The Real High Interest Checking Account

The High Interest Checking Account Is For Real

Have you ever heard of those offers from time to time for checking accounts that pay up to 5% in interest? You've probably wondered if these could be for real - if there was a catch. As far as the catches go, there is one; but it isn't a big one. The 5% interest checking account offers, are ones you can really believe in to be the real deal.

There are more than 500 community banks and credit unions that deal in savings accounts with a checking option. More than 1 million banking customers have already taken advantage of their services. Your average everyday checking account with such a banking institution does pay you really generous rates of interest. The catch is that if you don't commit to use their services in a certain way, you forfeit all of that good interest. What kinds of conditions do they have for using their services? Typically, one requirement is that you will need to get their e-statements and use their direct deposit facility; and you have to swipe your debit card a given number of times each month. That's it.

These really aren't much of a restriction; put up with them, get with the program, and you stand to make the 4% of 5% they promise for up to $25,000 that you get to keep in your account. Anything above $25,000 that goes into your checking account, you earn only 1% on it. You get everything else that you do on any other checking account too, the government mandated deposit insurance included. Up to $25 in ATM fees are excused you each month too, and you don't have to maintain a minimum balance. There is practically no real sacrifice involved. Compare offers like these with your regular savings accounts that pay less than 2%, and it's practically a no-brainer. The best part is, that 5% interest checking account isn't some kind of shady offer. It comes to you from regular banking institutions.

So how exactly are they able to offer you a 5% checking account? Don't they lose money? Well, there are ways in which they make it back. Primary to their plans of making some money is their requirement that you use your debit card a stipulated number of times. Each time you swipe your card at a merchant's, Visa or MasterCard, that processes the transaction, will give the bank a portion of the fee that the merchant pays them. Also, when the bank offers these high rates of interest, it does so on new deposits; existing deposits don't make those high rates. So it isn't as bad as it looks for them.

And then of course there is the law of averages that applies. Not everyone is actually going to remember to keep up with all of the bank's rules to make that level of interest. Someone who only remains in keeping with those rules one out of three months, helps the bank save money, while it gets to still advertise those attractive high interest checking account offers. Offers like these may not really need to be around in a few years. The Federal Reserve is planning to raise interest rates on CDs in a couple of years. Once you have offers on CDs that pay as much, these checking accounts won't really seem like such a big deal anymore.