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Are Today’s Savings Rates Driving You Mad?

Feb. 25, 2011
Credit Cards
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This is a guest post by, a team of savvy banking consumers helping people find the best rates and promotions available.

If you happen to be in the market for a high yielding FDIC insured bank account, then today’s abysmal rates are undoubtedly bringing out the rate-hunter within you. Back in the pre bank collapse era of 2008, you couldn’t go wrong with CDs. Local banks, online banks, credit unions – they were all dishing out record high APY’s on their CDs. Some local CD rates in Texas were even featuring promotional APYs that would rival a decent year for the DOW. Back then 6 month CDs were providing APY’s that not even 10 year CDs can touch today.

In our current environment, banks no longer need to raise their CD rates in order to compete against each other to draw in private funding from individual savers. The government, in an attempt to jump start out economy, has been lending money to banks at near zero interest, so that they can then lend us this money at record low APRs. So where, might you ask, is the incentive for them to offer you and me a 3 or 4 percent bank CD? There isn’t.

A savings account countering this phenomena – which was the center of much hoopla during the midst of the bank deposit rate decline – were products called “rewards checking accounts.” These FDIC insured investment vehicles did and still do provide interest rates which put bank deposit rates to shame.

What is a Rewards Checking Account:

A rewards checking account is an FDIC insured bank account that provides a higher interest rate in exchange for a few monthly requirements to be met by the account holder. The requirements generally include the following: (1) monthly direct deposit, (2) monthly online bill payments, (3) receiving electronic statements instead of paper statements, and (4) predefined number of monthly debit card transactions (usually between 8-15 for higher yielding accounts).

Who are they for?

Anyone looking for a higher interest rate who also has the ability to maintain regular checking-account-type activity AND who has a monthly bill or payment that can be completed using direct deposit.

For example, let’s say I have $15,000 I’d like to invest in a safe FDIC insured account and I’m looking for an interest rate of at least 4% APY. I also have $7,000 in credit card debt which I’ve recently transferred to a 0% balance transfer credit card that I must make monthly payments on (which can be set up via direct deposit). Under this scenario I am an ideal customer. The hypothetical credit card debt could also be interchangeable with any recurring payment (auto loan, mortgage, etc). To fulfill the requirements of the rewards checking account, I’d also need to be able to make 8-15 debit card transactions per month. Keep in mind any transaction which doesn’t involve a cash withdrawal will suffice. This could be a stop by SUBWAY for lunch, a quick gasoline top-off, or a Starbucks coffee on the way to work.

What else should I know about these accounts?

  • If you fail to maintain the monthly requirements in any given month you may receive no interest at all for that month.
  • You will have a maximum balance allowed. Most accounts offer an excellent interest rate on the first $15k – $50k with a still respectable, but significantly smaller interest rate on any amount exceeding that.
  • If opening this account through a credit union, you may also have to have another account with the institution to be eligible.