Top 9 High-Interest Checking Accounts For 2016

Think stashing money in a savings account is a waste of money?

  • The average savings account interest rate in 2016 was 0.06% APY
  • The inflation rate is 1.1%.
  • The savings accounts with the highest interest rates max out at 1.11% APY.

So, yes, you have a point. But don’t give up on checking accounts quite yet. This article reviews 9 nationally available high-yield checking accounts that will change your mind about checking accounts. Frist, a brief primer on high-yield rewards checking accounts.

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What Are High-Yield Rewards Checking Accounts?

High-yield rewards checking accounts are a less known investment that can earn you up to 5% returns on your cash. These accounts offer higher returns than savings accounts, CDs, and money market accounts.

High Interest Checking Accounts 2016 Graph

Source: FDIC May 31, 2016

What’s the catch? High returns are only paid on a certain amount: called the balance cap. Balance caps vary by bank or credit union. There are also certain requirements account holders must meet, such as opting for electronic statements, having a direct deposit, and making a minimum of 10 (or more) debit transactions a month. The secret is to stay as close to balance cap as possible to maximize the yield of your savings and ensure you meet the account requirements. Any month you do not meet the minimum requirements, you will not receive the higher yields.

How To Use High-Yield Rewards Checking Accounts

High-yield rewards checking accounts provide better returns than savings accounts, regular checking accounts, and CDs. True. There are some hoops you have to jump through and the high yield is usually restricted to $5k to $25k. Still, they generate 2x to 5x the APY of high-interest savings accounts, so the extra effort is well worth it. Although high-yield rewards checking accounts are not an alternative to a diversified retirement fund, they do provide important advantages that make them a valuable tool in anybody’s portfolio. Here’s why.

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High-Yield Checking Accounts, Emergency Funds, And Cash Drag

Financial advisors agree cash is a terrible investment. Once you calculate inflation, taxes, and the opportunity cost, you are losing money by holding cash in your investment portfolio. However, financial advisors also recommend having an emergency fund with enough cash to cover three to six months worth of household expenses. For the average American household, that means saving anywhere between $13,000 and $26,000 in cash, which is a serious chunk of change for most of us.

High-interest checking accounts provide a perfect solution for the cash drag vs. emergency fund dilemma. By depositing your emergency fund in a high-yield checking account, you have quick access to your savings (the whole point of an emergency fund) while still earning a solid 2.5% to 5% APY. Unlike stocks and bonds, there is no risk involved because your deposits are federally insured up to $250,000.

When done correctly, the savings you put in a high-interest checking account can balance, instead of dragging, your investment portfolio. Take last year as an example. 2015 was a bad one for my retirement fund. It wasn’t just me. Around 70% of investors lost money in the worst year for the stock market since 2008. My fund is mainly invested in stocks (90%) and bonds (10%) and generated a negative yield of -2.5%. Ouch. On the other hand, my emergency fund, which I have parked in a couple of high-yield checking accounts, generated a tidy 3.5% APY.

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Follow these guidelines to make the most out of your high-yield checking account

  • Only open as many high-yield checking accounts as you can realistically manage. Consider two or three as a reasonable limit. Remember you need to make 10 or more debit transactions a month and set up automatic payment/direct deposits. The time involved in managing these accounts adds up fast.
  • Make sure one of your checking accounts allows you to transfer funds as direct deposits for free. If not, you may struggle to meet the “direct deposit” requirement. Some financial institutions accept PayPal and other money transfer services as a direct deposit.
  • Never spend money just to meet the minimum requirements. It will negate the interest you are making from the high-yield accounts.
  • Stay as close as possible to the balance cap to maximize your interest returns.

 

Banks — Best High-Yield Rewards Checking Accounts For 2016

This list breaks down the top 5 bank accounts offered nationwide with the highest yields. It also includes the requirements you must meet, and any restrictions you should consider. Good hunting.

Northpointe Bank
Northpointe Bank high interest bank account

APY: 5%

Number of Debit Transactions Required: 15

Balance Cap: $5,000

 

Northpointe Bank is based in Grand Rapids, Michigan, and offers a 5% APY on its Ultimate Account. The catch is that it has a balance cap of just $5,000. Hey. That is still $250 a year. Anything above $5,000 earns 0.1% APY, which is still ten times better than what Chase, Wells Fargo, and Bank of America offer. To qualify, you must make 15 monthly debit transactions, have bill pay and direct deposit (minimum of $100 a month), and opt for e-statements.  As a bonus, Northpointe Bank offers a monthly $10 refund on ATM fees for customers that meet the requirements. If you don’t meet the requirements your savings will earn 0.05% APY.

Ouachita Independent Bank

Ouachita Independent Bank high interest bank account

 

APY: 3.01%

Number of Debit Transactions Required: 12

Balance Cap: $15,000

Ouachita Independent Bank is based in Monroe, Louisiana, and offers a 3.01% APY on its OIB Reward Checking. The balance cap is $15,000, which translates to $450 a year. Anything above the cap receives a 0.25% APY. There is a catch that may be a deal-breaker for some. Although this bank account is available for people throughout the United States, customers must open it in person. Ever caught a game at the University of Louisiana? Go Warhawks! To qualify for the higher yield, you must also make 12 monthly debit transactions, opt for e-transactions, and have a monthly direct deposit or Bill pay. If you don’t meet the requirements, your savings will earn a 0.05% APY.

