Plenty of people aren’t aware of the interest rates on their credit cards, which means they also don’t notice when their rates go up.
There are a few ways that the interest rate on your credit card can change. Either the issuer decides to change the price or the index, or the card’s interest rate is prone to changes. If the bank adjusts its quota for rates, the bank needs to let you know ahead of time. However, if the index changes, the bank isn’t obliged to alert you.
Here are some of the most common reasons why credit card interest rates go up.
An Expired Promotional Rate
Many credit cards come with a very low or even zero interest rate during a promotional period, which usually ranges between six and twelve months. Taking advantage of such offers can help you save money if you transfer a balance from another card and pay it off during the low-interest window. However, you have to keep an eye on the promo’s expiry date, as the regular interest rate is a lot higher.
You’re Behind on Your Payments
If you’re late on two consecutive payments, credit card issuers can apply a penalty rate, which can be significantly higher than the regular interest rate. It’s essential to make payments on time if you want to lower the amount of interest you pay on your debt.
Variable Interest Rate Card Has an Index That Just Went Up
Some credit cards have a fixed interest rate that is determined by the issuer when you obtain the card. While banks are allowed to change this rate in the future, they need to give you a 45-day notice.
Many other credit cards held by Americans today are variable interest rate cards that charge a fixed percentage, plus the index the card is pegged to, which is usually the prime rate.
The prime rate is based on the federal funds rate and set by the Federal Reserve. Many banks choose to use it as a benchmark when setting interest rates for various lending products, including credit cards.
The Best Way to Avoid Interest Rate Surprises
The average American carries thousands of dollars of credit card debt. If you want to reduce the amount of interest you pay, you should work on paying down your credit card debt until it reaches zero. If you need help doing so, acquire the legal services of a local credit card debt attorney.
The Illinois debt relief attorneys at Benveniste Law Offices can engage in negotiation with creditors and lenders to agree on a debt repayment plan that is most beneficial to you. Heather Benveniste has several years of experience as a debt collection attorney. She now uses the insight gained to give those struggling with debt issues an upper hand when negotiating repayment terms. Contact us today for a free case evaluation and start on your road to a debt-free life.