Attention, Bank of America cardholders: your interest rate's going up, up, up!
Filed under: Banks, Borrowing, Credit, Debt
The Wall Street Journal (subscription required) reports that Bank of America will raise its interest rates this spring for as many as four million cardholders who carry a balance and currently enjoy an interest rate below 10%.If you (like most of us) carry a balance and your interest rate is already higher than 10%, breathe easy. This news doesn't affect you. If your interest rate is lower, though, look out for your June account statement -- it will have a new interest rate on it.
The Journal suggests that the climb in interest rates may not be too devastating: if you're carrying a 6% interest rate, it probably won't shoot up to 33% (which increasingly seems to be the ceiling for customers who have made late payments). More common is the example of the Vermont woman in the story who just learned that her 7.9% rate is about to climb to almost 13%.
Bank of America says the change will affect "a small portion" of its customers, but that's got to be cold comfort to that small portion. And if you're among the unfortunate chosen ones, and your interest rate is about to skyrocket, there's one important things to remember.
Bank of America is making you an offer you actually can refuse. But think carefully before you decline to go along with the new rate. The bank will probably close your account, and if you have a balance, your credit score will drop. But for some situations, that might be a useful alternative.
If there's any good news in all of this, it's that the new rates may force some cardholders to reconsider whether they should be cardholders in the first place. It may still be worthwhile to use the card to buy a computer or at school, but maybe they won't reach for it whenever they're in line at McDonald's. And encouraging good behavior is a very good thing.
Still, this rate hike is troubling because it targets consumers who already exhibit good behavior -- they may have revolving debt, but they have good credit scores -- and from a business standpoint, it seems very self-defeating. The credit-card companies jack up the interest that their customers pay, and then if the customer uses the credit card, they're going to pay a lot more, edging them closer to a position where they can't pay at all.
And then their interest rates would rise even further, and their debt would get even harder to manage and pay back.
And then, when customers default on their credit-card debt, bank executives will grumble that nobody's paying them.
It reminds me of the old joke where a suspect, on trial for murdering his parents, begs the judge for leniency -- because he's an orphan.
Geoff Williams is a freelance journalist and occasionally writes about credit cards for various publications, including CreditCards.com.
Reader Comments (Page 1 of 15)
4-09-2009 @ 2:13PM
aaacuda said...
Thank god I finally paid of that card.......!
Reply
4-09-2009 @ 7:06PM
Sandy said...
I didn't even have a balance and they sent a letter stating that the rate would increase to almost 15%. So I sent a letter canceling the card and now they have one less customer to victimize. Greed and arrogance will not work on an American public that is waking up, like a sleeping bear to say NO MORE, We're mad as hell and we aren't gonna take it anymore. TEA PARTIES all across America in protest of this grotesquely arrogant, bloated government and corporations who have no ethical or moral compass. Aren't you all just tired of the money grab?
4-09-2009 @ 2:21PM
cynthia said...
I am a BofA card holder and have been for many years. I have always paid my bill on time, and more than the minimum amount due. My rate has been 7.99 for several years, and last October I got a letter from them that my rate would be 3.99 on new purchases, due to my great credit. This week, I received a letter from BofA that stated that due to the economy, my interest rate would be going up on May 1st to 16.99!! I have never been late, have great credit, and have been a customer for many years so I was shocked. I did notice that I had a option to refuse the changes, so I called and did just that. However, even though I can continue to pay my balance off at the 7.99 rate, I can no longer use the card. They did not close my account, but they told me that if I use it after May 1 the new rate of 16.99% will apply to the entire balance. Needless to say, I will no longer use the card and after this, I no longer wish to do any business with Bank of America. I will no longer even use them for my checking or savings, which I have switched over to a local bank.
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4-09-2009 @ 2:58PM
KN said...
