How To Earn 1% On Your Checking Account
- Jun 12, 2017
- 4 min read
Banks have been stepping on us with interest rates for years. If you feel anything like I do, you're frustrated that you earn basically nothing on your checking account. My wife and I maintain an average daily balance of $20,000 in our checking account, and that has only generated $0.15/month in interest for us. That's $1.80 per year, representing 0.01% of our balance. Big deal...
When a new client asked me where they should bank two months ago, I started hunting around. I quickly found several savings accounts with decent interest rates, but checking accounts with compelling interest rates remained elusive.
But then I came across the online bank Aspiration and their Summit Checking Account paying 1% interest.
1% On Checking Is A Big Deal
1% may not seem like much, but let's put it into perspective. I used Aspiration's online calculator and adjusted for a starting balance of $20,000. Over a 5-year time horizon, that's a little over $1,000 earned compared to my current 0.01% rate:
Source: Aspiration
P.S. to earn 1%, you must maintain a balance in excess of $2,500. For smaller balances, you still earn a relatively nice 0.25%.
What's The Deal With Aspiration
Aspiration is an online financial services company offering a checking account and two mutual funds. Radius Bank is Aspiration's checking account partner, and they provide FDIC insurance on the Summit Account. Radius was founded in 1987, is headquartered in Boston, and holds $725M in assets.
Aspiration's rationale for 1% is their focus on "doing well and doing good" at the same time. Doing well incorporates account features such as no minimum monthly balance requirements, no monthly service fees, and no ATM fees in any country around the world. Doing good is Aspiration's policy of donating $0.10 of every $1.00 in profits earned to Microloans targeting Americans starting their own small businesses.
For all these reasons, Money Magazine named the Summit Account the Best Checking Account in America.
If you're wondering how Aspiration can afford to offer 1% (if you're the too good to be true cynic), they provide an explanation Here.
My Personal Experience With The Summit Checking Account
Setting up an account online was painless. It took me approximately 5 minutes to fill out some info on their site, and the next day I received an email that my account was open and ready to fund. I was able to easily link my current bank account and transfer in an initial balance.
Last weekend, I changed my checking account auto-pay arrangements (mortgage, property & casualty premium, i.e., the few expenses I can't pay with my credit card) to the Summit Account as I prepare to shift the rest of my current checking account over.
The Summit Checking account is damn near perfect for me. I ordered a free round of checks, I have a debit card, and I downloaded their app (with mobile deposit) on my iPhone.
Considerations For You
You might feel weirded out because currently, they do not offer a joint ownership. My advice is to get over it. Either open a 2nd Summit account for your spouse or leave your current joint checking open with a small balance.
Also, Aspiration asks you during the account creation if you'd like to "tip" them a monthly amount. They allow you to choose an amount in between $0 and $10. While $10 is way too much for me to voluntarily give a bank each month, I generally do try to support progressive causes. With all the extra interest I'm earning, I can afford to carve off a couple extra bucks per year. I have no problem with them asking me for this, and you shouldn't either.
For clients at my company, the Summit Account integrates with our financial planning software. So, if you are the type who manages day to day cash flow at our site, transactions are automatically imported the same as any other bank you've linked. Speaking of integration, you can also link your Summit Account to 3rd party budgeting sites such as Mint.com.
Last, Aspiration is an online bank. There are no retail branches with a 20-something put-off teller annoyed by the fact that you actually walked in. It is 100% online. Again, my advice is to get over it. If you can't stand the thought of leaving your local bank or credit union (because they've treated you so well with high interest rates for so long...), just leave a small balance in your existing checking account.
How To Get Going
Start by doing your own due diligence. Visit their Site, email your questions to them at support@aspiration.com, or call them at 800-683-8529. Once you're solid on the details of what you're getting, begin the registration process by clicking their green "Sign Up" button in the upper right hand corner of their site.
Enjoy those extra dollars!
Disclaimer: I have assets at Aspiration in the Summit Checking account. However, I do not receive any compensation, monetary or otherwise, from Aspiration or any of its affiliates. The blog post is completely unbiased, and Aspiration was not even aware I was writing it.
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