When I pay my Verizon bill with a Citibank debit card, it recognizes it as such and changes it to an ATM purchase, but gives you the option to change it back to a debit purchase before you submit.

When I enter a SBoT, FABaT or M/A-Com debit card, it does not recognize it as such, and completes the tranasction as a credit purchase, without trying to change it to an ATM transaction.

alphaivt said:I have two bills, a Sprint phone bill and Time Warner cable bill, that both allow me to enter a credit card as form of payment. The Sprint bill lists as "credit/debit" so I don't know which method they will use, but the TimeWarner bill allows me to choose either credit OR debit.

Has anyone split their bills to 10 different payments and had no problems with meeting the required monthly transactions?
I can't answer your first question about Sprint. When I pay my Sprint long-distance bill online, I don't see any mention of "credit/debit", just credit. Why not make a small payment, and see how it looks on your bank's on-line banking? You can always call the bank's help line if you need help interpreting the description of the transaction.

Lots of people, including me, have split a single bill into multiple smaller payments. As long as you authorize each payment as its own transaction, each one should count as a separate payment.

I suggest you read the contents of this thread, starting with the Quick Summary. Also look at the Reward Checking Account Available to All thread. These two threads will answer most of your questions.

Just to see what would happen, I filled out the on-line form for the Dubuque Bank & Trust — Cash Rewards Checking, and here's what it says:

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Dubuque Bank & Trust — Cash Rewards Checking Application
Thank you, , for submitting your application via our secure website interface. A Dubuque Bank & Trust representitive will contact you about your application.

If asked, your application was for: Cash Rewards Checking
Your application invoice number is: 000649

Thank you.

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Looks like 649 people filled out the form so far, but that could be for all accounts at the bank.

BTW, Dubuque IA is near where the Field of Dreams field is.

Has anyone had success meeting the 10 point-of-sale requirement by buying stamps out of the new kiosks inside post offices? please post, if so.

Thanks

I had an interesting conversation with someone at Citizens Bank Minnesota, regarding their closing certain Reward Checking accounts, and changing their nationally available policy to allowing in-state accounts only. This was just a casual conversation, so I wouldn't necessaarily interpret it as an official statement from Citizens Bank Minnesota, and I can only speculate as to whether other Reward Checking accounts, particularly those that are nationally available, will start following this path.

In a nutshell, here's what I learned. The "bank" refers to Citizens Bank Minnesota, as discussed from this person's viewpoint.

* The bank intends their Reward Checking account to be used as a checking account, not as a savings account.

* Keeping a balance close to 25K (their cap for the high interest rate), using their debit card to run multiple small debit card transactions through on the same day, with little or no other activity on the debit card constitutes using their Reward Checking account as a savings account.

* Meeting the ACH Debit/Direct Deposit requirement by transferring amounts between an investment account and Citizens Bank Minnesota, as opposed to peforming a true direct deposit from payroll or paying a bill from a payee's web site, also sends red flags to them about using their Rewards Checking account inappropriately. Apparently, they can distinguish between these different types of ACH transactions based on transaction code.

* Using your account in this manner, particularly with out-of-state customers, will possibly result in Citizens Bank Minnesota closing your account, which they have the right to do at any time, per their disclosures. I gather, but can't say for sure, that a local account holder is likely to be talked with, and possibly not have their account closed, if they start using it as a checking account. There's also the possibility that the local account holder might add more profitable products from the bank.

* As mentioned above, Citizens Bank Minnesota is taking a loss on these accounts, at least when they are used as savings accounts with the above-described behaviors by account holders. What makes the account more profitable (or at least less costly) to them, is using your debit card instead of writing checks, and of course, getting e-statements. Using their Bill Pay system saves the cost of processing paper checks, but it's still a net loss to the bank, because they pay a fee to the bill pay software vendor.

* If the bank closes your account just because you had numerous small debit card transactions, no negative information is reported to ChexSystems, unless you've done something else to warrant that negative information, such as bouncing checks or fraudulent activity.

