Q: I am a single parent and have always paid my credit cards and mortgage on time. I pay more than the minimum, and they keep raising my interest rates. I have four cards with balances. I have stopped using them and called, but they will not lower the rates. I can’t afford to pay them off totally, but I am working toward it. Short of not paying and ruining my credit, what recourse do people have, who are caught in the cycle of rising interest rates? One card went from 6.74% to 13.99%. My credit score is about 730. They basically told me be glad it didn’t go higher.
Grand Rapids, MI
A: You poor dear. But I’m afraid the rude person who told you that you should be glad your interest rate isn’t higher is, in a sick way, right. Many credit cardholders are seeing their low rates jump to 20% or more. As you know, we are in a recession. People are not paying their bills, so the card companies—the vultures that they are—are picking the bones of the poor souls who can pay.
Technically, if you go back and read your credit card agreement or the statements you get, you will find in fine print that the credit card issuer has the right to increase the interest rate on your card anytime and for any reason. That will change next year, when a new law takes affect; but, until then my dear, you are stuck.
Part of the reason they probably raised your rate is, I bet, you are overextended. By the very fact that you are carrying balances on four cards that you can’t pay off every month means you are overextended. If you are using more than 30% of the available balance on any one credit card, and more than 30% on the four cards together, you are reaching beyond what is financially wise.
It’s great that you still have a good credit score. It’s smart that you have stopped using the cards. If you can, consider transferring the remaining balances to a card with a lower rate. It may cause your credit score to drop a bit (because it may take you over that 30% threshold), but it’s worth it for the short term, if it will help you get this debt paid off soon.
If you can’t transfer any balances, you don’t have much of a choice but to live with the higher interest rates. If you become too overwhelmed and need help to negotiate a debt settlement go to debtadvice.org.
The thing you should avoid is giving up. Not paying will ruin your credit. But you are obligated to live with the higher rates. This may not be fair, but it is what you agreed to when you signed and used the cards to buy whatever you bought. You know the old saying: “When you play with fire, you can get burned.”