Is Bank of America Helping Its Customers or Just Done Raising Their Rates?

by Odysseas Papadimitriou on October 17, 2009

bank-of-americaRecently, Bank of America announced that it would stop raising interest rates on the credit cards of its existing customer base.  This news comes ahead of the February 22nd deadline mandated in the Credit CARD Act, and is certainly a step in the right direction.  However, there is an issue that hasn’t been raised that would put this announcement into better perspective.  How much of Bank of America’s existing credit card portfolio does this news really affect?

Even after the bank has already re-priced millions of credit card customers into higher interest rates, the national media seems to be treating BofA’s announcement as a sign that the North Carolina-based bank is falling in line with the spirit of consumer rights—that it has ended the practice of raising rates in the midst of this credit crunch.  Unfortunately, it is not at all clear what this announcement actually implies given that the media has toed the company line, and has not asked the necessary questions to put this announcement into perspective.

The key question that the media should be asking is: how many of the customers in Bank of America’s portfolio still have a low rate that is not part of an introductory offer?  If the bank still has millions of customers below a 10% non-promotional interest rate, then this announcement has merit:  BofA’s assurance not to raise those rates matters.  If, however, there are only, say, 100,000 customers that have a low non-introductory rate, then this announcement only affects a small number of people–too small to deserve the kind of attention BofA’s announcement received. We need to know the percentage of the credit card portfolio that this news affects in order to come to conclusions about the nature of the announcement and what it means in terms of Bank of America’s position on consumer advocacy.

I don’t want to be cynical about possible good news, but my experience says that Bank of America has already re-priced everyone that it planned to.  The announcement implies that Bank of America is making an active attempt to be pro-consumer in its operations, while in reality it’s likely that they’ve simply finished re-pricing their portfolio of credit cards.  If so, then this announcement is nothing more than an attempt to create media coverage out of standard operating procedure.  Perhaps worst of all, the media seems to be buying into the announcement, and is now providing Bank of America with much needed positive PR spin by recasting the bank as a mighty corporation that remains in touch with the needs of its customer base.

The Wall Street Journal’s article on this story, for instance, is headlined: “BofA Holds Line on Credit-Card Costs.”  The New York Times headline reads “Bank of America Makes Pledge on Credit Card Act,” while the Washington Post’s reads “Bank of America Won’t Hike Card Rates.”  Before interpreting positively or negatively with respect to the company, shouldn’t the media ask what Bank of America’s announcement really means for its customers?  If it turns out, as I suspect, that this story is simply Bank of America trying to get some publicity after finishing the task of raising credit card rates, then the national press is doing the job of Bank of America’s public relations department, and what we’ve been reading is hype and not news.

Discussion

robertsjulia
Bank of America or any bank only help the peoples if they are getting any profit.
Julia
March 5 at 05:38 am
fed up
Bank of America may be done raising rates but it still is lowering credit limits even when the account has ALWAYS been paid timely, no over limits etc....My credit score has taken a nose dive because they keep lowering the limit every couple of months. I opted out of their variable rate so I guess they are trying to make things more difficult for me.
January 15 at 16:50 pm
Frank Fitton
What Bank of America is doing here is sticking it to the people that don’t play the credit game the way they want you to play it. These would have to be the people that pay off their entire balance at the end of each month. Those people are the truly financially responsible people, and BofA doesn’t really want them as customers.

Check out my blog on Bank of America's "testing" of annual fees at.... http://www.thedebtgazette.com/2009/10/bank-of-america-starting-credit-card-annual-fees/
October 21 at 12:29 pm
Brian Donovan
The following article discusses how comprehensive, standardized, simplified, and transparent credit card reform legislation may fund a Natural Disaster Trust Fund.

http://www.csnews.com/csnews/images/pdf/creditcardreform.pdf
October 17 at 14:08 pm

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