Want 4% Guaranteed Returns? Give Reward Checking a Try

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Banks are trying everything they can to bring new clientele to their business.  In fact, they’re going as far as offering 4% interest on checking accounts, a banking product that generally yields less than a tenth of a percent, if anything at all.

How Reward Checking Accounts Work

Like reward credit cards, reward checking accounts offer benefits to those who make frequent use of their checking accounts.  To get started with reward checking, most banks require a minimum deposit of $25,000 and offer to pay 4% on the first $25,000, plus 1% on any amount over $25,000.  For fixed income investors looking for liquidity, this is an excellent deal.  Money market accounts are paying just a fraction of what rewards checking accounts offer.

There Are Some Catches

Alas, you will not earn 4% as easily as just depositing $25,000 into a checking account and letting it sit.  Most banks require that you make at least 10-12 purchases per month with a paper check or a debit card attached to the account.  This may seem like a large number of transactions, but for most people, it can be covered just by swiping your debit card for common purchases like gasoline, dinner, utilities and cable bills, and groceries once a week.  Most people will find they’ll hardly go out of their way to make 12 purchases with a debit card each month; you probably make that many without even trying!

Earn 3% More with Rewards

The average money market account with a $25,000 minimum currently yields just .99% per year, while rewards checking accounts are quickly topping 4% per year.  With such a differential, those who can slightly alter their spending habits, or can find the time to open a new account, should most certainly do so.  With such small requirements, as well as the chance to earn 4 times what you would be receiving with a similar money market account, it makes perfect sense to try out rewards checking.

Beware, though, that the rules are stringent, and you must meet the monthly requirements, or your benefits will be forfeited.  However, most should find the rules to be straightforward, easy to meet, and most importantly, rewarding!

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