Bank of America giveth and taketh away

10.15.09
By Nicholas Storie

New laws that will go into effect in February are aimed at helping Americans with mounting credit card debt, but some say credit card companies are raising rates and increasing fees before the legislation starts.

Although Bank of America said in a letter last week to Connecticut Senator Chris Dodd that it wouldn't be raising interest rates on its cards before the second wave of the Credit Card Accountability Responsibility and Disclosure (CARD) Act goes into place in February, the bank said this week that it will be "testing" annual fees on some of its card holders next year.

The Associated Press reports that Bank of America will begin charging between $29 and $99 on 1 percent of card holders around the globe.

In a letter sent to Bank of America customers obtained by the AP, the company said it is "making this change in response to market conditions, new federal laws and regulations, and the increasing costs of providing unsecured credit."

According to the wire service, customers who will be seeing the fee can reject the terms, but must do so by December 16. In turn, Bank of America will close their account.

But even Bank of America's announcement of an interest rate freeze might be nothing but a good PR move according to one industry expert.

In a column this week for TheStreet.com, Odysseas Papadimitriou, founder and CEO of Evolution Finance, wrote that the bank's letter to Senator Dodd may only help a few people.

"If the bank has millions of customers below a 10 percent non-promotional interest rate, this announcement has merit: Bank of America's assurance not to raise those rates matters," wrote Papadimitriou. "If, however, there are only, say, 100,000 customers that have a low non-introductory rate, the decision affects only a small number of people - too small to deserve the kind of attention the bank has enjoyed [from the media]."

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Some Bank of America card holders will see annual fees starting next year