Bank Of America’s Rate Hike Freeze A Hype

Credit card companies have been getting a lot of flack lately from credit card holders. For the past few months, credit card companies have continually raised interest rates and fees, introduced new fees, cut available credit and more. Credit card holders, already facing the problems of a weak economy and a growing unemployment rate, have been further burdened by these changes in their credit card agreements. As a result, credit card companies and credit cards in general are showing a major drop in consumer satisfaction.

With the current state of the economy and the high premium of consumer satisfaction among financial companies, the first credit card company to recover from the low consumer satisfaction dilemma would be at a concrete advantage and would, most likely, emerge as an industry leader. At the moment, Bank of America seems to be that company.

With its recent announcement of stopping interest rate hikes, Bank of America has captured the attention of consumers and the national media. Amidst a flurry of credit card companies raising their interest rates and whatnot, Bank of America’s announcement of stopping interest rate hikes is certainly worth a pause and a few lines in the front page in the financial section of the news.

The New York Times headlined the news as “Bank of America Makes Pledge on Credit Card Act”, the Washington Post’s take on it reads “Bank of America Won’t Hike Credit Rates” and the Wall Street Journal proclaims “BofA Holds Lin on Credit-Card Costs.

To the casual reader, it would seem that Bank of America is finally getting in line with the much touted Credit CARD (Card Accountability, Responsibility and Disclosure) Act which was signed into law earlier this year and set for activation on February next year. The Credit CARD Act is a new government effort to reshape the credit card industry into a fairer arena for credit card holders. So far, it has seen plenty of opposition from credit card companies. Credit card companies have not made compliance with the Act a priority agenda and have focused more on circumventing it instead. Because of this, Bank of America’s announcement has made quite an impression among consumers and the news media.

However, some important details are being left out amidst the general furor. One major detail is the fact that, before their announcement, Bank of America was also busy raising their interest rates. Thus, the effect of Bank of America’s announcement is only limited to those who have not seen their rates hiked. It is currently unclear how many credit card holders will be benefited. There is also the matter of the move from fixed to variable rates in card holder interest rates.

As encouraging as Bank of America’s announcement is, its actual benefits to credit card holders may not be as impressive in the long run.