Help me earn 4.5% APY in my rewards checking account!

October 8, 2008 8:40 AM

In order to earn 4.5% APY in my checking account, I need to make 12 debit card purchases/month. What is the cheapest, most automatic, least time consuming way to do this?

I have this rewards checking account.

This question has been asked before, but there were only a couple answers that fit my situation. The ones I liked the best were the AmazonS3 idea (@ $0.15/charge) and the Google checkout idea (@ $0.20/charge).

Let me make this very clear - I will not use my debit card for regular purchases (groceries, gas, coffee, etc.), so please refrain from suggesting that. I am simply looking for very cheap items/services to pay for online that can be setup to charge automatically every month - I probably won't even use the service - I'm just trying to earn that 4.5% APY on a sizable balance in my checking account.

What ideas do you have that are automatic and can beat ~$0.20/charge?

posted by charlesroper to Work & Money (25 answers total)

How much are you willing to spend on these non-vital purchases? Will it really exceed the interest? Are you willing to share why you wouldn't use the debit card for things you buy anyway, thus satisfying the requirement with no additional expense? (I feel like I'm missing something.)
posted by nax at 8:48 AM on October 8, 2008

Make small charity donations.
posted by ThePinkSuperhero at 8:49 AM on October 8, 2008 [1 favorite]

Response by poster: I have $25,000 sitting in my checking account. Every month that I earn 4.5% APY, I earn ~$90 in interest. I know there are better investment options . . yada yada . . but I'm happy with this account and need the liquidity of a checking account.

I wanted to get by with only a few dollars in charges/month in order to earn that APY.

I refuse to use my debit card for regular purchases because there is very little consumer protection and I'm already earning great rewards with my credit card.

I'm simply trying to maximize the profit off of my rewards checking account.
posted by charlesroper at 8:54 AM on October 8, 2008

I will not use my debit card for regular purchases (groceries, gas, coffee, etc.),

I don't understand why not. Does your utility or cable bill count a regular purchase? I would set up one of them to debit from the card.
posted by and hosted from Uranus at 9:01 AM on October 8, 2008

I have $25,000 sitting in my checking account. Every month that I earn 4.5% APY, I earn ~$90 in interest. I know there are better investment options . . yada yada . . but I'm happy with this account and need the liquidity of a checking account.

I realise what I'm about to say isn't exactly what you're asking, but it fulfils the cheap/automatic/not time consuming requirements of your request.

My bank offers an internet saving account linked to my checking account. It pays a good interest rate, and retains complete liquidity as I can transfer money between accounts online in moments. No 12*$0.15 purchases required.
posted by Mike1024 at 9:01 AM on October 8, 2008

Response by poster: @ Uranus

Please read my above comment. I don't make very many purchases on a monthly basis, and the ones that I do make happen to be pretty big so I want to use my credit card for protection and to earn 3% cash back.

From a profit standpoint, it does not make sense to use my debit card for regular purchases. Even for a purchase as small as $8, I'm better off using my credit card (earning $0.24 cash back) and using my debit card to make a worthless transaction for $0.20 to earn the high APY.
posted by charlesroper at 9:07 AM on October 8, 2008

It may be possible to set up regular PayPal payments of like .02 cents to someone or something. I'm not sure if this violates ToS
posted by GilloD at 9:08 AM on October 8, 2008

Before you do this, make sure that your bank treats "PINless transactions" the same as ones where you use your PIN. When I looked into a similar account (from a different credit union), the requirement was not just that the card get used a certain number of times each month... it's that it was used a certain number of times with a PIN entered at time of purchase (so the transaction cleared through the ATM network, not through the Visa/Credit network).
posted by toxic at 9:10 AM on October 8, 2008

Response by poster: @ Mike1024

I know there are better accounts out there - I'm not here to chase rates. I'm just looking to maximize the earning potential of my already established checking account. It seems like a pain to do all this work (and spend $3-4/mo in worthless purchases) just to earn 4.5% APY, but when you consider it's $90/month, it'd be worth it if I could set it up to be automatic.

