Millions of Credit Card Holders are Experiencing Hikes in Interest Rate; BBB Advice on Keeping Rates Low
January 13, 2010
Anyone who has recently seen the interest rates on their credit cards more than double isn’t alone. Citing economic conditions, American Express, Bank of America, Citibank, Capital One, and HSBC are raising rates on potentially millions of credit card holders. Fortunately though, there are a few steps that credit card holders can take to try and keep their old rate and BBB offers the following advice for fighting back against skyrocketing interest rates.
Bank of America is one of the most recent banks that have decided to increase interest rates for customers. Effective in June any Bank of America credit card customer who carries a balance and has an interest rate below 10 percent will see their rate jump into double digit territory. According to the Wall Street Journal, this could affect as many as four million card holders.
“For many people this is the worst possible time to see interest rates rise on their credit cards,” said Kim States BBB President. “The best defense against rate hikes is to manage credit responsibly and maintain a good track record for paying bills on time, for those who don’t have a stellar record, there are still a few things to do to keep from paying even more every month.”
Contact your credit card company
While most interest rate hikes affect only customers who carry a balance, some customers in good standing have seen their rates increase as well. Anyone who believes their rate was increased by mistake should contact their credit card company. There is evidence that credit card companies might be willing to negotiate rates in order to keep cardholders as customers, so it doesn’t hurt to contact the company and discuss options.
Pay off the account
If the cardholder doesn’t want to accept the new rate, they can choose to keep their current rate and pay off their outstanding balance, as long as they don’t make any new purchases. If any new purchases are made, the higher rate will be enforced.
Find a better deal elsewhere
Other credit card companies might be offering better deals, such as low introductory rates that give the holder a less expensive way to pay down debt. There are many websites that compare current credit card offers, including www.bankrate.com/credit-cards, so shop around for a better deal.
Manage credit responsibly
According to banks, most rate hikes affect people who maintain balances on their card or have rates that are too low for the market. Therefore, one of the best ways to avoid a sudden interest rate hike is to use credit card responsibly which includes paying bills on time and not carrying a balance.
Keep an eye on new regulation
The Federal Reserve has passed regulation, effective July 2010, which will limit a bank’s ability to raise interest rates on cards. In the meantime, some members of Congress and the Obama administration are encouraging reform of the credit industry and increased oversight to restrict practices such as arbitrary interest rate hikes and exorbitant rates.