Who’s This Account Really For?
I’m all for novel ideas. And I’m all for creative ways to save. But I’m a little put off by the new concept, imported from the U.S., that has people fooling themselves into saving. Called the Bank The Rest® savings program, Scotiabank proposes that each time you use your debit card to make a purchase, you round up to the nearest dollar or $5 and put the rest in their high-interest savings account so you “save while you spend.”
Okay, so let’s go through the “offer” one piece at a time.
Bank of America came up with the idea and called it Keep the Change®. But their offer is way sweeter. Bank of America not only let’s you round up, but promises to match your Keep the Change savings at 100% for the first three months. After that they’ll continue contributing 5% a year, every year to a maximum of $250 per year. So Scotiabank imported the idea and then watered it down.
So why is the U.S. bank more willing to cough up some dough to get and keep their customers’ biz. Simple. It’s good business. Since clients must have both their transaction and savings accounts in the same place, and since they’ll use their debit card for all transactions (remember, the merchant pays every time you debit), they are very profitable clients. So why isn’t Scotiabank offering the same benefits to its clients? That’s a good question.
Now, let’s turn to the “high-interest” savings account. Sure, it’s High Interest if you compare it to the other savings account Scotiabank offers. But, let’s face it, at 2.25% on June 10, 2008, is less than…
- 3.60% offered at ICICI Bank*
- 3.50% offered at Citizens Bank
- 3.35% offered at Canadian Tire Bank
- 3.30% offered at HSBC Bank and ING Bank
- 3.20% offered at Dundee Bank
- 3.05% offered at Manulife Bank
- 3.00% offered at Royal Bank
*interest rates from FCAD
So what if you can’t earn an extra 1.35% on your money in a true high-interest savings account? On your pathetic $500 in savings, that would amount to a whopping $6.75 . Yeah, but it would be YOUR $6.75.
The BIGGEST problem I have with this savings account isn’t that Scotiabank has wussed out on the savings-matching program, or that they’re positioning their savings account as high-interest when it’s way down the line, or even that they’ll be able to consolidate your business in one place. It’s the idea behind the round up.
Here I am telling y’all you have to be on a budget, you have to plan your spending, you have to be aware of every penny you’re spending. Then along comes The Banker to tell you, “Nah, you just have to round up.” So how are you going to get to the end of the month on that budget of $130 for gas if every time you pay for your gas you’re adding up to $4.99 to your transaction. Do that on every transaction you make with your debit card in a month and you’re budget will be out of whack and you’ll be wondering why.
Why do we have to FOOL ourselves into saving anyway? Are we children, or are we grow-ups? Are we so unaware of what our goals are that we need a TRICK to get us to save? Really?
If y ‘all think this is a good product, I’ve FAILED in my quest to get you to take control of your money. 
If y’all think this is a great way for Scotiabank to use a terrific marketing idea to capture more business, then maybe, just maybe, you’re on the road to becoming savvy consumers. I’m proud of ya!
June 11th, 2008 at 7:48 am
I keep my saving accounts at a different bank. My chequing account is with PC Financial while my saving accounts are with Citizens Bank. PC Financial offers very comparative saving account interest rates, too (and I’m surprised that you didn’t mentioned PC Financial in your post). But if every time I log into my chequing account and see the balance of my saving accounts, I might end up using the money I try so hard to save.
Thanks for the head’s up about this new acount from Scotiabank. I was wondering what that was about. It seems to be a very complicating product. I doubt people can use it in an intelligent way.
June 11th, 2008 at 8:33 am
Couldn’t agree more with you on this Gail. But allow me to point out the silver lining in this: that Savings accounts are back in the mainstream. It was only a couple of years ago that I went to the my big six bank looking for a Savings account that paid more than a pittance (less than 1%) and left empty-handed. (Luckily there were other banks like PC, ING, Citizen’s to serve my need then)
In these credit-crazy days of negative savings rates I am heartened that there seems to be a mainstream demand for Savings Accounts and that the Big Six are at least trying to meet it.
