One problem that can lead many credit card borrowers to have more significant debts than they might have bargained for is repeatedly making only the minimum payments into their balances every month, and now one major national bank is trying to give them incentive to start making larger contributions to their balances.
Bank of America will soon begin giving credit cardholders who open a new type of account an additional $25 cash back per quarter, plus an another $5 if they have another account with the institution, for making payments of more than the minimum on their credit card bills, according to a report from the Los Angeles Times. Altogether, that could add up to as much as $120 in cash back per year just for taking more steps to slash their credit card bills.
The company says it is introducing this new repayment plan as a means of encouraging borrowers with lower incomes in general to make more contributions on-time, the report said. By further incentivizing their having other accounts with the bank, it is also hoping to generate new relationships with those borrowers.
And good news for those borrowers who might have been avoiding more sizable payments in the past is that even if their monthly contribution is just $1 over their minimum payment, they will still qualify for the new incentive, the report said. In general, credit experts say that there are numerous benefits to consumers opening such an account.
“It’s a very positive development, because it encourages people to reduce debt and to open savings accounts,” Tom Feltner, director of financial services for the Consumer Federation of America, told the newspaper.
Terms of the card include no annual fee or interest charges for the first 12 months it’s open, and a variable rate of between 11.99 and 21.99 percent after that, the report said. The card also comes with no interest on balance transfers, but does charge a 3 percent fee for such a transaction.
Consumers nationwide have generally been seeing their credit card balances grow over the past several months as more return to the borrowing habits they might have had prior to the recent national recession. At the same time, though, more are making significant efforts to slash their late payments, resulting in drastically reduced instances of delinquency and default.