By LaToya Irby
Edited by Samuel MountjoyWhat Are Reward Checking Accounts?
Quick Answer
Rewards checking accounts allow you to earn points, cash back or interest on your everyday banking activity. Depending on the bank, earning rewards may require an existing bank relationship, set debit card usage or a monthly direct deposit.
Rewards checking accounts allow you to earn perks on your everyday banking activity. Depending on the bank, you could earn points, cash back or interest just by using your debit card, making direct deposits or keeping a balance in your account. Rewards vary and you may have to meet certain requirements to qualify. Here's what you need to know about rewards checking accounts and how to open one.
What Is a Rewards Checking Account?
A rewards checking account is a type of checking account that offers incentives on your checking account activity or balance. Instead of just being a place to manage bills and spending, this type of account allows you to earn something in return.
Depending on the bank, you may be able to earn rewards as points on eligible debit card purchases or interest earned on your balance. You may have the option to redeem rewards for a deposit into your account, transfer to another rewards account and more.
To access rewards, you may need to meet certain requirements.
- Maintain a minimum balance. You may have to keep a certain balance in your rewards checking account or a linked relationship account to qualify for rewards.
- Receive a minimum direct deposit. Some accounts require you to have at least one direct deposit each month.
- Make a loan payment. If you have a loan with the bank, you may have to set up automatic payments from your rewards checking account.
- Make a minimum amount of debit card purchases. You may have to make a certain number of debit card transactions each month.
- Have an existing bank relationship. The bank may only allow you to open a rewards checking account if you already have another product with them.
You may be able to earn more rewards based on other account activity. For instance, you may have the option of earning rewards on your checking account balance, debit card purchases and loan payments.
Tip: Rewards checking accounts offer ongoing rewards. These are different from bonus offers you may receive for opening a new account and meeting other requirements.
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Pros and Cons of a Rewards Checking Account
Rewards checking accounts come with both benefits and drawbacks. It's important to consider both as you decide whether this type of account will work for you.
Pros
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Cash back or interest earnings: Earning rewards on a checking account essentially means you're getting paid for spending or banking as usual.
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Combined rewards across accounts: Some banks allow you to combine your checking account rewards with credit card rewards, which can help you maximize the overall value of your rewards.
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Accessible to more consumers: Unlike rewards credit cards, checking accounts don't require a good credit score. You'll need a positive checking account history, however. Banks may check for previous unpaid overdrafts or account closures by viewing your ChexSystems report.
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Lower risk of debt: Since you're using your own money, you can earn rewards without the temptation to overspend and go into debt. While overdrafts are still possible, they're usually less costly and more limited than running up a credit card balance.
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No or low fees: Many banks have no fees or waive monthly maintenance fees if you meet activity requirements, so you can earn rewards without added costs.
Cons
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Complex earning structure: Rules can vary significantly between banks and tracking requirements can be inconvenient.
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Account requirements: Failing to meet the requirements could mean you miss out on rewards for that month or that you end up paying account fees.
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Limited rewards: Unlike credit card rewards programs, checking account rewards are often capped. For example, you may only earn interest on balances up to $5,000.
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Less availability: Rewards checking accounts aren't standard at many banks. Those that do offer these accounts may only be available online or through credit unions.
Learn more: How Do Rewards Debit Cards Work?
Is a Rewards Checking Account Worth It?
A rewards checking account can be worth it if the rewards are simple to earn and redeem. It's a smart way to earn rewards and avoid credit card debt. Plus, if you consistently meet the requirements anyway, it's a way to boost earnings on money you keep in your checking account.
However, if the rules feel too complicated or rewards are limited, you may get more value from these other types of accounts:
- High-yield savings account (HYSA): This type of savings account offers higher interest rates on deposits with easy access to funds and no minimum balance requirements.
- Money market account: These accounts often offer higher interest rates with limited debit card access and less complex requirements compared to a rewards checking account.
- Rewards credit card: You can earn more cash back or points with a rewards credit card, but they do require responsible credit habits to avoid accumulating debt.
- Interest-bearing checking account: These are more widely available and offer ongoing interest on your balance without the need to track debit card purchases. However, higher balances may be a requirement.
Learn more: Do Checking Accounts Earn Interest?
How to Get a Rewards Checking Account
Opening a rewards checking account is fairly straightforward and works much like opening a standard checking account.
- Choose a bank or credit union. Compare options based on the rewards offered, requirements, monthly fees and other features. If you choose a credit union, you'll need to meet membership requirements.
- Apply for the account. Most applications can be completed online or in person. You'll typically need to provide your Social Security number, a government-issued ID and proof of address.
- Make your opening deposit. Some banks require an initial deposit, which you can usually make by transferring money from another bank or credit union. Be sure to check for a minimum ongoing balance requirement.
Frequently Asked Questions
The Bottom Line
Rewards checking accounts are one way to get more value from your everyday banking, allowing you to earn rewards without the risks of credit card debt. Before opening one, check to see whether you can meet the earning requirements and estimate your earning potential. Earning rewards or interest from other options may offer better returns for your typical financial habits.
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About the author
LaToya Irby
LaToya Irby is a personal finance writer who works with consumer media outlets to help people navigate their money and credit. She’s been published and quoted extensively in USA Today, U.S. News and World Report, myFICO, Investopedia, The Balance and more.
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