Reasons Interest Rate on Your Credit Card May Go up All Of A Sudden

Why the credit cards interest rate may increase suddenly.

An increase in the credit card interest rate typically worries the credit card users who are used to carrying a balance from one month to another. The higher your interest rate the higher your financial charges will be. This means that rotated balance from one month to another you will end up paying a lot more as interest and finance charges on a credit card with a higher.

When you sign up for a credit card, you sign up for a particular rate of interest. But you may be surprised to find out that this rate can increase. The new federal law that was put into effect on February 22nd 2010 provides that the bank cannot increase the credit before 12 months of the account being active.

However certain circumstances like account delinquency and late payments may have the interest rate go up for that the creditor is also required provided the credit card you submit an advance notice of a bad case with the option of opting out of the higher rate of interest.

While certain situations might have changed with the new law having gone into effect on 22 February 2010, according to the consumer action survey of us make your credit card rate may have increased or your credit card may have been closed many of the following reasons, some of them being completely independent of your actions.

1) You were late on the credit card payment.

2) You were late on a payment to another credit card.

3) You were too close to your credit limit.

4) You went over the credit limit.

5) You got too close or went over the credit limit on another card.

6) Your credit score drop.

7) You have too many credit cards.

8) You have too much debt.

9) You check for the payment of the credit card Bill passed.

10) You file for bankruptcy.

11) You gave the bank false information about your credit history.

12) You fail to adhere to any of the terms in the cardholder agreement.

13) You have a variable rate tied to another interest rate that increased.

14) Your credit cards issuer’s business strategies changed.

15) Market conditions.

Whenever the interest rate on your credit card increases you have the option of opting out of the increase in the credit interest hike and paying off your current balance at the old interest rate. However, the creditor is most likely to close your credit card account if you choose to do this.

How to Opt Out Of an Interest Rate Increase On Credit Card

Letting your creditors know when you reject the higher interest rate on a credit card.

As per the new laws that have been brought into effect since February 22, 2010, a creditor is supposed to provide a 45 days advance notice to the consumer whenever he is increasing the interest rate on a credit card. He is also supposed to provide the option of opting out of the higher interest rate within this 45 day window period. If you opt out the credit card issuer will allow you to repay your current balance at the old interest rate but will probably cancel your account once you have done so.

If you decide to opt out of the higher interest rate you must let the creditor know immediately. Informing the creditor by phone is not enough and you must send in an opt-out letter in writing. We have mentioned the template of a sample interest rate opt out letter which you can use to send out the notification to the creditor. There is no fixed form of any kind so you can type of your own letter using this template.

As is advised in any kind of publication with the creditors you should send your mail with certified mail with return receipt requested so you have the proof of the letter’s mailing and receipt by the lender. You can get a certified mailing label from the Post Office before mailing the letter and include the 20 digit tracking number on your opt out letter. This is additional proof that the opt-out letter was indeed mailed and received by the creditor. Always keep a copy of recommendations with your creditors were yourself.

Very often notification on the increase in the interest rate may come as an insert with your billing statement. Many people have the habit of throwing away inserts and not paying much attention to their credit card billing statement because the levy the check the Bill online or over the telephone. Pay attention to your Bill and the inserts because just might come along with a notice of increase in the interest rate. It is also important know that your creditors are not always required to alert you for the increase in the interest rate. If increase is due to a default or delinquency on your part is the creditor does not have to provide you with a notice or give your opportunity to opt out.

5 Things To Do To Fight the Increased Rate on Credit Card

What to do when the interest rate on the credit card increases.

Just because the interest on your credit card has increased does not mean that you were either forced to endorse the higher rate or risk losing the credit card. You’ll have other options available to you.

Opt out of the higher rate.

This is the first option that make to the mind of many people when they want to reject the higher rate of interest. This will be particularly to people who carried a balance from one month to another. A higher interest rate will make the maximum difference the people involved their balance. Rejecting the higher interest rate by opting out will allow you to pay your current balance at the lower rate of interest. However your creditor will probably close your credit card account which could result in a negative impact on your score, especially if the creditor closes on the credit account before you had the chance to pay off the balance.