June 11th, 2008 at 9:23 am
Gail, how is this that much different from dumping the change in your pocket at the end of the day (from cash purchases) into a jar? At least this way you’ll gain some interest that you don’t get from a change jar, so it is at least some kind of a step forward isn’t it. And nothing stops the person from transferring this money into their ING account I think? And the accounting seems pretty simple - record your actual expenses to the penny, and then create a ‘money jar’ account and record the rounded up amounts there. If mid way through the month you’re running low, transfer in from your moneyjar account online. While I see your point, I really don’t think scotiabank is out to “get” anyone (and there’s nothing wrong in trying to get new customers at the same time, that’s what a business does). Or am I missing something in the fine print?
June 11th, 2008 at 10:23 am
Thanks Gail! I was wondering what that ad from Scotiabank was all about. I could smell a rotton fish there, but could not put my finger on it.
My saving stratagy is, treat it like a fixed bill - the savings bill - on the 2nd of each month, I write a cheque, that I physically take to the bank that has my savings account, I deposit it, get my updated bank statement and as I walk out of the bank, I pet myself on the shoulder, walk a little taller and smile like crazy! Another slam dunk baby!!!
I don’t know any bank that has our interests before their own. They are out to make money like any other business - if they can squeeze out a couple of bucks each month from every one of us - they’ll do it in a heart beat!
I deal with 2 different banks - one for chequing and one for savings - never put all your eggs in one basket concept - and have had to keep on top of all bank info so I can give them a good shaking every now and then.
This is what happened to me recently - I have had a mortgage with RBC for a while now- and recently found out that they had, conviently, forgotton to give me vital information that would have helped pay off my mortgage faster- in the process they have been making a pretty penny off me - so I’m on a mission now to bite their heads off! I can’t even tell you how mad I am at RBC - have been banking with them for 15 years and this is the crap I get! I know everybody who works at the branch where I bank, they know me by name, and still, they do this….like…. come on people!
My tip to everyone - no need to fool yourself into saving - do it physically {write a cheque, make a transfer from your chequing account into your savings account, etc}, and make it a celebration - once completed - do the happy dance!
Super blog Gail! You rock lady! Thanks!
June 11th, 2008 at 10:44 am
I agree totally with Gail! My husband and I looked into the savings account from Scotiabank and we thought it would provide more incentives that it does. We save regularly for different items in our savings account, that can’t be withdrawn on the same day. You have to make a request for a transfer that takes one whole day and has a great interest rate (PC Financial - 3.05%). It saves us from ever touching it!
June 11th, 2008 at 11:50 am
I’m with Geoff on this one. I have this account as all of our regular banking is done through Scotiabank. When I buy something with cash, all of the coins go into a jar, which I roll up and put as extra savings in an account. This to me is the same thing. Our budget is not so tight that an extra $100/month throws us off. I plan on transferring the money out of this account every month to our ING or PC account.
We already save well over 10% of our income. To me this is just an extra little bit that we won’t miss.
June 11th, 2008 at 11:55 am
Hmm…I bank at Scotia because a) there are no credit unions in Whitehorse and b) I don’t like any of the other big banks and I have to put my money somewhere. I still keep my main account on Vancouver Island with my credit union, however, and a savings account with ING.
I was looking at this account and wondering what the deal was, considering it might be an extra way to save, but put so succinctly by Guru Gail, I will definitely take a pass. I’m already not making what I could with my Money Market account if it was elsewhere, so I might have to consider moving my Scotia savings to something with a bit more punch.
June 11th, 2008 at 12:46 pm
Geoff- the difference is you make a conscious, informed choice of where your money is going when you allocate X dollars to your savings account.
how can you possibly keep track of what is being spent in each category, when things are rounded up?
it makes you spend on purpose and save by accident. save on purpose!
now i’m not the jar-know-it-all, but the remainder of what is in your jar is left AFTER all your expenses are covered because you were thrifty in your spending. so you can choose what you want to do with it AFTER.
the round up is not done AFTER all your expenses are cover, it’s done before.
i see people dipping into that account often as they find the end of the month getting tight (unless they have a stupid high income with low expenses. yah… right).
i prefer to have conscious control of every penny of mine, and until they start offering a ridiculously great rate to sweeten the pot, you won’t see me near it.
