If you notice that the credit card interest rates have gone up, then congratulations! You are one of a small group of people that even check the rates on their cards. Many people believe that interest rates are something they have no control over, so they do not even look each month to see what kind of rate they are given. This is a huge mistake that could cost thousands of dollars! There are several reasons why your interest rates went up and you have the power to control some of them.
If your credit card has a variable rate of interest that is tied to a bank index, then the issuing bank can increase your interest rate as the prime interest rate increases. They do not have to tell you of the increase but you will be aware of the possibility of an increase if you watch the news and hear about the nation’s prime interest rate rising. If your card has a fixed rate, your bank must give you at least a 45 day notice if your rates will be increasing.
Many credit cards offer new customers a promotional rate, often as little as 0% for several months on balance transfers or new purchases. These promotional rates can last from a few months to a few years, but you should always be aware of when your promotional rate will expire. When you sign up for a new card, write down any promotional offers you have and keep those notes with your credit card bills. You can even write it on calendars or set an alert on your phone. When your promotional rates expire, plan on paying as much as possible, as soon as possible to save yourself a lot of money.
This is one instance when you are in control of your interest rates. Issuing banks can change your interest rates to a default rate if you are ever 60 days delinquent on your payments. If you are having trouble making your monthly payment, call your bank and explain the situation to them. They may consider lowering your monthly payment or your interest rate to help you. Banks do not want default accounts. They would much rather have a little money coming from you each month than none at all. It may be embarrassing to make that phone call, but it will save you a lot of money in the end.
Debt Management Plan
Often, people who complete a debt management plan will see their credit card interest rates increase soon after the completion. Banks consider your account a high risk account because of the debt you have accumulated in the past. Your rates could also increase if you default on a plan. Read your bank’s policy carefully and see when you will be able to request a lower interest rate if you have completed a debt management plan. Again, do not be afraid to call and ask for lower rates. All the bank can do is say no and if they do lower the rates, you will be saving a lot of money.
If the interest rates on your credit card increase, you can always ask for lower rates. Banks often count on people being too busy to really look at their credit card statements so you need to be diligent in checking yours every month. It may take a few minutes to do, but you could save yourself thousands of dollars in interest over the life of your credit card.