Is it possible to stop credit card rates from increasing?

Because increasing credit card rates are at the discretion of the card company, it is difficult to stop it. Before 2009, credit card companies pretty much had free reign to decide when they were going to increase interest rates. In February 2010, the Federal Reserve published new rules regarding credit card companies, which put more regulations in effect to protect consumers.

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Although the new credit card rules help protect you a bit more, the companies can still increase your rates with no notice for certain reasons. In other circumstances, your card company has to give you notice about the rate hike but you still have to abide by the new rate if you continue to have a balance. Fortunately, there are some things you can do to deal with the rate increases.

Reasons for Increasing Your Credit Card Rate

According Credit Card Rules set by the Federal Reserve, there are three instances in which your company does not have to inform you in advance of a rate increase. In these scenarios, you don’t have much choice except to accept the changes.

If you have a credit card that has a variable rate, your bank does not need to inform you when the rate increases. With a variable rate card, the APR is connected to a particular index, which changes periodically. When the index changes, your rate will change, whether it is up or down.

If you originally got a credit card that had a promotional rate for a specified length of time, when that promotional period is expired the company does not have to let you know that your rate will be increasing to the regular APR.

Perhaps you have had difficulty paying off your credit card in the past and the company was willing to work out a revised payment plan. If you have defaulted on that plan or haven’t been making the scheduled payments, your credit card company can increase your interest rate and not give you advanced notice.

Credit Card Companies Must Give Notice in Advance

In contrast to the circumstances that were just laid out, your card company must give you advanced notice if they are going to increase your credit card rates. If your company is going to increase your APR, make changes to any of the fees, or make any other important changes to your card terms, it must give you a 45-day written notice of the change.

increasing your credit card rates In the past credit card companies only had to give you a 15-day notice, but under the new Card Act they must give you 45 days. When you get this notice, you will have the chance to opt out. If you choose to opt out, the company will close your account, you won’t be allowed to use the card, and you must pay off the balance. Closing your account can negatively affect your credit score, according to Credit Report. If you choose not to close it, you have other options.

How to Respond to Increased Rates

If you don’t want your account closed, you will be stuck with the higher interest rate. If you have a balance on the card, this will end up costing you more money. There are some things you can do to save your bottom line.

You can always call your card company and ask for a lower interest rate. Ask to speak with a supervisor and explain why your request should be granted. It will help if you have been timely with your payments in the past.

If you are unable to negotiate a lower APR, search around for a credit card with a lower interest rate. If you find one you may want to transfer your balance to the new credit card. Keep in mind that most companies charge a transfer fee. Do the calculations and see if it would make sense to make the transfer or if it would cost you more money in the end.

Another way to save money is to work to pay off the majority of the balance at the lower interest rate, before the new rate goes into effect. If you are not exactly sure how to pay down your debt, SmartMoney can help.