Q&A: The interest rate on my credit card increased. What can I do about this?

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Question: My credit card company just raised my interest rate. Is there anything I can do about this?

Answer: Yes, but the steps you should take depend on the circumstances and on how long you've had your card. The Credit CARD Act of 2009 put rules in place when it comes to interest rate increases. If you've had your card for less than a year, the issuer is only allowed to raise your APR in these situations:

  • You had an introductory rate and it expired.
  • You paid your bill more than 60 days late.
  • You have a variable rate (most cards do) that's tied to an index and the index went up.
  • You didn't pay as agreed in a workout agreement.

Now, if you've had your card for more than a year, the rules are different. They can raise your interest rate for any or no reason as long as they give you a 45-day notice. But, as in many things, there are exceptions to this rule. They don't have to give you a 45-day notice if any of the following apply to your situation:

  • Your rate is tied to an index (as mentioned above), and the index goes up.
  • You didn't pay as agreed in a workout agreement.
  • You had an introductory rate for a specified amount of time and it expired.

Assuming that your issuer has played by all the legal rules, you have a few options. You can call the issuer with the intent to negotiate. But keep in mind that if you've made late payments or have used your card in a way that's lowered your score, you might not be successful.

When you call customer service, state your case to the representative who answers the phone. If this person is unable or unwilling to help you, ask to speak with a supervisor. If you've been an excellent customer, this approach might work. And if you've received card offers from other issuers offering a lower rate, bring that up in the conversation. It's nice to have some leverage!

If you aren't successful, you have the option to close your account if you find the new rate unacceptable. But keep in mind that this has the potential to lower your score. Here's why: if you close the card, you lose the amount of available credit associated with that card. This, in turn, can increase your utilization ratio, which is the amount of credit you've used compared to the amount that you have available. You want to have a ratio of less 30 percent, and if you're trying to improve you score quickly, it needs to be closer to 10 percent.

Of course, it's always best to pay your bill in full by the due date every month. If you do this, the interest rate doesn't really matter because you won't be paying interest on a balance.

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