Bank of America, the second-biggest bank in the U.S., launched a program that lets clients take out loans of up to $500. Called “Balance Assist,” it offers small dollar, short term, and low fee loans, which is a relatively unique program among major banking institutions.
Mobile platforms have rolled out similar features in the past. Cash App is offering small-dollar loans on its platform, and Chime’s SpotMe feature automatically loans clients $100 if they overdraft their account. But Balance Assist is relatively unrivaled by traditional banks. Here’s how the program works, and who’s eligible.
BofA Balance Assist
Through Balance Assist, Bank of America clients can borrow $100 increments up to $500. Every loan has a flat $5 fee and will be paid in three monthly installments. While these loans are similar to payday loans, Balance Assist is much better for consumers. Most low-dollar payday lenders charge extremely high fees and can leave consumers worse off. By offering a low, flat fee, Bank of America is essentially offering payday loans at significantly lower interest rates.
“We continue to develop a variety of innovative solutions to help our clients achieve solid financial footing,” April Schneider, head of Consumer and Small Business Products at Bank of America, said in a statement.
Early in the pandemic, a joint group of federal and state organizations penned a letter urging banks to offer more responsible small-dollar lending options. The letter, which came from the Consumer Finance Protection Bureau, the FDIC, and the National Credit Union Administration, among others, said:
The agencies recognize the important role that responsibly offered small-dollar loans can play in helping customers meet their needs for credit due to temporary cash-flow imbalances, unexpected expenses, or income short-falls during periods of economic stress or disaster recoveries.
To be eligible, clients must have had a Bank of America checking account for at least one year. In addition, the bank will consider clients’ banking info and credit history to evaluate eligibility.
The Bottom Line
The Balance Assist program is positive for consumers, and other banks may follow suit in the future. If nothing else, consumers now have reasonable alternatives to payday loans if they need cash relief fast.