Todd Ossenfort has been chief operating officer for Pioneer Credit Counseling since 1998. He writes our weekly “The Credit Guy” column, answering reader questions about credit counseling and debt issues.
Dear Credit Guy,
I have a promotional rate of 0 percent that will expire on Jan. 1, 2010. The rate that I agreed to when I first got the credit card will be 11.24 percent after the promotional rate is up. So, my question to you is, can I opt out with my promotional rate before Jan. 1, 2010, which is 0 percent, or do I have to accept the 11.24 percent that I originally agreed to when my promotional rate is up? — Bernita
Unfortunately, the answer to your question is, no, you cannot opt out of the 11.24 percent interest rate. The promotional rate is just that, a promotional rate with an end date. You agreed to the terms of 0 percent interest until the end of the year, and then a rate of 11.24 percent after that. The regular interest rate of 11.24 is not a term for which you may opt out. It is part of your original agreement with the card issuer.
I can understand why you might think otherwise. The Credit Card Accountability Responsibility and Disclosure Act of 2009 is taking effect in phases; the first big batch of reforms that took effect in August 2009 gave consumers the right to opt out of many rate increases. But that doesn’t apply to the end of promotional, or “teaser,” rates.
But if you happen to receive one, you could transfer the balance from your current card to another promotional rate card. Two things I’d like you to keep in mind should you decide to do this. One, you will be adding additional credit, which you will have access to with the new card. Access to too much credit may make a potential lender nervous if you are planning to borrow money for a car or home any time soon. You might consider closing the old account after the transfer is complete to avoid this issue. Two, I would only make this move if you would be able to pay off your balance within the promotional rate period.
I don’t blame you for wanting to hold on to that 0 percent interest rate. You may not, however, have to settle for the 11.24 percent rate if you have good credit. Do some research on [%Link?type=cardcategory&id=83&text=”low interest credit cards”%]. Be sure you understand all the terms before making the change and watch out for high balance transfer fees. You could, of course, pay off the balance before Jan. 1, 2010, and then the increase in interest rate would be a moot point.
You don’t say so, but if the reason you were hoping to opt out is because you would have trouble making payments at the 11.24 percent rate, then I recommend you contact a qualified nonprofit credit counseling agency and get some assistance. You can find a trusted agency at from the Association of Independent Consumer Credit Counseling Agencies or the National Foundation for Credit Counseling. Your certified counselor will thoroughly review your finances and make recommendations. If you qualify and were interested in a debt management plan, you would most likely be able to pay down the balance at a lower interest rate. However, the account would be closed and you would not be able to use it for purchases.
Take care of your credit!
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