Consumers concerned about high credit card interest rates

On Tuesday, MMI was one of nine organizations that participated in an all day call-in event called Your Money Marathon. During the course of the day, we had received a whopping 14,000 phone calls. It quickly became clear that callers shared some common concerns and I wanted to address these concerns in the blog. Yesterday, I talked about settlements. Today, I would like to talk about rising credit card interest rates.

Credit card interest rates are being raised even though the Fed has cut interest rates. Rate hikes can have a huge impact a person’s financial situation—particularly those who are on the edge financially. Here are a few rate-hike scenarios and suggestions on how to handle them.

-If you get a letter in the mail saying that your rate is being hiked due to no fault of your own, read the fine print—you may have the chance to refuse the change. In many cases, you are given a chance to refuse the term change if you write to the creditor. This action would mean that you are no longer able to use the card, but you would be able to repay any balance at the original rate.

-If you are late on a payment and trigger the default rate, you might want to communicate with your creditor. A creditor does not have to readjust your rate upon request, but some people claim that they have had success with this tactic. If your initial call is unsuccessful, ask to speak with a supervisor. Be clear about what you want, but not confrontational.

-If a temporary setback resulted in actions that triggered a default rate, ask your creditor if they will place your account on a temporary hardship program. Many creditors have programs in place to help consumers recover from unexpected setbacks such as a job loss or medical emergency.

-If you are unable to lower your rate, you can try to seek a card with more advantageous repayment terms. However, consumers who have less than an excellent credit score may find it more difficult to qualify for a new credit card account. Also, there is nothing to say that your new card’s lower rate won’t be raised in the future.

Finally, if you are having trouble making minimum payments on high interest debt, do not allow the problem to escalate. Talk to a certified credit counselor to see if they can work out a revised payment plan with your creditor.

Of course, the best thing you can do is to reduce your reliance on credit entirely. (I do realize that this is easier said than done.)

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

  • The Consumer Federation of America (CFA) is an association of nonprofit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education. Today, nearly 300 of these groups participate in the federation and govern it through their representatives on the organization's Board of Directors.
  • The National Council of Higher Education Resources (NCHER) is the nation’s oldest and largest higher education finance trade association. NCHER’s membership includes state, nonprofit, and for-profit higher education service organizations, including lenders, servicers, guaranty agencies, collection agencies, financial literacy providers, and schools, interested and involved in increasing college access and success. It assists its members in shaping policies governing federal and private student loan and state grant programs on behalf of students, parents, borrowers, and families.

  • Since 2007, the Homeownership Preservation Foundation (HPF) has served as a trusted, neutral source of information for more than eight million homeowners. They are partnered with, and endorsed by, numerous major government agencies, including the U.S. Department of Housing and Urban Development and the Department of the Treasury.

  • The mission of the U.S. Department of Housing and Urban Development (HUD) is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD works to strengthen the housing market in order to bolster the economy and protect consumers; meet the need for quality affordable rental homes; utilize housing as a platform for improving quality of life; and build inclusive and sustainable communities free from discrimination.

  • The Council on Accreditation (COA) is an international, independent, nonprofit, human service accrediting organization. Their mission is to partner with human service organizations worldwide to improve service delivery outcomes by developing, applying, and promoting accreditation standards.

  • The National Foundation for Credit Counseling® (NFCC®), founded in 1951, is the nation’s largest and longest-serving nonprofit financial counseling organization. The NFCC’s mission is to promote the national agenda for financially responsible behavior, and build capacity for its members to deliver the highest-quality financial education and counseling services.