How to Earn Crazy High Interest on Your Checking Account
Finding a checking account that pays a decent amount of interest is a challenging process. According to the FDIC, the average rate is just .04%. If you keep about $10,000 in your account, that's only $4 per year!
Instead, try an option that helps you make 60 or 70 times as much interest: a Kasasa checking account (pronounced kah-sah-suh). Paying 3% annual interest and higher, these might be the best checking accounts around.
Kasasa is not a bank, but a financial services brand owned by BancVue. They created Kasasa accounts to help community banks and credit unions compete against the big banks. The company provides the basic technology and framework, letting the community financial institutions decide on the interest rates and modify the qualification rules in minor ways. The basic idea is provide consumers with free checking and other services and pay higher interest rates than the big banks.
The Fine Print
Of course, there are some catches (aren't there always?), so these accounts don't work for everyone. Most of them limit the high interest they pay to the first $10,000 or so, dropping the rate for any balance beyond that. You'll also usually need to meet three criteria to get the high interest rate for any given month:
1. Be signed up for e-statements (no paper statement by mail)
2. Have direct deposit of a paycheck or other income at least once monthly
3. Make a minimum number of debit card purchases monthly (typically 10 to 15)
For example, Kasasa Cash, a checking account offered by Iowa State Bank, pays a nice 3.25% APY on balances up to $10,000 for any month in which you receive an e-statement, have at least 10 debit card charges clear, and have a direct deposit or make an automated payment. If you normally use a debit card ten times monthly, you can easily arrange to meet the other requirements and earn 3.25% interest. On an average balance of $10,000 you would make $325 per year, easily better than the $4 an average account would pay. This particular account also pays 0.50% APY on any part of your balance above $10,000, which is 12 times better than the national average.
What if you don't meet the requirements? Let's say you only did eight debit transactions one month. In that case, there is not exactly a penalty, and you still have free checking, but your account reverts to a base rate for that month. For the account offered by Iowa State bank the base rate is 0.10% APY, which is low, but still more than double the national average. Then you'll go back to the higher rate as soon as you meet the requirements again.
If you find a Kasasa account through a credit union rather than a bank, you'll have to become a member. For some credit unions that's a simple as paying $5 to join whatever organization they were set up to serve. For others you might have to live in a certain area or work for a specified employer.
More Than Just High Interest
Kasasa accounts are specifically designed to provide cheap banking for customers, and you get more than just good interest rates. Usually you won't even need to maintain a minimum balance to avoid fees. In other words, you get free checking. With most qualifying accounts, the ATM fees for transactions outside of the system are completely refunded, so you don't have to worry about which ATMs you use to get cash. And Kasasa accounts are only available from banks and credit unions that are federally guaranteed (FDIC or NCUA insured up to $250,000), so your money is safe.
Kasasa has other account options as well. Some give you better cash-back rewards on debit card purchases instead of high interest, and Kasasa also offers savings accounts.
Where to Find Your 3% Checking Account
Just enter your zip code provider search tool on the Kasasa website and you'll find a list of community financial institutions near you that offer Kasasa accounts. Using their search box, I discovered a few near me. Unfortunately, the best one pays only 2.5% and requires 15 debit card transactions monthly. I don't use a debit card much -- my main problem with these accounts.
However, some banks only require ten monthly debits, and you can open an account online from anywhere. So why not look for 3% or better? Don't restrict yourself to your local area.
Unfortunately the Kasasa website only allows searches by state or zip code, and not by interest rate, so you have to do a bit of digging to see who pays the best rates. As mentioned, Iowa State Bank's Kasasa Cash checking account pays 3.25% at the moment, and a quick Google search yielded several Kasasa checking accounts that paid 2.5% or more.
Your Turn: What's the interest rate on your checking account, and have you used a Kasasa account before? Share your experiences below...