Your credit card interest directly affects the cost of implementing a balance on your credit card. You can start with a low interest rate on your credit card, but your rate does not always remain the same for the life of your credit card. Your credit card company may raise your interest in certain circumstances, but they don’t always have to inform you in advance.
Mandatory interest rate increase Notice
There are a few situations where a credit card issuer is required to send an interest rate increase in advance.
Banks must send an increase notification interest at least 45 days prior to the increase. This is a requirement of the Truth in Lending Act, a federal law that protects consumers from lenders.
You do not have to accept the higher interest rate. During this 45-day period, you have the option to opt-out of the interest rate increase if you prefer to pay off your balance with the current interest rate. Opting-out allows you to pay the existing interest from your balance. However, if you choose to opt-out, the creditor can close your account.
If you do not respond to the increase notification interest at all, the credit card company can apply the new interest rate to all new purchases made starting 14 days after the notification is sent.
When the rate increase Notice Cannot be required
Credit card issuers do not always have to send a notification interest increase before increasing your rate.
If the rate increase is due to a delinquency or default, the creditor does not warn you of an interest rate increase. These penalty increases are usually outlined in the small print of your credit card agreement. For example, if you are at least 60 days late on your credit card payment, your card issuer may raise your interest rate without sending a rise in interest notification interest or giving you a chance to opt out.
The credit card company also failed to notify you if your interest rate increased because a promotional rate expired.
Most credit cards these days have a variable interest rate that is linked to an underlying rate, such as the prime rate or LIBOR. If the underlying interest rate rises, your April credit card may also increase. Your credit card company does not have to send in advance to increase your rate in this case; Your credit card agreement will provide an overview of what rate your April is bound to and how it responds to changes in the index rate.
Dealing with Unfair Rate Increases
Contact your credit card company about an inexplicable increase in your interest. They will be able to explain why your interest was raised. If the increase has occurred an error, you may be able to get your old interest restored.
You can file a complaint with the Consumer Financial Protection Bureau if you think that your credit card interest was raised in the error or the credit card company raised your rate without proper notice of default.