BofI Federal’s New Internet Bank and Savings Account

BofI Federal Bank has recently launched a new internet bank. It’s called Bank X at bankx.com (Thanks to the reader who emailed me news of this). BofI Federal has a history of creating online banking brands that are targeted to specific consumer segments. One example of this is UFB Direct which focused on airline miles rewards. This attracted a lot of attention due to the high rate of its savings and money market account. Last April it attracted attention for the opposite reason: very low rates. Both the savings and money market rate fell to a pathetic 0.20%.

For Bank X, they seem to be targeting consumers who want a top savings account rate. Its savings account is called HighX Savings, and it has a 0.95% APY as of 6/19/2013. I was told Bank X and this savings account rate has been around for the last two months.

They are trying to show that this rate will remain competitive by advertising the following pledge:

We pledge to have higher rates than the top 50 National average Annual Percentage Yield (APY) of U.S. banks and thrifts

I can’t find what that average APY is. I called the bank yesterday, and the CSR didn’t know. If that average APY is low (like 0.50%), this pledge doesn’t mean much. I track internet savings and money market rates of 57 banks, and the June average is 0.59%.

The Bank X Savings account does have some nice features:

• No monthly maintenance fees and no minimum monthly balance
• Free Mobile Deposit for depositing checks with your smartphone
• Free MyDeposit for depositing checks with your home PC
• ATM card available

However, there is one important downside. The savings account doesn’t have an ACH external transfer service. The best way to make external transfers is to initiate them from your other bank.

Bank X also offers a free checking account called X Checking. This does offer an ACH external transfer service, but the limits are low. I was told it’s initially limited to $2K/day or $5K/month. If used without problems, it can eventually be increased to $15K/day or $25K/month.

As we know from reward checking accounts, banks have more opportunity to make money with checking accounts. That may be why only the checking account has an ACH external transfer service. They’re encouraging customers to open both the savings and checking account. The checking account does have some nice features. The most noteworthy is unlimited ATM reimbursements for domestic ATMs.

Bank X also offers CDs, but the rates are low. The highest yield is 1.35% for a 5-year term as of 6/19/2013

After seeing what happened at UFB Direct, it’s hard to trust BofI Federal Bank. The current Bank X savings account rate is competitive, and if it lasts it will be a good deal. However, if the rate falls in a few months to be no better than the major internet savings account rates, the effort of opening another new account will not have been worth it. One important consequence of the low rate environment is that rate chasing is losing its usefulness. There’s not much to be gained from moving from a 0.80% savings account to a 0.95% savings account.

One positive feature of BofI Federal Bank is that 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 8.02% (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).

The Best Deal at BofI Federal Bank

In my opinion, the best deal at BofI Federal is its Rewards Checking Account that’s opened through one of its affinity groups. That still has a top yield of 1.50% for balances up to $150,000. Like any reward checking account, there are monthly requirements to qualify for this high rate. By joining one of these affinity groups, you get an extra 25 bps on the account. The Rewards Checking account available at Bank of Internet USA has maintained a 1.25% APY since July 2011. That’s the kind of consistency that I like to see. Let’s hope that will last.