New Banks Compete With Lower Fees and Better Rewards
New Banks Compete with Lower Fees & Better Rewards
As banks increase rates and fees for the basics such as checking and ATM withdrawals, start-ups and non-traditional banks like BankSimple and PerkStreet are attempting to capture some customers with innovations, more attractive rates and lower fees.
BankSimple plans to launch at the end of 2011, but it won’t be a traditional neighborhood branch bank. BankSimple will offer checking accounts and debit cards, but partner banks will hold customers’ deposits, make loans and process card transactions. BankSimple will provide the interface and customer service to help consumers access their funds in the banks. It claims it will do away with hidden fees and overdraft charges.
Visa is BankSimple’s partner for debit and credit cards and Allpoint’s ATM network will give BankSimple’s customers fee-free access to over 43,000 ATMs.
Investors recently gave BankSimple $10 million in new funding.
PerkStreet is an internet bank with checking accounts, online banking, and the PerkStreet Financial Debit MasterCard. In the days of vanishing debit card rewards and higher fees, PerkStreet offers lucrative rewards for non-PIN debit card transactions. PerkStreet gives 2 percent cash back for all non-PIN debit card purchases during the first 90 days of your account. After that, you will earn unlimited 2 percent cash back on the days that your account balance is at least $5,000 at the start of the day. If your balances is less than $5,000, then you will earn 1 percent cash back on non-PIN debit card purchases. It also gives up to 5 percent cash back when shopping at partner retailers (limited to $250 per household annually).
The difference between a PIN debit card purchase and a non-PIN purchase is a consumer signature and the amount of the interchange fee that the retailer pays the card processor. Starting October 1, new regulations will cut the debit card interchange fee from 44 cents per transaction to 21 cents plus an additional amount to cover losses from fraud. Banks will lose billions of dollars in debit card revenue and have reacted by dropping debit card rewards.
However, the interchange fee for credit card purchases will remain the same. Approximately 2 percent of every credit card swipe goes to the bank that issued the card.
“PerkStreet is using rewards to increase the use of signature transactions. The bank will receive a higher fee from retailers, then will pass much of that fee back to the cardholder as rewards,” says Bill
Hardekopf, CEO of LowCards.com. “Two percent is a generous offer, but the catch is you only get this on the days that your account starts out at $5,000.”
PerkStreet gives three options for rewards:
* Cash back rewards. A MasterCard gift card or gift cards from Target, Best Buy, Amazon.com, Gap, and Ticketmaster.
* Music rewards. Receive credit for songs at iTunes, Rhapsody, or Amazon.com.
* Coffee rewards. A Starbucks or Dunkin Donuts gift card
The PerkStreet Debit card can be used for free at one of the 37,000 ATMs in the STARSsf surcharge-free network. If you use an ATM outside the network, there is a $2 fee plus any fee the ATM owner may charge.
There is no monthly fee for using your account, but there is a $4.50 fee in the months you don’t use your account. To open an account, you will need a a driver’s license or other government issued ID, your social security number and a current US address plus a $25 deposit. You can make the initial deposit with a debit card, credit card, or check.