June 11th, 2008 at 1:18 pm
Hallelujah Gail! What a dumb idea, spend more so you can save more! Are you joking! I quit using my debit card so I can track my money and actually see where it is going. I budget to the penny. I know for myself if I use my debit card, I always spend more than if I have cash. I’m a big girl and am more than capable of saving my own money without trying to trick myself. Two thumbs down from me for this program!
June 11th, 2008 at 4:23 pm
I first saw the commercial and thought “how CLEVER of them!”
It would be a fantastic system for folks that DON’T USE JARS and don’t keep track of the pennies…. you have to give it that!
For anyone that follows the “word-of-Gail”, it simply would mess us up. Besides, if we are using jars and binders, the debit card isn’t being used and the account would be useless! LOL
June 11th, 2008 at 4:24 pm
PS Thank you for putting the particulars on that one under the microscope!
Do you have any thoughts about the pros and cons of the MANULIFE ONE account?
June 11th, 2008 at 4:29 pm
Exactly it Shannon and Kristin. As adults we should be smart enough to save. If you want to save, do it consciously! (And if you don’t want to save, give your head a shake!)
June 11th, 2008 at 4:42 pm
Kristin and others - I hear what you’re saying. However, by your logic than at the end of the day all your spare change must 100% go back into jars (parsed out by which quarter came from which jar) which I just can’t see most people doing. Instead, like some other posters above, this just helps you pool your change. As for being adults and saving as a matter of course, well I agree - but I also like things being automated for me.
P.S. That this is spending more to save more doesn’t make sense. This is, ultimately, still your money. You spend $99.23 and 77 cents gets transferred from your chequing account to your high interest account (99.23+.77). You didn’t lose this money, you moved it from one account to another. The Bank isn’t saying spend $500 more than you did last month, you can spend less than you did before you signed up for it.
This, I grant, will cause problems if this allows you to incur overdraft charges, etc but seems harmless enough.
P.P.S. I do not have any dealings with scotiabank.
June 11th, 2008 at 5:23 pm
Well, it’s great to see you all weigh in on this.
GEOFF: this account is very like the coin jar For most people who are carrying debt, the coin jar is a lazy savings program. While I believe everyone should be saving — even as they are paying down their debt — it should be proactive saving, not toss-the-money-in-a-jar savings. And if you round up to the nearest $5, which the program offers you the option of doing, you have little control of your money. I also don’t believe people will note how much they’re rounding up in a day, and that can lead to overdraft charges.
TRACY J: I’ve blogged on the Manulife One. Search for it.
CHRISTY: I’m thinking from your comment, “Our budget is not so tight that an extra $100/month throws us off” that you have no consumer debt, so you’re in the clear. Hey, if this account works for you, go ahead.
For the most part, when I see a gimmick my radar goes off. Then I try to figure out what’s in it for me, what’s in it for them, and who the product really works for. In the case of this account, there’s not a lot in it for me: a lower interest rate than I could get elsewhere; the potential to lose track of my money (unless, I always round up when I make an entry). For The Bank, the benefit is more profit, tying the customer tighter to me (loyalty) and looking really smart.
I know some financial reviews have given the account the thumbs up, but I won’t. I like the Manulife One product because it has upsides when used the right way. This product is for lazy people who don’t want to have to think about managing their money.
June 11th, 2008 at 5:31 pm
I bank with Bank of America for checking and savings and I take part in the Keep the Change program. When the money is transferred from my checking to savings, I then transfer that money to my ING account. Every little bit helps.
