Soaring interest rates remain a key reason why many Tampa Bay Area residents are unable to pay their way out of debt. Bank of America recently announced that it is joining the current practices of Chase, Citi and Discover related to penalty interest rates on credit cards: missing one payment may mean that all future balances will be subject to a 29.99 percent interest rate.
Bank of America credit card holders should be receiving notice of the rate hike, scheduled to take effect after June 25th, by mail. The continuing poor economy, sinking job and real estate market mean that many people are still using credit cards to meet everyday living expenses and may be directly affected by the new penalty rates.
The Good News and the Bad News Regarding BoA’s Penalty Rates
The good news regarding the dramatic change in interest rate after a late payment is that it is not automatic. Instead, Bank of America will review an account for additional ‘risk factors’ and adjust from there. The rate increase would also apply only to future balances, rather than existing credit card debt, allowing a consumer to get around the rate hike by simply not using the credit card going forward.
The bad news regarding the interest rate hike is that those consumers most likely to be affected are those who are already struggling to make on time credit card payments. These consumers may have no other choice but to continue using the Bank of America card, with the penalty interest rate applied, for future expenses. An almost 30 percent interest rate makes nearly any debt impossible to pay off in the near future.
After six months of on-time payments, the credit card holder may be eligible to return to his or her original interest rate. For those who cannot make on-time payments, or continue to struggle with credit card debt, whether due to unemployment or sky-high interest rates, bankruptcy may be a better option than continuing to pay on the debt.
Bankruptcy–Get Rid of the Debt, Not Just the Penalty Interest Rate
A typical Chapter 7 bankruptcy can take as little as 90 days from filing to discharge–a mere three months to being debt free as opposed to six months to return to a non-penalty interest rate and continuing to pay on existing debt. Beginning a fresh start through bankruptcy may be just a phone call away.