Been debating whether to really mention this or not, but it’s too cool and I have to share. If you aren’t in the same boat, well, I’m not gloating or anything. Credit cards can be useful, if used carefully and responsibly.

Back in college, about 10 years ago or something, I didn’t have a credit card or any credit to my name. So to build up credit, I applied for and received an eBay Mastercard which was just a Bank of America Mastercard with the eBay logo on it. I was active on eBay at the time, mostly selling old CDs, and it was around then that eBay and PayPal were integrating, so I could earn PayPal points good towards purchases via PayPal by making other purchases using the eBay card.

I didn’t use it much in college having been warned off easy credit by my parents, but after I got married, I did start to make use of it occasionally. Usually covering for expensive or unplanned purchases like car repairs or medical bills, and sometimes covering for a slow web-hosting month when there weren’t subscription dues available to pay the bills.

Over the years, the balance grew to something like $6600. I don’t know if that’s a lot or not compared to how other people manage their credit cards, but it was an annoying amount because it seemed impossible to pay off, and chipping away at it with occasional $100 payments just wasn’t getting me anywhere.

In April of 2009, Bank of America and other banks were quaking in their boots over Obama’s Bank Reform bill which said among other things that banks could not raise the interest rates of their credit card holders unless they’d been late with their payments a few times. This was a pretty good new rule since apparently they had been free to raise the interest rate on people for no/any reason. I had a 8.9% fixed rate that had never changed as far as I could recall, but the limit kept being increased – of which I was not complaining – probably to entice me to charge more.

So before the law took effect, BofA and other banks made efforts to raise interest rates and mostly get people off fixed interest rates to variable APRs so they could make more money as the prime rate fluctuated. I would hate borrowing any amount of money at a variable rate because you can’t plan very easily and as far as you know, the rate may jump wildly out of control and what debt was once manageable is now impossible. If the rate change is known in advanced, such as when using an adjustable-rate mortgage, then planning is easier. I received a letter from BofA stating that effective in May, my rate would change from 8.9% fixed to some variable APR, starting at something like 11.99%. The weird thing was that they offered the option to deny the rate change and keep the old rate – as long as I didn’t make any new purchases. I thought it was incredibly benevolent of them to offer this chance to reject the change. I guess that was part of the card issuer agreement – should have read that more closely.

Like its competitors, Bank of America in recent months raised interest rates, cut credit limits and took other actions to change terms before legal reforms restrict its ability to do so. Across the U.S., changes to interest rate and/or credit limits hit about 65 percent of all outstanding credit cards in the past year.

Among the most notable changes made by Bank of America was shifting most credit cards from fixed to variable interest rates, which move in relationship to the prime rate. The new law will prevent banks from changing the fixed rate on existing balances unless the cardholder falls two months behind paying the bill. The bank also began testing annual fees ranging from $29 to $99 on certain cards that previously were not subject to such charges. Some Bank of America cards, such as airline rewards cards, already come with fees.

 

Bank of America spells out credit-card fees, rates (11/30/2009)

This rate change turned out to be a blessing in disguise. Faced with the prospect of a higher interest rate making it take longer to pay off the balance, we stopped charging things to the card. We delayed purchases, or saved up, or just skipped them. We called up BofA and rejected the rate change and didn’t charge anything new to the card and set our minds to paying it off, no matter how long it took.

Fast-forward a few years and after chipping away at the balance and finally making a large payment at the end to just be done with it, we had the card paid off. Fiscally-conservative celebrations were had.

Fast-forward a few more years and we are contemplating making a very large purchase and financing it by putting it on the card, because it may have the best rate compared to other options, but that old threat of the rate changing with a new purchase to a variable APR is still out there. We get online and chat with a BofA customer service rep. All she can see on the account is the 8.9% fixed rate that we had before. But won’t it change with a new purchase as previously threatened? Unknown. So we make a trial purchase. $3.99 coffee from Starbucks. Whoever charges a consumable to a credit card is out of their mind. But anyway, we waited for the statement to become available.

Statement arrives. 8.9% interest charged on the outstanding balance of $0. We pay off the $3.99.

A month later, another statement becomes available, $0 balance.

The rate has stayed the same.

At the time it was threatened, we didn’t realize the rate hike was due to the impending bank reform law. And now that the law is in place, BofA can’t make good on that threat to raise the rate if we charge something new, because now they can only raise it if we’re late on a few payments.

Which pretty much means we’re locked in with 8.9% fixed forever.

Not bad.