The good rates on high-yield checking accounts come with stipulations. Account holders typically have to meet a number of conditions, such as making 10 debit card transactions a month, signing up for direct deposit or enrolling in electronic statements.
If a consumer does not meet the requirements, the rate on the account falls to an average of 0.06 percent -- about the same as a normal checking account interest rate.
McBride says consumers should understand their banking habits before deciding whether a high-yield checking account is for them. He says if consumers have to radically change their banking behavior to get the account -- such as by learning to use electronic statements or starting to use their debit cards more -- this may not be a good fit.
Pay attention to balance caps
"As long as you meet these requirements, this fits like a glove," McBride says. He says the people who use high-yield checking accounts most effectively are those who use it like a savings account, meeting the requisite conditions but also keeping the balance as high as possible.
Most high-yield accounts have balance caps, meaning they pay the higher interest rates only up to a certain amount of money.
McBride says customers looking for high-yield checking accounts need to pay attention to these caps in deciding what's right for them.
The average balance cap in this year's survey was $17,009, a slight drop from last year's $17,102, with the range of caps as low as $500 and as high as $25,000, McBride says.
For instance, McBride says, the highest interest rate in the survey also has a cap of $500.
"That won't put the most money in your pocket," McBride says. "You're better off with an account that pays 2 percent up to $25,000, if you have $25,000 to put into the account."
Fewer high-yield checking accounts are available
Interested? Hang on: You may not be able to just walk into your current bank and ask for high-yield checking.
"High-yield checking accounts are much harder to find today than a few years ago," says Ron Shevlin, a senior analyst with Boston-based Aite Group.
He says fewer banks are choosing to offer these high-yield accounts, in part because of the low interest rate environment and in part because the profitability of such accounts has fallen, thanks to government regulations that cap how much banks can earn every time a customer swipes a debit card.
"The economics of the industry simply can't support a high-yield checking account right now," Shevlin says.
Gabe Krajicek, CEO of BancVue, a company that works with financial institutions to offer high-yield checking, says some banks balk at the idea of such an account.
"I see a lot of bankers get spooked about offering 1.5 percent or 2 percent in this interest rate environment," Krajicek says. "Then, they shut it down."
Rewards checking: Still offered by small banks
Still, McBride says high-yield checking accounts are out there.
"For every one that disappears, there's no trouble finding another one that's cropped up in its place," he says.
In general, these are not offered by the big banks. Rather, smaller community banks and credit unions offer this product. They use these accounts to grow deposits and compete with much larger competitors for customers, McBride says.
Of the accounts Bankrate surveyed, 38 percent are available nationwide with no limitation, while 12 percent are available nationwide but require certain conditions such as a charity contribution, a credit union membership or an in-branch signature.
BancVue's Krajicek says that high-yield checking still can help community banks earn money, and he says these accounts also are good for consumers.
"The biggest reason consumers don't use them is because they're not fully aware of how awesome they are," Krajicek says.