Banks are fleecing credit card holders

American banks are increasing their rates for credit cards. Thousands of account holders of Bank of America were advised about rate raise from 9% to as high as 28% if they didn't pay off their balances at the old rate and stop using their cards.

Such kind of measures is considered unfair by consumer advocates. Rate increase they think should be applied to those who are behind in their payments or whose credit scores decline greatly, but the customers paying on time don't deserve to be included into the higher-rate list.

If consumers don't want to pay higher rates they are to pay off their accounts ac it is claimed by Bank of America. But "Consumers need to be aware of what is going on," says Curtis Arnold, founder of cardratings.com. Banks should inform their account holders in advance and in writing.

Both huge financial institutions and smaller banks set unheard-of rates and fees for credit card usage. The New Millennium card, issued by New Millennium Bank of New Brunswick, N.J., is a secured card with a $59 annual fee, higher than typical. Adding up the other costs to open an account, cardholders have to fork over $140 just to have access to money they put on deposit with the bank to back their spending on the card. It turns out that people should pay money for spending their own money.

All these institutions make every effort, at least they did previously, to gain new customers willing to open an account, taking in to account that banks are making attractive promotions with splendid offerings.

Millennium card also has no grace period, meaning a 19.5% interest rate on charges kicks in as soon as a charge is made. Chris Van der Stad, president of New Millennium Bank, says the card offers a "good value" and a chance for borrowers to rehabilitate their credit ratings by paying on time and being responsible. As for the lack of a grace period, he says, "It's very expensive to process a low-balance card. That's why we have no grace period."

Rewards programs also claim to offer a lot, but the card holder will pay much in return. The Marathon Platinum reward card and the Speedway SuperAmerica Platinum MasterCard, both issued by JPMorgan Chase, and the Citgo Preferred Visa, issued by Citigroup have rates of nearly 30% in case borrower falls behind his payment.

The only option for customers available is to decide which kind of rates will be cheaper to pay if some troubles occured with their credit capacity. And by no means should they surround tempting advertisement.