savings

5 low-risk ways to earn higher interest

Rewards checking can be, well, rewarding
Rewards checking can be, well, rewarding | Tetra Images/Getty Images

Rewards checking can be, well, rewarding

Racking up rewards on checking accounts can substantially boost your earnings.

FDIC-insured Northpointe Bank in Grand Rapids, Michigan, for example, offers an almost unheard of 5% annual percentage yield on balances up to $5,000. This nationally available account is among dozens featured on Bankrate.com's annual high-yield checking survey.

The trick is clearing the checking account hurdles, which can include meeting monthly minimums on the number and dollar amount of transactions, using online rather than paper statements and switching to direct deposit.

For any month in which you don't meet these requirements, you'll earn much less: a near-worthless 0.05% APY at Northpointe, for example. There's also no guarantee that rates won't drop after you open the account.

While you should check the disclosures on any rewards account to make sure monthly fees and other costs won't eat up your rewards, you shouldn't assume that these deals are too good to be true.

Rewards checking isn't a "gotcha" device, but a way for banks to encourage specific depositor behaviors, says Scott Hein, the Robert C. Brown chair in finance at Texas Tech University in Lubbock. He sees it as a win-win product for banks and their customers.

Another example: Discover Bank's rewards checking encourages depositors to use their debit card for purchases and pay bills online by rebating 10 cents for each of these transactions, up to $10 per month.

RATE SEARCH: Ready to shop now? Find a great checking account near you with the help of Bankrate.

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