Monday, May 11, 2009

How Bank of America Steals from the Poor

Normally I don't write about politics, I prefer writing about topics related to my job. I vaguely heard about a Credit Card bill that Obama has proposed to end abusive lending practices. I'm not familiar with that bill, but I do have an experience that I would like to share. 

When I moved to the US almost 4 years ago, I did not have a credit history. Therefore I applied for a secured credit card at Bank of America. They provided excellent service, and I was happy that I could start building a credit history, even though I had to deposit $1000 to get a $1000 spending limit. 

Being privileged with a stable middle-class job and healthy spending habits, I was able to get better credit card offers fairly quickly. However, every 2 weeks I still get a letter from Bank of America that tries to lure me into an unsavory deal. 

The envelope says "Account Information Enclosed" and it contains 3 checks that you can use with a 1.99% promotional APR that is good until January 2010 (8 months). That sounds like a great deal: you could pay the rent or the mortgage, for only 2% interest. 

What is does not say that a transaction fee of 4% applies (recently raised from 3%), and that after January 2010 the APR goes up to 20.99% (5% higher than the APR for credit purchases). Before BofA corrects me: it is listed in the small print, but it took me 5 minutes to find it. 

So is this abusive or not? I tend to say 'Yes'. This offer is clearly designed for people who need cash most, and those are not financially priviliged, to say the least. The BofA letter only emphasizes the benefits, while hiding the downsides: people in urgent need for cash will be lured into this deal for sure. Therefore my strong statement: "BofA is stealing from the poor". 

What do you think? Is this indeed unsavory, or is this just the American way of doing business: buyer beware?

PS. I called in to stop receiving these checks, but that didn't help, they just increased the frequency.
PPS. Also, I still pay a $39 annual fee just to have this BofA credit card (it's my oldest card, so I keep it for my credit history). BofA claims this fee is needed to ensure global acceptance, customer satisfaction, to provide online account access, to maintain security, and to give you balance transfers and cash access. Then why does my other credit card pay me approximately $1000 per year in cash back? 

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