Negotiate a lower rate.

You can always call of the creditor and try negotiating a lower interest on the credit card. Sometimes a creditor may increase the credit card interest rate in spite of you had a positive credit history with the creditor. In this case you may be able to speak to the creditor and have them revert to a better rate of interest. If the rate increase is due to a delinquency of late payment on your part you may not be able to negotiate a lower rate of interest. However, if the late payment is just a one-time slipup in a history of otherwise timely payment, your creditor may be willing to make an exception for this one occasion.

Pay off the current balance fast.

You can decide to keep the credit card with the higher rate of interest by paying off the current balance quickly till the current lower rate of interest is active. After that once the new higher rate of interest into effect you can continue to charge your credit card as usual but pay down the balance in full at the end of every month. Interest rates only affect those people who reward the balance from one month on other. As long as you pay down the balance in at the end of the billing cycle you will not have to pay any interest and the interest rate would make a difference to you.

Transferring balances.

People also transfer the balance of one credit card to another but the interest rate on credit cards in a high. Just make sure that the credit card you can spend balance to has a high enough credit limit and does not make the balance on the credit card close to or over the credit limit as that could hurt your credit utilization which would in turn have a bad effect on your credit score.

When nothing else works.

If nothing else works free within you may just decide to keep the credit card and pay off the balance at the higher rate of interest is to even be faced with a situation where you do not have any other credit card or other credit cards are maxed out paying a slightly larger sum of money on the current balance may be worth it to keep the credit utilization ratio in place and not damage to your credit rating. You can either decide to stop charging the credit card so much from the next billing cycle onwards or decide to pay your balance down in full so that’s the high interest rate will not affect you so much.

The federal law also requires the credit card issuers to review the credit history of a person and determine whether the previous increase in the interest rate is applicable in the consumer in the current situation are not. This means that if you continue to make only payments on time and your payment history stays positive the credit card issuer may decrease your interest rate after 6 to 12 months.

Credit Card Companies Need to Give a 45 Day Notice before Rate Increase

The new laws that have been brought into effect from February 22, 2010 will restrict the number of times that the banks can increase the interest rate on a credit card. The law is called the Truth in Lending Act and is a federal law that protects consumers against lenders. It requires the banks to give a peripheral days advance notice before increasing your credit card interest rate. It also requires the banks to provide the customer with the option of opting out of the changes in the interest rate. If you choose to opt out you will be allowed to pay the current balance at the prevailing lower rate but the creditor will likely close your account after you have done so. The creditors are not always required to notify the consumer before increasing the interest rate on the credit card. If the rate increase is due to a delinquency or sleep payment, the creditor doesn’t have to warn you of a rate increase. To some time back there was a practice in effect called Universal Default. This practice allows the credit card issuer to increase your credit card interest rate without letting you know if you’ve defaulted on another credit card. The terms and conditions of increase in the credit card interest rate are usually mentioned in the fine print of the credit card agreement. A creditor can typically increase credit card interest rate when you’re in violation of the any terms and conditions of the contract or the interest rate in the market has gone up.

What To Do When Credit Card Interest Rates Go up

The list of scary credit moments is provided as a list of situations that you should be forewarned against. The situations can come up at any time without warning. If you are aware that they can happen you can be better prepared for them.

This post is about the credit scary moment where your credit card interest rate increases. Typically a creditor is required to give a 45 day’s notice to the consumer before increasing the credit card interest rate. The creditor may choose to increase the interest rate on the credit card number of different reasons. He can increase the interest rate if you have defaulted on a payment, being in violation of any of the terms and conditions of the credit card contract or because the interest rate of the market has gone up. This time back a creditor could also increase interest rate on a credit card because he defaulted on any other loan officers according to a room called the Universal Default.

Earlier a creditor was required to give the consumer a 15 day notice before increasing the credit card interest rate along with an option to opt out of the highest interest. Now according to the new laws that have been brought into effect on February 22, 2010, the creditor is required to give a 45 day’s notice to the

Consumer about the oncoming increase in the interest rate along with giving him an option to opt out. Choosing to opt out of the right interest rate will allow you to pay down the current balance at the original interest rate. However the creditor is most likely to close down your credit card account after that.

