The Demise of PerkStreet: How a Bank Collapses

Yesterday I woke up to this email from my bank:

Hi Damien,

We have some bad news to share. PerkStreet Financial will be closing permanently and ceasing all business operations…Consistent with the terms of our Rewards Program Agreement, we have discontinued our perks program and cancelled all perks balances as of today.

Ouch. This has been my bank for four years. I’ve pitched it to friends and family, seen its ups and downs, and now it’s breaking up with me. Not only do I have to switch banks, but all the perks I had earned and not yet cashed in were null and void.

Why did I love this bank so much? Well, mostly because of the perks. When PerkStreet started out about 5 years ago, it partnered with Bancorp and promised to change the way banking is done.

It Started So Well

Besides being an online bank, the major draw was that you earned cash back (perks) on debit card purchases. Every time you swiped your debit card as credit, PerkStreet would share some of the interchange fee with you.

It began as a pretty sweet deal, if you had a balance of $5,000 or more in your account, you got 2% in perks. Any lower balance, and you earned 1%. So where did it all go wrong?

Ignoring the Warning Signs

I should have seen this coming, there have been many warning signs:

  • A few years ago they did away with 2% for high balances and switched to a gimmicky way to earn higher points by shopping at certain stores each month.
  • They switched banking partners 3 times, making us get new debit cards.
  • They spent a long time developing a (dumb) “digital envelope system” that they hinted at several times but never rolled out.
  • For years they promised a savings account and mobile app. They finally rolled out the mobile app this year, but get this: only for new customers. Me, a loyal customer of four years, never got access to the mobile app.

So, after receiving the email yesterday, I wasn’t too surprised. But the thing that really ticked people off was that PerkStreet voided everyone’s accrued perks that they had not cashed out. Facebook blew up with complaints. There were several commenters who had racked up over $500 worth of perks that they will never get.

I understand that what PerkStreet did was legal, but it doesn’t seem ethical. Unclaimed perks were an expense they could have and should have planned for.

Even Dave Ramsey is Mad

An interesting twist in the story is that PerkStreet has been an advertiser with Dave Ramsey for several years. Hundreds, maybe thousands of PerkStreet’s customers came because of Dave’s recommendation and seal of approval.

According to Dave, PerkStreet told him at the end of July that they were being acquired by another company and were not interested in advertising with him anymore.

Then, he found out on facebook (like many of PerkStreet’s customers) that they were going out of business and not honoring anyone’s perks. He was ticked off at PerkStreet and let it fly on his radio program. You can listen here: search for the August 12th show and start at 40 minutes in.

Lessons Learned

So what lessons can be learned as a customer of a bank that went under? In our case, it doesn’t affect us too badly. We have another checking account with Schwab, and I transferred our balance over there.

Also, I cashed in our perks whenever they hit the minimum threshold. So, we lost somewhere between $20-30 in perks. No big deal.

The lesson in this situation is to always cash in your perks, points, gift cards, etc. as soon as possible. Otherwise your bank may go under and take your money with it.

Alternatives to PerkStreet

So where do we go from here? Who can replace PerkStreet? The sad truth is that no one else occupies the space of online bank offering cash back on debit card transactions.

The best alternative would be a “high” interest checking account. High is in quotes because interest rates are abysmally low right now. The best online banks with the highest return on checking accounts would be either Ally or Everbank. Once I move back to the US I plan on opening an account with Ally.


Steve Stewart at MoneyPlan SOS had a chance to interview the CEO of PerkStreet and got more insight into why the bank folded. It sounds like new regulations made it very difficult for them to be profitable. An interesting listen here:

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