Credit Cards, Banks Offering Cash Back for Money Spent

FORGET ABOUT CHALKING up reward points, air miles and cash-back checks. How about some cold hard cash instead? Banks and credit-card companies are offering all sorts of products — from checking and money-market accounts to credit cards — that can help you improve your bottom line every time you deposit cash in an account or buy something using your credit or debit card.

Considering that Americans save less than a penny out of every dollar they earn (just $0.003, in fact), according to the Bureau of Economic Analysis, that should come as welcome news. Yet, while savings-rewards accounts may help you sock away a little extra cash, most are little more than the bank-sanctioned equivalent of putting loose change in a jar, says Linda Sherry, spokeswoman for advocate Consumer Action.

"It doesn't really add up to serious savings," she says. "People who put their mind to it and save 10% of their income over the course of a year will get further. Ultimately, these are all gimmicks to get you in the door and get you an account."

True enough, but if it gets the ball rolling toward a consumer opening a savings account or even thinking about socking some of their own money away for college or retirement on top of what the bank or credit card is offering, it may not be such a bad idea. After all, a penny saved is a penny earned. Here's what's being offered:

If using a credit card to improve your bottom line sounds counterintuitive, make no mistake — for many consumers, it is, warns Ed Mierzwinski, consumer program director for the U.S. Public Interest Research Group, a consumer advocate. "Rewards are only a good thing if you don't carry a credit-card balance," he says. "The 1% you're saving isn't going to offset an 18%, 19% APR." Or even one that's 8%.

For those who pay off their balance in full each month, however, using the right card can help boost your savings. Using the American Express One card, for example, generates 1% cash back, which goes into a high-yield account earning 5%. Spend $1,000 a month, and at the end of the year you'll have a windfall of roughly $175.

The 1% cash-back rate (plus bonuses) that savings credit cards offer is comparable to that of many cash-back cards. But instead of receiving rebate checks from your card issuer, your savings are direct-deposited — a forced savings aspect that ensures you won't be tempted to blow your windfall on an impulse purchase. Bonus: Such cards are a much better deal than swapping points or miles for cash, which rarely works out in the consumers' favor. To see the math, click here.)

Here's what major issuers are offering:

Case in point: Bank of America's Keep the Change program, which rounds up every debit card purchase you make to the nearest dollar, diverting the difference from your checking account into one of its two savings account options. The bank then matches your savings 100% for the first three months, and makes an annual match of 5% thereafter. You'll earn just 0.20% or 0.50% on the measly balance, depending on the savings account. But frequent debit-card users may find the free match makes the low rate bearable.

While national programs are few and far between, smaller bank chains, independents and credit unions tend to be more generous. Wisconsin-based Guaranty Bank, for example, contributes an annual match of up to $100 to your savings account, based on your average monthly checking-to-savings transfers. Bank of Utah offers a $300 match on its Bridal Savings Account, which helps young couples save for their first home.

Here's what major banks are offering: