Different credit card companies have different fees and interest rates they charge, so it’s important to read over your card agreement before signing on the dotted line. Rate changes aren’t always the result of not paying your credit card bill on time. While the Credit Card Accountability, Responsibility and Disclosure Act of 2009 prevents credit card companies from raising the interest rate on existing balances, you aren’t necessarily in the clear as certain exceptions apply.
Annual Percentage Rate
By law, a credit card company must tell you the annual percentage rate it charges before you open an account. The APR is the interest you pay on a credit card balance you carry. Besides the APR, a card company must also give you the periodic rate, says the Federal Trade Commission. That’s the amount of interest or finance charge the creditor adds on for the billing period if you don’t pay the outstanding balance in full. How much of a finance charge you pay depends on your balance and the APR.
Although the Credit CARD Act makes it harder for credit card companies to raise interest rates, you could still see a rate increase on your credit card bill. For example, Bankrate cautions that a card company can raise the APR on your current balance once a promotional or introductory rate ends. If you sign up for a card with an introductory rate, read the fine print to learn when, and how much, the rate will rise when the introductory period is over.
Disclosure of Rate Changes
Under the Credit CARD Act, a card company can raise the interest rate and finance charge as long as it notifies you of the change in writing at least 45 days in advance. You can avoid getting an unexpected and unwelcome surprise when you open your credit card bill by reading every piece of mail a credit card company sends you. That way, a rate hike or other change isn’t as likely to slip past your notice, especially if you pay special attention to the fine print.
Making a single late payment on another card can result in a penalty rate on your other credit cards, even those you always pay on time. Just one blemish on your credit report can be enough to make other card companies charge you a higher interest rate. It won’t matter that you paid those creditors on time. Reading all your credit card agreements helps you to know the facts before charging up your credit cards.
- WhiteHouse.gov: Fact Sheet -- Reforms to Protect American Credit Card Holders
- Federal Trade Commission: Credit, Debit and Charge Cards
- Bankrate: 6 Facts About Credit Card APR
- Senate Committee on Banking, Housing and Urban Affairs: Summary -- The Credit Card Accountability Responsibility and Disclosure Act
- Forbes: 5 Secrets Credit Card Companies Don’t Want You to Know
- Bankrate: Credit Card Fees and Penalties FAQs
Amber Keefer has more than 25 years of experience working in the fields of human services and health care administration. Writing professionally since 1997, she has written articles covering business and finance, health, fitness, parenting and senior living issues for both print and online publications. Keefer holds a B.A. from Bloomsburg University of Pennsylvania and an M.B.A. in health care management from Baker College.