Current State of Reward Checking Accounts

by admin on July 30th, 2009

Almost six months ago, I wrote about high interest reward checking accounts. Back then, the economy was weak and banking was in turmoil, yet these small regional banks were offering exceptional rates on a normally pedestrian checking account. We learned about their business model and the accounts made sense, unlike the 5% APY CDs that Washington Mutual was offering before they collapsed. To briefly recap, reward checking accounts offer high interest rates because they require you to make ten to fifteen card transactions each month and the fees from those transactions fuel the high rates. There are other requirements designed to cut costs, such as paperless statements and online billpay.

How are they doing now?

Rates Dropping

In February, each of the banks we listed offered as much as 5.25% APY on deposits up to $10,000 and 2.25% APY on deposits above that. Evantage Bank was one example. Today, they offer only 4.00% APY though the activity requirements haven’t changed. You must agree to receive paperless statements and you must make 10 CheckCard sales transactions each month.

The three other banks listed on the original post have also lowered their rates and, in some cases, lowered the amount earning the top rate. For example, First New England used to give 4.25% APY on $20,000 of deposits, now it gives 3.65% APY on $15,000 of deposits.

Limiting Availability

This hasn’t happened to the four banks we listed but many other banks offering rewards checking accounts having begun limiting the availability of those accounts to their local region. So unless you live near one of the banks offering a reward checking account, you won’t be able to open an account. As always, call the bank to confirm that you can open an account, even if you don’t live in the area.

Despite the falling rates, if you’re willing to deal with a little bit of hassle, you could be getting some good rates on your checking deposits.

Current State of Reward Checking Accounts