Now that bank rewards programs have gone through a few years of refinement, community banks are quickly getting into the game before their customers decide to start earning incentives elsewhere. That means some banks are paying interest rates as high as 6 percent on free, rewards checking accounts for customers who meet certain qualifications. Other banks are encouraging consumers to rack up points toward merchandise and gift cards with each swipe of their debit cards. Both types of rewards programs encourage the use of more electronic banking services, which saves banks overhead costs, improves retention and creates cross-selling opportunities. Each can attract high-dollar depositors, generate fee income and help smaller institutions remain competitive with the mega-banks and Internet-based institutions. Bankers believe the cost of funds is going to skyrocket. There's no way that they can offer a 5-percent-interest, free checking account with no minimum balance - in their minds, that's never been done; there's no way we can afford it; there's no way it can profitable.
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