Regions Bank added a new savings account to its line of alternative banking products and services — called Regions Now Banking — that aims to cater to a broader range of consumers. The account is designed to complement the prepaid card that is also offered by the bank.
The Regions Now savings account — only available to customers who have a Regions Now prepaid card — carries no monthly fee or minimum balance requirement. As of Aug. 9, 2012, deposits in the Regions Now savings account earns 0.01% APY.
Accountholders receive a 1% annual savings bonus, up to $100 per year, on the average monthly balance for the year when they post a monthly deposit of at least $5. For example, with an average monthly balance of $1,000 in the past 12 months, customers will receive a $10 savings bonus.
Also, they earn $1 in each month that they have a deposit of at least $5 and have no withdrawals. Regions charges a $3 fee for each withdrawal after the third of each month.
Other perks include discounts on safe-deposit box rentals and installment loans.
Customers can receive paper statements for $2 per statement or they can access free online statements through online banking.
Although the Regions Now savings account has no monthly fee, the prepaid card has a $5 monthly fee that can be avoided with a $500 monthly direct deposit.
Expanding the prepaid market
In addition to a prepaid card and savings account, Regions Now offers check cashing, Western Union bill payment and Western Union money transfers.
Many of these services cater to the unbanked and underbanked population, which either cannot or chooses not to conduct banking in the traditional sense. Some may have tarnished records with banks, which prevent them from opening regular bank accounts.
“It looks like [Regions Bank] may have realized that prepaid cash-based accounts for low-balance, non-traditional, transaction-oriented consumers costs a lot less than demand deposit accounts, and they are willing to pass some of the savings onto customers,” Jim Wells said when Regions announced the new savings account in June. Wells is the president of Wellspring Consulting, a firm that focuses on expanding financial services to the unbanked and underbanked.
Other competitors in the prepaid-card market that also offer savings accounts include NetSpend, H&R Block and Mango Financial.
The Regions Now savings account does not offer much on its current interest rate of 0.01% APY — that’s $1 in interest earnings on a $10,000 balance. However, the 1% annual savings bonus is attractive, especially at a time when online savings accounts struggle to break 1.00% APY.
To maximize the savings potential of the Regions Now savings account, customers would have to maintain a $10,000 balance every month. If customers are able to earn the extra $1 credit per month, that’s $112 earned in one year.
Mango Financial offers a savings accounts with a 6.00% APY but only on balances up to $5,000. NetSpend offers 5.00% APY on balances up to $5,000. H&R Block’s savings account pays 1.00% APY.
Although the interest earnings on the Regions Now savings accounts is inferior compared to these other market players, Regions does offer bank-branch access, which cannot be said of most other prepaid card companies.