Bank Adds $250 Debit Card Purchase Requirement To Its Reward Checking


2.00*%-$25kLegacy BankWin-Win Checking
Accounts mentioned in this post. Rates as of October 24, 2016.

After more than seven years of offering its reward checking account, called Win/Win Checking, Legacy Bank has added a new requirement. To qualify for the top interest rate (currently 2.00% APY for up to $25,000), customers must now ensure their monthly debit card purchases total at least $250. Previously, the debit card requirement only consisted of making 12 purchases with their debit card. Thanks to the reader who emailed me news of this. Below is the email he received from Legacy Bank about this change:

Federal Regulations and some customer abuse to the Win/Win Checking account have compelled us to make a change to the way interest is paid on the account. Effective March 1, 2015, in order to receive interest on the Win/Win Checking account, customers must use their Legacy Bank VISA® Check Card at least 12 times for purchases of goods or services, AND these transactions must total at least $250.00 each month. As always, the Win/Win Checking account is free. This change simply affects the payment of interest. The solution to receiving the interest is easy; simply use the account and your card as your primary checking account, making sure that those 12 transactions total at least $250 per month. Thank you for being a Legacy Bank customer.

I assume "customer abuse to the Win/Win Checking account" is too many small debit card purchases. That would explain the new $250 total purchase requirement. The average debit card purchase will now have to be at least $20.84. That may be an issue for those who have multiple reward checking accounts or for those who use cashback credit cards for the big purchases.

For many years we’ve seen banks and credit unions push their reward checking customers into making larger debit card purchases. Some have sent customers letters warning them that they were making too many small purchases and that they weren’t using the account in the true spirit of the program. I reported on several of these cases back in 2009.

Why do banks care about our debit card purchases? Banks and credit unions earn fees for each debit card purchase you make. This is called interchange fees, and a fee of 1% appears to be a good assumption for the average interchange fee for a debit card used in a signature-based purchase (the fee is lower for PIN-based purchases). Since the fee is proportional to the amount of the purchase, banks make more money when we make larger debit card purchases. At least with reward checking accounts, some of those interchange fees received by the bank are used to help pay the reward checking interest.

It might seem all banks would implement a total purchase requirement on their reward checking accounts. A few banks and credit unions have done this, but most have not. The FDIC has ruled against a total purchase requirement. A 2007 FDIC bulletin details what is allowed and not allowed, and according to this bulletin, "Banks may not require that transactions be of a certain dollar value (individually or in aggregate)." Perhaps the FDIC has changed its mind? Legacy Bank’s notice appears to suggest a change in federal regulations. I found this 2012 FDIC notice to banks summarizing the rules for high-yield checking accounts. I did not see anything against total purchase requirements.

Even without total debit card purchase requirements, the value of reward checking accounts has diminished in the last several years as interest rates and balance caps have dropped. Reward checking accounts can still be a good deal as a free checking account, but in my opinion, they have become less useful as an alternative to internet savings accounts.

If you’re new to reward checking, please refer to my article on the 10 Common Traits of High-Yield Reward Checking Accounts.

me (anonymous)   |     |   Comment #1
innova has a more stringent policy where the number of transactions is lower (5) however only transactions that are over $50 are counted.
Anonymous   |     |   Comment #2
As I use my credit card for everything, I think I would use my debit card to pay off the credit card each month and then use smaller debits to complete the requirements. I may start doing this with Inova using 5 $50 debits to pay on the credit card bill when I want my interest to start again. The only time I spend $50 on anything are the gas heating bills 3-4 times a year, the Comcast bill and the car insurance and house insurance once or twice a year. I can't remember the last time I spent $50 in one place and going back 3 months on my credit card bill I have not spent $50 in one place.  
Anonymous   |     |   Comment #3
Your credit card allows you to pay it off using another credit card? (Inova's debits need to be run as credits to count.)  What card do you use that allows this?
Anonymous   |     |   Comment #4
I see that reading comprehension is not your strong point.
Anonymous   |     |   Comment #11
Clearly it's not yours  - I'll assume that you're just blowing smoke about having a credit card which can be paid off by $50 transactions which must be run as credit, then.  Thanks!
jep1960   |     |   Comment #6
I have to agree with you, I also use my CCs for everything, mostly for Frequent Flyer miles on my CCs. This is a disturbing development, I hope my CU rewards checking at CCU won't go this way. I do use it as my main account, but I use small debits to complete the requirements. I don't see it as account holder "abuse", but I'm not running the CU.
kiwi   |     |   Comment #14
I don't spend $50 either. I just opened INNOVA again. I closed it when they changed the requirements. The card has to be swiped or it will count as a debit purchase. Currently, I have all my utilities automatically charged on my credit cards and I get 2% back on them. I am going to take 2 off the auto and go to the utilities' offices and  swipe my card for $51 until I reach the 5 swipe deal. I may end up with a $20 credit balance for a month. I was going to do it with my health insurance but Kaiser said it would get all messed up if I tried to pay it locally. If I call it in, it would count as a debit. That would be an easy one if you have health insurance you can swipe.  It should all work out in the end. I'm going to start using it in March 2015. It would be nice if we could tell them to run it as a credit card over the phone. Even if you use them for PayPal, they still post as debits. If it gets to be too much of a pain, I will get 2 $10,000 limit accounts with the regular small charges. If anyone has any good ideas, please share. Thank you.
Anonymous   |     |   Comment #7
Can a debit card from Legacy Bank be used to pay a credit card bill, and be counted as a purchase?!? How is this done?
RJM   |     |   Comment #8
This is not surprising.  I have 3 RCAs that require a total of 34 transactions per month.

Most, if not all of my transactions, are under a dime.

Ive been cussed out in Indian, had gas pumps stopped on me and last month, for the first time, I had the police called on me.

Had to show him my ID and 3 debit cards and explain what I was doing.

I came here today to ask others how they meet their requirements.

I recall some mentioning they pay bills with them and I might consider that.

I need the details as to who you pay and how much ?

My Internet bill is $28 a month, Id imagine they wouldn't like it much if I tried to make 28 $1 payments each month.
gregk   |     |   Comment #9
Transactions under a dime?  I myself sometimes do a lot of $5 transactions to meet RCA requirements when I'm under the gun, but your practice shows no good faith whatsoever in my judgement even if not technically against the rules, - and frankly I'd be embarrassed to swipe my card anywhere for a few pennies.
gregk   |     |   Comment #10
BTW, - do you buy food?  Why not do small but not miniscule transactions for that purpose at the grocery store?  34 average $5 transactions would amount to only $170.  Can anyone eat for less than that in a month?
RJM   |     |   Comment #12

I buy food with discounted gift cards.

34 $5 transactions takes more time than 34 4 cent transactions and "good faith" is not really mentioned in the terms.

I don't swipe my card anywhere in person for pennies. I do it at the gas pump.

And for dollar store purchases, I use my discover bank debit card which pays 10 cents per transaction.

I do not otherwise "game" the discover debit card because their terms do mention it.

Although I admit to a number of small billpays, so far, it hasn't come back to haunt me.
kiwi   |     |   Comment #13
When I buy my groceries at Walmart, I go through self-checkout and ring up each item individually. Most cards will let you do 3 charges with each company per day. I have 6 accounts so I can do 18 in one trip. Add your comment
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