Respond to Credit Card Interest Rate Increases
Learn How to Deal with Credit Card Companies
Nov 6, 2009
When applying for a credit card, always read the fine print. It might state the zero percent interest rate will increase after nine months or a year. Credit card companies can increase interest rates for other reasons as well. Know how to respond to credit card interest rate increases to stay out of debt. The good news, according to The Early Show, is that credit card companies are now required to give customers forty-five days notice before interest rates increase, so customers will have more time to make decisions on how they’re going to handle the increase.
Opt-Out and Close the Credit Card Account
Someone who receives notice that her credit card interest rate is going to increase has a period of time to opt out of the rate increase and close the account. This means that she will not be able to make any more purchases with the credit card, but will be able to pay off the balance with the old interest rate. If someone can’t handle the interest rate increase and will not be hurt by closing the account, this is a good option.
Credit scores can be negatively impacted from closing certain credit card accounts, so this should be taken into consideration before opting out. If it’s someone's oldest credit card, then it can be detrimental to close the account. In this case, one should consider other options.
Negotiate With the Lender
If someone has always paid his account balance on time and always paid other credit card balances on time, he could call the credit card company and try to negotiate for a lower interest rate. Customers who have missed payments on their credit cards may not be able to negotiate a lower rate, but one never knows until he tries. Customers should let the credit card company know that they are considering closing their accounts and moving the balance to another card and see if the company is willing to negotiate.
When calling to negotiate, one should realize that the first person may decline the offer or may not be able to help with interest rate decreases. Ask for that person’s supervisor and continue to go up the chain of employees until the person can help. Many first line employees can’t approve rate decreases or limit increases.
Pay the Credit Card Balance
If possible, upon receiving notice that the interest rate will be increased, attempt to pay off the balance within forty-five days. Even if it requires cutting back on spending, one should try to get rid of the balance. This allows someone to keep the card open without a balance which will help that person's credit score in the long run. This is the best option overall.
Transfer the Balance or Accept the Increase
Another option is to transfer the balance of the credit card to a different credit card with a lower interest rate. It may not be in someone's best interest to open another credit card account; however, if he already has another credit card with a lower interest rate open, this alternative is practical. If he isn’t able to pay off the balance right away, this can help him to stay out of further debt.
If it’s not possible to pay off the balance or transfer the balance to another card with a lower interest rate, the interest rate increase may have to be accepted for the time being, especially if closing the account will hurt the one's credit score. If this is the case, he should try to pay off the balance in the shortest time feasible. Cutting back on unnecessary spending will help in paying off the debt.
When someone realizes that her credit card interest rate is going to be increased, she can opt out of the increase, negotiate with the credit card company, pay off the balance immediately, transfer the balance to another card or accept the increase.
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