Hi, I see that higher yield checking and savings accounts require many ATM transactions, which for me means sacrificing 1% to 5% in credit card rewards. Which one is the better “buy” - high yield interest rates - or rewards?
Does Uncle Sam tax your interest on your high checking acct rate?
Hi @sharon.nityashri.fried - I’d recommend just using credit card rewards, for multiple reasons.
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You won’t get taxed for the same amount of money you get back.
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Having to use debit cards instead of credit cards is fairly dangerous. If someone magnetically swipes your card, it’s a lot more troublesome to revert debit transactions than credit card transactions.
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1-5% in credit card rewards is no the same as “cash back” – it’s a lot better than cash back. 1-5% can translate to 10-20% in value back per dollar spent. And if you’ll spend money on travel anyway, you’ll always get to use those points. The most extreme example is Chase Sapphire Reserve: You get 10X points on Lyft rides, and a $12K USD first class plane ticket is redeemed with 120K points. In this extreme case, $1 spent on Lyft rides is a free dollar on a first class plane ticket (i.e. +100% value).
But if you don’t travel or have a lot of credit card expenses, why not do a high-interest savings account? Their interests are surely going to beat a high-interest checking account and its purpose is more akin to what you’re looking for: lower requirements for transactions.
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