Bank of America and MBNA Merger Will Result in Major Shakeup in the Card Industry

Bank of America recently announced a final agreement to obtain MBNA Corporation.    This will combine the largest bank in the U.S. with a major provider of credit cards and payment methods and will greatly improve Bank of America customer reach and product mix.

Upon completion, Bank of America will become one of the largest credit card companies in the U.S.    Bank of America will add over 20 million new customer accounts and will have $143 billion in managed balances and 40 million active accounts upon completion of the acquisition.

The acquisition greatly increases the Bank of America's opportunity to improve customer relationships by offering new services to MBNA's customer base.

Kenneth D. Lewis, Chairman and C.E.O. of Bank of America, said:

---

"Today's announcement is not only about the creation of one of the world's largest card providers.    That is compelling in and of itself, but it's really a much larger story about two companies with complementary strengths.    The result will be the country's top retailer of financial services with the size and scale to drive distribution and marketing efficiencies."

---

The deal is expected to be completed later this year.    Upon completion, Bank of America will be one of the leading worldwide payment services companies and issuers of credit, debit and prepaid cards based on total purchase volume. The deal today would make Bank of America the fourth most profitable company in the world.

Lewis added:

---

"This acquisition makes strategic sense for our combined customers and shareholders.    It provides us access to MBNA's attractive portfolio as well as their leading product, service and marketing capabilities.    We can now deepen existing and future customer relationships with differentiated capabilities to exceed customer expectations and grow market share.    This merger also provides us with an attractive foothold in Canada, the United Kingdom, Spain and Ireland.

For our shareholders, the Bank of America and MBNA combination yields a diverse business mix less dependent on market-sensitive businesses.    The financial strength and cash flow generation of the combined entity should provide significant resources to support future growth."

---

Bruce L. Hammonds, C.E.O. and president of MBNA will become C.E.O. and president of Bank of America Card Services.    He will be part of Bank of America's Risk and Capital Committee.

Hammonds said:

---

"The merger will create one of the largest credit card portfolios and will give the combined company access to new marketing channels, customers, products and opportunities for further expansion.    Both companies benefit as cross-sell opportunities exist to sell MBNA products to Bank of America customers and Bank of America products to MBNA customers."

---

Reaction to the merger by consumer advocates has been less favorable.

According to Curtis Arnold, Founder of CardRatings.com:

---

"Competition has kept the industry in check and has really driven these zero percent and low interest rate offers. Competition is really going to be stifled when you put two of the largest issuers together. I can't see how it can be a positive for consumers."

---

According to Linda Sherry, Editorial Director for Consumer Action, a non-profit, membership-based organization that was founded in San Francisco in 1971:

---

"During mergers of credit card companies, Consumer Action has noticed that the companies at first are pretty quiet about planned changes. But watch your bills carefully, because it is almost inevitable that change will come and it's likely that it won't be good news. We've seen interest rates increase, fees go up, minimum payment calculations change. We've seen people lose rewards and rebates and promises of "lifetime" fixed interest rates.

If your card company merges, I'd start looking closely at the preapproved offers that come in the mail. Even if you have a Bank of America or an MBNA card currently, you are bound to get new offers from these companies. It's possible the new offer could be a lot better than what you'll end up with by doing nothing. Bank of America and MBNA are such different banks that it's hard to predict what will come out of the merger. In that regard, you have to watch and wait, and have a strong fall back position."

---

We welcome your comments about credit card mergers in our popular credit forum!

---

CardRatings.com is the most comprehensive source for comparing credit card offers.  Please visit CardRatings.com to view the best rated credit cards!

---