The company discontinued its perks cash-back rewards program and canceled all reward balances as of Monday; redemptions already requested will be processed, it said.
Customers could receive the rebate on gift cards, including Visa cards that could be used at any merchant. “Glad I cashed out my perks as I earned them,” a customer named Debra Barrett on Facebook said Monday. “This is a really bad way of treating your longtime customers.”
PerkStreet aimed to be a different sort of financial institution, one that rewarded its users with cash back on debit card purchases, helping them avoid credit card debt. It wasn’t a bank, but offered banking services like checking accounts through two federally insured banks: Bancorp Bank and Provident Bank.
Dan O’Malley, PerkStreet’s chief executive, said in a telephone interview that several factors had led to the company’s demise, including regulatory changes that made fewer potential bank partners available, the interest-rate environment, and a reduction in fees that banks could earn from merchants accepting PerkStreet’s debit card.
PerkStreet assured customers on Monday that their money was safe. According to its Web site, accounts held at Provident will be closed; those held at Bancorp can remain open, if customers want. They can use its banking functions, like online bill paying, but won’t earn cash-back rewards on their debit purchases. Mr. O’Malley would not say how many customers had unredeemed rewards or how much those rebates totaled.
PerkStreet began aggressively courting customers in 2010 by increasing its rewards to a flat 2 percent on purchases made with its debit card, for customers who kept balances of at least $5,000 in their accounts. But as Ron Lieber of The New York Times noted in a Your Money column last year, few banks have been able to sustain an overall 2 percent cash-back program for either credit or debit cards. PerkStreet rolled its debit reward back to 1 percent in early 2012, saying it wanted to be able to offer rewards to more customers.
Mr. O’Malley said Monday that the company had paid for customers’ rebates out of general corporate funds, “and there were no corporate funds left.” The company sought to raise more money and also tried to sell the accounts to other banks that would agree to honor the rebates that customers had earned, but was unsuccessful, he said.
“I know it’s tough for customers,” he added, “but we just don’t have the cash.”
Ron Lieber contributed reporting.
Article source: http://www.nytimes.com/2013/08/13/your-money/banklike-company-offering-cash-back-rewards-to-close.html?partner=rss&emc=rss