Have you ever heard of Kasasa?
Until recently, I hadn't. But I've heard of similar products out there.
Kasasa is financial services company based in Austin, TX, and they offer white-label banking services to small community banks and credit unions. Founded in 2003, they were originally called BancVue (doing all the same stuff) and changed their name in 2016.
Bigger banks have the manpower and infrastructure to offer rewards on many of their accounts. They have huge customer bases so the relatively smaller profits can be enough to pay for the systems that support, track, and maintain them. Smaller community banks and credit unions don't. Without tens of thousands of customers, it's hard for them to offer rewards, keep track of them, and offer the interfaces we've come to expect.
That's where Kasasa comes in. They let smaller banks offer rewards on traditional loss-leaders in the banking world – checking accounts.
It's “Rewards Checking”
Kasasa falls under the category of “rewards checking.” Years ago, we were treated to eye popping interest rates on checking accounts through a product commonly known as “rewards checking.”
Rewards checking promised high-interest rates on checking accounts if you satisfied a few conditions. The two biggest ones were 12-15 debit card purchases and going all electronic (electronic statements, enrolled in online banking). The idea was to let smaller banks compete with online banks by using less paper (and mail) but also subsidize the higher interest rates with debit card transaction fees.
When you swipe a credit or debit card, the merchant has to pay a fee. With credit, it's usually something like 30 cents plus 2-3% of the transaction. With debit, it's slightly less. Either way, those fees help subsidize the higher interest rate. This is also why the high-interest rate is only offered on balances up to a certain limit, like the first $15,000.
Kasasa Cash Checking
Kasasa Cash is their flagship product – a checking account that pays you interest on your checking account. You don't open an account with Kasasa, you have to find a local bank that offers that product and open your account there.
Let's take a look at once example – First Financial Bank in El Dorado, Arkansas – rates quoted are as of 3/30/2018 and for illustrative purposes They offer a Free Kasasa Cash Checking account that pays 4.07% APY on balances up to $15,000. Above that, the rate falls lower:
|$0 – $15,000||4.00%||4.07%|
|$15,000+||0.50%||4.07% – 0.97%|
|If qualifications not met||0.05%||0.05%|
Funny enough, even if you don't meet the qualifications, you get a better interest rate than at most major banks anyway!
Kasasa Cash Back Checking
Kasasa Cash is their vanilla high interest checking but they also have a way for small banks to offer cashback on debit card purchases, which is rare for any bank. With the Kasasa Cash Back product, you now get some percentage of cashback up to some limits.
Let's go back to our friends at First Financial Bank – their program is structured as 3.00% cash back on debit card purchases – no category restrictions but maximum cashback of $7.50 per month ($90 a year).
It's not a lot of money and you lose high interest rates on the checking product itself. You still have the 12 debit card purchases/online banking requirements but it's an option that works for folks who don't have high balances and wouldn't benefit from a higher interest anyway.
Finally, we have the Kasasa Saver – savings account that you can link your checking accounts. It's everything you expect in a savings account plus decent interest rates, which again are tied to your activity with debit cards and online banking. (obviously your Saver card doesn't have a debit card, so you need a checking account too)
Here they are at First Financial Bank:
|$0 – $50,000||1.00%||1.00%|
|$50,000+||0.50%||1.00% to 0.67%|
|If qualifications not met||0.05%||0.05%|
As you can see, the savings rates are higher than commercial banks and credit unions, but lower than an online bank.
Here are some of the best rates:
(as far as I can tell, there is no money market type of account)
Is Kasasa Worth It?
There are a lot of factors at play here.
First, there are all the qualitative reasons. It's great when you support local community banks and credit unions. It keeps your money in the local community since local financial institutions tend to do more of their lending locally. If you have reservations about the “Wall Street banks” (I personally do not, but I recognize some people feel strongly against them with good reason), this is a way to go local without sacrificing financially. This comes down to your gut feel.
As for the numbers, we can play with a few numbers to see whether you're surrendering much financially. When you use these types of accounts, you're trading higher interest for the cashback rewards of your credit card. If your credit cards don't offer cashback, then the Kasasa account is better.
If you have a standard 1% cashback credit card, we can take a guess at the cashback you're giving up. If you make 12 transactions a month of $20 each, that's $240. That's $2.40 in cashback. Over 12 months, that's $28.80 – let's make it an even thirty dollars.
The average online savings account will get you around 2%. With a Kasasa account, you may get 4% (First Financial Bank has one of the highest rates). That's a 2% difference.
If you have an average of $1,500 in your checking account, 2% is $30.
If your checking account balance is less than $1500, it's a financial loss. (it may be better to go with the Kasasa Cash Back account)
If your checking account balance is greater than $1500, it's a financial win.
That's the line, around $1500, not accounting for the hassle.
Also, the 2% you can get with an online checking and savings account has no requirements. 12 transactions a month is probably not a huge bar but you may find yourself scrambling if you miscounted or are otherwise trying to optimize it.
Is that worth it? Only you know.