News

B of A turns change into dollars

February 13, 2006

This article appeared in the ATM & Financial Self-Service Executive Summary, Winter 2006.

Bank of America (B of A), the nation's largest debit card issuer, has devised a new approach to allow customers to save spare change. Keep the Change, launched September 2005 at more than 5,800 Bank of America branches, allows customers to round up debit purchases and put the change into savings accounts.

B of A's patent-pending program, touted as an electronic piggy bank, is the first free savings feature tied to a debit card, B of A representatives say.

Those reps add that Keep the Change was designed to encourage customers to save more money during a time when the personal savings rate is low - less than 1 percent, according to the U.S. Department of Commerce's Bureau of Economic Analysis.

The experiment apparently is successful. Although B of A officials have refused to divulge results, an Oct. 19 quarterly earnings report shows that B of A's debit-card usage has risen, with purchase volumes soaring 28 percent from 2004 and revenue increasing 29 percent to $421 million. The report also states that third-quarter net income rose 10 percent to $4.13 billion from $3.76 billion a year earlier, with a record 635,000 new retail checking accounts and 294,000 new savings accounts.

What is Keep the Change?

When a customer signs up for Keep the Change, each purchase made with a B of A Visa debit card is automatically rounded up to the next whole dollar. At the end of each day, the excess above the actual purchase price is rolled into savings.

As a bonus, B of A matches 100 percent of the Keep-the-Change transfers for the first three months after enrollment. After that, the bank contributes a 5-percent match per year. The maximum match is $250 annually - an amount that is credited to a customer's savings account once a year. And B of A has not guaranteed that the matching program will continue indefinitely.

Diane Morais, a B of A executive who oversees deposits and debit products, said Keep the Change launched after extensive research. "Our customers told us they want a simple way to save, so we created Keep the Change."

When the bank started its rollout in September, "customer feedback was very strong regarding KTC," said George Owen, a B of A spokesman.

The bank's incentive to offer this program is multilevel, Owen added "The bank is focused on organic growth and building relationships with its customers."

Merchant's concerns

While B of A and customers are happy with the program, it's not without its detractors.

Ed Mierzwinski, consumer program director for Washington, D.C.-based U.S. Public Interest Research Group, said B of A's initiative is "a blatant attempt to collect more interchange fees" by boosting usage of more than 27 million B of A debit cards issued in the U.S.

Mierzwinski's concern is that the program will, ultimately, increase the cost of small purchases. "If everyone uses plastic to pay for minor purchases, such as a cup of coffee, the merchants will raise the price of their goods to overcome the increased fees," he said.