Main Street Bank

MAIN STREET BANK high interest bank account

 

APY: 2.25%

Number of Debit Transactions Required: 12

Balance Cap: $25,000

Main Street Bank is based in Bingham Farms, Michigan. It offers a 2.25% APY on its Kasasa Cash with a balance cap of $25,0000. Anything above $25k will earn 0.25% if you meet the account requirements. To qualify for the higher yield, you must make a minimum of 12 monthly debit transactions, have either a direct deposit or an automatic bill payment, and opt for e-statements.

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It’s worth noting that Main Street Bank may close or convert your account to an account with a lower yield if you don’t use it as your main checking account. In other words, if all your purchases are for $1 or you wait to the end of the month to use your card, they may suspect that — gasp — you are only using the checking account for the rewards. Customers who meet the minimum requirements receive ATM fee refunds. However, if your ATM fees exceed $4, you must present receipts to the branch.

Cross Keys Bank

cross keys bank high interest bank account

APY: 2.05%

Number of Debit Transactions Required: 12

Balance Cap: $10,000

 

Cross Keys Bank is based in St. Joseph, Louisiana, but has branches throughout Northern Louisiana. What is it with Michigan and and high-yield bank accounts? Cross Keys offers a 2.05% APY on its Cold Key Rewards Checking with a balance cap of $10,000. Anything above $10,000 will earn a 0.35% APY. On months that requirements are not met, the account yields a 0.05% APY, and customers must pay a $25 fee per statement cycle and a $5 Bill-pay fee (Bill pay is not a requirement though). To qualify for the high yield and avoid the fees, you must make 12 monthly debit transactions, have either a direct deposit or an automatic payment per month, and opt for electronic statements.

All America Bank

All America Bank high interest bank account

APY: 1.5%

Number of Debit Transactions Required: 12

Balance Cap: $10,000

 

All America Bank is based in Oklahoma City, OK. It offers a 1.5% APY on its Ultimate Rewards Checking account with a balance cap of $10,000. Anything above the $10k cap earns a 0.5% APY. Half that (0.25% APY) if you don’t meet the account requirements. The requirements are easy to meet. Just make 10 monthly debit transactions and accept e-statements.

Why Haven’t I Heard About These Banks?

The banks that offer the highest interest are not household names. The financial institutions that offer the bank accounts with the highest yields are community banks and credit unions. Don’t worry. The banks on this list are all insured by the Federal Deposit Insurance Corporation, FDIC. Your savings (up to $250,000) are as safe as if they were deposited in any other bank.

Credit Unions — Best High-Yield Rewards Checking Accounts For 2016

Do you prefer credit unions to banks? No problem, so do I. Credit Unions also have high-yield checking accounts, and they are federally insured up to $250,000 by the NCUA. If you’re looking for a high-interest checking account, it may be a good idea to see what your local credit union has to offer. I get a 4% APY from my local credit union, Option1 CU,  but they are not available nationally. The following credit unions, however, are available to consumers throughout the United States and offer yields ranging from 2.5% to 4.59% APY.

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This list breaks down the credit union checking accounts with the highest yields offered nationwide. As we did with the banks, the list also includes the requirements you must meet, and any restrictions you should consider.

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Consumers Credit Union

consumers credit union high interest credit union checking account

APY: 3.09% to 4.59% APY (Tiered APY)

Number of Debit Transactions Required: 12

Balance Cap: $10,000

 

Consumers Credit Union is based in Waukegan, Illinois, and offers a tiered APY on its Free Rewards Checking account.

  • Customers who meet the necessary requirements receive a 3.09% APY. That is, they must make 12 monthly debit transactions, opt for e-statements, and have either one direct deposit, one automatic debit or Bill pay.
  • Customers who meet the basic requirements and spend $500 in credit union VISA purchases can get a 3.59% APY with a $15,000 balance cap.
  • Customers who meet the basic requirements and spend $1,000 or more on VISA purchases receive a 4.59% APY with a balance cap of $20,000.

Great Lakes Credit Union

great lakes credit union high interest credit union checking account

APY: 3% APY

Number of Debit Transactions Required: 10

Balance Cap: $10,000

 

The Great Lakes Credit Union is based in North Chicago and offers a 3% APY on its Ultimate Checking account with a $10,000 balance cap. To qualify, customers must make a minimum of 10 debit card purchases per month ($100 or more), have a $500 direct deposit, pay at least one bill per month through Bill pay or log into the credit union’s mobile banking platform once per month. ATM fees are also refunded when minimum requirements are satisfied. On months where they are not, customers receive no interest and must pay $5 per statement cycle.

Lake of Michigan Credit Union

lake_michigan high interest credit union checking account

APY: 3% APY

Number of Debit Transactions Required: 10

Balance Cap: $15,000

 

The Lake of Michigan Credit Union is based in Grand Rapids, Michigan, and offers a 3% APY on the first $15,000 you deposit in its Max Checking account. Didn’t I tell you about great checking accounts and Michigan? The minimum requirements to receive the high yield are 10 monthly debit transactions, logging into the account at least four times a month, a direct deposit (a PayPal deposit will work), and electronic statements. Anything above the $15k balance cap does not receive interest. The same applies to months customers don’t meet minimum requirements.

CapEd Federal Credit Union

capEd Federal Credit Union high interest credit union checking account

APY: 2.5% APY

Number of Debit Transactions Required: 12

Balance Cap: $10,000

 

 

CapEd Federal Credit Union is based in Meridian, Idaho, and offers a 2.5% APY on its High Yield Checking account up to $10,000. Anything above $10k receives a 0.2% APY. The requirements are 12 monthly debit transactions, either a direct deposit or an automatic payment per month, and e-statements. Customers that satisfy minimum requirements also receive up to $25 in ATM fee refunds.

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