Reward Checking Balance Cap Reduction - ECCU Is Latest Example

In April I reviewed the new Kasasa Cash and Saver accounts at California-based ECCU (formerly known as Evangelical Christian Credit Union). This reward checking account had three nice attributes. First, it was available nationwide, albeit with religious affiliation. Second, the top yield was 3.00%. Lastly, the top yield applied to balances up to $35k (the balance cap). ECCU recently announced an unfortunate change that will be effective in September. The balance cap is falling from $35k to $10k. Starting in September, only balances up to $10k will qualify for the top yield (currently 3.00% APY). At least ECCU emailed its customers and posted this upcoming change on its website. The following is an excerpt of what ECCU posted on its Kasasa Cash page:

Effective 9/1/2020, When your Kasasa Cash account qualifications are met during a Monthly Qualification Cycle, daily balances up to and including $10,000 earn a dividend rate of 2.96% that results in an APY of 3.00%; and daily balances over $10,000 earn a dividend rate of .25% on the portion of the daily balance over $10,000, resulting in a range from 3.00% to 0.50% APY depending on the account's daily balance.

Balance cap reductions on reward checking accounts are essentially a rate cut. If you continue to maintain a $35k balance, your monthly interest will fall from about $88 to about $30.

ECCU Kasasa Saver helps those with large savings

One feature at ECCU that helps customers with large savings is the credit union’s Kasasa Saver account. If the Kasasa Cash qualifications are met, the Kasasa Saver account currently earns 1.00% APY on balances up to $100k. In today’s environment with many online savings accounts that have rates under 1%, the combined earnings from ECCU’s Kasasa Cash and Kasasa Saver is very competitive for a relatively large balance ($110k). For example, the post-August potential combined annual earnings of the Kasasa Cash (3.00% APY/$10k) and the Kasasa Saver (1.00%/$100k) is approximately $1,300 (1.18% APY/$110k). I’m afraid it’s now difficult to find online savings accounts with a higher rate.

If more customers do max out the balances of these Kasasa Cash/Saver accounts, that may push the banks and credit unions to further lower balance caps on both the Cash and Saver accounts. So make sure to keep an eye on these caps in addition to the rates.

Thanks to DA reader andybuji who alerted us to this upcoming change.

Reward Checking and falling balance caps

Balance cap reductions may become more common on reward checking accounts as this new zero-rate period continues. A cap reduction probably doesn’t sound as bad as a rate cut to the “average Joe” who may not have much savings.

Banks and credit unions probably prefer an “average Joe” over a dedicated saver for a reward checking customer since they will likely maintain lower balances and spend more on their debit cards. Not only will these customers cost banks less in interest payments, but they will also bring in more interchange revenue on their higher debit card spending. In addition, customers who have smaller balances and spend more with their debit cards are much more likely to overdraft their accounts which provides an additional source of revenue to the banks.

More info on these Kasasa Cash/Saver Accounts and Reward Checking

Please refer to my April review of the ECCU Kasasa Cash and Saver accounts for more details of these accounts and ECCU membership. Also, the ECCU Kasasa Cash page and ECCU Kasasa Saver page offer additional details.

We have more than 1,000 Reward Checking Accounts in our High Yield Reward Checking Account Rates Table. These include accounts that are both nationally available and those that are limited to local areas or specific groups of people.

For an overview of reward checking, please refer to the bottom of the Reward Checking Account Rates Table page.

The above rates are accurate as of 8/7/2020.