PerkStreet Review Part 2

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

In the month since Part 1 of my PerkStreet review, the one thing that has become quite clear is that PerkStreet users are passionate about the checking account. The emails and comments have been numerous, and I appreciate every one of them. In response I've done some additional number crunching to again elaborate on why PerkStreet may not be the best option available (yes, I'm maintaining my position in spite of all comments). Before we get to the numbers, let's first recap what PerkStreet is offering. They are offering a checking account that pays you 0% interest, but will give you 1% back on all purchases. Additionally, if you keep over $5,000 in the account (beginning daily balance), any purchase made during that day receives a 2% rebate. In addition, and it appears rather randomly, they offer 5% back on certain items at certain times (limited to $500 annually). For example, on July 20, PerkStreet announced that in honor of National Junk Food Day on July 21, you could get 5% back on fast food purchases. I'm not going to go into why I think even playfully encouraging fast food eating is an ethically questionable thing (although they did include some healthful tips in the blog post), but I will note that this is a 1-day teaser rate that PerkStreet can basically toss out on a whim to keep you hooked into their card usage. You never know when it's going to happen or if it's going to happen in an area of interest to you so you have to pay attention all the time. In psychology we call that variable ratio reinforcement, the same thing thing they use to keep gamblers hooked. Let's forget the ethics for a minute and get down to dollars. In this new example, I've created 3 scenarios:

My Way – Just like it sounds, this is the way I currently exist. It means I put as many purchases as possible on my credit cards and I optimize their usage. In this simple example, I use my PenFed card for gas purchases and my Schwab card for all other purchases. I am also assuming that keep a $7,500 float in my interest checking account. This isn't quite the truth, but I did this to have an accurate comparison to PerkStreet. The interest on the account is .5% and I've assumed it for the 60 days in my credit card billing cycle. It is simple interest, not compounded because the short duration makes any difference nominal.

PerkStreet < $5000 – This scenario assumes I keep a smaller amount in PerkStreet and only reap the 1% rewards except when I hypothetically go to McDonald's on National Junk Food Day.

PerkStreet > $5000 – This scenario assumes I keep a the same amount in PerkStreet as I do in the My Way scenario and being greater than $5000 allows me to achieve 2% rewards on all purchase, again except when I hypothetically go to McDonald's on National Junk Food Day.

Perk Street Comparison Table

My WayPerk St < $5kPerk St > $5k
Banking
Amount in Checking (avg. daily balance) $7,500.00 $2,500.00 $7,500.00
.5% interest over 60 days$6.16$-$-
Purchases
Gas$200.00$200.00$200.00
Groceries$500.00$500.00$500.00
Entertainment$300.00$300.00$300.00
McDonalds$15.00$15.00$15.00
TOTAL $1,015.00 $1,015.00 $1,015.00
Cashback
Perk St. 1% Rebate$-$10.15$-
Perk St. 2% Rebate$-$-$20.30
Perk St. 5% National Junk Food Day Rebate$-$0.75$0.75
Schwab 2% to Brokerage on any purchase$16.30$-$-
PenFed 5% cashback for gas$10.00$-$-
TOTAL INTEREST AND CASHBACK$32.46$10.90$21.05
As you can see from the table above, My Way provides a return over 50% greater than PerkStreett 2% and almost 200% better than PerkStreet at 1% rebate. You could rightfully argue that because I only spent about $1000 in the example that the percentages are skewed. These percentages will come down the more you spend because the My Way advantage is largely a result of the interest earned (and the rest from using the PenFed card for gas). However, there were a couple of things I did that helped the PerkStreet scenario. Note that I did not take into account opportunity costs for the PerkStreet scenarios. That is, by leaving money at PerkStreet at 0%, you are missing out on the opportunity for interest elsewhere and so it should count as a negative. Further, in reality, I don't keep that much money in checking. So, a portion of the $7500 in the My Way scenario would actually be earning 1.5% in my money market account. However, to make it as apple to apples as possible, I left that part out of the calculation and just made the balance assumptions the same. Finally, it's highly unlikely that I would have eaten $15 of fast food on National Junk Food Day, but I thought it would be funny to include. No matter how you cut it though, My Way is likely the best way. So, as I concluded in Part 1 of my review, I am not saying PerkStreett is bad in any way. I am saying that the marketing tactics are a bit aggressive. However, if it were my company I'd probably be doing the something similar because you have to get your name out there and get people signed up. Additionally, there are a subset of consumers like myself who use credit cards to their advantage to such a degree that even a 2% rebate on purchases in a checking account becomes an unattractive offer. For many consumers though, this could easily be the most lucrative opportunity available. I eagerly await your comments! Read Part 3 with my response to PerkStreett management comments.

Posted in Debit Cards Tagged with:
  • Hi,

    Thanks for taking the time to write two in-depth reviews of PerkStreet. We really appreciate the exposure and feedback we get from pieces like yours. I’d like to address a few of the concerns you raised, because I think they will help people consider us more fairly.

