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Credit Cards - Interest

My credit card has a fixed rate. Why is the bank allowed to raise it?

Depending on the type of loan, the term fixed has two different meanings.

With an open-end credit account (e.g., a credit card or line of credit), the term fixed means that the periodic rate is fixed for a period of time. The bank can change the account terms, including the periodic rate, at any time as long as it notifies you at least 15 days prior to the effective date of a change.

On the other hand, if you have a closed-end loan (e.g., a car loan or mortgage), the term fixed means that the periodic rate remains the same for the life of the loan.

With an open-end account, the 15-day timing requirement does not apply if

• the consumer has agreed to the change, or
• the change is due to a consumer's delinquency (late payment) or default (going over the limit).

In both these instances, the bank must provide some notice prior to the effective date of the change, but there is no 15-day rule. Be sure to review your Account Agreement, which is the contract governing your credit card account. It provides information on changes that may occur to an account.

After I exceeded the limit (or made a late payment) on my credit card, the bank raised my interest rate. Can it do that?

Generally, yes, a national bank can change the terms on a credit card account (this also includes personal lines of credit and home equity lines of credit) at its discretion as long as the bank notifies you at least 15 days in advance.

However, the 15-day timing requirement does not apply if

• the consumer has agreed to the change, or
• the change is due to a consumer's delinquency (late payment) or default (going over the limit).

In both these instances, the bank must provide some notice prior to the effective date of the change, but there is no 15-day rule. Be sure to review your Account Agreement, which is the contract governing your credit card account. It provides information on changes that may occur to an account.

How often can the bank change the rate on my credit card account?

Generally, a national bank can change the rate and other terms on a credit card account at its discretion. However, it can do so only if it discloses those changed terms to you at least 15 days in advance.

The 15-day timing requirement does not apply if

• the consumer has agreed to the change, or
• the change is due to a consumer's delinquency (late payment) or default (going over the limit).

In both these instances, the bank must provide some notice prior to the effective date of the change, but there is no 15-day rule. Be sure to review your Account Agreement, which is the contract governing your credit card account. It provides information on changes that may occur to an account.

The bank is charging a higher interest rate than my State allows. Is this legal?

This may be legal because the maximum interest rate is determined by State law—in the State where the national bank has its headquarters.

You should review your Account Agreement, which is the contract governing your account, or any subsequent notifications regarding your account. These will provide information on where your bank is headquartered and any other change that may occur.

I was contacted by phone to apply for a credit card. The solicitor discussed a low interest rate and I agreed. But when I received the loan/credit card, the rate was higher. Can the bank do that?

Yes. The solicitor should have explained the steps the bank will take once you apply. Generally, the bank will review your credit report and the information you provide to determine if you meet the criteria for the offer. After the review is completed, you may not qualify for the terms that you requested—or even for the card itself.

If the bank is a national bank and you want to file a complaint with the OCC, visit the OCC complaint page.

The bank raised my interest rate because I made a late payment on an account with another bank. Can it do this?

Yes, your Account Agreement, or contract, provides the authorization for the bank to review your consumer credit report. Banks conduct these reviews routinely.

The bank is looking for information that indicates the level of risk in continuing to extend unsecured open-end credit. If you miss a payment on another account, your credit score will go down.

Generally, a national bank can change the Annual Percentage Rates (APR) and other terms on a credit card account at its discretion. However, it can do so only if it discloses the new terms to you at least 15 days in advance.

The 15-day timing requirement does not apply if

• the consumer has agreed to the change, or
• the change is due to a consumer's delinquency (late payment) or default (going over the limit).

In both these instances, the bank must provide some notice prior to the effective date of the change, but there is no 15-day rule. Be sure to review your Account Agreement, which is the contract governing your credit card account. It provides information on changes that may occur to an account.

Does the bank have to lower my interest rate after I make a series of timely monthly payments?

Generally, national banks do not have to lower interest rates due to timely payments unless your Account Agreement calls for such an adjustment. As the contract governing your credit card account, the Account Agreement provides information on changes that may occur to the account. If you have a question about this, please contact your bank.

I closed my account. Can the bank continue to charge interest and fees?

Yes, even though you paid off and closed your account, there could have been residual interest from previous balances. Residual interest will accrue after the statement cycle date until the bank receives your payment.