Millions Of Credit Card Holders Are Experiencing Hikes In Interest Rate

Jan. 14, 2010 - PRLog -- If you received a notice that the interest rate on your credit cards is going to more than double, you are not alone.  Citing economic conditions, American Express, Bank of America, Citibank, Capital One, and HSBC are raising rates on potentially millions of credit card holders.  

Economic conditions notwithstanding, these changes come just weeks before new federal legislation takes effect next month. The Credit Card Accountability Responsibility and Disclosure (CARD) Act aims to curtail some of the most notorious practices of credit card companies.  

Bank of America is one of the most recent banks that decided to increase interest rates for customers.  Effective in June, 2010, any Bank of America credit card customer who carries a balance and has an interest rate below 10 percent will see their rate jump into double digit territory.  According to the Wall Street Journal, this could affect as many as four million card holders.

Connecticut Better Business Bureau President, Paulette Scarpetti, says these changes are coming at the worst possible time for many Americans.

“Credit is getting more expensive and harder to obtain, however consumers can take steps to wean themselves off credit cards and avoid the new increases and even keep their old rate.”

The best defense against rate hikes is to manage credit responsibly and maintain a good track record for paying bills on time. For consumers who don’t have a stellar credit record, there are still a few things to do to keep from paying even more every month.

BBB offers the following advice for fighting back against skyrocketing interest rates:

Contact your credit card company:
While most interest rate hikes affect only customers who carry a balance, some customers in good standing have seen their rates increase as well.  Anyone who believes their rate was increased by mistake should contact their credit card company.  Some credit card companies might be willing to negotiate rates in order to keep cardholders as customers, so it doesn’t hurt to contact the company and discuss options.

Pay off the account:
If the cardholder doesn’t want to accept the new rate, they can choose to keep their current rate and pay off their outstanding balance, as long as they don’t make any new purchases.  If any new purchases are made, the higher rate will apply.

Find a better deal elsewhere:
Other credit card companies might be offering better deals, such as low introductory rates that give the holder a less expensive way to pay down debt.  There are many websites that compare current credit card offers, including www.bankrate.com/credit-cards.  

Manage credit responsibly:
According to banks, most rate hikes affect people who maintain balances on their card or have rates that are too low for the market.  Therefore, one of the best ways to avoid a sudden interest rate hike is to use credit cards responsibly, which includes paying bills on time and not carrying a balance.

Keep an eye on new regulation:
The Federal Reserve has passed regulation, effective July 2010, which will limit a bank’s ability to raise interest rates on cards.  In the meantime, some members of Congress and the Obama administration are encouraging reform of the credit industry and increased oversight to restrict practices such as arbitrary interest rate hikes and exorbitant rates.  

More information on handling personal finances wisely is available at bbb.org.

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Founded in 1928, Connecticut BBB is an unbiased non-profit organization that sets and upholds high standards for fair and honest business behavior. For more advice on finding companies and businesses, start your search with trust at www.bbb.org.