Money Tip of the Day: Cards That Claim to Help You Build Savings Most Likely Won’t

From Leigh Gallagher of FOX Fan Central:

You have to hand it to the credit card companies when it comes to creative loyalty marketing. First there were free miles. Then there was free stuff, everything from coffeemakers to Bose Wave radios. Then there was cash — cold, hard cash! Now comes the latest plan designed to entice consumers to charge more: free savings accounts.

Two new cards, American Express’ One and Bank of America’s Keep the Change card, promise to stash away a little something in a savings account for every purchase made. It’s a simple concept: spend more, save more.

With the One card (in case you’ve somehow missed the Ellen Degeneres television campaign), American Express will put one percent of every purchase into a savings account that accrues interest at the rate of 3.15 percent. Bank of America’s card works slightly differently, rounding every debit card purchase to the next dollar and depositing the change into a savings account, almost like an electronic piggy bank. Both companies offer a little something extra to sweeten the deal: American Express waives the $35 annual fee the first year and awards new cardholders a $25 bonus deposit; Bank of America will match 100 percent of the amount saved for the first three months, then five percent annually, up to $250 a year.

…. like most reward cards, the actual freebie value is pretty paltry compared to what consumers have to spend: Factoring in the card’s annual fee after the first year, One cardholders have to spend $3,500 before anything gets deposited into the savings account.

Also, as the author notes, the issuers have the money in the bank accounts of their own affiliates, and the 60% or so of cardholders who carry a balance will pay much, more in interest than the savings accounts will ever pay.

Stay, away.