It has been just over two years since Bank of Internet USA launched its Rewards Checking account with a top yield of 1.25%. During these two years, the yield has held. That’s a nice record in this awful interest rate environment. There have been one change, however. The bank introduced a balance cap of $150,000 last January. The portion of a customer’s balance over $150,000 does not earn interest.
When the Rewards Checking account was first launched in July 2011, it didn’t look that attractive since there were several savings and money market accounts with similar rates that did not have the monthly reward checking requirements. For example, in July 2011, Incredible Bank and MyBankingDirect were both offering 1.25% APY, and Alliant Credit Union was offering 1.15% APY. Over the last two years, rates at those accounts have fallen. Now, Alliant Credit Union savings account rate is only 0.70%. The other two have held up a little better, but their rates are still lower. Incredible Bank’s money market yield is now 0.91% and MyBankingDirect’s money market yield is 1.05%. So now the Rewards Checking account is more attractive.
Another thing that made Bank of Internet USA’s Reward Checking account unattractive when it was launched was the competition from other reward checking accounts. You could easily get twice the rate at other nationally available reward checking accounts. The main advantage at Bank of Internet USA was the lack of a balance cap. Most of the other reward checking accounts had balance caps of $25,000 or less. Over the last two years, rates at those other reward checking accounts have fallen, and the balance caps have also fallen. Many reward checking accounts have rates under 2.00%, and a $15,000 balance cap is now much more common. So now the Bank of Internet USA’s Rewards Checking account is more attractive even with its $150,000 balance cap.
If you’re considering this Rewards Checking account, don’t forget an easy way to get an extra 25 basis points. If you open this Rewards Checking account through one of Bank of Internet USA’s affinity groups, the Reward Checking yield is 1.50% instead of 1.25%. I have a review of these affinity groups in this blog post.
You can see the monthly requirements at the bank's Rewards Checking rate page. One thing that makes it different than the typical reward checking account is that the requirements are not all or nothing. There are four requirements, and each time you meet one, you get a quarter of the top rate. So if you don't meet one requirement, the rate that you get for that month will be 75% of the highest rate. For the typical reward checking account, missing any of the requirements results in a rate that's close to zero.
In addition to the competitive rate, the Rewards Checking account has some nice features such as no monthly maintenance fees, unlimited ATM reimbursements and online deposits of paper checks. I have more details in my original Bank of Internet USA Rewards Checking review.
Bank of Internet USA just had its 13th anniversary. The bank was officially established on July 4, 2000. The bank is now called BofI Federal Bank. They have kept the brand name Bank of Internet USA, but deposit accounts held at Bank of Internet USA are FDIC insured through BofI Federal Bank.
BofI Federal Bank's 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 8.02% (above average) based on March 2013 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).