Happy Valentine’s Day! That’s the message from Consumerism Commentary today. By my home office in central New Jersey the mid-50-degree weather is a welcome surprise, and I like sharing my resulting positive attitude. This isn’t today’s message from your credit card company, however. Several people have written to Consumerism Commentary today to let us know that on this day we celebrate love, they received unpleasant new letters from Bank of America announcing new annual fees. Some credit card users are receiving the worst type of Valentine’s Day gift from this bank — the type that pushes you to consider leaving your partner.
When Congress passed the Credit CARD Act, Bank of America jumped at the chance to increase fees in October 2009, ahead of the new law’s effective date. This issuer wasn’t the only company getting a head start. Many card issuers raised interest rates ahead of the deadline imposed by the law, in addition to adding annual fees. The issuers saw this as the best opportunity to make additional money in an environment where they perceived their revenue would be reduced in the future. The new law, once it went into effect, would make surprise changes more difficult.
The Credit CARD Act doesn’t completely stop credit card companies from changing their terms. There are many no-fee credit cards on the market right now, but there’s no guarantee they’ll stay that way. With these new letters going out in February 2011, Bank of America is converting more of its customers, those enjoying the benefits of a credit card with or without interest, to paying customers. Don’t be surprised if more issuers follow suit. Interest rates have not changed much overall, and if card issuers feel they can earn more money in addition to interchange fees — basically guaranteed income — and customer fees like interest and late fees, then they will listen to shareholders who demand financial performance, and they will go after additional sources of income.
Debt is a double-edged sword. Those of us who are responsible with credit, or are in a financial position to use credit not by need but by choice, manage to avoid interest and late fees and maximize rewards, but still perpetuate the industry by hurting our own bottom line while small retailers struggle with the industry. As more small businesses can’t afford to operate in a cashless society, the middle-class economy will falter.
Don’t expect the Credit CARD Act or the government to stop the credit card industry’s search for more revenue. Even if you haven’t received a letter yet, chances are, the credit card you keep in your pocket will eventually change its reward or fee structure to make it less valuable. Stay aware of your options and shop around. If you use a credit card by choice, take an honest look and decide whether you want a third party interfering with your money and if the benefits continue to be worthwhile. If you use a credit card because you have no other option, consider taking a tough look at your financial situation and find ways to get out of debt.