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Another Bank Enforcing High Debit Card Usage on Its Reward Checking Account

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Hyperion Bank

Hyperion Bank in Philadelphia is another bank with a high-yield reward checking account that is cracking down on customers who are not spending enough on their debit cards. One reader who reported using his debit card for a few hundred dollars in purchases a month received just a warning. Here's an excerpt:

Please understand that the "spirit" of this account is that you use it as your primary checking account – for all checks, online bill payments and debit card purchases. This account is NOT intended to be used as a savings account.

IMPORTANT: IF YOU ARE NOT USING THIS ACCOUNT AS YOUR PRIMARY CHECKING ACCOUNT, AN ACCOUNT REVIEW COULD REVEAL YOUR ACTIVITY AND YOUR ACCOUNT MAY BE AUTOMATICALLY CONVERTED TO A NON-INTEREST BEARING, FREE CHECKING ACCOUNT.

Another reader was not so lucky. Her account was converted into the non-interest bearing free checking account. She reported making between $10 and $20 per month in debit card purchases. Here's an excerpt of the email she received:

We designed our HyperInterest Checking Account product in order to give you the opportunity to earn an above market rate on your primary checking account while enjoying the convenience of using your debit card for point of sale transactions. Our ability to offer our customers this great rate is, in part, dependent upon the amount of fee income they help generate for us by making credit based debit card point of sale purchases.

It is obvious that you are not using this account as your primary checking account (the account from which you conduct all of your bill paying activity including writing checks and making online bill payments through our online banking service). And that you are abusing the intention of this account by using your debit card in a calculated and limited fashion.

Accordingly, your HyperInterest Checking Account has been closed* and converted to our Free Consumer Checking Account. If you do not wish to have the Free Consumer Checking Account, you have the right to close this account.

A reader in my Hyperion reward checking post left the following comment in February:

They have just informed me that they are changing their criteria for transactions for the high yield account. Effective (?) they will no longer honor the monthly high rate unless your debit transactions are each in the amount of at least $5.00 They said that transactions in the amount of $1.00 are considered abuse. When I asked about a letter in writing stating these new terms, they said they would get back to me. No return call as of yet.

So a $5 average debit card purchase may be the threshold that the bank is using in deciding whether to convert the customer to the free checking. The recent emails gave no indication about the exact amount. Perhaps the bank thinks it's better not to make it clear so that customers will make more purchases.

I first reported on Hyperion Bank in December 2008 when it was paying 5.01% APY on balances up to $50K. Both the rate and the cap have fallen, but it remains very competitive with a 4.26% APY on balances up to $25K. Earlier this year the bank stopped listing the account on their website. Hopefully, the bank will at least be able to maintain the competitive reward checking account without being too harsh on its customers. If you have this reward checking account, please leave a comment if you received a recent email or if you have been converted to the free checking account. And please let us know how much you are spending with your debit card.

Thanks to the readers who sent me the emails.

Other High-Yield Reward Checking Accounts

Please refer to the reward checking section of DepositAccounts.com to find reward checking accounts in your state or that are available nationwide.


  Tags: Hyperion Bank, checking account, Pennsylvania

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Comments
16 Comments.
Comment #1 by 51hh posted on
51hh
Using as "Primary accounts" seem to be the universal term RCA banks adopted.  The defintion is complex, but it basically means "debit card amount (at least $5 - $10), diversified usage (grocery, restaurant, gasoline, entertainment, department store); i.e., no automatic 5-10 debit payments for utility/gasoline (we hate that).

3
Comment #2 by Anonymous posted on
Anonymous
if one was never before a debit card user, then use is of course calculated.

banks should spell out their principal use criteria in their marketing material. all i have ever seen is 10-15 debit card uses, electronic statements, and at least one automatic credit/debit or bill pay ... never a requirement that it be your primary checking account.

an average $5.00 debit card usage ($50/mo-$75/mo) seems reasonable, but to expect it to supplant one's reward credit card use is ludicrous.

