Checking accounts provide a useful foundation for many people’s daily financial lives, and some offer additional perks beyond the basics. Called rewards checking accounts, these financial vehicles can benefit customers in a variety of ways. Your money might earn interest, cashback, points, airline miles, or other bonuses (or even a combination of these).
For some, this kind of incentive is a good reason to stash their money at a particular financial institution versus another. However, some rewards checking accounts can involve fees and/or minimum balance requirements which may make them less enticing.
To help decide if a rewards checking account is right for you, read on for such information as:
• What are rewards checking accounts?
• How does a rewards checking account work?
• How do you qualify for a rewards checking account?
• What are reward checking accounts’ pros and cons?
What Is a Rewards Checking Account?
Simply put, a rewards checking account is one that rewards a person for opening and using the account. Those bonuses can take a variety of forms. Consider this:
• A standard, no-frills checking account may have no monthly fees, minimum balance requirements, or minimum opening deposits. However, the perks are generally equally basic: a nonexistent or nominal annual percentage yield (APY), if any no ATM surcharge reimbursements, and often no signup bonus.
• This kind of standard checking account can be attractive for some, but those seeking to earn money for their banking loyalty might prefer a rewards checking account instead.
• Though the specific perks vary by account, you can typically find a checking rewards account that offers a higher interest rate or cash back. You might also be offered airline miles, a signup bonus, free identity theft protection, cell phone insurance, and reimbursement for ATM fees.
How Does a Rewards Checking Account Work?
Some checking accounts with rewards have criteria for earning perks each month. For instance, a bank may require you to:
• Use your debit card for a minimum number of transactions each month
• Maintain an average minimum account balance
• Receive a set number of direct deposits equal to a specified value
• Enroll in services like e-statements or online bill pay
If the reward is a higher APY, you will likely earn that in the form of monthly interest on your bank’s payment schedule, deposited directly into the account. If the checking reward is cash back, the bank may offer multiple ways to redeem the cash within the mobile app. Similar to cashback credit cards, you can often convert points into airline miles or other perks — or just receive cash in your account.
Perks of a Rewards Checking Account
The perks of a rewards checking account will vary by bank but might include:
Cash Back
Cash back is usually expressed as a percentage of the transactions made with a debit card; this might also be structured as points or even airline miles.
Interest
A rewards account may be an interest-bearing checking account. If so, it will offer an APY that is higher than the zero or the very low rate usually offered by most checking accounts.
Signup Bonus
A rewards checking account may pay a one-time bonus for signing up for a new checking account and meeting specific criteria.
ATM Fee Reimbursement
A rewards account may offer refunds for expenses incurred for using out-of-network ATMs.
Other Perks
Among the other rewards you may see offered are ways to earn airline miles, shopping discounts, cell phone insurance, and identity theft protection, among other options.
Some rewards checking accounts may offer a combination of these perks.
Who Should Use a Rewards Checking Account?
A rewards checking account can be a good option if you regularly use your debit card for purchases and keep a substantial amount of money in your checking account. If you do not have a rewards credit card, a rewards checking account can serve as an alternative way to earn money for spending money.
As mentioned, some banks have special requirements for members to earn rewards. Read terms and conditions carefully. If you cannot meet account requirements for the reward, the account might not be right for you, especially if there are monthly maintenance fees.
How to Qualify for a Rewards Checking Account
Qualifying for a rewards checking account may vary depending on the bank, but, as mentioned above, there tend to be common core requirements for earning rewards, such as:
• A minimum number of debit card transactions in a month
• An average daily minimum account balance
• A minimum number (or value) of monthly direct deposits
If an account comes with a signup bonus, the bank likely has a set of requirements you’ll need to meet to snag that cash. This may include enrolling in direct deposit to get you started.
When considering a rewards checking account, it’s wise to read the fine print before opening to ensure you fully understand the requirements. Opening a checking account is typically a simple process, but you do want to make sure you understand the details before you sign up.
Pros of Rewards Checking Accounts
Here are some of the benefits of a rewards checking account, though perks will vary by program:
• Earning potential: Whether through a higher-than-average APY or through cash back on debit card purchases, the main draw of a rewards checking account is often earning money (or more money) for doing the banking you would do anyway.
