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.