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MBNofA: Bank of America Adopts MBNA's Tactics

Bank of America's Credit Card Operation Looks More Like MBNA Everyday

By Martin H. Bosworth
ConsumerAffairs.com

September 13, 2005
Since buying credit card giant MBNA in June 2005, Charlotte, NC-based financial titan Bank of America has adopted some of its former prey's most prized tactics -- spiking interest rates, charging late fees even when your balance is paid, and customer "service" that leaves cardholders feeling worse than when they called.

MBNA America • Interest rate increases • Payoff agreements • Sales Practices • Credit protection plan • Credit line • Luring students • Pay-by-phone --- News • Bank of America Completes MBNA Buyout • Small Wonder MBNA Found Itself the Prey • Bank of America Buys MBNA • MBNA Profits Plunge • MBNA Turns Up the Heat • Supreme Court OKs MBNA's Charging Interest on Fees

The tactic circles around offering a credit card (like their Visa Platinum) at a 0% interest rate, and encouraging customers to transfer balances from other cards to their new Bank of America card.

Once that new balance is transferred, however, the card balance proceeds to accrue daily interest and late charges, until the balance hits its limit. Thereafter, the balance APR changes to an intolerable rate, anywhere from 17.99% to 31.99%.

That's what happened to Kelly of Longview, Texas. She accepted a "zero percent" balance transfer offer. "Once the balance was transferred I was dinged with a daily interest rate which caused the card to go over balance and then they changed the interest rate to 31%," Kelly said in a complaint to ConsumerAffairs.com.

If you look carefully at the fine print, you can see that Bank of America's seemingly generous offer of zero percent interest isn't all that generous after all. For example, read this list of fees:

Late Payment Fees: $19 for total balances less than $100, $29 for total balances $100 to $1,000, $39 for total balances great than $1,000. Over the Credit Limit Fee: $35.

So you could have a paid account with no balance, or never use the card at all, and get hit with a $19 fee.

Also, take note of their payment terms:

During the introductory period, if we do not receive at least the Minimum Payment Due during any billing cycle, you exceed your Credit Limit or you close your account, any introductory rate on Purchases and Balance Transfers will terminate and will be adjusted to the Standard Rates.

Given that mandatory minimum payments on credit balances are doubling, that's a lot of money to fork over in a very short time.

And if Bank of America's billing cycles are anything like their banking deposit cycles, it's no wonder so many customers are getting zapped with late fees.

Beth from Sterling, VA explains how Bank of America's holds on her deposited pay caused her to lose money for no reason:

Their policy was to "hold" any deposit over $500 (my paychecks were running just around $600 at that point) 3-5 days to wait on it to "clear" before it technically "posted" to the official statement. This should not have applied to direct deposit paychecks, which should come across as an immediate electronic transfer of funds into the account. When I would visit the ATM after my paycheck was sheduled to go in, it would show the funds as "available."

I would assume the funds were there and was budgeting my bills around when my deposits were due to go in; my employer put checks in at Midnight every other Thursday, so I would pay bills Friday. When I would write a check to pay bills, however, they would instead draw from my "statement," which held the deposit. Hence, the checks I was writing would be applied to my account 2-3 days before my deposits were showing as posting. They would take advantage of the above issue to apply "overdraft fees" on my bill checks before clearing the paycheck deposit that went in the day or more before! That's $25-$30 per bill!

A Poisonous Pedigree

Wilmington, Delaware-based credit card provider MBNA was the source of great consumer angst, thanks to such now-familiar tactics as exorbitant interest and fees upon fees, not to mention interest on fees.

Many cardholders decided they'd had enough, and began paying down their cards and closing their accounts in record numbers. The loss of revenue to MBNA was enough to torpedo quarterly profits by 94%. Soon afterward, Bank of America swept in and bought snatched MBNA in its beak.

The acquisition of MBNA's valuable credit card resources made Bank of America a serious challenger to Citibank and J.P. Morgan Chase, the top dogs in the financial and banking industry.

But it may be that Bank of America has also acquired many of its acquisition's bad habits, possibly hindering its efforts to improve its reputation in the consumer banking sector.

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