Don’t count on credit card terms

I received this Advice Team question today:

I have a new credit card with a $40k limit that has a great 0% APR offer for 12 months and I would like to use about $35k of this offer. Will this move hurt my credit scores in any way?

The first thing that caught my eye is the dollar amount. I can only assume that a purchase of $35,000 is for a secured item—like a car. So, if you have a credit score worth protecting, why wouldn’t you seek a nice, reliable fixed rate loan? Perhaps this consumer isn’t aware of the fact you cannot count on the existing terms of your credit cards.

MMI's own Steve Bucci recently addressed this issue in his column:

“Your card issuer may raise rates if your account now represents a greater risk than it did originally. You could trigger a rate increase simply by opening new credit, ending up with a late payment to another creditor (even if it's a mail delay and not your fault) or significantly increasing a balance on another credit card.

Even if you change nothing, the world may change. For example, the current credit crunch could cause the lender to decide that it is not getting compensated sufficiently for the perceived risk in your account. Many credit card agreements would allow for a rate increase under these circumstances.”

While they may seem unfair, term changes are perfectly legal. The best thing you can do is to be aware of possible changes and reduce your reliance on credit entirely.

Kim McGrigg is the former Manager of Community and Media Relations for MMI.