If you are like any other hard working individual than you most likely have a checking account where you put your hard earned money. And, you probably use your debit card (which is attached to your checking account) to make a lot of your purchases. In doing so you should notice that every time that you make a purchase with your debit card the money is immediately taken out of your checking account and deducted from your balance. But what if you were able to earn interest on the money in your checking account? And what if that interest was compounded daily? Wouldn’t you want to leave as much money in your checking account for as long as possible? Well, there is a way to do this, which will result in some extra cash in your account each month along with some great rewards. It involves using a reward credit card and combining it with an online interest earning checking account. By doing this you will find that you have a lot of extra money to spend that you didn’t have before.
Online Checking Accounts
There are a handful of online checking accounts out there that offer interest on the money that is in your account. And these accounts might even save you even more money by eliminating some of the fees that you have with your traditional bank. Online banks are a little different than traditional banks in the fact that you do not have a physical bank that you can drive down the road to make a deposit or talk to a representative in person. But with most people using direct deposit and doing most of their banking online this shouldn’t be an issue. Online banks do not have the overhead associated with managing and maintaining thousands of branches around the country and they are able to pass on these savings to their customers in the form of interest.
Here are some of the main online banks and the interest that they offer on their checking account products.
- Balance below $15,000: 0.40% APY
- Balance above $15,000: 0.75% APY
- Balance below $50,000: 0.20% APY
- Balance between $50,000 – $100,000: 0.80% APY
- Balance above $100,000: 0.85% APY
- Balance under $10,000: 0.82% APY for the 1st year and 0.39% APY after that
- Balance between $10,000 and $25,000: 0.91% APY for the first year and 0.56% after that
- Balance between $25,000 and $50,000: 0.93% APY for the first year and 0.61% after that
- Balance between $50,000 and $100,000: 0.98% APY for the first year and 0.71% after that
- Balance over $100,000: 1.01% for the first year and 0.76% APY after that
Note: as of today the national average for interest earning checking accounts is 0.05% APY. So by placing your money in an online interest earning checking account you could be earning at least 4x the interest that you are earning with a traditional bank.
If you are looking to earn cash back from your checking account when you use your debit card than PerkStreet Financials checking account might be right for you. Instead of earning interest on your balance you earn cash back on debit card purchases that gets put right into your account. PerkStreet is an online-based bank that not only earns cash back on debit purchases but comes with some other great benefits as well.
Now that you know all of your options for online checking accounts you need to obtain a rewards credit card. By using a credit card you pay off your bill once a month, you leave all of your money in your checking account to earn interest. And since the interest on your checking account is compounded daily it can add up quickly. And by using a rewards credit card to do this you can also add in all of the rewards and benefits you get from your card on top of the extra interest you are earning. Rewards credit cards can offer anything from cash back to free travel trip and merchandise. All this for buying the same things that you use your debit card or cash to purchase.
By combining these two options of, an interest earning online checking account and a rewards credit card, you will see a lot more in benefits and rewards then by just using your traditional bank checking account and your debit card. With so many available options out there for both of these products you should look at everyday that goes by without utilizing these options as costing you money and the opportunity to earn some great rewards.
This guest post was written by Matthew Coan, founder of the personal finance website Casavvy.