A creditor may not be required to inform a person about the increase in the interest rate if the increase in the interest rate is due to the person defaulting on the payment on the credit card.

In order to be prepared for the eventuality that your credit card rate may increase you should make sure that you have other credit cards as well. You should also try and make all your credit card payments on time although not all increase in the interest rate is due to bad payment history of the consumer. It can be a frustrating situation when your creditor increases your credit card interest rate in spite of few having a positive payment history. If you decide to opt out of the high interest rate you must remember that the creditor is most likely to close down your credit card account after you have paid off your current balance. You should ensure that you have other open credit cards so that your credit utilization ratio is not affected much by the closure of one credit card.

Sample Letter for Opting Out Of Rate Increase

Template to Opt-Out of Interest Rate Increase On Your Credit Card

Below is a letter you can use to opt-out of interest rate increases. Edit the bold words to fit your credit card information.

Date
Your Name
Your Address
Your City, State Zip
Credit Card Issuer
Address
City, State Zip
Re: Account Number XXXX-XXXX-XXXX-XXXX

To Whom It May Concern:

On January 15, 2009, I received a notice from you indicating an interest rate increase on the previously referenced account. Let this letter serve as my notification that I do not wish to pay the higher interest rate. I will continue paying my credit card balance at the current interest rate of 8.9%.

Please confirm in writing to the address listed above that I have been opted-out of the higher interest rate.

Thank you for your anticipated cooperation in this matter.

Sincerely,
Your Name

Tips for Sending Your Opt-Out Letter

· Customize the bold words.

· To be effective, your opt-out letter must be sent within 15 days of receiving notification of the rate increase or by the date listed on your rate increase notification.

· Even if you opt-out by phone, it’s a good idea to follow up with a letter so that you have proof of opting-out if the credit card issuer misplaces your phone opt-out.

· Send your letter via certified mail with return receipt requested. Ideally, you should obtain a certified mailing label from the post office prior to printing your letter. That way you can include the 20-digit trakcing number on the certified mailing receipt number in your letter for extra proof.

· You can track the letter at USPS.com using the 20-digit tracking number on the certified mailing receipt. The return receipt will arrive in the mail a few days after the mail has actually been received.

· Follow up with the credit card issuer to be sure your opt-out was processed and to find out if and when your account will be closed.

Credit Card Companies Are Obliged To Lower Your Card Rate

Till sometime back it was up to the banks discretion whether to lower rate that was initially increased for certain reasons or not. There was nothing to compel them to reduce the increased interest rate. This pretty much put the banks and the creditors in control because they were under no obligation to review the situation and reduce an interest rate as long as the situation was working fine for them and making more money for them.

However, the new regulations that have been passed in February a second 2010 now require the creditors to review previous credit card interest rate increases and to see if circumstances have changed enough to lower the interest rate accordingly.

Before this law came about many credit card holders had no choice but to continue paying off the balance with the increased interest rate. The new laws brought into effect after February 22, 2010 also restrict the creditors from increasing the interest rate within the first year of an account’s opening unless you were late the terms and conditions of the credit card agreement such as defaulting on the account. Other circumstances under which the bank can change the interest rate within one year case if you have a variable interest credit card, your hardship arrangement has ended or a certain promotional rate of interest has come to the end of its term, the minimum for which is six months.

When Are Banks Allowed to Increase Your Credit Card APR

There are 4 instances in which a bank is allowed to increase the credit card rate.

The Truth in Lending Act is a federal law that dictates when a bank is allowed to increase the credit card rate. Starting from February 22, 2010 new credit card laws have been brought into effect which have changed the way bank or creditor is allowed to increase or decrease the credit card interest rate.

