Comments on: Current State of Reward Checking Accounts

By: govenar

govenar — Sat, 16 Jan 2010 08:52:33 +0000

For pretty much everything I would normally pay with cash, the reason is that they don’t take credit cards, so I couldn’t use a debit card for them anyway. But I do have one RCA. I use the debit card for small purchases that wouldn’t give me that much reward from a credit card.

By: govenar

govenar — Sat, 16 Jan 2010 08:46:49 +0000

“If you’re a debit card fan, you’re going to use the card against your regular checking account frequently, regardless of the interest rate, so I don’t see how this benefits the bank.”

But that person probably never would’ve opened this account in the first place if it didn’t have a high interest rate. I think it’s kinda like an advertising expense for the bank, making more people aware of them.

By: Henry

Henry — Mon, 07 Dec 2009 18:29:07 +0000

BotS dropped rate from 4.51% to 4.09%, still not bad.

I will keep my BotS accounts for a while.

By: Henry

Henry — Mon, 09 Nov 2009 17:20:29 +0000

Above post: Good point. Thus never, Imean never fall in love with any RCAs.

Just take a look at FAB&T, for a long while, we all thought that they have their unique way of keeping their rate/limit high and it was a win-win for both the bank and their RCA customers.

The rate-hopping is agile at least at the present time, since none of the banks are limiting pull from an outside source (say Ally). If they start to change that policy (like HSBC, Emigrant Direct; for online savings), then one really need to carefully strategize an exit approach before signing up for such accounts.

By: SavingEverything

SavingEverything — Mon, 09 Nov 2009 00:13:12 +0000

Way the go Susan! My bank lowered its tiers and the rate; plus made changes to the qualifications. –Don’t forget that most participating banks in RCA pay a fee and have some contractual agreement with a firm, predominantly BankVue-FirstROI, that provides various services, tools, and consultants for these high yield reward checking accounts. Another pitfall of RCA: if banks can’t get enough qualified customers for personal loans, home equities or mortgages (depending on geographical areas or clientele), then they cannot lend and profit as much as they had hoped. Also, don’t forget that for all purchase transactions with your debit card, the interchange fee actually gets divided, not equally, to several firms: your Bank (the card issuer), Visa/Mastercard, and the merchant’s bank or transaction processing firm.

By: Susan

Susan — Wed, 04 Nov 2009 19:44:30 +0000

I have several reward checking accounts. It is a bit of work, but getting 4.5%+ on my money these days is worth it, in my opinion. I pay me cell phone or cable bill online in small increments to meet the debit card usage.

By: Henry

Henry — Wed, 04 Nov 2009 15:40:21 +0000

My RCA strategy: Keep my money in RCAs as long as there are options to get 4% APY.

Once these options diminish, I would either pay off my 4.75% mortgage or pay back my HELOC with those money. In other words, 4% APY is my absolute minimum threshold, considering my trade of high rate vs. effort.

Note that both paying off mortgage and paying back HELOC are effortless. BTW, my HELOC is at 2.24%.

By: Henry

Henry — Tue, 03 Nov 2009 16:00:59 +0000

Some of the most experienced banks with RCA offers are bailing out: FAB&T, Charter, Dedham Savings; to name a few. It is because the banks are not really making an acceptable profit out of it, no matter what the claim and commercials state.

Because most RCA customers are the smart shoppers, who put in the maximum amount, charging minimal debit, and incur no overhead (NSF, wire, etc.) fees.

But enjoy while it lasts.

By: SavingEverything

SavingEverything — Sun, 01 Nov 2009 23:02:17 +0000

GarpNYC is right. Banks have something called float and capital tier floats. It’s usually about a 1:10 float ratio. But, the rates on loans for most of bank lending is not 10%; it depends on the type of bank and the types of loans they lend. How do banks make money? No statements to produce or send out; limited # of checks to process against your account; hope that you use their bank services like wire transfers, cashier’s/certified check, or even return deposit item fee; hope to charge NSF fees; about 2% on your 10-13 debit credit card transactions; hope you dont fulfill a requirement so they dont pay the high interest rate or refund any ATM fees/ surcharges.

By: Garp NYC

Garp NYC — Fri, 30 Oct 2009 21:55:00 +0000

When I deposit $25,000 in a bank account, the bank can turn around and loan out many times that amount. This is fractional reserve banking. The bank can pay me 5% on $25,000 = $1,250 per year while loaning out $250,000 at 10% = $25,000. Money doesn’t grow on trees. Banks create it out of thin air.

By: Henry

Henry — Fri, 30 Oct 2009 01:26:01 +0000

FAB&T, a popular RCA bank with 4.4%/$50K limit suddenly drops its rate to 3.5% in November, limit to $35K; and limit to one account. They must be pretty desparate to take thses multi-fold rescue measures.

By: Henry

Henry — Thu, 22 Oct 2009 18:36:25 +0000

Rate hopping/chasing is worthwhile, especially when one has a large sum of cash. All it takes is ACH transfer, say using Ally as the transfer hub.

By: Andrew

Andrew — Fri, 07 Aug 2009 22:42:13 +0000

Why not just use the card for things you’d otherwise pay cash for? As long as the merchant doesn’t add a fee (most don’t, at least where I live), you’ll rack up the 10 transactions in no time and can go back to using cash the rest of the month.

By: Andrew

Andrew — Fri, 07 Aug 2009 22:41:01 +0000

I’m a fan of cash, so I racked up 13 transactions in the first three days of the month and plan to spend cash the rest of the month. If you’re a debit card fan, you’re going to use the card against your regular checking account frequently, regardless of the interest rate, so I don’t see how this benefits the bank. I guess they are getting a dozen or so more debit card transactions out of _me_ in a month, but that hardly pays for the fat interest payment I get each month.

By: Shane

Shane — Fri, 07 Aug 2009 19:58:34 +0000

I think they expect that a lot of people will use these as their regular checking account. By doing this, a lot of people will use way over the 10 minimum. I have one at two different banks. One for savings and one for checking. The savings I use the minimum of 10, usually a dollar at a time for a drink. The checking account consistently averages well over 40 debits a month between myself and my wife.