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Juan Novakosky /

Some savers want better returns than they’ve been getting recently as the economy improves and the rates flatten. Those discriminating savers should consider a lesser-known type of account called rewards checking.

While the best savings accounts are offering 1.00% APY, current rewards checking accounts pay out as much as 5.00% APY.

How rewards checking works

You can think of a rewards checking account as a free checking account (most rewards checking accounts have no monthly fee). When you meet a set of criteria, this free checking account transforms into an account that provides lucrative rewards, often in the form of a very attractive interest rate and ATM fee refunds.

Usually, such criteria consists of:

  • Monthly direct deposit
  • Sign up for paperless statements
  • Make a monthly online bill payment
  • Use your debit card 10-15 times per month

To many people, the criteria for rewards is seen as major hurdle. However, what they don’t realize is that they’re already meeting this criteria to earn great rewards. According to bank industry estimates, 70 percent of account holders qualify for rewards under these types of checking accounts.

Remember, even if the rewards criteria isn’t met, it still is a free checking account — which is difficult to find at major banks nowadays.

Where to find a rewards checking account

Rewards checking accounts are most common at smaller banks and credit unions — don’t walk into a branch of a national bank and expect it to offer one of these checking accounts. But, it doesn’t mean that you have reside close to these smaller financial institutions to get a good rewards checking account.

Northpointe Bank, based in Michigan, is an example of a community bank that offers a highly competitive rewards checking account. Northpointe makes the account available nationwide — you can apply online from any state.

Called the UltimateAccount, it starts off as a free checking account. But, you can get 5.00% APY on balances up to $5,000 (0.10% APY on the portion of your balance above $5,000) and monthly ATM fee refunds up to $10 when you meet this monthly criteria:

  • 15 or more debit card purchases totaling at least $500
  • Opt for electronic statements
  • Post a direct deposit or automatic withdrawal of at least $100

Just to give you an idea of the interest-earnings potential: On the first $5,000, you’ll earn $250 in interest per year.

To earn the same $250 with a 1.00% APY savings account (which is a pretty impressive in its own right), you’d have to maintain a deposit balance of $25,000.

Northpointe Bank’s UltimateAccount is just one example of the many rewards checking accounts out there — it just happens to be one of the most attractive choices at the moment.

Another noteworthy rewards checking account is Kasasa Cash from Hopewell Valley Community Bank, a local New Jersey Bank. The account offers 2.00% APY on balances up to $10,000. Its rewards criteria is a little more lax:

  • 12 or more debit card purchases
  • Enroll to receive electronic statements
  • Enroll into online banking

One more example is Redneck Rewards Checking from Redneck Bank (yes, it is a real bank). The account offers 1.50% APY on balances up to $10,000. All they ask is that the you:

  • Make 10 debit card purchase transactions
  • Receive all statements electronically

As you can see, the rates, balances and rewards criteria can vary from account to account.

Should you get a rewards checking account?

A rewards checking account is great as a checking/savings account hybrid, especially if don’t have a large amount of savings — but whatever savings you do have will earn a stellar interest rate.

Firstly, review the account statements of your existing checking to see if your spending habits are able to qualify for the great perks of a rewards checking accounts. Think you’ve got what it takes? Sign up for one!

Remember that most rewards checking accounts don’t have monthly fees. So, you can try one out risk-free.

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