Bank of America wants to be your piggy bank, announcing Wednesday that debit card users will soon be able to toss the small change from their purchases straight into their savings account.
Launching Oct. 17 in California, the Keep the Change program will allow customers to put away a few cents at a time. After each debit transaction, the purchase price will be rounded up to the nearest whole dollar, and the difference automatically transferred to a savings account.
Sell It Yourself
Let's say you purchase a gourmet cup of coffee for $2.89. The purchase would automatically be rounded up to $3, and 11 cents would be routed to your savings account.
Americans on the whole find it easier to spend than to squirrel away their money. Personal savings - as a percentage of disposable personal income - sat in negative territory for the third straight month in August after hitting a low of minus 1.1 percent in July, according to the U.S. Commerce Department.
That means Americans are spending all their after-tax income and dipping into savings to finance their shortfall.
"Americans are notorious nonsavers," said Sharon Morrison, a certified financial planner with the Savant Group in Citrus Heights. "We're consumers, which is good for the economy, but not good for the future. It's a precarious situation."
The BofA program comes with an incentive: The bank will match 100 percent of transfers for the first three months, and afterward, the bank will contribute up to 5 percent annually. The maximum match is $250 a year.
It's like tossing your pocket change into a jar every night, with Mom and Dad rewarding you.
"The whole idea came from speaking with customers," said Tara Burke, spokeswoman for Bank of America, on Wednesday. "People said they had a need for an effective way to save money."
Of course, BofA will get to loan out the money you're saving and make money doing it. But customers will benefit as well, since they will get the match and any interest the account draws.
The BofA idea, which comes as consumers are more often than not using plastic for purchases, received mixed reviews from consumers surveyed informally by The Bee. Carole Detherage, of Sacramento, said she liked the incentive program because Americans don't save enough.
"Everybody's trying very hard, but they can't because they're trying to live middle-class lives without having the money to do so, and they are borrowing a lot," she said.
Sacramento resident Tony Leonard, who said he feared he would lose track of his expenses, expressed doubt that the plan would motivate consumers.
"You can't force people to save," he said. "I already have an automatic deposit into my savings account, and this just sounds too confusing."
Linda Sherry, a spokeswoman for Consumer Action, a consumer advocacy group in San Francisco, feared consumers might be tempted to use the debit cards too often and end up overdrawn on their accounts.
Consumers also could rack up fees with merchants such as McDonald's or Arco, which charge them for using their debit cards.
If consumers do not have funds available, Bank of America spokeswoman Diane Wagoner said, the change would not be transferred. If the consumer has overdraft protection for the debit purchase, however, the change transfer would go through and customers would see the fees on their next bank statement.
While the saving will happen automatically, financial experts and consumer experts said, it still will require some discipline on the consumer's part. Besides ensuring that their accounts balance, consumers must also have the willpower to let the money sit and realize the benefit of compounding.
FW link to discussion
http://www.sacbee.com/content/business/story/13674246p-14516875c.html
Launching Oct. 17 in California, the Keep the Change program will allow customers to put away a few cents at a time. After each debit transaction, the purchase price will be rounded up to the nearest whole dollar, and the difference automatically transferred to a savings account.
Sell It Yourself
Let's say you purchase a gourmet cup of coffee for $2.89. The purchase would automatically be rounded up to $3, and 11 cents would be routed to your savings account.
Americans on the whole find it easier to spend than to squirrel away their money. Personal savings - as a percentage of disposable personal income - sat in negative territory for the third straight month in August after hitting a low of minus 1.1 percent in July, according to the U.S. Commerce Department.
That means Americans are spending all their after-tax income and dipping into savings to finance their shortfall.
"Americans are notorious nonsavers," said Sharon Morrison, a certified financial planner with the Savant Group in Citrus Heights. "We're consumers, which is good for the economy, but not good for the future. It's a precarious situation."
The BofA program comes with an incentive: The bank will match 100 percent of transfers for the first three months, and afterward, the bank will contribute up to 5 percent annually. The maximum match is $250 a year.
It's like tossing your pocket change into a jar every night, with Mom and Dad rewarding you.
"The whole idea came from speaking with customers," said Tara Burke, spokeswoman for Bank of America, on Wednesday. "People said they had a need for an effective way to save money."
Of course, BofA will get to loan out the money you're saving and make money doing it. But customers will benefit as well, since they will get the match and any interest the account draws.
The BofA idea, which comes as consumers are more often than not using plastic for purchases, received mixed reviews from consumers surveyed informally by The Bee. Carole Detherage, of Sacramento, said she liked the incentive program because Americans don't save enough.
"Everybody's trying very hard, but they can't because they're trying to live middle-class lives without having the money to do so, and they are borrowing a lot," she said.
Sacramento resident Tony Leonard, who said he feared he would lose track of his expenses, expressed doubt that the plan would motivate consumers.
"You can't force people to save," he said. "I already have an automatic deposit into my savings account, and this just sounds too confusing."
Linda Sherry, a spokeswoman for Consumer Action, a consumer advocacy group in San Francisco, feared consumers might be tempted to use the debit cards too often and end up overdrawn on their accounts.
Consumers also could rack up fees with merchants such as McDonald's or Arco, which charge them for using their debit cards.
If consumers do not have funds available, Bank of America spokeswoman Diane Wagoner said, the change would not be transferred. If the consumer has overdraft protection for the debit purchase, however, the change transfer would go through and customers would see the fees on their next bank statement.
While the saving will happen automatically, financial experts and consumer experts said, it still will require some discipline on the consumer's part. Besides ensuring that their accounts balance, consumers must also have the willpower to let the money sit and realize the benefit of compounding.
FW link to discussion
http://www.sacbee.com/content/business/story/13674246p-14516875c.html
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