BoA Hikes Rates On Millions Of Credit Card Customers
Last week Bank of America decided to hike rates on millions of credit card customers. They said that if you carry a balance and have an interest rate below 10%, starting in June you're likely to see it spike into the double-digit category. BoA said it had to do it because these customers were "underpriced relative to market conditions." But according to at least one email, Bank of America might be underrepresenting the number of customers caught in its interest rate dragnet...
Kevin got his rate hiked even though he always pays in full and his rate was 14.99%. It's now going to be 24.99%. His FICO is in the 800's and has never had a late payment in his life, he says. That's odd, that doesn't sound like he meets any of the criterion BoA says its using to explain the rate hike.
Anyone else experience something similar?
Kevin writes:
I received a letter over the weekend telling me that my APR on my credit card would be "adjusted" from 14.99% to 24.99%, for no reason whatsoever. I have never made a late payment, never used cash advance, always pay my balance in full, and have never gone over my limit so I found this to be odd. When I called I was told that this will be taking effect as a ‘company wide standard' and that it will be put in place for all BoA credit card holders. I talked to a few friends and coworkers who have BoA and they too have received the notice with jumps ranging from 6.99%, 8.99%, etc., all to 24.99%. We were all told that we can choose to reject the APR increase in which case we would have to pay off the remaining balance and close our accounts, otherwise there is nothing we can do about it but accept the increase to 24.99%.I am in excellent standing with all my loans and credit, I have a FICO score in the 800's and have never been late on any payments in my life. But my credit history is still relatively new and my BoA credit card is my oldest account. If I reject the APR and close the account I will be losing a valuable line of credit and damaging my credit history and score. At this point I may just pay off my balance and only use my card for purchases every few months to keep the line open, but I'd rather have a card I can use rather than need.
If you have any ideas on this subject I'm all ears. I may start an EECB later in the day but I doubt it will make a difference since every CSR I have talked to has shot me down left and right.
Remember that you can always reject a rate hike, but it will mean that you will have to stop using the card. With consumer credit getting squeezed left and right, some people might not have a choice in staying with the higher interest rate just to make sure they still have an available line of credit.
Bank of America boosting credit card rates [Consumer Reports Money Blog] (Photo: The Cornballer)
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Comments:
I got a letter like this too. I have never had a late payment, always paid off, never gone over limit, etc, etc. High 700s credit score and my rate is going from 9.99% fixed to 15.74% VARIABLE.
Screw that, it doesn't take effect until May 1st, and if you use your card after that time you accept the raise in rates. So I plan not to use it until there's a emergency.
In the mean time, I'll rely on my Captial One card, who has of yet to raise my rate and find a new card.
We've been over this. BoA is just the latest in a long line of what will no doubt be every credit card company. They're doing this in advance of the new law (which won't take effect until next year) which will only allow credit card companies to raise rates under certain very specific conditions (i.e. when the card holder is more than 30 days late with his payment, when he's receiving a promotional interest rate, etc.)
If Congress had any balls, they'd go back and make the new law retroactive to Jan 1, 2009 and screw these f*ckers over for trying to screw us over.
From now on I am stuffing my money under my mattress. Not one of the companies deserves (yes deserves) to use my money. Especially when they are bailed out with more of my money....then they charge me more for taking more of my money.
Kind of one sided don't you think?
I had the same thing over the weekend and mine read's like Kevin's story.
Except my fixed 9.99% percent card went to a 15.74% variable rate card. Doesn't take effect until May 1st, upon which I will not use (using means accepting) and start researching other cards.
I had them send a notification to me about the hike. I rejected it and then called and told them I was unhappy about this. They told me to hold for a moment, then came back on and told me that they would keep my rate the same and that I could use the card. I'm guessing that they will do this for many people if you just complain.
The Wall Street Journal has a very different take on this story ... that the Congressional Oversight Panel is reviewing the fee & rate increases at banks that took TARP funds, like BofA.
My husband and I have separate Discover accounts, and we both received letters notifying us of a rate hike of about 3%. We usually pay in full, not always, and don't have late payments. I wonder if there are going to be any cards that DON'T hike rates.
I was originally at 13.74%, then they jacked me up to 24.99%. I just got a notice that now it's going up to 28.99%. Fortunately, this time (unlike the last time) I can tell them where to stick their card.
@ophmarketing: I wish they would do that. This new law's timing is irritating me as well-it's like saying well, you can murder people, but come summer of next year, you must stop! Because murder is bad!
I have little credit and creditkarma claims I have something "in collections" and that's why my score is low (uh no, actually I do not). But I won't be getting any new credit till next summer. This is crap.
