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Beware the Sudden Rate Hike
There are some credit card lenders out there who are trying to scam you. They’ll offer you a good interest rate, wait for you to spend a lot of money, and then suddenly jack up the interest through the roof. Suddenly you’re screwed, with nowhere to go.
Is That Legal?
Well, it shouldn’t be, and in most countries it isn’t. Suddenly increasing your interest rate is generally associated with loan sharking and usury (the practice of lending money at illegally high interest rates) – it isn’t fair to raise the rate once you already owe the money, is it? Unfortunately, in the credit card world of ‘revolving’ debt, the distinction isn’t so clear cut.
In some countries, you might not have a legal leg to stand on – your card issuer can do what they like to you. This is a problem in the USA especially, where credit cards are based in states like Delaware that have ineffective usury laws.
What Can Trigger a Rate Rise?
Credit card companies do give reasons for any rises, and some of them are valid. Many, though, can seem quite unfair – a lot more sharing of information goes on in the financial industry than you’d expect. Here are some examples of things that can saddle you with the extra-high ‘penalty rate’:
Paying late. If you don’t pay your bills on time, the company seems quite justified in taking away your good rate. After all, you’ve broken the rules of your contract.
Spending on other cards. You might think that one card issuer won’t know what you’re doing with a competitor’s card, but you’d be wrong. Acting oddly or badly with one card can cause others to get jumpy and raise your rates.
Defaulting on another bill. Any bill you don’t pay – whether it’s for another card or for your electricity – gets put on your credit record. The next time your issuer check your credit rating (they usually do it quarterly), they’ll spot it and want to raise your rate.
Bouncing cheques. Again, this goes on your record, and spooks card companies.
Remember that your rate can usually rise at any time for any reason – most credit card contracts only require the lender to give you about two weeks’ notice. Plus, in general, when one of your cards’ rates go up, they’ll all go up. That’s another good reason to be scared of credit cards, and not to have too many.
What Can You Do If It Happens?
If you rate suddenly jumps up, the first thing you should do is try to cancel the card and move the balance elsewhere. If you can’t do that for whatever reason, then contact your local consumer protection agencies. The next step after that, really, is to get a lawyer.
It will also pay to make as much noise as you can. Complain to the company and the regulator by post. Contact your local newspaper and radio station. Make enough trouble that it would be easier for them to do the right thing just to shut you up. The squeaky wheel gets the oil.
We recommend the following credit card and debt resources. They are highly reputable and will help you in choosing the best available solution for you, as well as in finding the best credit cards around.
Credit Card Resources
CreditAxis guarantees anyone a bad credit loan or credit card approval through their directory of little-known lenders. They also offer a unique credit repair kit and a do-it-yourself bankruptcy filing kit. Their information is applicable to residents of the U.S., Canada, and the UK.
LowerMyBills is a comprehensive service that helps consumers lower all their monthly bills, all in one spot. They offer a broad range of savings opportunities, with a special focus on home loans. LowerMyBills has established itself as leader in the online comparison shopping marketplace.
Debt consolidation is one of the hottest offers online today and DebtAdvocates.cc (from Intermark Media) is the first in the industry to give consumers the choice to either consolidate or eliminate their debt - based on their financial situation.
Credit Card Debt Strategies
The strategies on this site are based on various reports and the
financial experience of respected authorities.
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