Friday, October 21, 2005

Keep the Change

I just read about this new promo that a national bank is doing called “Keep the Change”. Here’s the deal: they have this new debit card that automatically rounds up your purchases and puts the difference into a savings account for you. For example, I spent $4.92 at Starbucks with my debit card on Monday. So, if I was using their new debit card I would see a charge for an even $5.00 and the 8 cents would automatically go into a savings account.

The bank is promoting this as a way for people to save without really knowing it. In theory it is a good idea, so I went ahead and looked at the purchases I’ve made with my debit card to see how much I could’ve saved this week. I rounded up each of the charges and added up the difference for a total of $3.54. I only made 6 charges on my card this week, which is a little less than usual, so let’s just say that over the course of the year I’d save about $5.00 a week on average. Five dollars multiplied by 52 weeks is $260. That’s how much I would have in my savings account at the end of the year. Hmmmm…it doesn’t seem like much, but I guess it’s more than I would have otherwise.

I think it’s easier to just transfer an even amount out of my checking to my savings each month. I definitely wouldn’t rely on my debit card to save me a substantial amount of money. In fact, the argument that consumer advocates are making about this new debit card is that it could ultimately end up costing consumers more money in the long run. This is because the retailer pays the bank a fee for each transaction made with the card (called a point-of-sale fee). The more consumers use their debit cards, the more fees the retailers end up paying. In the end, retailers could decide to raise the prices of their goods to make up for this increase.

Considering that Americans tend to spend more than they save, this card might be a big hit. My opinion is that if you can’t manage to put away $250 on your own each year, then you need to talk to a financial counselor and get some help with your budget. Just my two cents.

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