@LegoMan322:
Err... I'm rather hoping you're not suggesting doing that literally. It was a common reaction to the bank failures during the Great Depression and it still carries the same big risk: inflation. Because you're not earning any interest on that money it's value decreases over time because the value of goods you can buy with it decreases.
I'm sure if you like you can find a bank that you like and trust. A credit union perhaps?
I'm in the same situation, and I don't know what to do. Not only did they raise my interest rate from 8% to 20% (no late payments, FICO above 800), they also lowered my credit limit to within $100 of my balance.
I ended up with a $5000 balance on the card in the first place because I lost my job. (I have a new one now, lower paying). During that time, I always paid at least twice the minimum, but I carried a balance, so I assumed they would think I was an ideal customer.
The CSR at BoA that I called on Friday was extremely cold and rude, even though I was trying to be really nice when I called to see if I could get it lowered. She literally told me that I needed to hire a debt management company, because they're the only people that can lower my interest rate - and then she gave me the number of the one they're affiliated with.
I actually called the guy, sat on the phone with him for half an hour, gave him all my income, expenses, debt information - and he said that it would be more expensive to use a debt management company than to just pay the interest rate, because I have never missed a payment and I have good credit - the banks won't work with me because I'm not a risk! He told me I should see if I can get a 0% card and just do a balance transfer.
Now, BoA, when even your debt management company thinks I should OPEN ANOTHER CREDIT CARD at 0%, why exactly do you think I'm a 20% interest customer?
Now, to add insult to injury, I tried to open up a 0% card offer that was offered on Mint. They decided to offer me an interest rate of 18.99% after running my numbers. I was freaked out and so I went and checked my credit score/report again, and nothing has changed since last time I checked! I don't know if its my new job (?? same field as last time) or what, but it seems like having excellent credit isn't enough to even get the "pre-selected" offers anymore.
Anyone have any ideas on what I should do, re: moving the balance? My last resort, I think, would be to suck it up and pay as much as I can to the card every month, simply because I don't want to reward BoA for their shitty behavior. I really want to stick it to them, pay it off in full (via transfer, loan, magic lottery) and tell them to go F themselves.
I wouldn't bother with an EECB on this one or complaining to anybody at the bank. They won't bother listening. They're doing this because they're very close to being insolvent and need to get as much money in as possible.
These credit card companies are going to price themselves right out of business. 25% interest rates might fly with the people with 600 credit scores, but when you work hard to maintain something like 750+, you expect better treatment. Citibank did this to me last year (although I called and had my rate brought back down to 9%). I'm currently in the process of using the snowball method to pay off my credit cards (although it will still take about a year). After that, they can look forward to me paying off my balance monthly.
> always pay my balance in full
What's the problem, then, really?
Someone explain to me how much this affects him if he pays off his balance in full for purchases made during the billing period. Even if they're using Average Daily Balance to compute a finance charge, the difference between 15% and 25% APR for his charges in a one-month cycle is not going to be more than a few bucks, even if he charges a lot in that billing period.
If he decides it's worth walking for a few bucks, so be it. As an alternative, he could always just keep the card with a $0 balance, and charge a pack of gum to it every 6 months or so.
I still use my BoA card as my primary CC since I pay it off every month and it has a decent rewards program, but between this and them cutting my credit limit, I might start using my Discover cashback card instead...
it used to be if a cc company was screwing around, I'd jump to one of the other bank cards that sent me great offers in the mail. Amazingly, all of those solid offers have dried up (except for Capiatl One, I think they feel if they send me enough crappy offers I'll take them up on it just so they stop sending me mail). So where does one go to get a decent credit card these days? Everything seems to have a variable rate attached to it.
Wait, Kevin "always pay[s his] balance in full" but now decides that he "may just pay off [his] balance"?
If you ACTUALLY always pay your balance in full, why does it even matter what your APR is? I have never, ever, carried a balance on my credit card. Why should I care if my bank wants to make my APR 1000%? I don't spend money that I don't have.
Yep, BoA increased my two cards with them. One card had 7.9% fixed jumps to 23.95 variable, the other 7.9% fixed to 13.95% variable. Plus on the new higher interest rate card, they claim a change in my credit file as the reason for the increase, even give an Experian contact number to call to get a FREE copy of the report. Problem is on calling the number, Experian claims no one has accessed my credit file in the past 6 months. Just BS.
@LegoMan322: Hey I'm with you friend.
I'm thinking the best way to resolve the current Credit Crap is to go to a strict "Cash Only" diet. Find a good Credit Union or Bank with a card that doesn't screw you with ATM fees (Good luck I think) and just take out all the money you'll need for a day or week depending on what spending you're doing.
Yea, not the best policy for establishing a good line of credit, but you know, damn them.
