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Beware Credit Card Rate Jackings (Increases)

We saw it coming. Last month Congress and President Obama changed the rules for credit cards by signing the CARD Act into law. A few weeks later, the credit card companies are already responding by increasing interest rates on existing customers. Have you been hit with a rate jacking in the last month? Please share your story in a comment. Here are a couple examples I’ve already seen.

Known Ratejackings

The ink had barely dried on the President’s signature when I received a tidy little pamphlet for a Captial One credit card I have sitting open with a $0 balance but never use informing me that they will be raising my interest rate from a so-so 12% to an ugly 18%…effective January 2011. Hey, at least they’re giving me plenty of notice. The notice was not to increase my rate now, but to inform me that my “regular” APR of 12% was being changed to a “promotional” APR of 12% that will expire in 2011. Under the new law, a credit card company can’t raise your regular interest rate without good reason, but they can still raise promotional rates. Sneaky little bastards.

I also received word via comment last week of Discover raising a cardmember’s rate from 8% to 17% immediately. I’d be curious to know if anybody else has been ratejacked by Discover, or whether that was in response to that particular cardmember. (Card companies will raise rates all the time if they suddenly perceive an individual customer is a higher risk).

What to Do If You Get Rate Jacked

If a credit card company raises your interest rate for no specific reason, they must inform you in writing and provide you with the ability to “opt-out”. If you opt-out, they will close your credit card account and allow you to pay off any remaining balance at the old, lower interest rate. If you do nothing, the rate will go up. Note that under old laws, if a card raised your interest rate because you were late, you cannot opt-out. Under the new laws, cards cannot raise your interest rate just because you are late once.

In general, it’s not a good idea to close credit card accounts, no matter how poor the terms are—unless you get rate jacked and are stuck with a huge balance. In that case, unless you can transfer the balance to another card, I would choose to opt-out and say good riddance. If you’re struggling with debt, you want to keep the balance at the lowest APR possible. If you’re relatively debt-free and have good credit, you can always shop for a new, better credit card.

Again, I would love to hear from anybody experiencing rate increases or other credit card term changes as a result of the new CARD Act. Share your story in a comment.

About David Weliver

David Weliver is the founding editor of Money Under 30. He's a cited authority on personal finance and the unique money issues we face during our first two decades as adults. He lives in Maine with his wife and two children.

Comments

  1. Aaron French says:

    Bank of America ratejacked me a few months ago (I’m guessing proactively in the event that the CARD ACT would be passed). My rate went from 7.9% to 12.9% immediately. Granted, this is still very low considering the other rates out there, but I’ve had this card since the pre-credit crisis days. I do carry a balance but no longer use the card from school-related expenses, so I didn’t want to get such a hefty rate hike. Bank of America gave me one of three options: opt-out and cancel, opt-out and continue to pay down the balance (but not make new purchases), or accept the rate hike. Since I wanted to keep my account open, I went with the second option. But the second I make a new purchase on the card, the rate jacks up to 12.9%. That’s not something I foresee myself doing, so I don’t consider myself in danger. All that to say that I think people may have a little wiggle room to negotiate. I had to speak to a few supervisors to secure the second option, but I did it. Just a little advice.

  2. drdrowsy says:

    supposedly, chase is raising the rates on all of their cards, no matter your credit. Mine went from 8.9% fixed to 13.9% variable (i really hate that variable part). I have excellent credit so it’s pretty insulting, but i already had one card closed for inactivity and closed another one myself for a rate hike from 10% to something like 18% so i’m not about to close another account. Person i talked to on the phone said i should call in january or so and see if i can get the rate lowered then.

  3. mschaca says:

    It’s amazing that cc companies can get away with that, specially having excellent credit.They’re turning away great customers and who knows who they’ll get instead. Chase also is increasing balance transfer rates from 3% to 5% effective with the August 2009 statement, just got the notice today. Good luck!

