Bank of America's acquisition of MBNA affects 20 million credit card users. Here's what they can expect.

LAST WEEK, BANK OF AMERICA (BAC) announced it was acquiring MBNA (KRB), the nation's third-largest credit card issuer. As a result, more than 20 million credit-card accounts will be switched from MBNA to Bank of America.

The deal was the latest in a string of high-profile financial-industry mergers. In June, Washington Mutual (WM) said it would buy Providian (PVN), a top-10 card issuer with 10.3 million accounts open as of December 31, 2004, according to industry web site CardWeb.com. And in July 2004, JP Morgan Chase (JPM) merged with BankOne, acquiring its 52 million credit card accounts and 5.5 million checking accounts.

Millions of consumers will soon see their accounts change hands. Here's what they can expect.

1. Beware of Changing Terms
When your bank or credit card issuer is bought out, your credit terms -- such as the interest rate, fee structure, or rewards program -- aren't likely to change overnight. "Typically, they'll keep it as it is for a little while," says Linda Sherry, a spokeswoman for Consumer Action, an advocacy group that publishes an annual survey on credit card fees. "But you'll (typically) find that down the road, several months or a year later, you will be getting a change of terms notice, and things will be different," she says.

In the year that has passed since Chase merged with Bank One, for example, Chase has sent at least three change-of-terms notices to its card holders. In the fine print: As of Feb. 1, 2005, interest charges on Chase cards will be computed using the so-called "two-cycle average daily balance method," which had previously been used by BankOne, but not by Chase. With two-cycle billing, your interest charges are computed based on the previous two billing cycles instead of the last billing cycle alone. For consumers who carry balances occasionally, this means that even if their pay their balance in full one month, they would be charged interest the following month as well, explains Curtis Arnold, publisher of CardRatings.com, a credit card information web site.

According to Chase spokesman Tom Kelly, this or any other change might not necessarily be a result of the merger, but possibly just a timing coincidence. In other words, Chase might have planned the change anyway, with or without the merger with Bank One.

Needless to say, a credit card company can change anything in your card terms, from the length of your grace period to the way it computes interest charges, as long as it gives you 15 days' notice. So you need to read carefully any correspondence that your new bank sends you. "There may be very important communication in there for you," says Sherry. "If you miss it and go ahead and use the card, this means you're accepting their (new) terms."

If you get a notice that your card terms are changing you might have the right not to accept those terms, says credit expert Gerri Detweiler, author of "The Ultimate Credit Handbook." Some banks give you the opportunity to pay off your balance under the old terms, but you could lose your right to use the credit card for new purchases. If you reject the terms, be sure to inform the creditor in writing and send any correspondence via certified mail, return receipt requested, says Detweiler.

Of course, for MBNA holders, change might be a good thing. In terms of customer complaints, Bank of America is doing better (meaning it's getting fewer complaints) than MBNA, according to Consumer Action's Sherry. Many of the complaints that Consumer Action has received concern MBNA's default rate practices, namely raising the rate on a card to 29% or more if late payments or other negative activity are posted on any other account in the customer's name. (By press time, MBNA hadn't returned our phone calls seeking comment.) Bank of America doesn't have a default rate practice, says Sherry. For the main differences between MBNA and Bank of America's credit card terms right now, see the table below.

2. Be Proactive With Your New Lender
Negotiating better card terms and disputing charges with your card issuer are never easy. But they're even trickier when your account is in the process of being acquired by another company.

In situations like that, it pays to be proactive, says Detweiler. Her advice: If you have some kind of a special agreement with the cardholder -- for example, you're in a hardship program because you've had difficulty making payments -- talk to the new company right away to make sure you're not going to end up in a different kind of program.

3. The Shrinking Credit Card Universe
The recent merger mania could have negative long-term effects on consumers, warns Cardratings.com's Arnold. "When you've got 10 issuers controlling 90% of the market and two of the top five issuers are suddenly merging, you've got to be concerned because competition will be affected," he says. "And competition is what has always driven the industry -- self-regulated it in a way."

There's no federally mandated ceiling on the interest rates and fees charged by credit card issuers. Until now, the only reason why consumers have been getting 0% or low APR deals and generous rewards programs is competition in the industry. But what happens when the biggest players start merging? "You have to wonder, is this really positive about the consumer," Arnold says. "Who is thinking about choice and keeping the marketplace as competitive as possible?"

Chances are, it's not banking bigwigs.

 Card Tricks
It's still too early to say how MBNA card terms will change, according to a Bank of America spokesman, but current MBNA cardholders can get a preview of what most BofA cards' terms look like here.
MBNA Bank of America
Interest rates Fixed Mostly variable, though some cards carry fixed rates.
Penalty APR Not disclosed in cards' terms and conditions Prime plus up to 23.99% charged if you fail to make two minimum payments on time or exceed your credit limit twice during any 12-month period.
Grace period for repayment on balance for purchases 25 days 20 days
Fees Late payment fees:
Cash Advance fee:

Over-the-credit-limit fees:
Transaction fee:

Late payment fees:
Over-the-credit-limit fee:
Cash advance fees:
Foreign currency conversion fee:
Source: Bank of America, MBNA Web sites. Data as of 07/05/2005.