The Evolution of Reward Checking and Kasasa

If you are familiar with reward checking accounts, you probably have heard of Kasasa. This brand was started in 2009 by the company that made reward checking popular, BancVue. In February, CNN Money had an interesting article describing how Kasasa started and how it's intended to help credit unions and community banks team up to fight the megabanks. The Kasasa blog recently published a useful article about Kasasa titled FAQ: How Does a Kasasa Account Benefit Me?. This provides a good overview of all the types of accounts that make up Kasasa and how they work.

The best known Kasasa account is the Kasasa Cash which is essentially a reward checking account. Some institutions also offer Kasasa Saver which is a savings account linked to the checking. This savings account pays a high yield if the customer meets the monthly requirements of the checking account. The yield is typically lower than the checking account yield. There are also other lesser-known Kasasa accounts. These include Kasasa Cash Back, Kasasa Giving and Kasasa Tunes.

One interesting thing to note in the article is a new personal finance management tool that's being rolled out called Kasasa 360. In the listing of the typical Kasasa requirements, one that is listed is "Log into online banking or log into Kasasa 360 (where available)". Kasasa 360 appears to be similar to Mint.com in that it can view and track all of one's accounts and loans at other institutions.

The article stressed that Kasasa accounts are designed "to be a win-win for both account holders and their institutions (local banks or credit unions)." It appears several reward checking accounts may not have been enough of a win for the institutions. Over the last year we have seen several institutions cutting rates and reducing balance caps. One recent example is at Pelican State Credit Union which announced the reduction of the balance cap of its reward checking account from $20K to $10K. It also renamed the account Extrabonus checking to Kasasa Cash Checking.

It appears the $10K balance cap is becoming more common for Kasasa Cash and Kasasa Saver accounts. This limits the top rate to balances up to $10,000, and it makes these accounts less useful for many as an alternative to internet savings accounts and CDs.

As the Kasasa article explains, interchange fees that merchants pay when you use a debit card helps pay for some of the high interest rates. I've looked into the question about how much this can add to the interest rate of the account. Based on some data that I received, I estimated it can add about 1.40% to the account rate. This is based on an average balance for all customers and an average amount that is spent each month with debit cards. I have the details of the math behind reward checking in this blog post. In summary, the larger the average balance and the smaller the average debit card spending, the smaller the interest rate the institution will be able to offer.

Even though reward checking accounts are becoming less useful for those with large amount of savings, they can still be a better deal than other types of checking accounts. It's important to remember that the Kasasa Cash account is a free checking account with no monthly maintenance fee regardless of meeting the monthly requirements.

Overview of Reward Checking

If you're new to reward checking, my blog post, 10 Common Traits of High-Yield Reward Checking, should be useful.

To find the highest reward checking rates in your area, please refer to our reward checking rate table. This can also be used to find accounts available nationwide. If you're new to these tables, my rate table guide should be useful.