Why high-yield checking accounts trump free checking
A recent Aite report, which includes a performance analysis based on blind data from 120 BancVue clients, points to a bright future for high-yield checking accounts. The report shows that compared to free checking, high-yield accounts like Kasasa Cash® and REWARDChecking® are more effective for acquiring new accounts, producing interchange revenue and delivering profits.
"The profitability of REWARDChecking accounts from May 2009 through April 2011 didn't come solely from account growth due to higher-than-average rates," said Ron Shevlin, senior analyst with Aite Group and author of the report. "Profitability was also driven by cost savings resulting from steering customers to lower cost channels, and from the revenue generated from debit interchange. All of this points to the need for active product design regarding fees, rates, and behavioral incentives regarding channel and debit card use."
Beyond strongly suggesting that high-yield checking accounts like BancVue's Kasasa Cash and REWARDChecking trump free checking, Aite Group's research also concluded the following key points:
- High-yield checking accounts have a vital place in the product portfolios of community banks and credit unions
- Active product design is critical for maintaining profitability, and
- Other revenue sources associated with high-yield checking accounts will accelerate.
Download Aite's full report and analysis
*Aite, 2011