What's the catch? Checking 2.25%?


No minimums, no anything. At my local bank, I get no interest on checking and 0.5% on savings. How can these guys offer 2.25% on checking with no fees?

Is it a scam or am I missing fine print?

Your bank is giving you a pretty bad deal.
They have a better economy of scale.
They are using it as a loss-leader to get people to use their investment accounts.
Somebody has to be the best.

I think I’m going to open an account.

All that, plus they have to offer very minimal service to their customers. It’s all online. See ING for a similar setup.

But did you see that you don’t have to fund the investment account or keep any balance in it?

If you look around, you’ll find better rates than that for checking accounts.

Banks are struggling to get deposits. It’s cheaper to pay you interest for the use of your money than it is to borrow money from some other source.

I always figured that was the key. They reach ALOT of customers with very little in the way of property tax/rent/utilities/employees/etc etc etc. As opposed to a national bank that might have 200 locations with all the above expenses at each and every location.

2.25% isn’t that high. Checking accounts (current accounts, we call them in the UK) have historically paid very little interest, simply because none of the banks paid much, there was no real competition and people were too lazy to switch banks. 0.1% pa was a typical rate, and still is for many of them.

But if you look around, you can get much more interest these days over here, e.g. 5.12% AER on the first £2,500.

Also note that any ATM fees are refunded to you every month.

Much cheaper to do that than maintain an ATM network and hundreds of branches.

I don’t know if you’d call it a catch or not. However, in the FAQ’s it says:

Sure, just like you don’t have to buy those candy bars by the register when you go into a grocery store to get an advertised deal.

But, the fact that you’re there, and it’s easy, means that some people will. Presumably, enough will that it will pay for the free checking everyone gets. If it doesn’t, then I expect this deal won’t last very long.

I earn 5.51% APY on checking with no minimum balance (Bank Iowa). A bunch of my local banks are doing this now, or, paying large fees (up to $100) to switch banks.

There are some requirements that save or earn them money. The typical requirements for high reward checking are taking electronic statements, having a direct deposit (so you can’t open a ton of these accounts), a fairly low ceiling on the interest rate (mine is 25k) and requiring a certain number, about 10 or 12, debit card transactions per month.

I switched my ING savings into checking for the increased interest.

This is a very small bank, but, they are also promising ATM fee refunds. I imagine it is a relatively small payout for the average user.

Another small bank offering high interest (currently 5%) is West Bank.