Credit Card Penalties May Jump to 30 Percent for Bank of America Customers

Customers of Bank of America Corp. may experience a massive increase in credit card penalties, according to an announcement made by a company spokeswoman on Tuesday. The spokesperson said the major card issuer plans to hike penalty interest rates to as much as 30 percent for customers who miss payments in the coming months.

Bank Increases Penalty Rate to Compensate for Lost Revenue

In order to compensate for a large decline in revenue so far in 2011, Bank of America is making changes that could have a huge effect on its customers. Starting June 25, the bank will begin charging a penalty rate of as much as 29.9 percent for customers who make late payments on their credit card balances, the company spokeswoman recently confirmed.

The bank reportedly saw a decline in revenue to $5.6 billion in the first quarter of 2011. This represents a 17.6 percent drop from the $6.8 billion it reported during the same period a year ago.

Fee-Only for New Purchases

Since the interest rate increase is not considered wholesale, borrowers will only be charged the penalty rate on new purchases after the rate is changed. Also, customers will be given a 45-day advanced notice of any penalty rate being placed on their account.

This is notably the second penalty rate change that Bank of America has placed on its credit card customers in recent times. Earlier this year, the bank introduced an annual fee of $59 for less than 5 percent of its credit card accounts. The annual fee will appear on the May statements of customers who are affected.

Bank Account Customers to Also See New Fees

In addition to making changes to its credit card fee system, the bank has also adjusted fees for its customers with bank accounts. Bank of America announced in 2010 that it would be setting up a new tiered system to cut costs.

The system is reward-based, allowing those who follow new rules set up for its checking accounts to avoid fees that could range from $6 to $25.

As of Jan. 2011, only one pilot program for its system was in the process of being set up in Arizona, Massachusetts and Georgia. If all goes well in these states, the bank plans to expand its system nationwide later this year.