PerkStreet Review

3/7/12 UPDATE:   The rules have been modified extensively since this review.  Please take the time to understand the changes before you apply.

PerkStreet Financial just announced a checking account with a 2% rebate when you make purchases with the debit card and sign for the transaction. Why don't they offer the same rebate for PIN transactions? Two words: merchant fees. When you make a debit card PIN transaction, the retailer only pays a swipe fee for the card somewhere between a dime and a quarter, but if you sign instead of using the PIN, the retailer has to pay an additional fee, usually close to 1.5% of the purchase. This additional fee is what lets PerkStreet give you a rebate on the purchase. All the rewards programs work like this so don't just get mad at PerkStreet (if you're going to get mad).

So, how does this checking account work? You can open your PerkStreet FinancialSM Debit MasterCard® with a deposit of $25. You wait and receive your debit card in the mail. It looks like it's managed by VISA. Then, from that day forward you get a 1% rebate on any purchase you make. If, on the day of your purchase you have over $5,000 in the account you get a 2% rebate. So, in a lot of ways it works like the Schwab and Fidelity cards that pay you a 2% reward I've discussed in previous reviews. On top of the 1-2% rebate, they offer additional perks on time-limited basis like 5% rewards for gas pay-at-the-pump transactions and another 5% rebate at home improvement stores. This is very much in line with what Discover Card does with their rotating rewards program, except with PerkStreet there is no cap on the rebates. In sum, the rewards are comparable to the best credit cards out there so what's not to like? I, of course, will tell you.

What's not to like? 1) In order to get the 2% rebate you are basically giving PerkStreet a no-interest $5,000 loan in perpetuity. You can't move that money or you won't get the rebate. I have much better uses for $5,000 than letting Perk Street use it. 2) Did I mention no interest? You get no interest on any money in the account. It doesn't matter whether it's $5 or $50,000 dollars. If you really wanted to make this account work for you, you'd want the balance to stay as close to $5,000 as possible, but to do this you would have to do daily management to transfer enough from an interest bearing account to this checking account so you have the $5,000 base to start the next day. That's simply too much work for me. 3) This is a small quibble, but for those who chase rewards, you'll get no reward for exploiting the US Mint Direct Ship program. So, who is this card good for? Well, I had an online conversation with Dan O'Malley, the CEO of Perk Street, where he reminded me that

"Fidelity has 19M brokerage customers, which means there are nearly 300M other Americans who can't get 2% without worrying about fees or minimum balances."

Although I don't know the numbers there, the gist of his statement is true. He also noted,

"Why do people choose to spend on debit? One reason is the large volume of research that shows on average, people spend 12-18% more when they spend on credit. That's not just some people spending less — that's the population average."

Again, although I don't know the numbers, he's probably right. So, I would say that for people who don't know how to manage their credit card spending appropriately and/or those who cannot qualify for 2% reward cards, the Perk Street Financial checking account might just be a really good deal. Read the Part 2 follow-up PerkStreet Review. Then read Part 3 when I address comments from PerkStreet management.

Posted in Debit Cards Tagged with: , ,
  • So this is a good decision for people that don’t make good decisions!

    • It’s a good decision for people that don’t necessarily always make good decisions.

  • Dennis

    I don’t know how you came up with the following:
    “In order to get the 2% rebate you are basically giving Perk Street a no-interest $5,000 loan in perpetuity. You can’t move that money or you won’t get the rebate. I have much better uses for $5,000 than letting Perk Street use it.”

    but the following is from PerkStreet’s web site:
    “When your Current Account Balance at the start of the day is $5,000 or more, you’ll earn 2% cash back for all non-PIN debit card purchases you make on that day. When your Current Account Balance at the start of the day is less than $5,000, you’ll earn 1% cash back on all non-PIN debit card purchases you make on that day. To determine your starting Current Account Balance, we use your closing balance after all settled transactions from the previous business day. Pending purchases and transactions are not included in your Current Account Balance.”

