Today’s Credit Issues: Why has my APR gone Through the Roof?
Many of us have stumbled across a little surprise, of sorts, the last time we opened our credit card statement: an increase in our credit card’s APR.
As we are beginning to see – and will continue to see throughout the upcoming months – credit card companies are starting to fight back against the new credit card laws due to go into effect next summer.
This may mean raising credit card interest rates, slashing credit limits and closing accounts that have been inactive for some time.
The Universal Default
One of the key terms to pay attention to in your credit card agreements is the card’s universal default. This is a clause, found in most credit card agreements, that gives your creditor the authority to raise your interest rate for a variety of reasons, mainly if the credit card company perceives you as a higher credit risk.
Did you know, for example, that a creditor can raise your APR because you were late on your mortgage payment? Did you also know that your creditor can raise your APR if you recently took out a personal or auto loan (thereby increasing your debt to income ratio)? It may not seem fair, but it is perfectly legal for a creditor to monitor your credit report and change your APR if they feel that you’ve become a higher credit risk.
Your Options
Unfortunately, you may have few options when it comes to a rise in your credit card’s APR. If you’ve been a good customer in the past, you may be able to contact the creditor and have your APR lowered; however, not many creditors are being lenient about APRs these days.
You may also try to find another credit card and transfer your balance to that card, but it may be quite difficult to find a good deal on a balance transfer. Something to watch out for: many creditors have begun raising the fees on balance transfers. In fact, Chase has recently announced that it will start charging customers a 5% balance transfer fee, which is the highest in the industry (most balance transfer fees are 3%, but you can expect other creditors to follow Chase’s lead on balance transfer fees).
It is important to keep an eye on your card’s APR and continue making your payments on time for all of your credit cards, as well as your other lenders, as to avoid an increase in your APR.
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