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.
In This Article:
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 0% 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 from getting approved for an additional credit card.
Aside from these steps, there are other ways you can lower your card’s interest rate, like paying off your balance or avoiding late payments.
If you’re considering getting a new card to reduce your rate, it’s important to recognize that 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? Find a credit card that will help you build your credit score up.
- 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 the top balance transfer credit cards in Canada.
- Canadian banks are competing hard for your business, so if you compare credit card offers, you’ll find some great deals.
*This post was not sponsored. The views and opinions expressed in this review are purely my own.
Has anyone heard of a company called Bella who calls and offers lower than 6% interest rates on any credit cards for the rest of your life with the catch being you pay a one-time fee of $995. for this supposed privilege? I’m pretty sure it’s a scam, but wonder what you think?
A quick Google search brought us to http://british-columbia.debtconsolidationonline.ca/debt-consolidation-bella-bella.html. They have an individual website for each province and multiple cities. Not sure if this is the same “bella” company that contacted you. That said, there is no address or phone number listed on the website – which is an immediate red flag and would be a no go for us. Not to mention a $995 fee is as much a red flag as any.
The Financial Consumer Agency of Canada has the following warning regarding Debt Consolidation companies here.
Thanks for bringing it to our readers’ attention!