Posted by Chuck on February 6, 2019
High-Yield APY Accounts

Published on February 6th, 2019 | by Chuck

92

What’s the Best High-Yield APY Checking Account Option?

Checking accounts typically offer an interest rate of near zero, which leads most of us to keep funds in a high-yield savings account instead. Someone who likes/needs to have quick access on large amount of funds from their regular checking account can use the two account method. Open a checking and savings account with a bank like Ally or Discover or some others, keep all liquid funds in the savings account, and make an instant transfer to the checking account when needed.

We once wrote that from all the high-yield accounts, there’s only one checking account with a decent yield. That’s the Memory Bank 1.60% checking account. And I wrote a follow-up post when Memory Bank began maintaining an attractive money market account with an interest rate near the top of all available accounts. That makes it a nice place to keep funds longer term.

Readers have pointed out a few other options for those who like to keep a high amount of liquid funds available in their regular checking account:

  1. Reader Tim suggests using Ally checking as your regular checking account, and keep all your funds in the linked Ally savings account (current interest rate is 2.20% on that). Enroll in the overdraft auto-transfer, and it’ll automatically pull any funds needed to cover checks or debits made on the checking account. Reader Arch notes that you can do a similar setup with Discover as well. Just keep in mind there is a limit of 6 withdrawals per month from a savings account.
  2. Reader Jeremy and David H tell of another option which is to use the Fidelity Cash Management Account as your main checking account. You can keep your money in the Fidelity Money Market Account, such as SPRXX (has recently been earning over 2% APY), and use the Fidelity ‘sweep’ option to automatically pull funds out of the money market fund to cover any debits or checks in your cash management account. Fidelity also has some nice ATM benefits as well.
  3. We recently wrote about the SoFi Money hybrid checking/savings account which (currently) earns an interest rate of 2.25% APY. They used to require spend and deposits to get that rate, but no longer. That makes them a terrific option to use as your regular checking account; much higher than the Memory Bank 1.6% rate.
  4. Readers note in the comments here that there are some checking accounts with requirements that offer a high yield on a limited amount of funds. If the requirements aren’t difficult for you and the limit works for you (in other words, you aren’t looking to  hold a very large balance), these could be even better the previously mentioned options since the rate or return is often  higher. The best examples would be the Orion FCU 4% rewards checking account on balances up to $30,000 or the Heritage Bank account which  is available nationwide and offers 3.33% APY rewards checking account on balances up to $25,000. Both require and ACH/DD and some debit transactions to get the rate.



92
Leave a Reply

avatar
 

  Subscribe  
newest oldest most voted
Notify of
PK
PK

Ally savings has limit of monthly 6 transactions out of savings account. after that you will hit a fee.

arch
arch

That policy is industry wide due to regulations but if you can go in branch there are no limitations. Of course, not applicable in an online only bank

MisterBill
MisterBill

I’m really surprised that rule is still around. Is it something that the banks like to prevent people from using the account for overdraft on a regular basis?

Asad
Asad

It is a federal regulation, not merely an industry standard or policy.

A savings account has interest rate incentives in order to keep money in the account (saved) and in order to be flagged a savings account as such, certain rules must be followed. A checking/MM account is expected to have more transactions, or more specifically in this case withdrawals, occurring during a monthly period. You choose the appropriate account for your needs and purpose. If you have a savings account and go over 6 withdrawals in a month then in addition to fees, after breaking this rule your account may be terminated or switched over to a checking/MM

Snorlax
Snorlax

It’s about how the SEC classifies different types of accounts.

sechs
sechs

Reg D is a Federal Reserve rule.

Financial institutions account for money in “savings” and “transaction” (i.e., checking) accounts differently towards their reserves. Banks do not have to have as much cash on hand to cover savings withdrawals as they do checking. This means that they can lend more money against those deposits.

For those who do their every day transactions out of a bank account, the limit slows those people from drawing down their accounts and causing problems for the banks’ liquidity.

