Credit card providers can hike up rates on their credit cards at any moment. Here's how to stop them doing it to you!
You’re innocently and, as far as you know, correctly using your credit card when suddenly, you get a letter through the door. Your credit card provider has decided to punish you, out of the blue, by hiking up your interest rates by 10 percentage points. No explanation, no apology – and there’s nothing you can do about it. Right?
Wrong.
If you’ve ever received a letter like this, don’t just put up and shut up. Use these tips to fight back against the rip-off rate hikes!
1) Switch to a 0% balance transfer card
The easiest strategy is to take your custom elsewhere. Move your balance to either one of these market-leading 0% balance transfer cards, and you won’t pay any interest on your debt for 16 months:
|
Card |
Transfer fee |
Typical APR (when the 0% period ends) |
|
2.9% |
16.9% |
|
|
2.9% |
16.8% |
Read the longest new interest-free credit cards for a detailed breakdown showing which cards are better.
The only potential problem with this strategy is that you need a decent credit rating to get a 0% card (read 5 tricks to boost your credit rating for help on how to boost your score). If you don’t have one or if you get turned down, don’t despair. You have other options, too.
2) Stop using the credit card
Legally, you have the option to close your account down and repay the remaining balance at the existing rate of interest, within a reasonable period.
In other words, if you tell them you are going to stop using the card and want to repay the balance within a reasonable period of time, they cannot increase your interest rate!
What’s a ‘reasonable period’? The definition is very vague but the UK Cards Association (which is responsible with the wording of this rule) says providers will take into account the way you’re making repayments at the moment.
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So if you’ve only been making payments of £50 a month, it would be unreasonable to expect you to increase this to £100 a month. If, however, you’re paying off £100 a month every month like clockwork, it would be reasonable to expect you to continue to do this.
Even if you’ve missed payments or broken any rules, the lender cannot refuse to allow you to do this.
But please note: for this to work, you should inform them you want to close the account within 60 days of receiving the notification of the rate increase.
3) Kick up a fuss
If you cannot afford to keep making the monthly payments you did in the past to pay off the debt and you don’t qualify for a balance transfer, then your final remaining option is to ‘kick up a fuss’.
By this, I mean:
- Demand that an explanation as to why the APR was increased. If you get a vague response or one that doesn’t make sense (such as your credit rating deteriorated, when it didn’t), you can complain to the Financial Ombudsman.
- Explain that you are struggling with your debts. Your credit card provider is not allowed to increase the rate for anyone who has failed to make the minimum repayments in the last two or more consecutive months. If you have managed to make minimum payments in the past but are worried you will not be able to do so in the future, seek help from a debt counselling charity such as Citizens Advice or the CCCS. If a debt charity tells a credit card company that you are in serious trouble with debt, then the company cannot increase the rate on your credit card.
Other rights you should know about
Your credit card provider is not allowed to make rate hikes in certain circumstances. Here are your rights:
- Credit card providers can only make rate increases in the first year that they informed you about in the terms and conditions when you took out the card. So lenders cannot increase your interest rate within 12 months you taking out the card – unless it’s a rate hike you already knew about, like taking you off a three month promotional 0% period and moving you onto the standard APR.
- Credit card providers can only carry out a single rate rise every six months. However, if you’ve failed to meet all the terms and conditions of the card – such as making every payment on time – then they can get away with it.
- Credit card providers have to give you at least 30 days’ notice of an increase in the rate, so you can make other arrangements if you wish to do so. Bear in mind your credit card provider may only inform you that you can close your account when the increase actually takes place, at which point you will only have 30 days left to do so.
Have you received a rate-hike letter?
If you have, I’d be really interested to hear from you. How the information was presented? Was it in the small print at the bottom? Was it clear you had 60 days to close the account and prevent the rate hike from happening? Please let us know using the comments box below!