Bank of America Steers Brokerage Clients to Credit for Rewards
September 19, 2011, 3:49 PM EDTBy Alexis Leondis
Sept. 19 (Bloomberg) -- Bank of America Corp. is pushing some of its brokerage clients who want to keep their debit rewards to switch to credit cards following U.S. caps on debit- card transaction fees.
Customers who have the Visa Inc. signature rewards debit card linked to their brokerage accounts will no longer earn rewards points after Nov. 15, according to a letter sent to clients last week.
They’re invited to apply for a Visa signature credit card and earn a one-time bonus of 25,000 points if they make retail purchases totaling at least $1,000 by Feb. 28. They’ll also get double points for purchases made within 90 days of creating the credit-card account if opened by that date.
“We created the best solution for clients by allowing them to transfer points from a deferred-debit card to a credit card and continue to enjoy the benefits of our rewards program,” Selena Morris, a spokeswoman for the Charlotte, North Carolina- based bank, said in an e-mailed statement.
Charges made with the debit card are generally deducted from the brokerage account at the end of the month, not at the point of sale like with debit cards linked to checking accounts.
The Federal Reserve capped debit-card swipe fees at 21 cents starting Oct. 1. It will let issuers tack on five basis points, or 0.05 percent, of each transaction, or almost 2 cents based on the average debit purchase of $38, and a conditional 1- cent adjustment for lenders that follow certain fraud-prevention standards.
Points Expire
The cap, mandated by the Dodd-Frank Act, replaces a formula that averages 1.14 percent of the purchase price, or about 44 cents. The limit may reduce annual revenue at the biggest U.S. banks by $8 billion, data compiled by Bloomberg Government show. Swipe fees for credit cards, which aren’t regulated, equal about 2 percent of the purchase price and generate about $40 billion a year.
Customers of Merrill Lynch Wealth Management who have earned rewards points on their Visa debit cards and open up credit cards will have those points automatically transferred to the credit cards, the letter said. If they don’t apply for the credit cards, they can redeem their rewards points by visiting card.ml.com by May 18. Rewards points that aren’t redeemed by May will expire.
“As far as our general policy on debit, we continue to evaluate pricing and benefits across all our payments products, including debit cards,” Betty Riess, a spokeswoman for Bank of America, said in an e-mail.
Other Banks
Morgan Stanley has a debit-card rewards program linked to brokerage accounts and it’s under review as a result of the debit cap, said Christine Pollak, a spokeswoman.
Wells Fargo & Co., the second-biggest debit-card issuer after Bank of America, stopped enrolling customers in debit-card rewards programs linked to bank accounts earlier this year and existing clients won’t get points for debit-card purchases starting next month. JPMorgan Chase & Co., the second-largest bank by assets after Bank of America, stopped offering debit- card rewards for most of its customers in July.
--With assistance from Dakin Campbell in San Francisco and Donal Griffin in New York. Editors: Rick Levinson, Peter Eichenbaum.
To contact the reporter on this story: Alexis Leondis in New York aleondis@bloomberg.net
To contact the editor responsible for this story: Rick Levinson at rlevinson2@bloomberg.net.
