5 On Your Side

Credit card companies 'reward' customers with higher rates

Posted March 12, 2009
Updated October 12, 2011

— A lot of credit card users recently got big surprises. Their interest rates jumped, and their credit limits shrank.

It is not just happening to people with late payments or large balances. Up-to-date paying customers are being hit with interest rate hikes, too.

Credit cards Credit card interest rates jump

The credit card industry is trying to boost revenue as the tough economy leads to rising default rates, and once-loyal customers are also being made to foot the bill.

A WRAL.com GOLO member says he recently received a notice his credit limit was "slashed by 33 percent." Another user found out his limit was cut the hard way, when he tried to use his card and was "informed it was declined." Yet another user says his Chase credit card "jumped from 14 to 24 percent interest."

Capital One sent some customers a notice that read because of "extraordinary changes in the economy" the interest rate "is going up to 17.9 percent." If you miss a payment, the rate goes up to 30 percent.

“They can become very extreme, very quickly, if you miss even one payment now,” said Rebekah O'Connell, Triangle Family Services credit counselor. “The banks are feeling squeezed right now. They're looking (for) every route they can to increase their revenue. Credit card holders are easy targets."

It is legal to Increase interest rates, and it usually affects current balances. One card's pamphlet that WRAL's 5 on Your Side looked into stated "the right to change the terms of your account including APRs (annual percentage rates) at any time, for any reason."

“It's kind of changing the rules in the middle of the game,” O'Connell said.

While you can try negotiating, most credit card companies aren't budging – though they will usually keep the prior interest rate on your remaining balance if you close the account and make no new charges that way.

“That may or may not help. It might keep you at your existing rate, but you've closed off one of your lines of credit, which can ultimately impact your credit score,” O'Connell said.

As an alternative, try a smaller community bank or credit union.

“They generally have more consumer-friendly rates than some of the large banks. Going forward, I think your relationship with your bank is going to be something that will be critical to you getting the best rates overall on your accounts,” O'Connell said.

The best advice? Don't use credit cards.

“Get the cards out of your wallet. Don't use them,” O'Connell said.

Under new federal rules, companies will only be able to raise interest rates on new cards and future purchases, not on current balances. They also will have to give customers 45 days' notice before changing the terms of an account.

The downside is that the rules don't take effect until July of next year.

O'Connell also said that if you have a reward credit card, use the points as soon as possible because many of those programs could go by the wayside.


This story is closed for comments.

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  • dlb800 Mar 16, 2009

    Obama's plan IS to redistribute wealth. Just not his. If you are given a federal tax credit, and you didn't pay taxes, that is the government giving you money that someone else earned.

    How is that NOT redistributing wealth? Wealth doesn't have to be millions of dollars, it could be $1. It just means something that belongs to a person.

  • dlb800 Mar 16, 2009

    The economic problem is caused by several factors. I blame Congress (after all they ARE the ones who forced the banks to make the subprime loans), the banks (because they were greedy, and the people who took the subprime loans (because they were stupid). Clinton, Carter, and many other presidents also had a hand in it.

    Who is paying for it and had nothing to do with it? Me and others like me. We are paying our mortgages, we don't have subprime loans. We made the right choices, but since others didn't, we are going to pay for it.

  • superman Mar 16, 2009

    I pay off my credit card every month and get money back! I dont charge anything that I cannot pay for during that month. So the credit limit doesnt matter. My house is paid for and my 3 cars--i dont owe anyone anything! If you cant pay for it -- you shouldnt be buying it. Its your fault if you have to depend on credit.

  • Rolling Along Mar 13, 2009

    Amex pulled that stunt with us. We always paid off in full, they cut our spending limit and raised the amount they charged us as a business to take their cards. BuhBye Amex. Citi and Chase did the same thing on a couple of card we had. BuhBye to them too. I have a CC from my credit union and one other from a smaller local bank with good rates. Who needs the big boyz...

  • seeingthru Mar 13, 2009

    oh will you all shut up for once about politics---you sound like a bunch of raving fanatics

  • chfdcpt Mar 13, 2009

    mrbill1382, that is what I have been yelling about. We cannot afford to keep sending the demoplucans and the repucrats back to the state and federal legislatures.

    Both parties have shown us beyond the shadow of the doubt that they do not care about their constituents; only those that pay the big bucks to their campaigns, such as the big banks.

    We need to fire both parties, and not send any D or R back to Raleigh or DC.

  • myworld007 Mar 13, 2009

    In 2 cases citi and another in the past have jacked up my rates without notice. And when you call them you get the same old story, we sent you a notice to opt out of the increase but you chose not to. I check my state ments for this because it's happene din the past to me. I have even opted out too when I did get a notice. but these CC companies are getting slick and theres nothing we can do. They need to make some better laws for this type of stuff.

  • Weaker Pelosi Mar 13, 2009

    I paid all of mine off at once, $9,000 worth. I always paid on time every month, and they all still cut my line of credit, and raised my rates.

  • lampagenda Mar 13, 2009

    Now, now, let's be consistent. As George Bush was also blamed for numerous economic factors completely outside of his control it is only fair that Obama takes the hit for this. Let's not start getting confused by the facts now. And in other news, Capital One is no longer in my wallet after receipt of their rate hike notice.

  • scujr Mar 13, 2009

    I got the same kind of letter from Capital One about a rate increase so I called for an explanation and they reduced my rate to lower that what it is now -- i just use it for the cash back anyways so the the intrest rate does not bother me no matter what it is --- number one rule with a credit card pay the full amount due with in 30 days of the transaction