    According to the above you don’t even need an average monthly balance of $5000, just have it there at the start of the day to earn 2%. So the way I see it is 2% earned on a purchase is more like 24% API since your money doesn’t have to be tied up “in perpetuity”.

  • Dennis,

    Thank you for your comment. Perhaps if we take an example and look at it through 2 scenarios, it may enhance your understanding. Let’s say I want to purchase a $500 home theatre system. I have $5000 sitting in a standard money market account at 1.5% APY.

    Scenario 1: Tomorrow, at the beginning of my new credit card billing cycle I order my HTS system on Amazon and charge it to Schwab Invest First card. I earn 2% ($10) on the purchase that’s placed in my brokerage account in 60 days. At the same time, the $500 sits in my money market account for the same 60 days until I have to pay my bill. At 1.5% APY that’s $1.23. Meanwhile the other $4500 is still sitting in my money market generating roughly .18 cents per day. So over the 60 days, I get $10 in reward plus $12.33 in interest for a total of $22.33.

    Scenario 2: Tomorrow, I transfer $5000 to my Perk Street account. It takes 2 business days to go through so I lose .21 cents per day interest waiting for the transfer. The transfer goes through and I go to Amazon and make my HTS purchase. $500 is taken from my Perk Street account and a $10 reward is added leaving me with a balance of $4510. I then transfer that back to my money market account. Another 2 days of lost interest. For the next 55 days, I gain $10.19 in interest. Plus a $10 reward. Total gain is $20.19.

    Scenario 1 is less time consuming and economically superior. And, this is taking a best case scenario for Perk Street where I only have the money in the account during the day of purchase. Every day you leave the $5000 in Perk Street you’re losing 21 cents in interest (not including compounding).

  • Dennis

    Hi Slug, thanks for your thoughtful reply.

    However, apples & oranges bro. We weren’t talking about comparing PerkStreet to the 2% Schwab cash back card, but other checking accounts. Off course your scenario using the Schwab card is preferable — if you happen to have one. I was primarily taking issue about needing to keep the 5K in your account for an extended period to earn the 2% back. If you don’t have that much there you still get 1% cash back (or 2% for the first 3 months regardless of balance). How many other CHECKING accounts do that? None I know of. Plus they have ongoing special rebates of 5% in select categories. For the month of July 2010 it’s a few fast food/ice cream places & some home supply stores, in addition to some daily offers.

    Full disclosure – I’m not affiliated with PerkStreet in any way other than opening an account with them recently. I came for the introductory bonus & stayed for the perks! Seriously, they seem to be really making an effort to offer great benefits for their customers, but they are the first to admit they’re not the ideal choice for everyone. Especially if you need a brick & mortar bank to go to in your home town.

    Bottom line: it’s the best online checking account around for my current needs, and is definitely worth checking out to see if it suits yours.

  • Dennis

    Well, a bit of a correction to my above before you reply. “I” was thinking/talking about checking accounts, “you” were in fact talking about 2% credit card rebates compared to PerkStreet. My bad. Otherwise, what I said applies…
    Have a good one.

  • Dennis,

    Thanks for checking back in. I really appreciate your thoughts. I agree that from a rewards checking perspective, Perk Street has much to offer. Their 1% rebate is completely reasonable within the frame of today’s economic conditions. However, as you pointed out I am considering it from the standpoint of all available options, and my options and the options of those seeking to maximize performance financially are capable of producing a better financial result because of our credit standing and hustler mentality. Others though may have fewer options or feel less capable of managing their credit card spending habits but are comfortable with internet banking and for them Perk Street offers an easy to understand and seemingly customer-friendly interface that I would gladly recommend.


    PS Perk Street should be paying you for how vigorously you jump to their defense.

  • Robert

    First I want to thank you for giving honest reviews of different finance sites and other financial products.

    I also would like to point out a few flaws in your logic. As you mentioned in an earlier blog post the Schwab Invest First card is no longer open to new applicants and that you believe the 2% rewards will eventually evaporate.

