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Gail MarksJarvis: It’s worth checking on better interest rates

By Gail MarksJarvis, Chicago Tribune –

Savers are suffering.

A trip to the gas station, supermarket or pharmacy can present gut-wrenching costs and leave people feeling vulnerable, while a trip to the bank account provides no relief. Savings are being eaten away at a brisk pace while the Federal Reserve keeps interest rates near zero, and promises to continue well into 2014.

Financial advisers have urged clients to step a little beyond their usual cautious approach, using solutions such as: Deriving income from dividends paid by blue chip stocks like Johnson & Johnson, or boosting income by investing a small portion of money in high-yield bond funds. But neither is a good solution for people who can’t stomach the sharp declines that arrive from time to time in both stocks and high-yield bonds. And stocks and high-yield bonds are never the place to put cash you will need within five years.

But some banks might provide relief.

A survey of high-yield checking accounts has identified a group of institutions offering average yields of 2.05 percent, or more than 34 times the usual checking account’s interest rate. The high-yield accounts also pay more than the average online savings account, with interest at 1.03 percent.

For example, according to the survey, Cross Keys Bank has had a high-yield checking account with an APY of 2.5 percent and Consumers Credit Union has been offering an APY of 4.09 percent. You can find other banks at and credit unions at While some of these institutions are a long way from your home, you can open accounts online or by telephone.

Still, keep in mind that these interest rates can be fleeting.

Banks and credit unions change rates often based on market conditions, and lately U.S. Treasury rates — which can set the pace for banks — have been hitting some of the lowest rates on record. As investors worldwide grew panicky last week about a financial crisis in Europe, they threw so much money into 10-year U.S. Treasury bonds as a safe haven that rates dropped to an incredible 1.63 percent. That’s a shockingly low rate for a bond that ties up money for 10 years. You may long for the days before the financial crisis when Treasurys were paying 5 percent.

So as you seek a high-yield checking account, don’t be surprised if rates dip — either while you are looking or after you have opened an account. Just a year ago, high-yield checking accounts were paying 2.56 percent on average, and the previous year it was 3.10 percent, according to analyst Greg McBride.

Institutions usually reserve the right to change rates from time to time and may not notify you as it happens. So if a relatively high yield interests you, keep an eye on your account.

Also, notice the restrictions on these accounts so you get what you are after. The high yield often applies to a limited amount of money in an account. For example, Cross Keys Bank and Consumers Credit Union commit high interest on deposits only up to $10,000. If you add more money, it could be subject to almost no interest — perhaps an even worse rate than the one at the bank you are using now.

If you have a lot of money to deposit, you could put some in one institution with a high-yield account, and some in another institution paying a high yield. Pay attention to the minimum you might have to leave in your account too.

Besides rules on minimum and maximum deposits in the account, to get the high yields you usually must make direct deposits regularly. That might mean having your paycheck or Social Security check sent directly to the bank on an ongoing basis. And you often have to make a certain number of purchases a month with a debit card because the institution earns fees when you use the card.

Bankrate says the typical number of required debit card uses is 10. Because of that, these accounts won’t work for people who rely on checks rather than debit cards for their purchases.

Be prepared for a shock if you aren’t attentive to the rules. McBride notes that if you fail to meet the rules any month, the average institution drops your interest rate to 0.08 percent. Some are even lower.

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