Moving your money into the right checking account can earn an APY that’s 15x the industry average.
Flashy bank account sign-up bonuses are becoming harder to ignore. Citi and Chase, for example, are offering $2,000 for rolling your cash into a new checking account. But experts say that while these high-dollar figures should not be discredited, there is likely a better way to earn bigger rewards over the longer term, such as a high-yield savings account. Indeed, many of these accounts are now paying upward of 4% guaranteed, which is more than they have in about 15 years. See the highest rates you may get on a savings account now here.
But how do you choose between the high initial reward or the longer term high yield? The answer isn’t always cut and dry, says Ted Rossman, senior industry analyst at Bankrate. “Consider the amount of the bonus and the specific terms,” Rossman says, adding that there are questions with every bank offering you may need to consider. “Is there a waiting period before the bonus is paid out? How long do you need to keep the funds in the account before withdrawing them?”
And how do you know which bonuses are worth the effort? Of course, you have to be financially equipped to qualify. A huge $5,000 offer from Chase for opening a high-yield savings account seems great at first glance, however, a closer look at the fine print shows you need at least $1 million to qualify for that reward. And although you won’t need seven figures to qualify for the $2,000 sign-up bonus that comes with a Chase checking account, not everyone has the $250,000 minimum account threshold required to get in on the action.
There are also a slate of other bank account bonuses that are more modest and easier to qualify for. Take SoFi, for example. Opening a savings account with this online bank earns a $250 bonus after you’ve moved over $5,000 in direct deposits during a 25-day evaluation period. While that may not be nearly as flashy as some of the larger bonuses out there, it amounts to a near 5% return in a little less than a month of your investment. Yes, that is only a one-time bonus, but add that to a normal 3.75% APY that comes with a typical high-yield account — which would earn about $190.76 over the course of the year — and your first year really amounts to an 8.8% return, or $440.76.
““Finding a bank partner that makes your life easier and earns a competitive interest rate should be top-of-mind when creating your wealth-building plan.””
“Another way to look at it is that your $250 bonus was more than the interest you earned,” Rossman says, adding that “even after five years, you’d have more earnings in [an] account yielding 3.75% with a $250 introductory bonus than you would if you earned 4.5% for five years without an introductory bonus.” Another bank with a decent signup bonus now is Huntington Platinum Perks Checking, which has a $600 bonus for depositing $25,000 in a new Huntington checking account within 90 days.
Be ready to jump through hoops
Depending on the offer, most banks require various levels of activity or steps before receiving a cash reward: set up direct deposit, make a certain number of debit card transactions each month, or keep your funds with that bank for a set period of time, to name a few. MaxMyInterest CEO Gary Zimmerman says that banks often make customers jump through multiple hoops because they “are betting on the fact that some customers won’t actually meet all the criteria to earn the bonus.”
That said, Zimmerman adds that any “bank that’s offering the best rate today may not offer the best rate three months from now,” and that “it pays to shop around, not just once, but on an ongoing basis, to make sure you’re always earning the highest yield.”
More than just a bonus
Ben Reid, general manager at M1 Spend, says that although earning a few hundred dollars will almost always beat your interest earnings over the short term, there are additional considerations. “Finding a bank partner that makes your life easier and earns a competitive interest rate should be top-of-mind when creating your wealth-building plan,” Reid says.
If it’s high rates you’re after, interest checking accounts have an average APY of just 0.06%, however these high-yield savings accounts and checking-account combination deals can bring in an APY that’s more than 15x the industry average of 0.33%, according to the FDIC (Check out the full list here):
Varo Savings Account: 5.00% APY
Set up electronic deposits for your paycheck, pension or government benefits from your employer or government agency totaling $1,000 and ending the month with a positive balance in both a Varo Bank Account and Savings Account. Balances that don’t meet the requirements and additional balances over $5,000 will earn 3% APY.
Centier Bank, Connect Savings: 5.00% APY
Link your checking and savings account and Centier Bank will reward your efforts with a premium savings rate. Just be sure to make the minimum deposits and follow the steps in the fine print.
MySavingsDirect MySavings Account: 4.35% APY
The rate offered by MySavingsDirect remains one of the best in the high-yield savings account market. Just fill out your online application and get started.
Calculate the fees
Those gains are not invincible, however: Fees can often peck away at those potential gains. Although down 11% in the past year, the average checking account overdraft fee was still $29.80 at the end of 2022, according to Bankrate’s latest checking account and ATM fee study. Other levies that can take away from any interest gains? Out-of-network ATM transaction fees averaged at $4.66, their highest since 2019; and the average non-customer fee hit a record high of $3.14 per transaction at the time of the report.
That said, you should do your due diligence to see what fees are associated with enrolling in any bank account, Reid says. “You should assess all fees associated with the account and also estimate the amount of interest that will accrue over time,” he says. “By using an online calculator, you can compare any fees to potential earnings and determine whether opening an account will be worthwhile.”
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