I do nearly all of my transactions on credit cards, and, so, do not need to make so many bank withdrawals that I cannot keep my money in savings all of the time.

Ferris
Ferris

It’s a Federal Reserve Regulation (different than SEC Reg D) called Regulation D. Part of it is meant to curb improper usage of accounts. If you’re withdrawing money 10 times out of a savings account, that doesn’t make any sense as you’re using it like a checking account. It also hurts banks funds predictability on their reserves, making the liquidity of the country arguably less stable.

Snorlax
Snorlax

Thanks for the correction on Federal Reserve/SEC, total brainfart, lol.

MisterBill
MisterBill

What about Heritage Bank with 3.33% for balances up to $25k? Granted there are some hoops to jump thru, 10 debit card transactions, one direct deposit and you need to login once a month.

For Fidelity, if you can get $100k in cash in your account you can buy into FZDXX, Fidelity Money Market Fund – Premium Class. It has a current 7 day yield of 2.37%. Once you make the initial purchase (which has a $100k minimum), the balance can drop lower. SPRXX’s 7 day yielld is 2.27%, so not too much of a difference I guess.

Mike Advantage
Mike Advantage

By the way, maybe now is a good time to ask whether anybody has 3 of these Heritage Bank accounts open? I’ve had two of the accounts (each one up to 25k) open for several months. I’m kind of wondering whether Heritage Bank would let us open a third one?

Andy
Andy

I have had 3 Heritage accounts for some time now. No problem whatsoever.
When I spoke to the CSR before I opened them, they seem to indicate that any number of accounts was fine, as long as you met the qualifications for each one individually.

Rolando Gonzalez
Rolando Gonzalez

I never thought of that, that’s brilliant!

Norm
Norm

I had two accounts as well until recently when I opened an additional two accounts. No problem. Interest is being paid at 3.33% on all four accounts

Johnz
Johnz

5 works, was thinking of doing more but then heard about Orion FCU’s 4% for $30K

John
John

Yeah, have several accounts at Heritage, along with other 3% accounts with Lake Michigan ($15K limit/account) and Evansville Federal Teachers ($25K). Can have multiple accounts at each. Takes a half hour once a month to make all the debit payments, but otherwise easy accounts to setup/maintain.

TooLate
TooLate

Isnt Evansville capped at $20k ? When did they change it to $25k ?

Midnight
Midnight

Evansville is capped at $20k, Heritage is capped at $25k per account.

Jeff
Jeff

I’ve been using Heritage for almost a year now, and I have no complaints. Ten $.50 Amazon reloads per account takes maybe two minutes, once a month. That drops the yield down to about 3%, but that still beats any other account out there I’ve seen. Their app is smooth and functional, and their customer service is really great, not that I’ve had to deal with them outside of signing up.

Jade
Jade

Why 10 transactions through Amazon Reload should drop down the yield from the proclaimed 3.3% to what you said “3%”? Should not they perfectly qualify you for the full rate?

Jade
Jade

I am asking for I just opened the account with them and planned to do the same (ten amazon reload) to meet the requirement. Thanks

Andy
Andy

I know of no reason that the Amazon reloads would drop your rate. You’ll see that before you meet the requirements, your account says 0.05%, and once you’ve hit the requirements it changes to 3.28%.

Andy
Andy

I use a combination of Circle Pay, Venmo, and Cash App to do the transactions. I never have to buy anything.

Oleg
Oleg

How are doing that?

Rolando Gonzalez
Rolando Gonzalez

You need an ACH transfer in, which is easily done by setting up automatic transfer from Discover for $25 every 1st of the month. If you do direct deposit, that’s fine and will count as ACH, but not entirely required.

Mathias
Mathias

This account is just available for U.S. Citizens online, so not an option for many…

Rick H
Rick H

The All America Bank Mega Money Market Checking account is a good option if you can limit yourself to 6 debits per statement cycle. The rate is currently 2.5% and is regularly updated. There are no special requirements (debit card transactions, etc.) to get this rate.

