High-Yield Checking Becoming Loss Leader in Exchange for Banking Relationship

With the markets wavering and economic conditions continuing their rollercoaster ride, consumers are socking away money and paying down debts at ever-rising levels. Many financial institutions have taken notice and begun to use high-yield checking and savings accounts as “loss-leaders” to get new faces through the door and begin a banking relationship.

CNNMoney published a piece last Wednesday discussing high-yield checking accounts—a tool that has been used successfully by credit unions for decades—and how the rates “handily beat the next best alternative for liquid cash: online savings accounts.” Reporter Les Christie used BECU, whose 6.17-percent annual percentage yield (APY) on its Advantage Savings and Checking Accounts earned it top placement on Bankrate’s list of high-yield checking accounts, as a prime example.

The next highest-earning account, according to the report, is Consumers Credit Union’s nationally-available Free Rewards Checking account, which pays an APY of 4.09 percent.

While a cursory scan of Northwest credit unions turned up one credit union not mentioned by CNNMoney offering a high-yield checking APY of 7.71 percent up to a maximum deposit threshold of $750, most offered checking APYs of around 3 percent, which is also considered high-yield.

Nonetheless, the fact that hundreds of community banks have teamed up under the banner “Kasasa” to offer high-yield checking accounts signals that not all banks have lost interest in the consumer market, and credit unions may want to be vigilant for competition.

For credit unions that didn’t see a spike in members during 2011’s 4th quarter and are looking for more managed growth, offering high-yield checking and savings accounts may be one answer. A minimum deposit threshold is often required to receive the peak rate, and in some cases, as with BECU’s high-yield option, the rate is only offered up to a maximum deposit amount. This makes the different accounts attractive to different types of members.

Additionally, some high-yield accounts require a certain number of debit transactions per month, online bill pay or direct deposit.

However, during a time when Bankrate says average high-yield checking account yields have fallen more than 1 percent since 2010, down from of 3.3 percent in 2010 to 2.05 percent this year, many consumers are willing to go the extra mile for a good return on accessible cash.


Questions or Concerns? Contact Matt Halvorson, Anthem Editor: mhalvorson@nwcua.org.

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