7 On Your Side:Spend To Save Programs - KLTV.com - Tyler, Longview, Jacksonville |ETX News

12/11/06

7 On Your Side:Spend To Save Programs

Jeff Weinstein saves every cent by spending.

What's his secret?

Every time Jeff uses his debit card, money goes into his savings.

"It's basically free money that you would never have," says Weinstein.

A growing number of banks now offer debit and credit cards with a savings component.

For instance, American Express now offers a card where one percent of the purchase price gets put into a high-yield savings account.

"It's an automatic thing and it sweeps your rebate automatically into this type of account," Curtis Arnold with Cardratings.com.

At Bank of America, it's not credit but debit that helps you cash in.

If you join their program, every time you use your card, the bank rounds up the purchase price to the nearest dollar.

The extra is then transferred to your savings.

For most cardholders there's an added incentive.

"In the first three months, we'll match it dollar for dollar 100%. And thereafter, we'll match 5% every single year," says Jackie Guy with Bank of America.

"Five percent of something can add up to a lot of money over time," says Jose Feliciano with Feliciano Financial Group in Tyler.

Feliciano says we could be seeing a trend with these type of "spend to save" programs, because consumers are putting away little amounts at a time.

"Anytime you don't feel a big bite and you can [save] in small amounts-- you normally don't miss the money," says Feliciano.

Consumer advocate Linda Sherry says these cards can work if you're careful, but she worries about customers digging into debt.

And if there's an annual credit card fee, beware.

You may not save enough to cover the costs.

Experts also say, like with most reward cards, interest rates may not be the best.

"If you ran a balance on one of these cards and you were paying a high interest rate, that might also cancel out any savings," says Sherry.

Feliciano advises, "It all boils down to what works for you."

Issuers say people are going to spend regardless, so why not offer a way to jumpstart savings. For some it may only be stash, but at least it's something.

Before opening one of these accounts, ask whether there are restrictions. Like if you have to charge a certain amount before you see any savings or if there are rules about when you can pull your money out, or about stipulations for any matching components.

Christine Nelson reporting. cnelson@kltv.com

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