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Bank of America (NYSE:BAC) has done a couple of things of late that are making other banks a little nervous, as well as other competitors such as brokerage firms. First, it eliminated commissions on stock trades when a customer had $25,000 in a brokerage account with the bank. Then it followed up by offering credit cards to undocumented immigrants. What will this giant do next?

BAC is swinging hard at the competition because the competition is moving aggressively on BAC. On the brokerage front, there are plenty of online brokers willing to offer a few free trades to get an account started. Or they'll charge a relatively small amount, such as $7 a trade, no matter how many shares are involved. Brokers, like banks, have figured out that the money in the account is as valuable as the commissions on trades. That's because when money is sitting idly in an account it earns a rather minimum amount of interest. The broker (or bank) can use that money and earn a higher interest on it by investing in overnight repos or other instruments, pay the client a small amount of that interest and make a nice living doing it.

BAC wants more of that interest income. If it has to give away the commissions on trades, it will. Now Wells Fargo (NYSE:WFC) is joining the party, offering 100 trades free if an account has any kind of $25,000 deposit or loan at the bank. In other words, it's using the commissions as a marketing tool to get more deposits or loans. Look for BAC to counter with the same or better offer.

As for the latest marketing tool, credit cards to undocumented immigrants, BAC is going after a new, expanding market: Hispanics. It has several programs now, including the ability to send money to Mexico without the large fees usually associated with it. Now the credit cards are being added to services such as checking accounts and mortgages for undocumented immigrants, the majority of which are Hispanic.

Here's how they qualify: the individual needs to have had a checking account with the bank for three months without an overdraft (another way for the bank to add deposits at a very low cost since checking accounts usually pay very little to the holder). Once the 3 months have passed, a credit card will be issued to the applicant, usually a person with no previous credit history. And that's the power of the program. Credit cards are almost impossible to get without a credit history. BAC is changing that.

Of course, the credit cards aren't free. There's plenty of risk to the bank for lending to undocumented persons who have never had a credit history. So the upfront fee is high and so are the rates on the cards, to compensate for that risk.

This is a controversial program. Some supporters say it's a way of getting these immigrants more into the mainstream of American life, to allow them to own more of a stake in the American way, to develop a credit history which is so important for buying a home. Others believe BAC may be crossing the line, encouraging and helping an illegal group.

It's controversial, but it's also banking outside the box. The company is willing to take more risk to gain more market share as well as deposits and loans. Other banks may or may not follow. But if they don't, BAC is moving one step closer to being the bank that the Hispanic market will turn to when it has banking needs.

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Disclosure: Author has no position in BAC.

Source: Bank of America: Banking Outside the Box