When can banks increase the credit card Interest Rate

Your credit card interest rate can increase when you have defaulted on the credit card terms by being late, by going over the credit limit or by bouncing the check for your payment. Before the new law that was passed on February 22, 2010 a credit card provided could increase your interest rate even if you had a defaulted on another credit card with another creditor according to a practice that was known as Universal Default.

The other three circumstances under which a bank is allowed to increase your credit rate are as follows:

Banks can increase your credit card interest rate at any point if you have a variable rate credit card. A variable interest credit card is tied to the index rate of the economy. Whenever this index rate goes up and down so does your overall credit card interest.

Your credit card interest can change if any promotional rate expires. The new laws that have gone into effect from February 22, 2010 require promotional rates to last at least six months. After the duration further promotional rate is over the new interest rate can come into effect which can be the prevailing rate of interest or the one that you agreed on during the time of signing up for the credit card.

The creditor is allowed to increase your interest rate on the credit card when you have just completed a debt management plan or a hardship arrangement or have defaulted on an existing arrangement.

When Can You Negotiate for Lower Card APR

You may be given to believe that the interest rate on your credit card is something that cannot be negotiated or changed. The interest rate on a credit card may be of particular importance to a person who revolves a balance from one month to another. The higher the interest rate is the more money you would end up paying as interest and finance charges. Now the fact is that situation and circumstances might have well changed from the time that you first got your credit card.

Either your credit history might have substantially improved or the changes in the economy might have made it possible for interest rates to come down on credit cards. If you are aware that you can get another credit card at a lower interest rate you can call up your credit and specifically mentioned that you are getting credit card offers with lower interest rate than the one existing on your credit card. You can ask you credited to do something about it failing which he would be forced to switch to another card. You can put the same request in writing.

It is important though that you actually have a better credit card of before you make such a request or demand from their current credit card issuer. When you have an actual offer her a credit card with a lower interest rate not only are you in the position to provide accurate and verifiable information to the credit but also do not risk the chance of losing a credit card if your bluff gets called by the credit card issuer.

Credit Card Interest Rates: Fixed and Variable Interest Rates

What is the difference between a fixed rate and variable rate in a credit card?

Fixed Interest Credit Card Rate:

A fixed rate is a predetermined rate of interest that is decided at the time that the consumer signs up for the card. The creditor cannot change this interest rate on the credit card expect under certain circumstances. The circumstances are as follows and are regulated according to the new credit card regulations passed on 22nd February, 2010.

· If the consumer is late by more than 60 days.

· If a promotional rate on the credit card has ended.

· The consumer has completed a debt management plan.

The creditor is also expected to inform the consumer 45 days in advance before changing the interest rate on the credit card. The consumer has the option of opting out of the new interest rate and pay off the balance according to the older rate.

Variable Interest Credit Card Rate:

A variable interest is an interest that is usually connected to the index rate of the economy. This can have interest rate fluctuates according to the changes in the economy and the index rate. A variable rate of interest is set a few percentage points above the index rate which is decided during the time of issuing the credit card. For example credit card may have a variable interest rate that is 14 per cent above the index rate. So depending on what the prevailing index rate in the economy is the credit card interest rate will be 14 points above the prime rate. The difference between the prime rate and the credit card interest rate is known as the margin. The credit card issuer does not have to inform the consumer whenever the interest rate yen changes according to the fluctuations in the index rate. However if the credit card issuer decides to increase or decrease the margin between the index rate and the credit card interest rate then he needs to inform the consumer according to the same rules that are applicable to fixed interest credit card rates. If you are trying to decide between opting for a fixed interest rate or a variable interest rate on your credit card you should understand that as long as you pay your balance in full at the end of each month it will not matter very much what kind of interest-rate you have active on your credit card. The advantage of having a fixed interest rate on your credit card is that your creditor will have to inform you well in advance about any interest increases and also give you the option of opting out of the higher interest rate. However, opting out can hurt your credit scores.

The advantage of a variable interest rate is that you can predict the change in the interest rate of your credit card provided that you keep yourself up to date with the changes in the Federal rate of interest. Also if the crime rate of interest goes down than the interest on your credit card will also decrease in which almost never happens with a fixed interest rate credit card.