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[C1218]Credit Card Interest Rate Increase

by Stephen Snyder, Ste

That's exactly what happened to my friend Kyle recently.

Because he was close to his credit limits on unrelated accounts his bank legally jacked up his interest rate nearly 200%.

The practice is generally referred to as a "universal review." And more and more lenders are using this trick to fill their pockets at the expense of an unknowing public.

Kyle didn't have late payments with the credit card that raised his rates. In fact, he didn't have any late payments on any credit cards. However, his lender simply decided that because Kyle was using his other credit, he somehow became a greater credit risk to them'so they nearly tripled his interest rate.

This situation hasn't only happened to Kyle. You see, I have several friends that hold high positions within the banking industry. Here's a recent comment from one subscriber who works as a credit analyst for a major national bank. This information is so hush-hush he's asked us to keep his identity secret:

"...Everyday in my job as a credit analyst I see so many mistakes people make with their credit. You are right, most all lenders do a universal review, especially credit card companies. When we review a card member's credit bureau report (CBR) we are assessing risk to the bank and our goal is to reduce risk and exposure. When we find risk we either lower the credit line, increase the APR, or close the account. That is why account performance and utilization of revolving trades is so important..."

As you can see, Kyle's situation could have been worse. The lender could have closed the account or lowered his credit limit.

And the credit analyst went on to say...

"...A lot of times we are using old income information when making a decision. Usually, when we see something that doesn't fit the card member's profile, we will call to try and get updated information such as current income and reasons for recent delinquency on their credit reports or their account with us. If we can't get them on the phone the moment we call we have to make a decision with the information we have. And that information can be several years old. If the income we have on file is older than six months I can't use it and need to call. If I don't get the card member I have to make my decision right then'I can't wait as we review thousands of accounts a month. So it is in the card member's best interest to call the credit card company and give them updated income information and any explanation for delinquency or increased utilization."

So what do you do?

First of all, if this has not happened to you, I wouldn't get overly concerned just yet. Just be aware that nearly half of the credit card lenders do some sort of universal review and it's a growing trend. To be on the safe side, whenever your income increases you should call your credit card lenders and let them know?make sure they note it in your file.

If your credit card lender does conduct a universal review on you and you're negatively affected by their decision?here's what to do:

Contact your lender immediately and determine why the lender feels you're a greater credit risk...and then fix it, if it's fixable. It could be as simple as giving them updated income information.

If the lender's answers don't sit well with you, begin interviewing new lenders. Call and request credit card applications. To determine if a credit card lender uses universal review, do this: go to the disclosure form and find the headline "Other APRs," then look for the term "default rate." That should tell you what you need to know. And if you're comparing credit cards you already have, and cannot locate the original application you signed...call each lender and ask them for a copy of your application with your current account's terms and disclosures. You need to know your current terms, as they may not be the same as the original offer you received.

After you have compiled your list and found a lender that will give you acceptable terms and rates, contact your original lender and tell them you are considering closing the account.

Remember, before you begin this cat & mouse game, have a "Plan B" in place. Just make sure "Plan B" doesn't use the same or worse practices as your original lender.

Just be aware of card tricks. Not all lenders use them (thank God), but be careful of the ones that do. Lenders have lowered the bar on their ethics. It's up to us to read the fine print and play their game.

Just about everyone over the age of 18 has at least one credit card- if not four or more! Credit cards are very convenient, but can quickly turn into your arch nemesis. Consider opening your credit card statement to find the interest rate has been increased, yet you did not make your payment late, and can determine no other reason for the rate hike. Citigroup Inc has decided to put an end to many of the interest rate increases that consumers are baffled by.

Considering that the average American credit card holder has over $8,000 in estimated credit card debt, the interest rates on these accounts make a huge difference in how much money is paid back for credit card purchases. Credit cards are the solution for shopping online, making travel reservations, and eliminating the need to carry large amounts of cash around with you. Unfortunately, though, most people are not all that good about paying off their entire credit card balances at the end of each month, and therefore end up paying interest on all of their purchases.

Why Credit Card Companies Raise Interest Rates

Did you know that for most credit card issuers, raising the interest rate on your credit cards is a fairly standard practice? They can raise the interest on your account if you've made a payment late on any OTHER credit card or loan; this is called the “universal default”, and consumers who are late once on one of their accounts are likely to see every single credit card statement displaying the interest rate increase. Credit card issuers can raise your interest rate for the dreaded, “anytime, for any reason” disclaimer typically found within the credit card terms of agreement!

Citigroup Inc Helping Consumers Save by Eliminating Unnecessary Interest Increases

Cardholders of credit issued by Citigroup Inc will no longer be the victims of interest rate increases on Citigroup cards due to paying another account late. They also will not raise the rate under the “anytime, for any reason” clause. In fact, for credit cardholders of Citigroup Inc issued credit cards, the only reason for an interest rate increase will be if you specifically make a late payment to your Citigroup account.

Credit Issuers to Play Follow the Leader

It is likely that other credit card issuers will follow Citigroup Inc's example with time, as currently many improvements are being made throughout the credit industry in the favor of consumers. If you aren't sure of your credit card company's policies for interest rate increases, just ask! If they participate in the universal default raising of interest rates, or say they can raise the interest on your account at any time and for any reason, you may want to consider transferring your balances to a Citigroup Inc issued card, as it has the potential of saving you hundreds (perhaps even thousands) of dollars in interest fees over time.

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Both Stephen Snyder & Debbie Dragon are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

Stephen Snyder has sinced written about articles on various topics from Free Credit Report Score, Credit Card Companies and Credit Card Interest Rates. is the founder of the