Bank of America recently announced that it would begin charging 5% of its credit card customers $59 annual membership fees this May. However, I don’t foresee them lasting much longer than that, if they are even implemented at all.
Why? Because these fees break the intent of the rule against credit card companies increasing interest rates on preexisting balances unless account holders are 60 days or more delinquent, which was implemented by the credit card law that took effect in February 2010. While Bank of America’s fee is not an interest rate increase per se, it has the same effect as one. You see, membership fees, like interest rates, are considered finance charges. Both increase the cost of one’s debt, which means a rise in membership fees is tantamount to an interest rate increase and therefore should not be allowed.
Bank of America is simply using a loophole to make a quick profit, but considering the fact that the Federal Reserve has shown a commitment to closing loopholes within this new credit card law, and soon-to-be head of the Consumer Financial Protection Agency Elizabeth Warren has indicated her intention to continue such a practice, the clock seems to be ticking down to the time when Bank of America’s new membership fees become Bank of America’s old membership fees.