BofA Releases “Simple” Yet Expensive Credit Cardby Tim Manni
Beginning this month, Bank of America (BofA) is supposedly offering a new credit card designed around simplicity. The new BankAmericard Basic Visa card features only one page of terms and conditions as well as a fixed interest rate (sort of — we’ll explain in a second) for all purchases, even cash advances. The card also boasts one flat fee of $39 for late payments.
While the product was announced on September 16 with a decent amount of media coverage, when we checked back with BankofAmerica.com this afternoon, the product was still classified as “COMING SOON.”
The card’s fixed rate is based off the U.S. Prime Rate, plus 14%:
That rate, however, should be noted by consumers. It is pegged to the U.S. prime rate plus 14 percentage points, which sounds like a lot, and it is. The current prime rate is 3.25 percent, meaning that the BankAmericard’s interest rate would be 17.25 percent. By comparison, the national average credit card interest rate is 12.32 percent, according to the Sept. 23, 2009, survey by CreditCards.com.
“It’s a good thing that the Prime Rate is at its lowest level in decades, since a 17+% interest rateis already pretty high” said HSH VP Keith Gumbinger. The rate topped out at 21.5% in 1980.
We were slightly surprised to read that personal finance expert Clark Howard — usually very critical of the big banks and their policies — is actually excited about the new card:
Looks like BOA has finally heard how how feed up people have become with bank gotchas, mice type and lawyer doublespeak in their contracts.
It should not have required the collective anger of a nation — which gave rise to the Credit Card Holders Bill of Rights — to get to the point where a giant bank finally makes the terms and conditions on a credit card understandable. But Clark’s glad we got here all the same.
Spurned by credit card companies and mortgage lenders for offering complex and confusing financial products, Americans seem to be on a simplicity kick these days, and some lenders seem more than happy to oblige. Always remember, just because a product doesn’t have pages upon pages of terms and conditions, doesn’t mean that it’s simple, or more importantly, cost effective.