Rewards Checking Accounts: What You Need to Know


Rewards checking accounts, also called cash back checking accounts, are a type of checking account that functions similarly to a rewards credit card. Depending on the account, you could get cash back for certain types of purchases, or other rewards like airline miles.

These kinds of accounts are typically available from major banks, though some credit unions also use these kinds of accounts. Typically, these accounts will monthly debit card usage requirements you don’t see on simple checking accounts.

Let’s take a look at some types of rewards checking accounts and their pros and cons.

Pros of Rewards Accounts

You can find interest rates with much higher returns on rewards accounts, often getting close to three percent. That’s double what you normally see for online savings accounts. As such, if you have a decent rolling balance in your checking account, you’ll be raking in some serious interest rates. That’s literally free money for you, so it’s hard to pass this up for some people.

Contrary to what you might think, these accounts are also usually free. That might sound counterintuitive, but it’s true. These kinds of accounts don’t tend to have minimum balance requirements or fees, per se. What they do have can feel like a minimum requirement, but we’ll get into that in the “Cons” section.

Another upside that is common on rewards accounts is that they refund ATM fees. Since these accounts are usually offered by credit unions, it’s nice to have peace of mind that your card won’t be charged when you’re using other banks’ ATMs.

Cons of Rewards Accounts

Now for the drawbacks. Rewards accounts usually have minimum purchase requirements with debit cards. So, you need to have the money you’re spending ready to go. You usually need to use your debit card a specified number of times per month to keep the account active. In this sense, you sort of has a minimum account balance, since you need to be spending a certain floor of money each month.

Since you’ll need to use your debit card so often, you won’t have as many chances to get rewards through a credit card. Instead, you’ll have to be content with the rewards from your checking account. Also, banks have gotten wise to people using their debit cards for their small purchases while saving their credit cards for their large purchases, and will even turn off rewards accounts of customers they see doing this.

So, these accounts aren’t for everyone. However, for some financial situations, cash back checking accounts make the most sense. Just make sure you do your research before you open a rewards account in favor of a cash back card!