    I could put a purchase on my Citi card that 2 years ago was giving me 5% cash back on everything so 2% from perk street is a terrible deal. Products that are discontinued are discontinued for a reason. In this case Schwab realized 2% cash back on everything wasn’t sustainable.

    To fix this Perk Street is taking a different perspective. Instead of hoping people will carry a balance on a credit card they make up the difference by using your money interest free.

    You only looked at a very short-term example with your transfering of money in and out of Perk Street just to get the 2%. If you stick $5000.00 in a money market account earning 1.5% (just using your numbers) after a year you will earn $75.52 in interest. Now in order to earn this back with that extra 1% you would need to spend $7552.00 or about $630.00 a month. Most families spend more than that per month on debit cards or credit cards. Therefore over the course of a year leaving $5000.00 siting in Perk Street and earning the extra 1% makes sense.

    On top of that you have 5% rotating categories and no minimum redemption.

    The Schwab Invest First card is a better deal if you don’t spend that much but it also has been discontinued. Fidelity makes you spend $2500.00 just to redeem rewards and that is with the AMEX card. Of course we don’t need to go into the benefits of having a Visa vs. AMEX card.

    Whew sorry for the long winded comment. You have some great thoughts. I’m just pointing out a different perspective. I look forward to your follow up.


  • Robert,

    Thanks for your comment! Perk Street users really are supportive so I’m going to write a longer follow-up on the review.


  • AV

    There are several problems with this bank, so I would warn potential customers to be aware of the fine print. Although PerkStreet’s website has the appearance of being clear about their policies, I found that not to be the case. These “fine print” policies seem designed to (1) make it difficult to move money out of the account, and (2) to limit the cashback that you can earn. Below are examples.

    (1) They have a limit of $1500 on incoming online transfers in an entire *month*! They don’t tell you about this anywhere except when you actually try to move money into your account. When I called them about it, they said that they have this restriction for new customers and I was still in my first month. After a couple more calls, I realized that they will increase this limit to $2500 after six months.

    Stated reason: Security.
    Suspected motive: To limit the amount of money you can spend to get cashback.

    (2) They have a limit of $500 on outgoing online transfers. So, say you move $5000 into your account to get 2% cashback. You are stuck with that money with them for the rest of the month (unless you adopt a slower paper check route).

    (3) They have a limit of $1500 on daily expenses and explicitly say on their website that it can be waived simply by making a phone call. I had to book two one-way international flight tickets that cost a total of over $1500. I booked these and called them to waive the limit. They refused to do so because I was still in my first month. There is no notice about waivers not being allowed in the first month anywhere. As a result, I have to now spend much more money re-booking that ticket just because PerkStreet does not allow me to spend my own money.

    Stated reason: Security for new customers. They claim that all banks have spending limits on debit cards. Really? Bank of America did not.

    Suspected motive: Limiting spending => limiting cashback.

    (4) When I tried to circumvent the limitation in (1) above to move more money into my account using FedEx, there was another surprise! The first FedEx check takes not 1 day as stated, but about 9 days for some reason. Again, some vague security reason that is incomprehensible to rational beings is given as an explanation.

    Bottomline: It is not easy to get much cashback because of their restrictive policies on what you can do with your money. And they make it harder to move money out of the account while not giving any interest on it. As for the 5% cashback, they are on such specific and tiny items that I have never been able to get 5% cashback so far.

  • AV,

    These are some pretty strong drawbacks to the Perk Street model. Since we know Perk Street employees read my blog, I hope they respond to your comment and work towards making your experience better.

    If not, you might want to consider some of the alternatives I suggested.


  • Dennis

    Wow AV, I feel like I should apologize for Perk Street for not tailoring their banking offers to your expectations EVEN THOUGH I’M NOT AFFILIATED WITH THEM (as mentioned in an earlier post). Methinks I doth protest to much? No, just setting the record straight.

    That said, I can see why you were bummed out about the $1500 purchase denial. Heck, I didn’t even know about that limit. But when I sign up for a new accounts I “cut & paste” all the fine print & sure enough it was there.

