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Your Credit Card Rates: When They Can and Can't Go Up

by Barbara Marquand

Under new federal credit card regulations that went into effect February 22, you're protected from certain interest rate hikes on your credit cards, but that doesn't mean credit card companies can never raise your rates.

Here's a look at how the new rules impact interest rates.

When Credit Card Companies Can't Hike Your Rate

• Your credit card issuer can't increase the regular, fixed interest rate or the margin charged on a variable rate on your current balance unless you're 60 days late on payments.

Credit card companies can't raise the fixed interest rate or the variable rate margin on new purchases during the first year an account is opened.

When Your Credit Card Rates Can Rise

• After the first year of an account, your credit card issuer can raise the fixed interest rate or the margin it charges on a variable rate after giving you 45 days notice and the chance to opt out of the card.

• A variable rate includes the index, plus a margin tacked on by the credit card company. Even if the credit card company doesn't change the margin, the rate will rise if the index goes up.

• Your interest rate can go up when promotional or introductory rates expire. Promotional rates must stay in effect for at least six months, and credit card companies must still give you advance notice and the chance to opt out of the credit card when the regular rate goes into effect.

• If you're late on payments for 60 days, the credit card company can raise your interest rate. The issuer still must give you 45 days notice, the reason for the rate increase and the option to cancel the account. The issuer must lower the rate to its original level if you pay all the minimum payments on time in the next six months.

Understand Credit Card Rates Before You Sign Up

Follow these tips to avoid unexpected rate increases:

• Read credit card offers thoroughly to avoid mistaking a promotional or introductory rate for the regular interest rate.

• Understand how the variable rate is calculated, and expect the rate to go up if the index is at historically low levels.

• Pay your bills on time.


Published 03/27/10 (Modified 01/21/13)

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