On Tuesday, MMI was one of nine organizations that participated in an all day call-in event called Your Money Marathon. During the course of the day, we had received a whopping 14,000 phone calls. It quickly became clear that callers shared some common concerns and I wanted to address these concerns in the blog. Yesterday, I talked about settlements. Today, I would like to talk about rising credit card interest rates.
Credit card interest rates are being raised even though the Fed has cut interest rates. Rate hikes can have a huge impact a person’s financial situation—particularly those who are on the edge financially. Here are a few rate-hike scenarios and suggestions on how to handle them.
-If you get a letter in the mail saying that your rate is being hiked due to no fault of your own, read the fine print—you may have the chance to refuse the change. In many cases, you are given a chance to refuse the term change if you write to the creditor. This action would mean that you are no longer able to use the card, but you would be able to repay any balance at the original rate.
-If you are late on a payment and trigger the default rate, you might want to communicate with your creditor. A creditor does not have to readjust your rate upon request, but some people claim that they have had success with this tactic. If your initial call is unsuccessful, ask to speak with a supervisor. Be clear about what you want, but not confrontational.
-If a temporary setback resulted in actions that triggered a default rate, ask your creditor if they will place your account on a temporary hardship program. Many creditors have programs in place to help consumers recover from unexpected setbacks such as a job loss or medical emergency.
-If you are unable to lower your rate, you can try to seek a card with more advantageous repayment terms. However, consumers who have less than an excellent credit score may find it more difficult to qualify for a new credit card account. Also, there is nothing to say that your new card’s lower rate won’t be raised in the future.
Finally, if you are having trouble making minimum payments on high interest debt, do not allow the problem to escalate. Talk to a certified credit counselor to see if they can work out a revised payment plan with your creditor.
Of course, the best thing you can do is to reduce your reliance on credit entirely. (I do realize that this is easier said than done.)