My interest was raised to 28% after "a few"
(honestly) late payments. They told me they would review my info in 6 months. Do
you think I have a chance of getting them to lower my rate?
What's happened to you, and many,
many others, falls under the "Penalty Rate" or
"Default Rate" clause in your credit card agreement. In
the mid- to late-90's, I started receiving Change of Terms Notices
from many credit card banks informing me that if I missed a couple
payments, they'd raise my rate to 29.99% or even higher!
Today, I believe that most, if not
all, credit card banks have these clauses in their agreements. That's
why it's so important to read the fine print and why I say that the
greatest sin in bill payment is being late. Being late can cost you
thousands of dollars in, what I consider to be, unnecessary rip-off
Here are some of the terms as they're
written in my personal notices:
"Starting on the
Effective Date, the Annual Percentage Rates (APRs) section of your
Account Agreement will be amended to provide as follows (if not
already applicable to your Account): Each time you default under any
Providian Account Agreement because you fail to make at least the
Minimum Payment by the Payment Due Date, Exceed your Credit Limit,
or make a payment to us that is not honored by your bank, the APR
(including any introductory rate(s) for Purchase, Balance
Transfer, Cash Advance, and Promotional Offer Balances may increase
up to 29.99%, or up to the Prime Rate plus 25.99%, whichever is
"If you default under
any Citibank Card Agreement because you fail to make a payment to us
or any other creditor when due, you exceed your credit line, or you
make a payment to us that is not honored by your bank, we may
increase the Annual percentage rate (including any promotional rate)
on all balances to a default rate of up to 24.99%."
Bank of America
"If we do not
receive at least the Minimum Payment Due shown on a Statement for
two consecutive Billing Cycles after the billing date for that
Statement; or within a twelve consecutive Billing Cycle period you
either miss three Minimum Payments or are three times Overlimit; or
you are reported 60 past due by any creditor (including any Bank of
America Corporation affiliate) or a lien or judgment appears on
your credit report, then the Annual Percentage Rate for all balances
on the Account will be a variable rate of the Index plus a Margin of
14.99% (23.99% minimum APR)."
What does all of this mean?
Well, if you miss a payment, bounce a
check, miss a payment to your electric company, have any
legal-financial problems and so forth, you can be penalized by having your rate
increased to insane levels! The Mafia has better terms--well, unless
you include the breaking of limbs--hey, maybe that's where the banks
are going next!
Paula, this also happened to my
friend Joe DiBiase. In his case, he moved and his mail wasn't
forwarded, so he was late paying an electric bill. Shortly
thereafter, he received notice from his Providian account that they
raised his rate to 29.99%! In the next few weeks, four of his other
credit cards sent him notices that they were raising his rates.
Here's what you can do, what I would
do, and what Joe did. Call the bank and ask to speak to a
supervisor. Tell them that this rate increase is ridiculous and you
want your rate reduced to the original APR right away. Don't plead.
Don't beg. Simply explain that if they do not comply, then you'll be
transferring your balance to another credit card, pronto!
If the bank does not budge off that
penalty rate, then you need to punish them by transferring your
balance. And since the rate is 28%, it shouldn't be too difficult to
find another credit card to beat that rate. The important thing is
that you actually transfer your balance so you save money. Teach
your bank a lesson in the only way they understand, which is to
spank their bottom lines!
As soon as you pay them off with a
balance transfer, it won't be long before they reduce your rate and
beg you to use them again!
Please let me know what happens!