Bank of America is expanding its secured card program, launched earlier this year in Arizona, to customers in California.
Adding Californians to the program is part of the bank's overall plan to roll out a secured card in the seven other western states in which it has retail branch operations.
The Nilson Report ranks Bank of America the eighth-largest credit card issuer, with $6.4 billion in outstanding credit card receivables.
Bankrupts Ruled Out
The San Francisco-based bank is offering this product to people with a poor or non-existant credit record. Unlike some issuers, Bank of America will not consider consumers who have a personal bankruptcy listed on their credit report. A bankruptcy filing remains on a credit report for 10 years.
"The new BankAmericard secured card enables us tO meet the credit needs of our customers who may not otherwise qualify for our credit card," said Stephen B. Galasso, marketing director for the bank's credit card division, in a news release.
Bank of America is not planning a marketing or advertising blitz to promote the secured card. Instead, it is getting the word out through materials placed in its branches.
Also, if a customer applies for the bank's unsecured credit card and does not qualify, he or she will be offered the secured card. By avoiding direct mail solicitations and advertisements, Bank of America appears to be testing the market with its new offer.
Its foray into the secured card business comes after a number of major credit card issuers, including Citicorp and Chase Manhattan Bank, began offering secured cards, bolstering the reputation of this product that has had a shady past.
Annual Fee
Bank of America requires a minimum deposit of $500 and it has set the interest rate at the prime rate plus 10.9%, or 18.15% at today's rate.
The BankAmericard secured card offers a relatively low annual fee of $18, which is waived if the customer has a checking account with the bank that is linked to the card for overdraft protection.
If a customer with such an arrangement overdraws his or her checking account, Bank of America restores the overdrawn amount to the checking account from the customer's secured card's line of credit, and assesses a cash advance fee. Cardholders are given a 25-day grace period on the secured card.
The account is revaluated after 18 months to determine whether the customer qualifies for an unsecured credit card.
