There’s a reason that issuers offer credit card rewards: They want you to spend more. Ideally, you’ll spend so much that you can’t pay it off in one month, and pay interest on your debts. And according to the literature, it works pretty well. Even though we know that we should carry balances on our low interest cards and pay off our high-APR rewards ones, we have difficulty comparing far-off, nebulous interest payments with the immediate gratification of 5% cash back.
But SaveUp, a San Francisco startup founded in 2011, is changing that dynamic. They reward good financial habits, not bad ones. Members of more than 18,000 financial institutions who enroll in SaveUp earn credits redeemable for prize entries every time they save money, pay down their debts and increase their financial literacy. They announced their public beta today, allowing financial institutions, merchants and everyday customers to try out their program.
“The driving force behind SaveUp is to help Americans succeed financially,” says CEO and co-founder Priya Haji. “We hope to do this by building a fun and engaging experience that rewards them for saving money and reducing their debts instead of rewarding them for spending.”
Making saving as compelling as spending
SaveUp gives customers an incentive to take care of their financial health, pairing long-term benefits with immediate positive feedback. The program encourages members to contribute to retirement accounts, pay down their credit card or student loan debt, and more. The credits earned from such positive financial behaviors can be redeemed for chances to win prizes, be they instant, weekly or monthly giveaways. The startup’s prizes are furnished by merchants like Virgin America and include gift cards, cash jackpots, vacations and gadgets.
The company also offers a free savings rewards programs to banks and credit unions that requires no additional technology or capital investment, and gives them the chance to participate in financial literacy outreach or other community engagement programs. And as a special promo, you can get 100 credits free by going through this link.
SaveUp has already partnered with nine banks and credit unions, and has had positive feedback from those who participated in their private beta. Says San Francisco resident and iPad 2 winner Hana Yang, “If SaveUp is going to give me a chance to win great prizes every time I pay my student loans or contribute to my 401K, then you bet I’m going to keep playing it as often as I can!”
(Oh, and to help you get the most out of that money you’re now incentivized to save, our new interest rates tool finds the best rates for your area and tax bracket)
Why doesn’t everyone offer rewards for saving?
As we’ve noted before, consumers are pretty terrible when it comes to saving and paying down our debts. When the downsides are far away and the upsides within sight, we tend to underestimate the downsides by a lot. Some employers have tackled this problem in another area, changing individuals’ calculation from cookie now vs. lower medical bills later, to cookie now vs. lower medical bills later and financial or other incentives today.
The difference between the health care market and the credit market is that the people who encourage spending with the immediate gratification of rewards – that is, credit card issuers – have little incentive to encourage better behavior. That’s where SaveUp comes in. They’re actually looking out for their members, and making sure that the incentives favor their users rather than just their own bottom line.