Apparently the fee does not apply to ATM withdrawals. A single purchase will  trigger the $5 fee for that month.

Consumers agree that they do not like the fees. However, the fees are not so unsavory that they are planning to leave Bank of America.

Instead, we are seeing another trend. Many customers including this author are making the switch to an alternate account with another institution.

If Bank of America does not waive my fee on a monthly basis, then I will simply stop using it for debit transactions. My credit union does not assess any fees, which makes it a perfect switch.

Another expected trend is one that Bank of America and others are definitely in favor of. They believe that customers will begin using their Bank of America credit cards instead of their debit cards. This benefits the bank, since this opens the door to finance charges that were not possible when customers depended on their debit cards.

For more information about the new fees, Debtors Unite is keeping up with the developments on the $5 monthly debit card fee at Bank of America. They are also following the regulatory unrest over the fees which Senator Durbin is personally monitoring.

What is a Re-age?

When a creditor re-ages your account, they agree to restore current status. This change in status provides multiple benefits.

First, you no longer are required to pay for arrears. Instead of catching up through sending in back payments in addition to your current month’s payment, you can now send one payment each month. This is important when your budget is already stretched.

Second, you can say goodbye to late fees. That $39 to $45 a month that you were getting charged as a penalty goes away when your account is current.

A third major benefit to an account re-age is that your creditors can now report your current status to the credit bureaus. While your late payments will still be on record for 7 years, your scores will jump when your current status is reported. This current status will outweigh older late payments in your credit report, which will allow your scores to continue to climb as long as you maintain that current status.

Major credit card companies are restricted in how often they can re-age an account. You should understand that you may only get a maximum of 2 chances over a 5 year period to re-age your accounts. Therefore, they will not make the decision lightly. They want to make sure that you are serious about maintaining your account.

When you enroll in a debt management program, it provides proof to your creditors that you are committed to getting back on track. They will compare your program summary with your credit report to make sure that you are enrolling all of your credit card accounts. If they see multiple accounts with balances left off the program, there is a possibility that they may deny benefits until you have added those accounts. That is why it is imperative that you include all of your unsecured debt for maximum benefit.

To see how re-aging through credit counseling can benefit you, imagine this scenario. You have a credit card with a $200 a month payment. If you miss a payment, your next month may require $447 as a minimum payment rather than your usual $200. This includes 2 months payments, additional finance charges on your higher balance and a late fee. If you dare fall 2 months late, your interest rate will skyrocket to 29.99% or more, depending on the penalty rate on your account.

By enrolling in a debt management program, your creditor can re-age your account. Instead of a $447 minimum payment, your new monthly payment might be $160. Your payment could be lower or higher than this example. Your new payment primarily depends on which creditors you owe as well as specific details on those accounts.

If you fail to receive credit counseling before your accounts are charged off as bad debts, you lose the right to a re-age as well as the other benefits of a debt management program, such as lower interest rates, reduced payments and a rebuilding of your credit rating. You only have a limited window to act. Once an account approaches 4-6 months late, you can expect your lender to provide final notice of charge-off. If you miss their ultimatum, you get to deal with the nasty collection agents that will pursue collection of the defaulted debt. For more information about re-aging your past due credit cards, contact our financial counselors today.

This removes one potential source of confusion that likely led to overdrafts from customers who thought their account balance was as high as what was posted in “Account Activity.” Now all transactions appear on that page.

Prior to May 2010, Bank of America would omit any pending or completed scheduled bill payments for the current day from the “Account Activity” listings. This resulted in an overstated account balance.

As anyone knows, when your actual account balance is lower than what you believe it is, you run a higher risk of over-drafting your account. Such a discrepancy in account balances has likely resulted in millions of dollars in overdraft fees over the years.

This change to Bank of America’s online account management console aids transparency and improves accuracy of account information. A better informed customer is better able to plan future payments and ensure they will have enough money in their account.

While Bank of America has finally embraced full transparency of their online banking, other major financial institutions have not. Since regulatory interference is unlikely, it will be up to the competitive market to put pressure on those banks that still do not provide a true balance to their customer.

