A new study on high-yield checking accounts shows that banks can do more than charge fees and serve as holding pens for your money as it slowly loses its value. Many of these accounts earn 3%, 4%, even over 6% guaranteed, though (of course) there are a few catches, and more than a few requirements.
Bankrate’s High-Yield Checking Survey for 2011 was just released, and overall, the yields from high-yield accounts aren’t quite as high as they were last year. In a survey of 155 banks, thrifts, and credit unions, the average high-yield account pays a 2.56% APY, down from 3.3% in 2010. Even though the numbers are down, high-yield accounts are still the “top-yielding place for federally insured, liquid cash,” according to Greg McBride, Bankrate’s senior financial analyst. After all, when compared to the typical checking account—which not only pays no interest whatsoever, but probably charges fees resulting in a net loss—any payback at all looks attractive.
While the high-yield account average is 2.56%, some accounts pay better than others. Bankrate lists the specifics, including, for instance, that checking accounts at Capital Bank, in North Carolina only, pay as much as 4.01%. To get that rate, a customer must meet the following conditions:
One direct deposit or draft, 10 debit or check card transactions, view your statement online, $500 or more average monthly checking balance avoids the $8 monthly service fee. Non-Capital Bank ATM fees refunded nationwide at the end of each statement cycle if monthly account conditions are met (up to $20 per statement cycle), unlimited transactions, monthly electronic statement includes free check images. Interest: 0.30 percent for balance over $10,000, 0.10 percent if conditions are not met.
These are fairly typical stipulations alluded to earlier. Another issue is that some of these institutions limit who they do business with (residents of certain states, for instance), though many offer accounts nationally. Beyond the annoyance of having to use a debit card a certain times every month—98% of high-yield accounts come with such a requirement—the most limiting part of a high-yield account payoff is the balance cap. The APY shrinks dramatically for the amount a customer saves above the cap limit. While the caps are usually $10,000 or $25,000, the institution that boasts the most impressive APY—Boeing Employees’ Credit Union, paying a whopping 6.17%—has a limit of only $500. That’s pretty much a joke, as is the fact that savers get a meager 0.10% APY on anything above $500 in their checking accounts.
In any event, if you don’t mind jumping through a few hoops each month—10 debit card purchases and direct deposit are typical requirements—a high-yield checking account is sure to earn you more than the no-yield checking account maintained by the typical bank customer.