Woman Refuses to Pay Bank of America Credit Card

There is a video making the rounds this week in which a woman named Ann Minch decides to take a stand against Bank of America after her credit card interest rate was boosted to 30%. Although we only hear her side of the story, it is an interesting tale in light of the horrible time banks have had recently.

In America we like to root for the underdog, so at first it is easy to want to be on Ann’s side and join her “Debtor’s Revolt.” If you take a closer look at what facts we know, however, you might find that joining her cause isn’t as appealing as it seems.

Ann Minch’s Story

Ann claims to have been a Bank of America (BoA) customer for 14 years. She has two BoA credit cards, one on which she carries a $5943.34 balance and makes the minimum monthly payment. Ann is not over the limit or behind in payments, she has good credit and no problems paying her bills in spite of being laid off recently.

This year BoA started to raise the interest rate on her credit card, which was originally 12.99%.  In July it reached a whopping 30%, which is the number she quotes throughout the video. Ann feels this is unfair and has decided to stop paying on the credit card until BoA lowers the interest rate to a more reasonable amount.

Ann claims this will be, “…the proverbial first shot fired in an American Debtor’s revolution…” She calls what she is doing, “civil disobedience.”

This past weekend Ann closed her BoA checking and savings accounts and transferred the balance (approx. $5000) to a local community bank.

Facts to Consider

• A note 52 seconds into the video reveals the interest rate on the credit card in question is 23.74% as of the most recent statement. Quite a high rate to be sure, but not nearly the 30% she is so upset about. This is good news for Ann as it seems her rate is going down.
• A credit card is a financial option you request. When you apply for a credit card you sign a legal agreement. In this case that agreement must have stated that BoA can raise the interest rate at any time for any reason.
• Ann had almost enough cash in her checking and savings accounts to pay off the credit card.  There are also other options she could explore such as transferring the balance to a lower rate card or taking out a lower rate loan to pay off the card.
• We don’t have all the facts, so it is difficult to draw conclusions.

My Take on the Situation

I can totally understand where Ann is coming from – she lost her job, is still meeting her financial obligations and as a reward her interest rate is nearly tripled. This can be quite demoralizing, and given the recent situation with the banking crisis and bailouts it is easy to point the finger at BoA and portray them as the “bad guys.”

The reality is that Ann chose to carry a balance of almost $6000 on a credit card with a variable interest rate. The lender decided to raise the interest rate over a period of six months or so. It came at a bad time for Ann, but it was the risk she signed up for.

In a later video Ann mentions in an offhand way that using an American Express card has worked for her because you have to pay off the balance each month. Obviously she KNOWS that carrying a balance is financially risky, yet she is doing so for whatever reason.

I applaud Ann for taking a stand, but I can’t help but feel that her approach could be better.  Closing her BoA checking and savings account was a great move – banks need money to make money, so by removing access to her funds it has an impact on BoA (albeit a small one).

Choosing not to pay an obligation you chose to assume won’t solve anything. BoA will pile on late fees, raise the rates even more, and ultimately write off the bad debt and sell it to a collection agency. There is a legal obligation to pay off this debt, and not doing so is criminal disobedience, not civil.

Another thing to consider is that Ann will take a credit score hit, which seems like a poor move for someone who is looking for a job (many employers check credit scores as part of the application process).

The Bottom Line

When you borrow money you give someone else control over a portion of your finances. When you are not in control bad things can happen at bad times. Poor Ann just learned this lesson the hard way.

Take control of your finances by paying off any debt you owe.  If your financial institution is unsatisfactory stop using them and take your business elsewhere. Read the fine print of any legal agreements and if you aren’t comfortable with them don’t sign.  There are always other options.