A DA reader forwarded me an email he received from First National Bank in Louisiana which announced that they are changing their high-yield reward checking account, called Kasasa Cash. Effective in November, the new account will no longer offer high interest rates. The rewards will mostly be 1% cash back when customers use their debit cards. The bank’s email claims that their Kasasa Cash customers “want an account that offers financial rewards without requiring they jump through hoops to qualify or maintain a high balance just to earn a respectable rate of return.” The chart below provides an overview of the change. Note, the 1% cash back on signature-based debit card purchases is limited to $40 per statement cycle.
The current Kasasa Cash account pays 2.55% APY for balances up to $15K. The new account will only pay interest for balances over $10K. The interest rate is only 0.25% on balances of $10K to $15K and 0.50% on balances over $15K.
These changes may be better for those who don’t maintain much of a checking balance. However, for most savers who plan to maintain over $10K in their accounts, this change will be costly. This isn’t the only bank that has chosen not to offer high-yield reward checking.
The company that created high-yield reward checking accounts and Kasasa Cash accounts, BancVue, also has an account called Kasasa Cash Back which functions like the new account above. Instead of paying high interest rates, the account offers cash back on customers’ debit card purchases. This is similar to cash back credit cards, and they don’t provide savers much value over the cash back credit cards. In fact, I think most savers would choose a cash back credit card over these checking accounts.
One thing I’ve noticed over the last year is that several banks have launched Kasasa Cash Back accounts instead of the Kasasa Cash accounts. You can see these banks in BancVue’s Kasasa Providers page.
This isn’t good news for savers. The typical high-yield reward checking accounts can be good deals for savers who can earn 2% to 3% on balances from $15K to $25K with only 10 to 15 debit card purchases a month. Below is a comparison of how much can be earned:
Monthly interest earned on a Kasasa Cash account with a 3% APY and a $15K balance equals $37.50.
To generate that much with Kasasa Cash Back account that offers 1% cash back would require $3,750 in purchases for the month. Debit card purchases are also required for the Kasasa Cash account, but there is no minimum required amount for the purchases.
As you can see, high-yield reward checking and Kasasa Cash accounts are a much better deal for savers. Fortunately, Kasasa Cash accounts are still much more popular than Kasasa Cash Back accounts. Let’s hope it stays that way.