24 Feb 2008 12:33:29 | Lee Asher
The best credit cards are often those with the best credit card
rates. A low apr gives you those low interest rates. The APR is
the amount of interest you pay on your credit card balances. The
lower the APR your credit card offers, the less you"ll have to
pay. Unfortunately there are some credit card lenders out there
who are trying to scam you. They'll offer you a good interest
rate, wait for you to spend a lot of money, and then suddenly
jack up the interest through the roof. Suddenly you're screwed,
with nowhere to go.
Is That Legal?
Well, it shouldn't be, and in most countries it isn't. Suddenly
increasing your interest rate is generally associated with loan
sharking and usury (the practice of lending money at illegally
high interest rates) - it isn't fair to raise the rate once you
already owe the money, is it? Unfortunately, in the credit card
world of 'revolving' debt, the distinction isn't so clear cut.
In some countries, you might not have a legal leg to stand on -
your card issuer can do what they like to you. This is a problem
in the USA especially, where credit cards are based in states
like Delaware that have ineffective usury laws.
What Factors Can Trigger a Rate Rise?
Credit card companies do give reasons for any rises, and some of
them are valid. Many, though, can seem quite unfair - a lot more
sharing of information goes on in the financial industry than
you'd expect. Here are some examples of things that can saddle
you with the extra-high 'penalty rate':
Paying late. If you don't pay your bills on time, the company
seems quite justified in taking away your good rate. After all,
you've broken the rules of your contract.
Spending on other cards. You might think that one card issuer
won't know what you're doing with a competitor's card, but you'd
be wrong. Acting oddly or badly with one card can cause others
to get jumpy and raise your rates.
Defaulting on another bill. Any bill you don't pay - whether
it's for another card or for your electricity - gets put on your
credit record. The next time your issuer check your credit
rating (they usually do it quarterly), they'll spot it and want
to raise your rate.
Bouncing cheques. Again, this goes on your record, and spooks
card companies.
Remember that your rate can usually rise at any time for any
reason - most credit card contracts only require the lender to
give you about two weeks' notice. Plus, in general, when one of
your cards' rates go up, they'll all go up. That's another good
reason to be scared of credit cards, and not to have too many.
What Can You Do If It Happens?
If you rate suddenly jumps up, the first thing you should do is
try to cancel the card and move the balance elsewhere. If you
can't do that for whatever reason, then contact your local
consumer protection agencies. The next step after that, really,
is to get a lawyer.
It will also pay to make as much noise as you can. Complain to
the company and the regulator by post. Contact your local
newspaper and radio station. Make enough trouble that it would
be easier for them to do the right thing just to shut you up.
The squeaky wheel gets the oil.
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