Credit
Card Interest Rates
Jeanette Fisher
Are you paying higher
interest rates on your credit cards than you signed
up for?
Take a close look at your next
credit card statement. You might be surprised to see
that you're paying higher interest rates on
your credit cards than you think.
Many credit card holders sign up for a credit
account with an 8.9% interest rate and then later
realize that their interest rate has been bumped to
27.4%. Why?
You know that your credit score affects the credit
card rates that you qualify for. But, did you know
that a little clause in the fine print of the credit
card terms and agreements, called the
"Universal Default Penalty Clause" may mean
that you're already paying a higher interest than
when you signed up for the credit card?
What does this fine print mean
to you?
If your credit score goes down or one of your other
credit conditions change, then your interest rate
increases significantly. This doesn't mean any new
charges you make to this particular credit card
account: the higher rate affects the entire balance.
Yes, even items you purchased with the understanding
that your interest rate would remain the original
rate.
Your credit grantors periodically review your credit
report. Almost half of all credit card companies
take advantage of you when you are perceived as a
delinquent or high-risk borrower. The small print in
your account information may include the universal
default penalty, which allows the credit card
company to increase your interest rate if it
uncovers any of these six changes in your credit
report:
1. You have a late payment on any credit account.
The company doesn't care if you've never made a late
payment to them.
2. You go over your available credit line on any
credit account. Even if you unknowingly charge a
small amount over the credit limit, which many
credit card issuers let you do; your interest rate
can be raised.
3. Your credit score declines. Just one late payment
can hurt your credit score. Experian reports that
people with no late or missed payments in the last
year had an average credit score of 759; consumers
with one or more late payments in the past year had
an average score of 598.
4. You charge up too much on one account or many
credit cards. If you charge up your credit card near
the limit, or even charge up some of your credit
cards over the preferred proportional amounts owed,
you could pay extra for the privilege. The amount
owed on a credit line compared to the available
credit is termed the proportional amount owed. With
a credit card limit of $5,000, the score will be
higher if less than $2,500 is owed. Even better is
to owe less than one-third of the available credit
or less than $1501. Owing less than ten percent of
the available balance gives you the best possible
rating. On the other hand, owing over $4,500 on an
account with a limit of $5,000 lowers your score
considerably, especially if you have too many credit
cards and other loans with high balances compared to
available balances.
5. Your charge activities indicate a high
debt-to-income ratio. If your credit card issuer
sees that you've made many new charges and believes
that you're getting in over your head, they may
raise your interest rate. Even if this is a
temporary situation, like many new home owners who
make many purchases in a single month, the companies
take advantage of the unsuspecting credit card
holder.
6. You open new accounts. Opening new credit lines,
especially consumer finance accounts, lowers your
credit score and adds notations like "Too many
consumer accounts" to your credit report. Once
again, your credit card company may take advantage
of this to raise your interest rate.
Credit cards that start with a low interest rate can
jump to interest rates as high as 29.99%, if they
find any of these new conditions listed on your
credit report.
Check your credit card statements closely; look to
see if your credit card grantor raised your interest
rates. If you find that you're paying more than you
thought, call your credit card company and ask the
reason. Once you determine the cause, you can work
on your credit issue. After you've fixed the
problem, call back and ask for a reduction in your
interest rate.
Don't pay high interest rates
on your credit cards.
Worry-Free Credit Information:
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Copyright
©
Jeanette J. Fisher
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