High-yield checking: A good bet
When the economy is in a downward spiral and the federal funds rate is stuck between zero percent and 0.25 percent for the foreseeable future, you could reasonably assume that you're stuck with low-yielding deposit accounts if you want an FDIC guarantee.Our surveys show that the average yield for a three-month CD is 0.86 percent. Six-month CDs are paying 1.14 percent and you'll get about 1.37 percent if you sign up for a year. Money market accounts are typically yielding 0.49 percent, and interest-bearing checking accounts, a paltry 0.16 percent.
But there are high-yield checking accounts that continue to sport very good yields despite the low-rate environment. Checking is a particular brand, a product of BancVue in Austin, Texas. Company officials say their product was the first on the market, but other companies are now creating similar products for financial institutions, and some banks and credit unions are coming up with their own versions. (To find other high-yield checking accounts, search the Internet for "high-yield checking.")
In early 2008, REWARDChecking accounts often had a top yield of 6.01 percent. Currently, the top yield is 5.15 percent. The lowest rate we saw is 3.5 percent. While the yields will fluctuate, the accounts are always meant to be high yield.
"We will never allow anyone to come onto the site if their rate is so much above market that we don't think they can maintain it," says BancVue CEO Gabriel Krajicek. "If we think someone is trying to run a teaser rate, we pull them off the site.”
Requirements to open
These checking accounts are meant to be free -- no fees and no minimum balance to maintain. To open one you must abide by certain requirements each statement cycle. Traditional requirements involve using a debit card at least 10 times, access online banking at least once and have one direct deposit, ACH debit or online bill payment. If you don't meet the requirements in any given month, your interest rate will be significantly lower for that cycle, often no more than 0.5 percent.
Krajicek says the accounts are designed to help community banks compete against their larger brethren. When we first spoke with him in Nov. 2007, Krajicek said approximately 350 banks and credit unions were offering REWARDChecking. That number has now increased to 526 institutions with 912,000 accounts and just shy of $9 billion in deposits.
Some banks and credit unions choose to offer the product only in their local area, others allow consumers nationwide to sign up.
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