@PunditGuy: What about if there was an emergency? Suppose something catastrophic happens and his emergency fund can't cover it. He'll need to use his credit card. In cases like that, 15% versus 25% can make a big difference.
But honestly I think it's more of a respect thing. We work hard to get our credit scores to a certain level. We do this so that we can be treated with a more than a modicum of respect by the people who are issuing us credit. What does it say when somebody who pays their bills on time and has a FICO in the 800's has their rate raised by double digits? What was all that work for?
CRAP. Working on trying to pay a BofA MasterCard now as we speak.
Whatever. Not something I can overly worry about, I guess. Just keep on truckin'. I need it for car emergencies (I travel a fair amount in the middle of the desert), so I don't want to cancel it. Sigh.
@PunditGuy: Yeah, someone who has always paid in full can suddenly lose his or her job or get really sick or something. Shit happens.
@RecordStoreToughGuy: I don't know what's supposedly in collections-no one I know has been trying to collect from me. I tried to get something from annualcreditreport.com, and it said there were problems and I needed to mail a form in with my social security card or pay stub or some other stuff.
@hedonia: Call up B of A and tell them that you talked to their debt management company and they told you to file for bankruptcy - then consider it.
Discover just sent me a % rate change notice in the mail. The letter notice said that I could opt out by sending a letter to a certain address by a certain date to close the card and pay off the balance.
This notice also said that if I used the card after that date ~~~even if I had sent a letter opting out already~~ that the card use would be considered approval of the new rate.
Question: how can use of the card be considered agreement to the new rate or acceptance of the new contract rate? If this is so then can I send a letter to Discover saying that my new rate is 1/2 of their %rate offered and acceptance of my next payment check is aggreement to this 1/2 rate?
I do not understand how the card companies can say just using the card accepts this rate change yet I cannot do the same. Anyone care to explain this to me?
I too, just received notice of a rate hike to 24.99% on my M&T credit card. I work at a credit union so I asked the people here what they offer and they have a fixed rate 7.9% platinum card and a 10.9% fixed gold card. Needless to say, I'll be switching over very shortly. It might be worth the trip to your local credit union to see what they have to offer.
@Goatweed: Again, I'll say it, until the sun falls from the sky:
Credit Unions are your best friend. Very, very few play fast and loose with your finances, and nearly everybody in the universe qualifies for at least three.
Call the bank and ask if they'll lower your rate. No need to get argumentative, just something like "I have another card with a lower APR that I'll probably use instead of my BoA card unless you can lower the rate for me."
If they don't lower the rate, go shopping for another credit card and throw the BoA card into a drawer.
So, they're pulling the same stunt Chase pulled? Seems the only options the customers have is to reject the increase, pay off the balance, and close the account, or accept it.
I'm not sure if "pay off" means continue making the minimum payments, or if it means send a check for the whole thing. But if it means the latter, then this is ridiculous.
Over on LiveJournal there's somebody at a third-party call center that handles the BOA calls, and she's getting swamped with people calling just to complain about the hike. Clearly people are really, really unhappy.
I canceled my BofA credit card along with my bank account a few years ago when I switched to a credit union. I then shopped for the best rewards card, and at that time it was the Citi Platinum Dividend card, which paid 5% back on gas/groceries/drug stores. Then they figured out their reward was too good, and lowered it to 2% or something, so I shopped around again. I've got an HSBC card now that pays the 5% back on those items, and I love it (aside from some customer service issues, which I grudgingly accept because the reward is so good).
Thanks! I'll take a look and see what offers I might be able to get. The wife has a BofA/Amex hybrid card that we use solely for Costco purchases (and some teacher supplies) with a low rate. We recently paid off a VERY large balance on it and have been keeping it at 0.00 or at most a few hundred dollars for a month or less so I'm sure we'll be receiving one of these "thanks for being a great customer" notifications any day now.
I just paid off my BofA balance a month or so ago, and as of the last statement, my rate is 6.99%. But I got the card less than a year ago, so maybe I'm still in a honeymoon period.
My score is only in the low 700s and I carry balances, so of course I've seen my rates go up. A few months back I consolidated some debt onto a Lending Club loan and I've stopped using my cards.
My parents, on the other hand, have a very high score and don't carry balances. Their rates have gone up.
Seems like everyone's has.
I agree with bilge about giving them a call. It couldn't hurt. However, must people can't shop for cards right now, so turning to another lender may not be a possibility. Doesn't mean you can't bluff, however.
@lalaland13: The new law will be toothless anyway, the lobbyists will make sure of that. Congress loves to sound tough but its rare they ever follow through.
My rejection letter to BoA:
FIA Card Services, N.A.
