Bank of America Corporation, one of the leading financial institutions in the United States, is now sending notices to some of its credit card customers to increase its annual fees starting next year. The hike, which will range from $29 to $99, is made to cope with market conditions, federal regulations and laws, and the rising costs of providing unsecured credit.
Betty Riess, a spokesperson for Bank of America, says the company is still "testing" this rate increase on one percent of its total credit card users. The bank, based in Charlotte, North Carolina, is the third largest credit card provider having 80.2 million credit cards in circulation in 2008. Chase tops the list with 119.4 million credit cards, followed by Citi with 92 million.
Riess reveals that a small percentage of credit card holders who will be charged fees were chosen based on "risk and profitability." Consumers with good standing could be among those who will receive this hike notice.
The hike update came after the bank's statement last week, promising "no more hikes" on its credit cards and interest rates, before the Credit Card Accountability, Responsibility and Disclosure Act (Credit CARD Act) will take effect next year. Congress considered moving the Act's effective date from December 1, 2009, to February 2010. The Credit CARD Act was signed by President Barack Obama last May. It has become a controversial set of legislation in the country and consumers have witnessed soaring interest rates and lower credit access since its ratification.
Analysts and banking experts disclose that the act will limit increase of bank interest rates and credit card fees and will require bank transparency on the customers' transactions. They predict that this will affect profits of the credit card industry, thus forcing some banks to deal with lost revenue through frequent annual fee charges on credit and checking accounts, even for card holders with good credit standing.
Customers may reject its new change of terms, but they will need to close their bank account. Bank of America says the deadline to reject the fee is December 16. However, closed credit accounts can negatively affect consumers by lowering their credit limit.
Other Bank of America cards already come with fees.
While Chase bank charges annual fees on some rewards cards, a spokesperson revealed that the bank has no plans to increase annual fees anytime soon. Wells Fargo says it is not speculating on prospective policies and practices. A Citi bank representative, however, could not be reached for comment on the issue.