How to Earn 1% Interest Income on Your Checking Account While You Sleep!
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In the past few years, online banks have enabled banks to offer attractive interest rates on savings accounts and checking accounts – benefitting savers.
One of the good things about online banks as compared with brick and mortar banks is that online banks have a relatively low cost structure. Brick and mortar banks have to maintain bank branches and employees, all of which cost big money. With an online bank, customers click to move money instead of working with for example a bank teller.
Based on my research, I discovered that online banks pay interest rates that are approximately one percent (1%) or 100 basis points More than the interest rates brick and mortar banks pay.
One percent (1%) or 100 basis points is a Big Difference!
American Express® Rewards Checking currently pays an annual interest rate of one percent (1%) on your checking account balance. A very attractive rate!
They pay interest monthly.
To find more banks that offer interest-bearing checking accounts, visit Bankrate.com.
When I visited Bankrate.com to research interest-bearing checking accounts, I discovered that:
Emigrant is paying 0.15% interest rate on its Emigrant Bank checking account (minimum balance to open = $100); and,
Ridgewood Savings Bank is paying 0.15% interest rate on its Ridgewood Savings Bank checking account (minimum balance to open = $250).
These rates are miniscule and a lot lower than Amex® who’s currently paying 1%.
If you’re looking for nice interest income on your checking account balances, American Express® Rewards Checking beats these two other banks hands down, at least for now.
Here’s how you can earn interest income on your checking account balances 24/7 while you sleep:
1. Select a bank that you are comfortable with, is financially sound and offers the services and features you’re looking for at a reasonable cost.
I am comfortable with American Express® National Bank, which is a unit of the American Express Corporation – often referred to as ‘Amex®’.
BUT be sure to conduct your own due diligence!!!
NO guarantees from Budget and Grow Rich®.
Currently, American Express® Rewards Checking does not require any minimum balance and charges no fees, which is nice. They also give you American Express® Rewards Points when you make purchases with your American Express® debit card.
In contrast, Chase Bank requires $2,000 and Wells Fargo requires $1,500 minimum balance to avoid monthly checking account fees. Believe me; I know. I have checking accounts with both.
And to capture any interest income, you have to keep a lot of money on deposit or possibly open a Certificate of Deposit (CD) and lock up your money for three, six or twelve months!
With Chase Bank, Wells Fargo and many other banks though, typically you can avoid monthly checking account fees and service charges if you have direct deposit payroll.
American Express® Rewards Checking gives you a debit card which gives you American Express® Rewards Points on your spending.
2. Be sure to select a bank that IS FDIC insured.
FDIC means Federal Deposit Insurance Corporation (FDIC), a U.S. Government agency, which is designed to cover your money in the event of a bank failure.
FDIC insurance generally covers account balances up to $250,000.
But, study the current rules, specifics and nuances and how they apply to your particular financial circumstances.
3. Open a new checking account with the bank you select. But. . .
Please note that Budget and Grow Rich® cannot give specific personal financial advice. Be sure to conduct your own due diligence and consult your own professional financial advisors.
4. Activate direct deposit payroll with your employer so they deposit your paycheck or a portion of it into your checking account every payday.
Direct deposit payroll could help you avoid monthly checking account fees.
With American Express® Rewards Checking, you can deposit money with direct deposit payroll; transferring money; from your mobile device using the American Express® App. available on iOS and Android™
5. Make sure you can withdraw money – withdraw cash – at No Charge – NO ATM Fees.
With American Express® Rewards Checking, you can withdraw your money in cash at ATMs run by AllPoint Network® and MoneyPass® at no charge.
AllPoint runs approximately 55,000 ATMs across the USA. In my area (outside New York City); they are located in CVS and Walgreen’s stores and Sunoco gas stations.
MoneyPass runs approximately 61,000 ATMs located at financial institutions and retailers across the USA.
AllPoint and MoneyPass say they don’t charge withdrawal fees. But be sure to check the fine print. Look before you leap.
A few years ago, my boss was going to a golf outing and claimed he left his wallet at home. A likely story. He asked me to lend him $200 to pay the caddie.
I withdrew the cash from the ATM in our office building which by the way is a BAD idea due to the risk of hacking.
That ATM machine charged me a $4.00 cash withdrawal fee; AND my bank Wells Fargo charged me a $3.50 withdrawal fee – $7.50 in total ATM withdrawal fees. Ouch!
My boss actually repaid me the next day but I decided not to ask him for the $7.50. . . Although I’m sure he would have covered it. He gave me a nice year-end bonus, so I didn’t want to seem ungrateful or cheap.
Even with the popularity of online banking, credit cards, debit cards, mobile pay (for example, Apple Pay, Google Pay, etc.), and electronic payments (for example, PayPal®, Venmo® and Zelle®), I find that I still use some cash every month. Coffee at the commuter rail station, newspapers, haircuts and a few odds and ends.
6. Order a book of checks (paper checks), if you need them.
Printed checks?
Just humor me on this please.
I find that I still write a few checks every month. Last month, I wrote one check and the month before I happened to write four; although I could automate a couple of those payments.
