How to react to a 'rate-jack' attack
When issuers raise your APR, what do you do?
The bad news is in. Your credit card issuer has sent a change in term notice of an impending interest rate hike on your account.
Your first reaction will likely be anger, especially if you're one of the "good" customers who pays your bill on time and who has not gone over your limit. It doesn't matter. Standard credit card agreements allow issuers to change terms on future purchases (though, as of February 2010, the Credit CARD Act only allows raising rates on existing balances under very limited circumstances).
Get over the anger and plan your response.
Most major card issuers -- American Express is the exception -- offer consumers the option to opt out of the changes. Under the old federal rules issuers had to give account holders just 15 days' advance notice of changes. However, rules that took effect in 2010 require 45 days' advance notice of changes. Some issuers have already adopted the longer, 45-day advance notice. In theory, this time allows consumers the opportunity to shop around for better deals and explore their options before the higher interest rates kick in.
Note: Doing nothing -- an option often taken by those who choose to put their heads in the sand -- will result in a de facto interest rate increase.
(Update: On Aug. 20, 2009, provisions of the Credit Card Act of 2009 went into effect that mandated consumers be given the right to opt out of increases in interest rates, fees, finance charges and certain other changes in credit card agreements. See story.)
These helpful resources will help you avoid -- or at least better cope with -- credit card interest rate increases:
- Sample opt-out letter
- Not all issuers allow you to opt out of interest rate increases
- Take these steps to opt out of rate increases
- Balance transfers 101
- 6 steps to successful balance transfers
- Balance transfer calculator
- For some, switching credit cards gets harder
- When do credit card balance transfers make sense?
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