Again. This time the letters have gone out to cardholders who carry a balance on accounts with an interest rate below 10%.
They’ll see their interest rate increased “to the low- to mid-teens” in their June statements, according to spokeswoman Betty Riess.
Bank of America says it has to do this because the cost of providing credit has significantly increased. “In the current environment, the portion of the portfolio that’s under 10% is underpriced relative to current market conditions,” Riess told us.
Really? The Federal Reserve is flooding banks with cheap money and CD rates are pathetic. So it’s hard to imagine that the cost of raising money is the problem.
A rising default rate is the only reason Bank of America’s costs could be going up. And if it that’s the problem, then what does it think will happen when it imposes higher rates on customers who are carrying a balance?
Cause more defaults, perhaps?
Of course Bank of America isn’t the only credit card provider raising rates.
Citigroup. JP Morgan Chase. American Express. They’re all doing it. Even stores like Target are increasing their credit card rates.
But that doesn’t mean you have to accept a rate increase.
Customers can opt out by notifying Bank of America in writing or by phone using the contact information provided in the rate increase notification letter.
You can then pay off your outstanding balance at your existing rate, but the account will be closed and you can’t make any additional charges on the card.
If you make just one purchase, or allow one automated charge from your gym or parking garage, then you’ve accepted the new terms, voiding whatever you may have done to opt out.
Another option is move that debt to another credit card offering a good rate on balance transfers.
Check out, for example, the Pulaski Bank Visa card’s great deal — no balance transfer fee and 0% interest for 6 months.