Some Benefit From Reward Checking, Some Pay

Rewards checking accounts pay high interest rates on money in a checking account.

How do they do it? The bank requires you to jump through some hoops, with requirements such as:

• Minimum number of debit card transactions per month
• Paperless (statements, etc) relationship required
• Maximum account balance that earns the high rate
• Direct deposit into the account required

It turns out that about 20% of account users don't meet the requirements. As a result, they earn much less than the high rate they hoped to get.

Ken at Bankdeals highlighted how these accounts work and how the 20% who forfeit the rate help subsidize the more careful 80%. His posting includes links to articles with more detail.

If you're going to use a rewards checking account, make sure you can commit to the requirements - otherwise you'll just have one more account on the books that doesn't do you any good.

Further reading:

• How Reward Checking Works
• Debit Cards - Should You Choose Debit or Credit?