Don't Let Your Credit Card Rate Get Spiked

Credit card companies are raising interest rates and canceling cards left and right. Bankrate has seven ways to avoid getting caught up in the “risk repricing” spree. It all comes down to keeping everything looking normal.

You can trigger adverse action if you:

  • Start paying only minimums instead of paying your balance off in full
  • Put one month’s mortgage on your credit card
  • Start to get close to or go over your credit limit
  • Have a high balance
  • Do an “app-o-rama” or “credit card arbitrage”
  • Engage in multiple balance transfers
  • Charge more than 30% of your available credit
  • Miss payments on your other bills

Basically you want your actions to tell the credit card company, “Nothing to see here folks, everything is hunky dory, move along, move along…”

For extra credit, here’s how you can increase your credit score by scoping out the “reason codes” for the factors that are dragging it down. Credit scores are an essential element in how creditors assess your riskiness.

7 tips for surviving the credit crunch [Bankrate]

Comments

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  1. Shappie says:

    Charging more than 30% of avaiable credit isn’t that hard to do…I can’t believe that would be a reason to cancel a card

  2. HonestNigerian says:

    Not sure what here I’m guilty of – but Amex sent me a letter two weeks ago, they were reducing my credit line to almost the amount of balance I had. Basically, they made sure I couldn’t charge more on my card. Thier reason? they pulled my report and noticed some negative things on there. At first I was upset, so I pulled all my reports and understood their reasonings. I had disputed some items on my reports about 2 years ago. The credit agencies agreed and removed the items. the “creditors” went back over time and added all the removed items and then some. in some cases they even changed the dates to make it appear more recent. I had to dispute all the items over again. Most of them came off, I’m still waiting on a response on some and now I signed up for the Experian $4.95 credit monitoring so I can be alerted IF and WHEN they try this again. I guess I have Amex to thanks for tipping me off.

  3. Orv says:

    @HonestNigerian: Quite a hose job, isn’t it? They screw up your records, then make you pay them to be notified when they screw them up again!

  4. HonestNigerian says:

    @Orv: Yeap. and I guess I have to take it bent over. It’s either pay them to tell me or wait until my credit cards get canceled.

  5. corsec67 says:

    @HonestNigerian: If you had fraudulent charges on your card, why didn’t you get a new card number?

    When I had some fraudulent charges on my US Bank check card, they gave me a new card number along with reversing the charges.

  6. yo, naomi leon (nee captain_underpants) says:

    how do you put one month’s mortgage on your credit card? i’d do that if i could to get the cash back, and then pay off the card in full.

  7. Orv says:

    @corsec67: As I read his message, it wasn’t that he had fraudulent charges on his card, it’s that he had fraudulent entries on his credit report.

  8. corsec67 says:

    @Orv: DOH! I do think you are right.

  9. Etoiles says:

    @HonestNigerian: Be careful with Experian. I, too, signed up for a $4.95 service from Experian… and 22 days later, found myself receiving $14.95 bills from FreeCreditReport.com. Color me pissed off.

    (Luckily, it was fairly recently and nowadays they actually let you cancel when you call.)

  10. stopshopping says:

    Some will do this reduction or rate change for NO reason, and they’ll be happy to tell you it is because their company is in trouble with all the bad credit of OTHERS. ADVANTA is guilty of this, I have a perfect payment history and perfect credit. They bumped up the rate on my EXISTING balance from 7.99 to 25.99 and then I told them they’ll not see another penny from me, but kindly leave the account open. I paid the whole thing off, and on the final statement it went to 36.99% for cash and balance transfers. Yikes! They are criminals.

  11. RobinB says:

    I haven’t engaged in any of the listed practices, have been a Citicard member since 195, never had a late payment or exceeded my limit, and they are still raising my interest rate later this month.

  12. RobinB says:

    Sorry, make that member since “1985.”

