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Bank of America is raising rates by several percentage points on many of its lower-interest credit cards that carry a balance.
Bank of America says credit-card customers who carry a balance and have interest rates below 10 percent will see their rates increase to the low to mid teens. Betty Riess, a bank spokeswoman says more people are defaulting on loans these days and that has helped to push up the cost of lending. And so the company is passing that onto customers.
"Normal practice has been focusing on risk, but given the current economic environment, we are at this point looking at accounts that are priced below ten percent," says Riess.
Other banks such as Citigroup and J.P. Morgan Chase say they have changed terms on accounts of some existing customers for similar reasons that Bank of America gives. Emily Peters is a credit analyst at Credit.dot.com, an educational website. She says the banks may be anticipating changes approved by the Federal Reserve in December that make it harder for companies to raise credit card interest rates. Those go into effect July of 2010.
"With those reforms, basically credit card companies are not going to be able to have any-time-any-reason rate increases. So we're a little bit worried that some of these rate increases may be pre-empting that change," says Peters.
Congress is also considering bills that would enact more stringent limits on credit card companies much sooner. Bank of America's rate changes take effect in June.