(if you spend ~$8K/mo on a 1% reward CC or ~$4K/mo on a 2% reward CC you are earning roughly the equivalent or the reward Ck income on a 4% reward Ck that holds a constant $25K. the favor goes to the reward CC if you spend that much as a matter of course b/c it takes less 'funding' to generate equivalent income. i spend about $10K/mo.)

7
Comment #3 by flat broke (anonymous) posted on
flat broke
between people making ten 50 cent purchases a month on their rewards checking accounts and government intervention in the banking system, rewards checking accounts will soon be extinct or be so fundamentally changed that it wont be such a good deal.

come back in 18 months and the typical rewards checking account requirement will be 12 debit purchases of minimally $5 each for 1.5% interest on a max balance of $15,000.

i dont blame banks for being ticked-off at people trying to take advantage of the system by making a handfull of tiny purchases to earn the high interest.  

3
Comment #4 by Anonymous posted on
Anonymous
I don't understand why banks just don't change their terms and conditions and put in "10 debit card purchases of at least $5".

I agree that making 10 $1 payments isn't the nicest thing to do, but it is well within the terms and conditions to do it.  I don't care what the "spirit" of the account is, if I meet the terms and conditions, they shouldn't have a problem with it.  If they do have a problem, change the terms and conditions.

I think they make lax terms and conditions to sucker in the average consumer and then selectively close accounts that they don't like.  That's wrong.

12
Comment #5 by Andy (anonymous) posted on
Andy
I basically agree with the banks' position. They are in the business of making money, not handing out high monthly interest to people who are trying to game the system by making 10 small purchases  which may fall within the "terms and conditions".

I have two 4% RCAs with balances that earn me at least $120 a month in interest.  So I've stopped using my Chase Ultimate Rewards Credit Card which earns 3% on groceries, drug stores and utilities.  I figure I would have to make over $4,000 in purchases a month on my Chase card to earn the same $120.  So I pay my bills and make my purchases using my RCA debit cards, spending over $300 a month in debit card purchases at each bank, plus my rent and an ACH payment each month.

It seems to me that as long as the bank is willing to give me an interest rate I can't get from a CD or MMA, I owe it to them to let them make some money in exchange.

If RCA customers continue to game the system with small purchases, RCAs will continue to drop interest rates and more will limit the amount that people can deposit in order to earn their high rates.  In this era of low interest rates, it seems foolish to kill the last "golden egg" out there by being selfish.

6
Comment #6 by Anonymous posted on
Anonymous
Anonymous #2, I suspect that if you spend $120K a year in credit card purchases, you are in a very small minority on this site.  And if you spend that much, I don't see why, if you have $25K in a RCA, you can't spend $400 of your $10K a month card purchases using the bank's debit card.  Assuming it's a 4% RCA, you're earning about $80 a month in interest from your RCA.  With a 2% credit card you'll get $8 in rewards for that same $400.

0
Comment #7 by 51hh posted on
51hh
There are still a high percentage of RCA banks that really do not care about the debit card amount/variety as well as the "spirit" of the RCAs.  These banks are usually sizable and quite customer-friendly.

For those "fuzzy" banks (usually of small size - $50M - $200M), one can simply switch to more friendly banks with comparable interest rates.  Or one can comply with a "calculated" plan; i.e., do minimum or near-minimum debit transactions (say $5 - $8) with some varieties.  By calculation, I mean something like #2: Ex.: ten debit transactions.  Just do $7 (average) x 10 = $70.  Do 50% in utility (loss of 2% vs. reward cards).  Do 50% in daily (grocery, restaurant, gasoline, drugstore) (loss of 5% vs. reward cards).  Thus it is a loss of $2.45 per month.  A tiny loss comparing to the $80 interest earning for ($25K, 4%) RCA.  Or $40 interest earning advantage vs. the highest 2% savings without RCA requirements.  The point is that one can still make the fussy banks happy while earning attractive RCA interest at the same time. 