  13. williehorton says:

    My wife worked at Discover, and they were under huge pressure to sell credit monitoring. She pretty much refused to persuade people that they needed it.
    Our solution: we obtain one free annual report every four months from the three reporting agencies, staggering the schedule to get one per hear from each agency. (I keep track of which one is due by setting reminders in my Outlook calendar).

  14. williehorton says:

    oops… “per year.”

  15. lchatburn says:

    Amex just raised our limit with no prompting, when we came to $7500 on a $9000 credit line, giving us $13000 :D

    Because we’re “responsible users”, apparently.

    Which is odd, because it was the first time that we’d kept a high rolling balance for a few months.

    And then, after they raised the limit, we paid it all off :)

  16. quail says:

    RBS canceled my card last year. I’d had a zero balance on it for 18 months, and to their credit they gave me a chance to dispute it. But I felt like, “good riddance.” Yea it hurt my FICO a little bit to lose their history but they were the worst credit card company I ever dealt with. Changing due dates and mailing off statements so that I got them a week before the due date, etc. were some of their crimes. (Yea, that’s why I hadn’t used them in 18 months.)

  17. PinkBox says:

    I REALLY wish someone would be done about collection agencies being able to put just about anything they want on your credit reports. They’re near impossible to get off!

    I have two debts listed on my report that I’ve tried to get rid of many times, and they somehow manage to “verify” them each time. How?!

  18. timmus says:

    I accidentally went overlimit on my WaMu Mastercard back in June by $200 and fixed it the next day. Haven’t seen a rate hike or any FICO change.

  19. dante1337 says:

    why does this link to the 2nd page of the article?

  20. alice_bunnie says:

    @HonestNigerian:

    Call them. AMEX tried to do this to us once, we called them and very calmly asked them, “Have we ever not paid you?”, and they backed down. This was even when we were carrying several thousand on their revolving line and still charging a couple of thousand every month. We put everything on AMEX, one month (a very rare occasion) put $10K on it.

  21. Whiskey Tango Foxtrot says:

    Credit card companies are also refusing to lower interest rates even if you call them and let them know you have received an offer for a lower rate from another credit card. I discovered that last month with the Canadian Tire Mastercard which I have at a fixed 9.9% and was offered a Mastercard through my credit union at 4.9 – they didn’t care and said they don’t match interest rates anymore. Needless to say I switched.

  22. t325 says:

    @RobinB: I was going to say….being a loyal customer since the year 195 should mean that they pay you interest for using the card :D

  23. darkrose says:

    I had a BofA card that they jacked the interest rate up to about 30%. I transferred to a platinum card from my credit union at 8.9%. I’ve pretty much kept it maxxed out for about 2 years now, and they’ve neither raised my limit (per my request), nor have they jacked up my interest rate. I pay more than the minimum each month, and I suppose they’re cool with that. I’ve also been banking with this credit union for about 25 years. :)

  24. pigbearpug says:

    Does anybody know how long a lower credit limit is detrimental to your credit score? I mean, say they cut it from $20k to $10k…what impact does that have and for how long?

  25. rpm773 says:

    I stopped caring about my credit score. My repayment record on important debt – student loans, cars, mortgages, etc, is impeccable. I have 1 card, an old fashioned Amex charge card. I don’t carry a balance on it.

    If my lack of credit cards drags down my score, so be it. I’m not playing their stupid game. It’s like comparing SAT scores in 12th grade.

  26. pigbearpug says:

    @rpm773: I didn’t care either until I got my mortgage. When I first applied my score was lower because I didn’t have much of a credit history. Then when I found a place to buy, it was under construction. I had to wait 9 months to close, by which time my score had gone up because I had some history of on-time payment and I got a much better rate. (Independent of the market fluctuation.) I hate the game too but sometimes you have to play. :)

  27. From the article:

    “You don’t want to all of a sudden start revolving a balance just for the heck of it because you want to put more money toward your 401(k) or put more money toward other investments or stick more money in savings. If you have the ability to continue to pay in full, it’s probably a good idea to continue to do so.”

