What Are Reward Checking Accounts?

Quick Answer

A reward checking account rewards you for adding money to your account, withdrawing money or using your debit card in the place of a check or cash.

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A reward checking account provides perks and incentives for consumers when certain monthly requirements are met. The perks you can receive vary from one account to the next but may include welcome bonuses, cash back, free checking, no service or ATM fees, high annual percentage yields (APYs) and even cellphone insurance. Although there's a lot to like about reward checking, there are also some drawbacks. Learn more about reward checking accounts and what the benefits are for you.

What Is a Reward Checking Account?

Although credit card rewards have become commonplace, some banks, credit unions and online banks now offer bonuses and rewards on checking accounts to attract and keep customers.

Most people have a checking account to make everyday purchases or pay bills. A debit card is also often tied to the account for use at ATMs or to make purchases without using a check. A reward checking account goes a step further and "rewards" you with perks, bonuses, cash back and more if you meet certain monthly requirements specified in your account agreement.

Since payments for purchases are deducted directly from your checking account (unlike with credit cards), you are not charged interest on debit card transactions tied to your account. And, unlike opening a rewards credit card, your credit score is not a factor when you open a reward checking account, as most banks don't consider your credit report.

However, your banking history may be considered when you apply, and you can be denied a checking account if you have negative marks on your banking history, you can't verify your identity or there's a suspicion of fraud.

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Pros and Cons of a Reward Checking Account

Reward checking account benefits and drawbacks can vary significantly between financial institutions, but here are general factors to consider.

Pros of Reward Checking Accounts

  • Interest-bearing: Like savings accounts, many reward checking accounts earn interest, so your money grows faster in an account you potentially use every day. Many high-yield checking accounts offer competitive interest rates well above the national average and may also come with free checking and no minimum balance requirements as long as other conditions are met.
  • Opening bonuses: Some reward checking accounts offer bonuses just for opening an account. Although the amount can vary, you might earn $100 or more. Restrictions will apply, and you'll likely be required to make a minimum deposit to earn the bonus reward.
  • Widely available: There are numerous reward checking accounts offered by banks—both physical branches and online—and credit unions. So finding one that meets your personal needs for sign-up bonuses, cash back or no ATM fees may only take a quick search. Or, you can visit your current financial institution and take advantage of a reward checking account where you already bank.
  • More difficult to overspend: Unlike a rewards credit card where it can be tempting to overspend, it's more difficult to spend too much with a reward checking account because only the money currently available in your checking account is yours to use.
  • Debit card rewards: Some banks offer cash rewards for any purchases made with your debit card. You might be charged a monthly fee or be required to keep a minimum balance in your account, but the cash back reward might offset these fees.

Cons of Reward Checking Accounts

  • Account requirements: Most reward checking accounts require you to meet detailed terms and conditions before earning rewards. If you can't meet the requirements, you might not earn any rewards or perks. For instance, you may not be eligible for rewards if you use a third-party payment service such as PayPal or don't maintain a required minimum balance.
  • Debit card usage: One of the main drawbacks of reward checking accounts is the requirements placed on debit card usage, with some reward checking accounts requiring a certain number of debit card purchases each month. If you don't meet these requirements, you may not earn rewards, have your ATM fees refunded or earn cash back.
  • Limits on multiple accounts: Some (but not all) banks and credit unions limit how many reward checking accounts you can have at the same institution. If you have several checking accounts and use one to make purchases and another to pay bills, you may not qualify for rewards on more than one account. If you can open multiple accounts that earn rewards, you'll likely need to meet the requirements on each account.

How to Get a Reward Checking Account

The steps you take and the requirements you need to meet to open a reward checking account can vary significantly from one bank to the next. Most accounts require filling out an application with your personal information and completing qualifying activities such as making a minimum deposit into your reward account or setting up direct deposit.

There are a few documents you may also need to open a checking account, whether in person or online. Check out your financial institution to determine what documents they require. Some of the information you may need to supply include a government-issued photo ID, driver's license or birth certificate, and proof of address in the form of a utility bill or credit card statement.

In addition to the documents, you'll want to think about whether you'd like to manage your account completely online or have a place you can visit in person. If you choose an account with a credit union, you'll likely need to become a credit union member. Consider which services, perks and benefits are important to you—and which aren't. Also consider the potential downsides of a reward checking account, like withdrawal and monthly service fees or minimum deposit requirements.

The Bottom Line

Reward checking accounts may not be a good option if you can't meet the monthly requirements. But if you can, and you prefer to use debit cards, a reward checking account is a good alternative to a standard checking account. While temporary banking promotions geared toward attracting and keeping customers are appealing, taking advantage of permanent rewards and perks is a long-lasting bonus in its own right.

Because financial institutions don't report your checking account information to the three major credit bureaus, your account won't directly affect your credit score. But to ensure your checking account stays in good standing, make sure you always have enough money to pay your bills—and keep an eye on your credit by signing up for free credit monitoring from Experian.