Why You Need a Rewards Checking Account

by Kevin on March 16, 2010

I raved about rewards checking accounts when my wife and I moved our main accounts last summer. For those of you that are still on the fence, here is some additional data on why you should switch.

Rewards Checking Accounts Have Better Rates

The proof is in the pudding. Or in this instance, the numbers.

  • Highest national bank savings rate I can find: 1.28%
  • Interest rate with our rewards checking account: 3.61%

Granted, the rewards checking account gives you that great rate on the first $25,000. (After that it pays 1.01%.)  But I’m guessing reaching that cap would take a while for most people.

How much is that interest worth to you?

  • $25,000 at 1.28% = $320
  • $25,000 at 3.61% = $902.50

The difference? $582.50 in interest per year.

Even thought it is a “checking” account we leave a majority of our money in the account to earn the higher rate. It’s like the best of both worlds — you don’t have to worry about limited withdrawals like a savings account, and you’re getting a much better rate on top of it.

Reward Checking Accounts Come with Better Service

You won’t find an above-average interest rate tied with a rewards checking account at a big bank. They’ve got too many customers willing to accept 0.2% (or less!)  interest payments.

No, you’ll have to go to a local, community, or regional bank to find a rewards checking account. That may sound risky, but in reality you will get better service.

Plus, big banks may feel safer, but remember the bailouts during the financial crisis? Those were big banks getting bailed out.

National banks will never provide the level of service that a local or regional bank provides. The staff at my community bank recognize me, know my name, and know my wife’s name. I’m not just a number. I’m a customer. There is some value in that.

You Already Meet the Requirements for Rewards Checking Accounts

Yes, our rewards checking account has requirements. It’s no big deal.

Here’s the kicker: you are most likely already meeting the requirements for the account.

Our account requires 10 debit card transactions, online statements, and 1 direct deposit or bill pay each month. You’re telling me you don’t already do that with your current bank?

One Major Risk to Consider

That having been said, why wouldn’t you open an account? You’re meeting the requirements, and you’re getting a much better interest rate.

I’ve embraced this type of account. We are very happy to be earning a ton of interest every month with a higher rate.

But there is one major risk you’ll need to consider. More on that in my next post. Stay tuned. (Subscribe via RSS or e-mail updates so you won’t miss the next post.)

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