BofA adds penalty rate to its credit cards
Bank of America credit card customers could soon get a nasty surprise when they open their statements.
The big bank, following in the footsteps of its competitors, said it will begin assessing a penalty annual percentage rate of nearly 30% on customers who make late payments on their credit cards.
"All other major issuers already do this," says Bank of America spokeswoman Betty Riess. "Since the CARD Act, Bank of America has not raised rates on consumer cards."
The penalty rate increase goes into effect June 25.
Riess says the bank may charge up to 29.99% on new purchases and transactions if payments aren’t made on time. Existing transactions will be billed at the rate in effect when the transaction occurred.
One late credit card payment might not trigger the penalty rate.
"We review every account that goes late to determine if, based on the account’s overall risk, a penalty rate is appropriate," Riess says. "And not all accounts are automatically assessed the maximum 29.99% penalty rate. The penalty rate, just like the rate assigned when a card is opened, is based on an individual’s credit."
The penalty won’t come as a surprise.
BofA has to give 45 days notice before implementing the new rate as required by the Credit CARD Act of 2009.
Of course, you can sidestep the penalty interest charges by not using your credit card.
Riess says customers assessed the penalty rate shouldn’t assume they’ll pay that interest rate forever.
"Rates are reviewed every six months as part of the CARD act. So the rate may drop down if a customer’s credit reflects such worthiness," says Reiss.
It used to be a perk of owning the card that no matter how late you were, BofA only charged its standard interest rate.
Although BofA is late to the game on assessing penalty APR, this change should have no impact on you if you pay your credit card debt on time.
Many card issuers, including Bank of America, offer customers the option to set up automatic payment reminders.
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