With the struggles in the banking industry, many financial institutions are looking to their credit card branches to help them recoup losses. Traditionally, credit cards are the most profitable venture a bank or lending institution offers. With the high rates they charge both consumers in interest and the merchants in fees, this is usually a win-win for the company.
Unfortunately, consumers are being hurt by this crunch. Many credit card companies are now increasing interest rates to help drive up the profits. Even good customers, with strong credit scores and payment history, are receiving letters notifying them their interest rates will increase. This can be tricky when you have a large balance you can’t easily pay off.
Can they do this? As of today, the answer is yes. There are no legal restrictions to prevent credit card issuers from raising their interest rates or changing their terms at any time. The only law is that they give you a 15-day notice with an option to close your account. However, if you carry a large balance, you won’t be able to completely close your account until it is paid off.
Luckily, there are some possible changes to this current situation. The Federal Reserve is proposing some modifications to the laws to restrict credit card companies from imposing a retroactive interest rate hike. They are proposing a ban on raising an interest rate on a current balance, unless the customer has been more than 30 days late on payment.
If this is something you would like to see happen, now is the time to get involved. Write to your congressional representative to indicate your support for the Credit Cardholders’ Bill of Rights, which includes changes like the one described here and even more favorable legislation to help consumers’ battle unfair credit card tactics.
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