BusinessWeek has just published an article about Bank of America’s recent surprise mailings in January to some of its customers, announcing “that it would more than double their rates to as high as 28%, without giving an explanation for the increase.” These customers have good credit scores and hadn’t made any late payments, and those who called Bank of America to ask why this was happening weren’t given clear reasons. Industry experts say Bank of America has reached a “new level” of “lack of transparency in raising rates,” beyond anything Citigroup and JP Morgan Chase currently practice, because BoA is apparently using some undisclosed internal metric to determine who gets the rate hike.
The easiest explanation is that BoA is just trying to get rid of customers who don’t make them any money, usually by carrying extremely low balances or no balance at all. But the anecdotal evidence suggests otherwise:
Michael Jordan, 25, a software developer who lives in Higganum, Conn., says he received a letter from Bank of America in late January advising him that his card rate would rise from 9.99% to 24.99%. The software developer, who earns $80,000 per year, says he was “shocked” because his payments had been on time and his credit score hadn’t changed in the last year. In fact, Jordan says, he has only $4,500 in overall outstanding credit-card debt on two cards and that, on the Bank of America card in question, he had paid down his balance to $3,000 from $3,700 last August.
Some analysts think the bank might simply be trying to shore up profits in anticipation of dealing with the “profit sinkhole” that is Countrywide Financial and the anticipated rise in charge-offs and write-downs as the economy continues to falter. “Boosting rates on existing credit-card holders is one of the quickest levers a bank can pull to try to boost earnings,” says one analyst.
(Thanks to W!)
“A Credit Card You Want to Toss” [BusinessWeek]
(Photo: Getty)
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Hopefully they don’t pull that garbage on me, but I should have plenty of places to switch to if they do.
I stopped using my credit card as credit card. I use it as a “charge card”. This simply means, I pay for things using the card, and pay off my balance at the end of the month. If the balance is more than I can pay that month, I borrow money from my equity line at a much lower rate. I then pay back the equity line when I can. So far so good.
If I didn’t have the equity line, then I would seriously pay the credit card by borrowing against my 401K. It’s much cheaper than paying BOA 24%!
This happened to my wife and myself last year at this time. It was obvious after I was transferred to a retention specialist who said they would do nothing that the simply did not want our business. No lates, carried a balance, paid more than the minimum, had banking & savings with them but we pulled it all after that maneuver on their part.
Does anoyne have the phone # that was on the letter?? I want to call them and see if I was snared in this trap!!
@azntg: exactly. now couple this little BOA bomb shell with the recent Bankruptcy “reform” , current economy & other CC following suit – people are going to be seriously screwed.
My rate with BofA is 16.9%, down from 19.24% at this time last year.
I hadn’t really paid much attention to it, since I pay it off every month, honestly I hadn’t even been looking at the rate until now. Should I be making noise to them about this? I’ve been looking really hard at a better rewards card (Amex blue?) for a while now anyway…
Federal laws prohibit banks from making aquisitions if they have over 10% of the nations deposits. BofA was at one time near that limit and started raising fees & rates to get rid of less profitable customers. I don’t know if it’s related but I know their experience from that first experiment in culling customers was that they made a lot more money.
(Our local consumer reporter says to avoid them altogether.)
Anyone who has a BofA account of any kind and doesn’t get rid of it,if they can, is not too bright. Bof A has just told their customers that the don’t give a crap about them. Thank God I don’t bank with these jerks.
Bank of America cannot increase my rate because it’s locked in an introductory offer for 12 months, so the letter I got from them tells me that they’re reducing my line of credit by $1,000, instead. The reason they give is that I’m only making the minimum payment each month. Here’s the first sentence of the letter, “Bank of America takes a proactive approach to reviewing our Customers’ accounts.” I intend to pay off the balance during the 11th month, and then I will close this account.
I know it sounds corny but the internet is an amazing tool for rebellion. If enough people comment to one source or a couple major news outlets and the story goes viral, bigger companies or the Govt. usually gets involved and puts a stop to unfair activity. The Bank has some of us by the balls and thinks that it can get away with this but if enough of a stink is made of the issue they will be forced to back down! The key is bombarding servers with thousands of consumer complaints. This includes the White House. Nothin’ pisses our new president off more then unfair interest rate gouging in this tight economy!!
The bank lady over the phone warned me that everyones rates are going up to 14.99% percent. My current long time rate has been 9.99 percent. I have been a loyal customer for 14 years have a credit score in the 800′s have no fickle points often carry a balance all year long and then pay it off with tax refunds (I have no savings). They have made a ton of money from me and I am currently for the first time debt free including vehicles but might buy a house soon. Navy federal has offered 9.99% for credit cards so I guess loyalty goes only so far they need to be competitive and they have decided not to be. I want a low no frills card that’s all, no air miles or merchandise and I will be happy.
The best thing we do right away is send a short letter to all our elected officials to get the credit card companies and banks to stop abusing their customers. I have been encouraging everyone to express their disatisfaction that the new rules limiting what the companies can charge for credit card rates will not go into effect until July 2010!!!!!!!
This gives these companies motivation to “abuse” us now.
The best thing we can do is” STOP DOING BUSINESS WITH THESE THIEFS”…………….
Please email or write ( or call) your elected officials right away.
If anyone is interested I can give you some great links to get to your elected officials e-mail quickly.
Dan
had bofa credit cards for over 20 yrs. never a late payment. got letter saying they are doubling our interest rates. they should be investigated by the bank commissioner and then made to reverse their policy of ripping off customers. they have powerful lobbyists that influence government policy, so they are virtually untouchable with all their money, including our taxpayer dollars. don’t bank with them anymore.
I just received the letter from bank of america raising my 9.99% card to a variable 14.99%. Funny thing is, I am still on the 0% interest for 12 months then it was supposed to go to 9.99 next month. At first I thought I was targeted for some reason since the letter doesn’t fully explain. I am not a risk at all. I have been with BOA for around 17 years, never once late with a single payment, paid off several cars, cards, loans over the years, have a 800+ credit rating and my only dept is this card which has a balance of about 14k since I used it to pay off some other things and buy a harley(my home is also 100% paid off). I called and did the opt out, so I can remain at the 9.99% and now I will make large payments until it is paid off. I can see them doing this on high risk people, but on customers with a outstanding record and many options out therem they are just losing good customers. This year my income doubled, my debt less and now I am thinking about closing my 2 accounts at boa and going to my local credit union. The biggest thing that made me angry is they are charging 11% over prime, which the prime rate is low now, if it goes up to 8 or 9% my card will hit arounf 20% interest and if I ever have to pay over 12% on any card, I just dont need to use one.