Another UFB Direct MMA Rate Cut - Future of BofI's Rewards Checking?

UFB Direct once again cut its money market rate. The yield fell from 0.95% to 0.80% APY. The money market account now has the same rate as the Airline Rewards Savings Account. In both cases, UFB Direct launched these accounts with top rates. Below is the rate history for both the money market account and the savings account:

UFB Direct Money Market Rate History

• 05/30/12 - 1.15% APY (launch)
• 07/14/12 - 1.25% APY
• 08/06/12 - 1.30% APY
• 09/04/12 - 1.10% APY (~3 mo from launch)
• 10/10/12 - 1.05% APY
• 10/29/12 - 0.95% APY (~5 mo from launch)
• 11/19/12 - 0.80% APY (~6 mo from launch)

UFB Direct Airline Rewards Savings Rate History

• 08/04/11 - 1.30% APY (launch)
• 01/18/12 - 1.10% APY (~6 mo from launch)
• 02/01/12 - 1.05% APY
• 02/07/12 - 0.95% APY
• 02/13/12 - 0.90% APY
• 02/22/12 - 0.85% APY
• 02/28/12 - 0.80% APY (~7 mo from launch)

After the last money market rate cut in October when the yield fell from 1.05% to 0.95%, I had thought we might not see another cut for a while. The savings account rate had stabilized at 0.80% in February. Since the money market account has a monthly service fee for low balances, I thought that it might maintain a higher rate than the savings account. That wasn't the case. This is another reason to avoid accounts with monthly fees for low balances. If an account requires a minimum balance, it doesn't mean the account will maintain higher rates. Another example of this is at Discover Bank. Its savings account which has no minimum balance requirement has long maintained a higher rate than its money market account which has monthly fees for low balances. I noticed that the Discover money market account's top rate (that requires a $100K balance) has recently increased to equal the savings account rate (that applies to all balances). The savings account rate had been higher than the top money market rate for many months before this.

Future of Bank of Internet USA's Rewards Checking?

Another question to ask after this UFB Direct rate cut is what can we expect from Bank of Internet USA's Rewards Checking account? Both UFB Direct and Bank of Internet USA are part of the same parent bank, BofI Federal Bank. Bank of Internet USA's Rewards Checking account still has a 1.25% APY on all balances if the monthly activity requirements are met. This rate has held since the account was launched in July 2011. Unlike the UFB Direct accounts, the Rewards Checking rate has been holding. It is a reward checking account which requires monthly debit card purchases and other activity (see my review). If those requirements aren't met, the rate falls. That's surely one reason why the bank has been able to maintain the 1.25% APY. However, that can only help so much especially when there's no balance cap. One bank that has long offered a nationwide reward checking account without a balance cap now pays only 0.20% (that's City National Bank).

I really hope that Bank of Internet USA's Rewards Checking Account will be able to maintain the 1.25% APY. I'm happy to see it has held for over 16 months. However, UFB Direct makes me nervous about the future of this Rewards Checking account.

UFB Direct & Bank of Internet USA Overview

Deposit accounts held at UFB Direct and Bank of Internet USA are FDIC insured through BofI Federal Bank (formerly called Bank of Internet USA). BofI Federal is one of the oldest pure internet banks. 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 8.24% (above average) based on June 2012 data. Please refer to our financial overview of BofI Federal Bank for more details. The bank has been a FDIC member since 2000 (FDIC Certificate # 35546).

Finding the Best Savings, Money Market & Checking Account Rates

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