I completely sympathize with you. I had a rate of 4.99 for 5 years and I got the same increase. Just like you I had no late payments and always paid more than the minimum. The girl I talked to was really nice but there was nothing she could do. I made sure to go off on a rant so her supervisors would hear what I had to say. I made sure she knew I wasn't mad at her, just her greedy company. The economy sucks already and now they want us to have less money due to paying higher finance charges, it's just not fair! I was also absorbed by MBNA so the fact that I have to adhere to Bank of America rules is complete crap!!! I told her about how a billion dollar company shouldn't screw over all their customers. I had to do this with my capital one card as well so times are going to be tight because I can no longer charge anything! i am a student and currently student teaching so I am going to school and working as a teacher for free.
4-09-2009 @ 2:21PM
Gary H said...
Bank of America has just given about 10% of the credit card business a jolt. They have made their cards unaffordable with the new interest rates. However, they didn't mind taking my tax dollars or yours to bail their bank from Chapter 7. Well, if the shoe fit's then let them wear it. The federal Government should now raise the interest rate to Bank of America by the same standards that they raised the interest rates to many of us who held their credit accounts. Then this bank should be told that if the credit rates are to escalate to compensate for federal intervention, then all money owed by the bank to federal government should be due and payable at this time. Also, no other funds from a federal source should be made available to Bank of America.
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4-12-2009 @ 6:59PM
TinaBeans said...
Awesome suggestion Gary ^5 ! This is something the fed's should get involved in...Bank of America is scamming everyone. By the way, if it hasnt effected you yet...hold onto your hair..it will!
4-09-2009 @ 2:25PM
rakujath said...
I received the news yesterday. This was my response, please feel free to fill in your name and number and use it.
I think disgusting is the best non-profane word!
Your Name Here
XXX XXXX XXXXX
XXXXXXXX, XX. USA
April 9, 2009
FIA Card Services, N.A.
RE: Rejection of modified terms for account number XXXXXXXXXXXXXXXX.
To Whom It May Concern,
About the only appropriate word I can come up with
is “disgusting.”
My taxpayer dollars bail your bank out from your own
incompetence, and now in your supreme wisdom you are
dinking with the few customers you have who have actually
been paying you. You cut my credit limit and now
want to raise the interest rate!
The proposed changes to the credit card account numbered
above are not acceptable.
I am officially rejecting the proposed changes and prefer to pay
off the account under the existing terms.
By the way, have you ever called one of your customer service
lines and had to try to understand the India/Pakistani English
they speak over the phone?
Let me guess, “outsourcing” saves you money so you can pay
your Incompetent management bonuses.
I look forward to the day when I will never have to deal with you
people again.
Sincerely,
XXXXXXX XXXXXXX
XXXXXXXXX XXXXX
XXXXXXXX
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4-09-2009 @ 4:59PM
JoJo said...
Oh I couldn't agree with you more, I LOVE the letter you sent them with the "opt out" of thier new terms. What gall these banks have, I have written to my legislaters, the Fed Reserve, Dept. Of Banking and Insurance, Comptroller, etc. to complain about just this type of behaviour the banks & credit card comapnies are getting away with these days....dispciable & disgusting, no more money 4 them President Obama...you listening??? Over the limit fee's, excessive overdratf fee's and huge finace charges on top on high interest rates....banks suck!
4-15-2009 @ 11:11AM
cd said...
I couldn't agree with you more. Have you ever thought about turning to Facebook or MySpace to post your frustrations? What better way to get the word out about BofA than to spread it through your network of friends. Maybe you would stir things up to the point where enough people will take their business elsewhere.
Just something to think about
4-09-2009 @ 2:45PM
Julie said...
Bank Of America charged me many Bank Fees when they bought out Fleet Bank several years ago, without warning. $30.00 was a lot of money for someone on Disability...Multiply $30 x 10 Million People they did this to = $300 Million they made in Fees alone. They are Crooks.
Notice the High Interest rates they charge on credit cards, but when it comes to Savings Interest Rates, they are like 1% or Less. They don't like to pay out Int Rates for Savings Accounts, but they like to screw ya for all they can get.
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4-09-2009 @ 2:34PM
CDorsey said...
Only 2 posts??? People had better pay attention to this type of interest gouging.
