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Future of PerkSreet Financial and its Checking Account?

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PerkStreet Financial

With the new debit card fee regulation that's now scheduled to take effect on October 1st, some might have concerns about PerkStreet Financial's checking account which rewards customers between 1% to 5% cash back on their non-PIN debit card purchases. PerkStreet Financial developed this internet checking account and debit card rewards program over 2 years ago. It partnered with The Bancorp Bank in Delaware which holds the deposits. The COO of PerkSreet, Jason Henrichs, recently answered some questions about the company in this PerkStreet blog post. One of the questions concerned how the debit card fee regulation was going to affect PerkStreet. Here was Jason's reply:

You’ve probably heard about the impending legislation that has caused most banks to drop their debit rewards programs and hike fees, and might be wondering if it will impact PerkStreet in the same way. We don’t believe so – based on the current implementation of the new rules, we think we’ll be able to offer the same 2% back with great service and no monthly fee. We’ll continue to watch this closely and will communicate any changes we anticipate before we make them. No matter what, we’ll stick to our core philosophy of giving customers huge value for being responsible.

One thing that helps PerkStreet is that The Bancorp Bank is well under $10 billion in assets, so they should be exempt from the debit card fee cap. However, like I said yesterday, there are concerns that smaller banks will eventually be hit with reductions in interchange fees. I'm sure that's why Jason included in his answer that they will "continue to watch this closely and will communicate any changes".

One new thing we should soon see at PerkStreet Financial is a savings account. Here is what Jason had to say about this:

Yes! Building a savings account is also a top priority for us. Makes sense, since saving is such a big part of living a better financial life. We’re working hard with our banking partner to develop a savings program that makes sense for our customers and aligns with our vision, and we hope to have it rolled out later this year.

It will be interesting to see what features the savings account will have and how competitive the rate will be. It will also be interesting to see if the savings account can be used to meet the balance requirements of the checking account. Currently, to qualify for the 2% unlimited cash back on debit card purchases, customers must maintain a minimum checking account balance of $5,000. If the balance drops below $5,000, the cash back is only 1%. The downside with the PerkStreet checking account is that it doesn't offer any interest. So if you are maintaining a $5,000 balance, you're losing a significant amount of interest. This downside is becoming less of an issue as rates fall. For example, with a 1% APY, the amount of interest earned on a $5K balance over one year is only $50 (before tax). It only takes $2,500 in spending with 2% cash back to equal the interest.

I have more details about the checking account and rewards program in my PerkStreet Financial checking account review post.


  Tags: PerkStreet Financial, checking account

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Comments
8 Comments.
Comment #1 by Anonymous posted on
Anonymous
Isn't it more beneficial for us to just carry a credit card that pays at least 1% cashback on all purchases AND keep $5000 in a 1% APY high-yield savings?? Plus, credit cards have a grace period to pay the balance on due date.

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Comment #2 by KenBDG posted on
KenBDG
PerkStreet's extra 1% cash back could be worthwhile if you spend more than $5K per year. In that case, you'll earn over $50 more than the 1% cash back credit card which is more than what you would earn with $5K in a 1% savings account. Of course, you can get more than 1% cash back with some credit cards and you can get more than 1% APY on some savings accounts and reward checking accounts.

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Comment #3 by Anonymous posted on
Anonymous
"PerkStreet's extra 1% cash back could be worthwhile if you spend more than $5K per year." That doesn't make sense? If you spend more than $5k per year, then you have more than $5k earning at least 1% APY in online savings or upto 2-3% in reward checking account. And, as you say, there are credit cards that even earn more than 1% cashback (some upto 2%; others with the rotating 5% capped categories). They need to offer something more for us!!

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Comment #4 by Anonymous posted on
Anonymous
Any APY has taxes deducted at tax-time.  Cashback will not.  Something else to consider.

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Comment #5 by KenBDG posted on
KenBDG
@anonymous #3, one could spend more than $5K per year but maintain a balance that averages only $5K. This assumes they are constantly adding to their checking account from their paycheck or pension at roughly the same rate that they are spending.

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Comment #8 by Anonymous posted on
Anonymous
To anon3 & Ken: If you spend $12k, then 2% gets you $240 (more if you spend on their monthly, rotating 5% category). Since you must maintain $5k daily with Perkstreet, you lose 1%APY online savings' interest of $50. This means your cashback is only $190 on spending $12k. If you have a reward checking 2%, you lose $100; or cashback of $140. No cashbacks as cash.

With a credit card paying 1%, you only get $120. With $5k balance at 1% savings, $50 interest; $170 total; less than Perkstreet. But, if you have a credit card with 1.25% cashback, you get $150 plus the $50 interest from online saving. Cashbacks can be given as cash or gfit cards, depending on issuer. The details of grace periods for purchases, consumer protections, greater coverages, rotating 5% cashback categories per month or per quarter, and your tax bracket for bank interest is up to you.

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Comment #9 by Anonymous posted on
Anonymous
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