PK
PK

with 4 more transactions monthly you can earn 3% on Rewards checking. Ask them to convert existing account to rewards checking.

Judy Jones
Judy Jones

Yep, Good Old Redneck Bank!! I love them for up to $10K I am still doing the 10 transactions a month, mostly a buck in gas every time I fill up.

Rick H
Rick H

I don’t make 10 debit card transactions a month and don’t want the hassle. The Mega Money account is good for 2.5% up to $50K and has no minimum transaction requirements. It’s a good place to keep cash to pay off reward credit card statements.

Snorlax
Snorlax

“Enroll in the overdraft auto-transfer, and it’ll automatically pull any funds needed to cover checks or debits made on the checking account. Reader Arch notes that you can do a similar setup with Discover as well.”

This is bad advice, or at least misleading advice:

1) You have to stay under 6 withdraws a month to comply with Regulation D, so this needs to be mentioned. Even if you get all the fees waived (going over Regulation D limit often is penalized with fees), if you go over the limit many times banks *will* close your account, they are basically legally required to.

2) You’re still overdrafting and that’s generally “bad” or at least should be an infrequent occurrence. Depending on the bank, frequent overdrafting may lead to account closure because they may consider it a risky behavior.

3) You will be reported as an overdrafter to varies data brokers: I used this feature with Discover once and my Early Warning Report (https://www.earlywarning.com/) reports my “last status” on my Discount Checking Account as “overdrafted.” Will this negatively effect me? I don’t know, but I wouldn’t risk it willingly.

4) Regulation D is there to prevent people using a savings account as a checking account. Behavior that turns a savings account into a checking account bypasses Regulation D so this by itself is grounds for account closure by itself if the banks notice.

Basically, there’s a legal difference between a checking account and a savings account.

Matt P
Matt P

Not to mention, if someone gets ahold of your atm card, they can drain a lot more if you have overdraft protection on.

Snorlax
Snorlax

For ATMS, most banks have an ATM withdrawal limit of a few hundred a day and they’d need your PIN too (not that there’s not ways to get that).

Of course, debit card purchases would be a problem.

Aferrell21
Aferrell21

Aspiration was great until they switched their back end from Radius to some credit union. Many of the places needed to pay bills for (Car payments,Wells Fargo, Target and Barclays) I used to have no problem did not recognize the new routing number. Aspiration told me to used a different routing number from some website and then the payments never went though and I was hit with late payment/returned check fees. I am currently doing battle with them to get these fees reimbursed but I have moved most of my money out and into the Hybrid checking with Radius. 1% interest, free checks, ATM fees reimbursed globally, and most importantly all of the places I need to pay bills at recognize the account and routing number.

Moral of the story: Stay way from Aspiration.

Snuupy
Snuupy

Watch out – they both have a 1% FTF.

playsgames
playsgames

The issue with the Fidelity option is that it has a .42% expense ratio, so the net interest is around 1.6%. Still much better than most banks, but be aware of it.

Charlie
Charlie

This is not correct; yield is reported net of expenses. From the Fidelity page for SPRXX: “The current yield reflects the current earnings of the fund, while the total return refers to a specific past holding period. The 7-Day Yield is the average income return over the previous seven days, assuming the rate stays the same for one year. It is the Fund’s total income net of expenses, divided by the total number of outstanding shares and includes any applicable waiver or reimbursement. Absent such waivers or reimbursements, the returns would have been lower.”

This is true of basically every fund provider; I’m not aware of any exceptions. For more examples, compare the SEC yield reported for Investor and Admiral share classes of Vanguard fixed income funds. They have the same underlying fund but different expense ratios, so the SEC yield is higher for Admiral shares.

