Tag Archives: Bank of America

Reports of branch channels’ demise greatly exaggerated

A few months ago, Bank of America reported that it would consolidate reducing the size of its branch network, with speculation that it would eventually close up to 10% of branches (Bank of America has grown its branch network aggressively over the past decade (organically and through acquisition) and even with a 10% decline, the bank would have approx. 5,500 branches).

Some industry commentators saw this announcement as indicative of the long-term demise of the branch channel.   With self-service channels accounting for a majority of service transactions, branch density does not have to be as high, so some branch consolidation is inevitable.

However, the bigger change is the repositioning of branches as platforms for more complex transactions that require one-to-one transactions with specialists.  The staff mix in branches will change, with fewer tellers needed to handle everyday transactions, and greater deployment of sales specialists (Chase recently reported that it grew its sales specialists from 5,454 in 1Q09 to 6,319 in 1Q10).

Bank of America BankAmericard Basic Visa sign of things to come?

Bank of America recently launched the BankAmericard Basic Visa, featuring a single APR of Prime +14% (17.25%) on purchases, balance transfers and cash advances, and no default rate.  The card also has no over-limit fee, a flat late fee of $39, no introductory offer, and no universal default.

Given the arrival of new credit card legislation in the coming months, this type of pricing could become the norm in the coming quarters.  The card launch also reflects a bank-wide emphasis on clarity.  In April 2009, the bank introduced the Clarity Commitment for mortgages, and extended this to home equity loans in November.  It also recently launched online advertising, promoting “clear, easy-to-understand products.”

This card is a part of a suite of BankAmericard-branded credit cards, which also include Visa, Cash Rewards Visa Signature and Power Rewards Visa Signature.  These cards have an APR range (10.99%-19.99% on Visa, and 12.99%-20.99% on Card Rewards and Power Rewards).  And the three cards have a 24.24% rate on cash advances and 27.24% default rate.

Growing proliferation of credit card annual fees

Bank of America reported in mid-October that it plans to impose annual fees on some of its credit cards.  In the short term , this will probably create some bad press for the bank.  However, all of the leading card issuers are overhauling their pricing models to address new card legislation as well as huge increases in charge offs and provisions for credit losses.  So, we should expect greater proliferation of annual fees, as well as lower incidence of introductory offers and higher APRs.  Some examples below of cards from leading issuers that feature annual fees (this list does not include secured cards, many of which come with annual fees):

  • Capital One No Hassle Cash Rewards: $39 annual fee
  • Fifth Third Platinum Prime MasterCard: $89 annual fee (although note that the APR on this card is Prime + 0%
  • PNC points Visa Signature: $75 annual fee (waived with $20,000 in annual spending on the card)
  • U.S. Bank FlexPerks Travel Rewards Visa: $49 annual fee (waived first year, and waived any year when at least $24,000 is charged to the card)
  • Escape by Discover: $60 annual fee

And of course, American Express has increased marketing of its charge cards, all of which have annual fees.

Ironically, Wells Fargo appears to have dropped the $19 annual fee that came with its credit card rewards program.  Rather than market an optional rewards program to cardholders, it simply promotes rewards and non-rewards credit cards.  Wells Fargo still imposes an annual fee (of $12) for an optional rewards program with its check card, and does allow customers to pool rewards earned on check and credit card spending.