Wachovia

So, I'm driving to work yesterday morning "switching four lanes, screaming through the sun roof money ain't a thang" listening to the Steve Harvey show and this woman from Wachovia says something about a promotion where you can earn 16% interest for the summertime. WHAT!?! I pulled up the website on my iPhone at the next light and couldn't find anything about 16%, but I did read up on their Way2Save campaign. Every time you make a purchase with the card, Wachovia moves $1 from your checking account into a savings account. I know what you're thinking. Didn't Bank of America do this already with Keep the Change? Well, yes, and Bank of America is being sued for infringing on someone else’s idea.

I commend Wachovia on their effort, especially with personal savings rates at about 1%. Helping people save and being known for it helps your brand equity. Good intention, but I disagree with the execution.

The Reason:
Most people can’t budget. A program that moves money around your accounts every time you make a purchase is going to throw you off.

Way2Save: a confusing program + undisciplined budgeting habits = bouncing checks = unhappy consumers. The same consumers Wachovia claims to help will likely feel the most pain, and that negative word of mouth will definitely hurt the program.

Comments

[Jeff Meade]

Your back of the envelope math shed interesting light on the evil that is banks. The worse part about this promotion...Wachovia doesn't help the consumer at all. They provide incentives to spend (codename: we'll help you save). If you really want to help me save then give me YOUR dollar every time I make a purchase. Don't move MY money around and then tell me you helped me. Reminds me of the old quote... "Don't piss on me and call it rain."

[Dan]

This is NOT a way for banks to actually help their clients save money. This is a desperate attempt for the banks to try and look like a stand-up bunch while making some BIG dough along the way. The US banks have led us knowingly onto the precipice of a recession and it was largely in part to absurd compensation and incentive plans for executives and managing directors at these banks. These individuals would have sold their own children to wolves if it meant another BMW, sailboat, house in the Hamptons, or a bigger wall to keep the poor away from their homes in suburbia.

Approximately 46% of all families now carry a credit card balance and the mean balance on these cards is $5,100 (Federal Reserve) which is up from $4,400 a year ago. The list goes on and on as to how much our spending is out of control when you look at some of the results from the Federal Reserves annual survey. But let’s get back to the banks as they are less depressing to talk about and more fun to slam on a blog.

Data sets by Dun & Bradstreet and Experian document that over the past 18 months consumers spend 12-18% more when using credit cards than when using cash. Huh? Wait! Let’s look back at that equation, “I spend using my credit card and I get one dollar moved into my savings account.” Is that really a promotion that favors the consumer? Back of the envelope tells me that given that the average APR is 14.9% (Federal Reserve) that there is a VERY high probability that the bank will be seeking to collect an extra $0.14 as most people don’t pay their bills on time and all the while their savings account is invested at a MUCH lower rate. So somebody. ANYBODY. Tell me how we are not getting screwed on this?

This type of program is perceived to not screw those of us that pay our bills and taxes on time but it does. Who do you think is bailing out the banks? It ain’t the govt. It is those of us that earn a living as that is coming out of our taxes….or in this case, the national dept is so outrageous it will come out of our children’s children’s children’s children’s children’s paycheck.

A fun site with lots of data points: http://www.lowcards.com/household.aspx