Bank of America's Twist on Debit Card Rewards
Oct 6, 2005 - 1:37 PM by Ken Tumin
A typical credit card rewards program gives you back a certain percentage of every purchase. Some debit cards do the same. For example, USAA Bank debit Mastercard gives you back 0.5% on purchases. Bank of America just announced a new type of debit rewards program called Keep The Change.
Here's how it works: every time you buy something with a Bank of America Visa debit card, they'll round up your purchase to the nearest dollar amount and transfer the difference from your checking to your savings account. So the change goes into your savings account.
Here's the reward. For the first 3 months, they'll match the change 100%. After 3 months, they'll match 5%.
As an example, if you buy coffee for $2.15 with the debit card, $3 will get deducted from your checking account. The $0.85 change gets transfered to your savings account. In the first 3 months, Bank of America will add $0.85. After 3 months, it'll add 5 percent of $0.85 (4 cents).
Some of the small print includes a $250 max on the matching per year, the matching funds are added to your savings account only once a year, their savings account currently only earns 0.5% interest and can have monthly fees.
This MSNBC article discusses some of the ways Bank of America will profit from this. One way is from more use of the debit card. Banks charge merchants 1% to 2% of each debit card purchase. Another way is the additional deposits in a very low interest account.
This might be a decent deal for the first 3 months if you can use the debit card for lots of purchases. After that, it's probably better using a high cash back credit card and keeping your savings at Emigrant-Direct where the money will earn 3.5% more interest. If you want help thinking of ways to get that $250 match, check out this Fatwallet thread.
Here's how it works: every time you buy something with a Bank of America Visa debit card, they'll round up your purchase to the nearest dollar amount and transfer the difference from your checking to your savings account. So the change goes into your savings account.
Here's the reward. For the first 3 months, they'll match the change 100%. After 3 months, they'll match 5%.
As an example, if you buy coffee for $2.15 with the debit card, $3 will get deducted from your checking account. The $0.85 change gets transfered to your savings account. In the first 3 months, Bank of America will add $0.85. After 3 months, it'll add 5 percent of $0.85 (4 cents).
Some of the small print includes a $250 max on the matching per year, the matching funds are added to your savings account only once a year, their savings account currently only earns 0.5% interest and can have monthly fees.
This MSNBC article discusses some of the ways Bank of America will profit from this. One way is from more use of the debit card. Banks charge merchants 1% to 2% of each debit card purchase. Another way is the additional deposits in a very low interest account.
This might be a decent deal for the first 3 months if you can use the debit card for lots of purchases. After that, it's probably better using a high cash back credit card and keeping your savings at Emigrant-Direct where the money will earn 3.5% more interest. If you want help thinking of ways to get that $250 match, check out this Fatwallet thread.
Featured Accounts
Useful Resources
Nationwide Savings Accounts
Banking Guy (anonymous) - #1, Thursday, October 6, 2005 - 1:41 PM
There's also a $25 bonus for signing up online for a Bank of America Regular Savings account. Here's the link to the deal.
Anonymous - #2, Thursday, February 1, 2007 - 6:57 PM
This program, after the first 3 months, is essentially worthless, unless you make lots of purchases under $2.50. This is because it gets dominated by a 1% cash back card.
Explaination:
---------------------
1. Assume that, on average, the amount of change is randomly distributed between 0 and 1, making the average return 50 cents on any purchase.
2. You then recieve 5% on this, for 2.5 cents.
3. At a 1% cash back return card, you would have to spend $2.50 to get this same amount of return.
4. Who spends less than $2.50 using a debit card? How often will this happen? No one and not often.
5. Even during the first 3 months, the returns are not amazing- for any purchase greater than 50 dollars you should still be using anything that gets you 1% back.
Banking Guy (anonymous) - #3, Friday, February 2, 2007 - 8:39 AM
Thanks for the detailed analysis. You're correct that after the first 3 months, you'll be better off with a 1% cash back credit card unless you specifically make many $1.01 purchases.
Add Your Comment
Post a Comment