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—the higher your interest rate, the higher your monthly finance charges will be. Interest rates aren't locked in forever. There are a few situations where your credit card issuer can increase your interest rate and 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 notify you of an interest rate increase at least 45 days before the new rate becomes effective. Fortunately, 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 keeps your existing interest rate in effect allowing you more time to pay off your balance with the current rate.
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.
While opting-out keeps your existing credit card rate in effect, your credit card issuer could respond by closing your account.
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.
You've become delinquent. Credit card issuers are allowed to raise your interest rate if you're seriously behind on payments. In this case, the card issuer doesn't have to warn you of a rate increase. 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.
If your interest rate increases because of a 60-day delinquency, your rate could also increase without warning on any other credit card accounts you have open with the same credit card issuer.
Your promotional rate has expired. If you're enjoying a promotional interest rate, it's up to you to keep up with the months until your promotion is over. Your credit card issuer isn't required to notify you when the promotional rate has ended and the regular rate goes into effect. You might be caught off guard if you're not paying attention.
The benchmark rate has increased. Many credit cards have a variable interest rate that's tied to an underlying rate, like the prime rate or LIBOR, also referred to as an index rate. If the index rate increase, 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.
Be on the lookout for changes to your credit card interest rate whenever the Fed makes changes to interest rates. Increases to the federal funds rate signal an increase to your credit card rates, which means you should rein in spending or prioritize paying your full balance to lower your interest cost.
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. Note that after your account has been open for a year, your credit card issuer doesn't have to explain why your interest rate went up, but they do have to give an advance notice.
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.
Consumer Financial Protection Bureau. "12 CFR 1026 § 1026.9 Subsequent Disclosure Requirements." Accessed Apr. 30, 2020.
Consumer Financial Protection Bureau. "What is the Difference Between a Fixed APR and a Variable APR?" Accessed Apr. 30, 2020.