What Strings to Attach to High-Interest Checking?

With rewards checking accounts projected to become a more popular option for deposits in coming years, Bankrate.com has released its first annual 2010 Rewards Checking Survey. The survey takes a look at the requirements consumers must meet in order to qualify for the high-interest checking rate. Among the findings:

  • The average annual percentage yield for rewards checking accounts maxed out at 3.3%. Bankrate found that 58 of the banks and credit unions it surveyed offer high-yield checking accounts, with rates ranging from a high of 6.17 percent to a low of 0.75 percent
  • The average default APY if not keeping up with the minimum requirements was 0.16%, a significant drop-off. The drop off in yield among study participants ranged anywhere between 0.5% and a dismal 0.04%.
  • The balance cap for earning the high APY was, most commonly, $25,000. Any additional money in the account  exceeding the balance cap earns the default rate rather than the high-yield rate. Three of the accounts surveyed have no balance cap. Of those, two offer their rates nationwide.
  • 95% of financial institutions with high-interest checking require a certain number of debit card transactions to be made each month in order to receive the highest APY. The average amount of debit card transactions required was 10-11, although a few require as many as 15.
  • Mandatory bill pay is required for 35% of high-interest accounts, ranging from logging in to as many as four bill payments per month. One bill payment per month is the most common requirement.

Bankrate surveyed 211 institutions for this study. Fifty-eight of those surveyed offer high-yield checking accounts, or 27%. Of those offering these accounts, 41 of the 58 are available to consumers nationally.

BECU, a credit union, offered the sweetest yield of the bunch in Bankrate’s survey — 6.17 percent. However, BECU imposes a $500 balance cap. That means you’ll earn 6.17 percent on only the first $500 you keep in the account.

“Reward checking is typically twice as profitable as free checking and the attrition rate is half of what you would see with free checking accounts,” says Gabe Krajicek, CEO of BancVue, the Austin, Texas-based company credited with introducing the financial industry to high-interest checking accounts.

“Consumers are looking for ways to boost their interest earnings in this low rate environment,” said Greg McBride, senior financial analyst for Bankrate.com. “Rewards checking accounts offer very compelling yields as long as consumers are able to meet each of the account requirements on a monthly basis.”

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