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A basic checking account offers a lot – you can use it to deposit checks, transfer money, make purchases, and get cash. A rewards checking account offers all that plus a little more, such as paying interest on your balance and giving you cash back on purchases you make using your debit card. To earn these rewards, however, you may need to maintain a certain minimum balance or level of spending, or pay monthly fees, so it’s important to read the fine print. Here’s what you need to know about rewards and cash back checking accounts, including how they work, where to find them, and if the added benefits are worth making the switch.
What Is a Rewards Checking Account?
The best rewards checking accounts offer an array of benefits. These might include:
Getting cash back on purchases you make with your debit card
Getting reimbursed for out-of-network ATM fees
Earning bonus points/travel miles
Getting discounts on certain purchases
While some people refer to this type of checking account as a “cash back checking account,” not all rewards checking accounts offer cash back on debit card purchases. A competitive annual percentage yield (APY), however, can more than make up for not offering a small percent in cash back rewards.Regular checking accounts, by contrast, typically pay no or very little interest and generally don’t reimburse ATM fees, or offer cash back.
How Do Cash Back Checking Accounts Work?
A cash back checking account works in a similar way to a traditional checking account. The difference is that you may be able to make a little bit of cash, such as 1% of a purchase amount, when you use your debit card to make purchases. Often these programs come with restrictions, however. You may only earn cash back on certain types of purchases or if you spend a certain minimum amount each month. Or, you may earn cash back on all purchases but need to maintain a certain average daily balance to earn the full cash back percentage (otherwise you may earn a lower percentage). Cash back rewards may also be capped at a certain dollar amount per month.It’s important to read the fine print to make sure you will actually benefit from the advertised cash back program.Recommended: Checking vs Savings Account Differences
How Much Can You Earn With a Checking Rewards Account?
Different cash back checking accounts have different policies. Some accounts offer 1% cash back on purchases made with a debit card. That means if you bought something for $500 using your debit card, you would earn $5 cash back. Or if you bought something for $30, you would earn three cents. While these sums may seem small, they can add up over time.
Best Rewards Checking Accounts
What follows are five top rewards checking accounts (based on a Google search of “best rewards checking accounts” conducted on May 9, 2023), many of which offer cash back.
Upgrade
Upgrade offers a rewards checking account with 2% cash back for common everyday expenses and 1% cash back on everything else. There are no ATM or account fees.
Axos
Axos has a rewards checking account that has no monthly maintenance fees and an APY up to 3.30%.
Quontic
Quontic offers a rewards checking account with 1.00% cash back on all eligible debit card purchases. It requires a minimum opening deposit of $100 and charges no monthly fees.
Lake Michigan Credit Union
Lake Michigan Credit Union’s Max Checking account comes with a 3.00% APY and no monthly fees or minimum balance requirements.
SoFi
SoFi offers a high-yield checking account that offers up to 1.20% APY, plus the ability to earn up to 15% cash back on debit card purchases at qualifying local businesses. There are no account fees or balance minimums.
Aspiration
Aspiration’s Aspiration Plus account allows you to earn up to 3.00% APY, plus up to 10% cash back on debit card purchases.
Connexis
Connexis offers an Xtraordinary Checking account that pays as much as 1.75% APY and reimburses up to $25 a month for non-network ATMs in the U.S.
Pros of a Rewards Checking Account
There are numerous reasons to sign up for a rewards checking account. Here are some to consider.
Earn Cash Back
You may be able to earn a little bit of cash by using your debit card for purchases you normally make. Some rewards checking accounts offer cash back on a variety of purchases, including groceries, retail, and transportation.
No Annual Fee
Many rewards checking accounts won’t charge you an annual fee. This is different from many credit cards that offer cash back, which could make this a preferred method of earning rewards.
Earn Interest
Certain rewards accounts pay interest on your monthly balance. If you can earn interest on top of cash back, that’s even more cash in your pocket.
Avoid Overspending
Another benefit of cash back checking is that you’ll be incentivized to use your debit rather than your credit card for purchases. This can help you to keep your spending within your budget and avoid running up a high credit card balance and interest payments.
Grow your Savings Account
If you make it a policy to transfer all of your rewards to your savings account, cash back can help you build your savings. While the amounts will be small, they can add up over time. Plus, you can likely earn a higher APY on any money you transfer to savings, especially if you choose a high-yield savings account.
Cons of a Rewards Checking Account
Rewards checking accounts also have some drawbacks. Here are some to keep in mind.
Fees
Some rewards checking accounts charge monthly fees, which can eat into your rewards. You’ll want to be sure you read the fine print and look for a rewards account with no costs attached.
Strict Requirements
A rewards checking account may require a higher minimum balance than a regular checking account. Or, you might need to sign up for direct deposit to earn perks. Also, the rules surrounding rewards can be complicated, making it difficult to understand exactly how to earn them.
Rewards May Be Limited
Some rewards checking accounts put a cap on the amount of cash back that can be earned each month. In addition, you may only be able to earn the advertised APY if you maintain a certain minimum balance, which could be higher than you can manage.
Better Deals Elsewhere
Some credit cards may offer a higher amount of cash back than a rewards checking account. If you pay off your balance in full each month, a rewards credit card could be a better deal.
Credit Cards Offer More Consumer Protection
If your debit card is stolen and used for unauthorized transactions, and you report it within two days, you’ll be liable for $50. If you report it within 60 days, your liability jumps to $500. By contrast, many credit cards offer zero liability for all fraudulent transactions.
Is a Rewards Checking Account Right For Me?
It depends on the perks that are being offered and the requirements for getting them. Rewards checking accounts typically have activity minimums you need to meet to earn rewards and avoid fees. If you can comfortably meet these minimums, it could be a great deal. If you can’t — or, worse, you’ll be incentivized to spend more to earn a tiny percentage in cash back — you will likely be better off with a basic free checking account.
The Takeaway
Rewards checking accounts can help you earn money — by accruing cash back and/or interest — that can add up over time. Using a rewards debit card instead of credit card may also help you better manage your finances and avoid debt.However, these accounts often come with strict requirements, such as spending a certain amount each month to get cash back rewards or keeping a high minimum balance in order to earn interest on your deposits. In some cases, you might be better off a basic free checking account and a high-yield savings account. If you’re looking to get a better return on your savings, Lantern by SoFi can help. With our online banking marketplace, it’s easy to compare high-yield savings accounts based APY, fees, and balance minimums.Lantern can help you compare online savings accounts and find today’s best rate.
Frequently Asked Questions
Is a cash back debit account a checking account?
Is there a downside to cash back?
Are cash back debit cards worth it?
Photo credit: iStock/tonefotografia
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About the Author
Chris Alexis
Chris Alexis has been putting pen to paper and fingertips to keyboard since his youth. He ultimately grew into an accomplished and award-winning writer who loves using the power of language to connect with audiences. He also strongly enjoys learning about who he is writing for so he can create something that will truly resonate with them. He has worked for a variety of companies, each of which have given him more experience and insight.
