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.
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.