Savings That Fade in the Fine Print

Dig deeper into the details of Wachovia's new savings account offer. The deal isn't quite as good as it sounds

At first blush it sounds great: Wachovia's (WB) new savings account offers a 5% rate at a time when the average rate offered on savings accounts is near zero. And customers can earn a bonus of up to $300 based on the size of their account at yearend.

Wachovia is making a big push for its "Way2Save." The ad budget is in the "tens of millions," says Kathryn Black, the bank's savings director. That's more than Wachovia has ever spent on a new-product launch.

Dig deeper into the details, though, and the deal doesn't look quite as good. You can deposit only a limited amount —up to $100 a month, plus $1 that will be transferred from your checking account to the higher-interest savings account for each debit-card transaction and online bill payment. And that 5% savings rate is only for the first year—it ratchets down in years two and three. The size of any annual bonus payment falls after the first year as well, and Wachovia caps bonus payments at $300 a year.

Why launch Way2Save now? The bank earns revenue on debit- card use, but the main goal is to attract the required new checking accounts. These tend to be "sticky" assets and lead to sales of other products, says Black: "The core checking relationship is a key driver of our profitability." Current interest rates on the bank's checking accounts are typically 0.1% to 1.5%.

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