Magazine article American Banker

AT&T Cash Advances Losing Grace Period

Magazine article American Banker

AT&T Cash Advances Losing Grace Period

Article excerpt

Just when its 25-day grace period on cash advances was being touted as a bargain in a major magazine, AT&T Universal Card Services was sending out notices canceling the policy.

The Jacksonville, Fla.-based unit of American Telephone & Telegraph Co. will bring its cash advance policy in line with most of the card industry by eliminating the grace period effective Feb. 28.

It will also reduce the cash advance fee from the greater of $2 or 2.5% to the greater of $2 or 2.0% of each transaction.

The cash advance fee will continue to be capped at $20, significantly more than the big issuer's peers charge. "The top 10 issuers charge the greater of 2% or $1, with a maximum fee of $10," noted Robert B. McKinley, president of Ram Research Corp. in Frederick, Md.

Ironically, the former price scheme, which has long been the target of criticism by consumer groups, finally received some favorable publicity in Time magazine Jan. 10.

The Time article made the point that one could conceivably borrow up to $10,000 for nearly two months, and only incur a $20 fee. This works out to two tenths of 1% or about 2.4% annualized.

"Until AT&T closes the loophole, how can I resist?" the author asked.

Consumer groups such as Bankcard Holders of America, of Herndon, Va. have criticized AT&T, saying in most cases the fee is more expensive than paying interest.

In one report, published in January 1993, Bankcard Holders calculated that a $500 cash advance would cost an AT&T customer $12. …

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