Bank of America gave Timothy a fun new “change in terms” yesterday that says if he pays late on his Visa at least twice in 12 months, they’re reserving the right to jack his rates up to a higher APR. It could go high as up as an effective APR of 32.24%. Hey, gotta make up for that 32% earnings drop somehow.

This post is a non-event. These types of punitive actions are completely typical and are enforced all the time. They’re also completely insane.

Why should the rate jack be so high? Does it really cost them that much if your payment is a little bit late? Nope. These fees started out as ways to recoup costs, then became ways to try to encourage better customer behavior, and now they’ve metastasized into revenue streams. The credit card industry needs a strong dose of chemo. Full text of the notice below.

A provision for Default Pricing is being added to your account as described…In the future, if you have had two instances of not paying on time in a rolling twelve month period, your account may be default re-priced to a higher rate without further notice. In the event your account becomes default re-priced, any APRs increased as a result of the re-pricing will be reduced a minimum of two percentage points after six consecutive months of on time payments…Default Rates are variable rates calculated using the Variable Default Rate formula with a margin of up to 23.99 percentage points; as of July 31, 2007, the results in a corresponding ANNUAL PERCENTAGE RATE of 32.24%

If you don’t like it, you can reject the changes following the Rejection Instructions (yes, they capitalize that):

1. Write to us at FIA Card Services, N.A., P.O. Box 17151, Wilmington DE 19850. Clearly print or type your name and full credit card account number and state that you reject this change. You must give notice in writing; it is not sufficient to telephone us.

2. We must receive your letter by January 18, 2008 or your rejection will not be effective.

Timothy says the letter didn’t say anything about rejecting the charge resulting in your account be closed.

(Photo: Spidra Webster)

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