My credit card rates doubled – what should I do?

credit card rates doubledYou can do several things if your credit card rates have suddenly shot up. Understand that under certain circumstances, your credit card rates could even double! There may be several reasons for these increases including the end of an introductory interest rate period. The change may also be due to your annual variable interest rate adjustment.

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Your interest rates could more than double if you’ve missed a monthly payment or two and the credit card issuer imposes their penalty APR. In most cases, penalty interest rates top out at nearly 30%!

Check Your Agreement

Before taking any other action, review your current credit card agreement to make sure that your card issuer is within their rights to make such a change. If you can’t find yours in a drawer at home, ask your lender to send you an up-to-date copy. You can also check the bank’s website as most will have posted these documents online for the convenience of their customers.

It’s important to remember that in many circumstances, your bank has the right to change portions of your agreement, but must provide you with appropriate legal notice in advance, amounting to at least 45 days, before implementing any changes to your credit card account.

Often you may have received legal-looking documents from your bank and tossed them in the trash without realizing that they were notifications of important changes to your credit card account.

Credit cardholders should review documents as soon as they receive them and place them in a safe place with their other credit account paperwork.

Pay Off Your Credit Card

If possible and you have the cash available, you may want to pay off the high interest credit card balance. At typical credit card interest rates of 14 or 15%, it can take many years to pay off an average balance of just a few thousand dollars. Paid over time, most consumers will end up paying more in interest charges than the original amount of their credit card purchases.

Shop for a New Credit Card

credit card rates doubledIf you’re unable or would prefer not to pay off your high interest rate credit card balance, a new balance transfer credit card may be the answer. Many credit card companies offer low introductory interest rates on balance transfers from other credit cards.

Some banks offer APR’s as low as 0% on transfer balances for 6, 12, or even 18 months! However, just as the rates increased on your former credit card, your new balance transfer card will cycle back to rates that are more typical after the initial period has ended. Some banks also impose front-end fees on balance transfers, which can range as high as 3% of the amount transferred.

Look for a credit card with the lowest balance transfer interest rates and no fees or low fees and. It’s also important to look at the interest rate your transferred amounts will jump to if the card still has a balance when the introductory period expires.

According to CNN Money, it will always be to your financial advantage to pay off transfer balances during the initial six to 18 month low interest or zero percent interest period.

Negotiate with your Present Lender

If your current interest rate situation is due to your having fallen behind on your monthly payment obligations, it may be helpful to negotiate a short-term solution with your bank.

Customer service representative are often empowered to authorize temporary interest rate and payment reductions for cash-strapped credit card customers.

For instance, if the regular credit card interest rate is 15% and the penalty rate is 29.99%; your bank may be willing to cut their rates back to 21% or 22% for six to 12 months. This will reduce your minimum monthly payments and allow you to catch up.

If you are able to successfully complete this short-term arrangement, the lender will likely put your account back to a regular customer status, which will reduce your interest rates even further. In any event, you should continue to make your current payments, on time, to the best of ability while you work on other options.

Forbes Magazine, offers a number of tips on how to negotiate with your credit card company, including lowering your interest rates and reducing or eliminating fees and other charges.

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