Pay Attention
March 11, 2009 5 Comments
I am guilty of not looking as closely at my credit card billing statement as I should be. I never really thought much of it as I had a pretty good mental calculation of how much I spent during that billing period and approximately how much my balance should be. I glance over the recent transactions to make sure that my card hasn’t been used at places I’ve never heard of, then I file it appropriately. A few months down the road it gets permanently filed in the paper shredder.
The one area of my statement which I never bothered to pay attention is the APR. In my mind I always thought that this number would remain unchanged so long as I paid my bill on time every month. My girlfriend felt the same way about her account. She has had her account for years and her APR had only ever went down, but while checking her account online she noticed that her credit card company had nearly doubled her Annual Percentage Rate.
Confused and upset, she went through her history to be sure that she made her payments on time and that nothing had been late. As she suspected, her payments had all posted to her account with plenty of time to spare. There were no signs indicating why they would double the APR on her account.
The next morning she called her credit card company and asked them to explain why they raised her rate. After talking with one customer service employee she was directed to another customer service representative. She explained her situation and pointed out that she had always been on time with payments. After discussing the matter for quite some time she was told that she had a couple of options available to her.
First, she could have her rate returned to what it had been, but she would have to close the account. Her next option would be to take an interest rate which was a couple of percentage points higher than her old rate, but less than the rate her card had been raised to. The third option she could take was a rate which was lower than her original rate by a few percentage points, but would again return to the higher rate after 9 billing periods.
She looked to me for advice. I suggested that she take the third option. My reasoning behind it is that she could use the lower rate to pay the balance on her card down faster and when the 9 billing cycles are up, call the card company to renegotiate a lower rate at that point. If they don’t offer a reasonable rate, close the account.
What was the reason she was given for the rate increase? IT’S THE ECONOMY STUPID!
When you check over your account statements, pay close attention to your Annual Percentage Rate, and if you see any changes have been made that aren’t any fault of your own, call your credit card company and request a lower rate. If they are unwilling to work with you it may be time for you to consider closing the account.
About Steven
wow, that’s hideous! i can’t believe the state credit cards have gotten into. i guess they don’t want anyone defaulting on their debt, and if you’re flagged for some obscure reason, they’ll raise your rate to get you to transfer…
i’m guessing, though, that your girlfriend is not at all about to default on her loan, but maybe they think she is? all it takes is one red flag and you’re on the black list these days.
sorry to hear about that, but i think you chose the right option. hopefully, in 9 more billing cycles, they’ll be able to do better than that!
From the sound of it, we are in the majority with this credit card company as they have been doing this to many of their customers. It is unfortunate because at the end of the day they will end up losing a lot of longtime customers who have an excellent history of paying their bills. I suppose though, the ones who pay their bills every month don’t generate the needed income for them, so it may actually be a wise business move on their part to do what they can to eliminate non-profitable accounts.
In my opinion, it is bad business.
I don’t care what the credit card APR is because I pay it off every month. And I avoid charging more than I can pay.
@ Atkins- If you are able to pay off your balance in full every month you are right that you don’t need to worry about what your interest rate is. I would caution credit card users in general that knowing the terms of your contract with the credit card companies is crucial and that they can change the terms of your contract whenever they want.
Using credit cards can have its advantages as I will discuss in an upcoming post, but being aware of the drawbacks is important as well.
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