New debit card shows pitfalls of ‘keep the change’

By Mary Hunt, Special to the BDN
Posted Oct. 26, 2009, at 12:59 a.m.

When I first heard the radio commercials for Bank of America’s “Keep the Change” debit card, I was fairly impressed. I mean, with the slogan “save automatically with everyday purchases” and the promises that “you don’t have to think about saving,” that you can “double your savings” and that the bank will “match your Keep the Change savings at 100 percent,” what possibly could be the downside?

Trust me; there is a very steep downside. But first, here’s how it works:

You have to get a Bank of America Visa check card, which is a debit card. Each time you use it, the card issuer rounds up the difference to the next dollar amount and deposits it into your savings account. For example, your fast-food lunch comes to $6.19. You swipe your card. The charge against your account is $7, and 81 cents goes into your savings account. Bank of America gives you another 81 cents to reward your good behavior.

Here are the pitfalls:

The biggest drawback of this “savings program” is that it could entice you to swipe the card more in order to boost your savings. In fact, to end up with the maximum total match of $250 from Bank of America in a year, you would have to swipe your card about 14 times a day, every day!

There are also a few things in the fine print you should know about. First, that 100 percent match is good for the first three months only. After that, the match drops from 100 percent to 5 percent. In the above scenario after three months, you would save 81 cents, and the bank would kick in 4 cents. Once you reach $250 in a year, that matching feature stops. Matching funds are paid annually, after the anniversary of enrollment on accounts that remain open and enrolled.

You’d have to become nearly obsessed with debit spending to get the maximum match. Another downside is that if you were to run your account pretty close to the edge, this rounding up thing could wreak havoc with your balance. Trust me; one slip-up that ends in a “courtesy overdraft,” or bounce, fee could cost you $30 or more in fees, a lot more than simple pocket change.

All this sounds like a lot of trouble to me.

Of course, I have a better idea. Get a jar, for goodness’ sake. Put away the plastic, and start living with cash for your day-to-day spending.

At the end of the day, transfer all coinage into your jar. Do that every day. I predict that you, like me, will stash $20 minimum per month just by saving change you won’t miss anyway. By the end of the year, you really will have a respectable amount of cash, provided you deposit your stash in an interest-bearing account at the end of each month.

Want to foil Bank of America’s plan even further? Stop spending $1 bills; opt to stash them, as well.

Now you’ve really got a good thing going!

Mary Hunt is the founder of www.DebtProofLiving.com and author of 18 books. You may e-mail her at mary@everydaycheapskate.com, or write to Everyday Cheapskate, P.O. Box 2135, Paramount, CA 90723.

http://bangordailynews.com/2009/10/26/business/new-debit-card-shows-pitfalls-of-lsquokeep-the-changersquo/ printed on September 20, 2014