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As X.com ends checking accounts, new
online choices check in
By • Bankrate.com
 X.com
is closing customers' checking accounts on Dec. 1, a mere year after
the company began offering online banking.
X.com notified customers by e-mail on Nov. 9,
giving account holders three weeks' notice. By Dec. 1, customers
have to close their checking and mutual-fund accounts and make sure
that all checks and debits have cleared.
People had about 200,000 accounts with X.com
Finance, says spokesman Vince Sollitto, and most of those accounts
were relatively inactive. But a few customers will be inconvenienced.
Seth Kaplan's phone bill is debited automatically
from his X.com checking account. The New Yorker worries that the
phone company will try to debit money from the closed account in
December, and that could create problems.
"Automatic debits? This could take two
months to change," says Kaplan, who harbors no illusions about
the speed of phone-company bureaucracy. He has notified the phone
company, and he will pay his bill with a check from another account,
but he still worries that Bell Atlantic will try to debit the closed
account. That could land him on the ChexSystems list of people who
have misused their checking accounts, which could make it difficult
to open another checking account for five years.
Sollitto says customers should have known that
X.com was planning to close customers' checking accounts because
the financial services portal kept dropping hints: It stopped offering
overdraft protection, then it ceased opening new accounts, then
it began to charge a $12 monthly fee to maintain accounts with a
balance of less than $100, and it stopped reimbursing ATM fees.
"In our view, customers have been fairly
cognizant of this transaction," Sollitto says. "No one
should have been surprised."
Kaplan thought that 21 days' notice wasn't long
enough, and he tried to complain to the Comptroller of the Currency,
one of the federal agencies that regulates banks. But the regulator
wouldn't take his complaint because X.com is not a bank. X.com provided
customers to First Western National Bank of La Jara, Colo., which
operated the checking accounts and provided customers with checks
and debit cards bearing the X.com logo.
Kaplan says he understands the relationship
between X.com and First Western, but he thinks Web companies that
act like banks should be regulated like banks. Otherwise, he says,
"we're just left flapping in the breeze."
Even if Kaplan got a regulator to listen to
him, he probably would be told that X.com and First Western did
everything by the book.
Don't hum any dirges for X.com, which operates
the PayPal
person-to-person payment service. "PayPal itself is going gangbusters,"
Sollitto says. "We continue to add 20,000 accounts every day."
As of mid-November, 4.1 million people had signed up for Paypal,
and it is the undisputed leader right now in person-to-person electronic
payments.
Sollitto says that most people who had X.com
checking accounts have switched over to PayPal. Recently PayPal
began offering customers the option of sweeping their PayPal balances
into a mutual fund every day, letting them earn interest on their
money -- sort of like an interest-bearing checking account, but
without deposit insurance.
If you're in the mood for a laugh at my expense,
check out the story I wrote
in January about X.com, in which I predicted that the company's
"daring, innovation and consumer-friendly policies" might
"change the way we bank by summer." Here's another prediction:
The Tennessee Titans will beat the St. Louis Rams in a Super Bowl
rematch. I guess that means you should bet against the Titans now.
PayPal's new competitor: Citicorp
Speaking of PayPal, it has a credible
competitor now that Citicorp has stepped into the fray with its
c2it
person-to-person payment service. Eventually, c2it will become a
pay-anyone service that will enable people to e-mail money to friends,
pay bills and buy products online, says Antony Jenkins, c2it's chief
operating officer. Right now, though, you can use c2it only to e-mail
money to individuals.
After a three-month trial period, c2it charges
$2 to send money. PayPal charges nothing to send money. Although
PayPal offers a better deal, c2it operates America Online's heavily
promoted "Quick Cash" person-to-person payment service.
AOL will attract a lot of customers, but I'll be interested to see
how many people continue using c2it and Quick Cash after the 90-day
trial is over and they have to start paying $2 for each transaction.
Jenkins isn't worried. He notes that people
pay for the convenience of using ATMs. They don't pay gladly, but
they pay.
Jumpin' Juniper!
A new online-only bank wants to reach
you the old-fashioned way -- by U.S. mail.
Juniper
Financial opened last month with a direct-marketing campaign
that will reach millions of consumers over the next few months.
The bank offers savings and high-interest checking accounts, online
bill-paying, loans and certificates of deposit, but those won't
be the main draw. Instead, the bank will push its credit card to
attract customers.
A mass mailing invites customers to apply for
the translucent Juniper MasterCard, which offers a 2.9 percent introductory
rate that rises to 13.99 percent in four months, no over-the-limit
fees, and a late-payment fee of $19, about $10 under the industry
standard.
Juniper is the first online-only bank to try
signing up customers primarily through credit card solicitations.
The bank's top managers were the brains behind First USA, the credit
card issuer that began in 1982 and grew into a juggernaut behind
the success of its mass mailings.
The idea is that people will apply for the credit
card on Juniper's Web site and be enticed to sign up for checking
accounts and other services, such as online bill payments, account
transfers and automatic reminders that can be sent via e-mail, cell
phone, pager or Palm device.
"A lot of online-only banks don't focus
much on the credit card," says James Stewart, president of
Juniper. "The other online-only banks focus on very high deposit
rates. There's not much focus on functionality, making banking easier
for customers.
"For example," Stewart continues,
"you can tell us, 'Let me know when my checking account balance
goes below a certain amount. Let me know if I'm about to go past
due on my credit card. Let me know when my deposit has cleared.
Let me know when my Bell Atlantic bill has arrived."
Other bankers might argue that their online
banks are functional, too, but Juniper is ahead of the competition
in one area: Juniper accountholders can make deposits at most Mail
Boxes Etc. stores, where clerks accept payments and send the money
to Juniper by overnight courier.
Customers also will be able to make deposits
at about 15,000 automated tellers nationwide. Most online banks
don't accept ATM deposits, but Juniper customers will be able to
make deposits at some ATMs with the MAC logo. Juniper has deposit
agreements with four smaller ATM networks and is trying to sign
up more, Stewart says.
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