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.

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