Even some of the best savings accounts aren't earning 4.5% APY right now anyway.

@ toxic

Thanks for clearing that up. I'll have to look into that to make sure that's not the case. For the sake of continuing discussion, let's assume that credit transactions are ok.
posted by charlesroper at 9:15 AM on October 8, 2008

Response by poster: @ toxic

I just called my bank and they said that both types of transactions (PIN and PINless) are eligible.
posted by charlesroper at 9:24 AM on October 8, 2008

Well, this isn't a small purchase, but the US Mint is currently selling money at cost price with free shipping. It's a $250 or $500 purchase, but it's cash that you're buying, so you can put it right back into your account.
posted by mhz at 9:50 AM on October 8, 2008

There are lots of people who accept 'micropayment' / micro-donations, like open source projects. But again, even if you donated something like $1, there's the question of whether they'd resent it. On one hand, it's a donation... On the other hand, it seems insulting to give $1 to someone. (Then again, I actually did that once, explaining that I was a college student with no job, but that I appreciated their work, so that it was more of a symbolic gesture, and they seemed to appreciate it.) But this would leave you having to find a dozen projects a month, or looking like the lunatic who repeatedly gives the same project lots of trivial donations.

I do wonder, however, if this would also set off red flags. Isn't a tiny little purchase exactly how scammers 'test' a credit card they stole? I can totally see a new Ask MeFi, "Someone keeps donating 25 cents to me, 12 times a month. Is this fraud? The e-mails are annoying, can I make them stop paying me?"
posted by fogster at 10:04 AM on October 8, 2008

Actually, why not take my previous idea a step further? Instead of making worthless micro-payments to someone else, set up a Paypal account and pay yourself?

However, now it seems even more likely to be venturing into setting off red flags / seeming like fraud?
posted by fogster at 10:10 AM on October 8, 2008

Response by poster: @ fogster

You bring up a good point. I thought about creating a Google checkout account and using adwords. If I spend $1 in adwords, I can have up to $10 in transactions/month with no fees. I just can't find what their minimum purchase price is - also, there is no way to setup recurring payments, so this isn't exactly as automatic as I wanted it.

Another option I'm considering is using Amazon S3 and just doing the minimum 1GB for $0.15/month. The only downside to this is that I'd have to create 12 separate accounts - but I guess once it's setup, I wouldn't have to worry about it again.
posted by charlesroper at 10:14 AM on October 8, 2008

From a profit standpoint, it does not make sense to use my debit card for regular purchases. Even for a purchase as small as $8, I'm better off using my credit card (earning $0.24 cash back) and using my debit card to make a worthless transaction for $0.20 to earn the high APY.

And look how much time you've already wasted worrying over 4 * 12 = 48 cents a month or six dollars a year.
posted by TheOnlyCoolTim at 10:21 AM on October 8, 2008

Response by poster: @ CoolTim

Clearly that was just an example that I presented earlier - I used it to prove that even in the worst case scenario (a charge as small as $8) - it's still more profitable for me to use a credit card for my regular purchases. Your math proves it - thanks for making my point!

Typically, my smallest purchases are over $50 which yields slightly higher results:

$50 @ 3% cash back = $1.50 cash back per transaction
$1.50 x 12 transactions/month = $18 cash back/month
minus ~$3 in worthless debit transactions (12 @ $0.20/ea.)
= $15 extra/month by deciding to not use my debit card to make those twelve transactions

Pardon me, but I think that $180/yr. is well worth an hour on MeFi getting other users' opinions.
posted by charlesroper at 10:43 AM on October 8, 2008

I will not use my debit card for regular purchases (groceries, gas, coffee, etc.)

Typically, my smallest purchases are over $50

Soooo, what do you get at Starbucks?
posted by grateful at 10:50 AM on October 8, 2008

Best answer: This sort of thing is best answered in the finance forum at fatwallet. You'll find plenty of people willing to put hours upon hours of research and effort into maxing out their earnings to the penny.

