Feeling Rewarded without Spending

July 29, 2010 by  
Filed under Debt and Credit, Spending

In May we opened our first rewards checking account at a community bank. Since then we have been transitioning our direct deposits and other routine transactions into that account. By the beginning of this month, we had built up the balance in our rewards checking account to the $25k limit for earning 3.80% interest.

This morning I logged in to our rewards account and saw that our interest payment had been credited – $75 and change. That’s right – 3.80% on our checking account deposits. Try to get that rate at one of the internet-only banks that are blogged about elsewhere until your eyes glaze over. You can’t.

You know what Mr. ToughMoneyLove likes most about a rewards checking account? You are rewarded for what you are not spending.

Other folks like to brag about all of the points and rewards they can earn on their credit cards. That requires buying things. I prefer being rewarded for the money we did not spend.  I like a bank that emphasizes that.

The critics of rewards checking accounts complain about having to make ten debit card transactions each month to receive the top interest rate. It’s as if that will cost them a trip to Tahiti because they didn’t swipe their credit card instead.

Let me tell you how challenging it is to make ten debit card transactions in a month. It’s not. A few trips to the grocery store and stops for gas and you are done.

Does it bother me that these small transactions are taking money immediately out of our checking account? Not when I know that what is still there is earning 3.80%.

Other self-appointed personal finance geniuses (OK – I”m also self-appointed) will argue that strategic use of their credit cards will boost their credit score.

You know that I hate FICO and credit score obsession. I have regularly boasted that I did not know my credit score and have never known it. That changed yesterday.

I received a standard notification in the mail from our community bank as it processes our mortgage refi application. As I was reading the fine print and boilerplate, I suddenly noticed that my credit score was stated on it.

Whoops. I did not expect that so I couldn’t avert my eyes.

I’m no longer a credit score virgin.

So what score did FICO give to someone who dislikes credit and has ignored his credit score for his entire adult life? 793  I’m guessing that’s pretty good considering they tell me the scoring range is 300-850.

So now you might be thinking, if you didn’t know your credit score when you applied for your refi, how did Mr. ToughMoneyLove know he was getting the best available rate? Easy. I asked if I was being offered the best available rate offered to the best customers. I was assured that I was.

I probably didn’t need to ask. Think for a minute. Banks are going to promote their best available rate to get you interested in their mortgage loan product. When they run a credit check on you after you apply, you may be declined or the rate may change if they find something negative. If it doesn’t change, you are good to go.

So my recommendation to you is to think like a saver and not like a spender. Find banks and financial products that reward saving, not spending. They are out there. And keep your focus on responsible spending and building net worth, not your credit score. If you do, everything else will fall into place.


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Comments

2 Responses to “Feeling Rewarded without Spending”
  1. Kevin says:

    I’ve been trumpeting the reward checking account for a while now. We’ve got a similar deal — 3.61% up to $25k. They said we could open as many accounts as we want so we have two. Really nice having that interest show up each month!

  2. Jonathan says:

    I love my rewards checking account as well. However, I do use it as a handy excuse to eat $5 lunches during the week. Oh well, the extra interest ends up paying for it, eh?

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