Some checking and savings accounts are now paying far more.
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When you see a rate like 7.5% — on a checking account no less — you might think: This can’t be, right? Well it can, but there’s a big (sigh) catch. (Though at least there is a silver lining: A number of savings accounts are now paying more than they have in a decade, and you can see the best savings account rates you may get now here).
The deal with the 7.5% offer
For those interested in becoming a checking account holder at Wisconsin’s Landmark Credit Union, you can earn 7.5%. But it’s only on up to $500 (beyond that, your money will earn an APY as low as 0.11%, in this particular account), and you must get direct ACH deposit minimums of $250 per month via payroll, pension or government benefit payments to qualify for that 7.5%.
Another major caveat? To join this credit union you or an immediate family member must live or work in one of several various counties in Wisconsin and northeastern Illinois. There is also a limit of one account per member.
While switching banks to earn $37.50 (that’s 7.5% of $500) over the course of the year isn’t worth it for most of you, Greg McBride, chief financial analyst at Bankrate, says these kinds of options may be worth it for some. For those who intend on storing more than $500, though, McBride says you may consider maximizing your interest earnings with a lower yielding account. “For example, earning 4% APY on a $10,000 balance generates $400 in annual interest earnings.”
If you meet the requirements, an account like Landmark may very well be one you may still consider, says Spencer Tierney, banking specialist at NerdWallet. In general, though, “a high-yield savings account is a much easier place to earn interest, with few to no requirements or fees.” (See the best savings account rates you may get now here).
(For his part, Landmark Chief Experience Officer Brian Melter says his bank has a variety of other products to appeal to different customers.)
Where can you earn more on your checking and savings — without too many hoops to jump through or other issues?
While major banks these days offer an average APY of just 0.1% for checking accounts, according to Value Penguin data, some pay far more. At La Capitol Federal Credit Union, for example, personal checking accounts offer a 4.25% APY on balances of up to $3,000. However that too comes on a sliding scale, ranging as low as 0.36%, depending on your account balance.
And at Consumer Credit Union, you can earn up to 5% APY on balances up to $10,000, according to the company website. Though this also comes with caveats — you must make 12 debit card transactions that clear in the calendar month, receive e-statements and e-documents, and have ACH direct deposits or remotely deposited checks totaling at least $500 every month.
“These types of high-yield checking accounts are available at many smaller community banks and credit unions,” and “you must meet whatever requirements — direct deposit, certain number of debit card transactions, online bill pay, or e-statements on a monthly basis to earn the stated yield,” McBride says. He adds that the most important thing is to “make sure your financial lifestyle is consistent with the requirements of that account. After all, having an account paying 4% where you only meet the requirements half of the time means you’re actually earning closer to 2%.”
Make sure it’s ‘worth the effort’
Tierney says anyone looking for the best rate must always consider the whole account’s offering. “If a rewards checking has a non-promotional rate that’s still higher than the national average for interest checking, that’s a perk,” he says.
Above all, reading the fine print is key to finding the best deal for your money, Tierney added. “The hoops to earn checking rewards might be hard to satisfy month after month, and what you actually earn might not be worth the effort. Check for fees, account requirements and rewards requirements such as any maximum balance for a rate.”
And while rewards checking accounts may be enticing, “they’re mainly useful if all other checking features work for you,” Tierney said. “Avoiding fees and having easy access to funds are more important for your checking.”
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