Consumers know they have many options for how to spend their money. Smart consumers know they have options for how to pay that can benefit them financially. You are likely familiar with credit cards that offer rewards such as airline miles, travel perks, and cash back. But if you aren’t comfortable maintaining lines of credit, or you’d like to earn rewards for everyday purchases, you can earn rewards with a cash back checking account.
Below, you’ll learn about the many benefits of these accounts, as well as tips for choosing the right account, strategies to maximize your benefits, and answers to FAQs.
How Do Cash Back Checking Accounts Work?
Cash back checking accounts are gaining popularity because they pay you back for purchases you’re already making. Like many interest-bearing checking accounts, your cash back checking account may require a minimum balance or a set number of minimum monthly transactions to qualify. It’s also likely that an account offers higher cash back percentages for certain categories of spending, such as dining out, gas, or travel and hospitality. Depending on your lifestyle, different accounts will reap different rewards.
When compared to other types of accounts and reward-earning cards, cash-back checking accounts offer several advantages:
- Traditional checking accounts do not offer rewards and have the same banking features as cash back accounts.
- Interest-bearing checking accounts may not seem very different, but you earn interest on the money kept in your account, as opposed to the money you spend. And this doesn’t always equal a higher reward.
- There is less risk of late fees, interest payments, and debt compared to rewards-earning credit cards. Cash back checking accounts are ideal for those who want to earn rewards while avoiding revolving debt.
Key Benefits of a Cash Back Checking Account
Debit cards are a preferred spending method for several reasons, including ease and security. When compared to credit cards and cash, cash-back checking accounts offer some key benefits:
- Get Paid for Everyday Purchases. You’re going to spend the money, anyway. Expenses like gas and groceries are unavoidable, so you may as well earn cash back. Linking your debit card to your favorite online retailers means all those impulse purchases earn money, too!
- No Interest Fees. Sure, if you pay your credit card balance off each month, then you can avoid interest fees, but if you carry even a small balance month-to-month, it can negate your earned rewards. Cash back checking accounts don’t charge interest, though if you maintain a low balance, you may need to be careful not to overdraft. Dieterich Bank lets you open a cash back checking account with as little as $25.
- They Can Help You Budget and Save. Digital banking allows you to track your purchases and spending habits, making budgeting easier. And many people use their rewards to jumpstart savings accounts or pay off nagging debts.
Tips to Maximize Cash Back Rewards
Use your cash back checking account wisely to maximize your benefits. Below are some expert tips on maximizing your rewards.
- Meet Transaction Requirements. These vary by account, but many have a minimum monthly transaction requirement. Not meeting your minimum transactions means not earning rewards.
- Use Your Debit Card for Monthly Bills. All those monthly expenses–utilities, phone, car insurance, streaming services can be paid with your cash back checking account. Not only will this ensure your bills are paid on time, but it will also help you meet the minimum transaction requirements. Set up automatic bill pay and watch the rewards accumulate.
- Picking the Right Account. How you spend money should influence which account you open. Certain accounts offer higher rewards on spending categories like gas, groceries, dining out, or travel. Many also offer higher rewards through specific retailers. Shop around to find the account that best fits your lifestyle.
- Enable Direct Deposit. Direct deposit not only guarantees you’ll receive your funds faster, but many accounts require it to qualify for the account.
- Take Advantage of Bonus Promotions. Banks often partner with retailers to offer extra cash back on certain purchases.
- Avoid Fees. Overdraft fees, ATM fees, and fees for not meeting your minimum balance requirements will negate the rewards you’ve earned. Make sure you understand the account’s fee structure to avoid unnecessary charges.
- Use Digital Banking Tools. Banks offer a variety of digital tools to help you track and manage spending. Set up alerts to keep track of your balance, earned cash back, and schedule regular payments.
- Monitor Spending and Adjust Monthly. Regularly monitoring your spending is always a good budgeting habit, and it can help you adjust to maximize your cash back.
- Don’t Forget to Redeem your Cash Back. Some banks don’t credit your cash back automatically, and in certain cases, your cash back might expire. Set a regular monthly reminder to redeem your rewards.
- Read the Fine Print. Much of the above varies from bank to bank, so it’s essential that you read the fine print and understand your rates, cash back limits, redemption rules, fees, and account requirements. Not doing so can lead to surprise fees or not earning the cash back you thought you were earning.
FAQs About Cash Back Checking Accounts
How Much Cash Back Can I Earn Per Month?
Banks have monthly or yearly limits on cash back rewards, but these limits vary. Most banks offer 1% cash back up to their limit. A cash back checking account at Dieterich Bank offers 2% cash back—double the national average.
Is There a Minimum Balance Required?
Again, this will vary by bank. Many banks offer incentives for maintaining a minimum balance, such as fee forgiveness or earning rewards. Know what is realistic for you when shopping for the best account.
Do Online Purchases Qualify for Rewards?
Yes! In fact, many online retailers offer promotions of their own, which, when combined with your cash back checking account, will earn you even more.
What Happens if I Don’t Meet the Monthly Transaction Requirements?
If this happens, don’t worry. You won’t lose your account. Likely, you’ll miss out on that month’s cash back or reimbursed ATM fees. Monitor your spending and see where you can make adjustments going forward.
Can I Have Multiple Cash Back Checking Accounts?
Yes, you can, and often at the same bank. Many people have multiple cash-back accounts to use for different spending categories. It’s important to keep in mind, though, that rewards structures will be different, and they’ll all likely have minimum transaction requirements. Being successful with managing multiple cash back accounts hinges on your organization and spending tracking.
How Can I Choose the Best Account for Me?
To find the best account for you, consider the following:
- Accounts that reward the spending habits you already have
- Whether you can maintain the minimum monthly balance
- Cash back limits
- Minimum transaction requirements
- Other fees and restrictions
You can open a cash back checking account with Dieterich Bank with a $25 deposit and earn up to 2% on all purchases with as few as 15 transactions per month. And with Dieterich Bank’s digital banking tools, it’s easier to track and manage your spending habits, deposit checks, and set up alerts and reminders. Contact us or stop by one of our locations in South Central Illinois to open your cash back checking account today!