• Tax implications: In general, the Internal Revenue Service (IRS) sees cash back as a rebate for or discount on something you purchased, so you won’t have to pay taxes on that money. Not a bad deal at all! However, if the reward for the account is a high interest rate or a signup bonus, you should expect to receive an IRS Form 1099 from your bank for that income.
• Fees: Some rewards checking accounts charge monthly fees (some of which might be waivable), but other rewards checking accounts are noteworthy for being fee-free.
Recommended: Pros and Cons of No Interest Credit Cards
Cons of Rewards Checking Accounts
Depending on the individual and their financial style and goals, there may be some downsides to a rewards checking account:
• Limits on rewards: Some bank programs cap the rewards at a set amount each month, meaning there could be a limit to the amount of cash back you can earn.
• Better rewards elsewhere: Rewards credit cards may offer more cash back than a rewards checking account. However, these cards often have credit score requirements that make it more difficult to qualify. You probably need a credit score in the good to excellent range, meaning 670 or above.
• Minimum balance requirements: Some banks have minimum balance requirements to earn the reward. If you cannot meet the requirement or do not wish to keep that much money in a checking account, the account might not be the right fit.
• Fees: While some rewards checking accounts have no fees, others do charge monthly maintenance fees that can make the rewards less attractive or possibly even negate them.
Cashback Checking Accounts vs Credit Cards
You may be wondering whether a cashback checking account or credit card is the better fit for you. See how they stack up here:
| Cashback Checking Account | Cashback Credit Cards |
|---|---|
| Provides a secure hub for daily finances | Provides a line of credit for purchases |
| May charge fees | Charges interest |
| Earn cashback typically through debit card use | Earn cashback typically through spending with credit card |
Is a Rewards Checking Account Worth It?
A rewards checking account with cash back can be a good fit if the conditions to earn the perks are no problem for you.
• You might already be in the habit of swiping your debit card for everyday purchases or this prospect doesn’t faze you. If so, then a rewards checking account with cash back might be worth it. It can be easy to manage a checking account like this and make your money work harder for you.
• If you like to keep a large sum of funds in your checking account to cover automatic bill payments, you might enjoy the earning potential provided by a high-interest checking account even if it has a higher-than-usual balance requirement.
Is a Rewards Checking Account Right for You?
Each person has a unique financial situation and goals. Here are some considerations that may help you decide if a rewards checking account is right for you:
• If you want to earn interest (or more interest) on cash you have sitting in your checking account, a rewards account might be a good choice for you.
• If there are perks that you could reap for behaviors you engage in (swiping your debit card, receiving direct deposit) or don’t mind adopting, this kind of account could work well for you.
• Not a person who has a rewards credit card? A rewards checking account could give you some of the same perks.
FAQ
What are rewards in banking?
Rewards in banking refer to incentives and perks that account holders receive. They might be a signup bonus for a new account, a higher-than-average interest rate, or checking account cash back in the form of points, miles, or actual cash that can be deposited into your account or, for a credit card, applied toward your statement.
Why do banks offer points or rewards?
Banks offer points or rewards to entice consumers to choose their accounts or cards over competitors. Once you become a member, rewards ensure you continue to engage with the bank’s product, either by depositing more funds into your account or using your debit or credit card for more daily purchases.
Are bank rewards interest?
Bank rewards can come in the form of higher interest. For example, the current national average interest rate for a checking account is 0.43%, while rewards checking accounts may offer a higher than average interest rate, often 1.00% to 3.00% or higher. The interest that you earn is taxable, while cash back typically is not (it’s considered a rebate).
Can you earn points on a checking account?
Some checking accounts do allow you to receive points as a reward. For instance, you might receive one point for every dollar or two you spend with your debit card.
Are bank rewards worth it?
Whether or not bank rewards are worth it depends on your financial situation and preferences. Do you meet the criteria for a rewards checking account (such as swiping your debit card often enough or receiving a certain dollar amount of direct deposits)? Can you handle any requirements such as monthly minimum balance or account fees, if assessed? If so, earning interest or receiving other perks could be a smart, money-wise move.
Photo credit: iStock/Feodora Chiosea
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SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.
As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.
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