The fine print in a credit card bill can be a daunting read.
The terms are lengthy, they're written in "legalese" and your
eyes typically glaze over before you finish reading. Despite the
complicated nature of these terms, they are important, and
consumers should understand exactly what sorts of things to
which they have agreed. A little known provision of most credit
card terms is one that allows the credit card companies to raise
your interest rates for any reason at all. You might think that
most companies would only raise interest rates for cause,
responding to late payments or insufficient payment, but you
would be wrong.
The average credit card debt in the typical American household
is nearly $10,000. With minimum payments recently raised to
about 4% of the balance and interest rates that are more than
generous, the credit card industry is a profitable one. The
industry will soon be even more profitable after the new
bankruptcy law takes effect this fall. Nevertheless, they are
always seeking ways to find more profits, and the clause in your
terms that allows them to raise your interest rates for any
reason at all is a surefire way for them to increase their
profits.
The companies check the credit reports of their customers from
time to time, and then use anything negative that appears on the
report to justify an increase in the interest rate. That
increase may not be clearly announced; it may just appear on
your bill as a different number than the one that appeared there
last month. The wise consumer will read his or her bill
carefully each month; otherwise an increase may go unnoticed.
"Anything negative" on a credit report doesn't necessarily mean
late payments, bankruptcy filings or other judgments against a
consumer. It could be something as simple as a balance on an
account that the credit card company thinks is too high, or too
many open accounts. In fact, the reasons used for raising
interest rates often seem rather arbitrary.
The companies justify such actions by saying that their loans
are not backed up by collateral and that there is inherent risk
in their business which must be minimized whenever possible.
That 'risk" is increased when a customer takes on too much debt,
and raising that customer's interest rate is a way to minimize
that risk.
That may be so, but doing so to a customer who has an
outstanding balance unfairly penalizes them and forces them to
pay more for purchases that they have already made. What can you
do if this happens to you? The best course of action is to call
your card issuer and complain. More often than not, the company
will reduce the interest rate to the prior level, particularly
if there was no egregious offense, such as a late payment, to
justify the increase.
Should your issuer not agree to lower your rates, you may wish
to shop around for another card. The market for credit lending
is an aggressive one, and you can probably find a better deal.
No matter what you do, make sure that you read the terms of your
credit card bill carefully, and check your credit report often.
It's better to be safe than sorry.
About the author:
Talbert Williams offers debt consolidation, debt reduction,
credit card debt referrals and advice. For more information,
articles, news, tools and valuable resources on debt solutions,
visit this site:
http://www.1debtfreedom.com
