Bank of America Corp. on Monday said it is marketing charge cards to small-business customers, a move that other banks may follow as they try to attract high-spending customers who pay balances in full.
A borrower must pay off a charge card in full at the end of each month, unlike a credit card, which allows a borrower to carry balances forward and incur interest charges. This is the first time B of A has offered charge cards, Betty Riess, a spokeswoman, said in an interview.
"Charge cards provide small-business owners with another option for their payment needs, combining the convenience of short-term credit with the ability to manage their spending and cash flow," Chip Rossi, B of A's unsecured borrowing and small-business products executive, said in a press release Monday.
The Charlotte, N.C., company said that its three MasterCard-branded cards offer varying levels of rewards and that two come with annual fees, of $49 and $125. Both fees are waived the first year and can be waived in subsequent years for cardholders that use certain business checking accounts with the bank.
B of A faces competition from American Express Co., which has offered charge cards to consumer and business customers for many years and is considered a leader in the market.
More banks will likely offer the products to consumers and businesses as a way to optimize revenue in light of the Credit Card Accountability, Responsibility and Disclosure Act of 2009, which restricted banks' ability to raise interest rates, charge late fees and other actions on consumer credit cards, said Odysseas Papadimitriou, the chief executive of the lead generation website CardHub.com.
Issuers can steer customers who are not likely to carry balances month to month to charge cards, using rich rewards programs and other perks to get consumers to use the product for everyday spending, Papadimitriou said. Banks could push customers who are likely to revolve to traditional credit cards, generating revenue from interest charges.
"What is driving interest is that they want to isolate the customers that have the ability to pay in full every single month so that they can give them the most rewards and benefits and perks and the highest credit lines they can," Papadimitriou said.
The CARD Act did not apply to charge cards nor did it apply to business credit cards, though B of A last year began applying consumer protections under the regulation to its business credit cards, Riess said.
Riess would not say if B of A has plans to offer charge cards to its consumer customers. It decided to offer the product to small-business customers based on feedback from that group, she said.
