Details of Wells Fargo's New Way2Save Program - Big Changes from Wachovia's Way2Save

Wells Fargo announced on its blog the new Way2Save program which is now available in Minnesota and Washington State. Unfortunately, the rates and bonuses have fallen. If you already have a Wachovia Way2Save program, here's how Wells Fargo's blog describes how your account will change:

NOTHING will change with your current Way2Save account until the Wachovia branches in your state convert to the Wells Fargo brand. Also, when your home state does convert, your Way2Save account and all automatic transfers you've setup will convert to the new Wells Fargo Way2Save. Plus, you'll automatically be enrolled and eligible to receive the first-year premium interest rate and savings bonus on one Way2Save account.

Two important points that I get from the above include:

• The rates and bonus terms will change to the new Way2Save account when your state converts
• If you have multiple Way2Save accounts, you'll only get premium interest and bonuses on one of those after your state converts

Here's a recap of the current Wachovia Way2Save program:

• 5.00% APY in the Way2Save account during the first year
• At the end of the first year, there's a 5% bonus on the balance (up to $300)
• Only two ways to get money into the current Way2Save account: $100 maximum monthly automatic transfers from checking to Way2Save or $1 transfers from checking to Way2Save after certain electronic transactions
• Electronic transfers that qualify for initiating the $1 transfer include debit card purchases, ACH debits and paperless online bill payments

The perks go down after the first year. Refer to the Wachovia Way2Save webpage for the full details. I also have more details in my old Way2Save review.

The important features of the new Wells Fargo Way2Save include:

• 3.00% APY the first 13 months on balances of up to $500
• At the end of the first 13 months, there's a 3% bonus on the balance (up to $150). The amount of the bonus will be 3% of the lesser of: A) the total dollar amount of Automatic Transfers and Save As You Go transfers, up to a maximum of $385 transferred per month, made during the first 13 months from the account opening or B) the Way2Save account balance at the time the bonus is credited
• No limit on the automatic monthly transfers. However, there's little incentive to go above $385 per month
• Save As You Go transfers are $1 transfers from the checking to Way2Save after a debit card purchase, online bill pay or automatic payment (ACH debit).
• You are allowed one Way2Save account that is eligible to receive a premium rate and bonus. Wells Fargo will use your taxpayer ID number to determine your eligibility for the one-time premium interest rate and one-time bonus. Additional Way2Save accounts will receive our standard interest rate and no bonus.

After the first year, there's no longer any premium interest or bonus. The non-premium interest rate is negligible (0.05% or less). Consequently, after the first year, you'll be better off moving the money into a high-yield savings account.

For more details of the new Wells Fargo Way2Save program, refer to this Wells Fargo savings account page, select Minnesota or Washington State, and select the Wells Fargo Way2Save link.

Comparing the Old and New Way2Save Accounts:

For those who have 5 Way2Save accounts per family member, I'm afraid the easy money will soon be over since the new Way2Save will limit the bonus to one per family member. Also, for those who have been able to initiate enough ACH debits to qualify for the $300 maximum year-end bonus, the new program will be a disappointment.

For those who just have one Way2Save account per family member and have just done the $100 per month transfer, the new program will be a little better if you can increase your automatic transfers to $385. Here's how I determined this:

First, if you compare the current Way2Save program with a high-yield savings account that pays 2% APY, you can easily earn about $80 more in the first year in the Wachovia Way2Save program. This comes from a 5% bonus on $1,200 (12 $100 monthly transfers) and total interest of 12 monthly $100 deposits which equals about $33. The interest if the account paid only 2% would be about $13. Thus, the total advantage of the old Way2Save account over a high yield savings account is about $80.

Now if you compare the new Wells Fargo Way2Save program with a high-yield savings account that pays 2% APY, you can easily earn about $96 more in the first 13 months in the Wells Fargo Way2Save program. This comes from a 3% bonus on $5,000 (13 $385 monthly transfers) and about $5 additional interest from the first $500 of the balance (difference between 3% vs 2% of $500). As you can see, you don't gain much by the premium interest since it's capped to the first $500. The vast majority of the benefit comes from the 3% bonus at the end of the first 13 months.

Unlike the old Wachovia Way2Save program, you're free to make as many deposits as you want into the new Wells Fargo Way2Save program. However, after you max out the premium interest and the bonus, there's little reason to transfer money into the Way2Save account. You'll earn a lot more if you transfer the money into a high-yield savings account at another institution like Ally Bank or Alliant Credit Union.

Another thing to watch out for with the new Wells Fargo Way2Save is a $5/month fee. This can be waived with a $300 balance or automatic recurring transfers.

I haven't read through all the small print of the new Wells Fargo Way2Save program, so I might have missed some important details. Please leave a comment if you find something that I've missed.

Thanks to the reader who emailed me the link to that Wells Fargo blog post.

Wachovia's Free Checking Refer-a-Friend Bonus:

Wachovia still has its checking account refer-a-friend bonus in which both you and the friend can earn a $25 gift card. If you need a referral, email me at bankdeals at gmail dot com. [Update 10/12/09: The online referral system is no longer available.] This bonus is scheduled to last until the end of 2009.