The Truth About Credit Card Interest Rates
Filed Under (Credit Cards Blog) by creditblogger on 05-10-2008
Credit card interest rates are the most popular factor that people use to choose between credit card offers. Many credit card companies offer introductory APRs to pull customers in and retain them for a long time. However, just because you have signed up for a credit card with a low APR, doesn’t mean your APR is going to stay low forever. With the state of economy deteriorating fast, many consumers are worried about the possibility of credit card companies hiking the interest rates.
The truth is many credit card companies reserve the rights to increase APRs on their customers. So in essence, you rate can go up even if you have been an exemplary card holder. But in most cases, your rate goes up when you become a riskier proposition to credit card issuers. Here is how:
- Your rate will go up if you have too many open credit card accounts: you are simply a riskier consumer if you have 10 or 15 credit card accounts open. I personally don’t recommend going over 5, but opening too many accounts can lead to an interest hike.
- Your rate can go up if you pay your other bills late: let’s say you have a credit card account with Capital One and you have paid your bills on time with them all the time. But if you miss a payment with another credit card company, your other issuers can hike the rate on you. It’s all about being trustworthy, so if you miss a payment you are a riskier proposition.
- Your rate can go up with too much debt: whether you have too much student loans or you have taken on too many miscellaneous loans, your credit card company can raise your rate. If you have too much loan, you are riskier. That’s just a fact.
- Your rate can go up if market conditions deteriorate: your rates can and probably will go up if the economy worsens or if the credit card industry sees a significant decrease in average credit scores. In addition, your card issuer may experience hardships, and that could lead to an interest hike as well.
At the end of the day, consumers are at the mercy of credit card issuers. That’s why the Congress is trying to protect consumers against unjustified rate hikes. Credit card companies are in it to make money, and if the market conditions worsen, they will have to find a way to sustain themselves, which means your rate can go up. The best way to deal with this issue is by spending conservatively and paying your bills on time. Credit card companies can’t charge you interest rate if you pay your balance in full, now can they?