    Seriously? People will carry a balance on their CC, paying a 10%-20% APR just to put more money in savings or their 401k? WHAAAT?

  28. @pigbearpug:

    Does anybody know how long a lower credit limit is detrimental to your credit score? I mean, say they cut it from $20k to $10k…what impact does that have and for how long?

    The negative impact from a Credit Line Decrease isn’t directly from the decrease, it’s from the increase in your credit utilization, which is basically “amount of revolving credit used” versus “amount of revolving credit available”.

    The lower your utilization, the better your credit score.

    So if you had $50,000.00 in credit lines, and typically charge $5,000 a month, you have a 10% utilization. If your limit is lowered to $40,000, and you spend $5000 a month, all of a sudden you have a 12.5% utilization, and your credit score drops.

  29. …so to directly answer your question, a decreased credit limit can hurt your score until your spending decreases, or other revolving credit lines increase.

    I think most lenders look for a 10-20% utilization…getting down to 5% isn’t really going to help you much, but having a 50% utilization is definitely going to hurt.

  30. pigbearpug says:

    @InfiniTrent: Gotcha. I’m not so worried about utilization since I pay it off every month, but I’ve heard that a sudden drop in your limit can hurt you. I travel a lot for work, so my amex limit is quite high. (They keep raising it even though I don’t need it.) So I’d be pissed if they lowered it and hurt my score. Thanks!

  31. mike says:

    The credit watch services are useful if you’re busy and want someone else to do it for you. There is nothing wrong with this, persay. There lots of things we can all personally do but pay someone else to do it for us.

    But in the case of credit reporting, I’d still pull my reports once a year to make sure that the credit reporting company didn’t miss something.

  32. rshettle says:

    Lets all try this crazy novel approach of mine and when you use your credit card… PAY OFF THE FRIGGIN’ BALANCE. NEVER, NEVER, NEVER EVER CARRY A BALANCE FROM MONTH TO MONTH. Remember this, if you don’t go into debt, then you won’t have to dig yourself out of it. Cash is your friend.

  33. TouchMyMonkey says:

    @rpm773: THIS. I also refuse to jump through hoops. My attitude toward credit card companies is, “don’t call us, we’ll call you.” I stopped carrying a several months ago, and it feels GREAT. “Oh, you don’t want to be my credit card company anymore? OK, fine. It’s been real.” Screw them.

    Of course, it helps to have enough money so you don’t run out of it before you run out of month. Still, I’ll eat ramen noodles before I carry a balance again.

  34. Ringl says:

    I was carrying a balance on my Credit Union issued Visa for a bit (changed jobs and moved, figured a few months interest was worth a little less stress), but the month after I payed it off in full I got my rate hike letter. Haven’t put a dime on it since

  35. xphilter says:

    @InfiniTrent: I was doing this for a while, I had a rate of 7-8% on my CC and I was getting 20% returns on the small trades I was doing. But it wasn’t that much on my CC (like 2k). It’s the same thing hedge funds do and see how its turned out for them…crap.

  36. Etoiles says:

    @rshettle: Yup, because if the owner of your apartment building is foreclosed upon, and you have 20 days in which to move to a new apartment (in New York City no less), you will totally have first, last, and security, not to mention money for the movers, on hand right this second. (When you aren’t getting your deposit or pre-paid last month back from the current apartment, either. Although thankfully, this was a friend, not me.)

    Or because if you are laid off and working 2 or 3 part-time jobs to pay the undeferable student loan bill and the rent, you totally have enough money for your $30 worth of groceries every week.

    Or because a car never suddenly breaks down and needs $900 in repairs, right after you’ve drained your emergency fund on an unexpected medical bill.

    Sometimes, one has to suck it up and carry a balance for a while if it’s the best of a lot of bad alternatives. That doesn’t give companies a god-given right to screw anyone over.