I, too have been a BoA customer for many, many years & have had all of my business with them - checking, savings, Visa, line of credit & IRA. I have never paid late & like others have paid extra on my account, which has a small balance compared to my credit allowance from them. If they raise my rate above the current APR, I will most certainly seek another card & pay them off. And I may seriously consider closing all of my accounts with them. I was already disturbed that BoA had sent $8B of the 'stimulus' money they got from the taxpayers to China, and that they are providing
credit to people with no social security numbers which enables the illegal immigrant population to defy our laws and abuse our programs.
BoA - you may be big, but you aren't THAT big! When your customers start leaving in droves - see how much you make off those Chinese investors and illegal immigrants!
Reply
4-09-2009 @ 2:40PM
onosibiv said...
banks are more powerful than the US presidents,
why conggress accepted bribes from the credit cards companies ? to kill their own people ??? just like the beasts
eating their own puppies ???
There are many things wrong with this great USA !
WHO can tackle those mistakes if not the honest and rational economists ? Oh common......do not drink peoples' blood you
bankers !!!
Reply
4-09-2009 @ 2:49PM
Gloria said...
This just happened to us and we had made all of our payments on time and even pd more than minimum and we called and just told them to close the acct so we did not have to pay the higher interest. It is insane to treat good customers the way they are. I have 7 accounts with Bank of America and I plan on taking all of my business elsewhere! And I have been doing business with them for over 20 years.....THEIR loss!!!
Reply
4-09-2009 @ 2:42PM
Tom F said...
Sure, Save the bank, SCREW the customer. Let the money whores FAIL.
Reply
4-09-2009 @ 2:43PM
Lisa said...
Notice Bank Of America doesn't pay out High Interest Rates on Savings Accounts? They pay out the Lowest Interest Rates on Savings Accounts.
BOA, Chase, CitiBank are the wealthiest banks because they charge surprise fees on Checking & Savings Accounts.
I can't stand them.
Reply
4-09-2009 @ 2:43PM
Greg M said...
Bank of AmeriKa is taking over the world with their Nazi tactics. They are the biggext loan sharks in the world! They'll probably be Bank of China before long! Do not give the Conglomerate banks your money! Actually, there is no need to give any bank your money. Pay off your debts and pay your utilities in cash, buy a vault and guns and protect your money like free americans, you can do a better job than the banks! They are a bunch of legal criminals!
Reply
4-09-2009 @ 2:49PM
wendygoerl said...
"If you (like most of us) carry a balance and your interest rate is already higher than 10%, breathe easy. This news doesn't affect you."
WRONG!!
I'm already over 16% and I'm caught in this fee raise. (And for the record, I didn't "sign up" with BoA, I was absorbed with MBNA) I'm thinking of refusing the rate, but most of these refusals include a time limit that you have to pay the balance of by, and if there is, somewhere in the fine print, I wouldn't be able to. Heck, if I could have afforded to pay it off completely I would have done so long ago. Truth is, there have been times I've had to take a cash advance to pay my bill. Only good thing about this is it's happening in spring rather than late winter, when my paychecks are smallest.
Reply
4-09-2009 @ 2:56PM
Robert said...
The problem with everything that is going on right now in the economy is the banks themselves. See the Federal Reserve System was formed by bankers to keep the little banks from taking away too much of their profit. The federal Reserve is only half governmental and half the big banks. This was done so one or the other would not be solely responsible for anything. We are charged outrageous interest for loans, then when the greedy bankers messed everything up, we are charged yet again with the bailout. Our government wants us to believe that they need to help the banks to help us, this however is a lie. It is another way for us to be charged! In reality the only solution is to not borrow money, and keep our money out of banks. We really dont need banks, they just want us to think we do. If you have to borrow money for something, you cant afford it
Reply
4-09-2009 @ 3:02PM
bob40wil said...
And the government puts Mafioso in prison for extortion, pfft.
Reply
4-09-2009 @ 3:02PM
james tome said...
if we get smart stick to gether cut up bank america cards maby the u.s. goverment will pay them 18 percent in. on the money we tax payers loan them lets suht these s.o.b. down!!!!!!!!!!!!!
Reply