Answers about Changes to Credit Card Terms and Other Forms of Credit

My credit card has a fixed rate. Is the bank allowed to raise it?

For credit card accounts, the term "fixed rate" usually does not mean that the rate can never be changed over the life of the account, although there are important limits.  Starting February 22, 2010, banks cannot advertise a rate as “fixed” unless the ad also says how long the rate will be fixed and that it won’t increase during that period.

In general, if you opened your account on or after February 22, 2010, the bank cannot change your fixed rate for one year after the account was opened.  There are exceptions to the general rule.  For instance, if you agreed to an introductory rate that ends after six months or more or if you are more than 60 days late in making a required payment on your account, the bank can increase the rate that applies to your existing balances and new transactions.

If you opened your account before February 22, 2010, the bank does not have to wait 12 months to raise your rate for new transactions.  But regardless of when you opened your account, the bank usually must give you 45-days advance notice in writing before the rate change goes into effect. 

After the rate change goes into effect, the bank can apply the new rate to transactions that occur more that 14 days after it sent you the 45-day advance notice.  The old rate will apply to transactions that occurred before that.  There are also important limits on how quickly the bank can require you to pay off the existing balance when it does this.

If you wish to avoid the rate increase, you should consider contacting the bank to close your account or not using your card for further transactions.

March 2010