John Carmichael says he always made his credit-card payments on time and had never had problems with his credit rating. But earlier this year, the interest on his Bank of America Visa card nearly tripled overnight, from around eight percent to nearly 25.
"To jump from a low rate to a high rate in one fell swoop, with no justification in something that I did wrong, I think is bad business," said Carmichael.
Bank of America says Carmichael had too much debt, even though his card balance was almost $1,000 below his limit. Carmichael speculates that banks are changing credit card terms to compensate for their mortgage-related losses.
Chris Fichera of Consumer Reports says that's possible.
"Banks earn a large part of their revenue from credit cards, so when the mortgage meltdown hit, they turned to credit cards to make up for slacking profits," said Fichera.
Credit card notices alert you to changes in your account. Although plenty are junk mail, don't toss out a notice without reading it -- otherwise, you could miss important changes to your credit card account.
Banks often give you the choice to stop using your card and pay off the balance at the old rate, which is what Carmichael worked out with Bank of America to avoid a rate increase. But not everybody does that.
"Some economists fear that overextended credit card holders could be the next shoe to drop in the economic crisis. With home-equity loans harder to get, some people are turning to credit cards to cover their expenses," said Fichera.
Consumer Reports says with so many banks changing their terms, you need to navigate this new credit card jungle with care.
If you're not happy with your credit card terms, make a switch. And always be sure you read through the card's terms and conditions before signing up so there are no surprises later on.
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