Banks Make Out on Rewards Checking

Bank investors are so desperate for a decent return on their money that more and more of them are turning to rewards checking accounts. True, you can get interest rates of up to 4% on rewards accounts, but there are some hurdles you have to clear to cash in.

But hurdles or not, the demand for bank rewards checking programs are on the rise. reports that the average U.S. personal checking account held $4,621.05 in December 2009. But the average rewards checking account holder has an average monthly balance of $7,700, according to

If you’re getting 4% or even 5% in interest from your rewards checking account, as many banks offer, that’s a significantly larger return than you’d earn with a traditional checking account.

Let’s take a look at the numbers: According to the BankingMyWay Weekly Interest Checking Rate Tracker, the average checking account interest rate is a paltry 0.132%. But a recent study estimates the average bank rewards checking account pays an average of 3.3%, and many banks pay better rates than that.

Bank rewards checking accounts also usually offer decent perks like free ATM transactions and free checks. They’re mostly covered by the Federal Deposit Insurance Corp., as well.

But then there are those hurdles. Banks use the high-interest gambit to force customers to trigger fees and revenues toward banks in other ways. For example, most bank rewards deals come with a caveat: the customer has to make a minimum number of debit card transactions each month to remain qualified for the higher interest rate. It’s no coincidence that every time you use your debit card, your bank collects an “interchange” fee that goes right to its bottom line.

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