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Bank of America Credit Cards: Introducing New Annual Fees?

November 10, 2009 by Silicon Valley Blogger

Will I need a new credit card again?

We haven’t had much luck with our credit cards lately. Within the year, we had some issues when our Advanta business credit card accounts got closed with little warning. Advanta closed down their credit card division due to tough business conditions.

This time around, we’re hearing rumors about what may happen to our personal credit cards. You see, we carry Upromise rewards cards which used to be managed by Citibank. For years, we were happy with our cards, given that we were great customers who paid in full and on time, each month. Then came what we thought was a minor inconvenience: Upromise switches out their card issuer to Bank of America. No biggie for us just as long as they keep with the status quo.

Bank of America Credit Cards: Introducing New Annual Fees?

Except…. we’re now hearing that BofA is thinking of making some changes to their credit card terms, a rumor which has got many customers and consumer advocates up in arms. Apparently, the company is planning to introduce annual fees in cards that never had fees before. As a customer, I must say that this just blows. I really only care about having a good credit card rewards program and no annual fees to deal with, and it would be a shame if, after all these years, I end up having to do away with Upromise because of principle. And because I don’t intend to ever have to pay for the use of plastic.

Let’s place this all into context by reminding ourselves what the new credit card rules state. The Credit CARD Act of 2009 is intended to protect consumers from credit card companies’ more underhanded tricks. Here are just some of the proposed changes in the Act:

• Credit card bill payments will be applied to the highest interest portion of your balance rather than the portion that generates the lowest interest. This is contrary to what card companies want, which is to keep your high interest debt around for as long as possible (such as what you owe for cash advances).
• Interest rate hikes will be much more limited. With the new rules, you will no longer be getting rate increases for existing balances unless you fall delinquent on your account or you’re dealing with a promotional rate that expires.
• There will be limits on “over the limit fees”. This time, you won’t forget that charging over your credit limit will incur penalties and interest on those penalties; you’ll now be required to “opt in” before you’re allowed to charge beyond your credit limit.
• Credit card terms and conditions can only be changed after you’re given 45 days’ notice. So those with rewards points, for instance, can be alerted to the potential expiration of their rewards, way in advance. Hopefully this will mean “no surprises”.

Some of these rules have already passed, while others are set to go into effect in early 2010. As credit card companies anticipate these changes, many astute industry watchers, insiders and commentators have been predicting that some of these card companies may decide to pull one last trick or two out of their hats before the doors of opportunity close, so to speak.

Sneaky Bank of America Hat Trick

So is BofA trying to sneak one past us based on how they interpret a particular rule? With the company allegedly intending to introduce new fees with their cards, BofA insists that “annual fees” are not the same as “interest rates”. And while the CARD Act protects us from unexpected changes in interest rates, we’re supposed to think that annual fees are something else altogether and are therefore, not subject to the same rules.

Then again, there’s supposedly at least one court case that does establish a loose equivalence:

Interest = Annual Fees.

as per The Consumerist. But this is something for the legal eagles to handle.

Nevertheless, I’ve heard that Bank of America will try to “test” their customer base with the new annual fees. And while I think this is quite annoying, I wonder how much of this they can actually get away with — will their customers, like me, abandon them for the nearest No Annual Fee card? Or will there be loyalists who stick around? Who among us will simply roll around and take it, thinking that $30 a year isn’t really “that bad” in the whole scheme of things? The worst case scenario is that this sets a precedence for companies to start raising annual fees because they can no longer get away with much else. Sure, go ahead and pick on your best customers.

If this pushes through, I’ll regret having to abandon Upromise’s great rewards program that feeds cash rewards into my kids’ 529 savings plans.

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