Indeed, the entire Bank of America online banking experience is much improved. Users now have direct access to all linked accounts, including checking, savings, money market, credit cards and even investment accounts through Banc of America. Having access to all accounts facilitates payments and moving money around. It still takes a day to transfer funds from checking to investment banking, but I imagine this barrier will soon fall as well.

We recommend meeting face-to-face with a financial counselor whenever possible. CCCS of Northeastern Ohio provides face-to-face counseling. However, we also understand that navigating downtown Cleveland is not always the easiest chore.

Our counselors know how to deal with high limit credit cards that are burdened by heavy balances. Juggling multiple accounts can be stressful, since late payments are not an option.  Transferring balances have also become more expensive due to 4-5% upfront balance transfer fees.

Our counselors are certified as Accredited Financial Counselors and understand the types of benefits that major credit card companies frequently provide through debt management programs. Many of our clients were surprised at how they could successfully manage tens of thousands of dollars in high interest credit card debt.

Being in debt does not have to mean that you will have to file for bankruptcy. If you take action while you still can, you may be able to avoid the embarrassment and expense of bankruptcy.

We cannot promise that you can avoid bankruptcy. We cannot promise that all of your interest rates will be lowered. We cannot even promise that we can lower your rates. These are benefits typical of our debt management program and are enjoyed by our current clients, but they cannot be guaranteed.

This might be different from what you see on television from many of the so-called “debt relief” companies that profit from your misfortune. Of course, if you look at their Better Business Bureau rating, you might find that they cannot back up their extraordinary claims.

We at Vision Credit Education will help you evaluate your situation. We will help you develop a budget, analyze your debt situation and provide feedback based on our years of experience with other clients in similar circumstances. Of course we also know that no two clients are exactly alike.

That is why we take the time to tailor a plan to meet your needs. You cannot feed MasterCard before you feed your family. We will help you prioritize your needs and answer your questions about your available options.

We cannot tell you what to do. Instead, we discuss your options with you and support your decision on how to handle your situation.

If you are in Lorain, Avon Lake or Elyria, give us a call to discuss your financial situation. You may contact an Accredited Financial Counselor at 1-800-379-4720. Find out how you might benefit from the interest rate reductions and lower payments available through our program.

Which Accounts are Targeted?

If you charge more than $200 a month to your Citi card, then you likely will be spared this $60 annual fee. According to Citi, all of the letters were mailed out and affected cardholders have already received notification.

Accounts that are used less frequently and fall well below the $2,400 annual threshold are likely to see the fee. Citi did provide affected cardholders with the ability to reverse this fee:

However, because we value you as a customer, we wanted to give you an opportunity to have the annual fee credited back to your account.

Decisions to reverse the fee reportedly depend on the customer demonstrating that they do indeed charge close to that $2,400 annual threshold. Otherwise, it is likely that many of these requests will be refused.

The first annual fees are set to be charged on April 1, 2010. It is worth stating that this is not an April Fools joke!

If you want to opt out, the deadline is March 31, 2010. Here is the contact information:

Call Citi at 1-866-915-9425. If you choose to write them, include your name, address and account number in the letter:

What Was Amiss?

Specifically, I noticed that my credit card balance had increased from a $-17.53 to $46.47. Curiously, I wondered what was that $64 charge?

As a matter of habit, I routinely review all of my transactions to ensure that no fraudulent activity has occurred. A review of the account activity as well as the actual statements showed no transactions, yet the balance mysteriously showed that something had been charged.

The Culprit

My interaction with a Bank of America text chat specialist revealed the answer. This was her response:

please do not check the online banking balance as it is in correct.

The online banking is under maintenance and hence your are not able to see correct information.

Due to new card act that has been introduced, there will be a user friendly site for the customers to use it more efficiently due to that online banking is changing and there are lot of changes made I request you to do check it after 24 hours as we updating it as per the new card act from the federal government.

