Bank of America recently announce that they would not be raising interest rates on credit card holders. Read This From Washington Post.
What they are in the precess of is re-calculating they way you are charged interest. For instance:
You already have a inflated rate of 16.99% (or more) at this point.
You will be converted to a variable rate APR that is now indexed to your current margin over the published prime rate. Currently 3.25% which leaves you with their index of 13.74% which will not change now.
If the prime rate goes up (very likely to have two rate hikes in the next year) you would pay the 13.73% + the new rate.
In effect, they will be blaming the government on the increase of your credit card rate.
This, I can only imagine, will be followed by many credit card company’s as the new law governing how rate hikes are applied, will take effect early next year.
This reminds me of the 90’s when the utility company’s were advertising they froze the price of electricity to save you money (like they were doing you a favor) when in reality, the price trend was going down and they were locking in some big profits.
For the life of me, I can not seem to figure out just how it is profitable to raise rates and cause additional bankruptcy’s unless it is from a tax break that the federal government should eliminate in response to these kind of actions.
I propose an option whereby a person could agree to pay-off in 12 months and get a lower interest rate of say 9.99%. This would go a long way in shoring up those high debt to cash on hand ratios that got us in this mess and allow taxpayers to have their money back instead of US giving our tax dollars to shoring up the banks and paying high rates for their mistakes. (paying for it on both ends). And would stimulate the economy by having more cash on hand by consumers at the end of the period.
This could be done as a month by month basis. If you take a snapshot of a account and give the 9.99% and require a payment of 15% of that snapshot each month. If account holder does not for-fill, back to old rate + fees that would have accumulated anyway.
A one time deal stimulus while they figure out how to hold these loan sharks at bay. They are pretty crafty folks so I’m not sure it is possible.