2

They do say

“Must enroll in eStatements and use your Genisys Debit Mastercard® at least ten times per month for purchases of $5.00 or more, excluding ATMs, to earn 4.07%APY.”

And that

”Balances over $7,500 will earn .05%APY.”

This still seems like a very high APY. You can earn still $300+ per year on your account only having to make 10, 5-dollar purchases every month ($600 total at year-end), right? How do they afford to pay 4.07%?

6

They're paying interest on $7500 in balance so $352.50 per year.

If you're using a debit card, they're making a couple percent in merchant fees. If you were using a credit card, you could get, say, 1.5 - 2% in cash back that they aren't paying on debit card transactions. Most people don't have all that many card transactions over the course of a month-- if they're going to make 10 purchases a month every month on this card, that's likely to make the card their primary card and they're likely to use it for all their transactions (and thus make this their primary bank account). If we assume they're only making 1.5%, they'd need $23,500 in annual charges ($1958.33 monthly) to break even. That's probably more than most people are going to spend on their primary card but not by a huge margin. Say they make half their money back from merchant fees. You can certainly game the system by going to grocery store every couple days to make a $5 purchase on the card but that's a lot of effort for $350 in interest and not something that most people are going to keep up.

Then they get the benefit of being the primary bank for most people that take the offer. That's going to open up opportunities to make money by selling you other banking products (home loans, personal loans, etc.). They can probably expect to make most of their interest costs on that over the life of your account.

Additionally, someone that has enough money to park $7,500 in their checking account, be in the market for a high interest checking account, and tech savvy enough to be fine with electronic statements is likely to be a pretty low cost customer. They're unlikely to be calling in and talking to a human or to visit a physical branch that the bank has to maintain so the bank gets a relatively low cost customer compared to an average checking account user. I've seen estimates that banks can spend $100 - $200 a year to maintain a checking account. If you can cut that in half by not needing to print and mail statements, not needing as many physical buildings, tellers, call center operators, etc. you can afford to pay more interest.

1
  • 2
    Yup. It's basically a marketing expense for them.
    – ceejayoz
    Sep 11 at 14:34

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