The main trick with the Keep the Change program is rounding. For each purchase you make, Bank of America rounds up the amount charged to your account. On their website, they show an example with a cup of coffee:
Coffee Price: $3.43
Round Up: $ .57 (Deposited to savings)
Total Charge: $4.00 (Charged from checking)
The extra amount is deposited to your savings account at Bank of America.
In addition to the extra money you charge, Bank of America will add matching funds to your savings accounts. For the first three months theyll match you dollar for dollar, and after that theyll match 5% of your rounded up contributions.
Whats the catch? Bank of America will only give you a maximum $250 per year under this program. Whats more, they only make deposits to your account once per year, so those matching dollars arent compounding. Finally, the Bank of America savings account that they deposit your funds to has a low APY of 0.5%.
A Good Deal?
Is this a good deal? If you need a little extra help, this program might do the trick. Unfortunately, its not going to make a significant impact on your financial situation. Youll have to save $5,000 per year (by rounding up) to get the $250 match after your first 3 months. If youre able to save $5,000 per year, you might as well just deposit those dollars in a higher yielding account throughout the year. You might use an internet bank account, or you could save it for your future in an IRA.
While Bank of America may have good intentions, the program is probably not going to help you much. The program may be more of a strategy to generate interchange fees for Bank of America. Each time you use your Visa debit card as a credit transaction, Bank of America stands to earn about 2% of the total transaction amount.
You should also watch out for fees that eat up your rewards (or worse, cost more than you earn). Find out what it takes to avoid fees. A monthly $25 transfer into the account or a balance of more than $300 may be required.