Bank of America Reneges on Card Costs

Odysseas Papadimitriou is founder and chief executive officer of Evolution Finance, the parent company of Wallet Blog and Card Hub, an online marketplace for credit cards.

A week after making the pledge, Bank of America said it would begin introducing annual fees, ranging from $29 to $99, to select customers next year. The two announcements result in a net win of zero for consumers as well as an unethical bait-and-switch. Why? Because, according to regulations, interest rates and annual fees fall under the same umbrella. They are both considered finance charges.

The introduction of new annual fees to existing credit-card accounts will result in increased finance charges. For insight, consider that the addition of an annual fee of $50 on a credit-card account with a $500 balance and a 10% interest rate would double total yearly finance charges. Bank of America is simply using the introduction of new fees as a way to shore up its credit-card portfolio in the face of narrowing profit margins.

In January, with our help, the New York Times broke a story that called out another credit-card issuer, JPMorgan Chase(JPM Quote), for violating its marketing promises using a formula similar to what we now see with Bank of America. After the story ran, JPMorgan was pressured by New York Attorney General Andrew Cuomo to change its tactics and went so far as to extend refunds to customers for membership fees. Unfortunately, almost a year later, there have been no lessons learned, and Bank of America is engaging in similar behavior.

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