Should You Consider an Account for High Yielding Rewards?
As the Federal Reserve keeps interest rates low , many savers feel pain in their savings accounts . CNBC reports that rates on high-yielding savings accounts have dropped to record lows, leaving savers looking for alternatives. One option that has garnered attention: high-performing checking account rewards. Here’s how to find out if one of these accounts is right for you.
Benefits of Checking Fee Accounts
“This is primarily the only bank account these days with an interest rate above 1%,” says Ken Tumin, founder of DepositAccounts . According to DepositAccounts’ Fee Verification page, you can find banks that currently offer fee verification accounts with rates above 2%.
Tumin says most reward checking accounts are free and do not require a monthly maintenance fee. Another benefit is that most reward checking accounts will reimburse you for ATM fees.
Disadvantages of Rewards on Current Accounts
While the interest rates for account verification rewards are hard to beat, you need to jump over a few extra hoops to get a higher return.
“If you don’t like using a debit card, the reward may not be worth it,” Tumin says, noting that most accounts require you to use your debit card a minimum of times a month to validate rewards. This can be a disadvantage for those who prefer to use cash or credit card for day to day expenses.
Another potential drawback: Many reward checking accounts require you to use online banking for monthly statements and other transactions. If you prefer paper statements or dislike online banking, rewarded checking accounts may not work.
Finally, reward verification accounts may not work for those with large balances. Tumin says that on these accounts, your balance is usually capped at $ 10,000-50,000. “If you keep hundreds of thousands in savings accounts or CDs, checking remuneration won’t be a good alternative for them,” he says.
Read the fine print before registering
Tumin says there are a few things to notice about the fine print. While most reward checking accounts are free, some banks may charge a monthly service fee. “You might be able to avoid being charged by meeting the activity requirements,” he says.
In addition, many banks and credit unions expect you to use their reward checker as your primary account. “If they see that you are meeting the requirement to use a debit card with only small purchases, they could threaten to close your account,” he warns.
Other tricky moves to look out for are lowering the upper limit on the balance sheet and lowering interest rates. “The maximum balance on a single checking account for rewards was recently lowered from $ 35,000 to $ 10,000,” warns Tumin.
Alternatives to Account Verification Rewards
If you don’t like the debit card requirements, online banking, or lower balance limits, Thumin said, you might be better off with an online bank offering free verification and a high-yield online savings account. “Some online banks also offer CDs free of charge and standard CDs that can help you increase your income,” he adds.