kmull

Thanks for stopping by. If you're new here, you may want to subscribe to my RSS feed and check out some popular articles.

Bank of America and American Express have recently touted the benefits of two of their programs. BoA’s Keep the Change and AMEX’s One Card. Let’s take a better look at these programs. Are they worth your time and money?

Overview
Keep the Change: Goes with Bank of America’s check card. They put the change from every purchase into a savings account. The first three months they match your change 100%, the next 9 months they match 5%. Example: You go to the grocery store and spend $45.74. BoA deposits 26 cents into the account ($46.00-45.74), plus whatever match you are eligible for. To sign up, you must have a checking and savings account with BoA. The savings account has a minimum deposit of $100. The catch here is the savings account only pays 0.20% APY as of 5/1/07. Each of the accounts could have additional fees. You are limited in the amount of match you can receive at $250 per year.

One card: AMEX deposits 1% of eligible purchases into a savings account that pays 5.00% APY. After your first purchase, AMEX deposits $50 in the account to get you started. The first year is fee-free. After that, you pay a $35 annual fee. Then you have your typical credit card risks. Getting hit with a late fee or even paying interest will negate the effects of this card.

Let’s take a hypothetical situation where a person spends $6,000 spaced out evenly over six months. Your average change you receive is 50 cents from every purchase, and you make 50 purchases each month.

With your Bank of America check card, this is what your savings would look like:

…and with the One Card:

As you can see, the Bank of America card is the winner in terms of money it allows you to save. However, this is based off of multiple transactions with an average “keep the change” of 50 cents. The interest on the savings account is terrible as well. The One Card is better in terms of savings rate, but then you’ll get hit with a $35 annual fee the second year.

The accounts look very similar if you lower the number of transactions to 25, and the average change back to only 25 cents:

The one card looks better in this light, as it isn’t based on the number of transactions, but how much money you spend. You also are not relying on having a high amount of ‘change’ from each transaction.

Keep the Change
Pros: Opportunity to get to keep a lot of change if you make a lot of purchases with totals in the $x.01 to $x.25 range. Pick up a cup of coffee every morning that costs you $4.01? You’ll get 99 cents back, plus that 100% match the first few months. Also good for those who make a ton of transactions each month.
Cons: Incredibly low APY of 0.2% on the savings account. If your transactions usually end in the $x.75 to $x.99 range, you won’t make a lot back with that extra change. Requires a lot of transactions each month to get true benefit, which encourages spending. Is a debit/check card — if stolen or lost, you might not get your money back.

One Card
Pros: Same percent back, no matter what you spend, or how many transactions you have each month. Strong savings APY of 5.0% trumps the Bank of America savings account. Credit card benefits - if lost or stolen, the amount you owe is usually limited to $50.
Cons: If you don’t spend a lot (good for you), you don’t earn as much back. Annual fee of $35 kicks in the 2nd year which will negate some of the benefit. Is a credit card - interest and other charges could dig into your benefit.

Conclusion: Neither of these cards are worth having, in my opinion. The BoA card requires a lot of transactions and the ability to somehow force your purchases to get you a lot of change back. The AMEX card is slightly better thanks to the savings account APY, but then the annual fee kicks in.

You can find a better deal with other credit cards. Get a cash back card like the AMEX Blue Cash (I have one) and earn better cash back (1.5-5%, depending on the tier). Take that money you get back and save it yourself in an online savings account like ING.

I have uploaded the Excel file if anyone is interested in playing with the numbers. Let me know if this is useful!