How to Prevent an Increase in Credit Card Interest Rates

Credit card interest rates are usually adjustable or variable, meaning they can go up or down at the credit card company's discretion. Interest rates may not lawfully increase on past balances; however, higher rates on new purchases will increase the cost of financing in the long run. Fluctuating interest rates also make it difficult for you to track spending costs. You can prevent these increases through smart use of your credit.

Make Monthly Payments

Missing a monthly payment is the most common reason for a rate increase. Your company will bill you a minimum payment amount based on the total balance you have on a credit card at the end of the payment cycle. This is typically a small amount, only a percentage of the total you owe. You should make this payment immediately to assure it is on time. Even being late by a day or two on this critical payment can result in a drop in your credit score or an increased rate on the card.

Pay Down Balances

Whenever possible, you should do more than meet the minimum and actually pay down the entire balance on your card. Financing costs go up the most when you allow a balance to roll over onto the next month. To avoid this, you should aim to pay the total amount you owe. Most people will not find this possible, however. In fact, the average person in the United States carries over $4,000 worth in credit card debt from month-to-month. If you cannot meet the full balance requirement called for, then you should aim to keep your balance lower than 10% of your total credit limit. In doing this, you will be helping your interest rate as well as your credit score. High balances can knock points off your credit score.

Watch Your Credit

It is important to be vigilant about your credit score in order to control your interest rates. Contrary to what some people think, checking your own credit periodically does not adversely affect your score. There are many credit watch companies that now offer this service; the credit bureaus themselves also offer options to check your own credit. You should know these checks are rarely free in their entirety. You usually have to pay a minimum monthly fee for the service. However, most financial advisers recommend checking your credit at least once a year and after any major changes such as a missed payment or a new debt.

Pay Attention to Rates

Most importantly, prevent rate hikes by simply paying attention. Credit users who do not open mail and email from their creditors are ignoring key pieces of information. Your credit card company must notify you if it intends on raising your rates. You will have the chance to close the credit line and pay it off if you do not want to accept the new rate. Sitting back and allowing your company to raise your rate once may prompt them to make similar moves in the future. Watch out for these changes, and question them when they occur.


Improve Your Credit Score - Free Consultation

Need debt consolidation relief? Click here!