The congressional lawmakers are shining the spotlight upon the unfair credit practices of credit card companies. This is a larger effort by Congress to rein in credit card issuers and their abusive consumer practices. But while the lawmakers continue their oversight, there are steps you can take to find respite from rising interest rates.
The Senate Permanent Subcommittee on Investigations, a subcommittee of the Senate Committee on Homeland Security and Governmental Affairs, are holding hearings to look into unjustified interest rate hikes by card issuers for customers’ current on their payments.
Credit card issuers justify the interest rate hikes with a drop in the customers’ credit scores. In many cases, interest rates increased from single digits to double digits, sometimes by as much as 15 points. The Senate Subcommittee is looking to pass legislation that would prohibit card companies from increasing interest rates without merit and if rates are increased, to provide customers with a 45 day written notice as to the justification for the increase.
Meanwhile, here are five steps you can take to protect yourself from interest rate hikes:
1. Inspect your monthly statements
Credit issuers’ original contract terms permit them to change your interest rates at anytime without any justification.
Also, they reserve the right to change any other terms of your contract without your permission. However, in both instances of interest rate or contract changes, you must receive written notification. The written notification may not be prior to any change of the contract by the credit companies.
It is critical that you evaluate your monthly billing statements closely and lookout for any changes. In the era of junk mails, it is difficult to discern change of term notices from the rest of the credit card offers, but you must maintain a careful overview of your mail.
2. Fight for a Lower Interest Rate
You might open you statement one day and see a sudden increase in your interest rate. What do you do?
Call the customer service number on the back of your card and request your original rate. If the representative is unable or unwilling to help you, escalate the call to the reps’ supervisor. If the supervisor is of no help either, write to their head of consumer credit. Wait for a response.
If the response is not to your satisfaction, cut your losses and stop using that credit card. Sometimes, it helps to be vocal and threaten to take your business elsewhere works, but not in all cases.
3. Keep an Eye on your Credit Report
Always get your free annual credit report. It is worth monitoring. You can access your credit report from various internet sources.
A recent amendment to the federal Fair Credit Reporting Act obliges the three consumer reporting companies – TransUnion, Experian, and Equifax to give you a free copy of your credit report, as per your request, once every 12 months. But use the only legitimate authorized Federal Trade Commission website, annualcreditreport.com to get a free copy of your credit report.
Beware of any other site promising a free credit report. You may end up giving away your personal information unnecessarily.
4. Take your Business Elsewhere
If you don’t find a satisfactory resolution to your interest rate hike conundrum, perform a balance transfer. You have the option of taking you high interest rate balance to another credit card. If you have several high interest balances, you can do a credit consolidation or a debt consolidation to a lower rate.
You may have to pay upto 3% balance transfer fee of the cumulative credit cards balance, not to exceed $75 fee threshold of many card companies. If you can get an offer with no balance transfer fee, that is even better.
Make sure you pay off your entire balance within the timeframe of the offer, after which the new fixed or variable interest rate will apply.
5. Limit the Use of Credit Cards
Don’t worry as a consumer, you do have the option of not using credit cards or limit their use for emergencies only. Never give away financial control to credit card companies.
There is some good news, due to the congressional hearing, card issuers - Citigroup and JP Morgan Chase have decided to stop the abhorrent practice or raising interest rates based on shifting credit scores.