Basic Visa touts the "simplicity" that customers crave. Sure it's simple: the interest rate starts high and goes up
Tired of incomprehensible credit card mumbo jumbo? Are you craving simplicity? Hungering for a flat fee monthly charge instead of ballooning payments tied to how much you owe? Well, then Bank of America has the credit card for you: the new BankAmericard Basic Visa.
Here’s how BofA describes it:
Key features of the BankAmericard Basic Visa card include:
- The interest rate is the same for all transactions, including purchases and cash advances, making it easy for customers to keep track of their interest rate at any given time.
- One interest rate — U.S. Prime plus a margin of 14 percent — that never changes for the life of the account. Rate increases and decreases will only occur if the Prime Rate changes.
- No over-the-limit fee.
- Easy- to-understand, single-page disclosure explains terms and conditions.
- One flat fee of $39 for late payments.
The Wall Street Journal says the card “is BofA’s response to calls for simpler and more transparent banking products that eliminate confusion about what customers are getting.” The Washington Post says the card is “intended to make it easier for consumers to handle their debt.”
But it seems like a bad deal to me. The prime rate right now is sitting at a historic low of 3.25 percent. A year ago it was at 5 percent. Two years ago it was at 8 percent. So a return to the conditions of two years ago would give you an APR of 22 percent. There’s a word for that, especially when targeted at the kind of customers who are likely to be the market for this card — people who generally have trouble paying off their credit card debt. The word is “usury.”
My guess is that these new, “simpler” cards are really a bet on inflation. If and when the economy starts growing at any kind of reasonable pace, the Federal Reserve will be forced to start raising interest rates. The prime rate rises in step with the Fed Funds rates. A healthier economy, with consequent higher inflation, will jack up the interest rates on these simpler.
Does Bank of America think people can’t read? “One interest rate — U.S. Prime plus a margin of 14 percent — that never changes for the life of the account.” Except of course, the prime rate is constantly changing, and for the foreseeable future, it will be headed up.
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