Dear Money Helps: In August 2005, I signed up for a Bank of America credit card with a great fixed rate of 6.9%. Last year I got married and put a lot of wedding expenses on the card, figuring to pay it off in a year or so. I opened my bill last month, and my rate had shot up to 19.99%! I called the bank and was told that I’d been mailed a notification. But I never received it. Can the issuer really triple my rate even though I always pay on time? And is there anything I can do to get my 6.9% back? – Eric Jones, Denver
Answer: Unfortunately, even diligent customers like you can get slammed with out-of-nowhere rate hikes. That’s because some credit-card issuers, including Bank of America, have a policy – buried in the fine print of your contract – which says your rate can change at “any time for any reason.”
According to Bank of America spokeswoman Betty Riess, the most common reasons for a rate hike are a change in a customer’s credit score and a change in account activity. There are no blemishes on your credit history, but your $13,000 balance was close to the card’s limit. And that, the bank says, is why your rate was raised. You may argue with that logic, but because of the policy, it’s perfectly legal.
Issuers are required to notify you about any APR change and give you a chance to pay off the balance at the lower rate (though any new charges would be at the higher one). Since you say you never received the mailing, Bank of America agreed to restore the 6.9% on your existing balance and refund the $150.81 in interest charges on the higher rate. They also offered to reduce your rate on new purchases to 9.99%.
Still, I’d suggest shopping around for a new card – maybe one with a 0% balance-transfer rate – so you don’t risk that APR spiking again arbitrarily. Check out CardRatings.com for ideas. Just be sure to scan the fine print for the “any time for any reason” clause and the phrase “universal default,” which means your rate can be hiked if you’re late on another debt. Or go with a card from Capital One, Discover or Citibank – issuers that do not have these policies.