Savings program from Wells Fargo is anything but

Wells Fargo sign

Are you looking for an easier way to meet your savings goals? Here’s a product you can skip.

Wells Fargo’s Way2Save program is supposed to help consumers by automating savings.

The Way2Save account automatically transfers $1 from your Wells Fargo checking account to your linked Wells Fargo savings account each time you make a debit card purchase, pay a bill online through Wells Fargo Bill Pay or make an automatic payment from your checking account when you sign up for Save As You Go transfers.

However, this product is more likely to harm consumers than help them for three big reasons.

Reason 1. Fees could quickly eat up those small savings transfers.

First, there’s a $5 monthly service fee for this savings account.

You can avoid the fee by keeping at least $300 in your account (but that means you have no access to your money) or by maintaining an automatic, recurring savings transfer from your checking account to your Way2Save account.

That's a monthly automatic transfer of at least $25 or daily automatic weekday transfers of at least $1.

The former option is OK, but the latter seems silly. Why clutter your transaction history and bank statements with a bunch of $1 transactions?

Then there are the checking account fees.

The Way2Save account needs to be linked to a checking account to effect all those automatic transfers from checking to savings.

Wells Fargo checking accounts come with monthly service fees ranging from $5 to $30 (you’ll need a minimum daily balance of at least $1,000 and a qualifying direct deposit to avoid these fees).

Reason 2. Way2Save encourages bad financial habits.

Saving shouldn’t be linked to spending, and spending shouldn’t be a precursor to saving.

A good savings product doesn’t encourage you to spend more because you can justify that you’re getting something (that $1 transfer to savings per purchase) each time you spend.

All you’re getting is a computer moving your own money around. And you can just as easily move it out of your savings and back into checking to be spent. (That, too, could lead to extra fees.)

Automatic savings is a great idea, but these transfers should be linked to what you earn and to specific savings goals, not to how often you spend.

Automatic savings should come out of each paycheck and go to a CD, high-interest savings account or investment account.

There, it will earn a meaningful return and won’t be eroded by unnecessary fees, and you won’t be able to easily access the money. Your money will actually be there when you need to withdraw it for emergencies, retirement or other savings goals.

And we haven't even mentioned the pathetically low 0.01% APY the Way2Save account earns. That's even less than the rates some of the other -- yet nearly equally pathetic -- Wells savings accounts pay, from 0.05% APY to 0.20% APY.

Reason 3. Shopping with your debit card puts you at risk of incurring those pricey overdraft fees if you don’t carefully monitor your balance.

Debit card spending is supposed to be a good idea because it limits you to spending money you actually have rather than spending yourself into debt as you could with a credit card.

But overdraft fees can easily equal or exceed credit card fees.

An overdraft can occur when your account doesn’t have enough money to cover a check, withdrawal, automatic payment, debit card purchase or ATM transaction. For the latter two, you must explicitly opt in to have your overdrafts paid.

The good news is that, with your Way2Save account linked to your checking account, overdrafts that can be paid from your savings account will only cost you a $12.50 daily fee for all overdrafts that occur in a single day. This is considered an overdraft protection plan.

If Wells Fargo pays your overdraft fees, it’s considered a standard overdraft practice, and the charge is $35 per overdraft with a maximum of four fees (that’s $140) per day.

You can avoid any fees if you don’t opt in to overdraft protection. Let your transactions get declined -- for free -- when you don’t have enough money in your account.

At least the bank says it won’t initiate any automatic transfers to savings that would overdraw your checking account.

  • Dennis Braxton

    I like the idea because it help those that's not discipline enough to save on their own.If you know the money is there in your checking account than your more likely to spend it,but if its not there then you cant spend it.So the way 2 save is for those type of people.