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Turbocharge checking with high-yield accounts

Discouraged by the yields on CDs these days? It's time to check out high-yield checking accounts.

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Average yields* for three-month, six-month, and one-year CDs are, according to Bankrate surveys, 2.34 percent, 2.48 percent and 2.43 percent, respectively. Not much of a deal when inflation, by some estimates, is in the 4-percent neighborhood.

Even high-yield CDs are showing wear and tear from the economy. It's difficult to find many CDs paying 4 percent or better on Bankrate's High Yield CD page. CDs certainly deserve a spot in your portfolio if you have a ladder or funding need that requires locking a rate for a specific period of time. But if you can forgo the guaranteed rate, you'll find some excellent deals in these challenging times.

There are plenty of banks and credit unions offering at least 4 percent for online savings or online checking accounts. Plus, they're liquid and insured by the FDIC. Even though the rate can be cut tomorrow, many of the institutions offering these accounts say that's not their intent.

Online action rewarded
By far, the best bets seem to be checking accounts that reward customers for online behavior. For instance, Eastern Financial Florida Credit Union in Miramar, Fla., pays 6.01 percent on balances up to $25,000 if you use your debit card at least 12 times per month, agree to receive statements electronically, and have at least one direct deposit or electronic automatic transaction, such as bill pay, per month. Failure to comply with the requirements will result in an APY of 0.25 percent for that month.

"The product is designed for people who are doing a certain amount of electronic banking and using their debit cards," says marketing director Mark Holmes. "As long as you're doing that, you might as well get that high yield.

"We're going to hold the rate as long as we can. I know there are pressures from the Fed cuts, but the product is meant to be a very high-rate product. If it eventually has to move down, it'll still be high compared to other savings products."

Eastern's membership is open to people who live or work in various parts of Florida, or to their relatives. Many credit unions have opened their membership to geographical areas, which makes it much easier to join. Many online banks and credit unions, especially smaller and midsize institutions, are offering these accounts, and most of the banks accept applications from outside their area. Charter Bank in Albuquerque, N.M., is another institution paying 6.01 percent on its Turbo Checking, and the account is available online to anyone in the U.S.

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