A great mediocre idea from Bank of America

Ramit Sethi · October 26th, 2005

Bank of America has a great new idea out.

Keep the Change:

Every time you buy something with a Bank of America Visa® debit card, we’ll round up your purchase to the nearest dollar amount and transfer the difference from your checking to your savings account free of charge.

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In other words, if your coffee costs $3.57, you’ll pay $4.00 and they’ll put the $0.43 in your savings account for you. It’s not much, but it’s a good start and it adds up.

Why didn’t I think of this?

Link via Signals vs. Noise (see their discussion of Keep the Change)

Update: Dale points out why I am wrong in the comments.

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  1. Kiran Umapathy

    I was going to send you an email about this the other day haha, but you’re on top of things. If this automatically went into an ING savings account that’s be great since B of A is only 0.5% right now. It’s good though, you can sign up for it online or while you’re in the bank.

  2. Dale Swinford

    Ramit, I find it interesting that you think that this is “a good idea”. To me, in spite of entreaties from every quarter, the case for using a debit card has never been “made” (let’s see, a check with no float?) to me as a consumer. I hate to sound like a Luddite (and I’m anything but), but you young folks sometimes think that inconsequential “benefits” like this obviate the need to be cognizant of what is actually happening. If one pays $3.57 for coffee every day, and as a result earns 0.5 or 1% on the $0.43 change, isn’t the *real* question here “why the heck do you spend $3.50+ on *a cup of coffee*?”! I enjoy a Vente Cafe Mocha as much as the next guy, but I doubt if I splurge on that more than 3 times a year. While I do (and want to) recommend your blog to my kids (22 & 24 years old), I’m concerned that you seem to suggest that certain habits are “acceptable”. Using your example, someone who foregoes an expensive habit that doesn’t contribute to their long-term success could save them almost $1300/year–a much larger figure that their expected return on their pocket change. This is pretty simple economics…$1300 spent on an ephemeral “good” like coffee is $1300 *not* available for other uses, including (but not limited to) savings.

  3. Ramit Sethi

    Woah–good point. Why didn’t I notice they were encouraging the use of a debit card?

    I agree with you, so thanks for pointing that out.

    My one comment is that, debit-card notwithstanding, the idea that they would move the remainder of the dollar spent to your savings account is DIFFERENT than saying “don’t spend on coffee.” Those are 2 separate ideas: You’re saying “don’t spend on irresponsible stuff,” which I agree with. BofA is saying “we’ll charge you for the remainder but just move it to your savings account.” So this could apply to someone who’s buying a $6.00 mocha, or someone who’s buying groceries for their family.

    Anyway, you are right about the debit card and I take back my support of this idea. I never use my debit card unless absolutely necessary. I use my credit card and pay it off every month so it’s a free micro-loan, it builds credit, and credit cards offer consumer protections that debit cards don’t.

    Thanks for pointing out my mistake, Dale.

  4. I think the comments are forgetting that BofA is doubling your change the first 3 months and then giving a 5% match the rest of your life. Normal credit card match is 1-3% so that return is much better. I know there is more to this argument, such as you have more time to pay credit cards but at least they are trying to be unique.

  5. Zeljko Dakic

    Using debit card is wrong why? I don’t quite get it as you all talk like it something really wrong.

    I find debit cards much better as with credit cards I would look at credit limit and with debit cards you are looking at actual money you have on hand.

  6. Julie Isserman

    This is a great idea for those who don’t actually save money (and those who don’t understand different savings accounts). However, for those who do – and those who set up automatic savings accounts as you’ve suggested in the past – The BoA Keep the Change program is really only great for the matching portion during the first two or three months (can’t remember the exact plan). After that, I would recommend the participant keep their money elsewhere.

  7. OugadasBob

    One thing that was mentioned in the comments was that debit cards were inferior to checks because of “no float.”

    However, with current technology checks no longer have “float”. At businesses using modern quickcheck equipment the money is withdrawn the same as a debit card as soon as your check is scanned.

  8. Parapraxis

    The entire Bank of America “roundup” scheme is a scam to drive your checking account balance below the required minimum so they can charge you a fee.

