Bank of America offers customers an innovative incentive program Keep The Change — the “change” of each debit transaction is moved to a savings account, and Bank of America matches a percentage of your change.
This sounds like a pretty good deal, but it leaves out part of the story — what is the interest rate in the savings account? While your change earns a great rate of return, the rest of your savings will languish.
Here is my analysis on participating in this program for one year and using the savings account as an emergency fund.
I assume that 30 debit transaction are made each month. The average amount of change is $0.50. Total amount of change generated in one month is $15.
First three months
- Change generated: $45 total
- Match from the bank (100%): $45
Last 9 months of the year
- Change generated: $135
- Match from the bank (5%): $6.75
Totals for the year:
- Change generated: $180
- Match from the bank: $51.75
Those numbers look pretty good.
To enroll in Keep the Change, though, you need to have a qualified account, such as the Regular Savings Account, which has a minimum balance of $300 ($3 monthly fee if below), and only pays 0.2% interest.
Your “change” earns a great 100% return for three months and then a respectable return of 5% for nine months. The rest of your money, however, is earning a paltry 0.20% interest (as of July 2008). With an emergency fund of $6,000, using this account means forgoing more than $100 in interest that could have been earned in an account earning 3% interest.
Bank of America can keep its own change.
If you like the concept, set up an automatic transfer of $20/month to a high-yield, no minimum savings account where you keep your emergency fund
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