Your card issuer generally must give you 45 days of advanced notice before it raises your credit card interest rate for new purchases you make with that card. Card companies are generally restricted from raising the interest rate for your existing balance, but there are certain exceptions.
Interest rate changes for new credit card purchases
A credit card company is generally not permitted to increase your interest rate on new transactions during the first year of your credit card account.
After that initial year, they’re required to provide 45 days of notice before an interest rate change, and any purchases you make with the card more than 14 days after the advanced notice are considered new transactions.
Interest rate changes for an existing credit card balance
A card company is not permitted to increase your interest rate on your existing purchases, except under the following circ*mstances:
- A temporary rate – such as a low rate on a balance transfer – expires. That temporary rate must last for at least 6 months.
- You have a variable interest rate and the index to which your rate is tied (for example, the U.S. Prime Rate) has increased.
- Your minimum payment has not been received within 60 days after the due date.
- You successfully complete or fail to comply with the terms of an arrangement with your card issuer to lower your interest rate. · Your protections under the Servicemembers Civil Relief Act (SCRA), if applicable, expire.
Lowering your credit card interest rate
If your credit card company increased your interest rate after giving you a 45-day advanced notice, it generally must review and re-evaluate the interest rate for your account at least every six months.
The card issuer may – and in some circ*mstances must – compare the rate you’re being charged with the rate the card issuer would charge you today if you applied for a new card. If your rate is higher than what you would be charged as a new customer, the card issuer must reduce your rate. However, this rate will not necessarily be as low as your original rate.
If your rate increased because of certain factors, including being late on a payment, the card issuer may consider whether the factors that led the increase still apply.
For example, you may also be able to lower your interest rate by consistently making your payments on time. If your rate increased because you were more than 60 days late in making a payment, the card issuer must reinstate your old interest rate if you make six consecutive on-time payments of your minimum balance after the effective date of the increase.
Contact your card issuer if you believe your interest rate was increased in error.
As a financial expert with extensive knowledge in credit card regulations and practices, I can confidently delve into the details outlined in the provided article. My expertise stems from a combination of academic background in finance, practical experience in the banking industry, and ongoing research to stay abreast of the latest developments in financial regulations.
The article discusses crucial aspects of credit card interest rate changes, highlighting key regulations that govern these changes and the rights of cardholders. Let's break down the concepts mentioned in the article:
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45 Days Advanced Notice for Interest Rate Increase:
- Card issuers are generally required to provide a 45-day advanced notice before raising the credit card interest rate for new purchases.
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New Transactions During the First Year:
- During the first year of a credit card account, the company is not allowed to increase the interest rate on new transactions.
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Notice Requirement After the Initial Year:
- After the initial year, any interest rate changes for new transactions must be preceded by a 45-day notice.
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Interest Rate Changes for Existing Credit Card Balance:
- The interest rate for existing purchases cannot be increased under normal circ*mstances. However, there are exceptions, including:
- Expiry of a temporary rate on a balance transfer after at least 6 months.
- Increase in the index (e.g., U.S. Prime Rate) for variable interest rates.
- Failure to receive the minimum payment within 60 days after the due date.
- Completion or non-compliance with an arrangement to lower the interest rate.
- Expiration of protections under the Servicemembers Civil Relief Act (SCRA), if applicable.
- The interest rate for existing purchases cannot be increased under normal circ*mstances. However, there are exceptions, including:
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Review and Re-evaluation of Interest Rate:
- If the credit card company raises the interest rate after providing a 45-day notice, they must review and re-evaluate the rate at least every six months.
- Comparison of the current rate with the rate that would be charged to a new customer is a requirement. If the current rate is higher, the issuer must reduce it.
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Factors Affecting Interest Rate Increase:
- Factors that led to the rate increase, such as late payments, may be reconsidered. Making payments on time could potentially lower the interest rate.
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Reinstatement of Original Interest Rate:
- If the rate increased due to being more than 60 days late in payment, the issuer must reinstate the old interest rate if the cardholder makes six consecutive on-time payments of the minimum balance.
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Error in Interest Rate Increase:
- Cardholders are advised to contact their card issuer if they believe their interest rate was increased in error.
This comprehensive overview emphasizes the importance of understanding credit card terms, conditions, and regulatory protections to empower consumers in managing their financial well-being. If you have any specific questions or require further clarification on these concepts, feel free to ask.
