Creditors Can Raise Your Rate

There are federal regulations on why and how credit card providers can increase your interest rates. For instance, they must give at least 45 days notice before increasing your rate. There is no cap on the amount of interest they can change the interest rate, certain fees, or make major changes to the terms of your account.

Common circumstances when creditors will raise your interest rate

  1. If your promotional rate is expiring.

    If you opened a credit card with a introductory promotional interest rate, your interest will rise significantly after the introductory period is over. In the case of promotional interest rates, the credit card provider does not have to give you 45 days notice before increasing the rate. Make sure to set a reminder for yourself and pay off any balance transfers before the offer expires so you do not have to pay interest on the entire transfer.

  2. If your rate is tied to a national rate that varies, like the Federal Reserve’s Prime Rate.

    Most credit cards have a variable APR, so your interest rate may vary based on the prime rate changes made by the Federal Reserve. When this happens your credit card provider is again not required to provide 45 days notice.

  3. If you are 60 days late on your payments.

    Failing to pay your bills on time is a slippery sloop for anyone. If you neglect your credit card bill not only will it impact your credit, but the credit card company can increase your interest rates if the account goes past 60-day delinquent.

  4. If the account is over 12 months old.

    The Card Act states that they cannot raise your rates on an account that is less than 12 months old. With the exception of 60 day delinquency and prime rate changes, of course. After that period card issuers are free to increase the rate as they please, but they do have to provide notice.

  5. Your credit score has dropped significantly.

    Creditors will occasionally review your financial and credit standing even after the account has been open for a while. If there has been a significant decrease in your credit score they can decide to increase your interest rate, this is another case where your provider will have to send notice 45 days prior to the change.