    After Bank of America aquired Fleet, where I’d had a credit card for years, service became miserable, account errors began appearing, resoluton became time consuming and difficult.

    I cancelled the card.

    NOTE: Unless you are completely dis-satisfied with a card issuer, NEVER cancel cards when you reduce balances to zero, as you erase your good payment history with that creditor.

  9. Parapraxis said “Unless you are completely dis-satisfied with a card issuer, NEVER cancel cards when you reduce balances to zero, as you erase your good payment history with that creditor.”

    What? What is this? If you don’t want to do business with a card issuer anymore, what do you do? Wouldn’t this card still show up on your credit report, account closed or not?

  10. I am amazed that you are saying you take back your support of it just because they are endorsing the use of the card. What company does something with the hopes that it would decrease consumers use? Isn’t that the best part of free market? If companies didn’t do things that benifit their consumers to get more sales then wouldn’t we all be buying plane tickets direct from the airline and paying top dollar for every flight? As you said, you use your credit card because it builds credit and gives you protection? While I don’t know you personally I would assume that if visa instead didn’t give you credit and didn’t offer protection you wouldn’t use it.

    I have two debit cards through banks, neither offer me any benifit, one charges me $7 a year and the other usually has an ATM eat my card every few months and then charges me 20 dollars for a new one. Because of this I barely use the two. On the other hand my Paypal debit card gives me 1.5% cash back and currently gives me almost 5% intrest. Because of this I use that card. Sure it promotes my use of their card, normally I would just deposit my paycheck and then pay my tuition by check, now I know better and I take the extra effort and transfer it to my paypal account and pay with that debit card. So yes I use it more than I usually would, but what is the harm when it means I get $150 back?

    Same thing with this BOA card, my boyfriend can’t save money to save his life. He is barely 20 and its only the first of august and he has made 30,000 dollars this year with not a cent in savings and still has loans and credit card payments he can never get down. Why? because when a 20 year old gets a 2k check for one week of work they think they have enough money to burn and still have tons left over. After going over his checking account statement (all debit card charges) he could only account for about 1,500 dollars out of the almost 6,000 dollars he spent. Everything else was dinners, walmart, movies and basic junk. Rounding that up to the nearest dollar could give him enough money at the end of the month in his savings account to pay off his credit card bill.

  11. Charlie Hoyer

    I thought that this would be a great way to put a little money aside without even thinking about it. After a month, I had $10 and some change in savings just from using my debit card. Not much, but a good start. However, today I went to check my accounts and I have $7 in savings. Apparently there is a $3 a month maintenance fee. The only reason I opened the account was to save while using my debit card. At the rate I am going, that will cost me almost 30%. Doesn’t sound like a sound investment to me.

  12. cooliojones

    Ok, I just did the computations, and PayPal’s debit card beats this in terms of what you are getting from the bank.

    The simplest way to see this is on a charge that is even, say $15. With BoA’s KTC, you get NOTHING. With the PayPal Debit Card, you get 15¢. Not much, but better than nothing.

    Now if the charge was *.01 (the star representing any positive number), the maximum you would receive from the bank exclusively is 5¢ ($0.99 rounded up * 5% = 5¢). PayPal would only net you 1¢ if it were a $1.01 charge, 2¢ if it were a $2.02 charge, and so on. So whereas PayPal’s amount will increase with the amount that you spend, BoA’s amount will always be flat, based on the rounded up amount.

    Here’s a breakdown for BoA:

    Charge *.01 – *.10 = 5¢
    Charge *.11 – *.30 = 4¢
    Charge *.31 – *.50 = 3¢
    Charge *.51 – *.70 = 2¢
    Charge *.71 – *.89 = 1¢
    Charge *.91 – *.99 = 0¢

    So the only way you will prosper with BoA is if your charge is less than $5 AND the “cents” is 10¢ or less.

    The only thing I want to know is how some of you are getting the 1.5% cash back, because I am only getting 1%.

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  17. offizielle Quelle

    Dies geilte mich noch mehr auf, was ich mit noch kräftigerem saugen und kneten ihrer Brüste quittierte.

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