According to an article in the Star-Telegram , JPMorgan Chase & Co. and Bank of America Corp. are replacing fixed interest rates on some credit cards with variable rates. The credit card lenders’ decision to go with variable rates was influenced by the new laws created to protect consumers from predatory credit card lenders.
The article said:
“They are basically keeping your rate stable while rates are really low, so that they can raise them when rates go back up again – and rates will go up,” said Leigh Allen, a consultant and a former investment banker for financial services companies at Citigroup. “The industry is going through a transformation that is leading to higher-priced credit and less credit available.”
I couldn’t have said it better. Credit card companies are afraid that they will lose money if they’re forced to play fair with credit card consumers and they’re not going to “go down” without a fight. Bank of America actually claimed that the new legislation designed to protect consumers from predatory credit card lenders was inhibiting its ability to offer credit.
The article said:
Bank of America “took into consideration the legislative and regulatory changes that limit our ability to re-price based on a change of risk or a change in economic conditions,” Riess said. “This will enable us to continue extending credit to creditworthy customers and be prudent in our lending practices.”
All of the banks are tight-lipped about how many credit card consumers their new policy will impact. If you have a credit card with either of these companies please keep an eye out for notifications about changes in the terms and conditions of your credit card. Bank of America has already implemented this variable rate on some of their credit cards and JPMorgan plans to implement their changes by August. It’s important for credit card consumers to check for changes in their credit card’s terms and conditions because the interest rate displayed won’t change immediately to very low interest rates [for now]. But it won’t stay that way forever and those with the variable rate credit cards face “resetting” interest rates on their credit cards in the same way some homeowners have faced toxic mortgages that reset at much higher interest rates, sometimes as much as three times the original monthly cost.