So the big question -- finally -- is: Will other Reward Checking accounts, especially those available to all, start taking similar measures to Citizens Bank Minnesota's? My own opinion: Given the 2% Federal Funds Rate, and the resulting low deposit APYs, I think similar measures are likely. If the Federal Funds Rate were back to around 5%, then I think such actions would be much less likely.

People like scott1961, who have long warned against making lots of small transactions to meet debit card usage requirements for Reward Checking accounts, might eventually be correct about this. My take on the situation is that everyone -- FDIC-insured deposit account holders that rely on interest income, and banks and credit unions that are both trying to attract new business and be profitable -- is having a hard time dealing with the current interest rate environment. Even if interest rates creep up, we've a long ways to go before we see a situation where financial institutions and their customers are relatively satisfied with interest rates related to deposit accounts.

Good information glxpass.

I think we all have to be careful of trying to "take more gold then we can carry".
I understand we want to minimize the rewards checking transaction amount so we can use a rewards credit card for purchases and get Cash Back or miles among other things. In the end though, and I believe someone on the rewards checking thread calculated, we are not loosing much by paying with our bank credit card vs. say our Discover Card.

I am sure no one wants to be responsible for the demise of these rewards accounts. I think if we knew the monthly transaction amount that would keep the rewards checking accounts reasonably profitable, we would better be posed to make these accounts more of a long term partnership rather then a one way deal.

I ran a calculation to see just how much money in monthly transactions the rewards checking bank would need to pay the full interest payment (assuming they only make money on transactions (they don’t)). On a $20,000 limit account at 6.01%, the result is $3580/month. If you divide it by (10), that’s (10) $358 transactions per month. This pays for the full 6.01%. If we assumed the bank needs only half of this to be more like a 3% non rewards checking bank, then the amount is 10 $179 dollar transactions. It seems like a lot but remember this is just an attempt to dial in where our transaction amounts need to be. I think these calculation results are a lot higher then what is actually needed for transactions because these banks are making (and saving) money in other ways.

Note:
The calculations above were made assuming when you buy something with the credit card, the place you buy it from pays Visa 3.5% and the rewards bank keeps %80 of that 3.5%. These assumptions came from this Web Page

In summary, I think it would be helpful if we knew all the sources of income the rewards bank have. At that point we could better estimate where our transactions amounts need to be. I think we all know more is better for the bank but we need to find that happy medium.

Any other ideas on where and how much the rewards banks make/save from rewards accounts would be helpful to find the happy medium.

Also, keep in mind reward checking is profitable to the banks and CUs based on how many people don't use them. Some people are using these accounts as their regular checking account and not completing the 10 debit transactions to earn the interest. So in a sense, these people are subsidizing us, but it depends on what the breakdown of deposits earning interest vs not earning interest is.

I agree with the observations that we need to place Reward Checking accounts, and whether they are good or bad for financial institutions, in context. If the FI is eager to increase deposits in order to have funds available for lending, then that might offset some of the costs of Reward Checking accounts. But in a lower-rate environment, the difference in interest between what FIs are paying their Reward Checking depositors and what FI's are receiving from their borrowers is obviously less.

From the perspective of someone with multiple Reward Checking accounts, I simply can't use all of them as regular checking accounts, and thus small debit card transactions are necessary in order to meet the requirements of all of my Reward Checking accounts. That means paying my phone bills, satellite TV bills, and other applicable bills in small increments ($1 or more), making automatic $1 or $2 monthly donations to charity, etc.

If people who have small Reward Checking account balances, have high dollar amount monthly debit card transaction amounts, or simply don't meet the requirements to get the high rate end up making Reward Checking accounts viable, then I'm grateful to them. Unless Reward Checking accounts are more profitable to me than other FDIC-insured liquid deposit accounts that require little or no effort on my part, then there's no point to my having Reward Checking accounts.

lhendricks92, I understand and somewhat agree with what you're saying regarding being disinclined to chase after any more Reward Checking accounts, because it seems likely that their rates will decline in a very short time frame. That might indeed be the correct decision for now. I'll mention why I've continued to chase them, up until now.

