You have probably seen or heard the ads for accounts with higher than expected rates. They have names that begin with turbo, super, great… You are confused because your other interest bearing accounts are not getting those rates!?
Welcome to the world of rewards checking. The cliff notes are just this: do a few easy tasks and get a great rate! Now common sense is kicking in and you are saying yeah yeah I have heard this before, there is always a catch. Let’s talk about the few easy tasks. All banks are different so consult the disclosures for the product you are signing up for before inking your name on the dotted line.
Example requirements for rewards checking:
- 8-15 signature debit card transactions
- 1 qualifying direct deposit
- Log in to online banking once a month
(The higher rate only applies to funds under a certain dollar amount)
Just in case you are still a little hazy, a signature-based transaction is one where you sign, no pin required. Direct Deposit is when you receive your paycheck (social security works too) automatically deposited each month. e-Statements are paperless; you get those from online banking, which also fulfills the login requirement! Finally, each bank has a limit to how much you can keep in the account at the higher rate, you can always keep more, but the benefits are not as great.
So you are thinking this sounds pretty good, but in the end it always comes down to the bottom line so let us work up an example:
High Yield Savings Account:
$49,000 x 1.20% APY = $588 per year
Rewards Checking Accout:
$49,000 x 2.25% APY = $1,103 per year
So as you can see if you have a fairly large sum of money in your savings account moving it to a rewards checking can make quite a difference! Do not forget that you only get that higher rate when you fulfill all of the requirements each month.
How do you make sure you fulfill the requirements? Set up your bill pay to work automatically, make it a point to look at your e-Statement every month to fulfill the login requirement, sign up for direct deposit from your employer, and finally the debit card purchases… One easy way to track them is to logon to internet banking weekly to count your transactions. This helps you fulfill the login requirement and reminds you to pay a bill online. Another way is to have a running tally in your wallet. If you have a better idea leave us a comment below.
Now for the million dollar question… Is it worth it? If you are disciplined and have high balances, like our example, then this is a no brainer and rewards checking is for you. Sometimes the rewards are not just in the higher interest. Some accounts offer ATM surcharge refunds for doing just a few debit card transactions a month, that can save you over $100 a year, while others offer rewards if you have a direct deposit. There are many rewards options – you just have to find the one that is best for you. Drop into a local branch to discuss your options and check out the disclosures. Getting a few extra free dollars each month might be easier than you think…