Burning MoneyBack when checks were the most common method of payment, many personal finance gurus suggested rounding up the payments you made to the nearest dollar when recording your checks in your register. Then, when you balanced your check book at the end of the month, you’d have a pleasant surprise of quite a bit of money you could transfer into your savings. These days, banks like Bank of America offer special programs that offer a similar system for debit cards: if you’re enrolled in Bank of America’s Keep the Change program, the difference between any payment you make with your card and the next dollar is automatically transferred to your savings account. The process is entirely automated and it’s marketed as an easy way to build up your savings. But is Keep the Change really worth it?

Bank of America isn’t the only bank offering this sort of automatic savings plan. Wachovia offers a similar program, called Way2Save, as do other banks and some credit card companies. But most banks also offer automated savings plans that are far more beneficial.

One of the big benefits of the Keep the Change program is an offer by Bank of America to match up to $250 worth of transfers each year. But, because the way the system is set up, once you’ve passed out of the introductory three-month period, that matching offer is only good on 5% of deposits. That means that you’d have to make about 10,000 transactions in order to get the full benefit of the program. (That number is based on the assumption that transactions average out to fifty cents for each transfer.) That’s a pretty significant sum of money you’d have to spend to get $250 — for a likely total savings of perhaps $5,000, assuming you don’t pull that money back out of savings for something else.

The value of the program is even less when you start looking at interest rates. Assuming you’re using the standard Bank of America savings account, the interest rate is just 0.20%. When you consider the interest rates of online banks like ING Direct (2.75%), you’ll quickly notice that leaving money in a Bank of America savings account is a fast way to miss out on interest. The disparity only gets larger if you look savings instruments like CDs or other investments.

Automating savings makes sense, but the Keep the Change program just doesn’t work that well. You have plenty of options to create your own automated savings plan: you may need to put in a little time initially, but the returns will be greater in the long-term. For instance, you could set up an automated transfer from your checking account to a high-yield savings account once a month — you may not get the $250 match that Bank of America offers, but you can more than make up for it by putting your money in an account with a better return.

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