For us, we have the majority of RCAs in the customer friendly arena, only one bank is advocating the "primary account" spirit.  We are currenly complying with their request, but are ready to leave any time they express further dismay about our charging pattern (we have a less fussy bank with a higher interest already in line). 

1
Comment #8 by 51hh posted on
51hh
Corrrection (Last Post): "fussy", but also fuzzy (i.e., unlcear about "primary account):-)

-1
Comment #13 by Anonymous posted on
Anonymous
A friend, and friends of that friend, and I all received the tacky red-print warning email. I'm meeting all of the requirements and then some, although my balance is near the max and my aggregate monthly debit card usage is under $75. It is my main checking account, I just don't have that many bill pays to do or checks to write.

Hyperion is a one branch bank in a funky part of Philly. They had an armed robbery back in February. I don't know how much lending they're doing.

I think they didn't realize the downside of First ROI's product. I think it's only a matter of time before the interest rate drops precipitously or the product is discontinued. Sad.

0
Comment #14 by Anonymous posted on
Anonymous
I also received a warning email.  The filter they are applying is more sophisticated than simply ensuring every transaction is over $5 (as all of mine have been over that amount).  They appear to be looking at the pattern of spending, when the purchases are made, and possibly where.  My Spending has is usually been in the $110 to $150 range, with another $150 (or more) in ACH and checks. 

I agree that explicit requirements, including a minimum spending threshold, would make compliance more cut and dried.  Trying to balance a rewards checking account and a reward credit card may become impossible, forcing a choice of one or the other.

 

 

 

3
Comment #15 by Makido (anonymous) posted on
Makido
If a company has a set of rules for a RCA and someone meets those conditions, then they should earn the higher interest rate.  Andy mentioned earlier that he was on the side of the banks because they didn't agree with people "gaming" the system.  However, I take the opposite approach.  Aren't banks "gaming" the consumer?  Banks offer a rewards checking account in the hope they won't have to pay much interest in return for loaning consumers' money out at a far greater interest rate.  When the bank doesn't make enough money, then they yelp and say the consumer is "gaming" the system. 

The banks wouldn't even offer the accounts if they couldn't make money from them.  It's a matter of if they're making enough money.  If certain banks don't feel they are making enough money, don't take the PR low road.  Simply change the requirements to have a minimum charge amount per transaction/month in addition to the 10, 12, or 15 card transactions.  This way they can keep their current customers that they are happy with and force other individuals they feel are "gaming" the system to increase their usage.  Relatively speaking, simple and effective.

3
Comment #16 by Anonymous posted on
Anonymous
I was just about to open an account and give them 25k since they are offerring a good rate, but not NOW!   Shame on them trying to intimadate people.  I thought small banks were supposed to be friendly?????      I agree, if you don't want people "taking advantage" of your terms then change your terms.

Personally, I think that the bank should be contacted by this website and told that if they send any more letters out like this that they will be taken off this site.

 

2
Comment #17 by Anonymous posted on
Anonymous
I recommend that readers stay away from this bank. I received a warning letter on my rewards account and had the account switched from the rewards account to a low interest rate account within 1 week. Now they say that I owe them money due to bank errors. Never dealt with a bank as incompetent as this one. Danvers is a better bank and nationwide.

1
Comment #18 by Anonymous posted on
Anonymous
I just logged into my Hyperion RCA account. It looks like they have dropped the APY to 3.01% There was no mention of the drop in my last statement, on their website, or by email. Add that to the recent insulting e-mail and I'm leaving. Shame.

1
Comment #19 by Anonymous posted on
Anonymous
I called Hyperion Bank this morning. After checking, the CSR said the HyperInterest checking APY is 3.01%, effective June 1st. When asked if any announcement had been made, she said no.

1
Comment #20 by Anonymous posted on
Anonymous
Someone on the FWF forum said his rate had dropped to 2.5%. I logged back on and sure enough, that's what it now is. Apparently the CSR didn't know about the second rate cut when I called her.

1