[Update in October 2015: BBVA changed the terms of the Build My Savings account. Accounts opened before July 2015 are still on the old terms described here. New accounts have a maximum transfer period of 12 months and a maximum match bonus of $50.]
I updated this post I first wrote a year ago. I received the match bonus as promised. The bank is still offering the same program. It also came out with a checking account that doesn’t require a $1,500 minimum balance or direct deposit, which makes the deal even better than a year ago.
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. BBVA Compass has branches in Alabama, Arizona, California, Colorado, Florida, New Mexico and Texas. Deposits at the US branches are FDIC insured.
If you live within 60 miles of a BBVA Compass branch, BBVA Compass offers a unique product called Build My Savings. The bank encourages customers to save regularly in a 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 a checking account and two Build My Savings accounts with $1,000 each and automatically transfer $640 per month from the checking account into each savings account for 12 months. At the end of the term, you will get a $250 bonus in each savings account for a total of $500. The return is about 4.5% on an average balance of $5,200 in each of the two savings accounts. 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 6% a year for 3 years. Follow these steps I already figured out for you.
(1) If you don’t have one already, open a ClearConnect checking account at BBVA Compass. All transfers to the savings account must come from this checking account. The ClearConnect checking account doesn’t have a monthly fee when you opt-out of paper statements. It doesn’t require a minimum balance or direct deposit. Leaving $50 in the checking account will suffice.
(2) Add the new checking account as an external bank account at your own bank. Transfer $2,100 to it. Also set up a recurring monthly transfer of $1,050 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 $50 in checking. 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, the balance in your savings account is now $7,050. 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 and close the accounts. If the program is still offered by then and the 6% effective rate is still attractive, set up the savings accounts again.
After taking into account the idle $50 in the checking account and all the monthly transfers, the combined average daily balance in all three accounts comes out to under $8,000. You earn $480 a year on this $8,000 in the first two years and $500 in the third year. That’s a return of 6% a year for 3 years.
6% a year on $8,000 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 or more debit card charges every month.
In a risky variation, you can tweak the return to 9.8% on an average daily balance of $5,000, although the total match in dollars received is still the same. 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 6% return is easy enough and good enough. Some might say even the 4.5% return from resetting annually instead of doing a 3-year deal with annual withdrawals is easy enough and good enough.
This is not a short-lived promotion. According to reader comments, this program has been running for at least several years.
If you happen to live within 60 miles of a BBVA Compass branch (branch locator), it’s an easy extra $1,000+ over 3 years compared to other alternatives. Here’s the match bonus after one year. I received two of these for my two savings accounts.
[Photo credit: Flickr user Dystopos]