by Joseph Kenny | 12/15/09

The credit card companies have been scrutinized by the government and consumers lately in response to concerns over interest rates and fees and how they are charged on accounts. The new Credit CARD act establishes rules that determine how and when changes in rates and fees may be instituted. But Bank of America has decided to address some of the issues concerning consumers immediately.

One of the problems people have with their credit statements is the fine print. In that fine print is a lot of legal language that gives the credit card company virtually all the legal rights to make rate changes and add fees whenever they want. Now Bank of America has decided to address some of its customers concerns ahead of the implementation of the new law. In fact, the banks is sending a single page letter out that is not mandated by the legislated reforms.

Bank of America has decided to send customers a one-page letter that simply and clearly explains the interest rates and fees on the statements. Instead of pages and pages of small print that no one ever seems to read or can’t understand even if they do, the letter will use understandable language. It will be sent to 40 million consumers who are currently Bank of America customers.

In the letter will be an explanation of the interest rates that will be charged for all transactions including purchases and cash advances. It will explain all the fees and will also describe under what conditions interest rates can be changed when a customer makes a late payment.

Many of the credit card companies, including Bank of America, have been making policy changes in anticipation of the implementation of the new Credit CARD Act. These changes include raising interest rates, converting fixed interest rates to variable rates, reducing credit limits, and/or adding new annual fees.

The new Credit CARD Act prohibits credit card companies from changing interest rates on current balances unless the card holder is 60 days late making payments. The letter is a clarification of the policies but consumers will still find the fine print credit card statement in their monthly statements.

Consumer advocates point out that it is incumbent on card holders to understand the terms of their credit card accounts. Though the fine print is hard to read, it does contain the rules and policies attached to the account. The new law will stop credit card companies from making short notice changes in interest rates and payment requirements, but consumers will still be faced with penalties and rate changes if they don’t make payments on time.

One thing many credit card holders don’t understand is that it can take years and years to pay off even a small credit card balance when the interest rate is above 15% and only minimum payments are made. The median amount currently owed on credit card accounts is $3,000, and at 15% interest it can take up to 7 years to pay off the $3,000. After the new law becomes effective, consumers will be informed as to how long it will take to pay off the balance if making only minimum payments.