  4. so it seems the rule now is to treat a credit card like a charge card, pay your balance in full every month.

    since closing an account will affect your credit score, leaving it in your drawer is a good option, provided there is no annual fee on the card… but be aware your account may be closed for a long period of dormant

  5. John Meyers says:

    See the movie “MAXED OUT” for the real scary info: holding your payment till it’s past due, actually shredding your payment, the fact that the second largest owner of strip mall “PayDay Loan” operations is Wells Fargo & suicides, from the elderly to college kids. Show it to your kids. Show it to everyone.

  6. I have banked with my local credit union Allegacy Federal Credit Union for 27 years. I have a Prime Plus Platinum VISA card with them that I’ve held for 17 years paying an annual fee of $15.00 for the rate priviledge. A couple of years ago the card was “sold” to FIA Card Services. I’ve had nothing but headaches ever since.

    I’ve never missed a payment, been late on a payment, overdrawn the line, or even come close to maxing out the line. Today however I got my monthly statement and imagine my surprise when my interest rate was jacked (more likely super jacked) to 11.50% from 4.75%. Yes a more than doubling of the interest rate.

    As an economist and a financial services employee I understand that some upward movement was to occur but not a doubling. I contacted the company and spoke with a representative who’s assistance was totally unstatisfactory. I was told “its the economy”. I was also informed that I had only two choices: 1. Accept the rate change and get over it or 2. Opt out of the rate change where by my rate drops back to 4.75% and the card would be closed. Neither of these is an acceptable option to me for several reasons: 1. impact on the credit score of closing the longest credit history on my credit report thus severely negatively impacting my FICO score; 2. Impact on insurance rates as FICO is used in determining risk there; and 3. I RECEIVED NO NOTIFICATION OF THE INCREASE!!!!!!!!!!!!!!

    In my past employment (during hardtimes as well) I worked in a position where a borrower in my position would come to me to deal with this issue. At that point (rising delinquencies poor utilization of credit, rescession), a borrower would have been offered some middle of the road ground: a rate above 4.75 but significantly less than 11.5% and no annual fee.

    What did I get…….

    Well: after asking for a supervisor, I was told that the best that could be done was 9.99% for purchases and the outstanding balance (currently equal to less than 11% of the line) with the $15.00 annual fee.

    I asked why I should pay an annual fee for a card I didn’t have anymore as the fee was for the prime plus interest rate option which wasn’t available.

    End result:

    9.99% on all purchases and current balance
    15.99% on cash advances (vs.4.75% previously. I’ve never used this feature but you never know what might happen).

    I also received a $15.00 credit for this year’s annual fee. Going forward there will be no annual fee for the card (I’ll believe it when I don’t see it on my bill) and I received an finance charge credit equal to the amount the charge increased this month since I didn’t receive a notification.

    Needless to say I am very very very displeased and will be contacting the “BANK” (name on the card) in the morning along with the appropriate state and federal regulators.

    Keep an eye on those statements and all that mail you consider junk.

  7. Milosava says:

    With my most recent monthly statement from American Express, I just received notification that my rate is being increased from 9.9% to 12.9% as of July 1, 2009. I was shocked because I’ve never been late on my payments, I’ve been a customer for 15 years and while my balance is high, I always pay more than double the minimum amount due.

    I contacted customer service immediately asking for an explanation and was told that the rates are being increased across the board because of economic times and that I was not specifically targeted. They advised me to check back in a few months to see if they had any lower rates available.

    To say the least, I was very disappointed but I’ll just use the situation as an incentive to pay off the balance ASAP.

  8. Most of you seem to be getting off easy. My Providian card went to WaMu, and then of course to Chase. Who immediately chopped my credit limit to within $100 of what I owe on the card. Goodbye credit score. Then to add insult to injury I receive notice that they are jacking my other Chase card from 9.4% to variable 17.9%. Yeah, that’s right. A whopping 17.9%APR. Thanks to my wife losing her job multiple times in the past two years from downsizing, we have over $15K in credit card debt. Ic an’t afford to murder my credit score any further by opting out, yet I can’t afford to pay them an extra $200-300 a year by keeping it open. I have so far been a general fan of the current administration, but if they were going to pass this law, it needed to be effective immediately to restrict card companies from pulling this kind of crap on those of us who are already struggling to stay on our last legs.