PJM
PJM

The funds 2.xx% 7-day yields are net of expenses. Fund and ETF returns are always reported after expense ratios have been deducted. This is most likely the reason the Vanguard funds offer a slightly higher yield.

miafll
miafll

You dont understand how MMF report their yields. Go back to read the prospectus and how the funds report yields.

It is NET of any expenses.

tidefan123
tidefan123

I do something similar to the Ally method, but I don’t have overdraft auto-transfer on, I just pay my CC bills once a month and send over the money that is needed at that time. Works similarly, but I have more control. I keep a little in checking for any Venmo transfers or checks.

James king
James king

Fwiw Redneck Bank has 3% for 10DC purchases a month. That’s not bad at all.

Dan
Dan

You really opened your account for the debit card, right?

Snorlax
Snorlax

As far as the Fidelity money market option goes: you can buy money market funds in your Cash Management account. Money invested in money markets funds are counted as “available for withdraw” and the securities are automatically sold to cover debts against the account. For example, if you had zero dollars in the FDIC Sweep Fund and $1,000 in money market funds, you could do a bill pay for $500 and $500 of the money market would be automatically sold and that would be automatically be applied to the bill pay. This doesn’t require any user action, so it’s basically the same if you had the funds in the FDIC Sweep. I have a friend who called to ask if the Regulation D max six withdrawals a month applied in this case, my friend was told that it didn’t because its a brokerage account. I don’t know if that’s bad information though, so take that with a grain of salt.

Anyways, this is kinda a pain in the ass to do though, because new money is automatically deposited into the FDIC Sweep so you’ll have to keep buying new money market securities every time money in deposited, which kinda defeats the purpose?

Caution: some money markets were frozen for withdraws during the 2008 financial crisis, so keeping your emergency fund in a money market account is a very bad idea since you’re most likely to need your emergency fund during a financial crisis. Also, I believe that money market funds aren’t FDIC insured.

So overall, I don’t think this is not a great option.

MXD
MXD

Money market funds will have SIPC coverage.

Lrdx
Lrdx

That coverage does not cover any market losses, it’s pointless to compare.

sechs
sechs

SIPC won’t protect you from the market.

Having lived through a number of money market funds breaking the buck, I’ll stick to my FDIC insurance.

Snorlax
Snorlax

Which only protects you from the brokerage going bust, not from market losses.

Lrdx
Lrdx

Do it at Vanguard, they don’t do FDIC sweep, it’s all money market funds by default. They also have better yields (lower expense ratios) than Fidelity.

Jeremy
Jeremy

Vanguard Advantage isn’t free and doesn’t have free checks after 50 checks. Only PNC ATMs are free. You are correct about better yields at VG though.

Ray
Ray

If you only use your Fidelity account for bill pay and not debit, set up direct deposit to your Fidelity brokerage account. Cash is automatically used to purchase a “core position” which you can choose from SPAXX or FZFXX (both have 2.03% 7 day yield). Any ACH withdrawal will automatically sell those for cash in order to make the ACH. The downside is that you’re not really supposed to use it for debit card purchases. You have to request a separate debit card for the brokerage account and I asked the rep if it gets the ATM fee reimbursement but only the cash management debit card does apparently. But since transfers from Fidelity brokerage to Fidelity cash management are instant then you can just use the cash management debit card and remember to transfer some money there for withdrawals.

Jeremy
Jeremy

+1

I’ve heard (though haven’t tried) that you can also have it automatically move money from your brokerage to your CMA account when your CMA account is below a certain amount.

John
John

Don’t need to remember anything. Designate the brokerage as overdraft protection and it’ll automatically transfer when needed.

Snorlax
Snorlax

Right, but this isn’t *too* different than setting your direct deposit to an Ally/Discover savings account and just opening an Ally or Discover checking account and doing the transfer at bill pay time since they are instant too.

Difference of course is Regulation D doesn’t apply to Fidelity brokerage and does apply to Discover/Ally; Fidelity has free ATM withdrawals everywhere and Discover/Ally doesn’t, but Discover/Ally are FDIC insured.

