Bank of America Overhauls Credit Cards to Boost Customer Base

Despite recent contention over interest rates and transaction fees, credit cards remain firmly entrenched in the U.S. payments landscape. To capitalize on this ubiquity, Bank of America is undertaking a credit card revamp aimed at driving profits to new heights.

A central force behind this overhaul is artificial intelligence. The bank plans to leverage AI to identify and attract new customers, while also encouraging existing clients to deepen their relationship with Bank of America.

Another key aspect of the redesign is offering tailored incentives to customers with higher account balances, a strategy long favored by credit card issuers.

“Bank of America’s strategy to further their rewards program with incentives on customer deposits enhances their strategy to leverage the credit card as a comprehensive tool for customer management,” said Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research. “It expands a program they deployed for the past couple of years, and the timing is right.”

“Instead of simply associating rewards with card purchases, it considers deposit relationships and adds point accelerators,” he said. “This allows the issuer to add incremental value to consumer deposits and reward customers for their banking relationship. It is not new to Bank of America, and the functionality has been proven in the field.”

Squeezing More Value

Recent years of high inflation and interest rates have pushed consumers toward credit cards, driving balances upward and prompting issuers to tighten lending standards, lower credit limits, and prioritize stable customers.

“The timing is perfect from two perspectives,” Riley said. “First, it targets premium and luxury cardholders that pay large annual fees, such as Amex Platinum, Chase Sapphire, and Citi Strata.

Secondly, with pressure on credit card rates looming, it is a way to squeeze more value out of the relationship for both the issuer and the cardholder.”

More Than Risk Mitigation

While interest rate pressures are not inevitable, many banks are preparing for a potential 10% cap on credit card rates. However, Bank of America’s strategy extends beyond risk mitigation The company has set an ambitious target: growing its customer base from 69 million to 75 million in four years.

One approach is using AI to gather deeper insights about prospective customers and deliver personalized offers at pivotal life moments, such as marriage or purchasing a home.

Ultimately, Bank of America aims to provide individualized underwriting for each customer. Once achieved, the bank has another ambitious goal: raising consumer unit profits to $20 billion—something that has only been accomplished twice in U.S. banking history.