  9. I am yet another example of someone with great credit, who never is late on any payments, and my credit card rate went through the roof. Not only do I pay every bill on time, but I always pay close to $500 more then the minimum required. It seems as though I am being penalized for having a large balance on my card (which is making them more money anyway). I might win some kind of award with my increase: Old rate 9.9% –> New Rate: 19.9%. And did I mention I have had this account with BOA for almost 10 years total now? Great customer confidence/satisfaction.

  10. Just a few minutes ago I received a notice of change in terms. Thank God this just so happened to be the day I actually opened that envelope and actually read it! I was sickened to see that as of Aug 4 my now 9% interest rate will jump to 29.99. I am an independent contractor and work has been extremely slow. I am struggling to make a little more than the minimum payments on this card and keep my head above water with all other financial obligations. There is no way I could sit by and watch my interest rate jump to 29.99! I called to opt out and have the account closed. I have held this card for a number of years. With what was an excellent credit until a few months ago, I was able to get the best rate on any and everything. I know closing the account is not good, but this is the best option for me at this time. Despite all this, I am focusing on the positive. The account is closed and my credit score has dropped because of it, but I can focus on paying it down. Without being able to get credit right now, I will be forced to do what I should have been doing more of all along, paying in cash. I am praying that business will improve and I will be able to pay off any remaining creditors. This might seem like an odd way of looking at things but its working for me.

    Call me Pollyanna!

  11. My american express was 7.9 and was jacked up to 13%. My chase was 8.9% and jacked up to 15.9%. I have a credit score near 800. Well I did till i closed both and my only credit cards out. I carry a balance close to nothing. Just enough to show history. At this POINT WHO CARES WHAT MY CREDIT SCORE IS. I will never take another loan or use credit cards again. If a place requires credit i will use the prepay one and load it up with CASH. Also invested in a nice safe. Since chase was also my bank which also did get my daily deposits. NO MORE. I use to believe in spending money and helping to create jobs and all that good stuff. No more the crooked banks will CAUSE this “so called recovery” to go no farther. CASH is KING! Oh yeah i was planning on helping the housing market out and the auto industry also. But whats the point so Obama can help out all the PEOPLE who dont pay their bills. Maybe i should just file bankruptcy on the little 1,000 dollars. lol since i dont plan on charging anything else ever again anyway. Even though i could pay i off. MAYBE I WILL GET A HAND OUT THAN. I think instead of the TEA PARTIES. We all should stick it too the banking crooks and obama adminatration and have BANKRUPTCY parties. Might as well get a hand out like the rest OF people who arent paying things out there. I know im not gonna suffer and pick up the tab for others no MORE! I am done with that.

  12. Marilyn Dyer says:

    Just got a notice that the Costco American Express is not only increasing their rates, they are not even giving you the option of “opting out” of the rate. They say this is not the law yet!!! Good Bye Costco. 15.24% is or should be usuary!!! If Costco prides itself on giving their customers a good deal this just makes it a loss to shop there. We will not “opt out” (almost paid off anyway) but we will no longer shop at Costco unless they decide to have a new partner like Visa or Master Card. I’ll be we aren’t the only ones either.

  13. Scott Knievel says:

    Here is a really good one. My AMEC card interest rate was increased from 9.9% to 12.99% In November 2008 and now again it is being increased to 15.24% less than a year later. The customer reps told me that there was nothing they could do because the cutoff for not increasing the interest rate was June of 2009, how convenient. I have excellent credit and charge a lot of money a year to my AMEX card and make high dollar payments, often between 5 and 10 times what the minimum payment is, sometimes more than once a month. Great appreciation for a good customer here. I guess it is time to pay everything thing off, let the credit card companies rot and see how they like getting no money from their customers at all! That should be good for business….

