How to Handle Credit Card Rate Increase
It is always good when you could take advantage of zero interest rate or a low rate on your credit card forever, however in reality, this is absolutely not possible. You may be able to get a credit card with a zero rate or low rate, but rest assured that it’s not going to last. You may be qualified to experience the zero APR for 6 months or 12 months but once the promotional period ends, you’ll have to deal with the credit card interest rate increase. What can you do when confronted with this scenario?
Check out the following tips:
1. Opt-out.
Under the new Credit Card law, issuers must send their customers proper notice about an up-coming rate increase 45 days in advance. This will give you the chance to decide whether you want to keep the card or cancel the account. Should you decide to opt-out, and you still have existing balance in the account; you will be able to pay it off under the old rate. After completely paying off the balance, the account will be closed.
However, before you decide to opt-out, you may want to consider the effect it will have on your credit score. If you had that account for years, cancelling now would mean deleting the oldest part of your credit history. Such a move can pull down your credit score, so you must carefully consider your decision.
2. Negotiate.
There is another way to deal with a credit card interest rate increase. You should try to negotiate for a lower rate with your credit card issuer. If you have been an old customer with good payment history, your credit card issuer may grant your request so you can enjoy the low rate. If your credit card company is implementing the increase based on its own decision and not as a consequence of your actions (delinquent payment), then you should negotiate first before you opt out.
3. Pay the full balance.
If the credit card offers good features and services, you may choose to keep the account active despite the up-coming rate increase. If you can pay your full balance before the increase is implemented, you can avoid paying the new rate by paying your balance in full before or on your due date. Of course, this would mean using the credit card only for small purchases, so you won’t have a difficult time paying off the charges.
4. Transfer your balance.
If you own a card with a lower rate, you can also transfer your balance so you can have a much easier time paying off your charges. However, before making this move, see to it that you will not be maximizing your credit limit, and that you will not incur expensive balance transfer fees.
You can also apply for a balance transfer card with zero APR. You can use this card for consolidating credit card debt which will allow you to pay off your balances without an additional interest rate charge. Should you decide to acquire a new card, see to it that you will have sufficient time to completely pay down the balances you transferred.
