I see Reward Checking offered mostly by Community Banks and Credit Unions. It seems that these programs have been springing up around the country. But I agree that Reward Checking is looking better and better! I’m finding many of these programs are running 2-3% Better than Fed Fund Rates. How do these guys do it? Are they committing financial suicide to offer these programs? I’d appreciate it if you could investigate these questions and let us know please on your blog.

The banks get 1% to 2% of every debit card purchase. And if the customer doesn’t make the required debit card purchases, the high interest isn’t paid.

If the average customer has a balance of $5,000, and they average $1,000 of debit card purchases a month, the banks may be able to afford the high interest rate.

If the average customer has a balance of $25,000, and they average only $100 of debit card purchases a month, the banks will probably have a difficult time keeping the rates high.

Luckily, I think the averages tend to be closer to the first one. So hopefully, these high yields can be maintained.

Coulee Bank ( http://www.couleebank.net ) offers an incredible 6.01% APY with their Rewards Checking account. The rate is easy to earn. All you have to do is make 10 check card transactions a month, use e-statements, and do 1 automatic payment a month (they call it ACH). Coulee Bank pays 6.01% on the first $25,000 and 1.01% on anything above that. The best thing about this account besides the rate is it is FREE, you can apply online, and it is from a great bank with real people that answer the phone. And as they like to say, Banking Green has its Rewards. The Rewards Checking account saves paper and preserves our natural resources. No wonder I feel good about recommending this to everyone I know. Check it out. I guarantee you will love it.

Hmm, I’ve seen the same comment that Tony Roberts posted, word for word, on other sites. It makes it seem likely to be an advertisement designed to be misleading to people looking for other customers’ opinions. That doesn’t exactly inspire confidence, although it remains a very tempting rate. I wish I could find convincing positive feedback from more than one poster though.

I agree that some posts look like bank ads, so I will be straightforward and tell you I work for a credit union that offers the product. It’s my job to market it.

You make money to recoup costs in three ways 1) Debit Card Interchange income (around 1.25%), 2) Cost reduction by getting people to receive statements electronically, and 3) cross selling other products and services.

It’s usually about 80% of the people in the account that qualify any given month. That 20% that misses usually gets a default rate of around .1%…so that lowers our cost of funds to something closer to 4.5%.

More and more people are exploiting the system by running 1 cent debit card transactions through paypal in order to hit the qualifiers. So if anything brings down Reward Checking account rates, it will be those little deviants that exploit it.

Those of course are the same type of people that make it so that financial institutions need 10 miles of fine print to close every little loophole.