Bank of America Raising Rates Because They Can

The Wall Street Journal and several blogs (PIRG’s Ed Mierzwinski, CU’s Daily Dollar, Credit Matters Blog, and Dirt Diggers Digest) have been reporting about the latest issuer to hike rates on good customers just because they can:  Bank of America.

We blogged about this overall trend a few weeks ago, as did Denise Richardson.  And we exposed some of the inside tricks BofA used to ensnare customers in debt by helping former MBNA/BofA employees tell their tales on national television (see the video we produced below).

Bank of America’s arbitrary and unfair rate hike is exactly the kind of thing we’re working to outlaw.  S. 414 would make it illegal to retroactively raise rates on old balances as BofA is doing. The law would just require credit card contracts to function like other contracts, where a deal is a deal.  The bill would ensure the rate at which you borrow the money can’t change just because the creditor would like it to.

After all, whoever sold you your toaster is not allowed to knock on your door years later and say, “I just retroactively raised the price on your toaster, please hand over another $30.”  We think credit should work the same way.

If you’ve been notified about a rate hike from Bank of America or an other credit card company, here’s CU’s advice on what to do:

1. The best way to deal with this is to pay off your balance, if at all possible.
2. The next best option is to opt-out of the increase. Basically this means that you lock in your current low interest rate while you pay off you balance. But remember if you opt-out, you can’t use the card for new purchases until it’s paid off.