Credit Card Firms Offering Simpler Deals Ahead of Law

Credit card companies took a great deal of criticism as Congress was writing a law restricting their ability to raise rates and fees. The law, passed in May, won't go into effect until February, but already some companies have begun offering simplified agreements to counter that criticism.

Bank of America announced Thursday that starting in October, consumers will be able to apply for its Basic Visa card. The new card offers one rate for all transactions -- including balance transfers and cash advances, which are typically charged different rates than purchases. That one rate, prime rate plus a margin of 14 percentage points, would only change if the prime rate fluctuates. There would also be a flat late charge of $39. Many companies charge late fees based on the amount owed.

"Consumers are looking for simple and straightforward solutions," said Brian Moynihan, Bank of America's global consumer and small-business president. "We want our customers to have offerings that are predictable, easy to understand, and will help them through challenging times and beyond."

Earlier this week, Chase introduced its Blueprint card, which is designed to help borrowers pay down balances more quickly. Cardholders can decide which expenses they pay off in full each month, such as groceries or gasoline, while accruing interest on other purchases. For items not paid off right away, borrowers can set a target date for doing so, allowing Chase to calculate the monthly payment that will get them to that point.

"Consumers want more control, simplicity and predictability when it comes to their finances," said Gordon Smith, chief executive of Chase Card Services.

Credit card experts said card issuers are clearly trying to improve their images after months of defending themselves for raising interest rates and cutting credit lines for even their most creditworthy customers. Consumers have been increasingly turning away from credit cards. Revolving credit, mainly credit card debt that consumers do not pay off in full each month, fell $6.1 billion in July, according to the Federal Reserve.

"It's stiff competition in terms of trying to regain consumer trust," said Curtis Arnold, founder of CardRatings.com, which compares credit cards, "and trying to regain loyalty among cardholders."

At the same time, experts said, the new cards could benefit consumers -- which ultimately would help the card companies. "I think the trend there is we as a credit card industry are trying our best to reinvent ourselves, not do business as usual, and at least give the appearance of being more consumer-friendly and more consumer-focused," Arnold said.

Some of the consumer-friendly changes will actually help companies avoid dealing with the new law.

Bank of America's Basic card won't impose a fee when customers exceed their credit limit; under the new law it must be disclosed before the transaction goes through. Discover and American Express recently announced that they were eliminating over-limit fees.

"Some of what they're doing there is eliminating some of what caused the anger and resulted in limits on what they can do," said Ed Mierzwinski, consumer program director for U.S. PIRG, a consumer advocacy group. "They're responding to market demand for a card that people can understand, that won't require a 45-page disclosure. It's pretty close to plain vanilla in some ways."

But consumer advocates say it's not time for borrowers to rejoice, pointing out that the rate on Bank of America's new card could be high depending on the prime rate.