What she was referring to is the Credit CARD Act of 2009 that places new restrictions on financial institutions. It is expected to make usage of credit cards a bit less of a debt trap.

I was able to view the charge a few hours later. I will be sure to sign into my online account in a couple of days to see how they have changed the online experience. Hopefully it will make things even better.

The Purpose

When Capital One and any other credit card issuer encounters an account holder who falls 180 days delinquent, they are required by federal law to charge off the account as an uncollectible bad debt. This is written off as a loss, of which a portion is recovered by selling it to a debt collector.

Attorneys, debt buyers and collection agencies often purchase these accounts for pennies on the dollar and pursue collection activities against the debtor. There is no limit on how long they can pursue collection of the debt.

There is however a limit to how long they can pursue legal action against the debtor. The statute of limitations on a debt prevents a debtor from being sued over an old debt. A lender or their agent must pursue a judgment before the statute of limitations expires. This can vary considerably by state.

The AG’s office is specifically charging that Capital One extended what it claimed were credit offers to these debtors. However, it charged that many of these credit offers were for only $1. The catch was that the debtor had to transfer their old “expired” debt over to the new card, thereby re-aging the debt. Attorney General Darrell McGraw had harsh words for Capital One:

Capital One’s practice of offering nominal extension of credit, if and only if, the consumer agreed to pay off a debt too old to be sued on is tantamount to loan sharking.

Any debtor that agreed to this credit “offer” would be subject to new legal action on a debt that was previously off limits. They would have been at a disadvantage, since the old balance would once again be subject to fees and interest.  If the client wanted more available credit, they would have to pay down the old balance to well below the credit limit.

To further complicate matters, many of these accounts were charged a $59 annual fee. This annual fee was charged on the second billing cycle, thereby making account holders mistakenly believe they had more available credit. The annual fee would frequently cause clients to go over their credit limits, thereby incurring an over-the-limit fee.

West Virginia residents may contact the Attorney General at 1-800-368-8808 for more information.

Poor Timing

Citibank began mailing out thousands of notification letters on November 1 to notify cardholders that they would see their interest rates skyrocket to 22.99, 23.99 or higher beginning just 5 days before Christmas. This is poor timing at best, and is sure to upset a large number of account holders.

Not only are these rates substantially higher than the national average of 12.60% (Source: Creditcards.com) at the time of this article, they are variable. That means that as the prime rate increases, these rates will increase with it.

Fortunately, no one is expecting prime rate to increase for some time due to the weak state of the economy. That should at least be a minor reprieve. However, at 23% no one is sure to feel relieved.

Increase Does Not Affect Life of Balance Offers

Cardholders that took advantage of one of the special balance transfer offers which held the rate constant for the life of the balance should not worry. Those rates will not change as long as you keep your end of the agreement. The increase only applies to purchases and cash advances.

You should feel fortunate if you are locked in at a low rate for a balance. Those generous offers are history. Where 3.99% for the life of the balance was common just 2-3 years ago, their latest offer is 15.99% until January 1, 2011.

Such a move is likely to raise the ire of Representative Carolyn Maloney, who has steadfastly pushed for more rapid implementation of the Crdit CARD Act. While other banks have backed off a couple of months early, Citibank clearly is willing to take a chance of being targeted in order to lock in some extra profits for 2010 and beyond.

Right to Opt Out

If you would like to opt out, Citibank will allow you to keep your card open under the same terms until your card expires. In case you haven’t paid attention to your cardholder terms, your rate has likely already increased within the past year, meaning that opting out probably would not save you much.

While Citi may look bad for its untimely move, it should be noted that several other major credit card companies had increased interest rates months ago. Citi may be late to the party, but they have still embraced the interest rate increases that desperate cardholders have feared. It remains to be seen whether Citi will follow suit and adopt the changes mandated by the Credit CARD Act prior to the government imposed deadline.

How Double-Cycle Billing Works

I experienced the frustration of double-cycle billing on a gas card that I use. The card itself is great, providing me with a 15 cent cash rebate on all gasoline purchases.

