Credit card's perk rewards responsible use

/ Source: The Associated Press

Credit card rewards programs encourage customers to spend, spend, spend. A new offering from TD Bank tries to turn that concept on its head by extending a perk for paying more than the monthly minimum.

Rather than accumulating points for airline flights or gift cards, the TD Bank Payment Plus Card offers a discount on interest-rate charges for paying at least 5 percent of the outstanding balance each month. The East Coast bank chain launched the card last month, promoting it as a product rewarding financial responsibility.

A look at the terms:

  • Customers paying 10 percent or more of their balance each month get a credit worth 50 percent of that month's interest charges on their next monthly statement. Those paying 5 percent to 9.99 percent will receive a 25 percent credit.
  • There's no annual fee for the card, but its other features are nothing out of the ordinary. The annual percentage rate for purchases is a variable 21.24 percent, higher than for some other comparable cards. Although there isn't a low introductory rate for purchases, there is for balance transfers — no interest for the first six months.

Who it's for:

Consumers carrying balances on other cards who need extra enticement to pay more than the minimum each month. The six-month period of 0 percent interest on transfers offers an incentive to transfer balances from other cards. The card's twist on typical rewards programs also may help consumers resist the temptation to overspend to qualify for perks.

TD Bank offers an example: By making 10 percent payments on an average monthly balance of $1,500, a consumer can cut $65 from interest charges in the first six months.

If the consumer also transferred $3,500 from a card charging 15 percent, an additional $122 in interest savings accumulates and that includes a 4 percent balance transfer fee.

Who it's not for:

Consumers who typically pay more than the minimum each month may be able to find a card charging a lower rate, even if they earn the maximum credits.