American Express just announced ‘Rewards Checking’ for U.S. credit card customers. It has no account fees or minimum balances, pays half a percent annual yield on balances, and comes with a points-earning debit card (1 Membership Rewards point per $2 spend).
- Long-time American Express-watchers will recall the company is hardly new to the no annual fee checking and debit card space, the Walmart co-branded Bluebird account came with checks.
- Mileage-earning debit has largely disappeared thanks to the Durbin amendment which made it generally illegal to earn a profit on debit transactions. That had the effect of making no fee checking harder to come by, and raising the cost of checking accounts led to more unbanked customers. Bluebird financed itself with a loophole in these rules.
I always found tremendous value in points-earning debit cards. For instance, I used to pay quarterly taxes using a SunTrust Delta debit card. Instead of paying close to 2% to pay with a credit card, I’d pay a flat fee of less than $4 per transaction and I’d earn miles. And of course mileage-earning debit had a role to play buying money orders. Whether those transactions will earn points with this product remains to be seen.
You’ll want to spend on the debit card only for transactions that don’t earn miles with a credit card, given the low earn rate. And you’ll get the most value out of the account if you have an Amex card with Membership Rewards, so that you can transfer the points into airline miles (rather than just statement credits at $0.008 per point).
The checking account offers fee-free ATM withdrawals at MoneyPass network machines, but doesn’t waive or rebate fees from out of network machines. There’s no current initial bonus for the account.
Odds-on this becomes my go-to for paying taxes.
This is going to run as credit (AMEX) but come out of your account like a check card. You won’t be able to use it on tax payments. You couldn’t for Bluebird either.
Non-network ATM fees. Foreign transaction fees. In a way, this seems like a short step beyond the Serve Card. I doubt whether this will be of any meaningful utility for anyone who needs more than the absolute basics. The same applies to its Kabbage offering. Punt.
I pay my tax payments with a credit card that gives me two points per dollar. So I pay a fee of close to 2% but I’m getting the two points for every dollar. Isn’t that a better deal?
$5,000 debit card transaction limit doesn’t make this that great for taxes. And I’d still rather net 0.6% in cash on PayUSATax with a B of A Premium Rewards card.
tax payments is an interesting problem. aside from minimum spend requirements on newly opened cards, 0% teaser offers (where the value decreases over time), and paypal credit at 0% for 6 months (versus the1.96% fee on payusatax.com), the best long term solution i’ve found (where the transaction cost is less than the benefit) is either
– the alliant credit union cashback visa card which gives you 2.5% cash rebate (versus a 1.87% transaction cost on pay1040.com credit card payments). (you need to maintain a $1k balance in a checking account for that rebate.)
– one of the bank of america cards at the platinum benefits level (which gives me 2.62% on the travel rewards card.). (platinum requires you to park some retirement assets at merrill edge, which is a low-brainer since it’s quite a good brokerage.)
Is this a solution for monthly mortgage and car-lease payments?
I’ll still be using the BBP for taxes. I’d like to see the Thought Leader’s math that suggests this debit card is a better deal.
@ Gary — Credit card seems to be a better way to make federal tax payments, but maybe not for state tax payments. For example, if you use AMEX Blue Business to charge $10,000 in taxes, you pay a $187 (Federal) to $235 (state) fee and earn 20,000 MR points, worth about $300, for a net of $65 (state)-$113 (federal). If you use the AMEX debit card, you pay $2.20 (federal) to $3.95 (state) and earn 5,000 MR points, worth about $75, for a net of $71.05 (state)-$72.80 (federal).
If only Amex points transferred to Hyatt.
American Express I can say is worth having as a credit card in your wallet long-term. 🙂
The only debit card I knew of was the American Express serve prepaid card.
The card is no good because they’re for credit card customers only
is it by invitation only? my application was canceled.when i called they said they are accepting limited number of applicants (similar to invitation only).
This card is treated as a credit card with the IRS payment processors. You should update the misleading statements Gary.
@Bob – yes it is. It has a $5k cap per payment though
Sorry Gary. You are not clear. Are you saying the card is treated as a debit card albeit with $5k cap? Even if that is the case that seems to be an important caveat to list in your article.