    I also wasn’t happy with the ach restrictions. But they’ve been increased since I signed up, and my guess is that if your other accounts can do ach transfers you could move your money with those. But I think you’d agree with me that this banks goal is not to attract clients that dump money into the account & pull it out to park it elsewhere (although a wiley critter like you or I could probably figure out how to do it) but rather people that want a primary checking account with benefits. If you direct deposit your pay check then getting money there isn’t an issue at all. Which again is something I suspect they would hope you’d do.

    So for what this account is trying to be, i.e., your primary checking account with more perks than you get elsewhere, I think they accomplish that hands down. Case in point – I have 2 other high interest checking accounts, one that earns 5% and one that earns 4% (when monthly qualifications are met). If I really wanted to “work it”, I could make more than that per dollar spent with Perk Street on my monthly expenditures (though admittedly not more than a 2% cash back credit card – not one of my options).

    So since I like Bottom Lines so much let’s take a closer look at AV’s:
    Bottomline: It is not easy to get much cashback because of their restrictive policies on what you can do with your money — so from what you said earlier I assume you mean purchases over $1500 during your first month

    And they make it harder to move money out of the account while not giving any interest on it — and compared to the .0whatever percent at just about any local savings account is not even worth the comparison.

    As for the 5% cashback, they are on such specific and tiny items that I have never been able to get 5% cashback so far — it’s my understanding that Home Depot et al carry many items, some of the non-tiny variety, sorry you weren’t in the market for a fridge or whatever. This month I understand it’s school supplies. I’m not in the market for those, but due to the timely nature I bet many are.


  • I think the takeaway here is that PerkStreet is savvy and understand the methods by which some of us strive to game accounts be it through frequent transfers or purchasing coins through the US Mint or whatever the case might be. Their account is designed to thwart these efforts. As with any game, it’s important to be fully versed in the rules before one plays. AV does a nice job of pointing out some rules that may not be as transparent as the perks.


  • Dennis

    With that I can agree!

  • My name is Jason Henrichs and I work for PerkStreet. I’ve corresponded with AV since his experience and also worked with our customer service team to improve the information he was delivered. We are always working to improve the experience and any customer’s feedback is appreciated. We are taking action on the areas of AV’s experience that can be corrected, but there are several parts of his claim that I’d like to better explain.

    Unfortunately fighting fraud is a tremendous burden that has several impacts not just for the bank but for the customers as we establish a relationship. For AV’s first point, the limit does go up over time and with the deeper relationship. There are several ways you can get money in the account besides our free online transfer- by pushing the money from the other account, setting up direct deposit or sending a check. We recognized that this would limit a new customer’s ability to meet the $5,000 threshold which is why we put in a 90 day grace period where you earn 2% no matter what. If we were looking to bait and switch to keep your balance captive we certainly wouldn’t have done that. We keep a small share of the interchange earned when a customer uses the card and give most of it back to the customer. It is in our best interest to make sure customers can spend as much as they want while balancing the fraud exposure to us and to the customer.

    On the daily limit, I’ve worked with the customer service agent on how to better handle the situation and apologize that it was not a stellar experience.

    For your last point on the check, it is clearly stated in FAQs what the hold times are but let’s face it, wading through FAQs is a pain so you naturally picked up the phone where the representative was not clear in her explanation. Again, I’ve worked on the education that she should have inquired whether you were a new customer because their is an extra hold time for the first 30 days.

    Unfortunately banks have done little to engender trust so we’re fighting little by little to do better and earn that back. IM- I hope you’ll give us a shot. We aren’t perfect but I can assure we have many customers who love us. And I don’t know many other banks that have their COO writing a lengthy reply to an irate customer on a Saturday because he genuinely cares about making banking better.

    Any customer or potential customer can contact me directly if they have questions or suggestions: jhenrichs -at-

  • Slug / Dennis – in this case the limits aren’t to deter gamers of the system, it is the outright fraudsters. POS/ATM fraud topped $800M in the US in 2008
    and that is a drop in the bucket compared to ACH fraud.

