I used to be a huge advocate of the “Keep The Change” plan offered by Bank of America. For the last couple years, I’ve touted the “coolness” of rounding up every debit purchase and putting the extra change into an attached savings account. Now, I’m not so sure…

Here’s my top 5 reasons why the “Keep The Change” setup from BoA is not really worth it, and could possibly hurt your personal finance efforts..

  • The interest rate on this account is lousy! - 0.20% APY as of this writing. If you keep any kind of savings, even your emergency fund, in this account, you’re losing money. If you’re enrolled in this program, transfer out your savings monthly to somewhere where it will do you some good.
  • Personal finance software issues – Some PF software doesn’t handle these regular transfers well, and most budgeting packages don’t handle them at all. Budgeting is about dictating your money beforehand, not afterwards, so it’s no surprise why programs like mvelopes don’t handle “Keep The Change” transactions well.
  • The match – Really, after the first match, it isn’t anything to write home about. If your budgeting, and using your debit card wisely, you probably have at most 8-10 transactions a month for groceries, gas, etc. Even at $0.99 rounded into the savings account that’s less than $10 a month. And 5% of that is $0.50.
  • BoA’s a crappy bank – Okay, okay, I only had four reasons to not use “Keep The Change”, so I had to throw this one in. I admit, in full disclosure, that I currently bank with them, their web-bank is definitely the best I’ve ever seen, but the bank is too big to be flexible to anyone’s individual needs. They sell the banking equivalent of the “Model A” of Ford’s early years… You can have it any color you want, as long as it’s black. And while I do bank with them for their web-bank, my money is never kept there, outside of the now $200/pp budget I keep.

And finally, probably the biggest reason why BoA’s “Keep The Change” is really not worth it…

  • It promotes PASSIVE “budgeting”! - At the beginning of the month you should have already assigned every dollar a job, every bill should already be defined as well as it could be, and excess should go to debt repayment or investment. The money you’re spending out of your checking account now is already budgeted to be spent on something, not saved. If you’re finding even $5-$10 a month extra in this “keep the change” account, you should probably re-evaluate your budget. This is not the same as hitting a great “everything in the stores 75% off and we’re taking triple-coupons” sale at the grocery store, that money is a savings above and beyond.

If I ever find a bank that offers a web-bank comparable to what BoA offers, I’m gone.  Until then, they’re just a catalyst for my money… quickly in, quickly out.

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