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While there are more restrictions on when and why credit card issuers can raise interest rates, it is still more than possible for issuers to raise your credit card interest rate.
How Card Issuers Can Raise Your Interest Rate
Here are some circumstances in which you might see a credit card interest rate increase:
45 Days’ Notice
The CARD Act does not cap the rate you can be charged. So it is possible for issuers to raise your credit card interest rate as they see fit. However, they do have to provide you with a notice of 45 days before doing this.
If you do not wish to accept the interest rate hike, you can have your account closed, and pay off your balance at the old rate. (Click here to learn more about opting-out of an interest rate increase.)
It is, of course, possible to keep your credit card, and work to pay off your credit card before the new rate is in effect.
Variable Rate Credit Card
Many credit card issuers are switching to a variable rate. A number of borrowers are finding that they are receiving 45 days’ notice for the end of a fixed rate.
This is because having a variable rate allows the interest rate to rise with the market, so issuers don’t have to notify you each time market forces mean that your credit card interest rate heads higher.
However, if the card issuer changes the formula it uses to figure your variable rate, you do need to be notified in advance.
Penalty Interest Rate
One of the most devastating realities of credit cards is the penalty interest rate.
Your card issuer does not need to give you 45 days’ notice if you do something that triggers a penalty credit card interest rate.
It may be harder for issuers to impose a penalty interest rate. But, if you meet the criteria, you could find a rather high rate – and there are no caps on penalty rates. This means that you need to be careful to make payments on time, and pay at least the minimum required amount.
It is also important to stay on top of how long your introductory rate lasts.
Zero percent credit card offers are making a comeback. However, many of them only last for six to twelve months.
Since the credit card issuer has already provide you with a date for the end of the intro period, you are not going to get a reminder.
This means that you are responsible for keep track of when your intro rates expire. Without a plan to pay off your purchases or balance transfers within the intro period, you might be in for a nasty surprise when it comes to an end.
The Bottom Line
No matter what protections the government tries to enact, the truth is that credit card issuers have the upper hand when you are in debt. This is why the cardinal rule of credit card interest is to not carry a balance. If you pay off your credit card balance each month, it doesn’t matter what your credit card interest rate is.
This article was written by Nation Richardson, the marketing manager of ComplexSearch. ComplexSearch is a bank rate monitoring site, tracking: highest certificate of deposit rates, credit card rates, and saving rates.