Increase Your Yield with Rewards Checking

Right now, many people are concerned about their investments. However, at the same time, they want to be able to earn an inflation beating yield. One way to do this is to consider a rewards checking account. Rewards checking is a relatively new product offered by a number of financial institutions anxious to earn your business with the promise of higher yields on cash investments.

A rewards checking account works, for the most part, like a regular checking account. However, unlike most traditional checking accounts, you earn interest. You keep you money in the account, and the financial institution lends it to others at a higher rate of interest than you are being paid. The bank or credit union or thrift society ends up making money on the difference. Rewards checking accounts are offering between 3% and 4% yield on average. That is enough to beat inflation -- and even beat some of the other short-term investment returns being seen right now. For some local rewards checking accounts, though, the yields can be as high as 6%.

When you sign up for rewards checking, though, it is important to realize that there are likely to be some restrictions and requirements to take advantage of the highest yields. Make sure you read the fine print and find out whether you financial institution requires the following for rewards checking accounts:

Minimum deposit: You may be required to put in a minimum amount of money to open an account. In some cases, this might be as little as $100, although many rewards checking accounts require at least $1,000 as an opening deposit. Usually, though, the higher the deposit, the higher the yield.

Minimum account balance: It may be necessary to maintain a minimum amount of money in your account in order to earn the highest interest yield. Again, the higher the minimum, the higher your interest yield.
Sign up for electronic statements: Some companies require you to get rid of your paper bank statements in favor of electronic statements delivered to your email address.

Limit on withdrawals each month: You may find yourself limited to between three and six withdrawals a month (although using your debit card for purchases does not usually count in this tally).
Limit on number of checks written each month: Most rewards checking accounts cap your check writing to six per month. Many even require you to write no more than three checks per month.

Annual fees: In rare cases, a rewards checking checking account has an annual fee. Make sure that the annual fee does not cancel out your interest earnings before you sign up.

Signed debit purchases (like a credit card), instead of using your PIN: It is possible to use the "credit" option when you pay with a debit card. The money still comes out of your checking account, but it is treated by the store like a credit transaction. You may have to ensure that a certain amount of your purchases are done as "signed" purchases rather than PIN purchases to take advantage of the higher yields.

Disclaimer: I am not an investment professional. This should not be construed as investment advice. All investment carries the risk of loss. Before investing, do your own research and/or consult with an investment professional.