Rewards checking accounts are increasingly popular with consumers, but does that mean they should take the place of traditional bank checking accounts? Considering the fees and restrictions attached, not always. Here’s a look at the pros and cons of rewards checking accounts.

For the uninitiated, bank reward accounts pay higher interest rates on your bank account deposits – higher than even longer-duration certificates of deposit. For example, BankingMyWay’s National CD Rate Tracker pegs five-year CD rates at 2.29% this week. And a quick glance at reveals a host of high-interest checking account deals that pay more than 4% APY.

Unlike a traditional CD, rewards checking programs give you easy access to your cash, and at higher rates by and large. That’s a big selling point these days for bank rewards programs.

But there’s a catch. With bank rewards checking, you have to qualify first. The bar isn’t exactly sky-high, but the things you have to do to get a banks rewards checking account may give some consumers pause.

For example, to join a plain-vanilla bank rewards account, you’ll likely have to:

  • Set up a direct deposit into the account.
  • Get statements online - no statements will be mailed.
  • Use your debit card at least 10 times per month (that’s the hard one for some people).
  • Agree to a deal where your account only earns interest on a portion of your total deposits, say $25,000. After that, the rate could well go down again.

How can you get the best rewards checking deals? Here are some ideas:

Look for a good track record. Banks like to offer “teaser” rates that they can yank whenever they feel like it. To get the best deal, look for bank rewards programs where interest rates are fairly stable over the course of the past six months to a year.

Don’t be afraid to go small. Local banks and credit unions are usually more aggressive about offering better rewards checking deals than their behemoth counterparts downtown. They do so to remain competitive. A bonus: by working with a smaller bank, you get to meet your customer service reps face-to-face. Any bank customer knows problems go away faster when you’re banker is sitting across the desk from you.

Read the fine print. Banks also like to hide rules and restrictions in teeny-tiny letters at the bottom of their marketing letters and Web site deals. Read each line carefully. You’ll find out what tripwires might be in place that could lock you out of your great rate deal, and you’ll also discover what hurdles you’ll need to clear to qualify.

Bank rewards programs, as long as you qualify (and stay qualified) can be a great deal for consumers. If you do your research, search for the best rates and check the legal details, chances are you’ll get your just rewards.

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