So what happens when banks (such as Citi and Bank of America in this case) aren’t satisfied with their measly billions they make off of credit debt and interest payments? They create a new product that is the Personal Loan!

What is this new-fangled product that, I know from experience, took thousands of man hours and millions of dollars to come up with? Well, let’s see how I can best explain it…it’s credit card debt without a credit card! How ingenious! I hope they are patting themselves on the back right now.

Samples of the mailings are included for your amusement and as a warning.

Bank of America Personal Loan Offer Citi Personal Loan Offer

Apparently, these Personal Loans are targeted only to those that they see have outstanding revolving balances since those in desperate circumstances are more likely to apply and forge new debt that they need to dig out of. The selling point is that customers can take all their other debt and put it into one easy to manage package. The problem is with saavy customers. I have been involved with running Americans into piles of debt long enough to know that I don’t want to be one of those poor lost souls (and you have my pity if you are one of them and I will help). So, I try my utmost to take advantage of credit cards companies and my trusty employer (who will remain unnamed) by taking full advantage of 0% APR balances. Today, there are numerous places that you can get high returns on savings such as an ING Direct Account that pay 4.50% as well as the Washington Mutual Savings Account. So, I borrow for free and either invest in a stock market (which isn’t too wise given my track record) or accrue risk-free interest payments.

The banks also must think me stupid. My current credit card charges me 7.9% interest with very frequent offers of low APR balance transfer (0%-3.9% Fixed). Why then would I be dumb enough to put all my low or no interest balances into another loan “if [I] qualify for our lowest APR of 7.99″. Even more insulting is Citi’s offer of 12.99%. I current have a PremierPass Card from Citi with a line in the tens of thousands with a low APR and they offer me 12.99%.

Needless to say, I did not jump on this offer and hope this Personal Product dies in its tracks. However, based on experience the Personal Loan is vastly more abundant than credit card debt in places like Germany, Japan, and other Asian countries. Perhaps they are smart and use debit/cash rather than allow banks to prosper off of us and merchants by charging interchange (the fee charged to merchants for accepting Visa or Mastercard). Now there’s something for us to think about.

Common Sense…use it liberally.

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