Spare change investing apps, where purchases are rounded up and the difference invested automatically for you, have become hot in the past few years thanks to apps like Acorns. But they’ve actually been around for a long time – established banks have had similar programs for years.
Wells Fargo offers Way2Save savings accounts that use the Save as You Go program to transfer a dollar to your savings every time you make a purchase. Citibank has autosave.
One of the longest-lasting programs is Bank of America’s Keep the Change. But even coming from one of the biggest banks in the world, is a spare change investing program the way you should be building your wealth?
How does Keep the Change work?
Keep the Change is simple. Every time you use your Bank of America debit card, the purchase total is rounded up and that extra money is saved. So when you spend $4.76 on a morning coffee, 24 cents will be sent to your savings account from your checking account. It’s not that different from how Acorns or any number of other apps work.
If you haven’t noticed, there are three main components that you need to have in order to make Keep the Change work:
Bank of America checking account
Bank of America debit card
Bank of America savings account
Keep the Change transfers accumulated savings once every day, so you don’t see a dozen nickel and dime transfers every day. That’s nice, but even better is that fact that Bank of America won’t overdraw your checking account. It’s something that could be easily overlooked by a customer – the saved money is being transferred from your checking to your savings, purposely done so you don’t have to think about it, and the last thing you want is a $30 overage fee because $0.04 was transferred out of your account.
Bank of America makes saving easy, especially if you’re already a Bank of America customer. If you already have the three items mentioned above, why not join the program and save a bit? But that doesn’t mean there aren’t any drawbacks to Keep the Change (we’ll get to them below).
Spare change can add up, but it isn’t necessarily quick. Bank of America used to offer savings matching through Keep the Change, but doesn’t anymore. It may not be a feature that sways users one way or the other, but there’s no denying that free money is always nice, so it’s a shame that it was discontinued.
There’s also no Keep the Change app. Granted, you’re transferring from one Bank of America account to the other so you can see these transactions on your standard Bank of America app or online account, but having a standalone app that lets you clearly see what Keep the Change is doing for you money would be helpful. Apps like Acorns have made this standard, and there’s no doubt that some users would benefit from seeing, for example, where your biggest round-up savings are coming from.
Finally, since you’re dealing with a traditional bank, you need to be aware of some of the old banking standbys – namely, local branches and fees. Cancelling your Keep the Change membership requires you to call Bank of America, or visit a local branch. It’s obvious why this is done – putting friction around the cancellation process makes it less likely that people will do so – but in the 21st century, when you can do nearly anything online (including signing up for Keep the Change), it feels antiquated.
You also need to watch out for any Bank of America fees and minimum balances. Remember, Keep the Change requires a checking account, savings account, and debit card through the bank. Bank of America checking account fees can have total up to $25 a month; savings accounts have minimum opening deposits of $25 and can have monthly fees of up to $12.
And when it comes to debit cards, you don’t get the same protections you do with a credit card (and it also doesn’t help you build credit). Keep that in mind when you’re deciding whether to use your debit card for some spare change savings.
Is Keep the Change worth it?
On the surface, automated savings sounds great. Who doesn’t want to save for things they’re already buying? But spare change investing isn’t ideal, and Keep the Change is even less so.
Yes, it’s helpful to have some savings, but doing so with spare change isn’t the best way to go about it. First of all, it takes a long time to total anything. Any saving some is better than none, but you’re better off budgeting and putting larger amounts of money aside to reach your goals, whether it’s for retirement or simply an emergency fund.
Spare change investing also takes out the financial education component that comes along with setting goals, figuring out a budget, and really knowing where your money goes. It’s nice that every Starbucks purchase is contributing to your savings, but if you were to use a budgeting app like You Need A Budget, that hands-on experience would potentially reveal that you’re actually going to Starbucks way too often and you need to cut back. Automating your finances is good to an extent – knowing that money will be going into your IRA every month provides peace of mind – but you shouldn’t be automating to the point where you’re not learning about your finances.
And Bank of America’s Keep the Change offers further limitations. Unlike Acorns, which you can connect to any of your cards, Keep the Change requires you to use your Bank of America debit card, along with other accounts. You’re locking yourself in; that might be less of a hurdle for someone who’s already a customer, but it’s not something you should open an account for.
You’re also not growing your money that much; Keep the Change transfers money into your savings account. As of this writing, APYs for savings accounts at Bank of America are between 0.01% and 0.03%, with incremental increases for "Preferred Rewards clients." That’s fine if you’re building an emergency fund, but anyone who really wants to build their wealth has to put money into investments that will grow, not a low-yield savings account. Acorns has its issues, but at least it’s investing your money in ways that can see real growth. Investment platforms like Betterment, Wealthfront, or Robinhood can be even better.
So should you use Bank of America’s Keep the Change? For most people, the answer is no. It requires a (literal) investment in Bank of America’s ecosystem, it doesn’t invest your money in meaningful ways, and it plays into the larger issues with spare change investing.
However, for anyone who is already a Bank of America customer, has a handle on their finances, and isn’t relying solely on spare change to fund their future, it could be an option to supplement broader financial goals.