  14. Hello, I got a notice from Capitol One last September that they were tripling my rates. I think that was during George
    Bush’s admin. Hmmmmm

  15. Lupe Castro says:

    In June I received my statement from Chase that showed an increase from 5.9% to 11.9%. I called and they informed me about the opt-out and that I should have called them if I did not want my rate to increase. They told me it was too late to opt-out. I never seen the insert. I transfered the balance in May to Capital One. My interest rate was at 6.9%, I explained what had happed with Chase about the rate increase and specifically asked if they would be increasing as well they told me No. I completed the transfer the following month my rate went upto 15.9%. I feel I was definetly jacked. Can I fight this since the new laws apparetly don’t take effect until tomorrow for notification?

  16. hello capital one just jacked my rates nearly doubling them — they said they sent me a notice but i never received it — how convenient — the person i spoke to said he is receiving thousands of calls from angry customers whose rates were jacked — isn’t there something that can be done about this??? it is outrageous that they are allowed to do this without reason.

    thanks

    taz

  17. Darlene Morrison says:

    My husband and I have had the interest rate raised on both of our Capital One cards. We both had a fixed rate which was changed to a variable rate and increased on the existing balance. They said we were notified, but I don’t recall seeing anything about it or I would have cancelled both cards. This has doubled to tripled our interest rate and we have never missed a payment or been late since the cards were opened. Is there anything we can do?

  18. Chase and Bank of America can burn in HELL for their money grab of Tarp funds and then screwing their customers with jacked up interest rates. Screw them all.

  19. Add American Express Blue to the list of ratejackers. No late payments for me, and no other explanation than “our pricing has to be responsive to the business and economic environment”. What I get for their response to the economic environment is a new “variable” rate that basically takes me up to a 15% APR. And to boot, I’ve been a “member” since 1982 with no late payments that I can recall in all of that time. I hate the hit my credit score will take for closing the account, but they’ve finally crossed the line on this one.

  20. Chase hit the hardest and i m quitting them. No late payments, credit score in high 600, been with them since 99 and they jacked my visa rate from 11.99 to 19.49. I aid it off and will never use them again!

  21. i have ever missed a payment, nor have i only paid the minimum, even if it’s only $10 over. a few months ago my Chase Visa offered me a “payment free month” because i was such a wonderful customer.
    so my Chase Visa just raised my minimum from 2% to 5%, and never informed me in writing. they say i can pay the 5%, accept a higher APR and get it back to 2% (but with a higher APR)until 2011 when it will jump to prime+10.99, or close the card and go to their collections dept, who will let me pay it off at a fixed rate for 5 yrs but will close the card and tank my credit score.
    they also said i had the option of hiring an attorney to fight them, how nice.
    my combined FICO score is currently 723.
    advice?

  22. sorry, thought i should clarify the previous post–my minimum payment was 2% of the balance, now it is 5%. the balance on the Chase Visa was actually a “life of the loan” balance transfer, which galls me even more. “life of the loan” means nothing, apparently.

    clearly illegal under the laws that will go into effect Feb2010, but they don’t care if anyone notices, i guess.

  23. I’ve noticed everyone on here talking about Chase and BofA…well, I just got a notice in the mail yesterday about my credit card rate being jacked up to 17.3% from 11.65% from Wells Fargo. This happens to be really bad for me because I am a full-time student and I got my hours severely cut at work (to the point where I don’t even work some months), which only allows me to make minimum payments ($25) on my credit card. Now, I’m not blaming anyone for the balance that I have, but I am pissed off that I now have to pay more. I don’t understand why the rates are being increased and I don’t want to close the account because I don’t want to ruin my credit. I’m just afraid I won’t be able to keep up my payments and pay my credit card off

  24. I just got my mail and opened up my envelope from citibank informing me that my at&t universal card (on which I have never been late, carry a balance, and have paid off several years in the last 7 years) was being raised from 7.9 to 11.9 percent. I immediatly called and opted out. Screw them..I don’t even care that it will probably mess up my credit…

  25. I have discovered that my interest rate has gone up on two of my cards. 29.99% is to high! What can I do to fight this evil blood sucking attack on my accounts. I am beging to hate HSBC and Chase. Who do I report them too?

