BBVA Compass Build My Savings Match Bonus: Effectively 5% Return FDIC Insured

By Harry Sit

BBVA Compass

BBVA is the second largest bank in Spain. It bought a number of smaller banks in the US, the largest being Compass Bank in Alabama. BBVA’s US operation is now under the BBVA Compass name. It’s one of 20 largest banks in the country. BBVA Compass has branches in Alabama, Arizona, California, Colorado, Florida, New Mexico and Texas.

If you live within 60 miles of a BBVA Compass branch (branch locator), BBVA Compass offers a unique product called Build My Savings. The bank encourages customers to save regularly in a FDIC insured savings account. The savings account itself doesn’t pay much interest but BBVA Compass will match a percentage of your savings. The maximum match is $250 per year per savings account and maximum 2 savings accounts per person.

The match calculation uses three factors: the opening balance, the monthly savings, and the savings term. You can learn more about the match by reading this PDF document or by playing with the interactive calculator.

In the simplest form, you can open two Build My Savings accounts with $1,000 each and transfer $640 per month into each account for 12 months. At the end of the term, you will get a $250 bonus in each account for a total of $500. The return is slightly over 4% on an average balance of $11k. After a year, you start over.

If you are willing to do a little more work, the match can be easily managed to an effective return better than 5% a year for 3 years. Follow these steps I already figured out for you.

Action Steps

(1) If you don’t have one already, open a Built-to-Order checking account at BBVA Compass. All transfers to the savings account must come from this checking account. If you are opening one anyway, you might as well try this $100 offer. After making 3 $50 payments to a credit card, I received the $100 bonus as promised.

BBVA bonus

Don’t be surprised by a phone call from the branch asking you to come in to sign some paperwork. BBVA Compass apparently hasn’t completely automated the account opening process yet.

(2) Add the new checking account as an external bank account at your own bank. Transfer $3,700 to it. Also set up a recurring $1,050 monthly transfer to it for another 35 months starting next month.

(3) Open 2 Build My Savings accounts. Set up for each account: $500 opening balance, $525/month transfer from checking for 36 months. This will use up $2,050 from your checking account, leaving $1,500 in checking after 3 bill payments of $50 each, just enough to avoid the maintenance fee. Set the monthly transfer date at one week after the money is scheduled to arrive from your source account in (2).

(4) Now everything runs on autopilot. Every month, $1,050 arrives at checking; $525 each gets transferred into two savings accounts. After 12 months, BBVA will pay a 4% match on your monthly savings. $525 * 12 * 4% = $250 maximum match in each savings account.

(5) After the match is received, withdraw $6,540 from each savings account. Pay a $10 fee for the withdrawal. Keep the monthly transfers going as usual. After the withdrawal, the savings account is back to the $500 opening balance.

(6) Repeat (5) after the second year.

(7) After three years, withdraw everything from the two savings accounts.

After taking into account the idle $1,500 in the checking account and all the monthly transfers, the combined average daily balance in all three accounts comes out to under $9,400. You earn $480 a year on this $9,400 in the first two years and $500 in the third year. That’s a return greater than 5% a year for 3 years.

5% a year on $9,400 in FDIC insured bank accounts for 3 years is better than I Bonds, better than EE Bonds, better than CDs or bond funds, and better than a reward checking account which requires 10 debit card charges every month. After 3 years, start over from step (3) if the program is still offered and if 5% return is still attractive.

In an expert-level variation, you can tweak the return to 7.5% on an average daily balance of $6,400. It involves funding each savings account with $5,000 opening balance and $350 monthly transfers for 36 months but withdrawing the opening balance shortly after the transfers are going. If you don’t know what you are doing, I don’t recommend pushing the envelope. A 5% return is easy enough and good enough.

Because this is available only in 7 states — Alabama, Arizona, California, Colorado, Florida, New Mexico and Texas — I’m not going to count it in my “double the bond yield” movement. If you happen to live in those 7 states though, it’s an easy extra $1,000+ over 3 years compared to other alternatives.

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Posted on November 19, 2012 under Banking and Credit Cards. Keywords: , .

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Comments

14 Comments on BBVA Compass Build My Savings Match Bonus: Effectively 5% Return FDIC Insured

  1. Sad Sam on November 21, 2012
     

    Tried and got rejected. While I am a Florida resident, they said I live
    too far from their branches in the northern part of the state.

  2. Harry on November 21, 2012
     

    Sorry to hear that. I heard there is a 60-mile radius requirement.

  3. TJ on November 29, 2012
     

    Any concern they will change the terms before the 3 years are up?

  4. Harry on November 29, 2012
     

    Once you sign up, the terms for this installment savings program are fixed, like a CD. I’m not concerned about mid-course changes. However, I’m concerned that the program itself may be discontinued or scaled down after a term ends. That’s why I chose the 3-year term instead of rolling over after 1 year. They used to allow 5 Build My Savings accounts per customer. Now they only allow 2.

