Do you have a Bank of America credit card? Better watch your mail! According to Businessweek’s A Credit Card You Want To Toss Bank of America is notifying many of their better customers and telling them their rates may go up to double their current rates unless they opt-out of the card fast. Rates could go as high as 28%!! Of course opting out means you agree to no longer use their card and pay off your remaining balance.Previously a credit card company may raise your rate due to a decline in your FICO score due to a recent practice called “risk-based pricing.” Now BofA is using their own factors known only to the bank.
One consumer was informed that his rate would jump from 9.99% to 24.99%! When pressed for a reason the bank informed the consumer it was due to his not paying off his balance fast enough. This person had actually lowered his balance by 19% in the past six months and was only using 54% of his credit limit. Sounds like he was already paying it off pretty well. Besides, if the bank wanted the balance paid off faster maybe they should have raised the minimum due not raise his rate.
Look at another example from the BusinessWeek article:
Bank of America is trying to get ahead of Amanda Pennington, 29, of Euless, Texas. She says the bank raised her credit limit three months ago from $5,000 to $8,000 because of her strong payment history. Then she got the letter from the bank in mid-January notifying that her rate would rise from 15.74% to 25.99%. When she called, she says, the bank told her it was raising her rate because her balance was now too high, though it was still under the higher new limit the bank had previously granted. After paying tuition for a community college course, transferring another balance, and paying for daily expenses, Pennington’s Bank of America debt now stands at $7,500. Bank of America declined to comment on individual customers.
They raised her limit because she was a good customer then they raised her rate when she used the additional credit! Why bother increasing the limit? Oh yeah – Money!
“Analysts say the bank’s move is obviously aimed at shoring up profits,” says the article. By raising rates they either get higher returns on customers who keep the card or get balances paid off for customers who opt-out and pay their balances in full. Either way it’s more money for BofA!
This seems unfair! The examples shown are not people who have defaulted on payments or have done anything wrong to justify such increases.
BofA may be losing my business soon!
What do you think of all of this?
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{ 3 comments… read them below or add one }
Well, Mrs. Pennington of Euless, Texas (which happens to be 10 minutes from me) can probably file suit under the Texas AND Federal Deceptive Trade Practices Act. Sounds deceptive to me, especially in her case. Of course, she should check with an attorney first to find out if she has a claim, but it sounds to me like she does, and I happen to work in a law firm. I quit using BofA years ago when my husband and I combined accounts, but if BofA gets away with this, other banks will follow suit until somebody gets wise and files a suit.
Even if they raise rates, if they read your article from 2/13/08 where you say to pay it off every month, you’re still not in TOO bad of a boat. Granted you need to be happy with your bank to continue with them, but…
@ Sabrina – That would be great if they could start a class-action suit against this. You’re right about other banks following suit. If BofA can get away with this then we’ll see a lot of changes from credit card companies.
@ Hank – The concerning thing here is that the bank makes these changes with no real reason. It used to be you had to have a late payment at least. Now if the bank needs to shore up it’s profits due to bad housing loans then they push the fess onto credit card users!