0.01% APY. There is no monthly service charge.
The monthly requirements include:
- At least 12 debit card purchases of at least $5 each
- Receive e-statements and other electronic account notices and disclosures
- Log into Online Banking at least once
Another example is the reward checking account at the Virginia-based MainStreet Bank. Its nationally-available reward checking account is also called Kasasa Cash. This high-yield checking account earns 3.00% APY on qualifying balances up to $15,000. Qualifying balances over $15,000 earn 0.25% APY, and non-qualifying balances earn 0.05% APY. There is no monthly service charge.
The monthly requirements include:
- At least 12 debit card purchases
- Receive e-statements
- Log into Online Banking at least once
Summary
A high-yield reward checking account may not be a good account option for everyone, but those who maintain balances under $25,000 and who prefer to use debit cards, the reward checking account provides a good alternative to standard checking and internet savings accounts. Most high-yield reward checking accounts are free with no monthly fees even if monthly requirements are not met. That makes them at least equal to standard free checking accounts. When the monthly requirements are met, which can often be easily done when using the account as a primary checking account, the high interest rate can then match or exceed rates of internet savings accounts.