One month my bill did not arrive, probably due to a mail delivery problem. In order to protect my credit against such potential problems, I have the account scheduled to automatically send a payment each month before the expected due date with an amount that would mostly pay off an average month’s bill.

The bill itself was around $220, and I had automatically paid $200 on the bill. When I discovered what the actual amount was a few days later, I promptly paid the remainder via online banking. That remainder was paid a couple of days after the due date, meaning that that roughly $20 was rolled over to the next month.

In the next month’s bill, I noticed finance charges that were calculated using an average balance method that covered a two month period. Even though I paid off all but about $20, I incurred finance charges on a much larger amount. Fortunately for me, the card itself has a low interest rate.

Why it Was Eliminated

Double-cycle billing was identified as one of the practices commonly used by credit card issuers that heavily favored the issuers rather than the cardholders. It was included as one of the provisions in the CARD Act of 2009.

Some provisions of the CARD Act were implemented in August 2009. However, the remainder including this ban on double-cycle billing methods were given an effective date of February 22, 2010.

This practice will undoubtedly not be missed by consumers. This little victory for the consumer can be attributed to such advocates as Consumers Union and the Center for Responsible Lending.

It Depends on Your Unsecured Debt Levels

If you are using more than 25-30% of your total available credit on revolving accounts, then either closing an account or experiencing a reduction in your credit limits will reduce your score. There are two reasons for this.

First of all, closing an account will never help your scores and it could actually cause your scores to drop. This was confirmed by Craig Watts, spokesperson for Fair Isaac Corp. Secondly, any lost credit will increase your credit utilization rate which dominates the “total balance” portion of the credit scoring formula. That portion contributes 30% of your scores.

Different Impact for Those with Lower Debt Balances

Having utilization rates below 10% means that you are minimizing your reliance on revolving credit. You represent a borrower least likely to default.

Closing accounts would likely lower your scores. This is primarily due to your curtailing the credit histories of seasoned accounts that you have maintained for many years. The length of your credit history comprises 10% of credit scoring inputs. Instead of closing unneeded accounts, some people find that their available credit has been slashed by their lenders due to the tightening credit markets.

Conventional wisdom and most published reports would suggest that lowering your credit limits on existing revolving accounts would lower your scores, since it could cause a slight increase in your utilization rates if you carry light debt balances on credit cards. A recent Fair Isaac study initially appeared to counter this belief.

If we could hold all other conditions constant, we would expect that a reduction in available revolving credit would either have no impact on an individual’s FICO score or would cause it to decrease. In reality, the information on credit reports seldom stays fixed or constant. Our research shows that an individual’s score may go down, go up, or stay the same after the lender reduces a borrower’s credit limit or closes the account.

This study confirmed that most of the cardholders that experienced credit limit reductions actually had good credit scores. Of these cardholders, a surprising percentage experienced slight increases to their credit scores rather than decreases when their credit limits were cut. However, Fair Isaac spokesman Craig Watts said that these increases were attributable to other factors.

The conclusion is that if you have higher debt balances, you should favor keeping lines of credit open and try to avoid any reductions in your credit limits. While this may not necessarily be easy, you should at least focus on paying down your balances by sending in much more than your minimum payment requirements. Closing an account or reducing your credit limits would lower your scores.

Alternatively, if you have good credit and low or no debt balances, then you might entertain a reduction in your credit limits if you feel you have too much credit. Rather than closing unused accounts, you should instead consider limiting your overall available credit. While no evidence suggests that excessive amounts of available credit could be a detriment to your scores, closing accounts will have either a neutral or negative impact.

Most importantly, consider your immediate and long-term credit needs. The impact of these credit limit reductions is normally fewer than 20 points, whether it is a lower score for those overextended or a higher score for those with almost no debt. Your actual credit needs may be more important than simply gaining a few credit scoring points. This is especially true if you need deep lines of credit to handle small business contingencies or other emergencies. Most importantly, it is better to experience lower credit limits rather than to lose open accounts that have a long and positive payment history.