My credit card APR went up to 29 percent and I can’t afford the minimum payment. What can I do?
Rebecca asks: My credit card rate just shot up to 29%. I have been working hard to pay this card off but now the minimum is more than I can afford. What can I do? I would like to work with the card company to get on a special plan or something to pay this off. Also, what happens If I don’t pay the minimum each month and only pay what I can afford? Will they accept that?
I’m so sorry to hear about this, Rebecca. Credit card companies are ruthless.
The first step is to find out why your credit card rate went up. Did you miss a payment or pay late? Often times credit card companies will raise your rate for six months or a year after making one missed payment. (So it’s not just the late fee that costs you). If this is what happened and you have a good history of paying on time, call them up and plead with them to lower your rate back. If you can find somebody sympathetic, this may work.
Sometimes, however, credit card companies just raise rates because for whatever reason they now think you’re a higher risk customer. It’s not fair, but the credit card companies have never been known for playing nice. If this is the case, then credit card companies are required to give you the option of closing your account and paying it off at the lower interest rate.
You should call them up and tell them that with the new APR, you can’t afford your minimum payment. Ask them if you can close your account and pay it off at the lower APR.
If this doesn’t work (if, for example, you missed a deadline to “opt-out” of the rate increase, things will get trickier. If you can’t afford the minimum payment and send a partial payment, they will take it, but they may still assess you late fees and report negative information to the credit bureaus. If you have to do this, call the credit card company every time you make a payment and explain that you cannot afford the minimum payment. Ask for a payment plan.
It all depends on who you talk to each time you call, but eventually they should do something for you. If you’re finding you’re not making progress and still unable to pay the minimums, a credit counseling service like CareOne might be an option. They can negotiate a lower rate and minimum payment for you, but they do charge a monthly fee. If you only have one credit card that’s a problem, such a service may cost more than it’s worth.
Good Luck!
David
@MoneyUnder30
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I used to carry an American Express Credit card that sent me a notice that they would be raising my rates effective a certain date. I called to Opt Out / Cancel my credit card if they would not leave my rate as was. They canceled my account as I requested. Now 2 months after the fact they have raised my interest rate. Is this legal? I thought consumers could opt out of any rate increases simply by canceling the account which would effectively freeze the account unless payments were defaulted on. Am I in the wrong here?