PerkStreet, Rewards-Based Online Bank, Is Shutting Down

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BOSTON - JANUARY 5: Dan O'Malley, CEO of PerkStreet Financial, sits on the Hot Seat for The Boston Globe, on Wednesday, January 5, 2011. (Photo by Pat Greenhouse/The Boston Globe via Getty Images)
Pat Greenhouse/The Boston Globe via Getty ImagesDan O'Malley, CEO of PerkStreet Financial
PerkStreet Financial, an innovative online bank that offered rewards "perks" to its users, announced Monday that it was shutting down after failing to secure much-need funding.

"Over the last 6 months we have been pursuing additional investment to grow our business to the point it could be self-sustaining," the company wrote in an email to customers that was also posted on its website. "Unfortunately, we were unable to secure more funding and now must begin the process of closing the company."

PerkStreet was founded by former Capital One executive Dan O'Malley in 2008, but it really rose to prominence in 2011, when large banks started responding to consumer-friendly financial reforms by heaping new fees on their bank accounts. When Bank of America announced that it would introduce a debit card usage fee (a plan it later scrapped), PerkStreet saw twice as many new customers sign up the next day as usual.

That's because it reversed the usual customer-bank relationship: Not only did it not charge account maintenance fees, it actually offered rewards for customers.


If you had more than $5,000 in your account, you got 2% cash-back for using its debit card; balances below that threshold got 1% cash back. Like many rewards credit cards, it also had rotating categories offering 5% cash-back.

But last year, it started to change how it rewarded account holders: It did away with the $5,000 account threshold and said that all customers, regardless of balance, would get 1% cash-back on most purchases and 2% back at select retailers, including Amazon (AMZN) and Target (TGT). At the time, it said that it was doing so because most account holders weren't maintaining balances above the threshold.

As attractive as the deal was, it looks like PerkStreet just didn't have a sustainable business model. The company said Monday that it will officially cease operations on Sept. 26. The good news is that account holders can still use their cards, write checks and generally use their accounts through one of PerkStreet's two servicing banks, Provident and Bancorp; the accounts will convert automatically.

But the perks will cease, and customers with unclaimed perk balances are out of luck. On its Twitter account, the bank is apologizing to angry customers and explaining that it "just didn't have the financial capability to pay out perks earned."

That's cold comfort for customers who switched over in hopes of finding a friendlier bank, and are now finding that they can't use their hard-earned cash-back rewards.

Matt Brownell is the consumer and retail reporter for DailyFinance. You can reach him at Matt.Brownell@teamaol.com, and follow him on Twitter at @Brownellorama.

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momcat64

Perkstreet account holders, BEWARE! Make sure that when you contact the bank to close your account, you also tell them to close your debit card and cancel overdraft protection.

Failure to do so in my case resulted in a debit card transaction being honored AFTER I requested closure of my Perkstreet checking account because the overdraft protection was still in force and the debit card was still active - despite my checking account being "closed"!! I had called Perkstreet's customer service to close my checking account. During the course of this telephone conversation, Perkstreet's rep did not tell me I needed to close the debit card and cancel overdraft protection as well. I didn't know any better, and assumed that a closed account meant everything pertaining to the checking account was closed, including debit card and overdraft protection.

After I requested closure of my checking account, Perkstreet paid an online purchase transaction of -$75.00, then hit my account for a -$32.00 non-sufficient funds fee which put my checking account a total of -$107.00 in the hole. Somehow, my Perkstreet debit card had become the default payment method for my health insurance company's mail-order prescription service. It had not been the default previously, and I have no idea how the change occurred. My prescription service recently underwent an acquisition and updated their website which resulted in multiple login and information issues, so perhaps the payment default change happened as a part of that mess. Or maybe I did change it awhile back to earn more Perks and I just plain forgot. I'm not sure.

So now Perkstreet wants me to send them $107.00 to put the account balance back to zero. I'm not inclined to do so, seeing as how I lost $97.00 in Perks Rewards when they announced the bank's closure. However, I was told today by Perkstreet customer service that if I do not deposit the $107.00 then my account will remain open and future purchases would be honored. I told her to cancel my debit card and overdraft protection, making it clear that I do not want any future transactions to be honored. Ever.

