Do You Have What it Takes to Earn 5% on Your Checking Account?

Reward checking. You have probably heard the term by now, but should you sign up for one? If you like the thought of earning 5.01% instead of 0.51% , maybe the answer is yes. A reward checking account is a FDIC-insured checking account that pays a higher rate of interest to customers who meet certain preset monthly requirements. Most banks limit the dollar amount to which the highest yield applies ( in many cases $25,000), although you can find reward checking account which pay the highest-tier yield all the way to $50,000 or even $100,000. So what’s the catch? The devil is in the details and for reward checking accounts the details can require a lot of diligence. Reward checking account requirements typically include some combination of the following:

- Receiving electronic statements

- Significant check card or debit card activity each month

- Receiving recurring direct deposits

- Paying bills online or setting up auto-debits

If you read through this list and are completely unfazed, then you are well-suited for a reward checking account. However, if conducting your banking online is foreign to you a reward checking account can be a major lifestyle change. The pressure to meet the monthly criteria can be significant. Who wants to earn 0.10% ( a typical rate for not meeting a bank’s monthly requirements) instead of the lush 4% and 5% reward checking rates that are available in most states? Probably not anyone. But just make sure you understand the banks will make you work for it. Check the MoneyRates.com Reward Checking Page for some specific information about rates and requirements on reward checking accounts.

If you decide that reward checking is not for you, chances are that you know someone who would relish the conversion to online banking. Even a college student who only keeps a few hundred dollars in their checking account could be a candidate. So even if you divine that you do not have what it takes to grab the high checking rate, let someone else know about it. Reward checking is here to stay. Make the banks pay.