Credit Card Issuers Increasing Rates Before the Federal Reserve Finalizes Rules Prohibiting Credit Card Unfair Practices

In the last several months, The Federal Reserve has received more than 62,000 comments on the upcoming rules designed to prohibit certain unfair credit card practices and overdrafts, mostly from consumers who support the rules. It expects to finalize them before Jan. 1st, 2009. 

The proposed changes to credit card rules would prohibit banks from increasing the rate on existing credit card balances (except under limited circumstances).  Right now, most credit card terms and agreements state that the issuer can increase the interest rates on existing and future purchases any time they want. 

Credit card issuers seem to be responding to the new rules by increasing consumer credit card rates now, before the new rules go into effect.  Individuals who don’t make late payments but carry a balance from month to month are seeing increases to their credit card interest rates when in the past, rate hikes were typically only given out to individuals who made a late payment or two.

Banks do have to notify consumers if they plan to increase interest rates, so keep your eye out for notices that warn you of the rate hike.  If you get a notice - call the bank and ask to lower the rate.  You will be successful about 50% of the time, because it is cheaper for a bank to keep an existing customer than it is to find new ones.