High-Interest Checking Accounts?

TehSloth

Hey, a colleague at work recently told me about "High-Interest Checking Accounts", a concept which seems absolutely ridiculous to me, but awesome nonetheless. I'm currently a 21-year-old student, so I don't feel like I have the money to be looking into any more serious savings systems right now, but I've got a pretty good part-time job/internship right now, and I don't know why I wouldn't want my money to be working for me. The requirements seem pretty reasonable, basically just use their card frequently (I don't have any credit cards, and almost never carry cash so that won't be a problem), make a direct deposit monthly which also isn't a problem, and go paperless which I prefer anyway. I'm sure some people would dislike the whole ATM fee refund business, but I don't think I've used an ATM other than to make deposits for quite some time.

A couple I've looked at include Coulee Bank and Florida Central. Until now, I've only ever had checking and savings with your standard mega-chain banks like Bank of America and currently Suntrust. Nothing against them really, these just seem like much better deals, and I was wondering if anybody has ever had any experience with these types of things, since I'm definitely worried about these. Can I trust them with my money? Is there some secret way they're planning on ripping me off like hidden-fees? Is it just some creepy guy in his mom's basement with a web-site that decided he wanted people to send him money so he can roll around in it, and then mysteriously disappear with my paychecks?

Darkewolfe

Will the high interest cover the times when you have to spend a buck fifty to get a money order because you absolutely have to have a check? (Possibly rent, insurance payments, random bills, etc.)

I would be completely paperless if I didn't have to pay rent with a check. The apartment complex charges 4% to run a card, though.

Hlubocky

Get a credit card while you are in school. I don't know if they are as easy to get as when I was in school, but I certainly had a tough time getting one when I was done. I had to apply for the student credit card to get accepted at all, even with proof of income. You have probably already heard it before, but there are fairly good reasons not to use your debit card... ever... for anything except going to the ATM. Maybe you are worried about spending over your means... which is a legitimate concern, but you will have to learn to be responsible eventually, and building credit now is good for your future.

EggyToast

So, there's no reason that those things shouldn't work. Interest-bearing checking accounts aren't that rare, and it sounds like they're giving you a decent incentive to have an account. Here's the catches, as far as I see them:

--Most people don't have much money in their checking account, so they don't anticipate actually paying much (which is why it would work).
--By using your debit card frequently, you will likely go through your funds quickly at the beginning of a month to ensure you hit the 10/12 mandatory uses of your debit card.
--If the company doesn't have any convenient ATMs and you need cash, you could go through the $20 (or less) refund in 4-5 transactions.
--Many small banks change or cancel deals that prove too useful to their customers.

If you meet all the criteria, the cynic in me says that this is a promotion and will be phased out in a year or so, leaving you with a relatively crappy account.


However, if you don't want to play around with requirements, you can open a Charles Schwab checking account. This link may not work, but it should go to the schwab.com site and to their banking page.

So the cool thing about Schwab's checking is they refund ALL of your ATM fees, with no limit. They also send you free envelopes to mail in deposits. They also give you access to many of Schwab's investment vehicles, giving you far more savings options. Finally, the interest rate is solid -- and flexible. So since savings rates are in the gutter, Schwab's is low too -- but it used to be over 2.5%, and will likely head back up once interest rates at other banks start climbing as well.

My wife has it and is a big fan. I keep my BOA account for my own purposes because we like having access to a teller in person for the rare occasion where it comes up.

Note that none of these accounts, including debit card use, does squat for your credit rating. It's just an electronic way of writing a check.

TehSloth

Hey, thanks for the replies! The Charles Schwab checking account is looking like a nice option, as I've actually heard of them. As far as needing paper checks, fortunately my apartment complex will take it directly out of a bank account, which is way better than when I needed to either find a check or run down to Publix and get a money order. My plan was also to leave a little money in my current Suntrust account since there's no minimum, and who knows when you might need a notary or something that a real bank can give you. I'll probably look into getting a credit card though. I've had one for a while that my mom gave me for emergencies, which I think I used once when the magnetic strip on my debit card went bad. I'm not sure how she has me on her account, or if it will at all help me, so it's probably about time to strike out and get one.

I think I bought into the whole scaring kids about how they'll ruin their lives with credit cards a bit to much when I was little, so I've avoided them like the plague, and I'm sure it hasn't done my credit any good.

Zyre

I've never been a member of a bank, been a credit union man my whole adult life. My CU offers an a checking account that generates interest, but you have to have a minimum of $500.00 in the account at all times, if you ever go below $500.00 they charge you a fee, which is way more than the interest you generate. I tried it for like six months and getting dinged every time I went below $500.00 was not worth it, so I switched back to a normal checking account.

I don't even use my checking account / debit card anymore. Direct deposit from work goes into the account, I charge everything on my credit card, pay it off to a zero balance when its due, move everything else into my savings.

I've never owned a checkbook or wrote a check in my life either - in any instance I've absolutely needed a check for anything I can write one online on my CU's website and they will mail it wherever I want, I don't even have to pay for postage.