By Sabrina Karl
Among the pandemic’s many consequences is the tanking of bank interest rates, after the Federal Reserve dramatically dropped rates last March. As a result, it’s hard to earn much on your money in the bank, and even worse, this is likely to continue for a few years.
Fortunately, those who use a debit card regularly, or who are willing to get in that habit, can earn relatively substantial interest with something called a rewards checking account.
How much can you earn? While the highest-yield nationally available savings accounts are currently paying about 0.70% to 0.80% APY, multiple rewards checking accounts across the country are paying upwards of 2.00% APY, and some even above 3%.
What’s the catch? First, these accounts always have a maximum balance that can earn the highest rate. A common cap is $10,000, while some accounts allow more. The most generous usually tap out at $25,000.
Second, you have to earn the higher rate each month by undertaking certain transactions. Primarily, these are debit card purchases, with each bank specifying a minimum number of qualified debits. They might also require a direct deposit, bill payments from the account, or an ACH deposit coming into the account.
Part of the catch is that when you meet the requirements for a given month, you’ll earn the high rate. But miss the mark and you’ll earn close to zero that statement cycle. So there is a bit of monitoring required to make sure you hit the target every month.
But for those who already use a debit card regularly, these requirements could be very easy to meet. And for others, regularly shifting some purchases to a debit card might also be easy. In either case, making the switch to rewards checking could become a potentially lucrative new habit.