Today, Upgrade announced that they have launched a unique rewards checking account. What is different about this account is that it offers 2% cash back on everyday debit card purchases. The other piece that I find really interesting is that if customers switch their bank account they will enjoy 20% lower rates on Upgrade loans.
Upgrade has moved from being a consumer lender to more of a full service neobank over the last couple of years. They added a credit card in 2019 that combined the best features of personal loans and credit cards. That card offers 1.5% cash back on all purchases based on when the monthly payment is made, not when the money is spent.
Debit cards typically have much lower rewards and often no rewards at all. Other neobanks that rely on interchange as their primary source of revenue find it cost prohibitive to offer much in the way of rewards but Upgrade is not relying on interchange as a profit center. Their core product is a lending product so they can take the interchange revenue and give it back to their customers in the form of rewards.
This is what CEO Renaud Laplanche said about the new account:
We asked our customers what would cause them to switch their primary checking account. The overwhelming answer was attractive rewards on debit card purchases. While credit cards often provide decent rewards, it has been nearly impossible for consumers to earn a broad 2% cash back on debit charges.
Here are some of the features of this new account:
- No account fees of any kind.
- ATM fees will be reimbursed on five withdrawals a month.
- 2% cash back on everyday expenses, 1% on everything else.
- Up to 20% lower interest rate on Upgrade loans.
To get the lower rate on a loan you need to maintain a balance of at least $2,500 or make a direct deposit of at least $1,000 per month. And the 2% cash back applies to purchases at convenience stores, drugstores, restaurants, bars, gas stations, utilities, phone bills and TV subscriptions.
This Rewards Checking account is now broadly available online as well as through their mobile app on the App Store and Google Play. The money is FDIC insured up to $250,000 and the actual bank account is provided by Cross River Bank.
Cross River is a well known name in fintech circles as the bank partner of choice for many lenders. CEO Gilles Gade had this to say about the new Upgrade offering:
Upgrade’s no-fee Rewards Checking account combines everything mainstream consumers expect from a modern checking account with no fees, generous rewards and access to affordable credit. Cross River is proud to enable such a consumer-friendly product.
Renaud Laplanche is one of the shrewdest operators in the business. He is positioning Upgrade to become the central banking relationship for their customer base and is providing a compelling offering to encourage them to switch. The growth in debit cards has been dramatic during the pandemic as more people are avoiding spending on credit. Upgrade is well positioned to take advantage of this trend.
Peter Renton is the chairman and co-founder of LendIt Fintech, the world’s first and largest digital media and events company focused on fintech. Peter has been writing about fintech since 2010 and he is the author and creator of the Fintech One-on-One Podcast, the first and longest-running fintech interview series. Peter has been interviewed by the Wall Street Journal, Bloomberg, The New York Times, CNBC, CNN, Fortune, NPR, Fox Business News, the Financial Times, and dozens of other publications.