December 29th, 2009
Capital One’s SmartCents Review
Capital One’s SmartCents program is making it easier for consumers to tuck away more money in their savings, with the help of Capital One chipping in a few cents.
SmartCents enhances your savings for certain transactions you do on your checking account: for every debit card purchase, online bill pay, or direct deposit, Capital One automatically transfers $.50 from your checking account to your linked savings account, plus Capital One will match 100% of your SmartCents transfers for the first three months, and then 5% after that. Now, if you aren’t a heavy debit card user, the 5% matching contribution may not provide enough benefit to switch to Capital One. Or if you have a hefty-sized checking account, a high-yield checking account or money market account may grow your money faster with high interest.
The first three months are your optimum earning window, when 100% matching power means that saving $100 in SmartCents transfers will earn you $100 of free money, courtesy of Capital One. There is an annual matching contribution cap of $300, which bests the $250 cap of Bank of America’s comparable Keep the Change program.
An extra benefit in this program is Capital One’s current promotion that offers new customers a $15 bonus for the first direct deposit and an additional $15 for the first online bill payment. That is an extra $30 in free money.
For debit card users looking to save more, this is a great deal. It’s a truly free checking account that earns you extra change for your savings with no additional monthly service fee, minimum balance requirement, or maintenance fee. However, you are required to open a savings account and options are limited: the free, no minimum balance Simple Savings account is not available in all areas, and the InterestPlus Online Savings account earns a respectable return of 1.6% APY with a minimum balance of $2,500, but 0% APY for accounts less than $2,500. If you want better earning power than that, you may have to open an outside savings account.
More and more programs, such as BofA’s Keep the Change, Wachovia’s Way2Save, and US Bank’s START, have banks chipping into consumers’ savings. What makes SmartCents a great savings program to enroll in right now are the additional incentives, like the $30 bonus and the first 3 months of 100% matching contributions, that will add an extra jingle in your pocket.
At Credit Karma Blog, what goes around comes around… So what do you think about this post? Agree, disagree, or have something more to say? We’d love to hear your reactions!
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thanks for the summary — a great jumping off point as i look into these accounts to see if they are worth while — seems a few bucks (or “free money” as you call it) can be made once you jump through the hoops of setting up an account — and there are some hoops with regard to proving you are who you are — or at least there were when i tried setting up an online bank account a year or two ago…. keep blogging — always people in need of financial advice…
Cool story you got here. It would be great to read something more concerning this theme. Thank you for giving that data.
This SmartCents program is utter rubbish and its only goal is to be a marketing tool to discourage consumers from choosing one of Capital One’s competitors that have a similar useless program (such as BofA’s Keep the Change). Here’s the SmartCents approach to saving: spend $100 on dinner out and pay with your debit card, and then rejoice that 50 cents will be added to your savings account for the transaction. Oh, if it’s within the first 3 months, rejoice further because Capital One will match 100% of 50 cents, which is 50 cents. In total, you save $1.
Here’s the realistic approach to saving: set a budget, which amongst other things says that you don’t spend more than $35 on a dinner (as an example). You thus have $65 that you could save relative to the earlier example. If you wish to save, there are great personal finance guides out there that lay out effective techniques to build your wealth. SmartCents will get you nowhere. I should mention that I generally like Capital One and I bank there. My experience with them is that they treat their customers fairly but telling people that SmartCents is a good way to save is a disgrace.