ADVERTISEMENT

Avoid higher credit card interest rates

Duck the default rate! APR increases are not inevitable.

By

Perhaps the following situation sounds familiar: You are a responsible credit card user who makes sure to always pay more than your minimum balance on time each month.  Even so, the bank hikes the interest rate on your credit card from (what appears to be) out of the blue.

Compare Low Interest Credit CardsWhy would your credit card issuer decide to do that?  There are a number of possible reasons for default pricing -- all of which should be outlined in the card member agreement you received with your credit card.

Your credit card interest rate jumps when you do something that sends up a red flag suggesting you are a credit risk to the issuing bank.  These activities may include making a late payment or exceeding your credit limit, but could also include simply maintaining a high credit utilization ratio.

Even if you make payments on time and do not exceed your credit limit, by using a significant portion of your credit line, you may appear to be a risky borrower. From the issuer's point of view, should some unforeseen event take place while you have a large credit card balance, it could be difficult for you to pay it back.

To avoid having the bank suddenly raise your interest rate, a good strategy is to pay off as much of your credit card balance as possible each month.  Of course, the best course of action is to always pay down the balance in full every period.

What to do if hit with rate increase
If your credit card rate does spike, call the card issuer using the customer service number provided on statements and the reverse side of your plastic.  When you reach customer service, request that they lower the interest rate on your credit card back to its original level.

If you don't get anywhere with the first person you speak to, ask to talk to a supervisor.  They usually have more power when it comes to lowering customers' interest rates.  You can also threaten to cancel your credit card account, which can get you transferred to a retention specialist, who may reduce your interest rate to prevent losing a customer.  Customers who revolve \balances on their cards are especially valuable, since they earn issuers thousands of dollars every year.

Separately, you may choose to shift your high APR debt to one or more lower interest balance transfer credit cards.  Balance transfer credit cards may charge as little as 0 percent interest for six months or longger.  However, be careful when using your balance transfer credit card for new purchases, since any payments you make will first go toward paying off the low APR transferred balance before any being applied to new charges.

Published: May 1, 2007


Join the discussion
We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, do not disclose confidential or personal information such as bank account numbers or social security numbers. Anything you post may be disclosed, published, transmitted or reused.

If you are commenting using a Facebook account, your profile information may be displayed with your comment depending on your privacy settings. By leaving the 'Post to Facebook' box selected, your comment will be published to your Facebook profile in addition to the space below.

The editorial content on CreditCards.com is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company's business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.




Follow Us


Updated: 12-04-2016


Weekly newsletter
Get the latest news, advice, articles and tips delivered to your inbox. It's FREE.


ADVERTISEMENT