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Reward Checking Accounts - When Are They Worth It?

bemson
bemson   |     |   2 posts since 2010

I think I've just come up for air...

Reward checking accounts seem very attractive. However, what do we really make when we're spending so much?

At $5K and 3% APY, you earn $12.50 a month. But when the requirement is 12 debit transactions (or 10), at a dollar or so each, your efforts wipe out your earnings. Even for those with $10K in the bank, the debit transactions need to be under $2 (average) in order to make out with the smallest of gains.

So do I keep my rewards checking account? Should I look at it as my bank paying for my things? Or, should I look at it as money earned is money earned?

These banks are making money off our transactions, more than they're giving back. Why should we help them? With so many folks here with 8 or so accounts - are they debiting under a $1 per transaction all the time? Or, am I the first to realize that this hustle may not be worth the effort?



Answers
51hh
51hh   |     |   1,649 posts since 2010
You can do all the math and stuff to justify RCA or dismiss it.  It is your call.  Only you know whether it is worth it or not and at what APR you would drop it.

The threshold used to be 4% for me but I am still considering whether to drop the Danvers (3%, $100K) account...
Ken Tumin
Ken Tumin   |     |   5,703 posts since 2009
You don't necessarily have to spend more when you have reward checking accounts. You just have to plan your shopping so that you meet the reward checking requirements. It does take some work.

With new regulation, stores may start to give discounts if you pay with cash instead of a credit card. This might also include debit cards if you make signature-based purchases instead of PIN based. This is currently rare.

I've done a few posts which compare reward checking accounts with alternative savings methods:
51hh
51hh   |     |   1,649 posts since 2010
Pdxmale, how are you making 5% or more on 11 accounts?  The highest rate I can get is 4.75% (Randolph Bank in NC), so I have 2 accounts there and one at another bank for a smaller return.  Do you happen to live somewhere with incredible rates or am I missing something?
 

Pdxmale outlined his list of 5% RCAs previously already.  The basic message was it required some "creativity" for some, travel for some, and some were grandfathered (now have more restrictions such as locality, limited membership, etc.).  His list was also diversified so that if one goes down, he still has ten:-)

I think that he deserves the title of "Mr. RCA." :D
darkdreamer4u
darkdreamer4u   |     |   199 posts since 2010
I see it as the bank(s) paying my grocery expenses every month, thus, I can put more money into my savings (i.e., RCAs).

Here's hoping to be off RCAs almost entirely very soon and keeping just one with the best APR since I plan on making a down payment for a mortgage.
Rebecca
Rebecca   |     |   1 posts since 2010
Pdxmale, how are you making 5% or more on 11 accounts?  The highest rate I can get is 4.75% (Randolph Bank in NC), so I have 2 accounts there and one at another bank for a smaller return.  Do you happen to live somewhere with incredible rates or am I missing something?
darkdreamer4u
darkdreamer4u   |     |   199 posts since 2010
Probably quite a few of formerly nationwide available RCA's that have gone local only and therefore kept their rates high while grandfathering in early adopters. I have a couple of those as well.