| Bad Credit and Credit Cards |
|
|
|
|
|
Bad credit report entries can raise credit card interest rates
Some credit card issuers are raising the interest rates charged to their historically good credit customers who are now suffering problems such as late payments on other debts, even though they are paying timely their credit card balances and/or paying in full each month.
TIP: Each month, check your credit card statement for the current interest rate charged by your card company. Just because you had been given a low interest rate when the card was first issued to you does not mean you will always have that low rate if you make card payments on time. Failure to pay other bills timely; including utility bills, rent, mortgage, auto loan, etc, can impact your credit score and violate the Terms and Conditions of your credit card agreement, and flag your account as being a high risk subject to higher interest rates. You can quickly go from having a good to a bad credit card interest rate without any advance notice.
What do you do if your credit card company has raised your interest rate? Contact your card company and ask why. If you've been a good customer by paying your credit card bill timely, point out this fact to the company. Tell them you will be inquiring for a lower rate at other credit card companies unless their lower your rate. If you have not been paying your card bills timely, it will be more difficult to convince your issuer that you are not a high risk, and maybe it would be best for you to adjust your spending habits until you can get your debt under control.
Credit card issuers may also feel you are a high risk; and raise your rate, if you have high debt balances on other credit card accounts, and/or available credit on inactive, idle accounts which could become potential debt.
One senator; Sen. Carl Levin, MI, is sponsoring legislation that would restrict credit card interest rate hikes to certain instances, such as at the conclusion of a low, introductory rate period, contracts that have variable rates and when a cardholder violates the agreement with the issuer. CreditFederal.com is concerned with the latter reason; violation of the agreement, which could likely include late payments on bills other than that of the credit card and thus would reduce the effectiveness of such legislation.
According to Levin: "When a credit card issuer promises to provide a cardholder with a specific interest rate if they meet their credit card obligations, and the cardholder holds up their end of the bargain, the credit-card issuer should have to do the same."
Some major credit card companies stated they will discontinue the practice of raising a member's interest rate based solely on a credit report.
But many card companies are holding firm, claiming they need to have flexibility in how they set interest rates and other terms, including credit report score changes.
Such credit card companies fear that strict legislation could have unforeseen, negative consequences for consumers. One executive stated that the ability to modify the terms of a credit card agreement to accommodate changes over time to the economy or the creditworthiness of consumers must be preserved as a matter of fiduciary responsibility. And the consequences of imposing severe restrictions on the ability to reprice such loans in response to these changes could include significant reductions in the availability of credit to many and higher pricing for all, particularly to those historically underserved customers who pose a higher level of risk.
|
