Tag Archives: Bank of America

BofA boasts cash rewards of 3%, yet they cash in at 18.99%

11 Jan

“Cash in on life’s essentials” implores the envelop even before the offer is opened.

On their Cash Reward’s Visa credit card, Bank of America generously offers 1% cash back everywhere, 2% cash back at grocery stores and 3% cash back at gas stations. Best part, there is no annual fee.

But this stellar offer is only applicable on the first $1,500 spent per quarter. So if you spend $1,500 on just gas in a quarter, you’d receive $45 back. That’s the maximum cash reward that can be earned in a three-month span. Sounds like a lot of work for a mere $45 every 90 days, assuming only gas is bought on the card.

However, if you carry a $1,000 revolving balance on the card generating interest at the Cash Rewards Visa’s lowest interest rate of 18.99% for that same 90-day period, you’d pay $48 in interest, accounting for the daily periodic rate and compounding interest. When the average credit card debt for a credit card holder in the U.S. is $5,047, it’s not unreasonable to assuming $1,000 revolving balance in this scenario.

The point is very few will cash in on such reward cards. In fact, the credit card companies expect many people to never break even on these offers, allowing them to dish out diminutive cash rewards to the few who can manage paying off their balance monthly. While the only one who is truly cashing in on this scenarios is Bank of America CEO, Brian Moynihan, who received a $12.1 million pay package in 2012 (and all the other BofA execs).