Archive for the ‘Reward Checking Accounts’ tag
Reward Checking Accounts
It looks like the best days of the high yield savings account may be behind us, to be replaced by high interest reward checking accounts. Reward checking accounts are often offered by smaller local banks and sport yields of close to or above 5% APY. They’re able to give such phenomenal returns, given our current rate environment, because they have requirements that are a little tougher to fulfill. The standard reward checking account will often require that an account holder:
- Make 10-12 debit transactions per month,
- Sign up for paperless statements,
- Setup a direct deposit.
The only requirement that ever gives anyone trouble is the first one, 10-12 debit transactions a month. Unless you are sure you can make it, I wouldn’t sign up for an account because if you don’t make 10-12 transactions, the interest rate often falls to 0% (or some other small number). Another gotcha they have is that you can only deposit a certain amount of money into the account, usually a limit of $25,000 or $50,000. Of course, that’s a lot of money, but it’s good to be aware of those limitations.
How can they offer such great rates? The transaction fees on those debit transactions. You, the consumer, don’t pay a penny extra, the fees are taken from the store you buy from; so there’s no catch for you. Also, banks save a lot of money when they don’t have to mail you statements (they save trees too!), so that’s additional cost savings they can pass along to you. Finally, the direct deposit isn’t a money making ploy on their part, that’s to increase your affinity with them and keeps you from leaving as easily.
All in all, I wholly recommend reward checking accounts.