Maximizing Perks with Reward Checking Accounts

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What Is a Reward Checking Account?

A reward checking account offers perks and incentives when certain monthly requirements are met. These perks can include welcome bonuses, cash back, free checking, no service or ATM fees, high annual percentage yields (APYs), and even cellphone insurance. While there are many benefits, there are also some drawbacks. Let’s explore what a reward checking account is and how it can benefit you.

Understanding Reward Checking Accounts

While credit card rewards are common, some banks, credit unions, and online banks now offer bonuses and rewards on checking accounts to attract and retain customers. Most people use a checking account for everyday purchases or bill payments, often linked to a debit card for ATM use or purchases without checks. A reward checking account goes further by offering perks, bonuses, cash back, and more if you meet specific monthly requirements.

Unlike credit cards, payments for purchases are deducted directly from your checking account, so you are not charged interest on debit card transactions. Additionally, your credit score is not a factor when opening a reward checking account, although your banking history may be considered.

Pros and Cons of a Reward Checking Account

Pros

• Interest-bearing: Many reward checking accounts earn interest, allowing your money to grow faster. High-yield checking accounts often offer competitive interest rates above the national average.
• Opening bonuses: Some accounts offer bonuses just for opening an account, which can be $100 or more, subject to certain conditions.
• Widely available: Numerous banks and credit unions offer reward checking accounts, making it easy to find one that meets your needs.
• More difficult to overspend: Unlike credit cards, it’s harder to overspend with a reward checking account since you can only use the money available in your account.
• Debit card rewards: Some banks offer cash rewards for purchases made with your debit card, which can offset any monthly fees or minimum balance requirements.

Cons

• Account requirements: Most reward checking accounts have detailed terms and conditions. Failing to meet these requirements may result in not earning any rewards or perks.
• Debit card usage: Some accounts require a certain number of debit card purchases each month to earn rewards. Failing to meet these requirements may result in losing rewards or perks.
• Limits on multiple accounts: Some banks and credit unions limit the number of reward checking accounts you can have. Meeting the requirements for multiple accounts can be challenging.

How to Get a Reward Checking Account

The process and requirements for opening a reward checking account vary by bank. Generally, you need to fill out an application with your personal information and complete qualifying activities such as making a minimum deposit or setting up direct deposit.

Required documents may include a government-issued photo ID, driver’s license, birth certificate, and proof of address. Consider whether you prefer to manage your account online or visit a physical branch. If you choose a credit union, you may need to become a member. Evaluate the services, perks, and benefits that are important to you, as well as any potential downsides like fees or minimum deposit requirements.

The Bottom Line

Reward checking accounts can be a great alternative to standard checking accounts if you can meet the monthly requirements and prefer using debit cards. While temporary banking promotions are appealing, the long-term benefits of permanent rewards and perks are significant.

Remember, financial institutions do not report your checking account information to the major credit bureaus, so your account won’t directly affect your credit score. To keep your account in good standing, ensure you have enough money to pay your bills and monitor your credit regularly.

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