Like its competitors, Bank of America in recent months has raised interest rates, cut credit limits, and taken other actions to change terms before new laws restrict its ability to do so. Across the United States, changes to interest rates and/or credit limits hit about 65 percent of all outstanding credit cards in the past year.
Among the most notable changes made by Bank of America was shifting most credit cards from fixed to variable interest rates, which move in relationship to the prime rate. The new law will prevent banks from changing the fixed rate on existing balances unless the cardholder falls two months behind in paying the bill. The bank also began testing annual fees ranging from $29 to $99 on certain cards that previously were not subject to such charges. Some Bank of America cards, such as airline rewards cards, already carry fees.
The letters are intended to keep consumers informed and to help improve financial literacy.
“No matter what your status is now, you want clarity, you want simplicity, and you want to understand what you’re signing up for,’’ said Ric Struthers, president of global card services.
The letter states it does not take the place of the consumer’s credit card agreement. Struthers noted that those agreements can be up to 40 pages long.
One important item the letters don’t spell out is how long it will take to pay off outstanding balances if only minimum payments are made.
After February, that critical information must appear on monthly statements, and will probably shock many consumers. The median balance for US consumers, meaning half owe more and half owe less, is $3,000, according to the Federal Reserve. At an average interest rate of 14.9 percent, it would take more than seven years to pay off a balance that high while making only minimum payments.