  26. I’m 27 years old and recently graduated nursing school. Ive had a savings account before I could even walk.I now have a checking, savings, student loan and a credit card with a whopping 10k limit through Wells Fargo. Thank goodness my balance is no where near 10k (approx 1k). Last month I was informed that my APR would increase from 21 to 24%!!! I have an excellent credit and have always payed my bills on time. I am considering changing banks but sadly I dont think this is just a Wells Fargo issue. Any thoughts on EECUs?

  27. I have experienced the same issues. Wells Fargo raised my rate to 19% despite 7 years with them and not a single late payment. Then Chase was next, not as bad but still increased from 10 to 15%.

    I would recommend for everyone, if you are looking to shop around for a better card, wait until after the law goes into effect. You watch within 6 months you will start seeing smaller banks offering great rates to steal all the big bank customers. That’s what you want to wait for. When those smarter smaller banks start making good offers, goodbye Wells Fargo, Goodbye Chase. Then when you get a good card, leave your other ones open for 2 years without using them. You need to build up 2 years on the new card before closing the old ones so you can maintain your scores.

  28. Danny N Golden says:

    i have a chase credit card at a 9.80% and i went over the limit by $2.03 and they are now raising my interest rate to 13.55%…and even though I have never missed a payment or had any issues in they will not negotiate with me and I had to close the account. I have a $16,000 balance and that kind of rate hike would put me out on the streets

  29. Carmen Hardin says:

    On January 2010 my CITI card was raised from 3.99%(promotion) to 29.99%.The account had been set up on automated payments therefore I had never been late.When I called they said they had send me the ‘option’.My payments went from 100.00 a month to 520.00 of which about 100.00 goes to the principal and 400.00 to pay the interest.

  30. I have a few credit cards that I used to redo our paid for house.. Also a Care Credit Card for Dentist work that my insurance didn’t cover.
    In the past few months they have all jacked my interest..I have never been late and always paid way more than the minimum. Chase is one of them. My Sears card went up too and now there is a 70$ a month charge just in interest. I think I missed the opt outs or I didn’t realize what was going on due to the fact that I pay them all online and don’t usually read any of the mailed statements.I went to my bank to get a loan to pay them off and they wanted me to put my house up for collateral. My house is paid for and I do not feel comfortable doing that. I don’t understand that when the amount I wanted was about the same or even a little less than a new vehicle (nothing fancy) and they don’t make you put your house up for a car loan!! I can’t believe we are all getting treated this way. I have probably paid off the balances twice just in the interest!! I have called all of them and asked why and asked them to drop the interest down and the answer is always NO!

  31. Our citi premiere pass card went up to 29.99% interest

  32. here is a copy of an email i just sent Capitol One upon receiving notice of their impending rate jack.

    Dear Capitol One
    As a long time Capitol One card holder (7-10 years), I was very disappointed to learn of Capitol One’s decision to enter the high-risk

    Credit Market with both feet. As a loyal customer who has NEVER been late on a card payment, I was appalled to read of your intentions to

    raise my credit card rate to 29% APR. Needless to say come January my wife and I will be closing our account. Rest assured however, we will

    find a better rate and better service as I am sure your other customers will. At least those who have managed to make it through life with

    their integrity intact. Wow from 7.9 fixed to 29%! Shameful, simply shameful.

  33. Just paided on my Discover Card and was wondering why my interest rate was at 13.99% and now has jumped up to %17.24. I don’t remember receiving anything in the mail to inform me that my interest rate was going up. I have never been late paying and have always paid in advance. Plus have always paid over the minium due. I tried to work with to lower the rate some. But all I got was that this is the going rate now. So much for paying your bills on time.

  34. Bettina Lerman says:

    On the 22 of Aug. I received a 200.00 increase from Merrick Bank because I had made all my payments on time.On the 30 of Aug. I got a letter from them that my account is closed. They said that I have too much credit.