June 11th, 2008 at 5:39 pm
I have enrolled into Scotiabank’s “Bank the Rest” program, and I can add a few things to these comments. The BTR transfer does not occur at the end of every day if it will put you into overdraft. For me, it works, because I track my spending to the nearest dollar. Scotiabank’s program allows you to chose to bank the rest to the nearest $1 or $5. I do have higher interest savings accounts with ING, but this actually works in my favour. Because I track to the nearest dollar, the spare change is transfered into this little savings account and it’s pretty much out of my mind. I have $42.00 in my Bank the Rest account already, so for me it works. I was already a Scotiabank customer before this program, and I already had these accounts opened prior to the start of the program.
I guess it works for some and not for others.
June 11th, 2008 at 7:42 pm
Thanks for this post Gail. I had never heard about this Scotiabank program, however, you made me aware of the fact that interest rates can vary quite a bit from one financial institution to the next for savings accounts. I know that is elementary for people who have been tuned in to their finances but I only started to save last month thanks to you. As of today I have $91. in my savings account. Believe it or not this is the first time the balance has been above $5. for a very, very long time. Anyway, you got me thinking and I checked the interest on my savings account. I never bothered to do this before because no amount of interest matters when the balance is $5. Turns out the interest rate on my BMO savings account is 1%. When my husband came home we checked things out and decided to open and ING account which will give us 3%. Since we are going to be making regular monthly contributions I decided that we should pay attention to the interst rate. (Don’t roll your eyes!) next of all I plan to see how we can get better interest rates on my RSP (I just started to put money into that last month as well) and on my daughter’s ESP. Fortunately we have been contributing to that ever since she was born nine years ago. Thanks again Gail for all of you help. We really, really appreciate it.
June 12th, 2008 at 4:59 pm
Gail, I understand where you are coming from in terms of they way the “Bank The Rest” program encourages savings. Yes, in an ideal world people would pay attention to their money and make a conscience effort to save and budeget properly - but a heck of a lot don’t bother.
The benefit of the program is that people can quickly realize that maybe the didn’t even miss that money. Before they know it they have savings that they never took the time to save before. The bank has many ways to help people save if they want the help, such as re-occuring funds transfers on said days of the month/week.
The program is optional. There is no cost. It is also designed so that if the customer has a cheque clearing or a pre-authorization coming out that night it will not create an NSF or put the customer into over-draft.
They also can access the money from the Money Master account at anytime, at no cost.
I personally don’t use the program. I watch every penny in my account and have regular savings. But I do see the benefit for those who have not yet seen “the light of Gail”.
I like my Money Master accoutn for when I want to “park ” my money for a short time. I use my ING account for long term or more hands-off savings.
June 24th, 2008 at 2:25 am
Hello everyone!
I loved reading all your comments! Also, thank you Gail for pointing out that BoA did it first and pretty much did it better.
I just thought I’d post a little something @Geoff. I agree with you, that if it’s this or putting the money in a washed out pineapple jar for a rainy day, I’ll take the interest anytime (or at least…I should!). There is a “fine print” however, and it comes in the form of fees.
I should be clear THERE ARE NO FEES ASSOCIATED WITH ENROLMENT OR “PARTICIPATION” IN THE BTR PROGRAM. I put “participation” in quotation marks for a reason however, as to be able to participate, one must have a chequing account and a money master account to participate. And that can cost money, in some cases, if you earn little interest (the rate was 2.25% per YEAR on May 22nd 2008) the interest earned may not even cover your fees.
For more information, check out this blogpost I wrote after I called the nice people at 1-800-4Scotia
http://www.btgblog.net/2008/05/update-scotiabank-bank-rest.html
Also: @Christy: as my conclusion states, you are exactly the kind of person who would benefit from using this program. I wish I could take advantage of it as well, as it never hurts to save above and beyond what you’re already saving (though I understand Gail’s misgivings…spending should not necessarily become associated with something like spending, lest that push the spending out of hand, under the pretence that you’re actually “saving…”). But as I mention in the above blogpost, the fees coupled with the low interest rates are not beneficial enough for someone like me to switch.
But hey, it’s all about doing your due diligence and figuring out what’s right for YOU! I’m just glad I’m not the only one thinking about all this, I was getting kinda lonely there for a while