How to Fight Back If Your Credit Card's Rate Climbs
By SAUL HANSELL
Published: August 31, 1997
THEY are tiny slips of paper that can have a real bite. Millions of holders of Advanta credit cards have received them in recent months -- small notices inserted into their monthly bills advising them that their interest rates were being increased, sometimes to as much as 25 percent. For those with outstanding balances, that change could cost several hundred dollars a year.
For several years, credit card companies have increased rates for customers who miss payments or go over their credit limits. Now, with their losses rising from bad loans, some companies are raising rates for customers who just look potentially risky.
''You could be paying your credit card precisely on time and staying within your credit limit,'' said Robert McKinley of RAM Research, a credit card tracking company in Frederick, Md.''If you missed one car payment or just took out too many other cards, that may be enough to trigger a 24.99 percent rate.''
The Advanta Corporation is the most prominent of the increasing number of credit card issuers that have decided to ''reprice'' -- in industry jargon -- many of their accounts. Advanta, based in Horsham, Pa., has high loan losses and in April put itself up for sale. Other banks, including Capital One Financial of Falls Church, Va., have also been raising rates on accounts that they deem potentially risky.
Mr. McKinley and other credit card experts say consumers can fend off the rising rates in several ways:
* Read everything you receive from your card issuer. Most banks put rate and fee changes on separate pieces of paper inserted in their bills. Sometimes they print the notice on the statement itself.
* Keep copies of all terms and conditions. Issuers sign up accounts with so many different deals that they sometimes lose track of who got what. One Advanta customer said he was promised a rate of 9.9 percent, guaranteed not to change. When the bank tried to raise his rate to 16 percent less than a year later, he said, his copy of the initial offer allowed him to fight back.
* Be scrupulous in making minimum payments on time and in not exceeding your credit line. Card issuers may seize on the most minor infraction as an excuse to impose huge fees or rate increases.
* Consider freezing your account. In most states, you can reject an interest rate increase by writing a letter within a set period to the issuer and making no new purchases with the card. This gives you the right to pay your balance at the original rate.
* Call the bank and ask for a lower rate. Some companies will back down, at least partially, for customers who complain. If you think you have been treated unfairly, write a letter to a senior bank officer. If that doesn't work, complain to the bank's regulator. For nationally chartered banks, complaints may be made to the Comptroller of the Currency, a part of the Treasury Department. For state-chartered banks, write to the banking department in the state where the bank has its headquarters.
* Consider a different card. If you have other cards or other types of accounts with different banks, ask them if they will offer a special deal to move your balance to their card. Consider any low-rate offer you get in the mail, but check what the rate will be after the introductory period. Mr. McKinley says Wachovia, First Union, Key, USAA Federal Savings and AFBA Industrial banks all have cards with lower-than-average rates. Many of the lowest-rate cards, however, still have annual fees.
* Think about paying off your balance. Many people would be better off using savings or a lower-rate home equity loan with tax advantages to pay down card bills.
Finally, it may be prudent to have two or three accounts so that if one changes its terms you can freeze it and use another. But too many accounts may make you look like a bad credit risk, causing some card companies to send you that dreaded little slip of paper with the big rate increase on it.