The Perkstreet rep said they didn't find out about the Perks Rewards being cancelled until the FDIC informed them. Not exactly sure what that means, but okay, I get it the whole situation was not this particular employee's fault. I replied, "Someone in your company knew long BEFORE the closure and Perks rewards cancellation announcements were made that a problem existed. It was dishonest of Perkstreet to fail to notify their customers and give us the opportunity to claim our earned Perks in a timely fashion. I feel like your company ripped me off of nearly $100, so I am not inclined to reimburse it for the transaction and accompanying fees that never should have been applied to my account in the first place."

I'll probably wind up with a ding on my credit report, but I'm okay with that since I don't do debt anyway.

September 01 2013 at 3:26 PM Report abuse rate up rate down Reply
Phil Collins

Just like the Tucker Car Company the Big banks won't let a small bank like this thrive and survive, the Big 3 car makers back in the day all got together to put Tucker out of business and they did a smashing job of it while the Government turned it's head the other way.

August 15 2013 at 12:12 AM Report abuse rate up rate down Reply
edzackly

It would be interesting to know what Mr. O'Malley was paying himself. this could be another ponzi scheme.

August 14 2013 at 12:29 PM Report abuse rate up rate down Reply
caveredecorator

why wont Iselin007 tell us what they really think?

August 14 2013 at 9:53 AM Report abuse rate up rate down Reply
Chris Cravens

I switched to perkstreet from BOA in 2011. I collected over 250.00 worth of Perks. I always got connected with a live person when I needed help. I hate to see this bank go bust. Why not BOA?? They can't be trusted with money.

August 14 2013 at 7:10 AM Report abuse rate up rate down Reply
Iselin007

Better find some of that investment money for infrastructure because your going to need it.

August 14 2013 at 1:03 AM Report abuse rate up rate down Reply
1 reply to Iselin007's comment
Catzs

Bitter much chicken little? I guess it's time for you to go stick your head in the sand ostrich and hide.

August 14 2013 at 12:55 PM Report abuse -1 rate up rate down Reply
1 reply to Catzs's comment
betty_brock

We liberals think everything is wonderful don't we Catzs?

August 14 2013 at 10:04 PM Report abuse rate up rate down
Iselin007

Right your going to go 800 mph in a tube with every else in ruin.

August 14 2013 at 12:59 AM Report abuse rate up rate down Reply
Iselin007

Please don't boast about back to school sales any trickle is not going to prevent this economy from sinking. The casinos stink along with the rest of the shore tourism even the musks are laughing . The infrastructure is crumbling while we head in to fall with hardly anything repaired. Pot holes, falling concrete, and more. Old gas pipes, water and sewer pipes waiting to burst. That's the real picture folks enjoy your billions.

August 14 2013 at 12:56 AM Report abuse -1 rate up rate down Reply
Iselin007

In the consumer world you can see just what the floor traffic and shopping carts say about the economy. Those carts are barely filled like many of the parking lots. Don't hand me it's Online sales because those delivery trucks aren't delivering much of anything.

August 14 2013 at 12:44 AM Report abuse -1 rate up rate down Reply
evd10

I've never had a debit card and never needed one. I have a credit card and charge almost everything I spend on it. I get 1% cash back (2% at supermarkets and gas stations). When I have $20. in cash back they send me a check. See how simple that is.

August 14 2013 at 12:41 AM Report abuse -1 rate up rate down Reply
1 reply to evd10's comment
sadiemae1214

That's great that you get 1% and 2% cash back and get sent a check for $20.00 but the interest you're paying on that card is a lot more then you're getting back. See how simple that is? Try a credit union. Cost free, interest free debit card, earn interest on checking AND savings and if you belong to a credit union on a network, there's no fee at the ATM's.

August 14 2013 at 8:55 PM Report abuse rate up rate down Reply
1 reply to sadiemae1214's comment
jenjutz

If you pay off your credit card in full every month you don't pay interest. I charge everything to my rewards card. One percent cash back all the time on everything. Every three month certain places are 5%. Three months of 5% back on gas. Three months of 5% back on groceries. Well, you get the idea. I pay my bill in full as soon as I receive it. No interest paid. Credit unions pay far less interest than my online savings account through Discover. My online checking through Capitol One pays .8%. That is seven times more than the best rate at any of my local credit unions.

August 15 2013 at 12:53 AM Report abuse rate up rate down