It has been just over three years since Bank of Internet USA launched its Rewards Checking account with a top yield of 1.25%. During these three years, the yield has held. That’s not common in this interest rate environment. There have been a couple of changes over the last two years. In early 2013, the bank introduced a balance cap of $150,000. The portion of a customer’s balance over $150,000 does not earn interest. Another change was made just recently. The bank slightly changed the monthly requirements making it a little harder to qualify for the top rate.
The new monthly requirements put more emphasis on debit card purchases and it removes the online bill pay requirement. To get the full 1.25% APY now requires direct deposit totaling $1,000 or more and 15 debit card purchases with each purchase amount being at least $3.
One thing that remains the same and makes it different than the typical reward checking account is that the requirements are not all or nothing. There are three requirements, and each time you meet one, you get a third of the top rate. So if you don't meet one requirement, the rate that you get for that month will be 33% of the highest rate. For the typical reward checking account, missing any of the requirements results in a rate that's close to zero.
In addition to the competitive rate, the Rewards Checking account has some nice features such as no monthly maintenance fees, unlimited ATM reimbursements and online deposits of paper checks.
You can see the full details of the monthly requirements at the bank's Rewards Checking rate page.
Rewards Checking History
When Bank of Internet USA launched the Rewards Checking account in July 2011, it didn’t look that attractive since there were several savings and money market accounts with similar rates that did not have the monthly reward checking requirements. For example, in July 2011, Incredible Bank and MyBankingDirect were both offering 1.25% APY, and Alliant Credit Union was offering 1.15% APY. Over the last two years, rates at those accounts have fallen. Now, Alliant Credit Union savings account rate is only 0.70%. The other two have held up a little better, but their rates are still lower. Incredible Bank’s money market yield is now 0.95% and MyBankingDirect’s money market yield is 0.80%. So now the Rewards Checking account is more attractive.
Another thing that made Bank of Internet USA’s Reward Checking account unattractive when it was launched was the competition from other reward checking accounts. You could easily get twice the rate at other nationally available reward checking accounts. The main advantage at Bank of Internet USA was the lack of a balance cap. Most of the other reward checking accounts had balance caps of $25,000 or less. Over the last two years, rates at those other reward checking accounts have fallen, and the balance caps have also fallen. Many reward checking accounts have rates under 2.00%, and a $10,000 balance cap is now much more common. So now the Bank of Internet USA’s Rewards Checking account is more attractive even with its $150,000 balance cap.
Bank of Internet USA just had its 14th anniversary. The bank was officially established on July 4, 2000. The bank is now called BofI Federal Bank. They have kept the brand name Bank of Internet USA, but deposit accounts held at Bank of Internet USA are FDIC insured through BofI Federal Bank.
BofI Federal Bank's financials have remained strong. Currently, it has an overall health grade at DepositAccounts.com of an A with a Texas Ratio of 5.38% (excellent) based on March 2014 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).