Bank / Credit Union

Bank of America to offer short-term loans for $5

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October 9, 2020

Bank of America will roll out a short-term loan program for customers in need of quick cash beginning January, 2021. The program, called Balance Assist, will charge customers a $5 fee and have loan limit of $500, according to a Herald Sun report.

The program is designed to help customers with an immediate need of cash, but industry experts are concerned it could upend the market for short-term loans altogether.

The loans will only be available to Bank of America customers who have had a checking account at the bank for at least a year. Regardless of the size of the loan, the loan is expected to be paid back over 90 days in monthly installments Customers are only allowed to have one loan at a time, and can repay the loan early without penalty.

The program makes Bank of America one of the biggest financial institutions to have a small-dollar consumer loan program. Prior to the announcement, the only other banks that have similar programs are U.S. Bank and KeyBank, according to the news report.

These types of loan are generally dominated by consumer finance outlets and payday lenders, although regulators have urged banks to consider small-dollar loans, especially to help consumers affected by COVID-19

"Clients were telling us that they can't make it quite there from paycheck to paycheck. So, this is a bridge," Steve Boland, Bank of America's retail head, told the news outlet.