Personal finance
GE Capital Purchasing MetLife Bank

Washington DC Might Divest from Bank of America, Wells Fargo

Miles By Discover Offers Relief to Noncommittal Travelers

Collection Agencies Resurrecting Old Debts Through Credit Card Offers

Treasury Doubles Purchase Limits on Electronic Savings Bonds

Cordray’s First Move as CFPB Head: Regulate Nonbanks

Weekly Wrap: Bank of America’s Worst Week Ever?

Dear U.S. Banks, Your Business Model Stinks

Shadow Banking Due for Some Time in the Spotlight

Weekly Wrap: Banking Slowly Dissolves?

Under the Roofs of Coffee Shops You’ll Find Your Online Bank

Brokerage Checking Still a Competitive Choice

Beware the Mirthful FOMC Meeting

Did ING Direct Customers Overreact to the Capital One Purchase?

No Balance Transfer Fee Offers Reappear But Hard to Exploit

Russell Simmons’ RushCard Lowers Fees, Is Still Bad

The Reason Why Freddie Mac Doesn’t Want to You to Refinance

New Bank Perks Cater to Tech-Savvy Customers

St. Louis Fed President: Raise Interest Rates

Whitney Warns: Banks to Banish Middle Class

Dime Savings Cites Regulations in Switch to State Charter

FDIC to Banks: Start Lending Again!

Weekly Wrap: Grey Days and a Sideshow

Weekly Wrap: Banking’s Spring Is Still Far, Far Away

American Express and Gen Y: BFF?

Despite Falling Rates, Rewards Checking Still Viable for Savers
Finding a solid return on your savings is a tough task in today’s low interest-rate environment. Savings accounts and certificates of deposit (CDs) fail to impress diligent savers, who’ve watched rates sink in recent years.

Rewards checking accounts have also seen rates plummet. But they remain relatively attractive for some savers.

Many rewards checking accounts pay out 2.00% APY or more — double what you can get on many online savings accounts and 1-year CDs. In fact, rewards checking accounts have maintained this interest-rate advantage even as their rates have fallen. For example, in January 2011, East Carolina Bank’s reward checking account paid 4.01% APY. Today, it pays 2.01% APY — still twice as good as what most customers can get with a savings account.

Rewards checking rates are so attractive that some banks actually have to stop accepting new customers. Evantage Bank, AmericaNet Bank and Redneck Bank have “sold out” of their rewards checking accounts, all of which are paying 2.50% APY.

The typical rewards checking account offers a highly competitive interest rate only if the accountholder meets a stringent list of requirements, which usually include paperless statements, direct deposit and a certain number of debit-card transactions.

Customers who fail to meet those requirements will wind up getting different terms, such as a reduced interest rate or loss of certain account perks.

And banks tend to limit the balance that is subject to the high interest rate — any balance that exceeds the limit will earn less interest.

For example, the rewards checking account from Kinderhook Bank pays 2.50% APY on balances up to $20,000 and 0.75% APY on balances greater than $20,000 when customers have at least 10 debit card purchases posted, receive online statements and have a direct deposit posted per month.

Not meeting the requirements means customers earn 0.07% APY on balances of at least $1,000 and ATM fees are not refunded. However, the checking account remains free of monthly maintenance fees.
Some strategy required

When it comes to rewards checking accounts, meticulous savers recognize there is strategy involved.

First, it would be wise not to keep a balance in excess of the limit that can earn the maximum APY, because that extra money would earn more interest in an online savings account.

Second, savers have to acknowledge that spending is required to earn the higher interest rates (pushing balances lower.) And earning those higher interest rates will push balances closer to the APY limit. So if the goal is to maximize the balance without exceeding the APY limit, the account needs careful management.
Is it still worth it?

Rewards checking accounts can be considered “high maintenance” accounts. If this type of upkeep is manageable under your current financial situation, it could be worth it.

For example, in the above situation, a $20,000 balance in a rewards checking account earns $500 in interest. But holding that same balance in TIAA Direct’s online savings account, which pays 1.25% APY, would earn you $250. It is up to you to decide if the $250 difference between interest earnings on a rewards checking account and a savings account is worth the effort.

And, rewards checking accounts are most commonly found at small community banks and credit unions, which tend to be less convenient than the bigger banks. You may have to move your monthly direct deposit to the rewards checking account.

In the near future, interest rates on all deposit accounts are unlikely to improve. Because the Federal Reserve intends to keep interest rates remain low until late 2014, this period of low savings rates is likely to stick around for a while.

Using a rewards checking account is one way to weather the current economic climate. At the very least, rewards checking accounts tend to be free whether or not you meet the requirements to earn the maximum APY. That trait alone makes a compelling case for rewards checking.

Äë˙ ďĺ÷ŕňč

Weekly Wrap: Astrology is Bunk

Refinancing Your Mortgage Lines the Pockets of the Biggest Banks

Experian Unveils New Credit Score for the Underbanked

New Upromise Credit Card Gives 10% Cash Back at Major Online Retailers

The Best Experiences Your Credit Card Can Buy This Summer

Citi Offers New Way to Spend Rewards

Fed Study: CD Rates Are Less Attractive

Wells Fargo Raised Checking-Account Fee, Slashed Bill-Pay Fee

Weekly Wrap: Get Bullied, Get Rich

Taibbi: No Difference Between Banks and the Mafia

Why You Should Probably Raise Your Credit Limit, Especially When You Don’t Want the Money

Accounts Push Relationship Banking

Weekly Wrap: LIBOR Aside, You’re Still in Control

Fed Report Shows Mobile Banking Empowers the Underbanked

Top Gas Credit Cards to ‘Refill’ Your Wallet

Prepaid Cards for Payroll Purposes: Fair to Workers?

Weekly Wrap: Mobile Banking’s Onward March

Banks Close Revenue Gap from Overdraft Fee Losses

Banks Lack Social Media Efforts… Oh Really?

SpringCoin: Out to Automate Credit Counseling

Could Student Loan Forgiveness Help the Economy?

Chase United MileagePlus Club Card Takes Flight

Caviar and Champagne With Your Checking Account?

Weekly Wrap: Cash Rules Everything Around You? Not For Long

SmarterBank’s Checking Account Helps Pay Off Student Loans

Chinese Furious Over Banking Fees

Banks Should Use Prepaid Cards to Hook ‘Em While They’re Young

Prepaid Travel Debit Card Provider Eyes U.S.

Sallie Mae Credit Card Helps Pay Back Student Loans

Post-CARD Act, Banks Shift to Prepaid on Campus

Weekly Wrap: Things Are Not as They Seem

Gen Y Eyes Retirement with Rose Tinted Glasses

Low Interest Rates: A Ticking Time Bomb?

Are Discover Partner Gift Cards Worth the Rewards Points?

Kony Solutions’ Branding Problem: Bank Software Firm Has Killer’s Name

Weekly Wrap: Fancy Gadgetry, No Money

Weekly Wrap: Millenials’ Big Day at the Races

UFB Direct Adds Money Market Account With 1.15% APY