A Better Way 2 Save?

Posted by Mike Smith :: February 19, 2008 @ 4:42 am

In my post Strategies for Building Up Your Savings, I discussed the Keep the Change program for Bank of America customers. Wachovia has begun a competitive program that warrants a similar review.

The Wachovia program is called way2save and is marketed as paying you to save. Each time you make a debit card purchase, or pay a bill online from your account, $1 will be transferred from your checking to your savings account. At the end of the year, Wachovia will pay you a bonus based on how much money you have in your account. You can also set up recurring transfers from checking to savings which will also be eligible for the bonus.

While this is true, don’t expect to earn anywhere near the bonus payments of up to $300 that the bank advertises. Payments in the program have two components. First, the savings account currently has an APY of 5%. This is certainly better than even most direct banking rates, but it is noted that the rate may be reduced at any time.

The second part of the payment program gives you 5% (for the first year) of your savings account balance in the form of a bonus. This payment is limited to a maximum of $300. The second and third years also offer a bonus, up to $300, but only pays out at 2%.

The major flaw with this program is that the amount of recurring transfers is limited to $100 a month. Maxing that out would give you $1,200 in your account by that method over the course of the first year. To get the full payout bonus of $300, you’d need a balance of $6,000 at the end of the first year, since $6,000 x 5% = $300. To get your balance up to $6,000 you’d have to make 4,800 debit card purchases or online payments over the course of the year! That would take 400 transactions a month.

In years two and three, things get even worse. With a 2% bonus payout, you’d need to add $15,000 to your account to get the maximum bonus. With recurring transfers still limited to $1,200, you’d need to make 13,800 debit card purchases or online payments over the course of the year. That would take 1,150 transactions a month.

Clearly, very few customers will be able to get anywhere near the maximum bonus that is the major selling point of this program. That leads me to believe that way2save is nothing more than a gimmick, with Wachovia’s interests taking much higher priority than that of their customers. For a great way to save, with rates that actually do compare with the advertisements, start a P2P loan portfolio with Lending Club and leave the bank “savings” programs to those who are less informed.