What else is new?

Banks should wake up and realize whos moey this is
Bank of America Corp. is raising interest rates on as many as four million U.S. credit-card customers who carry a balance, becoming the latest bank to crack down on people who don't pay off their bill every month.
Starting with June account statements, any credit-card customer who carries a balance and has an interest rate below 10% will see his or her rate jump into double-digit territory. A company spokeswoman declined to provide an exact number, saying the changes would affect less than 10% of the bank's card customers in the U.S. The bank has 70 million card customers world-wide, but doesn't break out the number of customers who are in the U.S. "It impacts a small portion of our cardholders," said Betty Reiss, the spokeswoman.
The bank's move follows similar rate increases that other banks, including Citigroup Inc., J.P. Morgan Chase & Co., and American Express Co. have implemented in recent months. The banks, facing rising delinquencies, blame the economic turmoil. Many have been tightening the screws on people with less-than-perfect credit, but now they're pinching a broader range of customers who have good credit records, but carry a balance.

On Tuesday, Tamara Smith of Burlington, Vt., got a notice from Bank of America that her 7.9% rate will increase to nearly 13%. She immediately called the bank and opted out of the change. That means she keeps the 7.9% rate on her roughly $2,000 balance, but can't use the card for new purchases without having the higher rate apply to her entire balance.
So Ms. Smith is shopping around for another card. And while she has found a 0% promotional rate from Citi, she's planning to open a credit card with her local credit union instead. "I just don't have any assurance that Citibank won't pull the same thing," said the 51-year-old co-owner of a computer-software company.
The rate increases come as many Americans are losing their jobs and losing easy access to other forms of credit, like home-equity loans. That makes millions of cardholders even more dependent on their credit cards to get by.
The Federal Reserve and other bank regulators passed rules in December that would limit banks' ability to raise credit-card interest rates. But that doesn't start until July 2010.
Now, Congress is considering separate bills that would impose stronger restrictions on banks much sooner. Last week, the Senate Banking Committee approved its version of the legislation, which is waiting for a full Senate vote. A House subcommittee passed similar legislation last week.
The banking industry has said that the new federal rules and the proposed legislation will restrict its ability to manage risk and will force issuers to be stingier with credit and promotional offers. In a presentation to investors in February, Chase executives laid out various strategies they were exploring to deal with the new regulatory environment, including implementing annual service fees, shortening the duration of introductory interest rates and offering higher interest rates for new customers.
Bank of America said it started notifying customers of the rate increases last week. "The increase on these accounts reflects the current economic conditions where our cost of providing credit has significantly increased," Ms. Reiss said. The average annual percentage rate on the affected accounts is 8.5%.
Consumer advocates see another motive. The banks "want to mess with people before they can't," said Ed Mierzwinski, consumer program director with the U.S. Public Interest Research Group, a consumer advocacy group in Washington, D.C. "Every day they can earn income at a higher interest rate is more profits for them."
Credit.com, an educational credit Web site, started hearing from customers complaining about Bank of America's rate change on Saturday, said spokeswoman Emily Peters. She advises customers to pay off their balances, if possible, but keep the card open since closing the accounts could hurt their credit scores. "The best possible option would be to leave the card dormant and use it every six months" to prevent the issuer from closing down the account, she said.
In January, Chase Card Services changed the terms for thousands of customers who had low interest rates but were carrying a balance. In Chase's case, customers had to agree to pay at least 5% of their balances every month instead of the previous 2%. If they couldn't meet the higher minimum payment requirement, they would have to give up their promotional rate and accept a higher one instead.
Chase's change sparked a number of class-action lawsuits from angry consumers who had taken advantage of the bank's promotional offers. Separately, Citi and American Express raised the regular interest rates by two to three percentage points across many of their cardholders last fall.
In some cases, banks are offering carrots to get customers to pay down their balances. In February, for example, American Express offered select customers a $300 AmEx prepaid gift card if they pay off their balances and close their accounts.
Sandra Frye of Phillips, Wis., said the recent tightening by banks has prompted her to pay off her balances more quickly. "I won't be adding to the economy because I'm going to pay these guys off and get them out of my hair forever," said the 66-year-old. Ms. Frye, an adult home-care provider, said Bank of America notified her that it was going to raise her variable rate to 13.74% from 9.74%. She is in the process of transferring her $1,700 balance on the card to a credit card with Wells Fargo & Co. offering her a promotional rate of 0%.

The Rising Price Of Credit
As banks face higher costs, they're repricing more customers' accounts. Here's what to consider:
Higher rates typically affect customers who carry a balance.
Customers should be able to reject the higher rates -- although they may have to close the account or stop using the card.
New federal rules will limit rate increases -- but only starting in July 2010.