The unique selling proposition for internet checking accounts through BankDirect is the 100 American Airlines miles per $1000 average balance that you earn each month. If you keep $5000 in your checking account, that’s 500 miles a month, which is actually quite rewarding — 6000 miles a year at a time when most of us won’t maange to get $50 in taxable interest off a $5000 checking account balance during that time, and probably even less.
Some folks used the account effectively to earn large quantities of miles with big balances, I never saw this as an especially great investment account earning miles rather than money, as a replacement for mutual funds for instance. But earning say 10,000 miles a month back when American counted miles earned from any source was non-crazy, and FDIC insured against losses which my stock picks certainly were not in 2008 and 2009!
For me, BankDirect has been my primary checking account in July 2003. And that’s how I’ve used it, as a checking account. I do wind up with some reasonably significant balances, just from floating expense reimbursements, it’s short term money that I need to pay off my credit card bills but it needs to be parked somewhere for a couple of weeks and so earns some miles each month.
I’ve always experienced good customer service, and they frequently didn’t charge me for things that they could have like overnighting bank checks. Over time they’ve rightened up some of their offerings, though, imposing a cap on the out-of-network ATM fees that they would reimburse, which somewhat limited the benefit of not just not charging out of network ATM fees but even rebating those charges imposed by the other bank. But that wasn’t an especially big deal.
The downside to the account for many has been the $2500 minimum fee in order to avoid monthly service charges. Unlike some banks, BankDirect didn’t waive monthly fees for doing payroll direct deposit. As I say, I met this through regular expense reimbursement checks. So even though I wasn’t using this account to park money per se it always had a big enough balance to avoid these charges.
Effective January 2012, however, they are beginning to impose a $12 monthly service charge on everyone regardless of balance.
I understand why they’re doing this. 100 miles per $1000 average balance is actually quite a pricey return to be offering customers in such a low interest rate environment. And at the same time, the cost to banks of holding deposits has gone up as the FDIC charges increased premiums to banks to insure their deposits, in order to shore itself up given the rising cost of paying out claims incurred as a result of bank failures.
So BankDirect’s costs to hold deposits have gone up, and at the same time they’re paying above market returns to depositors. I get it. But it still irks me, because I’m now faced with the question of whether or not to continue my relationship with my primary checking account bank — at a time when the miles from them are no longer quite as valuable (since they are still quite spendable but no longer count towards lifetime elite status with American).
And it seems as well as continuation of BankDirect’s continuing devaluation, they limit the number of miles you can earn (not that I ever kept over $200,000 with them!) and now charge you for the privilege of using their accounts.
So it’s partly that the mileage earning may not offset the fee except at higher average balances, and partly a sense that they value me less as a customer — that I am somehow the enemy for doing business with them — that has me rethinking my relationship.
And that makes all of the little annoyances more significant, their online interface isn’t much changed since I became a customer over 8 years ago which means that though they’re an online bank they don’t offer the most extensive or sophisticated online services. And they have a particularly annoying practice of putting a hold on large deposits and putting a hold on an equal sum out of your existing balance. If you have $5000 in your account and deposit a $10,000 check, they may cause your balance to go negative by $5000 as a result of making a deposit! They explain this as a quirk in the programming, but also tell me this is not on their radar as a priority to change. It’s meant that they regularly honor all of my payments that should be honored out of my available balance but will then automatically post a fee for not having the funds available to cover and then manually credit that fee. They’ve never not credited the fee, and I’ve never had to ask that they do so they always do it on their own, but it’s still something that angers me every time I see it.
BankDirect seems to want to chase away deposits, there are real perverse incentives for them to do so, and I’m faced with a decision about my own relationship there.