Have You Checked Your Credit Card Interest Rate Lately?

One of the nasty surprises lurking in your mailbox may be a new credit card interest rate. You may be paying on time, and keeping your balance below the maximum, but your credit card interest rate may go up. I actually found this out the hard way with one of my cards.

My Chase card (the company now says it will discontinue the practice of jacking up rates based on credit scores) went up in its interest rate about a year ago. I still don't know exactly why; perhaps it was around the time we had a couple of credit inquiries for a large purchase and for satellite TV programming (yes cable and satellite companies now check your credit). But I had no late payments, and my balance was consistently low. I called and canceled, I was so peeved. But my experience is nothing like this, reported on Yahoo! Finance:

Most stunning, $3,478.39 out of $5,618 in payments had gone to Discover for interest accrued over the previous two years, Hard told the Senate Permanent Subcommittee on Investigations Tuesday. On a monthly level, about $176 out of her $200 payments went to finance charges. In the past year alone, Hard had paid $2,400 but reduced her debt by only about $350.

Hochschild and other top credit industry executives told the Senate panel that card holders are appropriately notified of any changes, given time to opt out and pay off the card at the old rate, and to contact the credit bureaus whose reports may have spurred the rise in rates.

It is possible to get a lower rate from your credit card company, but the bottom line is this. It is in credit card companies' interest to keep you in debt. Not overly crushing debt that results in you failing, but in the kind of debt that keeps you making minimum payments (or a little more) each month so that you remain just financially viable enough to keep on paying.

The best thing to do is to get out of debt as fast as possible. This means using aggressive debt reduction to focus on one debt at a time, since bigger payments to one loan at time (while paying the minimum on the others) will do more good than smaller, above minimum payments on a variety of debts.

Tags: get out of debt, aggressive debt reduction, personal finance, personal finance blog,
credit card interest rate, lower interest rate credit card