Hearing the term “cash back” associated with a checking account may seem a bit odd because of how widely used the term is for credit cards. However some banks are using this rewards structure with checking accounts now as an outside-the-box way of rewarding their loyal checking customers.
For several years now, all forms of traditional savings/checking accounts have seen their interest rates sink to historically low levels and many banks and credit unions have been scrambling to find new ways to reward their account holders. And the “cash back checking account” is a perfect way to do just that.
How it works?
As the name suggests, cash back checking accounts provide you with cash back every time you spend. Perkstreet Financial, the industry leader in cash back checking, has an online cash back checking account which provides between 1 and 5 percent cash back depending on the type of purchase.
This means that with every purchase you make you get at least 1 percent of that back in the form of cash. These “perks” can go up to 5% cash back when spending with certain online and offline retailers. Similarly to credit cards, these categories featuring larger cash back rewards rotate, so you’ll have to stay current on what type of purchases are featuring the largest rewards at any given time.
This cash back checking account rivals many credit card offers on the market in terms of rewards, however, like most traditional checking accounts, it doesn’t come with a credit check or annual fee!
These seem uncommon. Why don’t all banks offer cash back checking?
Banks rarely make money on consumer checking accounts. That’s a fact. They do, however, make money when their checking account customers open almost any other account with them. In other words, the banks view checking accounts as gateway accounts to additional products down the road.
That being said, when a bank is willing to offer cash back checking, they could very well be going even further in the red just to satisfy a customer who will (hopefully) one day deposit more with the bank or open another account.
Many banks dont like this strategy or simply think it’s wont pay off, that’s why you dont see these accounts offered very often.
Who Should Open a Cash Back Checking Account?
In short, someone who spends a good chunk of change every month and wants to be rewarded for it, but doesn’t want another credit card.
Another ideal customer would be someone with a shaky credit score, who maybe cant qualify for a lucrative cash back credit card, but wants the perks of one.
Here’s a simple example of how much you can earn. Let’s use the Perkstreet Financial offer we mentioned above and assume one would be able to receive 2% cash back on average for every dollar they spent throughout the month. If this person spent $1,000 per month this would mean $20 per month back into the account (2.0% cash back X $1,000 = $20.00). Keep that up for the whole year and you’ve got $240 in cash back coming your way annually.
Alternatives to Cash Back Checking:
As we alluded to earlier, banks and credit unions are always scrambling to create new and enticing accounts to grab new customers. If you’re in the process of researching various checking accounts with respectable rewards, you may want to also consider rewards checking accounts. These feature interest rates of 2 and even 3 times that which you can receive on bank deposits, however, you’ll need to meet monthly requirements with the account.
For one-off sort of bonuses, you may want to comb through our top checking account deals of 2013. Most of these feature one-time cash bonuses for signing up, but some may offer additional perks later on.
As with any checking account, pay close attention to the fee structure. The most common recurring fees people forget about are minimum balance fees (often smothered in the fine print) and outside of network ATM fees. So get out your magnifying glass and READ THE FINE PRINT.
Final Word on Cash Back Checking:
Although Perkstreet is the online bank with the most lucrative rewards structure, your local community bank or credit union may be providing something similar so check with them as well.
Until interest rates rebound – which according to the FED, won’t be until mid-2015 – these forms of checking accounts may be an extremely lucrative alternative. And for those who dont qualify for solid cash back credit cards – which frequently require credit scores of 700 plus – these are even more valuable.