Congratulations on putting aside the equivalent of three to six months of your salary toward the family's emergency fund.
Too bad it's stashed in a rewards checking or savings account earning interest that, after a year, couldn't even buy a Green Tea Latte at Starbucks.
The average interest checking account nationwide yields 0.06 percent annually. In Greater Hartford, interest checking rates as low as 0.01 percent are not uncommon. But First New England Federal Credit Union, with a main office in East Hartford and several branches in the area, is among the banks, thrifts and credit unions in a recent survey by Bankrate.com that blows those rates out of the latte.
First New England Federal offers to its members, local and national, a checking account with a 1.01 percent yield, close to 17 times the national average. Consumers Credit Union of Waukegan, Ill., offers a retro 3.09 percent return on its Free Rewards Checking account. Two other credit unions, Great Lakes of North Chicago and Lake Michigan of Grand Rapids, Mich., have checking accounts available to consumers nationwide returning 3 percent.
"Interest rates continue to go lower," says Greg McBride, Bankrate.com's chief financial analyst, "but that's not what sets these apart. If it rains, every car in the parking lot is going to get wet, right? When rates move up, these yields are going to move up. When rates move down, these rates will move down too but they're still head and shoulders above any risk-free liquid cash option."
Each high-yielding account has basic requirements like electronic statements, direct deposit or auto debit. First New England requires only one direct deposit or auto debit a month. If you have a loan with the credit union, your checking account returns 2.01 percent.
To get those returns, banks want some action — multiple debit transactions each month. (For First New England, it's at least 12.)
"Some of these [requirements] are pretty low hurdles to clear," says McBride. "The key determinant in whether this account works for you is, Can you meet that debit-card requirement month in, month out? . . . This is not a one-size fits all."
Anyone who depends on a credit card, and its rewards, and rarely uses a debit card is a bad fit.
"There's a big difference between what you earn if you make 10 debit card transactions than if you make nine," says McBride. "If you fall just short of that mark, you're not earning that high yield. The yield you're going to earn is much like any other interest checking account, which is not very much."
If a First New England account holder misses one monthly qualification, maybe 11 debit-card transactions instead of 12, the interest return plummets to 0.05 percent.
The higher returns apply only to what banks call a balance cap. At First New England, it's up to $15,000. Any amount beyond that earns 0.10 percent.
"The whole point of these accounts is they want an engaged consumer," says McBride. "They don't want this to be hot money that's in the bank this month then going somewhere else next month.''
The best place to find higher yields, locally or nationally, remains at a community bank or credit union. Lee Bank of Lee, Mass., is among the banks in the Bankrate.com survey with the highest returns on accounts offered to customers nationwide with a 2.50 percent yield on a $15,000 cap with 12 monthly debit transactions. Also consider ATM fees when applying for an out-of-area account. (Lee offers refunds up to $25 a month.)
"If you can meet the requirements on a consistent basis," says McBride, "these high-yielding checking accounts are a slam dunk."
The Bank of the Wichitas has perhaps the most demanding requirement for a high-yield checking account available nationally. Its Rewards Checking account offers a 1.50 percent return — almost double the return on a five-year certificate of deposit — on a $10,000 balance cap with 10 monthly debit transactions. It has free ATM transactions and takes only a $1 minimum to open.
The account does not require bill pay, automatic withdrawal or direct deposit, but it says each account must be opened at a branch.
So if you're ever in Snyder or Cache or Medicine Park or Elgin, Okla. . . .