Bank of America card pays consumers for paying down debt

Friday, March 8th, 2013 By

Bank of America

Bank of America’s new card product pays those who pay extra toward their monthly bills. Image: Susan NYC/Flickr/CC BY

Most credit card rewards programs pay card holders for spending and adding to debt. However, Bank of America recently issued a new card that rewards people for paying down debt. The BankAmericard Better Balance Rewards card incentivizes cardholders for paying their monthly bills on time and for throwing in a little more over their minimum charge.

Bank of America rewards responsible debt management

If a card user doesn’t have any late charges and pays a little more than the minimum payment required, they can earn $25 per quarter. In addition, if they also have a bank account with Bank of America, they earn another $5, four times a year. That is a maximum yearly earning of $120. Those rewards can be applied to the customer’s credit card debt, or they can be cashed out and deposited into another account.

There is no annual fee for the BankAmericard Better Balance Rewards card, and no interest for a year. After 12 months, the interest kicks in at anywhere between 11.99 percent and 21.99 percent, depending on the card holder’s earnings and credit history.

Not a typical rewards card

While most credit cards with rewards programs are aimed at cardholders with good credit and larger incomes, the BankAmericard Better Balance Rewards card targets consumers with lower incomes and fair-to-poor credit, speculates the Los Angeles Times.

A good thing…

While Bank of America is not the first lender to market a card that incentivize customers to pay their bills, Curtis Arnold, founder of CardRatings.com, says it is a good trend. He said, β€œAt the end of the day, rewards work to motivate cardholder behavior, and enticing someone to pay on time is a good thing.”

But could maybe be better

The card is not right for everyone, however, and some see a possible dark lining. Matt Brownell, writing for Daily Finance, said that, by offering the same reward for any amount paid over the minimum requirement, customers could be compelled to kick in an extra dollar on bills just to get the reward without making any real progress on their debt balance. He suggested a reward on paying a certain percentage over the minimum would likely be more effective.

Even so, it still incentivizes a timely payment.

Earlier cards to reward debt control

Earlier attempts at cards that incentivize consumers to pay their debts have included the Discover Motiva Card, which paid the equivalent of 5 percent of interest charges to customers who paid up on time. Likewise, the Citi Forward card, marketed to college students, reduced interest charges for responsible card use.

Sources

Fierce Finance
New York Times
Daily Finance

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