Consider High-Yield Rewards Checking Accounts

In my last post I mentioned we were considering adding a high-yield savings account to our banking mix. Today we went to two different banks to investigate their performance checking accounts.

What are High-Yield Rewards Checking Accounts?

A high-yield reward checking account (also known as a performance checking account) offers a very high interest rate in return for your business.

The two banks we visited offered rates of 3.25% and 4.41%. To earn those rates you must meet certain requirements otherwise the rate falls to something abysmal such as 0.25%.

Also the performance rate usually only applies up to a certain deposit level. After you reach that point the percentage rate falls off to something more reasonable.

We ended up opening an account with a small regional bank with locations in parts of Alabama, Mississippi, and Tennessee. More on the specifics of our account in a moment.

How to Meet Performance Checking Requirements

To earn the above-market interest rate every bank we found required the following:

a certain number of debit card transactions each month (10 and 12 at the two banks we visited)

one direct deposit per month

electronic statements (and/or internet banking)

We observed our spending and decided this was quite the easy hurdle to surpass. I eat out two to three times per week for work. That alone would get close or past 10 debit card transactions. Add in groceries, gas, and all the other purchases we make and we could easily get past 10 transactions.

Why We Are Considering Switching to Rewards Checking

It’s simple. The local bank we opened the account with offer a 4.41% up to $25,000. After $25,000 you earn 1.00%. If you fail to meet the requirements the interest rate falls to your typical 0.24%.

Compare 4.41% to the interest rate on our ING Direct savings account — 1.40%. ING’s rates have fallen — understandably — as the Fed rates plummeted with the financial crisis. Our ING Direct checking account is paying 0.25%.

So we can move our savings into a checking account and earn 3.01% more interest. This will bring in several hundred dollars of extra interest income to us.

Big Wins and Still a Fan of ING

This is part of the big win mentality. One change in our banking life will net us several hundred dollars in additional money. Money that without the change we wouldn’t have earned. Money that doesn’t require constant significant effort to achieve.

I also want to note we are still fans of ING Direct. We plan to keep any money above $25,000 with ING Direct in the savings account because it earns a bit more interest (1.4% to 1%) than the account we opened.

We’ll test this out once everything gets setup and we can transfer money in. I’m looking forward to earning a lot more interest than we used to earn!