5%+ Interest From a Checking Account? Yes! |
21 Comments |
Even now, you can get more than 5% interest from a checking account. (Some restrictions apply.)
When I went to Finovate Start-up a few months ago, one of the companies that caught my eye was CheckingFinder. Their web application was nice, but I didn’t realize that it was possible to get 5-6% interest from a checking account. I figured if I was going to get that kind of money, I’d have to sink in more money than I’d have or want to. That’s simply not the case.
Getting more than 5% from an account I can write checks from is not something to laugh at. If you have less than $50,000, ING Direct’s Electric Orange delivers a shockingly low 1.75% APY (pun intended). I used CheckingFinder’s “Find My Best Return” feature and found the Bank of Tipton will give me 5.26% interest… if I meet some requirements…
I know what you must be thinking, “Here is the catch. Watch the hammer drop on this one.” Actually, the restrictions aren’t so bad. For many banks, you don’t have to keep a minimum balance. Usually the requirement is to make 10-12 debit card purchases a month, sign up for paperless statements, and/or sign into your account once a month. With the bank I mentioned above, you have to do all three. Looking at a few of the banks that came up on my search, they seemed competitive in features that you’d want in a bank. For instance, many provided free online bill pay and most reimburse ATM fees.
How I might play the high-yield account game…
It seems relatively easy except that for the debit card puchases. I like to use credit cards to rack up the reward points. Giving up the reward points to earn more interest may still be a financial win, but it might not be optimal. A good plan might be to use your debit card on small transactions such as cheap lunches at McDonalds. That way you could get the best of both worlds. It might even be worth it to you to have 10 $1 transactions for a something on a value meal and then tell McDonalds to keep the food. Another idea would be to go to grocery store during off hours and use their self-checkout option to buy 10 things in small transactions. I’m sure that they’ll think you have lost your marbles, but then again, it wouldn’t be the first time. If I were to do this, I’d have a paper explaining what I’m doing and why. If they looked at me odd, I’d just hand it over and hope they let me continue about my business.
When I originally mentioned CheckingFinder after Finovate, Tight Fisted Miser was kind enough to point out that HighYieldCheckingDeals.com does much of the same thing. However it is simply a list of banks and their interest rates. It doesn’t seem to show you all the restrictions and doesn’t have a nice “Find My Best Return” function.
Has anyone gotten one of these extremely high-yielding checking accounts? If so, would you please share your experiences in the comments below.
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This post deals with:atm fees, checking account, CheckingFinder, free online bill pay, high yield
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August 19th, 2008 at 8:52 am
Wow, that’s a better rate than I can even find on any savings accounts or CDs. I always thought that banks made more money on accounts that you put money into and left there, but I guess the fees they charge stores for debit cards have altered the balance.
August 19th, 2008 at 10:14 am
Great post! I am actually using Charter Bank who is still offering 6.01%. The account has the similar requirements where you need to make 10 debit card transactions (I meet this requirement by making $1 payments through my cell phone provider’s web site), receive the statements electronically, access the web site at least once during each statement period, and either have a direct deposit or an ach auto debit (I meet this requirement by having one of my credit card accounts make a payment to the account, by deducting money from this Charter Bank account). Overall this has been easy to track and I am loving the 6%. The 6.01% applies to the first $25,000 in an account and a rate of 1.01% will be applied to rest of the balance. Again you can open accounts at other banks who offer reward checking accounts in order to earn a high rate on the rest of your money.
August 19th, 2008 at 10:15 am
I was wondering why you guys never talked about this. I found out about it through the fatwallet forums. I have an account with http://www.mwafcu.org/ for 7.01%. Just make 10 0.01 cent paypal donations at the beginning of each month. The other negative you forgot to mention was the cap on these kinds of accounts, typically at 25,000.
August 19th, 2008 at 10:37 am
I wish I had known about this before.
I neglected to mention the $25,000 cap because I really don’t see that limiting too many people. I think most people would either open up a second account of the same type or shift the money into the stock market. However at 7%, I suppose there’s really no need for the stock market.
You can also go over the $25,000 limit, you just don’t get big interest on money over that.
August 19th, 2008 at 11:04 am
Wow, I never knew this! Too bad I don’t qualify to become a member of http://www.mwafcu.org/
August 19th, 2008 at 11:30 am
Yes the rewards checking accounts are pretty cool.
The thing that stinks is the 25K to 50K limit to earn the nice rate. However, if you can somehow make twice the amount of debit card transactions you could open another account for your spouse.
One of the problems is that debit card transactions come directly out of your checking account.. So if the sales clerk had to type the amount you owe before you swipe the card there could be some errors..
