Bank of America isn’t going to get out of trouble by making trouble for its customers

bofaYou would think that a bank that has received tens of billions in taxpayer funds to avoid death would learn from their mistakes. Not Bank of America. Like the rest, they are not only suffering from the housing debacle, but they’ve now got the issue of revolving credit defaults sucking life out of them. Their solution? Raise rates, and obscure credit terms as much as possible.

I received some of those ‘balance transfer’ check thingies the other day. I have a credit line at B of A, but I barely use it. It’s kept primarily to cover the medical deductible after I break a leg fly fishing. I don’t have balances on any other cards because those other cards are American Express – you pay that off monthly or you don’t get to use it anymore. I can’t use these checks, and in fact I’ve requested that they don’t send them to me at all. Those requests have not been honored.

Nonetheless, what bothers me about these balance transfer devices isn’t that someone could nab them from my mailbox and transfer their balance to me (the reason I don’t want to receive them to begin with), it’s the terms within. They suck. The form they come attached to is labeled with “Promotional Offer 0.99%” in big bold letters, but as everyone probably knows by now it’s the fine print you have to worry about. Unfortunately, B of A screws that up as well. The bank spits out the standard jargon regarding balance transfers…

* Promotional Offer ID FXNH-ZKJDR: The Annual Percentage Rate (APR) for this offer is a promotional corresponding ANNUAL PERCENTAGE RATE of 0.99% (.002712% Daily Periodic Rate (“DPR”)) and applies only to new Balance Transfers, Direct Deposit Cash Advances and Check Cash Advances bearing this Offer ID (each an “eligible transaction” for this offer)…

It goes on to say that if you are late paying, or if your balance exceeds your credit line, that the offer ends immediately and an APR of 9.9% kicks in immediately. Pretty typical. But then, after all the normal legalese is spewed, the terms stop, a line is printed across the page to separate the next set of paragraphs, which continue as follows…

Non-promotional Check Cash Advances and non-promotional Direct Deposit Cash Advances are subject to the variable APR for Cash Advances, which as of March 31, 2009, this APR is 19.99% (.054767% DPR). In addition, we may increase the APRs on your account up to the Default Rate without giving you notice. As of March 31, 2009, the variable Default Rate is 27.24%.

The average person without a law degree immediately assumes that ‘non-promotional’ label means the following terms don’t apply to the ‘check’ they are about to write to themselves. Then they sneak this in…

The standard transaction fee for Check Cash Advances, Balance Transfers and Direct Deposit Cash Advances is 3% of each transaction, Min. $10. Effective as of June 1, 2009, the standard transaction fee will be 4% of each transaction, Min. $10.

So it’s really not a 0.99% APR – it’s a little over 4% (or 5%, depending on when you write your ‘check’) after tacking on the upfront fee and compounding it.

Again, all this comes from a bank that has taken tens of billions of taxpayer funds to stay afloat, and is going to need billions more to stay that way. But I guess when you have the government perpetually covering your behind it doesn’t matter if your revolving credit portfolio falls further in the tank. We can’t subsidize the banks forever, but B of A clearly has other ideas.

And by the way…

We will allocate your payments to balances (including new transactions) with lower Annual Percentage Rates (APRs) before balances with higher APRs.

That’ll be trouble for B of A soon too.

MG signing off (to shred those ‘checks’)


Joshua Collins says:

So basically if you pay your bill on time and this interest rate is lower than the rate for another card, it makes sense to transfer. Example: you break your leg fly fishing and use a non BofA card to pay your deductible. More tragedy: you get fired and put off paying off the other card. That other card has an interest rate of 9.9%. BofA offers a 0% rate to transfer and it sticks for a year. Yes, you’ll pay the transfer fee of 4%, but that’s a one time fee. Now you have up to year to pay off your deductible without accruing any additional interest as long as you make the minimum payment. That sure beats paying the minimum + 9.9% on the other card.

“The average person without a law degree immediately assumes that ‘non-promotional’ label means the following terms don’t apply to the ‘check’ they are about to write to themselves. Then they sneak this in…”

It’s not snuck in at all. It’s pretty clear English if you ask me. Standard fees for cash advances means for any cash advance, promotional or not. If your everyday credit card customer can’t figure that out, they have no business having a credit card. You, sir, are making mountains out of mole hills.

Good day.

P.S. Would it kill you to put a date on your posts?