Earlier notice on rate hikes gives credit card users options
— -- Here's another good reason to pay attention to mail from your credit card company: You could soon receive a notice that the interest rate on your credit card is going up. That's the bad news. The good news? Well, there isn't much, but how about this: You may actually have time to figure out what to do about it.
Within the next few weeks, credit card issuers will be required to give borrowers at least 45 days' notice before making a significant change in their interest rates or fees. The heads-up requirement is included in a credit card reform bill President Obama signed in May. Most provisions in the Credit Card Accountability, Responsibility and Disclosure Act don't take effect until next year, but the advance-notice requirement kicks in on Aug. 20. Previously, credit card issuers could raise rates with just 15 days' notice.
There are some exceptions to this requirement. If your card's interest rate is tied to the prime rate or similar benchmark and that benchmark changes, your issuer doesn't have to give you advance notice, says Ben Woolsey, director of marketing and consumer research for CreditCards.com. However, Woolsey says, issuers will be required to give you 45 days' notice if they increase the margin, which is the amount added to the benchmark index to calculate your annual percentage rate.
In the past, consumers have complained that by the time they learned about a rate increase, they didn't have time to do anything about it, says Gerri Detweiler, credit adviser for Credit.com. "This will give consumers a little longer to sort out their options if they get a notice of a change in terms," she says.
Your best bet, of course, is to pay off your balance before the rate increase. If that's not possible, you have two choices:
•Repay your balance at the higher interest rate. If you have a small balance and the rate increase is modest, this may not cost you much. And if you have other credit cards with lower rates, you can use them for future purchases.
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