For example if the clerk types that your meal costs $1000 versus $10.00 it might take a couple of days before the money is returned to you..
August 19th, 2008 at 11:52 am
I have two out of state rewards checking accounts both paying 6.01%. Make sure on your required transactions that they use the credit part of the card. When you swipe the card and the reader wants to bill as a debit, just hit cancel and it will charge as credit. Also, some banks don’t count charges less than a dollar towards your total. I reviewed both of my rewards checking accounts, if anyone is interested:
http://www.rickety.us/2008/07/rewards-checking/
http://www.rickety.us/2008/07/rewards-checking-lee-county-bank-and-trust/
August 19th, 2008 at 12:08 pm
I wonder why people in America allow their FED and banks to keep their deposits interest rates so low while inflation hits the ceiling?
Are you happy with deposits below inflation rate?
August 19th, 2008 at 12:30 pm
Appfunds, do you have an alternative? Much of our stock markets are down. Investing overseas (short of mutual funds and ETFs) is often very difficult to do directly due to international laws.
Plus it seems like that 6% that people are getting here is probably up there with inflation (if you look at inflation in the long term - i.e. over a ten-year average).
August 19th, 2008 at 1:49 pm
I also have Charter, this is my 3rd month with them and I love it. I do the 10 items in the self-checkout method to get my 10 debit purchases in, but I like the idea of 10 $1 transactions to pay a bill! I didn’t order their checks and instead bought my own mega-cute checks for $14 shipped for 2 boxes. With Charter, they allow both “debit” and “credit” transactions to count towards your 10 debit transactions for the month, so no worries about which way the card is processed. I’ve also spent less than $1 on transactions and they have counted. Highly recommend! Great customer service.
August 19th, 2008 at 5:23 pm
@ Matt w/ the $0.01 paypal donations idea.
I discussed this w/ Midwest American a few weeks ago and they discouraged me from doing small electronic transactions. Have you successfully done these transactions without penalty? Also, which donations qualify? Like charities or someone’s blog?
August 19th, 2008 at 5:35 pm
I’ve never heard of checkingfinder. I’ll have to check out the link. I just signed up with ING and really like the easy interface and ability to link to my current checking account. At 6% interest, that beats any cd or money market account.
August 19th, 2008 at 5:39 pm
Scott,
CheckingFinder is how I found one of my rewards checking banks. It is at https://www.checkingfinder.com/
August 19th, 2008 at 6:11 pm
how about $1 transactions to pay the rewards credit card bill?
August 20th, 2008 at 5:39 am
Deepali,
You could pay your rewards card’s bill, but I don’t think you would earn any reward points just for paying the bill. You can initiate the payment from the credit cards site as it will withdraw the amount from your specified checking account. These checking accounts do also usually have a bill pay system, so that could be used as well.
August 20th, 2008 at 6:01 am
Deepali,
In order for the transaction to qualify it has to be a POS transaction. In other words if you pay your utility bill you have to swipe the card; otherwise if you pay the bill online it doesn’t count.
August 20th, 2008 at 8:39 am
To get around the $25K limit just open an account for your spouse and another for yourself.
August 20th, 2008 at 9:01 pm
5% is higher than my savings account with Bank Of America (BOA). I will have to look at this website. Thanks for posting it.
August 23rd, 2008 at 11:36 pm
Bank of America? Looks like they’re paying 0.05% for checking accounts keeping a minimum of a $5,000 daily balance and 2.33% for savings accounts above $5,000. ING Orange is quite a bit better with automatic transfers from savings to checking, etc.
These accounts at 5% require some work, but with a $25k balance, it’s worth it.
August 30th, 2008 at 7:32 pm
I wouldn’t be trying to make $1 transactions on your rewards checking, I would mix it up a bit. I eat out for lunch every day I work so I use my card then. I have two cards I have to get 10 charges each with. I cut out two thin pieces of card that are the same size as my credit cards and place them together in my wallet. Each time I charge I write 1, 2, 3 etc. on the card. That way when I reach 10 I can switch to my money back credit card. My Voip provider bills me $3.50 each month on the card so this counts as a transaction.
When I eat I have a friend use one of my cards and I use the other. Places like Wendys just swipe the card. After a few lunches he pays me back. When my children fill up with gas they will take the card and use it. Then they electronically transfer the money back to my account (they are in the same credit union).
There are probably many other ways to make sure you get the transactions. The important thing is good but simple record keeping.
September 16th, 2008 at 5:54 am
Don’t know what to think of a high interest cd I found in http://themoneymakers.org/englishindex.html Are there others who know the company MoneyMakers International?