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07-25-2016, 10:08 AM #1
Save more with a high yield checking account
I got tired of earning no interest on my checking account. So I just caved over to a high yield online account earning 2% APY.
If you are like me, you probably moved your savings account online for higher rates years ago. But for some reason, you wanted to keep your checking account at a local branch. And for good reason: access to ATMs.
But I find that I rarely use cash anymore. So what was the point of paying (in forgone interest income) for a service I rarely used. And with a little planning, I always can access cash with accruing any nasty ATM charges.
Interested in earning more from your checking account? Then let's get started with some basics.
Getting Started with a High-Interest Checking Account
A high-yield checking account earns an annual percentage yield (APY) that is usually calculated using interest compounded several times per year. And interest rates on high-yield checking accounts are often competitive with high-yield savings accounts, sometimes beating the rate on typical savings accounts by up to 5 times.
The catch sometimes is qualifying for a high-yield checking account.
These account usually have strict eligibility requirements, including a minimum balance, living in a certain geographic area, or giving up the convenience of nearby branches in the case of an online bank. Some even have balance caps, after which you will earn a lower rate of interest. (But you should probably put that excess into your savings account anyway.)
Requirements will vary a great deal between banks. And not all banks will reimburse you for ATM fees. So you should check the fine print.
What to Look for in the Fine Print
Here are the most common requirements you will see. Make sure you understand each requirement and your responsibilities to earn the highest return on your balance.
Balance Cap. Most banks place a limit on the balance on which you can earn the high interest rate. These caps can range from $500 to $25,000. Anything over the limit will not earn interest and is better off in another interest-earning account or investment.
Minimum Debit Card Transactions. More than 90% institutions require making a certain number of debit transactions every month to get the maximum APY. Most banks require just 10 transactions per month but some require as much as 15 or as few as one. These debit transactions are important to banks as they generate revenue from interchange fees charged to merchants while discouraging people from using checks.
Access. Banks usually reduce expenses associated with high-interest checking accounts to fund the high interest rates. This may mean you need to sign up for direct deposit and automatic bill pay or pay fees for using an ATM. Many institutions only offer digital access with no branch access for these accounts.
"Default" Rate. If you don't meet the conditions of the high-yield account, you may earn a lower APY, typically between 0% and 0.25%. This helps subsidize the cost of the accounts to the banks as they know many people who sign up for a high-yield checking account will not meet the requirements each month. The good news is that even if you slip occasionally, your rate may still be better than what your savings account earns.
My Favorite High-Yield Checking Accounts
Here are some of the best high-yield checking accounts available nation wide.
Northpointe Bank with a 5.0% APY with a $5,000 balance cap.
Quachita Independent Bank. 3.01% APY with a $15,000 balance cap.
Main Street Bank. 2.25% APY with a $25,000 balance cap.
Cross Keys Bank. 2.05% APY with a $10,000 balance cap.
All America Bank. 1.5% APY with a $10,000 balance cap.
Heritage Bank. 1.25% APY with a $25,000 balance cap.
Consumers Credit Union. 3.09% APY with a $10,000 balance cap.
Lake Michigan Credit Union. 3.0% APY with a $14,999 balance cap.
Great Lakes Credit Union. 3.0% APY with a $10,000 balance cap.
CapEd Federal Credit Union. 2.5% APY with a $10,000 balance cap.
Advantage Plus Federal Credit Union. 2.05% APY with a $15,000 balance cap.
If you are willing to put up with some of the inconveniences of banking all (or mostly) online, you can earn a lot more interest on your checking account with a high yield account. I think this makes up for the shortfalls, and the negotiating between maintaining the minimum balance to qualify for the higher APY and the balance cap.
Maybe an online checking account is the right move for you too.
07-25-2016, 04:37 PM #2
Good info. Every little bit helps.
I can't believe I would use an online savings account, but not move to an online checking account as well. I guess I never thought about it.
07-25-2016, 06:28 PM #3
Thanks for the tip. Another great way to save money.
07-26-2016, 12:04 PM #4
This is on my to-do list for tonight. Thanks for the tip!
08-01-2016, 01:36 PM #5
These high yield accounts seem like a far better idea than CDs.