I'd start here, and follow the link about setting up monthly $1 charity donations.
posted by mbd1mbd1 at 10:55 AM on October 8, 2008 [1 favorite]

Not to belabor the point, but setting up strange recurring purchases of small amounts, etc. seems like way more of a hassle than just buying a newspaper and coffee every few days. I see that you are worried about 'consumer protection', but setting up micropayment schemes doesn't sound any less risky than swiping at Starbucks or Safeway.
posted by gyusan at 11:02 AM on October 8, 2008 [1 favorite]

Response by poster: I mentioned coffee only because it was brought up in the previously asked question - I don't drink it.

It seems as if in the previous question, people were fixed on getter the poster to switch over and start using his debit card for regular transactions - something I will not do. That's why I tried to make it very clear in my question - however it seems like my question will end up in the same graveyard . . . "just use your debit card more often!"

I simply wanted some ideas for some very inexpensive automatic transactions . . . nothing more.

I will try my luck at Fatwallet - thanks for that suggestion at least.
posted by charlesroper at 11:02 AM on October 8, 2008

If you fear that someone will get ahold of your info and empty your account you can ask the bank to set a daily withdrawal limit. Then use the debit card anywhere. They're safe as houses, and at least in the US guaranteed against fraudulent purchases (if it has a VISA or MC logo on it).
posted by Gungho at 11:36 AM on October 8, 2008

Best answer: I did this. I know you're looking for something fancy and automatic, but hear me out. I'm not suggesting you purchase all your groceries using the debit card, I didn't want to either. Just make a few extra transactions at the self-checkout kiosk.

You don't drink coffee. But do you ever buy a carrot, a clove of garlic, a candy bar, a pint of milk, an apple, a cup of yogurt, a bottle of juice, a zucchini, white mushrooms, a lemon, a lime?

How about a song from iTunes every 2-3 days?

If you need automatic, setup the S3 accounts and be done with it.
posted by reeddavid at 12:19 PM on October 8, 2008

Couldn't you set up a monthly automatic payment of a few cents towards a larger recurring debt or charge? For example, set up a monthly payment to the gas company of $0.25, and then pay the balance of your gas bill every month in whatever way you normally do.
posted by SuperSquirrel at 12:23 PM on October 8, 2008

Response by poster: @ SuperSquirrel

Thanks for the idea - I don't actually pay any utilities. In total, I don't think I have 12 transactions in a given month. Maybe a couple tanks of gas, 2-3 trips to the grocery store, and a handful of other fixed monthly expenses.

I read on the FW forums that if you just do the bare minimum (12 small transactions) for a rewards checking account that has a large balance, they are likely to close your account anyway.

We shall see.
posted by charlesroper at 12:59 PM on October 8, 2008

I read on the FW forums that if you just do the bare minimum (12 small transactions) for a rewards checking account that has a large balance, they are likely to close your account anyway.

Maybe, maybe not. I have accounts at a couple of local credit unions that offer similar deals, though not exactly the same. Interest rates are higher (7.5 and 8%) but limits are lower (those rates are applied to the first $500 in checking and first $500 in savings, so $1K total), and only one electronic transaction is required to maintain that interest level.

To fulfill that transaction requirement, I do one electronic bill pay a month from each acct. The bills I pay this way are about the same each month, so I have money electronically transferred from my "real" checking account into those high-interest accounts. My balances remain right at the $1K max for the high interest. If anyone at those CUs cared to look it would be totally obvious that this is not my "real" checking acct.

It's worked fine for the past several months. In fact when I opened the accounts I was totally upfront about this plan with the CU employees I interacted with, and they were totally fine with it. I sort of regard it as a high-yield CD.

Another CU nearby has the deal you're describing and I haven't taken advantage of it for just this reason--that I'd obsess about the debit transaction threshhold.
posted by Sublimity at 9:40 PM on October 8, 2008