In a low-interest environment, checking accounts which provide high rates of interest are receiving a lot of attention. You can apply for them in brick-and-mortar institutions or through Internet-only facilities. Banks, thrifts, and credit unions provide them.
Among the highest payouts is an annual percentage yield (APY) of about six percent. Frequently the highest yields are available through credit unions. Those are now often open not only to employees but also residents of the local community or state. But national banks and thrifts might also offer top-of-the-line rates as introductory teasers. This is a strategy to attract the high net worth who would be potential customers for mortgages, loans, and Certificates of Deposit (CDs). For information about the highest APYs, you can consult Bankrate.com or search the web, using keywords such as “high yield checking accounts.” You can also ask around your network.
However, as with many financial vehicles which offer a good deal, that deal might not be a fit for your particular needs. The highest yield and high yield checking accounts are often called “rewards.” In exchange for an interest rate that may exceed those of savings accounts and CDs, there are a number of requirements. Those may include some or all of the following terms and conditions:
- A high minimum balance that must be maintained. That could be about $15,000 or more or as low as $10,000. Funds above that required minimum may not receive the high yield interest rate. Therefore, the additional $5,000 in the account might earn a much lower interest rate.
- A minimum number of debit transactions monthly. This might be 10.
- Signing up for direct deposit, that is automatic deposit and payment of funds
- Agreeing to receiving only electronic statements, no paper ones.
If you wind up violating the terms and conditions, there are penalties. Those could range from lower interest rates to fees. In addition, if you benefit from using credit cards with generous rewards programs, being locked into a number of debit-card transactions could be a lousy tradeoff. You might “earn” more from credit cards’ cash back programs, frequent flyer miles, and discounts.
Another factor to consider is the value of your time. Consider the time you may have to invest in a search for the highest yield. There is also the possible inconvenience of having to find the most profitable place to put the additional funds which exceed the minimum requirements. Clearly, this might not be one-stop checking for you. In addition, you might not welcome changing the way you handle your financial transactions to comply with the rules of rewards checking accounts. Soon enough you may want to return to the ways you used to do business. That means you have to spend time exiting that account and put the time into setting up a more traditional one.
High yield checking accounts would not be thriving if they did not provide what a growing number of consumers want and who are willing to go along with the rules. The question is if you are one of them or should remain with a less restricted type of checking.