Jumping Through Hoops for Reward Checking

You’ve probably heard about reward checking by now, and maybe even wondered how a bank can advertise extremely high interest rates of 4% or 5% on checking accounts. Reward checking offers customers an above-average yield and often ATM fee rebates – if they jump through various hoops the bank sets up. Is jumping through these hoops worth the extra interest?

The Challenges to Earning the Higher Interest Rates

The exact challenges or hoops you’ll be expected to jump through to qualify for the higher interest rates offered to reward checking account holders will vary from one bank to the next. The general requirement is that an account holder must satisfy a list of restrictions and transaction criteria in order to qualify for the published, higher interest rate. If you fail to meet any of their criteria, your account simple earns the lower rate of a “free” checking account offered through the bank.

Examples of reward checking transaction criteria might include:

• making a minimum of 10 signature transactions per month with your debit card (meaning you use it like a credit card during check out and sign the receipt)

• have at least one direct deposit have at least one automatic-debit or online bill payment

• choose no-paper and receive statements electronically

• log into your online bank account at least twice each month

• higher interest rate applies only to a portion of your balance; while money over the
stated balance receives a lower interest rate

In order to accomplish the banks list of reward checking criteria, you would have to move most of your banking activities to the same bank. If you’re already using just one bank to manage most of your finances, this may not be an issue for you.

The bank knows that by creating a list of criteria or minimum transactions, not everyone will qualify for the higher interest rate. If everyone did qualify, the bank would lose money – so you know right away the reward checking rate may be difficult to obtain. Chances are, most people who sign up for the reward checking don’t pay attention to the requirements, forget, or mess it up in the process of trying to jump through the hoops to qualify.

Set Yourself Up For Success

If you’re going to join a reward checking account, you’ll want to set yourself up to achieve the interest rate. If you find making the minimum number of debit card purchases the hardest part to obtain (withdrawing money from the ATM doesn’t usually count), you can use the following strategy:

For your expenses that allow you to make free payments online in the amount you choose, break the bill up and make multiple, smaller payments to pay the bill. If your cell phone is $100, make ten payments of $10 each using your debit card as a credit card. You’ve satisfied your bank’s criteria and you’ve paid your bill off in full.

Until you get into the habit of meeting the criteria for your reward checking rates, just keep a close eye on the requirements and your banking habits to make sure you don’t miss out. After awhile, your banking habits will form to match what needs to be done to qualify and it won’t seem like such a hassle. The extra interest you earn over the course of the year will normally make you feel as though your efforts are worthwhile.