My credit card has a fixed rate. Why is the bank allowed to raise it?
Credit card rates can be fixed or variable. A fixed rate credit card means that the Annual Percentage Rate (APR or rate) on the account is not tied to an index that may change periodically. A fixed rate is set for a period of time. For credit card accounts, the term “fixed rate” does not mean that the rate cannot be changed over the life of the account.
In general, the bank may change the account terms of credit cards, including the APR, by sending an advance notice to the account holder. If the bank intends to change a significant account term, such as the APR, the bank must usually notify you 45 days in advance of the change. However, an advance notice of a rate increase is not required in some cases, such as when your credit card has a variable rate or a promotional rate that ends after a certain period that the bank has already disclosed to you.
In general, if you receive an advance notice of a rate increase, you can reject the increase for your existing balances and any transactions that occur 14 days or less after you receive the notice if you do so before the effective date of the change. However, you will not be able to reject an increase in the APR if you are 60 days or more late in making a required minimum payment on your account. You also will not be able to reject a rate increase for transactions on your account that occur more than 14 days after the bank sends you the advance notice of the rate increase.
The change in terms notice must advise you of your right to reject the increase in the APR. The notice will provide instructions for rejecting the change, and a toll-free number that you may use to notify the bank if you decide to reject the rate increase. You must reject the increase before the effective date to prevent the increased rate from taking effect.
The bank also must let you know if the bank will terminate or suspend your ability to use the account if you reject an increase in the rate.
Be sure to review your Account Agreement, which is the contract governing your credit card account. It provides information on changes that may occur to your account.
You should also know that starting in February 2010, additional limits on changes in credit card rates will become effective. Please check this Web site to stay informed of important information about credit card accounts.
Revised 08/19/09
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