  37. rshettle says:

    @EtoilePB: I agree, life just sucks sometimes and there’s not a lot that you can do about it, except be prepared. Most financial planners suggest that you have 3-6 months of living expenses saved in an emergency fund for just such an occasion. We’ve all had crap happen in our lives, and quite frankly it’s how you deal with the situation that determines

    I can easily say that the situation that you are speaking of is (by far) the exception and not the rule. For your case, you just need to prioritize where your money goes. Screw the student loan bills, CC bills, and whatever other bills you have and take care of yourself first (yes your credit score will take a hit, but you have to take care of yourself first, before your creditors).
    1) Feed yourself first. Set aside X dollars for food every month. Eat rice & beans, DON’T eat out…EVER! Don’t go to movies, bring your lunch to work… you get the point, quit spending money.
    2) Find a new place to live. Start saving.(good luck)
    3) Sell your stuff. You probably don’t need all the junk you’ve got anyway and when you sell all your stuff, you will have less to pay the movers to move. Got a nice car? sell it and buy a junker… or better yet, just sell (craigs list, ebay, garage sale…) it and take public transportation. You’re in friggin NYC for the love of God, the capitol of public transportation.
    4) After that, prioritize your bills and pay what you can with the money that you have left over. If you’re really in that bad of a situation, you should start bargaining with your creditors. Tell them you can’t make the payments and they need to work out a plan with you. If you handle this right, you can get your debts knocked down to $0.50 on the dollar or less. They creditors just want your money and when they realize that they might not get anything more from you, they will be MORE than willing to work with you (never give them electronic access to your checking account and get any agreed payment plans down in writing PRIOR to sending any money.

    A lot of people live paycheck to paycheck and keep sinking into debt because they have to keep up with the Jones’ and have the latest iPhone and coolest car. The only thing I can tell you here is “F*$K the Jones’”.

    I see a lot of the “hurricane Katrina” mentality where everyone was blaming the government for what happened, even though it had nothing to do with the weather AND it warned everybody to get out before. Those people stayed behind because of their own stupidity and decided that they’d blame the government instead of taking responsibility for themselves. My sympathies go out to all those affected by the storm but I really don’t feel bad for all the morons who stayed behind knowingly.

  38. chauncy that billups says:

    Meanwhile, I’m still getting 3 offers a day for 0% APR balance transfers for 12 months or more. I’ve been moving a 3k+ balance from one card to another for going on 4 years now (I occasionally transfer additional debt to this acct), and have never paid a penny of interest on that particular amount. I wonder how much longer I can ride that train…

  39. chauncy that billups says:

    Though I should mention that on my other card, which has a fixed-for-life 3.99% rate, they keep changing the due date every couple months. First it was the 17th, then it moved to the 14th, and luckily I checked my balance today and the due day was suddenly the 9th. This is total BS, but you can’t really beat the fixed rate (which they are obviously trying to get me to lose by missing a payment). I may call to complain, or I may just make my payment the day I get my statement.

  40. rshettle says:

    Watch out for those balance transfer offers, they still charge a 3% transfer fee everytime you transfer your balance.

  41. Etoiles says:

    @rshettle: For the record, this isn’t all me — it was a roommate whose building was foreclosed upon (that’s how I ended up living with her), and it was an ex who had the car / medical issue. I did not drive in New York and have since relocated to a lower cost of living area and a higher paying job. There’s a credit card balance, sure, but it’s a USAA card so they treat me right and I know when it’ll be paid off. ;)

    I was just making the point, though: those are three situations that have happened to three people (me being only one of them) and sometimes you’re just stuck.

  42. chauncy that billups says:

    @rshettle: Not all of them. I’d say 1 in 5 offer a 0% transfer fee as well. It’s a pretty sweet deal if you’re willing to wait for it. Even so, in my case 3% transfer fee is better than the 10% APR that will hit at the end of the 12 months. So many times it’s worth it, you just don’t want to do it more than once a year.