No more free checking with Bank Direct
 

Just got a letter from Bank Direct.

Starting in January B.D. will start charging for checking accts regardless whether it is linked to airline miles or not or whatever the balance on the account as it seems nothing will be exempt from this. The charge or monthly fee will start in Jan 2012 so I guess no more free checking with B.D.

With the monthly fee and the almost non-existant interest amount earned but just getting some airmiles out of B.D.

Still worth hanging on to B.D.?

Your thoughts on this.

I think this deal is dead.

Suppose you kept $10,000 in the account. Assuming you have already picked up the sign-up bonuses (including DD and BP) and you were just accruing interest. Your $10,000 balance earns 1,000 miles/month or 12,000 miles/year. At a cost of $12/month or $144/year, you are paying $.012 per mile. This isn't terrible, but it isn't good. Of course, the numbers get better as your balance increases. However, at some point, you should be putting that amount of cash to work in a more productive venture.

These thoughts should be added to the existing thread on BD.

I have to agree, pretty bummed about this one myself, I think the break even point is at least 10k, which isnt bad. Understandable I guess as interest rates are SO low, but I really hate to see this one go by the wayside!

My personal thoughts are that the only way this deal makes sense anymore is if you keep around 15k and up in the account. The other side of that coin, however, is the loss you might have from tying up a large sum of money. Certainly, this isn't close to as good of deal as it once was.

suggest this thread to be merged with the existing thread in AA forum.

There is a long running thread titled Questions on Bank Direct in AA forum and the last few pages are full of discussion on the new monthly fee.

The account only makes sense for folks who have high amount of idle cash which they do not want to have it subject to market risk (hence not the usual equity investment).

The BD situation just goes to show "A Penny Saved is a Penny Burned." Putting money in a bank costs you money, while running up credit card debt earns you a return in the form of sign on bonuses, miles, cash back and other forms of profit.

We need to teach the youth of the country to follow their government and do nothing but run up big piles of debt for years and never go near a bank property, unless it is a forclosed house they want to occupy free.

Ben Franklin is rolling in his grave, do ya think?:p

Somewhere, Ben Franklin is kicking and screaming.

I disagree. It only makes sense if your valuation of AA miles is high and you don't want to manage multiple rewards checking accounts at multiple banks. Even now you can get 3% APY or more. The debit card usage requirements will get to you but its just a few minutes of work paying your utility bills in small increments.

Let's say you value AA miles at X cpm, your marginal tax rate is Y% and that you keep a balance of P grand in the account.

Assuming a constant earn rate of 10% of balance per month, the value of miles you earn over a year is $12PX-144. The post-tax interest money you are giving up is at least $0.3P(100-Y). Your valuation of AA miles needs to be at least (2.5+12/P-Y/40) cpm otherwise you are better off putting your money in RCA's and buying tickets from the interest.

The largest value I am willing to put for X is 1.5 and it never made sense for me to keep the account after getting all the bonuses. Its worse now because they don't help you in getting lifetime gold/platinum and they are going to ding you with fees.

Don't forget to take into account the opportunity cost of putting your money in one of these accounts. Using your example of $10,000, you would lose $402 in interest if you put $10K into a BD account instead of a high-interest reward checking. For the past two years I have been banking at FDIC-insured and NCUA-insured banks and credit unions that offer 4.02% interest on up to $10K (some banks allow up to $25K). The only "catch" is you have to make 12 POS transactions per month plus one billpay or direct deposit. I personally rent Redbox movies or buy coffee for my 12 transactions. So if you are putting $10K in one of these accounts for the miles alone you're now spending $546 just to earn 12,000 miles, so you're spending $.0455/mile ($546/12000 = $.0455).

Could you kindly post WHERE you can get 3% APY with account balance in the 100K to 200K amount?

I am sure tons of folks would love to know if this is actually true. If you go to the AA forum and read that BD thread, you would realize that many folks have kept OVER $200K there, even though amount above $200K earns only 1 mile per $20.

Seriously, 3% APY in an FDIC account with a balance at $200K at today's banking environment? Whom are you kidding?

The above has been discussed Ad Nauseum in AA forum BD thread, just fyi.

Again, BD is not for those who are spreading 10K here, 25K there and deal with multiple institutions as well as have to perform monthly tasks in order to keep the accounts 0 monthly fee plus earning that high APY.

Folks using BD has high amount of idle cash that far exceeds the 10K here 25K there type of approach, and do NOT want to be bothered with those little tasks. For them, an annual trip in CX F to Asia is well worth the cost to acquire SIZABLE AA miles.

Different asset levels requires different approaches best suited to different folks - it cannot be more obvious in this BD discussion which is really a redundant to the much more in depth BD thread in AA forum.

Still a good deal if your balance (and tax bracket) is high enough. If you prefer to chase rates with all sorts of balance restrictions/activity requirements/etc then so be it.

Exactly. Even if your tax bracket is the middle ground, (at least at 15% to 28%) but have high level of idle cash, BD still beats all other high rate accounts.

Haven't played the BD game. Is this simply because you're getting a return on your investment in a non-taxed form (miles) instead of a cash return that is taxed?