P.O. Box 15088
Wilmington, DE 19850
Dear FIA Card Services, d/b/a Bank of America,
On April 9, 2009, I received a letter from you informing me of Amendments to my Credit Card Agreement of my Bank of America Platinum Plus Visa card, which include an APR increase from a fixed 7.9% APR to a variable 16.95% APR.
I am hereby rejecting the Amendments noted in the above correspondence, and demand the existing terms of my Credit Card agreement (which include a fixed 7.99% APR) remain unchanged.
Name on the card: (My legal name)
Account Number: (the account number)
I have been a loyal credit card customer since 2004, as well as maintain a mortgage with Bank of America. Despite this relationship, and the fact I have always paid more than the minimum balance on my credit card ahead of schedule, you have reduced my credit limit by $7200, and have now proposed to increase my APR 212%, since February 2009. I find these actions quite detrimental to our relationship, and am currently considering taking my business elsewhere.
Your cooperation in my rejection of your Amendments to my Credit Card Agreement is appreciated.
@lalaland13: You should definitely call one of the reporting agencies (I like Equifax) and try to work it out. It's probably an old utility bill or something.
Although, I find it odd that ACR.com would want your SSC or a pay stub, that sounds.....not right.
@hedonia: I would stop focusing on the 0% offers an try to find a decent rate under the double-digits.
You could try and get a personal loan. I consolidated to a Lending Club loan (as I said below). I feel much better giving random investors my money than CC companies.
WTF?
Greeaatt. First Time Warner Cable is gonna cap my 'net usage, and now BoA is going to jack up my rate?! (Rate's at 9.90% now, so I'm sure I'll be hit) Luckily the card will be paid off this month. I don't want to close it, since I've had it for over 10 years and my credit rating's near 800, but I sure as heck will not be using it any more. :-(
Raise interest rates on someone who pays their balance every month. Yeah, that will get some money. ?!?
I think everyone one reading this blog already knows this, but credit cards have always been (and even more so now.) an awful way to finance things. Use a consumer loan (e.g. car loan.) with a fixed rate and fixed term.
I pay my CC every month, and if I need a longer term debt, I take out a specific loan for that purpose (Fixed rate, fixed term.) In an emergency I have my HELOC whose rate is tied to the fed rate. My HELOC is at 3.25% right now.
@nakedscience:
I pay my balance in full every month.
However, there have been a few times over the past several years where I did carry over a balance, such as after my wedding/honeymoon, and when we did some work on our house. Both times I took an extra month to pay.
So yeah, I too would dislike a rate hike, even though it doesn't affect me often.
I have two credit cards and one line of credit with BoA. I am currently carrying a balance on one CC (balance transfer) and the LoC.
BoA raised the rate on the CC I'm not carrying a balance on. It's now close to 20%
I have no idea what their criteria are, but thankfully it's the best possible scenario for me.
@Penny Plastic: Or rather, a copy of that info. They said my account had been flagged or something and they needed to verify my identity.
I may have picked the wrong bank/the wrong amount in the "information only you would know" section to verify your identity. I was probably overthinking it, wasn't sure which bank for which loan and so on.
I got the same letter last week and was not pleased. They wanted to take my 8.99% fixed and increase it to the 16.99-24.99% variable rate. When I called the number on the letter to reject the change, I did not press 1 when prompted--if you wait about 5 or 6 seconds, you'll be given a second option to speak with a card member services rep.
Because I also keep a checking and a large money market account with BoA, I explained to the rep why I am an ideal customer and don't deserve the new terms. She tried to explain that it was the economy and not me--to which I replied that good customers like me were all the more important for their business. In the end, they raised my rate by 1% to 9.99 fixed, but across all credit lines, including the cash advance. While this is a feature I hope to never have to use, the overall new terms ended up being better than my old ones. Given all of the horror stories I frequently read here and considering the inflexibility of my and my husband's other cards (I'm looking at you, AMEX) overall I've been very happy with how BoA has treated me.
@Skankingmike: Citibank was the FIRST to raise rates, they bumped mine to 18% after 10 years of paying balances in full and a credit score in the 760s. [www.creditmattersblog.com]
Bravo to Kevin for realizing that closing the account is not the answer. Keep that credit history!
@ophmarketing:
You also need to remember that the Credit Card Companies are getting their teeth kicked in from this recession. Most of these companies will try and get debt off their books and unsecured debt is most likely the first to go. If you noticed the HELOC have been cut and other lines of credit have been cut already so this is nothing new. The debt frenzy is now over.
find a new card, they do this all the time and don't need a poor economy to initiate this.
BOA seems to like high interest rate cards.
My wife and I both had issues with them and have moved on.
Citi has been great to me and Wachovia too.