John
John

You can use your Fidelity brokerage account for overdraft protection. Deposits to the brokerage are automatically held in SPAXX (2.04%). No need to manually do anything.

Robert
Robert

New to this. Bought “YOU BOUGHT PROSPECTUS UNDER SEPARATE COVER FIDELITY MONEY MARKET (SPRXX) (Cash)” but I have not noticed any account value change since the purchase a week ago. Do they pay interest quarterly or annual?

DaveinAZ
DaveinAZ

I’ve been very happy with Memory Bank, joined for the $100 TaxAct bonus last year and stuck around. Transfers are very fast, max of 5 linked external accounts. I have direct deposits elsewhere, usually for bank bonuses, and sweep them the MB Money Market. Most of my payments are around the middle of the month, so easy to sweep funds from MM to checking and stay well under the 6 transactions per statement period.

SCULPTURE
SCULPTURE

How fast the transfers are from memory bank

DaveinAZ
DaveinAZ

3 days for transfers for recently added external accounts. After I had made 2 pull transfers from my local credit union they added the option for 1 day pulls with no fee.

H-bomb
H-bomb

Presidential Bank has a very interesting 2.0% “checkless checking” account. Not as high as some of the other APRs, but the requirements seem relatively easy to meet, with no required debit card transactions:

“An electronic monthly deposit of $500.00 or more from payroll, pension, social security, or annuity is required. Each account must have a unique direct deposit source. Seven (7) electronic withdrawals per month are required (electronic withdrawals include: ATM, POS, ACH and BillPayments).”

I may check it out — it also helps that they have a branch just down the street from me.

~N
~N

I’m a fan of Cambridge Savings Bank’s CSB One account. A checking account which yields 3% apy on 5k. Instead of requiring debit card transactions, it requires having a brokerage account with their partnered robo adviser. Min for the brokerage is 2k which carries a 0.5% fee. So per month the checking account yields ~$12 and brokerage fees cost ~$1, this doesn’t factor in capital appreciation or dividends. ~N

Justin
Justin

I signed up for Orion 4% up to 30K last month in CA thanks to this site. 8
50 cent amazon transactions and $500 transfer but it all seems relatively easy. Already got Jan interest on Feb 1.

DollarDog
DollarDog

Are amazon transactions considered ‘signature-based’? the Orion site says debit card transactions must be signature based.

Justin
Justin

All I know is that their debit card transactions had to be treated as a credit card, so no pin use. And amazon covers that.

Shaun
Shaun
Vicent Climent
Vicent Climent

Do you know if a regular old ACH transfer counts as deposit?

Justin
Justin

Yep! I did a $500 Push from Ally which was satisfactory

JOHN
JOHN

Do online transactions/loads satisfy the 8 “signature-based” transactions required per month?

Justin
Justin

Worked for me in the month of January. On my Orion account they coded as “Card Card Transaction” which is what you want. All 8 were reloads.

Victor Romero
Victor Romero

I recently (today) did the same as Justin. Thanks to this website which rocks!
Seems very easy.

As for the transactions, just needs to be 8 “non pin” transactions. No min amount.

Sage
Sage

This is super helpful. Was it pretty seamless to set up? I’m going to go ahead and open tomorrow. Thanks!

Ben
Ben

There is a small bank in my area that gives 3.01% up to $25k with 10 debit card transaction (pin or signature), no DD requirement. Been using them for a year now, I’m very happy.

JOHN
JOHN

Do you mind sharing the bank/account name?

Ben
Ben

United Bank NWA
Edit: I’m pretty sure they have a geographic restriction. I was asked to submit my utility bill after I have open my account.

Lew-Dog
Lew-Dog

I use Discover Savings Money Market account. Free checks, free debit card. 1st 6 withdrawls are free AND they are currently paying 1.9% (this is used solely as my emergency fund so I do not anticipate many monthly checks or purchases)

Back to Top ↑