  • Jason,

    Thank you very much for the update. I’m very impressed at the lengths you’ve gone to in order to resolve AV’s issues (hopefully he’ll return to comment on this) and to combat fraud. Definitely a key reason I continue to recommend the program to those interested in debit cards over credit cards.

    Sometimes it’s easy for me as someone who does exploit rewards offerings for their maximum benefit to feel like the ‘bad guy’. It’s good to be reminded that the true bad guys are those involved in outright fraud that truly do raise the cost of doing business for both institutions such as PerkStreet and the individual consumer.


  • Kumar

    Holding checks for 9 BUSINESS DAYS for new customers , even if it’s not a personal check, will cause pain to new customer rather than frustrate potential fraudster. Not mentioning this information on your FAQ and burying it inside a lengthy disclosure will not help a customer either

    Frequently locking out a/c and not informing the customer will cause pain to genuine customer more than it will keep the potential fraudster at bay.

    • Kumar,

      Sounds like you’re having some initial troubles with PerkStreet. Their customer service is usually quite good. Have you called them or tweeted @perkstreet? They are responsive.


  • Kumar- We regret that increased hold times for new customers does cause an inconvenience. Trust me that the last thing we would do is add a speed bump if it were not absolutely necessary. Waiting for funds to fully clear both institutions is one way we keep our fraud losses down so we can offer the best rewards program out there.

    We believe in transparency list our hold times upfront in our FAQs (you can see them here: I’d welcome any other suggestions you might have if you don’t mind dropping me a note at help”@”



    • Thanks Jason. Like I said Kumar, PerkStreet is dedicated to their customer service.

  • Kumar

    I am glad to see perkstreet listening to customer. Please add the hold time for new customer to the FAQ. I had deposited a payroll check which was held for 9days (as I am new customer). However, as per FAQ only personal checks are subject to 9 days hold time.

    I would appreciate if the customer are immediately notified if their a/c is locked or blocked for any reason , rather than they getting to about it after following up with customer care.

  • Carl

    WARNING ON THESE GUYS: If you take the “cash” rewards option they send you a visa check card. If you never receive your visa check card YOUR MONEY IS LOST AND THEY CANNOT REPLACE IT. I just got off the phone with a customer service rep because this happened to me. $50 card never arrived (although I did receive 2 $100 cards) and there is no way to replace it.

    I’m quite pissed.

    If you use these guys, opt for the Amazon gift card or something.

    • Carl,

      I’m sorry to hear that your card got lost somewhere in the process. To be eligible for so many cards, you must be a pretty loyal user. One would think that their customer service team might want to make good on your loss rather than lose a valuable customer. At the least it might be in their interest to institute a better method of tracking such reward payments. Your advice to go the Amazon route is a good one.

  • Hi Carl,

    I am sorry you did not receive your perks. This is definitely a rare situation and sounds like it could be a mix up on USPS’s end. Occasionally, perks get sent back to our PO Box and we reach out to the customer immediately for address confirmation. If you shoot a message to I will investigate.

    I completely understand your concern over shipping theft. We regularly audit our shipping department, and have strict limitations on who has access to perks. We take security very seriously.

    I hope to hear from you soon and get to the bottom of this.

    All the best,

    Brendan Carroll
    Customer Advocate Manager
    PerkStreet Financial

    • Thank you for the quick follow up Brendan! PerkStreet always seems to show real dedication to their customers.

  • Mike

    I wanted to like this account, but I don't.  I opened it in April, earned about $35 in perks, and now I'm closing it.
    The intro rate is nice. 2%.  Then, it's 1% unless you have 5K in there.  I don't.
    My first frustration was the inability to transfer more than $1,500 into the account.  Don't tell me to use it for everything, then not allow easy transfers.  The reps will say, you can call them for a one-time allowance, but that's a pain.
    The main reason I'm cancelling comes down to dollars and cents.  I recently posted a blog about how I earned nearly 1K in credit card rewards so far this year.  Only $35 came from Perk Street.  Their 5% categories are always very specific, so you can't really benefit from them.  Discover and Chase, on the other hand, use categories people actually will benefit from, like gas, groceries and restaurants.
    That's just my .02.  I'd say pass on this one if you have good credit and can use credit card rewards.  It's more work than its worth.

