A late fee isn’t the only repercussion for a missed credit card payment. Many cardholders also have to start paying a much higher penalty interest rate. That will soon be the case for Bank of America customers as well.
The bank began notifying cardholders this month that a single late payment could soon result in penalty rates as high as 29.99 percent. The change goes into effect June 25.
DETAILS
Bank of America says a late payment won’t automatically trigger the higher rate. But the account will be flagged for review and the rate could be hiked depending on the cardholder’s payment history.
If the rate is hiked, customers will be notified at least 45 days in advance. The penalty rate will only apply to new purchases. A late fee of up to $25 will also be assessed. The fee can go as high as $35 if there’s a second violation in a six month period.
The bank will review the account within six months to assess whether the original rate should be restored.
BACKGROUND
Penalty rates are common in the credit card industry. The average penalty rate is almost 27.96 percent, according to CardHub.com.
However, Bank of America got rid of its penalty rates last year as part of its changes to comply with new credit card regulations. That’s because the new rules prohibited it from raising the rate on existing balances unless an account is 60 days past due. Bank of America’s penalty rate had previously applied to existing balances as well as new purchases.
If the rate on an existing balance is hiked, cardholders should know that the original rate must be restored if payments are made on time for six straight months.
Source: The Associated Press.
