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On February 8, 2022, American Express just launched a new checking account option. In addition to offering competitive interest rates, you'll also earn Membership Rewards points on debit purchases. The new account is open to those with US-issued Amex consumer credit cards. Here's a look at the details of this new offering and the positives and negatives to this account.
Details of New American Express Checking Account
In a press release, American Express says it is filling a void — which is that it doesn't offer consumer checking account services. Amex already offers savings accounts, as well as small business checking (Kabbage), so this is definitely a new offering. If interested, you can apply at this link.
Fees / Minimums
There are no fees on the account. Additionally, there are no minimum balance requirements.
Interest Rate
The new American Express digital checking account will earn interest at 0.50%. This is a competitive rate in the market right now, where many banks are offering less.
While this is a great rate in comparison, remember that 0.50% interest on $1,000 is just $5 per year. What you're earning is higher than what you may find with other banks, but it's still not a lot. However, earning interest on a checking account with no fees and no minimum balances is excellent — especially on an account where you can earn rewards. More on that below.
Use of ATMs
Your ATM/debit card will include free withdrawals at Moneypass ATMs. You can find locations for these here. There are over 37,000 Moneypass ATM locations in the U.S.
Earn Membership Rewards on Debit Purchases
Using your debit card for purchases will earn 1 Membership Rewards point per $2 spent. Note that these are the same Membership Rewards we are accustomed to with credit cards. The key difference here is that how you use the rewards is a bit different.
First, if you do not have any other card that earns Membership Rewards, then you will not be able to transfer your Membership Rewards points to travel partners.
This is similar to the way no-fee cards with Chase work: you can't transfer the Ultimate Rewards to travel partners without a premium card of some type to unlock this feature. With American Express, the debit card will have this same “locked” points feature, for lack of a better term.
Second, if you can't transfer your points, your only option will be cashing them out into your checking account. The cash-out rate will be 0.8¢ per point. That's far below the average AwardWallet user redemption rate of Membership Rewards, which is around 2.41¢.
But…It's A Debit Card That Earns Points
Debit cards that earn points are not common. Thus, even though the points earning is not great (just 1 point per $2 spent) and the redemption rate is low (0.8¢) without another card to unlock the points, it can't be understated that a debit card which earns points is fantastic.
First, some businesses may not accept credit cards (or even might accept cards but not American Express credit cards). Second, there are businesses which tack on extra fees when using a credit card. Think of paying your taxes online or even gas stations that charge a higher rate for gas when paying by credit. In this way, you could earn rewards without paying these extra fees.
Make sure to do the important “do the rewards I earn justify the fees?” math before deciding which card to use on any purchase with fees.
And It's a Debit Card with Perks
Another unique feature of this new checking account option is that the American Express debit card will offer purchase protection for accidental damage and theft on items purchased with the card. Amazingly, the benefit is automatic and does not require enrollment in advance. Not needing to enroll is uncommon for Amex products.
The purchase protection is valid for 90 days from the purchase date of covered items. This benefit is limited to a maximum of $1,000 per occurrence / up to $50,000 per account per calendar year.
Downsides of the New American Express Checking Account
Lack of Incentives
While the above are all positives, there is a glaring negative. If you have high account balances or use your debit card often, many banks will reward you for this.
For example, Bank of America's Preferred Rewards program offers higher earning rates on rewards if you have a lot of money in investments, checking & savings with them. With this new American Express checking account, everyone earns the same rewards at the same rate — no matter how much or how often you use the account and its debit card.
Additionally, there are no extra incentives for those who hold premium rewards cards with American Express. The silver lining to this is that holding any type of Membership Rewards-earning credit card card will unlock your points for transferring to hotel/airline programs, but there are no other perks aside from this.
International ATM Fees
For those of us who enjoy international travel, this one will hurt. If you pay withdrawal fees at an international ATM, these will not be refunded. Use of Moneypass ATMs in the U.S. is free, but any use of other ATMs — in the U.S. or worldwide — will not be eligible for a refund on the withdrawal fee.
Who is Eligible?
If you're interested in this new checking account option, you can apply online with American Express at this link. You are eligible to apply if you have a consumer credit card (meaning personal, not small business or corporate) issued by Amex in the U.S.
Note that this card can be a co-branded card that earns Hilton points or Delta SkyMiles, for example. It doesn't have to be a Membership Rewards-earning card.
Our Take
This is a very interesting product with some real strengths. The new American Express checking account doesn't have fees or minimums, and you can earn Membership Rewards points and interest in ways you might not have had previously.
However, there are some negatives, such as the lack of incentives and the overseas ATM fees.
We don't believe the debit card here should replace your overall points & miles strategy, as you're likely to earn better points and are likely to have more / better perks available on consumer credit cards. However, the best use of the debit card on this checking account is likely in places where you would pay fees for using a credit card — or simply can't use a credit card. The ability to earn Amex MR points here might be the selling point for many people looking to earn more points in ways they couldn't previously.
What do you think? If you're eligible for an account, do you plan to apply?
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