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When you think about bank accounts that help you earn more on your deposits, high-yield savings accounts, money market accounts, and certificate of deposit (CD) accounts typically come to mind. However, there’s one option you might not have considered: a rewards checking account.
A rewards checking account allows you to earn perks when you complete qualifying activities with your checking account. Sometimes, you may earn a percentage back on certain spending categories like groceries, dining, travel or fuel. There might be a sign-up bonus or a higher interest rate in other cases.
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Not all rewards checking accounts are the same, but here are some common benefits you can enjoy with rewards checking accounts:
- No monthly fees
- ATM fee refunds
- Free mobile banking
Traditionally, a checking account is used for routine transactions like paying bills and transferring funds between different accounts. When it comes to earning money with a checking account, most people leave that to other deposit accounts, like savings.
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Unlike credit card rewards, a rewards checking account can help you earn more on your transactions without the risk of going into credit card debt. Rewards checking accounts may be a good option if you don’t use credit cards or aren’t yet eligible for a rewards credit card.
Types of Rewards Checking Accounts
The most common types of rewards checking accounts are:
- Cashback checking account. This type of account returns a percentage of your monthly checking account transactions. Some banks may also offer a sign-up bonus when you open a checking account with them.
- High-yield checking account. This type of account rewards customers who maintain high account balances and use their debit cards at competitive interest rates (higher than the national average).
- Senior checking account. Some banks offer this to their older customers. These accounts may offer more interest, cash back or reimbursement of ATM fees.
Online checking accounts often offer a higher APY than brick-and-mortar banks. Online rewards checking accounts may also have fewer fees and require lower minimum balances to qualify for rewards.
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Cash back refers to a cash reward you get to your account after making eligible transactions from your account, like a debit card purchase or bill payment. It’s generally a small percentage of the amount of your purchase ranging from 1% to 5% of the transaction, though typical rates are around 2%.
Pros
- Low to no fees. These accounts often have no monthly fee or minimum balance requirement. Even if you don't earn a significant amount in terms of rewards, you can still score a free checking account with rewards accounts since many bank accounts charge monthly service fees.
- Cash back or other perks. Rewards checking accounts have the potential to offer many attractive perks that increase your bottom line. Cash back, higher APYs, sign-up bonuses, etc. are things to look forward to with these accounts.
Cons
- High APYs may require high balances. Extremely high APYs may only apply to larger balances in the thousands and upwards. The APYs may be tied to some accounts, allowing you to earn higher rates only on certain portions of your account balance. This structure can limit the amount you can earn from higher APY offerings.
- You may not meet the requirements. If some requirements regarding qualifying activities like account transactions, direct deposits, maintaining a certain balance, etc., are difficult for you to meet, then your rewards could be minimal.
A rewards checking account could be a good option if you want to earn cash back on your daily checking account usage. This type of account is a good deal if you can meet the eligibility requirements to earn these rewards.
Going this route, it’s important to consider the fees involved.
For example, if your rewards checking account charges monthly fees, this will cancel out what you get back in rewards. So make sure you choose an account that truly offers rewards at no additional cost to you.
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Tips to find the right rewards checking account
Finding the right rewards checking account is key to exploiting its perks, especially if you plan to use your checking account often. To choose the best rewards checking account, you should consider:
- Watch account fees and minimum requirements. A minimum deposit may be required to waive the monthly maintenance fees. You may have to pay a monthly service fee if you don't meet their minimum requirements. When getting a rewards checking account for a bank that charges little to no fees.
- ATM availability and network. Banks usually have fee-free ATMs but may charge a withdrawal fee if you use an out-of-network ATM. If possible, choose a bank with many fee-free ATMs nationwide or one that offers the most ATM-fee reimbursements.
- Minimal requirements to qualify for rewards. Look for offerings that require the least work for the most rewards. Try to find an account with no minimum deposit or balance requirements to qualify for rewards. When it comes to earning cash back, choose an account that requires a reasonable amount of activities to earn it.
- The digital banking experience. When choosing the bank to open your rewards checking account with, try accessing their online services through their website or mobile app. If you plan on opening an online checking account, choose a bank whose website or app can help you keep track of your rewards.
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