    • Mike,

      As I’ve noted many times, if you are versed in credit card rewards, it’s unlikely that any debit card, including PerkStreet, can compete. This account is best for people who don’t like carrying credit cards.

  • Nate

    I am disgusted with Perkstreet and their customer service.  I heard about Perkstreet on the Dave Ramsey show and I couldn’t resist the 2% cash back.  Little did I know that I would spend an entire month calling them in order to fix my mistake.  So here is my story:  I applied to Perkstreet in June.  Once I signed up, the mail started coming one after another after another.  I felt overwhelmed with everything, so I put it aside.  About a month later I felt a renewed energy to resume my application paperwork.  I felt confused so I called up customer service to find out how to proceed (which led to the worst of my problems.)  The representative told me that my account had been canceled and that I would need to reapply.  So, I reapplied and not more than two days later I received a letter in the mail concerning my first account (which according to customer service had been canceled).  I called Perkstreet again to ask them why they had sent me the mail.  They told me that my original account was still active and that my second account application had been canceled.  I was upset because the guy who I had called had told me the wrong information (but at least I still had an account). Then, less than a week later I got my application papers for my second application.  Now, if you are confused reading this, I don’t blame you,  I am still confused how a company can have a customer service department that is so incapable of knowing the status of their accounts.  So I called up Perkstreet AGAIN to resolve the issue.  The customer service agent confirmed that I had two accounts in my name and that in order to cancel one of them I would have to write a letter, scan it and send it to their email support team (why on earth she couldn’t close an account is beyond me.)  So I did as she told me.  I received an e-mail stating that they would close one of the accounts.  Now, it has been 2 weeks since then and the only thing that they have done is move all of the funds from one account to the other.  So, today I called again asking them to close my accounts.  I hope that I can at least get out of the terrible mess and not lose all of my money trying to do it.
    Perkstreet has led me on a wild goose chase, wasted my time and withdrew (Stole) $20 of my hard earned cash for apparently having an inactive account even though I didn’t have access to my account.  If you are thinking about Perkstreet, DON’T!  If you do you will regret it.  I wish that I had read the other comments before I had applied.

    • Nate, I’m sorry to hear your experience was so negative. It certainly sounds confusing. This seems like one of those instances where escalating the issue beyond the typical CSR may have helped. Your situation was unique especially since it was originally caused by a delay you created. However, this situation could clearly have been handled better on the PerkStreet side else you would not be where you are now.

  • Hi Nate,

    I am sorry you are upset with us.  This definitely sounds like a very unusual situation.  Our team should of done a better job of communicating with you.  I would love to jump in personally, but need a little more info from you.  Can you please shoot me an email at help(at)  
    Brendan Carroll
    PerkStreet Financial

