This is the first time that I've seen a pure internet bank offering a high-yield reward checking account. Bank of Internet has just started listing the account on its website. It's a little different than the typical high-yield reward checking accounts, and some may dispute the use of the term "high-yield". The top rate is currently 1.25% APY which is low for reward checking, but this applies to all balances. Like the typical reward checking account, this rate requires certain monthly activities. Unlike most other reward checking accounts, it's not all or nothing. Meeting certain requirements qualify the account owner for an extra 0.3125% in the rate. Here's a summary of how to qualify for the full 1.25% APY:
- +0.3125% for receiving direct deposits each month totaling $1,000 or more
- +0.3125% for paying 2 bills each month through the free online banking
- +0.3125% for using your Rewards Checking Debit Visa Card at least 1 time per month for normal everyday purchases
- +0.3125% for using your Rewards Checking Debit Visa Card at least 6 or more times per month for normal everyday purchases
Like most reward checking accounts, there are ATM fee reimbursements. However, it doesn't depend on meeting monthly requirements. The bank automatically refunds fees charged by other banks at the end of your monthly statement period (excludes international ATM transactions).
Also like most reward checking accounts, this is a free checking account with no monthly maintenance fees and no minimum monthly balance.
How It Compares to Other Checking Accounts
In my opinion, the rate isn't high enough to make the required activity worthwhile. You can get rates close to 1.25% APY at internet checking accounts without the work. For example, Incredible Bank is offering 1.21% APY on its internet checking, Alliant Credit Union is offering 1.10% APY (with direct deposit) and ING Direct offers 1.15% APY ($100K minimum). Rates are accurate as of 7/12/2011.
Compared to other reward checking accounts, the rate is low. As I mentioned yesterday, you can get nationally available reward checking accounts with yields around 2.50%. However, this rate is only for balances up to $25K. The portion of the balance above $25K earns a much smaller rate. Reward checking accounts without a balance cap haven't held up well. One example is City National Bank which was the first bank in the nation to offer a reward checking account. The bank has always made this account available nationwide without a balance cap, and this appears to have seriously affected the rate. The top rate is now only 0.45%.
Even though the rate isn't that great, it's nice to see a new rewards checking account especially with the new debit card regulation that will be taking effect in October. Bank of Internet has under $10 billion in assets so it won't be directly affected by the debit card fee caps that will take effect in October. However, there have still been concerns that small banks will be affected.
Bank of Internet Overview
Bank of Internet has long offered competitive CD rates. I recently took a look at these and the bank's savings accounts in my Bank of Internet CD review.
Bank of Internet just had its 11th anniversary. It's one of the oldest pure internet banks. During that time, its financials have remained strong. Currently, it has an overall health score at DepositAccounts.com of 4 stars (out of 5) with a Texas Ratio of 12.25% (above average) based on March 2011 data. The bank has been a FDIC member since 2000 (FDIC Certificate # 35546).