Amid growing anxiety about American consumers' failure to sock something away for their golden years, American Express Co. is marketing a card with a rewards program that drops 1% of purchases into a high-yield savings account.
The company's aim is clearly to lure more credit-card users and encourage more purchases, but it might also be hoping that the savings aspect of the campaign helps stave off growing criticism of credit-card companies by advocacy groups and the public-relations nightmare that could cause.
The American savings rate-now at negative 0.5%-hit a 73-year low, according to a report from the U.S. Commerce Department released last week. The last time the rate was negative was in 1932 and 1933, when the nation was in the midst of the Great Depression.
Credit cards, while a crucial part of American economic growth engine, are often blamed for Americans' profligate ways, especially as credit has become more readily handed out in recent decades. That's made it easy for consumers to run up high balances buying stuff they don't need.
American Express isn't the only financial institution to address the savings issue. Bank of America has a debit-card program with Visa that rounds purchases to the nearest dollar and transfers that difference to a savings account. Emigrant Bank's online bank Emigrant Direct issues a MasterCard that will kick 1.25% into a high-yield savings account.
But the paradox of programs that require spending to save, as well as the almost negligible savings rate, has drawn fire from consumer advocates.
"These are nice marketing gimmicks," said Don Blandin, president-CEO of the nonprofit Investors Protection Trust. "There are some people who say because the savings rate is so low anything that can be tried ought to be tried. I'm not in that group."
Many of the companies offering such deals already walk on shaky ground with consumers, long frustrated by fine print, big corporate bureaucracies and overall shoddy service.
"These big financial institutions have to find a way to educate the consumer, maybe through a trade association or collaboration with some regulator," said Michael Robinson, VP at independent Levick Strategic Communications, a Washington PR firm.
"Ultimately, these credit-card companies need to be seen by their customers as doing something that helps them. If they give that information in a concerted way over time, they'll burnish their brands for the long term and get those consumers for life."
This spring, Mr. Blandin's organization will launch a national communications campaign aimed at educating consumers about the process of investing rather than on investment products.
"We have to reacclimate folks to the world on saving and investing themselves for a secure financial future," said Mr. Blandin. "If people haven't learned the basics, a card like this isn't going to start them on the path to savings. It'll give people who are prone to being what I call consumers on steroids a bit of benefit for spending all that money."
"There is a segment of our consumers focused on saving for the future rather than getting cash back or travel rewards," commented a spokeswoman for American Express. "These are people who are spending money on everyday items and his helps them in an automatic way to say on purchases they would make anyway."