  • Mark

    These new changes are DISGRACEFUL and personally INSULTING!  I was not thrilled about having to redeem rewards through the MasterCard gift card, but I understood the rationale for doing so. 
    These new changes are ridiculous and I will be ACTIVELY looking for another account; I see a great deal of potentials already.  One of the INFURIATING things is the spin from PerkStreet to make it look as though this is a new “benefit” and in the best interest of the customer. 
    What does this really mean?
    1.        If you maintain over $5k in the account, like I do, you will NO LONGER get the blanket 2%.
    2.       Now there is a LIMITED amount of retailers for which you can even receive the 2% on.
    3.       You are limited to only a max of $5k spending at the 2% level.
    I personally used the MasterCard gift card redemption option, which is now GONE.  (They have added more retail gift cards, which severely limit you, force you to shop at those establishments, typically entice you to spend additional money that you wouldn’t have normally spent and people tend to leave a small balance on each card that when added up is quite substantial).  They have replaced it with an “account credit,” which adds up like this:
    1.       You only get $20 for every $22 of rewards.  This is OVER 9% (NINE PERCENT) of your rewards that they have decided to just keep from you.
    2.       This means, that if you are not purchasing from one of THEIR retailers, you are getting 1% return.  THEN, they take 9.09% of your 1%.
    3.       FOR EXAMPLE, you spend $100 and earn $1.  They then take 9.09% of your dollar and only leave you with barely 90 cents.
    4.       This essentially drops their 1% “reward” to a 0.9% “reward,” if you can call it that.
    The $2500/$2500 online/in-store purchase limit is the final nail in the coffin.  I could not believe that when I read it.  Limiting the amount that you can even receive at the 2% level to $5000 IN ADDITION to limited the places you can spend at, is preposterous. 
    These executives must have sat at the table and thought, “Yeah, I think people are STUPID enough to buy all this.”  It’s like someone SPITTING IN YOUR FACE and telling you that it’s a ‘benefit’ and thinking you’re too DUMB to know the difference.
     It is unfortunate that it is seen by the PerkStreet executives as revenue vs. cost while the demand function will never surpass the motivation for INCREASED PROFITS.
    I'm sure in the future there will be a company that will offer a 2% rewards program with the direct account credit option and possibly even a high balance high percentage savings and/or investment account to compliment the checking.  I guess I will have to do some digging and find out what's currently out there and go with the best option.  It too bad because I thought PerkStreet was that option.  Who knows, maybe PerkStreet will even come around. 
    If this does take effect, I will make it my DUTY to get accounts and post negative reviews for this company as far and wide as I am able.  If I have to go through the HUGE PAIN of switching my bank (i.e., direct deposits, auto payments, etc.), then while I’m at it, I will warn anyone who will listen.

    • Mark,

      You won’t see me arguing with any of your points. For me the 2% a simple and easy marketing tool. It drew people in immediately. And, yes, it may have been the case that only 10% of their customers could earn the 2% but isn’t that actually good for PerkStreet? Doesn’t that make them more profitable? I certainly did not hear an outcry from the 90% who were only earning 1%. Why? Because the rules were simple and elegant. Now it’s all convoluted as you explained.

      PerkStreet has replied to concerns multiple times on this blog, and I really they hope they chime in here. They have some better explaining to do.

  • I'm one of the founders and COO at PerkStreet. We've always appreciated Slug's willingness to engage in an open discussion and while we'll miss him as an advocate, we understand why he's no longer going to be with us.
    Let me start by offering an apology to Mark and any others that were offended by the email we sent out. We never meant to hide that profitability was a driving factor (we openly discussed this in blog posts and multiple other places but we did not give it the front and center attention it should have gotten). We do not take our customers or potential customers as idiots and we've always strived live out our personal ethics of honesty in our work, not because it is part of the brand, but because we believe that is the right thing to do. I believe we do a good job at this, but this email is an example where we failed. No one bears responsibility for that besides Dan and myself. 
    The following is meant to be an explanation of the situation and is in no way a defense for the communication I'm apologizing for above.
    I will make no excuse that we need to maintain a profitable business. We launched the 2% product over a year ago and since that time who our customers are, how they use the product and the economic environment has continued to evolve. This is not a decision based on greed but of necessity: when we analyzed the data we found less than 10% of customers received 2% back (which in itself is an issue since that's one of our biggest marketing claims) but accounted for an outsized portion of the rewards. We were faced with the difficult decision of either reducing the economic benefit to the majority (cutting what they earned or finding ways to extract more in fees) or dropping the unlimited 2%. Slug to answer your question isn't it good that only 10% earn 2%? Here's the math – you previously used a 1.5% interchange number (it's actually less when you include association fees but let's run with this) which comes to us in revenue. At 2% rewards you can see that we're upside down immediately and without factoring in operating costs (this is a financial institution not a website remember). There is a perception that we make a large amounts on the deposits that should easily make up the difference; we do not do credit card, auto or mortgage lending so are subject to the same rate curves that others feel the pain of when trying to get a return on balances.
    Regarding the $2 fee on the $20 account credit, Mark is absolutely correct that this is the equivalent of dropping earn rate to 0.9%. We did this to bring it in line with the discounts we get from the retailers that we pass along to customers. Our other option would be to market a card that only earns 0.9% (which is still more than any of the debit cards I can find), but we know by looking at the data that a majority of our customers already shop at the expanded list of retailers we offer and this is an opportunity for us to give more back. 
    We understand that for those who use credit cards this is no longer the best product on the market. The customers we've set out to serve are debit card users and we need to stay true to that mission. We truly apologize for the communication which we see did not adequately explain the reasoning.

