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Okay, so I bank at a local credit union, AllegacyFCU. (Here is their rates sheet.)

Currently I have through this bank:

My bank is offering a "SmartRate" checking account. It yields 2.5% interest so long as the following requirements are met every month:

  • Signed up for eStatements
  • At least one direct deposit in the account
  • 10 transaction ("point of sales" - must be used to buy something)

If the requirements are failed to be met, it drops to 0.05% interest for that month.

I can easily meet those requirements as I already have a direct deposit in my checking account, am signed up for eStatements, and easily do 10 transaction/month on my credit card (that I pay off automatically).

I'm currently working on building up my 6 months emergency fund and am looking for a place to put my savings with an interest rate above inflation. The 0.2% savings account is a joke for that, so should I switch to this new checking account and keep all of my money there or should I look for another savings account at another bank?

The biggest downside I can see is that I will no longer have a separate checking/savings account (which I believe I can handle okay) and would be reducing the use of my credit card. On the plus side, I keep my money at the same bank.

Any thoughts on this? Thanks!

EDIT: I ended up switching my checking account to this SmartRate checking account. Thanks everyone for your input!

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    These types of accounts are usually limited to $5k or $10k (i.e. you couldn't put $100,000 in one and get 2.5%).
    – Michael Pryor
    Aug 17, 2010 at 18:30
  • @Michael this account in particular is limited up to $25k. After $25k it is 0.25% (which is still better than the savings account)
    – Bryan Denny
    Aug 17, 2010 at 18:37
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    @Bryan pretty good. But if you're going to do the work, you can get a much better interest rate (see my answer).
    – Michael Pryor
    Aug 17, 2010 at 18:42
  • @Bryan does the 10 "point of sales" transactions have to be done using this new checking account? Or does your credit card satisfy this requirement?
    – mpenrow
    Aug 17, 2010 at 22:11
  • @mpenrow the fine print says "10 Visa check card transactions" so I would assume that means with the debit card tied to the checking account
    – Bryan Denny
    Aug 18, 2010 at 1:28

4 Answers 4

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I do this, and as you say the biggest downside is not having a separate account for your savings. If you're the type of person who struggles with restraint this is not for you.

On the other hand this type of account gives more interest than any other type of US Checking or Savings account I've seen, so you will benefit from the interest.

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Check out the "rewards checking" accounts listed on this thread at fatwallet finance forums.

You could easily get 3.5% - 4% right now if you are willing to do the rewards checking dance.

If not, you should look into the 1-2% accounts at the top. I use Alliant CU and their website is nice (and they give you your credit score every six months).

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If you're relatively certain that you're going to meet the requirements, it sounds like a good move for you.

The #1 priority with emergency funds should be easy access to the money when you need it. Before the current economic situation, money market funds were great for this since they preserved the value of the dollars you put in. Now the rates on money market accounts are barely better than the 0.2% you're currently getting.

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I would also check into whether you can keep using your credit card instead of switching to a debit card tied to your checking account. The credit card provides you protection from someone wiping your account out. Most banks will help you get the money back if this happens while using a debit card. But you are out the money while the bank figures out who is wrong. In the credit cards case none of your money is actually taken from your account while you dispute the charge.

I also agree with the others that having all your money in one account is more difficult to keep real spending money separate from emergency fund money.

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  • I will probably keep using my credit card for large purchases and for purchases over the internet and simply use the debit card for dining out, gas, etc.
    – Bryan Denny
    Aug 19, 2010 at 16:40

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