    We created PerkStreet to give the best value possible to folks who prefer to use a debit card to pay for purchases. We believe that credit card rewards provide an incentive for some people to spend money they don’t have, and we believe we’re providing a better choice. It has been shown that people spend 12-18% less when they use a debit card rather than a credit card, so the simple act of using debit can be a great management tool. I can personally vouch for this, as can my colleagues – I spend less now that I’m on debit, and live equally well (or better). I’m sure most of our thousands of customers would say the same.

    Now some specifics that affect the math:

    1) Our 5% bonus categories are far broader than the one example you selected. Perhaps most notable is that we’ve had 5% back on gas since June, just like your PenFed card. We have monthly and daily deals, and we make them very easy to find on Facebook (http://www.facebook.com/perkstreet), Twitter (http://www.twitter.com/perkstreet) and our blog (http://blog.perkstreet.com). Nothing to sign up for, no hunting around.

    2) You’ll get more back by putting as much as possible on your debit card. Using Bureau of Labor Statistics data, we calculate that the average American family spends $600 a week on purchases that could be put on a debit card.

    Now, we don’t presume that you can spend that much, but you can see how the math would quickly change by factoring in our gas bonus and just slightly more card purchases. Here is a great way to find bills that can be paid with a card: http://www.visa.com/billpay.

    We’re also not aware that the Schwab 2% card is available any more (and, as a credit card, it may not be appealing to those who would consider us).

    Finally, I wanted to comment on the bonus categories in general. As VP of Analytics and Customer Management at PerkStreet, this is an important area for me. We’re geekily obsessed with behavioral economics at PerkStreet – that’s why we love how debit spend changes behavior. I’m a cognitive scientist by training, so I understand what you’re saying about variable ratio reinforcement. But our bonus categories and daily deals aren’t that. They were born from our desire to find ways to give more back to our customers, to be the best option available, to be a little bit unexpected, and to be fun to be with. It’s that simple.

    And on the fast food deal, we respect your opinion. We have both fast food fans and Fast Food Nation fans on our team. Sometimes they are the same person. We appreciate every bit of feedback we get on the deals, and we know that everyone will find at least one that they like. We just did National Parents’ Day (http://blog.perkstreet.com/thanks-mom-and-dad/) for spas and florists.

    Thanks again for your reviews, and we’re glad to answer any further questions or concerns any time.

    John Magee
    VP, Analytics & Customer Management
    PerkStreet Financial

  • Carl

    Another warning on Perkstreet: If you take the “cash” rewards option they send you a visa check card. If you never receive or lose your check card YOUR MONEY IS GONE AND THEY CANNOT REPLACE IT. I just got off the phone with a PerkStreet customer service rep because this happened to me. A $50 card never arrived (although I did successfully receive two $100 cards prior to this). I was apologetically told there was nothing they could do. Essentially, someone in their shipping department can take the cards, list them as shipped and you are S.O.L.

    I’m quite pissed.

    For those who do keep your account (I’m going to kill mine), you should take the amazon.com gift cards. The codes are supposedly emailed.

  • 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 help@perkstreet.com 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

  • Teresa Hendrickson

    I've just opened an account with Perk Street and I wish I hadn't! After verifying my bank account through the usual process (Perk St made a small deposit and withdrawal and I had to locate the amounts), I transferred my money over from my bank account. Waited…waited. The funds were showing up in my new Perk St account, but were not available to me. Only after inquiring by email did they tell me that my account had been frozen because further verification was needed. That further verification has turned out to be a ridiculous amount of hoop jumping, involving having to go to my bank and request a notarized letter from them stating that it was actually ME who transferred the money, and then over-nighting that letter to Perk St via UPS, upon the receipt of which Perk St will, theoretically, release my own money to me. In the meantime I have no access to my money. My emails have been replied to at what can only be described as an extremely 'relaxed' pace (an entire day later) and my phone calls have been met with polite indifference.
    I have never, ever known transfer of funds to be this complicated, drawn-out and frustrating. I am seriously pissed off and wish I had steered a wide course around this company.

  • Hi Teresa,
    I am sorry you are frustrated with us.  I cannot go into account specifics in a public forum, but I can say that we take measures to protect you and us from fraud.  ACH fraud costs banks millions of dollars every year.  Fraudsters take extraordinary measures to get access to your money.   We want to pay money to you, not fraudsters.  By keeping our fraud costs low, we can continue to offer a generous rewards program.
    Calling is always the fastest way to receive a response (available 24/7). Emails may take up to 1 business day to receive a reply.   We strive to provide the best possible service in the business.  If you remember, can you please shoot help(at)perkstreet.com an email with the date, time, and person you spoke with? I would love to listen to the call and possibly use it as a coaching opportunity.  I would also be happy to answer any other questions you may have.
    Best,
    Brendan 
    PerkStreet Financial