The maximum credit card rates you could pay depend on your credit card company. There are no limits. This does not mean that your credit card company is allowed to raise your interest rates arbitrarily, nor can they increase your rates without notice.
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There are new credit card rules that prevent credit card companies from taking advantage of credit card consumers, but they have limitations and do not always apply to every circumstance. To be sure of your rights, you must educate yourself.
The Federal Reserve has a breakdown of the new credit card rules, which clearly show how interest rates are monitored. Unfortunately, the laws have zero affect on how credit card companies assign interest rates. The best way to protect yourself is to review your credit card agreement, especially the terms and conditions where the APR information is listed.
CARD Act of 2009 and Credit Card Interest Rates – Good Points
The CARD Act of 2009 has an effect on the way credit card companies review interest rates. For example, as of January 1, 2009 all credit cards that received an increase in interest rates are now required to be reviewed by the credit card companies. Every six months, they must evaluate and if applicable, reduce the amount of interest.
Credit card companies are also banned from raising interest rates within the first year of acquiring the account. This means regardless of the introductory rate your credit card comes with, you cannot be charged a higher rate for previous purchases. This helps consumers avoid excessive debt by allowing them to make their payments based on the fixed 12-month rate.
After the 12-month period expires, your credit card company may only apply the new APR to your new charges. The previous balance will remain locked into the old APR until it is satisfied.
Young consumers are further protected because no one under the age of 21 is allowed to apply for a credit card anymore. To qualify, they must show proof that the payments can be managed or a co-signer is required. This helps to keep APR down as well.
The CARD Act of 2009 and Credit Card Interest Rates – Bad Points
While the CARD Act of 2009 provides new rules and guidelines that help protect the average consumer, there are several points that can be viewed as negative. For instance, you are not protected by this new law if your credit card has a variable rate related to an index and increases, you will not receive prior notice.
If you have an introductory rate, be extra careful with the disclosures. The teaser rate may revert to another rate that was previously acknowledged; you are not entitled to receive notice. Also, if your account becomes delinquent or defaults, you are not protected.
Penalty APRs are not included as part of the new credit card laws, which means failure to adhere to your financial agreement, can cause your APR to increase to the maximum allowed by your credit card company.
Finally, most business and commercial credit cards are excluded from receiving most of these benefits. This is because credit cards that are used for non-personal use do not fall under the consumer protection.
Keeping Your Credit Card APR Low
To avoid paying maximum credit card rates, the best step is to carefully monitor your transactions and keep your balance low; pay your bill on time. When you are able, pay more than the minimum. Low APRs are awarded to people who are careful about their credit. You can receive the same benefits by exercising self-control and avoiding overspending.
You should also keep an eye on your credit score. At minimum, you should order your credit report on an annual basis. While you are trying to raise your credit score, you may want to invest in a credit-monitoring system, like those offered by Experian.
For a nominal fee, you can have unlimited access to your credit score, report and an alert system. The alert system sends messages to your PC, cell phone or other mobile device when suspicious activity is observed.
Anything from excessive transactions to large purchases or uncommon actions are noted and investigated.
While credit cards have become much easier to manage, they can still pose financial hardships when they are not respected. Look for ways to keep your credit history strong and you shouldn’t have any problems finding the most comparable credit card rates available.
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