  5. Doug on November 29, 2012
     

    This interests me, Harry. Thank you.

    But, if we are to go through the trouble of opening these new accounts with the goal of locking in these rates, it seems to me that it would be best to optimize the return.
    Can you give us more detail on the “expert” version?

    It seems to me that the match is maximized when the opening balance is 5k and the monthly transfer is $350. I’m trying to understand why you mention $380.

    Also, with regards to the the opening balance:
    1) Is it available for withdrawal immediately after the monthly transfers begin? (I understand that at $10 charge will apply.)
    2) Is the opening balance (i.e. 5k) applicable for the entire 3 year term? Or, is the formula recalculated on each anniversary using the current balance?

    Thank you for the work you put into this blog, Harry. I enjoy learning from you.

  6. Harry on November 29, 2012
     

    Doug – Good catch. I looked at my spreadsheet again. Yes it should be $350/month not $380 for a $5,000 opening balance. $380 is the transfer amount required for a $3,000 opening balance.

    As I understand from reading the terms, the opening balance is only looked at once at the beginning of a 3-year term. So in the “expert” version you would fund two accounts with $5,000 each, withdraw $4,990 after one month, withdraw the account down to $25 at each anniversary after you get the match bonus. But if that reading is wrong, it will ruin a good thing for pushing it. It also seems to violate the spirit of the opening balance.

    The bonus is the same $250 a year regardless. The only difference is how much capital you use to drive it. The opportunity cost for the extra capital isn’t much anyway. So I opted for the moderate version: keep the opening balance in the account at all times and only withdraw the transfers and bonus once a year.

  7. Kyle on December 2, 2012
     

    According to the Build-to-Order checking terms (https://www.bbvacompass.com/checking-accounts/compare-checking-accounts.jsp), one of the requirements to avoid the $10.95 monthly charge is Preferred Client PLUS (http://www.bbvacompass.com/preferred-client/), which requires $100,000 in accounts at BBVA. Am I reading that wrong, or are you including the monthly fee in your calculations?

  8. Harry on December 2, 2012
     

    The requirements are OR not AND. I meet the requirements by keeping $1,500 in the checking account. The return percentages already take the $1,500 into account.

  9. TJ on December 4, 2012
     

    FYI, no need to go in branch anymore. I did it online and was called by a telebanker on the other side of the country to confirm some information. You can only apply for 1 build my savings at a time when you apply online, but easy enough to apply for a 2nd after it’s set up.

  10. Kyle on December 12, 2012
     

    Regarding 2) Add the new checking account as an external bank account at your own bank

    My bank doesn’t allow this, and neither does BBVA. Would I have to use a bill pay from my own bank to BBVA?

  11. Harry on December 13, 2012
     

    Kyle – You will have to find a bank that does outgoing ACH. ING DIRECT does. Ally does. So do many other banks.

  12. Jeanette on January 29, 2013
     

    I’ve been participating in the “Build my Savings” program for a few years now. They DO allow you to set up several accounts (as I currently have 6 running at once right now). Just talk to your banker at Compass and they’re glad to help.

  13. Louis on March 9, 2013
     

    From BBVA:

    “The monthly Service Charge will not apply for statement cycles during which one or more of the following requirements are met:

    There is at least one Direct Deposit transaction (ACH credit) of $300 or more from an unrelated 3rd party (such as an employer or Social Security), OR
    The account has an average daily collected balance of at least $1,500, OR
    The primary accountholder is enrolled in the BBVA Compass Preferred Client Program* and maintains Preferred Client or Preferred Client PLUS status (subject to eligibility), OR
    The primary accountholder applies and is approved for student status (active student ID required), the monthly service charge will not apply for a period of up to 5 years, or until the primary accountholder reaches age 25, OR
    The primary accountholder applies and qualifies for everyday hero status.”

    Everyday hero means:

    “(1) a certified teacher or administrator of an accredited or state-recognized public or private school; (2) a sworn member of a law enforcement department that is responsible for crime detection, prevention, law enforcement or incarceration; (3) a sworn member of a fire department involved in fire suppression or prevention, emergency medical response, hazardous materials response, terrorism response or management; (4) a health care worker who is certified, accredited or licensed to work in the health care industry as a nurse, pharmacist or medical technician; or (5) a person who has served or is currently serving in the U.S. Military: active, retired and reserved duty. ID or other verification required. BBVA Compass reserves the right to review everyday hero status on a periodic basis. Build-to-Order terms and conditions, including everyday hero promotional pricing, are subject to change at any time, at the discretion of BBVA Compass.”

    So, this is even a better deal if you meet the hero category because you don’t need to meet the daily balance requirement.

  14. John on May 24, 2013
     

    Harry, what is the “after 3 bill payments of $50 each,” in step 3? Why is it needed and is that a one time bill pay or recurring?

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