Money Angles

By Andrew Tobias

A notion is afoot that the 1990s will be to saving what the '80s were to debt. Good. We need to save more. But how?

There are the traditional payroll-savings plans, and they make lots of sense. But in May, American Express quietly began offering something new: Membership Savings. Under this plan, Amex bills you monthly for whatever amount you'd like to set aside, from $50 to $5,000, then deposits that money in a financial institution it owns in Utah, federally insured up to $100,000.

Perhaps to avoid riling the banks that sell its traveler's checks, Amex is planning to run ads only in Atlanta for now. Elsewhere the push will be through the mail. If you are a cardholder in one of the initial markets (Georgia, Maryland, Massachusetts, New Hampshire, Ohio, Oregon, Virginia, Wisconsin and the District of Columbia), don't be surprised to find an offer in your June statement.

But just because Karl Malden won't be brought to overbear on this doesn't mean Amex considers it unimportant. "Membership Savings will be the basis for establishing a broader financial relationship with Cardmembers," reads an internal marketing piece. "In time, we plan to offer several savings and investment products" -- IRAs and annuities, for example. With millions of affluent cardholders, Amex can quickly accumulate tens of billions of dollars in deposits with nary a bank branch or broken ball-point pen.

To withdraw funds from Membership Savings, you call a 24-hour 800 number and wait for the mail. Or for $10 you can get a 24-hour wire transfer. There is no other fee and no penalty if you fail to save what you said you would. O.K., you won't earn great interest, and you won't get a toaster, but you will earn 0.5% more than an average of what 100 other banks around the country are paying on money-market accounts. That average stands at 6.04%, so at the moment you'd be earning 6.54%.

Membership has its privileges, but depositing money at 6.54% is a privilege Amex is willing to extend to anybody. (Not least because it can turn around and lend that money to its Optima cardholders at 16.25%.) Noncardholders won't be billed, but can make deposits by mail.

The fact is, almost anything that gets a nonsaver to save is a service, and for $50-a-month savers, 6.54% is a perfectly respectable rate of interest. The Amex plan is laudably efficient. Amex is already sending millions and millions of monthly bills and reply envelopes, already processing payments; millions of us are already having to pay those bills. Combining a savings deposit with the payment costs Amex next to nothing and saves us time, a check and a stamp.

Just promise me you'll withdraw your savings each time they build up past $1,000 and transfer them someplace that pays more interest. You promise? Sure. As Amex knows, many of you won't get around to making the switch. You'll forget; you'll agonize for months over where to put the money. Face it, sports fans: Amex, already the Babe Ruth of marketing, has found the perfect way to get folks to accept 6.54% on money that could be earning more.

A final thought on saving. People are worried that if we save too much -- and spend too little -- we'll throw the economy into a stall. And there's something to this. (Not much, but something.) But the long-term solution to that isn't to save less; it's to work harder or smarter. That way, we can both save and spend more.