When Credit Card Issuers Must Send Interest Rate Increase Notices
Your credit card interest rate directly influences the cost of carrying a balance on your credit card. You can start with a low interest rate on your credit card, but your rate may not always stay the same for the life of your credit card. Your credit card issuer can increase your interest rate in certain circumstances, but they don't always have to notify you in advance.
Required Interest Rate Increase Notice
There are a few situations where a credit card issuer is required to send advance notice of an interest rate increase.
Banks must send an interest rate increase notice at least 45 days in advance of the increase. This is a requirement of the Truth in Lending Act, a Federal law that protects consumers against lenders.
You don't have to accept the higher interest rate. During this 45-day period, you'll have the opportunity to opt-out of the interest rate increase if you would rather pay off your balance with the current interest rate. Opting-out will allow you to pay off your balance at the existing interest rate. However, if you choose to opt-out, the creditor may close your account.
If you don't respond to the interest rate increase notification at all, the credit card issuer can apply the new interest rate to any new purchases made beginning 14 days after the notification was sent.
When the Rate Increase Notice May Not Be Required
Credit card issuers don't always have to send an interest rate increase notice before increasing your rate.
If the rate increase is due to a delinquency or default, the creditor doesn't have to warn you of a rate increase. Typically, these penalty increases are outlined in the fine print of your credit card agreement. For example, if you are at least 60 days late on your credit card payment, your card issuer could increase your interest rate without sending an interest rate increase notice or giving you a chance to opt-out.
The credit card issuer also doesn't have to give you notification if your interest rate increased because a promotional rate expired.
Most credit cards these days have a variable interest rate that's tied to an underlying rate, like the prime rate or LIBOR. If that underlying interest rate increases, your credit card APR may also increase. Your credit card issuer doesn't have to send advance notice before raising your rate in this circumstance; your credit card agreement will outline which rate your APR is tied to and how it responds to changes in the index rate.
Dealing With Unfair Interest Rate Increases
Contact your credit card issuer about an unexplained increase in your interest rate. They'll be able to explain why your interest rate was increased. If the rate increase was an error, you may be able to have your old interest rate reinstated.
You can submit a complaint to the Consumer Financial Protection Bureau if you believe your credit card interest rate was increased in error or the credit card issuer raised your rate without giving proper notice.