Rewards checking account yields remain frozen. Here’s why

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When the Federal Reserve hikes interest rates, savers normally have to wait to reap the benefits.

After the central bank raised rates three times in the past year, some banks and credit unions gradually increased CD rates. Savings account interest rates have climbed too, at least for online banking customers.

Rewards checking account rates, however, have barely budged. Out of 45 banks and credit unions considered in Bankrate’s most recent high-yield checking account survey, only seven have adjusted their rates in the last 18 months.

Banks and credit unions offering high-yield checking accounts
Institution Account name Top APY Balance cap
Northpointe Bank UltimateAccount 5.00% $10,000
Consumers Credit Union Free rewards checking 4.59% $20,000
La Capitol Federal Credit Union All access advantage checking 4.25% $5,000
One American Bank Kasasa cash 3.50% $10,000
Lake Michigan Credit Union Max checking 3.00% $15,000
Great Lakes Credit Union Ultimate checking 3.00% $10,000
Evansville Teachers Federal Credit Union Vertical checking 3.00% $15,000

Why yields remain stagnant

Ryan Blankenship, associate director at Bellco Credit Union in Greenwood Village, Colorado, says uncertainty may be keeping financial institutions from bumping up rewards checking account rates.

“We’re not 100 percent sure which way everything’s going,” he says. “Things could continue to go up or, with some of the uncertainty around, things could stay the same or even kind of go back down. So I think everyone’s in a wait-and-see mode right now, just to see what rates are going to continue to do.”

While rewards checking account yields are at a standstill, they’re significantly higher than the interest rates tied to other banking products.

“These rates are already above-market compared to savings or CD rates,” says Bill Clancy, vice president of deposit banking at Northpointe Bank in Grand Rapids, Michigan. “Until we start to see savings and CD rates push up into the 2 to 3 percent range, I don’t expect much, if any, movement with rewards checking rates. And it’s unlikely we’ll see savings rates jump into the 2 to 3 percent range anytime soon.”

To find the best rewards checking account rates, you’ll likely have to turn to a local credit union.

“Credit unions — being member-owned financial co-operatives — focus on giving back to the members and the community where most banks have stockholders to answer to,” Blankenship says. “Credit unions give back by offering members higher interest rates on deposit products, lower, fewer fees, lower interest rates and supporting the community through charitable endeavors.”

The truth about high-yield checking accounts

In addition to providing attractive interest rates, high-yield checking accounts can help you achieve certain savings goals, like growing an emergency fund.

“Everyone that needs to have some type of an emergency reserve account could definitely consider these types of vehicles,” says Diane Pearson, a wealth advisor and certified financial planner at Legend Financial Advisors in Pittsburgh.

Of course, there are drawbacks to having a rewards checking account. There’s typically a balance cap limiting the amount of interest you can earn. Northpointe Bank’s 5 percent APY — which is currently the nation’s best rate — only applies to balances up to $10,000. Beyond that, you’ll earn 0.10 percent APY.

There may also be fees that can take a bite out of your earnings.

“You could end up eroding all of your interest just in monthly maintenance fees,” says Douglas Boneparth, president of Bone Fide Wealth and co-author of “The Millennial Money Fix.”

Should you open a high-yield checking account?

Only customers who meet certain requirements — like setting up direct deposit, agreeing to receive electronic statements and using a debit card regularly — may be able to earn the highest yield.

In short, having a rewards checking account only makes sense if you can qualify for the top interest rate and any other rewards, like airline miles and sign-up bonuses.

Otherwise, you might as well choose an account that makes it easier to earn interest, such as a certificate of deposit. Compare today’s top CD rates and calculate how much interest you could potentially earn.

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