Pay off credit card bill, face a penalty NationsBank of Delaware to adopt that policy, which is becoming a trend

April 01, 1997|By BOSTON GLOBE

NationsBank of Delaware is preparing to impose a $25 annual fee on Blockbuster Visa customers who pay off their credit card bills each month.

The new fee is part of a growing trend in the credit card industry to penalize those customers who pay their bills promptly, in part because banks are making little, if any, money in serving them.

Company officials said 6 percent of Blockbuster Visa customers -- those who carry no balances -- would be charged the fee. The officials declined to say how many Blockbuster Visa customers there are.

"It's a payment to allow these customers to continue to enjoy the benefits of a card people like to use," said NationsBank spokesman Ellison Clary.

The GE Rewards MasterCard imposed a similar fee last year on customers who had less than $25 in annual interest charges. The move by GE set off a firestorm of protest.

U.S. Rep. Joseph P. Kennedy II of Massachusetts said GE was effectively penalizing those who pay their debts promptly, thus encouraging more spending and more debt and discouraging savings. The Democrat proposed legislation that would bar such fees.

Aides said yesterday that the legislation would be filed within the next few weeks.

For Blockbuster Visa cardholders who pay their bills off each month, the card is a moneymaker. The card currently carries no annual fee and pays holders a monthly usage dividend in the form of "Blockbuster Bucks."

The bucks come in $5 denominations and can be used to rent videos at Blockbuster stores, with change returned in cash.

Sources say NationsBank may have been losing money on these customers. Industry sources say the typical customer charges $3,000 a year. If the bank collects no interest on those charges, its only revenues are "interchange" fees that typically run 1.4 percent per transaction.

NationsBank would recover $42 on a customer charging $3,000 a year who pays his bill off each month.

Out of that $42, NationsBank would have to cover its expenses and pay the customer his Blockbuster Bucks.

Pub Date: 4/01/97

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