Automating more payments is on my to do list. But those payments are sporadic.
American Express® Rewards Checking doesn’t offer paper checks.
But you can order a book of checks from Walmart Checks and Costco® – Check Services (which is really offered by Harland Clarke®). For the Costco® checks, it looks like you have to be a Costco Wholesale member.
To order paper checks, you’ll need your bank’s 9-digit ABA Routing Number and your checking account number.
If you do use paper checks and the payee (recipient) uses mobile banking, make sure the payee Shreds your check after they deposit it. You Don’t want your checks or your signature floating around. These days, unfortunately thieves are stealing checks and altering the payee and the amount right and left. Terrible!
Be sure to protect yourself!
7. Regardless of how you set up your finances and manage your finances, create a personal budget.
Make sure you spend less than you earn so you don’t run out of money and bounce checks and can always pay your bills.
8. Earn interest income on your savings account balances while you’re at it.
As this blog post goes live, American Express® High Yield Savings also offered by Amex® is paying 4.25% interest rate per annum on your savings account balance.
Per annum means per year.
With American Express®, currently there is no required minimum balance – no minimum account balance and no fees.
If you want to earn the currently 4.25% interest rate on your savings account, you can deposit your money or extra money in your American Express® High Yield Savings account and transfer money to your checking account so there are enough funds – adequate funds – in your checking account to cover your bills – for example, pay your bills without bouncing a check, ACH or wire transfer.
I understand that you can move money from your American Express® High Yield Savings account to your American Express® Rewards Checking account same day. But contact Amex® to confirm.
9. Be sure to monitor the interest rates over time.
Banks and other financial institutions have a funny way of changing the interest rates they pay you when you least expect it. They set their interest rates based on the financial institution’s demand for money and customer supply of money.
Many banks attract new depositors / accountholders with attractive interest rates. These typically short-term rates are often called ‘teaser rates’. Then, a few months later, the banks reduce the interest rate. . . Many savers miss this. Be on the lookout for this!
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On the other hand, to me, one drawback with American Express® Rewards Checking is that at the moment, you CANNOT set your checking account so that American Express® automatically transfers money from your American Express® High Yield Savings Account into Your American Express® Rewards Checking account.
This is a type of ‘Overdraft Coverage’ or ‘Overdraft Protection’ to cover your checks and automatic payments. Although, with conventional overdraft protection your bank lends you money. With conventional overdraft protection, the bank pulls enough money from your savings account or money market account and transfers enough money into your checking account to cover your checks.
With this technique, you’re using your own money in your savings account to cover your checks that you write on your checking account.
However, with American Express® High Yield Savings account, you CAN transfer money from your American Express® High Yield Savings account to your American Express® Rewards Checking account MANUALLY, which requires a little time and effort.
This means you have to pay close attention to your checking account balance and your savings account balance to avoid bouncing checks.
Oh well. I wrote a letter to the Chairman of American Express Corporation, pointing out this issue. Hopefully Amex will address this and Budget and Grow Rich® can report back to you.
Initially, I planned to open an American Express® Rewards Checking account. But in the end, I decided to pass.
You see, my primary checking account is at Wells Fargo and I have a bunch of direct deposits, automatic payments and automatic bill payments already up and running, for years in fact.
It would be too much hassle to switch my checking account to another bank. Otherwise, I would have been All In.
The 1% interest rate – interest income – on my checking account balances is appealing, especially since we love passive income.
I estimate that I would earn roughly an extra $100 in interest income per year, essentially doing nothing.
Typically, I am game to earn an extra $100, but. . .
But for me, the time and energy to set up a new checking account and make it all work, for example reorganizing my direct deposits, automatic payments and automatic withdrawals plus the extra accounting and effort to keep track of my account balances and manually transfer money, would outweigh the $100 in interest income.
As always, I believe that practicality should win out.
As you read in these pages, I DO try to save money and organize my finances to minimize my expenses and maximize my savings and optimize my risk-reward tradeoff.
BUT, my time is worth Big Money. Yours is TOO!
As my late Uncle Albert and many others say, “Don’t be pennywise and pound foolish!”
Look at the big picture. Run your cost benefit analysis to figure it all out and determine the best plan for you now.
And that may change over time as deals, interest rates, terms and conditions change and your financial circumstances and needs change over time.
In the meantime, check out American Express® Rewards Checking and American Express® High Yield Savings Account.
American Express® High Yield Savings has been working well for me so far. To learn more, click here.
American Express® Rewards Checking could have worked for me (at least on paper, in theory) but given my current financial circumstances, it does not.
Maybe these accounts will work for You.
Let me know how it goes!
And to create more Free Cash, Save More Money on Groceries Every Day – click here.
See you next week.
Arthur V.
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Disclaimer: OH and Please Remember, we are Not financial advisors, financial planners, attorneys or accountants and are Not providing any specific financial, tax or legal advice here. Be sure to conduct your own due diligence and consult your own professional advisors to get sound professional advice that’s specific to your financial and personal circumstances, risk tolerance, time horizon and investment goals and objectives among other key factors!
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