Bank of America – Credit Card Companies raising all their rates + APR

We heard the warnings that credit card companies would be raising their interest rates. We escaped until this week when we got our message from Bank of America. We have an account with them on which we carry a balance. We have had this account for years – never been late with a payment – and yet they have seen fit to raise our interest rate from a set APR of 7.99% to a variable rate which they quote as currently 17.13%. Of course they state they “obtained consumer report information, including information about your accounts with other creditors, from TransUnion. TransUnion did not make the decision and is unable to provide the specific reasons why the interest rate was increased . . . ” This certainly is no surprise to us after trying to tie down an insurer in the past that used somewhat the same language to say we were not getting the best rate because of credit information. After checking our credit information, we called the insurer and attempted to find out the exact reason that applied to us. We were told that we were in the next to the top credit rating slot. When we tried to find out what number was needed to be in the top slot, we were only told that very few people were in the very top slot. Further, they could/would not tell us how much our premium was increased because of credit information. We gave up trying to understand.

Needless to say we have rejected the Bank of America APR increase and will discontinue using the card. Not only has Bank of America (and other credit card issuers) been bailed out by our tax dollars but now they will be trying to get more dollars from us by raising our interest rates. According to their letter, the 17.13% was calculated by using “the prime rate we select at the end of each month will be the highest prime rate published during the preceding three months.” As of February 27, 2009 the index used to calculate the APR was a variable rate of 4 percentage points with a margin of 13.13 percentage points (not variable).

How much are you willing to pay to bail out Bank of America (or other credit card issuers) for poor business decisions??? We urge you if at all possible to reject the APR increases and close your cards. But be careful. The notice from Bank of America informs you that if you use the card after you reject the rate increase amendment your rate will automatically change to the higher rate – “If your account is used at any time thereafter, this change will apply to your account even if you sent us timely notice rejecting the change.” After thinking about this we decided the only safe action was to completely close the account to insure that no charges would be presented in case we forgot to discontinue an automatic payment previously set up to be charged to the account. We called Bank of America customer service to explain our concern and to completely close the account. The customer service representative advised that even though the card was closed, they would accept any automatic payment requests, and subsequently increase the interest rate on any outstanding balances!!! Apparently once they have you in their grip there is almost no way to get loose.

In case you have not heard, new legislation regulating the credit card industry does not take effect until July 2010. Among these changes: 1) card companies are blocked from applying higher interest rates on existing balances and 2) payments made beyond the minimum must be applied to balances with the highest interest rate or spread proportionately between the balances. A study had determined that the new changes may reduce the credit card industry revenues by $12 billion per year. It is certain that most will make changes in their agreements prior to the July 2010 effective date!

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