Bank of America has tossed a lifeline to American families drowning in credit card debt.
BofA, the second-largest bank in the United States, is offering the “Better Balance Rewards” credit card that will pay users $25 a quarter, if they pay more than the minimum balance every month for three months.
Customers could get an extra $5 a month, if they open a checking, savings or other account with BofA at the same time.
That’s $100 to $120 a year cash back for using your credit card and paying as little as $1 more than the minimum payment due at the end of each month. In other words, if your minimum payment is $25 and you pay $26, you qualify.
“Customers have told us they want a credit card that reinforces good payment practices and recognizes them in a straightforward way for responsibly managing their credit,” Titi Cole, retail products executive at Bank of America, said in a statement. “For consumers who typically pay off credit card balances over time, paying more than the minimum due each month can help pay off debt faster.”
Best Offer Yet
BofA isn’t the first card company to entice customers to pay down their balance, but this offer appears to be the easiest to reach. CitiGroup offered the “Citi Forward” card last year, and Discover offered the “Motiva” card in 2007. Neither card is offered anymore. Both had conditions that were far more restrictive and incentives that were significantly less than the BofA card.
The terms for the Better Balance Rewards card are pretty acceptable. There is no annual fee and no interest for the first 12 months. After that, there is a variable interest rate between 11.9 and 21.99 percent, based on your credit worthiness. There is a 3 percent charge for balance transfers.
The real incentive is for card users to pay something extra on their balances every month. Many households are sinking in credit card debt. The average American household owes $7,122 on credit cards. That’s astonishing until you realize that if you only include households that actually have credit card debt, the average balance is a staggering $15,266.
Better Relationships with Customers
BofA says the new card is aimed at lower- and middle-income families. The bank is hoping users not only will pay more than the minimum balance, but also become customers who do their savings and checking with the bank.
“We want to build deeper relationships with customers, so we provide an added reward when customers have other accounts with us,” Cole said. “It’s good for our customers, and it’s good for us.”
The card also is unusual in that the reward is not tied to increased spending, the way it is with most credit card reward programs. Actually encouraging people to pay down their balances could be a considerable help to companies, including Bank of America, which had to write off $34 billion in credit card debt between 2009 and 2010.
Bill “No Pay” Fay has lived a meager financial existence his entire life. He started writing/bragging about it in 2012, helping birth Debt.org into existence as the site’s original “Frugal Man.” Prior to that, he spent more than 30 years covering the high finance world of college and professional sports for major publications, including the Associated Press, New York Times and Sports Illustrated. His interest in sports has waned some, but he is as passionate as ever about not reaching for his wallet. Bill can be reached at [email protected].
- Reckard, S. (2013, March 5). new BofA card offers cash for paying off debt. Los Angeles Times. Retrieved from http://articles.latimes.com/2013/mar/05/business/la-fi-bofa-credit-card-20130305
- American Household Credit Card Debt Statistics through 2012. Nerdwallet.com. Retrieved from http://www.nerdwallet.com/blog/credit-card-data/average-credit-card-debt-household/
- Yeebo, Y. (2011, May 25). Decrease in Credit Card Debt All Down To Write-Offs, Report Says. The Huffington Post. Retrieved from http://www.huffingtonpost.com/2011/03/20/decrease-in-credit-card-debt_n_837806.html
- Hauser, C. (2010, September 24). Bank Losses Lead to Drop in Credit Card Debt. The New York Times. Retrieved from http://www.nytimes.com/2010/09/25/business/25credit.html