Axos Bank Cuts Rate and Adds Requirements to Rewards Checking

After more than ten years with a top rate of 1.25% APY, Axos Bank has lowered the top rate of its Rewards Checking account to 1.00% APY. In addition, the balance cap has been reduced from $150k to $50k, and major changes have been made to the requirements to qualify for the top rate. For existing customers, these changes take effect on October 1, 2021. For new customers, these changes are now in effect.

There are now a total of five requirements to qualify for the top rate (1.00% APY) for balances up to $50k. The first two are similar to the old requirements and will qualify you to earn 0.70% APY. The next three are new requirements related to investing and loans. Qualifying for each of these will earn you an additional 0.10% for a total of 0.30%.

Below are more details of the monthly requirements:

0.40% is earned with monthly direct deposit. In addition, direct deposit is required to qualify for the additional added interest rates that are listed below. Monthly direct deposit must total at least $1,500, and according to Axos Bank’s small print, direct deposit does not include “intra-bank transfers from another account.”

0.30% is earned with either of the following:

• 10 debit card purchases per month (each must be a minimum of $3), OR
• Sign up for Personal Finance Manager (PFM) “Account Aggregation” in Online Banking

Up to 0.20% can be earned by investment customers. 0.10% is earned for each of the following investing requirements:

• Maintain an average daily balance of $2,500 per month in an Axos Invest Managed Portfolios Account.
• Maintain an average daily balance of $2,500 per month in an Axos Invest Self Directed Trading Account.

0.10% is earned by loan customers who use their Rewards Checking account to make their full monthly Axos Bank consumer loan payment. Mortgage, personal, and auto loans are eligible.

The APYs listed above can only be earned on balances up to $50k. The portion of the balance above $50k earns no interest.

The Rewards Checking account continues to be a free checking account with no monthly maintenance fees and no minimum monthly balance requirements. Minimum initial deposit is $50. Also, the account offers unlimited domestic ATM fee reimbursements which don’t depend on meeting the monthly requirements.

Thanks to the DA reader who emailed me news of this change and DA member, pinkterror, who posted on this news in the DA Forum.

My Take

The maximum annual interest that can now be earned is $500. Before these changes, the maximum annual interest that could be earned was $1,875. That’s a reduction of $1,375 of interest.

Customers may find it difficult to qualify for the full 1.00% APY. Many savers won’t be loan customers. For them, the maximum interest rate will only be 0.90%. Also, many savers may not want to participate in Axos Investments. Without participating in loans or investments, the maximum interest rate will only be 0.70%. With this rate, the maximum annual interest that can be earned is only $350. That’s not much better than what you can earn with many online savings accounts. The maximum interest earned for an online savings account with a 0.50% APY on a $50k balance would be $250.

One benefit of the new Rewards Checking account is that customers can qualify for the full rate without debit card usage. They can instead sign up for Personal Finance Manager (PFM) “Account Aggregation” in Online Banking.

Each time you use your debit card, the bank receives an interchange fee that is paid by the retailer. Due to federal regulations, small banks (under $10 billion in assets) receive a larger interchange fee than large banks (over $10 billion in assets). In the last two years, Axos Bank surpassed $10 billion in assets. This may have contributed to these major changes to the Rewards Checking.

This is another example that a long history of maintaining a rate doesn’t guarantee its continuation. Axos Bank had been offering 1.25% APY since July 2011. From 2011 through early 2013, the 1.25% APY applied to all balances, but then in early 2013, the $150k balance cap was introduced. The 1.25% APY on up to $150k held from 2013 until this month.

I had hoped the Rewards Checking would be able to avoid rate and cap reductions when this new zero rate environment began last year. It had lasted for more than four years in the last zero rate environment. However, this zero rate period has been worse than the last one in regard to deposit rates. For example, today’s online savings account average rate is between 30 to 40 basis points lower than during the last zero rate period.

I’ve been worried that the Rewards Checking account was at risk of a rate or balance cap cut since Axos Bank’s CD rate cuts in 2020. For example, the rates of all of its CDs (from 3 months to 60 months) fell to 0.20% last October, and the rates remain at 0.20% as of today.

Another factor that may have contributed to this Rewards Checking change was the surge of deposits that Axos Bank has experienced in the last year. Most banks in the last year have experienced a surge in deposits and weak loan growth. For the case of Axos Bank, its deposits have grown $2.18 billion (22.7%) in the last year, while its loans have grown by only $1.39 billion (13.4%). Its loan-to-deposit ratio has fallen from 108.0% to 99.8%. A falling loan-to-deposit ratio puts pressure on the bank to lower deposit rates since the bank doesn’t have the loans to pay for the deposits.

Availability

Headquartered in San Diego, California, Axos Bank is a "pure" internet bank, providing banking services and products nationwide. Accounts can be opened online by U.S. citizens and resident aliens who have a Social Security number and a valid U.S. address that is not a P.O. Box. If you have a security freeze on your credit report, it must be lifted before applying for an account.

Bank Overview

Axos Bank began on July 4, 2000 under the name Bank of Internet USA. In October, 2011, the official name changed to BofI Federal Bank. They kept Bank of Internet USA as a brand and website. On October 1, 2018, BofI Federal Bank officially became Axos Bank, and the Bank of Internet USA brand along with most of its other brands were replaced with the Axos brand.

Axos Bank has grown into a sizable bank with total assets of $13.42 billion and total deposits of $11.77 billion as of March 31, 2021.

Acquisitions have contributed to Axos Bank’s growth. On November 16, 2018, Axos Bank closed a deposit assumption agreement with Nationwide Bank which resulted in Axos Bank acquiring $2.4 billion deposits from Nationwide Bank.

Axos Bank has an overall health rating of "B+" at DepositAccounts.com, with a Texas Ratio of 11.59% (above average) based on March 31, 2021 data. In the past year, Axos Bank has increased its total non-brokered deposits by $2.87 billion, an excellent annual growth rate of 34.69%. Please refer to our financial overview of Axos Bank (FDIC Certificate # 35546) for more details.

How the Rewards Checking Compares

When compared to the Reward Checking Accounts tracked by DepositAccounts.com, which are available nationwide and have the highest earning potential for a $50k balance, Axos Bank’s Rewards Checking APY currently ranks fifth.

The above rates are accurate as of 9/6/2021.

To look for the best Reward Checking Account rates, both nationwide and state specific, please refer to our High Yield Reward Checking Account Rates Table page.