Attention, Bank of America cardholders: your interest rate's going up, up, up!

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The Wall Street Journal (subscription required) reports that Bank of America will raise its interest rates this spring for as many as four million cardholders who carry a balance and currently enjoy an interest rate below 10%.

If you (like most of us) carry a balance and your interest rate is already higher than 10%, breathe easy. This news doesn't affect you. If your interest rate is lower, though, look out for your June account statement -- it will have a new interest rate on it.



The Journal
suggests that the climb in interest rates may not be too devastating: if you're carrying a 6% interest rate, it probably won't shoot up to 33% (which increasingly seems to be the ceiling for customers who have made late payments). More common is the example of the Vermont woman in the story who just learned that her 7.9% rate is about to climb to almost 13%.

Bank of America says the change will affect "a small portion" of its customers, but that's got to be cold comfort to that small portion. And if you're among the unfortunate chosen ones, and your interest rate is about to skyrocket, there's one important things to remember.

Bank of America is making you an offer you actually can refuse. But think carefully before you decline to go along with the new rate. The bank will probably close your account, and if you have a balance, your credit score will drop. But for some situations, that might be a useful alternative.

If there's any good news in all of this, it's that the new rates may force some cardholders to reconsider whether they should be cardholders in the first place. It may still be worthwhile to use the card to buy a computer or at school, but maybe they won't reach for it whenever they're in line at McDonald's. And encouraging good behavior is a very good thing.

Still, this rate hike is troubling because it targets consumers who already exhibit good behavior -- they may have revolving debt, but they have good credit scores -- and from a business standpoint, it seems very self-defeating. The credit-card companies jack up the interest that their customers pay, and then if the customer uses the credit card, they're going to pay a lot more, edging them closer to a position where they can't pay at all.

And then their interest rates would rise even further, and their debt would get even harder to manage and pay back.

And then, when customers default on their credit-card debt, bank executives will grumble that nobody's paying them.

It reminds me of the old joke where a suspect, on trial for murdering his parents, begs the judge for leniency -- because he's an orphan.

Geoff Williams is a freelance journalist and occasionally writes about credit cards for various publications, including CreditCards.com.

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