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Monday, June 24, 2024   

Rate jacked-up to 21.99 percent
by Scott Bilker
Scott Bilker is the author of the best-selling books, Talk Your Way Out of Credit Card Debt, Credit Card and Debt Management, and How to be more Credit Card and Debt Smart. He's also the founder of DebtSmart.com. More about and DebtSmart can be found in the online media kit.
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Scott Bilker


I carry multiple credit cards and have enjoyed very much having banks compete for my business. Thanks to your publications, I have several fixed-for-life, low interest accounts, some of which are only 1.99% APR.

Now, due to this financial economy mess banks are running scared. I have had unused credit cards closed by the issuer. Available credit reduced to just above my balance on a few accounts. Last week, my Bank of America American Express card took a major rate increase. I had a fixed 7.99% rate, which I enjoyed for two years. I carried a high balance on this card because I purchased a nice motorcycle with it two years ago. My rate went from 7.99% up to 21.99%. No late payments to them or anybody else.

I called them up on the phone and got a 15-minute interview with a supervisor. After reviewing my credit history (Yes, I have a secure job, and I own my house and land; No, I have never filed bankruptcy or had a repo etc.), they finally returned my APR to 7.99% but reduced my available credit to just above my balance. I guess, in the future, available credit will be hard to get. I did carry about $75,000 of available credit but that is dropping by the Credit card companies.



You're welcome! I'm thrilled to hear that the information you receive from me has helped keep your rates low!

You are not alone. Banks are reducing credit lines across the board with impunity. I believe they are cutting off their noses because people like you are good, profitable, customers. By reducing your limits, they reduce their profits. Basically, the entire banking industry messed up, top to bottom, begged for a bailout, and will now punish good consumers like you. And it's your tax dollars that are saving them!

Your assertiveness paid off big time when you called BoA AmEx. Getting the rate back to 7.99% from 21.99% saved you thousands, no doubt. That's what everyone needs to do anytime their banks raise rates or charge fees. Your success is the perfect example of how to get results.

The questions is: Why did they raise your rate? My cynical answer is that they just want to extract more cash from your pockets--and that is certainly true to a large extent. However, another, and the greater, probability is that your rate increased because of changes in your credit score. You should consider getting a tracking service so you know exactly how your score is affected by changes in your activity. I use MyFico to keep tabs on what's happening with my score.

You may be thinking, "I haven't been late. What could happen to my score?"

The answer is that your score could be dropping because banks are closing your inactive credit lines. Also, they are reducing your existing credit lines. Both of those actions reduce your overall available credit which increases your credit usage ratio, the amount you owe vs. your total credit lines. And that can reduce your credit score.

Any drop in your credit score can trigger an increase in your rates. Sometimes even the smallest thing can lower your credit score. For example, recently I received an alert from MyFico that my credit score dropped 13 points! I logged in to find out why. The reason is because my balance went up $11. It was $11 on a credit card that had a $0 balance, so it was considered debt on "multiple lines of credit." Come on--it's 11 bucks. That's case-in-point that you can never know exactly how your credit score will be affected by one specific strategy.

Well, I've since paid back the $11 bucks to see what would happen. With that, plus other minor changes, my credit score hit an all-time personal high of 836! I'm sure it won't stay there long, but while it's there, I will be taking advantage of any 0% offers that come my way.

Congratulations again for your success with your finances, and keep up the good work!




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