Wachovia’s “Way2Save” and Bank of America’s “Keep the Change” Saving Programs
The personal savings rate in the United States is around 1%, an embarrassing number for one of the richest countries in the world. Why aren’t we following the saving generations that came before us? We can think of a few reasons: ARM mortgages, easy access to credit, ipods, 5+ year car loans, and rising college tuitions. As this troubling trend of insufficient savings continues, banks have created new ways to encourage saving, but should you enroll?
Wachovia’s Way2Save
Wachovia will automatically transfers $1 from your checking account into a special savings account each time a purchase is made with a Wachovia check card, an online payment is made or an automatic draft takes place. Wachovia will contribute a 5 percent annual bonus in the first year and a 2 percent annual bonus each of the next two years, up to $300 annually.
Bank of America’s Keep the Change
Each time you buy something with your Bank of America Check Card, they will round up your purchase to the nearest dollar amount and transfer the difference from your checking account to your savings account. Bank of American will match your savings for the first 3 months, to the penny. After that, they will continue matching 5% a year until a maximum of $250 per year is reached.
Deal or No Deal
Whenever a bank is offering free money, we tend to get a little leery, as is the case with these programs. While they are both are attractive on their face, we have have determined the possible problems outweigh the rewards for most people.
Problem1) We mentioned in an earlier post the significance of creating and sticking to a monthly budget, both programs make this much more difficult to do. How are you supposed to stay within your created budget when money is constantly and sporadically leaving your checking account? Wachovia’s program takes a $1 out for every purchase, I would be willing to bet the number of purchases most people make in a month is a higher number than the amount most people currently budget into their savings. Meaning, you can’t save what you can’t afford.
Problem 2) Overdraft fees are a pain and as I understand these programs, banks are going to cash in on us. Say you saved $100 this month using Bank of America’s Keep the Change program. Congratulations, but hopefully there’s something left in your checking account when you go to make your next purchase. These programs make it nearly impossible to keep track of your accounts, unless you are checking them online daily. The last thing you want to do is pony up $30 in an overdraft fees because the money originally in your checking account is now nesting in your savings. If you choose to participate in these programs make sure if your account goes overdraft it then pulls from you savings at no charge (but if this happens, what’s the point?).
Problem 3) These programs can give people a false sense of security. Just because you are enrolled in a savings program does not mean your financial planning is over. We fear people are going to have an “I’m saving more by spending more” attitude.
Conclusion
To really encourage savings, banks should make an effort to encourage people to shop wisely, stay within their budgets, and treat savings like a utility bill. Unless you are one that is very disciplined and can use these programs only to your advantage and not the banks, should you choose to enroll. $
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Comments
The problem with this program is bank of america doesn’t really care if you want it or not. They put it on several accounts regardless of anyone signing up for this program. Then when you have an overdraft the keep the change program takes $0.00 out of your account and then they charge you and over draft fee to move no money. Then they issue a cancel keep the change and charge you a second overdraft fee to not move the no money back to where it didn’t come from. Confused? Good because you’re not done yet.
Lets say you have overdraft protection and actually had some money in the savings. Now they’ll transfer that money into the checking account which will pay back some of or all of the money you had overdrafts on. But since you’ve got keep the change, they’ll pull some change out putting you just a few cents over and now we repeat the overdrafts on the keep the change and it’s cancellation.
Great, because within moments this undesired, nearly impossible to cancel feature will sap out hundreds of dollars from your account. This is really nice on student accounts, because between working 50 hour weeks and going to school full time and struggling to pay back student loans with my now destroyed credit wasn’t stressful enough. I really needed a bank to come steal as much money as they can get away with.
So to sum up in what is appropriate comment size, These programs cause far more trouble and expense than will ever be useful to the majority of the population.
@ Bobby - Your experience is exactly what I was afraid of when I wrote this article awhile back. The fact they would charge you $$$ to transfer $0.00 from one account to another in the form of an “overdraft” fee is ridiculous. Your right, nobody has the time and frankly money to mess with a program like this that can cause more harm than benefit. Again, you can’t save money you do not have and these types of programs play to this type of thinking.
Thanks for the great comment.
Bravo! These two programs make it appear easy to save just by “purchasing” when in reality you’ll just save pennies, or maybe a few dollars a month - if that.