For awhile, I had been thinking about opening a DollarSavingsDirect savings account for the 4.0% interest rate. Now that the DSD online savings account interest rate has dropped to 2.05%, I’ve been forced to look at other alternatives. All online savings accounts have taken a beating this year. ING is down to 1.50% and HSBC is down to 1.65%, neither of which is very enticing. I decided to take a look into high interest rate checking accounts.
What are high interest checking accounts?
High interest checking accounts are exactly what they sound like, checking accounts that offer a high interest rate. Some of these checking accounts offer interest rates as high as 5.25%. A checking account that offers an interest rate above 5%? I know what you’re thinking, “what’s the catch?” There are a few rules to follow. As long as you follow the rules though, you’ll be earning 5.0% on an account with check writing ability.
Rules for high interest checking accounts
There are some general rules or qualifications for high interest checking accounts. Not every high interest checking account has all of the following rules, but they all have at least one.
If you meet all of the qualifications, you will earn the high interest rate for that month. If you don’t meet all of the qualifications, you will earn some bare bones interest rate, which can be as low as 0.15%. Finally, each high interest checking account has a maximum dollar value that the interest rate applies. For instance, if the limit is $10,000, only the first $10,000 will earn the high interest rate.
How do the banks make money?
This was the first question that I asked when I heard about high interest checking accounts. How can these banks offer rates above 5.0% when other banks are all below 2.0%? The key for these banks is the minimum number of debit card transactions per month. The merchant you buy from will pay several percentage points in fees to the bank. These banks also save money by not mailing out statements, which is pretty standard these days.
I will be opening a high interest checking account in the near future. I’m not in a rush to open this account because I won’t have a whole ton of cash to earn interest on for the next month. I have a large number of payments in April and I’m transferring $5,000 into my Roth IRA. I have no problems receiving statements electronically or making a monthly direct deposit. The hardest qualification to meet is the minimum number of debit card transactions, but I go out to eat for lunch at work, so I should be able to make 10 debit card transactions per month. I’ll keep you all updated as I open my high interest checking account.
Does anybody else use a high interest checking account? If so, do you have a problem meeting the qualifications?
Did anybody catch my boy Night Train Lowe absolutely dominate the Phillies? 8 innings, 2 hits and 0 walks. Talk about domination. If Frenchy turns it around and Schafer plays up to his considerable talent level, it will be a fun season. I can’t wait to see the rest of the revamped starting rotation. PLAY BALL!
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