What’s the Catch? 2% Interest on Your Checking Account!
This headline in USA Today caught my attention: You can get 2% interest on your checking now”. Here’s a good mini-activity for students:
- Step 1: Go to Bankrate.com which lists thirteen credit unions (there is a tab that lists banks too) with checking accounts earning high rates of interest.
- Step 2: Identify the 5 accounts with highest rates of interest. Here is what they were today:
- BECU 4.07%
- Consumers Credit Union: 3.09%
- Great Lakes Credit Union: 3%
- Lake Michigan Credit Union: 3%
- Belvoir Federal Credit Union: 2.53%
- Step 3: Have students figure out which credit unions they would be eligible to open an account.
- Two of the five (BECU and Belvoir) are not eligible nationally so you would have to live in their region to open an account.
- Step 4: For the banks that they are eligible for, which one of the credit unions seem like the best deal when it comes to interest they would earn. Students should assume an average balance of $1,000.
- Consumers CU has 3.09% interest rate: $30.90 interest earned/year for $1,000 account
- Great Lakes CU has 3.0% interest rate: $30.00 interest earned/year
- Lake Michigan CU also has 3.0% interest rate: $30 interest earned/year
- Step 5: So, very little difference in interest between the three banks, ask students to go a level deeper and to click on each of the three credit union links (might be best to do in groups of 3 to even out workload). Here is what they will find:
- Step 6: Have them list all the requirements in order for them to earn the higher interest rate (note that their APY (Annual Percentage Yield drops to 0.2% above the $10,000 cap). Hint: There’s a lot of hoops to jump through.
- Step 7: Compare the requirements for each credit union. Choose one that you think might be the best choice for you. Be sure to list the reasons.
So, what do students learn from this activity? There may be more to that great offer than meets the eye and you better read the fine print!
About the Author
Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.