A rewards checking account is an account that requires you to meet certain criteria in order to receive a higher APR as compared to a savings account. Having a high-interest rewards checking account is the alternative with higher-return and lower risk.
You might be asking yourself, what are the requirements? Are there any risks? How can I maximize the benefits of the best high-interest rewards checking accounts?
Risks and Requirements
Rewards Checking accounts are typically offered by small to medium-sized community banks and credit unions to attract additional deposits. They are virtually the same as your typical checking account, except they currently earn anywhere from 2% to 4% interest on deposits. Banks will have a few requirements that must be met to get the higher interest rate such as:
- You are limited to earning the higher interest rate on the first $25,000 of your account balance (Varies between banks).
- You must swipe your debit card a certain number of times each statement period .
- You must have direct deposit or an ACH automatic transfer
- You must access online banking each statement period and/or receive your statements electronically
These requirements may not sound difficult to meet because they may already be part of your banking behavior already.
There are some risks to using a rewards checking account. You need to check the stability of the institution before committing your funds. If the bank is in desperate need for deposits, it may be at risk of bank failure. Another risk is a changing interest rate. Look at the history of the bank to make sure it has offered a stable rewards checking interest rate and is not simply quoting a higher rate that will decrease as soon as you sign up.
How to Maximize the Benefit of a Rewards Checking Account
- Use the Additional Interest Wisely: You should not look at extra interest income as free money that you could use without care. Use it wisely to accomplish long-term financial goals such as paying off debt, college and retirement. Occasionally, it is okay to spend a small about, always prioritize.
- Use Debit and Credit Cards: Rewards checking accounts require you to use your debit card a set number of times per month without any minimum dollar amount. It might be smart to use your debit card on small, everyday purchases. For bigger purchases, use your credit card to gain rewards.
- Utilize Multiple Accounts: Rewards checking accounts will limit your ability to earn the higher interest only up to a certain amount. However, you can always open multiple checking accounts. You can either open multiple checking accounts at the same bank, or spread your money between different financial institutions.
- Pay One Bill with Multiple Transactions: Many service providers will let you decide how much of your bill to pay when you login through their website. This is a great way to meet the monthly debit card quota if you might fall short.
Best Rewards Checking Accounts
Depending on your location, you may or may not be able to open up this type of account. If this is the case, feel free to check out our full list of the Best Rewards Checking Accounts here on HMB!
If you are looking to earn some extra cash, then you should try signing up for a Rewards Checking Account. In the past, having safe, low-risk investments resulted in low interest rates. However, the interest rates offered on savings and checking accounts aren’t enough for people to keep their money there.