    Sorry to be long winded but I wanted to err on the side of being thorough. I'm happy, as always, to field questions as well. 
    Regards, Jason

    • Jason,

      First of all thank you as always for chiming in, taking ownership of the original messaging issue, and bringing transparency to the situation. You and Perk Street deserve to be lauded for this. I’m still left with a few questions:

      1) You mention the interchange fees and that you are always upside down on the 2%er’s (10%). This makes sense. However, it suggests that you are profitable on the other 90% of users that you have. My guess is this is a bad assumption. The question is how much of the purchases per card are made by those 10%. It’s conceivable and actually likely that the 10% account for greater than 10% of actual purchase sales volume on the card such that thinking about a 90/10 split on profitability is incorrect, and you guys are getting squeezed more than people might think because those who can afford to keep 5 grand in the account are probably spending at higher rates. Is that the case?

      2) I guess it depends on the extent of losses your are taking on the 2%er’s, but at some point an analysis must have been done on the costs of changing your marketing message away from the key driver that brought people into the card in the first place. You must’ve done some form of market research with your existing customer base to understand the sensitivities around changing the message and the rules AND hopefully you were already doing additional research with non-customer users of debit cards to understand the extent to which they would be enticed to join PerkStreet based on the original market message as compared to the new one. Can you comment on that?

      3) I’m not sure why Perk Street is hung up on the ‘only 10% of our customers were getting that benefit’ piece when it was glaringly obvious from the rules who would qualify and who would not. There is no ethical dilemma here. You guys were following the rules you set. Can you explain this because it sounds really irrational for you to say this when I know how rational you guys actually are.

      4) You mention the interest rate situation, and I’m sure that’s killing you guys. In any other economic times you could be reinvesting those customer assets in riskless securities at rates that easily support the 2%. Instead, you either need to take on more risk in the investments or maybe create a credit card. Obviously neither of those are that appealing. No question here. Just that I feel for you in this unique environment.

      I’m going to dampen my dis-endorsement now. I may have been overly harsh. 🙂

  • Jason Henrichs

    I apologize that I don't have time for a lengthy reply but you are correct that we are uber-rational around here and lot's of analysis went into this.
    2% was never meant to be a loss leader and it did work as intended for a good amount of time (we launched it roughly 18 months ago) but as the base evolved some interesting dynamics came into play. You are correct that 10% represents customers not spend and it skew towards those earning the most were also spending the most. The amount spent relative to the balance and a host of other dynamics came into play when we look at overall impact. We had to make a change and a lot of thoughtful analysis went into it. The final conclusion was: we set out to be the best debit card and platform for those who are improving their financial lives by staying away from credit and we needed to stay true that cause. Taxing the masses to reward the top end feels much more like the credit industry most of us left. 
    The fixation on 10% is both a function of analysis and ethos; at the end of the day we didn't feel good about promoting a product that the majority of people would never see the primary benefit of. We used to do that but we quit those jobs and have labored for 4 years to build a business where the customer and business incentives are aligned. 

    Thanks for listening and less-de-endorsing us! You can justifiably be mad at us for some things, like the messaging. We can debate debit vs. credit (as we have in the past). But I don't think we can be faulted for staying true to vision and running a sustainable business.