There is nothing inherently wrong with the idea of a savings account, yet extremely low interest rates make them very unattractive. With rates hovering at around 1%, any money you put into a savings account will be only be growing at the most glacial rate.
The other problem with savings accounts is that they are usually dependent on your own resolve when it comes to actually putting money away. The Way2Save program from Wachovia/Wells Fargo is an attempt to address these two weakness that affect traditional savings accounts.
- Transfers to Savings with Each Transaction. Every time you make a payment, Wachovia will transfer one dollar from your qualified checking account to a Way2Save savings account. Eligible payments include debit card transactions, online bill pay, and automated bill payments.
- Automated Monthly Transfers to Savings. Account holders can also specify that a set amount each month gets transferred from their checking account to their Way2Save checking account – up to $100 a month.
- Premium Interest Rates. The reason that transfers to savings are limited has to do with the relatively high interest rate that Way2Save account holders receive. The current rate is 3%, about triple what other savings accounts from competitive banks offer.
- No Minimum Balance. Your balance will start at zero and go up from there. Even if you withdraw all of your funds, you will not have to worry about going below a minimum balance.
- Fees. To make this account attractive, Wachovia has limited the fees that are normally charged to these kinds of accounts. For example, there are no fees to open or close an account. There are also no monthly fees the first year, but you do have to continue to generate automatic transfers in order to avoid a $5 a month service fee after your first year.
- Easy Access to Funds. Although it is difficult to add money to this account, making withdrawals is easy. You can transfer money to your checking account online or you can make a cash withdrawal at a teller or an ATM.
- Forced Savings. Any bank will allow you to set up an automated monthly transfer. Wachovia’s Way2Save program is unique in its automatic transfer of one dollar with each debit card purchase or bill pay. For people who are not in the habit of saving, automatic transfers can make the difference between growing a savings account and living month to month.
- Super High Interest Rates. You don’t have to shop around much to realize that this is an unbeatable rate. At these rates, it is clear why you are only allowed to transfer $100 a month to this account.
- Locked into Wachovia. Wachovia Bank has clearly come up with a creative way to ensure your loyalty. Banks earn interest on your checking account, but pay out little or none. The idea is that you will continue to bank with them regularly in order to maintain your Way2Save account. This is fine as long as you are a satisfied customer, but if you are not, you could feel trapped.
- Substitutes Credit Card Rewards for Savings. The other goal of this program is to get you to use their debit card instead of a credit card. If you have sworn off credit cards, this program’s high interest rates provide the equivalent of a reward. A cash back rewards credit card that returns as much as 2% on your spending is clearly a better deal than 0% cash back and 3% interest on your own contribution to your savings account.
- Limited Savings Potential. If you want to put much more than $100 a month into a savings account, you will have to open up another account. In this way Way2Save could even inhibit saving for some people.
It can be really hard to motivate yourself to save, especially at today’s paltry interest rates. Way2Save offers a solution to these problems, but it is a limited remedy that comes with some significant opportunity costs. However, if have been trying to get yourself to save $100-200 a month, this may be a way for you meet your savings goals while earning interest at an unheard of savings rate.
Do you have a savings account with Way2Save? What are some of the pros and cons that you’ve experienced?