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Going on Autopilot

Maximizing a rewards checking requires that you keep the account balance at or near the interest-earning limit. So, you must consider the monthly activity that will occur in the account because the balance will change with direct deposit, debit card spending and interest earnings.

Again, let’s use the rewards checking account that offers 3.00% APY on up to $10,000 as an example. If you start off with $10,000, post a $300 direct deposit, spend $15 on debit card purchases and earn $25 in interest, you’ll have $10,305 at the end of the month. There’s $305 that is not earning interest.

This is why it’s still important to maintain another account with a high interest yield -- most online savings accounts will fit the bill. At the end of every month, you should transfer out any excess funds to another high-yield deposit account.

To meet the debit card purchase requirement, you can buy small items (e.g., gum and candy) at convenience stores. In the digital world, you can use your debit card to buy single songs, TV episodes, games and other digital content that often cost less than $1. Unfortunately, there aren’t a lot of options when it comes to making small purchases that you can automate on a monthly basis. (Be aware that it can take a few days for a transaction to post to your account. You might miss out on interest if you make a debit card purchase near the end of the month.)

When an air-tight strategy is in place, you can control how much of a surplus you’ll have at the end of every month. In this case, you can set up an automatic monthly external transfer and ensure that you’re taking full potential of the rewards checking account and all other accounts.