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Have you received a notice from your credit card issuer that your interest rate will be increasing? If so, you have the right to decline this increase or other significant changes to your account.
The Credit CARD Act of 2009 requires issuers to give you at least 45 days’ notice of these changes, inform you of your rights and allow you to opt out and have your account closed. This also gives you time to look for new solutions to pay off your balance or transfer it to another credit card, if you wish.
This is why it’s very important to make sure there are no automatic payments scheduled with your credit card after you opt out, such as utilities or monthly subscriptions. There are also some changes you cannot opt out of, including a decrease in your credit limit, the minimum monthly payment amount and an APR increase triggered by a default, or an APR interest that’s caused by a change in the prime rate if your interest rate is variable.
Your credit card issuer is also required under the Act to give you three options to repay any existing balance after you close your account:
- You may pay the balance over at least 5 years;
- You may make new minimum payments each month that aren’t more than twice the percentage used before; OR
- You may repay your balance under the terms in place before you opted out.
Why You Should Opt Out in Writing
You’re allowed under law to use a toll-free number to opt out of your rate increase, although it’s recommended that you reject an interest rate increase in writing. Submitting your request in writing provides a paper trail and gives you proof. If you use the toll-free number, the credit card issuer may promise to send you an acknowledgement of your request through the mail, although you may not receive it.
How to Decline an Interest Rate Increase
Here are the important steps you should take to formally decline an increase in your interest rate in writing:
- Write a simple opt-out letter (see sample below) that includes the account number, your rejection of the new interest rate and your preferred method for paying the balance.
- Mail it well before the deadline stated in the notice of change in terms you received from your credit card issuer.
- This step is very important – Mail your letter via certified mail with a return receipt so you have proof it was received.
- The letter should be mailed to the address listed in your notice of change in terms, not the payment address.
- Follow up with the credit card issuer to make sure your account will be closed and your letter was processed.
Sample Opt-Out Letter
Below is the form of a simple letter you can use to opt-out of an interest rate increase for your credit card:
Name of Credit Card Issuer
Re: YOUR ACCOUNT NUMBER
To Whom It May Concern:
On DATE, I received a notice indicating an interest rate increase on the above referenced account. The notice gives me until DATE to notify you of my intention to opt out of the increase in the interest rate on my account.
This letter serves as my notification that I am rejecting this change in terms. I wish to continue paying the existing balance on my card under the old terms with an interest rate of X%.
Please confirm in writing that I have been opted out of this interest rate increase.