How credit card interest rates work is a mystery to most people, including those inside the credit card industry, but the one thing that we do know about them is that the interest rate on a credit card can be increased or decreased in certain situations. What are these situations and how do you plan for them? Well, that’s what you are about to find out.
Unfortunately, credit card interest rates tend to increase much more than they decrease because the credit card companies want to make money and while an increase of an interest rate puts more money in their pocket and decrease in an interest rate will reduce their money making opportunity. If you are trying to avoid paying a high interest rate on your credit card it would be beneficial to know the main ways that a credit card interest rate can be increased. The most common method of credit rate increase is caused by an interest rate trigger that is in your credit card agreement and stipulates that under certain conditions the credit card company can, and almost always will, raise your interest rate. The most common triggers are failing to make a payment of falling into default. Dealing with these types of interest rate increases can be especially tough since they are usually multi point increases that are much higher than your previous interest rate. The credit card company stands to make a lot of money when an interest rate trigger causes your rate to jump from 3.99% to 16.99%. Another reason your interest rate can increase is because your initial interest rate has expired and it is time for your card to revert back to its normal interest rate. In some cases this entails a jump from 0% interest to a reasonable rate like 3-4% but in other cases, if the credit card company was able to trick you, the interest rate on the car may jump into double digits. This is why it is important to read the fine print on a credit card agreement before you sign up.
Unlike increases in interest rates, decreases in interest rates are not usually initiated by the credit card company unless you have a previous arrangement. In fact, credit card companies have gone to great lengths to convince card holders that asking for a lower interest rate on your card is a waste of time. While an interest rate decrease may not be as easy to come by as an increase they are still perfectly attainable if you are prepared to stand your ground with the credit card company. If you have been a loyal customer and have a good history with the credit card company chances are that with a little prodding you can probably get the rate on your card lowered, especially if you do not typically carry a large balance from month to month. Also, if you make it known that you are willing to walk and take your business elsewhere your credit card company will be much more likely to respond favorably to your request.