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Monday, October 29, 2012

A New Bank Lets You Choose Charity for Rewards

A new online bank is hoping that better-than-average savings rates, and the lure of charitable giving, will attract new deposits.

The bank, ableBanking, is offering those who open a new account a donation of $25 to the charity of the customer's choice - any 501c(3) organization will do. Then, each year on the anniversary of the account's opening, the bank will donate the equivalent of 0.25 percent annual percentage yield (25 basis points) of the account's average balance to that charity.

The bank's money market savings account, for instance, is currently paying a 0.96 percent annual percentage yield. So if an account has an average balance of $10,000, at the end of the first year the customer will have earned $96 in interest, and the bank will donate another $25 to the charity, for a total of $50 donated. (A minimum deposit of $1,000 is necessary to open an eligible account).

So why not just find an account paying an extra 25 basis points over ableBanking's offerings, and then make a charitable donation yourself?

AbleBanking's founders say that is not easy to do, because its savings rates are competitive with those offered by other, similar banks, based on rates listed at Bankrate.com. And the idea here is to encourage group efforts to maximize the amount of money donated to a cause. For instance, supporters of a specific charity - say, a local food bank, or even a Little League baseball team - could all agree to open accounts and direct the donations to that recipient. If 10 people opened accounts and selected the food bank, that would be at least $250 going to the charity.

“The attractiveness is the power of collective giving,” said Richard Wayne, the bank's co-founder and chief executive.

The bank's interest rates ar e not “teaser” rates (although they are subject to change, as are any bank's rates), nor is the charitable donation a temporary offer, he said. “The very heart of the product is the charitable component,” he said.

The money for donation to charity comes in lieu of expensive marketing, the founders said. AbleBanking is focusing its efforts mostly online, forgoing expensive options like billboards and television ads.

When customers create accounts, they can select their charities in several ways. They can choose one of ableBanking's partner charities, listed on the Web site; these are based in Boston, since the site began as a pilot program there. They can also search for charities in their communities by ZIP code or search a list of national charities.

AbleBanking is a division of Northeast Bank, a community bank based in Lewiston, Me., with 10 branches. The bank's parent, Northeast Bancorp, is publicly traded (Nasdaq: NBN). While ableBanking has no brick-and-mortar branches, it does have customer service available seven days a week through Northeast Bank's call center in Maine.

The bank isn't aiming to replace your traditional checking account; it's meant just for savings, says Heather Campion, the bank's chief administrative officer. But as with other direct banks, regular deposits can be set up from a checking account into ableBanking.

What do you think of ableBanking's concept? Would you open an account there to help a charity?