As big banks ratchet up fees on once-free checking accounts, they’re looking to entice some of their most credit-worthy customers to take on more debt with new promotions.
Bank of America is mailing offers to some customers that would allow them to transfer their credit-card balances to their accounts at interest rates as low as zero plus transaction fees through next year, Bloomberg reports. The bank is offering customers a one-time $10 or 4 percent fee, per transfer, according to Bloomberg. Other banks such as JP Morgan Chase, Citigroup and Wells Fargo are sending out similar offers.
Customers who take advantage of the offer would be able to transfer their credit card balances to their accounts, like a short-term loan, using the low interest rates, according to CBS News. The offers may be aimed at encouraging consumers to take on more credit card debt after the economic downturn made them skittish about taking on more debt.
Leading up to the recession, consumers racked up debt that they often had to pay back to credit card companies and banks at high interest rates. When the downturn hit, many couldn't pay back the money leading to a renewed interest in savings; The personal savings rate hit 5 percent in July 2011, according to the Commerce Department, that's up from 1 percent before the recession.
As consumers moved away from buying purchases on credit, debit card use went up. Signature debit card transactions increased by almost 10 percent between April 2010 and April 2011, according to website Digital Transactions.
The banks could also be betting that consumers will start to use their credit cards more as new debit card fees begin to kick in. Bank of America plans to start charging customers $5 per month to consumers who use their debit card for purchases starting in early 2012. Wells Fargo announced in August that it would start testing a $3 monthly fee for debit card use.
Bank of America CEO Brian Moynihan and other bank industry officials have said that the banks need to charge the debit card fee to make up for revenue they’re losing as a result of the Dodd-Frank Act’s cap on the debit card swipe fees take from merchants. But President Barack Obama slammed Bank of America for charging the fee, saying the bank was "mistreating its customers."For those customers who don’t opt to increase their use of credits or who don’t want to pay the debit card fee, there could still be another option: Credit unions. The nation’s largest credit union reported that new account openings were more than 20 percent higher the weekend following Bank of America’s announcement.