NorthPointe Notifies Customers of New Ultimate Checking Requirement

Last month I described two important changes that took effect on Northpointe Bank’s reward checking account, called the UltimateAccount. The first was a balance cap increase from $5k to $10k. Now balances up to $10k can earn a 5% APY, making this the nation’s highest-rate reward checking account for a $10k balance. The other change was that it no longer required debit card purchases to total at least $500 for the statement period. Now, the only debit card usage requirement is that 15 debit card purchases must be made each cycle to qualify for the high rate. However, a new debit card usage requirement is being added. A reader forwarded me an email he received from Northpointe Bank which describes the new requirement that is scheduled to take effect in July. Below is a copy of this email:

Effective Monday, July 17, 2017, the following updates take effect on all Northpointe Bank Ultimate Checking Accounts:

Purpose and Expected Use of Ultimate Checking Account

The Ultimate Checking account is intended to be the accountholder’s primary checking account in which payroll transactions and day-to-day spending activities including but not limited to grocery, gasoline, apparel, shopping, dining, sporting and entertainment transactions are posted and settled. We expect the account’s debit card to be used frequently throughout each month and for transaction amounts to reflect a wide dollar range. Small debit card transactions conducted on the same day at a single merchant and/or multiple transactions made during a condensed period of time, particularly near the end of a statement cycle are not considered normal, day-to-day spending behavior. These types of behaviors appear to be conducted with the sole purposes of qualifying for the account’s rewards, and thus will be deemed inappropriate transactions and will not count towards earning the account’s rewards.

Northpointe Bank reserves the right to determine if the account is being maintained for a purpose other than primary, day-to-day use. Accountholders who persist in making debit card transactions in a calculated and limited fashion in order to meet their monthly qualifications may have their account converted to a different checking account or closed altogether. We also reserve the right to convert the account to a different checking account if the Ultimate Checking account does not have consistent, active use of three (3) consecutive statement cycles.

We have the right to close this account at any time, with proper notice. Our decision to close the account will not affect your existing obligations to us, including any obligations to pay fees or charges incurred prior to termination. No deposits will be accepted and no checks will be paid after the account is closed. Upon termination of your Ultimate Checking account, any optional add-on products or services associated with this account will also be terminated at the same time.

These changes affect only a small number of clients but ensure we can continue to offer the great rates and value you’ve come to expect from us. Please contact us with any questions at (888) 672-5626 or [email protected]. Thank you for banking with us.

Many thanks to the reader who forwarded me this email.

These warnings from banks were common in the early days of reward checking. I first posted on these warnings in 2008. Banks hope that the average customer of their reward checking accounts will make many hundreds of dollars in debit card purchases each month. For each debit card purchase, the bank receives around 1% to 2% in fees from the merchant. These are called interchange fees. If the customer only makes small purchases, the bank won’t earn much in interchange fees, and that will impact the bank’s profits.

To qualify for the high rate, Northpointe Bank used to require account holders to have debit card purchases that total at least $500 per month. That’s a straightforward requirement that ensures the bank receives enough interchange fees to allow them to pay the high interest rate. Why did Northpointe remove this $500 requirement? I know the company behind Kasasa accounts (Kasasa, LTD) has maintained that federal regulations prohibit banks from requiring that transactions be of a certain dollar value (individually or in aggregate). I’ve seen this explained in an FDIC Bulletin. If a bank decides that it’s not allowed to place dollar requirements on debit card purchases, the bank may feel it’s necessary to issue the above warning to discourage customers from making multiple small purchases.

Even with this new requirement, the UltimateAccount remains a good deal. Being able to earn 5% on balances of up to $10k results in $500 of interest each year. That’s $370 more interest than the best savings account that’s currently available. If you have a cash-back credit card that can get 2% cash back, you’ll miss out on $2 each time you spend $100 with the debit card. So for a $10k balance, you can still make more with the UltimateAccount than a top savings account with a 2% cash-back credit card.

For more details about Northpointe Bank and its UltimateAccount, please refer to my recent review of the UltimateAccount.