As a credit card holder, you will likely remain the same depending on the terms of your card. However, this may not occur. For many reasons, credit card issuers can increase their annual rates – or APR. This is one of the terms that is most likely to change on a credit card and can have a major impact on the time when your account is made.
Your APR will determine how much fire you will fire for your monthly payments and how quickly you can pay off your credit card debt. If credit card APR increases, we don’t know about options. Here’s what you can do if the issuer increases your credit card APR:
Why has credit card APR increased?
Prime rate has been changed
Most credit card APRs are associated with prime rates. This is the rate that many lenders use for financial products such as credit cards, mortgages and car loans. If the Federal Reserve adjusts the federal funding rate (the interest rates that interest banks charge each other on overnight loans), it could also affect fluctuating credit products. In this case, credit card APR will be affected
When federal funds rise, they are called rate hiking. And in the spring of 2022, the Fed announced plans to enact many rate hikes from 2022 onwards. So far, there have been 11 rate hikes since March 2022, and most recently, on July 26, 2023, there was a quarter percentage point. On December 18, 2024, the Fed reduced its third reduction rate this time with a quarter percentage point, with a new target range of 4.25-4.5%. Since then, they have stabilized interest rates.
As interest rates are reduced and potentially more lines appear, card issuers may make adjustments to lower APR rather than increase APR. However, it is important to note that even with these adjustments, if you are balanced on your cards, you may not be able to save much in the long run.
You paid your credit card bill late
If you do not pay your credit card invoice on time, the card issuer may charge a penalty APR. Credit cards usually start with a regular variable APR unless an introductory APR book is provided via the card. If you miss a payment, your regular or introductory APR will be replaced by this penalty APR.
However, penalty APRs may not be permanent. If you resume making payments on time, the card issuer will need to verify your account and revive your regular APR.
Your referral APR offer is over
If you refer an APR offer as a new cardholder, such as a 0% introductory APR offer, the offer may have expired. This promotional offer will provide cardholders with a lower interest rate than a specified period. Once this promotional rate is over, the normal APR will begin and apply to the balance you are bringing in your card.
Your credit score has dropped
A decrease in your credit score can make your lender recognize you as a more credit risk. That’s why you’ll be charged a higher APR for the money you owe. If the card issuer notices a decline in scores, he is entitled to claim a new, higher APR. When informed of future changes, you have the option to opt out of a higher rate, but the issuer may end up closing your account as a result.
What can I do if my APR continues to rise?
Now that we understand all the reasons why APRs are increasing, it’s time to talk about what we can do when this happens. With some degree of planning and hard work, following these tips will help you get ahead of the increase in APR.
I’ll pay the balance back
The surest way to avoid the negative financial impact of a higher APR is to completely eliminate or reduce your credit card balance. The smaller the balance, the less you have to pay with interest fees.
There are many ways to reduce the balance. One way to get started is to not place a new fee on your card (while looking for an aggressive way to pay off your balance). You can also make extra money by selling things around the house and selling things with extra cash. Due to creativity and intention, many people use these methods to repay their credit card balances. It’s possible that you can do the same.
Transfer balance to the APR card below
If you can’t repay your balance right away, it may make sense to transfer the balance to your credit card with a low APR. This move can help you save hundreds or thousands of dollars.
Many credit cards come with an introductory APR offer for balance transfers. Depending on your card, you may be eligible for a 0% intro APR offer with a balance transfer (or other APRs below the national average).
Please note that balance transfers are not usually free. Many cards charge between 3% and 5% on balance transfer fees. If you want to see how much you can save with balance transfers, even with balance transfers, you need to check your balance transfer calculator.
Consolidate debt
If your credit card debt is very high, you could be a candidate for a low-interest loan that allows you to consolidate a large amount of credit card debt. The interest rate on personal loans is usually much lower than the interest rate on credit cards. However, lenders of this space may have stricter lending requirements. You need to demonstrate your strength as a borrower. This means that good or good credit, low debt-to-revenue ratios and a stable history of work are required.
If for some reason, your personal loan does not work for you, you may be able to borrow it in the form of a home equity credit line or cash-out refinance against the stocks in your home. As these are protected loans, interest rates may be much lower than personal loans or credit cards.
A loan protected by the capital of your home may be a little easier to qualify, but you should know that defaulting on this type of loan can lead to risk of losing your property. Certainly, a secured loan might be a great option for consolidating the high profit debt you may have, but that’s not a decision you should take lightly.
Consider credit counseling
None of the above options can be a candidate for credit counseling if you simply have too much debt (and an increase in your APR will make the situation worse) and it doesn’t work for you for you.
Working with a certified nonprofit credit counselor can help you put together your budget and attack plan and pay off your high-profit debt as quickly as possible. In some cases, we may propose debt management plans (DMP), bankruptcy, or other options.
If you are going this route, you are very keen to choose a credit counselor to work with. Make sure to check their references and reviews and whether they have a history of complaints or if they did not provide the services they promised to their clients.
Can we lower the higher interest rate?
If you don’t want to accept the new interest rates offered by the issuer, you can either lower the interest rate hike or try to negotiate the terms. If you reject a new interest rate offer, the issuer will usually tell you to close your account or cancel it because you are not willing to pay it.
If you do not accept the new rate, the issuer will notify you that there are 45 days from the notification date to cancel your account. However, the new interest rate will be valid for 14 days from the date of notification (i.e. you can only purchase for up to 14 days after receiving the notification).
However, it is important to note that if the issuer increases the fee on a new transaction (and not an existing balance), or if interest rate changes occur due to a minimum payment delay of at least 60 days, it is important to note that issuers do not need to notify you of your right to cancel your account.
How to negotiate with the publisher
If you decide to negotiate with the issuer instead, you may be able to lower the rate again in some cases. For example, if an issuer raises interest rates as a penalty for a minimum payment deferral, you could ask to return to a lower interest rate once the issuer has updated its payments for six consecutive months after the fee has been raised. You can also highlight the issuer what kind of financial situation you are in. Additionally, you can maintain a lower rate for a certain period of time, especially if you are a long-time customer.
Ultimately, it’s not painful to ask. So, before canceling your card, contact the issuer and try talking to someone in the retention department.
Conclusion
It can be confusing to see credit card terms change, especially if the changes are not advantageous. Even a small April adjustment on your card might mean taking away more hard-earned money from your wallet.
Generally, best practice is not to balance your credit card. But even if you happen to have one when your APR increases, you still need to deal with it. The good news is, whether paying off your debts right away or not an option for you right now, there are still many ways to do this situation. You can transfer your balance to your card with a lower APR, consolidate your debts with low interest rate loans, or talk to an authorized credit counselor.
However, calling the publisher to talk about your options before doing any of them is not a bad idea. They may be able to provide a way to lower your APR again.
