Fine Print Friday: Bank of America Power Rewards Visa Signature Card

Fine Print Friday is a weekly column where I examine and analyze Contracts that affect many of us in our daily lives. Each installment will point out a few interesting provisions the average reader may not have noticed.

Fine Print Friday: Bank of America Power Rewards Visa Signature Card

As one of the United States’ largest banking institutions, Bank of America (BoA) has made itself a household name in most areas of the country. It has its share of detractors as well, and in light of recent changes to the credit industry and BoA’s decision to eliminate overdrafts on debit card transactions (foregoing millions in revenue), one of their most popular credit cards seemed like a good candidate for Fine Print Friday. After reading through the card’s Terms and Conditions and Credit Card Agreement (PDF), the following is what struck me as most notable:

1. Changes to Terms and Conditions: As with most credit cards, BoA is able to change the terms of the credit card at any time, and can change them to anything allowed by law, including raising interest rates. Although changing the terms amounts to an alteration in the contract, all that is required is that the card-holder is notified of the change and given a chance to close the account within a reasonable period of time. If you do not close the account, then you have accepted the new terms, even if you don’t know what the new terms are.

2. Payment Application to Multiple APRs: If you have multiple types of credit balances (purchases, balance transfers, and cash advances, for instance), the payment amount of the minimum payment due will be applied to the balance with the lowest interest rate first. That means that the highest rate amounts on your credit card will be the last to be paid off. Given that the cash advance interest rate for this card is 24.24% per year, any balance for a cash advance will cost the customer the most in interest and be the last to be paid off.

3. Overdraft Protection: If you have a Bank of America checking account you may link your credit card to it as overdraft protection. Overdrafts are charged to the credit card as cash advances (carrying the highest interest rate), and are transferred in increments of $100, regardless of the amount of the actual overdraft. The credit account will also incur a transfer fee of 3% or $10, whichever is higher. If the amount required to cover the overdraft exceeds your credit limit, BoA can move the money anyway and charge an over-the-credit-limit fee as well. Ouch.

4. Power Rewards Points: For the first 6 months with this card, card-holders receive triple reward points at gas stations, grocery stores, and pharmacy. However, only stores that process transactions in certain ways (according to specific “Merchant Category Codes”) will award the triple points. There is no explanation of how to determine the Merchant Category Code of a given store, and no listing of participating stores.

5. Cash Rewards: Some rewards can be redeemed for cash rather than goods or services. These cash rewards consist of 1% cash back due to the Power Rewards bonus. The Power Rewards bonus expires on Dec. 31, 2012, however, so don’t wait until 2013 to redeem your rewards points for cash! Card-holders may also apply the cash rewards to their BoA mortgages, but there is no guarantee as to how the cash will be applied (to principle, interest, or fees), or whether application of the cash award to the mortgage will incur a prepayment penalty.

6. Variable APR Calculation: The APR is a combination of the highest U.S. Prime rate and a margin set by BoA. The Prime rate used is the highest rate published by the Wall Street Journal on the last publishing day of the month, but that rate applies retroactively to the balance on the account as of the billing cycle that started in that same month. So if your billing cycle starts on January 3, your balance and purchases would be assessed interest based on the Prime rate as of January 30.

7. Interest Accrual: Interest on balance transfers and cash advances begins to accrue on the date of the transaction. This differs from interest on purchases, which does not start accruing until the next billing cycle if it is not entirely paid off. This is particularly important given the much higher interest rate on cash advances, and the fact that interest accrues daily rather than monthly. See this post on compound interest if you need further information on how daily interest accrual works.

8. Postdated Checks: Card-holders are not allowed to pay on their accounts using postdated checks. If BoA receives a postdated check for payment, they will either cash it immediately (regardless of the date), or return it without cashing it. The latter could be particularly problematic if the postdated check is sent near a payment due date because BoA will still assess the late fee on a check returned to the card-holder due to postdating.

9. Mistaken Charges: If a card-holder disputes a charge on his or her account as being incorrect or mistaken, BoA cannot attempt to collect that amount while it investigates the claim. BoA may, however, continue to charge interest on that amount and hold the card-holder responsible for paying that interest as well as all the other charges on the account.

None of these terms are actually all that surprising given the typical credit card agreement, but for people unfamiliar with the usual practices of the credit card industry some of these items can be a surprise. The contract is clearly written in favor of Bank of America, and anyone considering applying for a credit card with BoA should read through the entire documents liked to at the outset of this post.

Generally, prior to applying for any new credit card, you should read the terms and conditions in full to understand what you are applying for. You should also consider other resources that will help you understand what to watch for in credit card agreements, such as the Federal Reserve System’s Consumer Guide to Credit Cards.

Thanks for joining me for another installment of Fine Print Friday. Please keep sending suggestions my way about other contract you would like to see examined.

If you have had any problems with a Bank of America credit card, please see below for some resources.

Bank of America may be contacted directly by calling 1.800.932.2775 or by writing to P.O. Box 15020, Wilmington, DE 19850.

The Power Rewards Visa Signature Card is administered by FIA Card Services, N.A., also known as Bank of America.

No related posts.

Graham Martin is a solo practitioner focusing on Contract law (including drafting, review, and litigation). He operates Martin Legal Services, LLC in the Minneapolis-St. Paul area.

Back to top