It was a credit union that scored the top spot for offering the highest return on high-yield checking accounts in a recent bankrate.com survey, underscoring how some credit unions are determined keep a checking account type that’s increasingly rare.
High-yield checking accounts often have no monthly fees or balance requirements but they often require a certain number of debit transactions from the consumer. The high-yield account, usually offered by smaller community banks and credit unions, was first developed by BancVue for a small community bank in Colorado as a member-retention tool that could compete against larger banks, according to depositaccounts.com. High-yield checking also allows financial institutions to secure more stable account and deposit growth as members try to take advantage of returns. About 41% of account holders would switch accounts to get high interest checking, BancVue says.
In Bankrate’s survey, Boeing Employees’ Credit Union ($9.58B, Seattle, WA) gives high-yield checking account holders a 6.17 percent return for up to $500 in their account, with a rate of 0.1% for any excess balances, according to the survey.
Other credit unions offering high-yield checking accounts, which are, included First New England Credit Union ($67.1M, East Hartford, CT), which offered 2.03% on a balance of up to $25,000. Consumers Credit Union ($551M, Waukegan, IL) with 4.09% with the same balance cap, on par with last year and Advantage Plus Federal Credit Union ($110M, Pocatello, ID), which offered 2.25% on up to $15,000.
Overall, the average yield on high-yield checking accounts in 2011 was 2.56%, down from 3.3% in 2010 but still higher than what consumers could earn with money market account or traditional checking accounts. While the yields declined, Greg McBride, senior financial analyst at Bankrate.com, says that checking accounts still have something to offer consumers. "High-yield checking accounts remain the top-yielding place for federally insured, liquid cash," McBride says in a press release.
Pacific Resource Credit Union ($103M, Los Angeles, CA) offers a 2.27% APY on up to $25,000 and Connexus Credit Union ($339M, Wausau, WI) offers 2.3%, and both MidWest America Federal Credit Union ($463.3M, Ft. Wayne, IN) offer 2.51%, all on up to $25,000, according to Bankrate. Provident Credit Union ($1.6B, Redwood City, CA) rounded out the list, offering 2.26% on up to $25,000.
Banks may increase the number of required debit-card transactions in order to earn the higher yield because of the recent debit-card reforms set to take effect Oct. 1, according to an analyst quoted in Bloomberg. That will likely put credit unions in an even better position to continue competing with high-yield checking accounts.