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High-yield checking beats CDs

By Sheyna Steiner ·
Wednesday, March 21, 2012
Posted: 12 pm ET

You don't have to swing a very big stick to hit higher interest rates than those offered on CDs. Of course, not all alternatives match the safety of CDs either.

Still, CDs are incredibly unrewarding to savers these days. Last Friday, the Bureau of Labor Statistics released the consumer price index for February, which showed that the all-items index increased 2.9 percent over the past 12 months. The all-items index tracks everything consumers buy, the official CPI metric used by the government strips out food and energy, which puts the rate of inflation at 2.2 percent.

With the average five-year CD currently yielding about 1.14 percent, the math practically does itself.

Not only will CD buyers earn less than the rate of inflation, they pay a liquidity premium for the privilege by agreeing to keep their money in the CD for a specified amount of time.

One alternative to this unhappy state of affairs offers comparable yields with no hit to liquidity. But there are some strings attached.

High-yield checking accounts pay depositors a relatively respectable rate on their savings in return for using direct deposit, making a certain number of debit card purchases and using electronic statements and online banking.

A company called BankVue allows consumers to search for high-yield checking accounts offered locally or nationally. According to their site,, rates available nationally are as high as 2.3 percent on balances up to $15,000.

Last summer, Bankrate surveyed the high-yield checking field to see if the accounts still delivered on promises after years of low-yield battering.

In the story, "High yield checking down, not out in 2011," Claes Bell wrote the following.

The yield may have fallen on average from 3.3 percent last year to 2.56 percent this year, but in the context of record-low CD rates and bond yields, the average rate on a high-yield checking account can look pretty good to yield-starved savers.

While yields did diminish, the main change noted was the availability of nationwide checking accounts; only 27 are now available to people located anywhere in the country as opposed to locals-only.

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