Have Your Credit Card Interest Rates Increased? Just Say No.
Enjoy when your credit card’s APR increases without warning? When that happens, you have a choice to stay or leave for a better rate. Let’s take a look at your alternatives and what you can do to stem the tide of rising interest rates.
First here are a few basics you should know about your credit card.
Definition of APR
In Canada, you’ll see different references to credit card interest rates such as APR or AIR. For the average Joe or Jane, it means the amount of interest the credit card company charges you on an annual basis.
The Importance of APR
APR is critical to understanding how much a credit card will cost you, because it determines how much interest you’ll be paying on any purchases, cash advances or balance transfers. The higher the APR or AIR, the more interest you’ll be paying.
Leaving a balance on your credit card at the end of every month, means you will be paying interest, at the rate dictated by your APR, on those balances. Where people get in trouble is when the interest owed, exceeds the minimum monthly payment that you might be paying. In that case, your credit card balance will continue to grow. Always make sure you’re paying more than the interest owing to ensure your credit card balance does not increase.
When can your credit card APR’s increase?
Some Canadian credit card companies have the right to raise your interest rates at their discretion. They’ll have to provide you a notice, but ultimately, they can raise your rates without you having missed a payment on your credit card or any other loan for that matter.
Most credit card companies will also automatically increase your APR if you have multiple late payments, or remain delinquent for an extended period of time. You’re almost guaranteed to lose your low rate or promotional rate if your late. Each credit card company will have it’s own threshold for raising your rates, some raise your rates if you’re late two billing cycles in a row, others if you’re late twice within twelve months, etc… Make sure you read your cardholder agreement, so you know the terms of your partnership with your credit card issuer.
What to do when your rates increase?
You basically have four options if your credit card rates have gone up.
- You can call your credit card company and ask that they reduce your rates.
- You can threaten to leave, and see if they’ll bite. If your credit score is impaired, chances are they won’t be too afraid, and may welcome the chance of you leaving. If your credit score is good, you spend a lot, and you happened to miss a payment, they may show more of a willingness to decrease your rate.
- You can actually pick up and leave. If your credit score is good enough to get another credit card, apply for a low rate balance transfer credit card, and transfer your balance from your high rate credit card to your balance transfer card.
You can always pay down your existing credit card balance with another line of credit product you might have on hand. For example, if you already have a home equity line of credit, use it to pay down your high interest credit card. This is especially helpful if your credit rating would prevent you for getting approved for an additional credit card.
Your credit card usage pattern and credit history will in large part dictate which type of credit card is best for you:
- Have a low credit score? Search through our repair credit comparison results.
- Pay off your monthly balances? Look for a compelling rewards credit card to get some well earned rewards.
- Paying a lot of interest on existing credit card balances? Compare 0% balance transfer credit cards.
Canadian banks are competing hard for your business, so if you compare credit card offers, you’ll find some great deals.