Consider High-Yield Rewards Checking Accounts

by Kevin on July 22, 2009

In my last post I mentioned we were considering adding a high-yield savings account to our banking mix. Today we went to two different banks to investigate their performance checking accounts.

What are High-Yield Rewards Checking Accounts?

A high-yield reward checking account (also known as a performance checking account) offers a very high interest rate in return for your business.

The two banks we visited offered rates of 3.25% and 4.41%. To earn those rates you must meet certain requirements otherwise the rate falls to something abysmal such as 0.25%.

Also the performance rate usually only applies up to a certain deposit level. After you reach that point the percentage rate falls off to something more reasonable.

We ended up opening an account with a small regional bank with locations in parts of Alabama, Mississippi, and Tennessee. More on the specifics of our account in a moment.

How to Meet Performance Checking Requirements

To earn the above-market interest rate every bank we found required the following:

  • a certain number of debit card transactions each month (10 and 12 at the two banks we visited)
  • one direct deposit per month
  • electronic statements (and/or internet banking)

We observed our spending and decided this was quite the easy hurdle to surpass. I eat out two to three times per week for work. That alone would get close or past 10 debit card transactions. Add in groceries, gas, and all the other purchases we make and we could easily get past 10 transactions.

Why We Are Considering Switching to Rewards Checking

It’s simple. The local bank we opened the account with offer a 4.41% up to $25,000. After $25,000 you earn 1.00%. If you fail to meet the requirements the interest rate falls to your typical 0.24%.

Compare 4.41% to the interest rate on our ING Direct savings account — 1.40%. ING’s rates have fallen — understandably — as the Fed rates plummeted with the financial crisis. Our ING Direct checking account is paying 0.25%.

So we can move our savings into a checking account and earn 3.01% more interest. This will bring in several hundred dollars of extra interest income to us.

Big Wins and Still a Fan of ING

This is part of the big win mentality. One change in our banking life will net us several hundred dollars in additional money. Money that without the change we wouldn’t have earned. Money that doesn’t require constant significant effort to achieve.

I also want to note we are still fans of ING Direct. We plan to keep any money above $25,000 with ING Direct in the savings account because it earns a bit more interest (1.4% to 1%) than the account we opened.

We’ll test this out once everything gets setup and we can transfer money in. I’m looking forward to earning a lot more interest than we used to earn!

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Passing the week | taxguy
July 26, 2009 at 5:11 am
High Yield Rewards Checking Accounts
November 12, 2009 at 4:21 am


CLB July 22, 2009 at 9:34 am

I also switched to a rewards checking for a 4.5% interest…unfortunately, they too have begun to scale back (~2%now). I’m not yet at the point where savings would generate ‘hundreds of dollars’ of interest, so for the moment I’ll hold tight until something worth the switch comes along.

Diane July 22, 2009 at 7:46 pm

I’m looking at switching to a rewards checking account much like the one you describe – 4.51% interest, same requirements for direct deposit, online statements and debit transactions.

I have an ING account, but interest is too low now… I’d be switching the majority of my savings from the ING account to the rewards checking for maximum benefit. Will keep the ING account open for now, in case interest rates go up.

Kathryn July 23, 2009 at 4:43 pm

You have convinced me. There is a local bank with 5% free checking – 12 transactions, one ACH or Dir. Dep. & online statements. I can do that and make so much more than the credit union where we currently have our checking. Thanks for prodding me along.

Ken July 23, 2009 at 4:44 pm

Another reason to keep your ING Direct account is that they have a pretty nice ACH bank-to-bank transfer service. Most banks offering reward checking accounts don’t have one or if they do, it’s not as nice as what ING Direct has.

Most reward checking accounts will consider an ACH transfer (initiated from a bank like ING Direct) as a direct deposit. So ING Direct account can be useful for those with reward checking accounts especially if you are unable to do a real direct deposit.

Kevin July 25, 2009 at 9:34 am

@CLB: Hey you’ve got to start somewhere!

@Diane: That is exactly what we are doing. Searching for better interest rates. Still waiting on our debit cards to show up and for direct deposit to kick in, but looking forward to earning more interest!

@Kathryn: Just verify that it isn’t a teaser rate just to get you to sign up. I verified the last time the rate had changed with our new bank was January 2008. That makes me feel pretty good that they are going to keep it relatively high. Worst case scenario we go back to ING Direct.

@Ken: Thanks for the tip. We’re not unhappy with the service or features of ING Direct, just the interest rate. Plan to keep everything over $25k in ING Savings.

Pete October 12, 2010 at 11:51 am

Just wondering if there is any update to these high yield checking account plans. Are you finding that the interest rates are slowly going down? Or are banks holding firm and keeping the rates? Are they increasing the requirements, or dinging you with fees? I am considering moving my money to a 3.5% checking account with a local community bank, but they of course want all of my business, long term. I like some of the features of the big bank I am with now so I am trying to figure this all out.

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