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2012 State of High Yield Reward Checking Accounts

Several years ago, I remember talking with a reporter about these new checking accounts that offered seemingly ridiculous interest rates. Consumers were so used to earning absolutely no interest on checking accounts that the prospect of earning just half a percent seemed too good to be true. So when these obscure banks started offering interest rates of 5%, it seemed like a scam. As I dug a little deeper, I discovered how these banks were able to offer these rates.

To review a bit, reward checking accounts are like regular checking accounts except they “reward” you for following the rules they’ve outlined. If you fail to satisfy all the conditions, you don’t earn the juiced up interest rate, you get the regular, often minuscule, rate. That rate, however, is often better than what you’d get at one of the big national banks, who often offer nothing.

Common requirements are that you sign up for online banking and paperless statements. Many require you to make a certain number of debit/check card purchases, usually ten or more. Some will require some bill payment through their online bill payment system. These are all designed to lower costs (paperless statements) or increase revenues (off fees they make from check card purchases) so that they can offer you increased interest.

Sadly, they’ve fallen on some hard times with the general fall in interest rates. If you thought interest rates at online savings accounts took a hit, you probably haven’t seen the rates of high yield reward checking accounts recently. Depositaccounts.com has a list of the highest yielding ones [3] and the list tops out at 2.01% APY, a far cray from the 5% that was available several years ago. While they’re still offering more than online savings accounts [4], it’s hard to justify the added hassle for only a small increase in interest.

Do you use a high yield reward checking account? Or do you think it’s too much work for too little gain?