1. I haven't seen any adverse action on my accounts yet, and unless what Citizens Bank Minnesota did with closing accounts because of small debit card transactions becomes a trend, I won't worry about that until it happens.

2. I'm glad I chased after Arizona Bank & Trust. The guaranteed 6.01% APY until April 2009 is a relief. Unless they start doing the adverse action thing. I wish I could get an account at Dubuque Bank & Trust, which guarantees their 6.01% rate through January 2010.

3. As you stated, market forces are at work here. Although non-Reward Checking rates can be found in the 4% area, I believe the number of accounts offering that kind of rate is steadily decreasing. Unless the Federal Funds Rate starts rising, or some other factor comes into play that will cause FDIC-insured deposit account rates to rise, I suspect eventually even 4.0% APY Reward Checking account rates will look good. For example, AARP, although still at the 4% area, has had rate decreases in a relatively short period of time after their rates became publicized and people starting flocking to their savings products.

But for now, I agree that the lower Reward Checking account rates are too close to the higher high-yield savings account rates. As I said -- I could be wrong of course -- I think we will see an increasing gap between the two. My guess is that the stabilizing point (although I think nothing is particularly stable these days) of Reward Checking accounts is higher than for other types of accounts.

4. Just as with 0% credit cards, there's a bit of a game going on here. I admit that I enjoy finding places to park my liquid funds that have much higher interest rates than average. And if some of those liquid funds come from 0% BTs, that gives me even more motivation to find the highest rate, even for the very short term.

5. By keeping small amounts in my various Reward Checking accounts that aren't looking so good right now and not bothering trying to meet their requirements, I feel I'm positioned to take advantage of those accounts, should their rates start to look good again.

I don't know if I'll chase any more of these accounts for the moment, unless a really spectacular deal appears. Of course, that's what I said about a month ago.

I concur with all of your points with one exception. I believe the FW effect directly affects the fall of the rewards checking APY. You cite many examples here. I was advised by an AAFCU rep that one of the deciding factors to lower their rate down to 4.50 was based upon the major influx of new accounts AND that the majority of those new customers were satisfying only the minimum requirements with minimal charges to their account. Apparently banks and credit unions receive a transaction fee that is tiered on a percentage amount of the charge.

I, for one, am disappointed to learn that a new thread was started about MidWest.

glxpass said:Regarding the dedicated thread that was started about MidWest America Federal Credit Union's 7.01% APY Reward Checking account that turns out to be open to all:

Unfortunately, every thread I've seen dedicated to a Rewards Checking account with one major exception I can think of, Charter Bank, has seen the lifespan of that account end within seemingly weeks or less of starting that dedicated thread.

I started the First Arkansas Bank and Trust (FABaT) thread with its great 6.06% uncapped rate on 12/31/07; the rate plummeted to 4.44% a little over a month later, and a cap of 70K was added. Actually, FABaT doesn't look so bad anymore.

Likewise the Air Academy Federal Credit Union (AAFCU) thread that I started on 5/2/08; on 5/8/08, AAFCU announced effective 6/1 that the 6.01% APY would decrease to 4.50% APY, at least it still has the 50K cap. But they recently restricted the number of MAAXIMUM checking accounts to one per primary SSN.

mh83 started the Arizona Bank and Trust thread on 5/16/08. It was open to all with a guarantee of the 6.01% APY (capped at 20K) through 3/31/09, no limit on the number of accounts. On 5/20/08, a branch visit was required, and they limited the number of accounts to two per household right around that time.

I'll spare you all further examples.

To be sure, more than the FatWallet/Bank Deals effect is at work. The Federal Funds rate has plummeted.

Date      Change Rate
--------  ------ ----
2008       
  Apr 30  -.25   2.00    
  Mar 18  -.75   2.25    
  Jan 30  -.50   3.00    
  Jan 22  -.75   3.50    
  
2007       
  Dec 11  -.25   4.25    
  Oct 31  -.25   4.50    
  Sep 18  -.50   4.75    
  
2006       
  Jun 29  +.25   5.25