Because of the recent rise in interest
rates, you may find yourself asking what that will mean
to your credit card balance. The news isn’t great.
Because monthly credit card payments are tied directly
into what interest rate the cardholder qualifies for;
rising rates mean higher monthly payments and more money
required to pay the balance down.
But even if you are secure with your current rates,
you shouldn’t let down your guard. Imagine that
you are lucky enough to have a 10% interest rate on
your card (The average nowadays is about 13%). If
you are late on your electric bill next month, you
may just find that your interest shoots up the following
month. Credit card issuers currently have the right
to raise your rate without warning if any of the following
occur:
-
You are late on any type of payment—even
one day.
-
You have a lot of inquires on your
credit report.
-
You are charging more in recent
months that is normal for you.
-
You are carrying a higher balance
than normal.
There is current legislation that, if passed, will
make it illegal for credit card companies to penalize
you for making late payments on any account except
the one that you hold with them. But in the meantime,
it’s important that you pay your balance, giving
the issuer plenty of time to receive and process your
payment.
So, what should you do if your credit card issuer
has suddenly raised your rates? Luckily, you have
a few options.
Your first step should be to call the issuer and
ask them to lower the rate. Especially, if it’s
due to a late payment, and you don’t make a
habit of making your payments late, they may be willing
to work with you.
If you find that they are unwilling to budge, you
should start looking for another credit card. Try
to find one with a low interest rate and little or
no fees for balance transfers or cash advances. You
can either transfer the balance, or take out a cash
advance, pay off the interest card and then make payments
on the cash advance with a lower interest rate.
Whatever you do, the rising interest rates mean one
thing: it would be wise for anyone carrying high credit
card balances to begin paying them down. Remember,
the higher the rates go, the more money you will have
to spend to just maintain your current balance.
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