My rate went up WHY?!

November 10th, 2005 | by mbhunter |

This MSN Money article,

Why your credit card rate just went up

reports on an increasingly-common practice of credit-card issuers. They’ll raise your rate even without a late payment on their card! Just make a late payment somewhere else — that’s all it takes for some issuers to hike your rate.

I suppose that if you demonstrate to another creditor that you’re not a good risk, then there’s a higher chance that you’ll fall behind on your payments with them. With the “default” rate ranging from 12% to 35% (yes, thirty-five percent!) it also is a short-term profit center for the credit card issuer.

The triggers that got me, though, were the ones that might be only harbingers of problems. Like getting another card or having issuers raising your limits too high. (Only about a third of the banks examined did this.)

But inquiring about a car loan or a mortgage? That makes no sense to me. If I’m looking to refinance, how does that make me a worse credit risk? I don’t know.

But anyway, this is only a problem if you carry balances on your cards. If you pay off your credit card balance every month, heck — make my interest rate 100%. I don’t care! If you carry a balance, though, I guess that this is one more thing to be careful about. No need to derail your debt reduction plans for something ridiculous.

Questions tagged savings at Cash Commons:

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  1. One Response to “My rate went up WHY?!”

  2. By ASAP Credit Card on May 16, 2007 | Reply

    It’s called “universal default”. It means a credit card company can raise your interest rate if you’ve defaulted on ANY of your credit cards– even if it was with another company! It’s like getting an increase on your electric bill because your gas bill was paid late…

    Luckily, congressional pressure has caused some credit card issuers to re-think this ’shady tactic’. CitiBank just recently removed their universal default policy. You can find more about how credit card companies are reponding to congress here…

    Hopefully, more companies will follow suit. But it’s a good sign that one of the largest issuers has take action.

    Credit Card Offers >

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