Credit card companies choose to raise the interest rate for a number of reasons. In any case, the account owner must accept the new rate or opt out if it was changed because of a terms of service update. If the percentage was raised because of a late payment, the account holder has no choice but to pay the new charges and a late payment fee. If they are able to opt out of the new rate because of a terms of service update, they can no longer use the credit card. The account is closed by the company, but the account holder must continue paying month after month without error until the balance is paid in full. Make one mistake and the interest rate will sky rocket. They make the rules, but you do not necessarily have to follow them.
I recently made a mistake when attempting to make my GE Money Bank credit card payment. It was due on the twelfth. I paid it on the twelfth, but because I paid it after 5:00 pm CST, I was charged a $25 late fee. The payment was considered late because I did not realize that it had to be paid by a specific time on the date it was due. It was a mere five hours late. To add insult to financial injury, I was also charged a much higher interest rate. The interest rate was raised to 26%, and although I only owed approximately $550, I had to find a way to pay it off as soon as possible. I no longer wanted the card or the line of credit.
Pay Off the Card as Soon as Possible
After my credit card interest rate was raised because of a five hour error, I decided to take aggressive action. I immediately made a $200 payment to GE Money Bank, and I plan to pay it off as soon as possible to prevent further interest rate charges. I have one other credit card, and the interest rate is far lower. I plan to pay a little more than the minimum payment on that particular account until the other credit card company is paid off. It will not take long because I do not want to give GE Money Bank any more than absolutely necessary.
Transfer the Account that Raised the Interest Rate
I cannot transfer the balance from the account that raised my interest rate to another account, but those with a balance transfer option should use it immediately. Credit card companies attempt to punish customers that cannot pay and those that might have made a simple mistake by raising the rate. You do not have to accept the punishment if you can transfer the balance to another credit card. Transferring the balance will immediately pay off the debt and eliminate the higher fees. The company might have raised your interest rate, but you no longer have to pay it off on their terms. Balance transfers can save hundreds of dollars. Mistakes can work out for the best.
In the long run, having the interest rate raised helped my financial situation. It made me want to pay the credit card off faster than ever to avoid the higher fees. If GE Money Bank had not raised the interest rate, I might have continued to pay just a little more than the minimum payment for years. If you made a mistake, look at the positive side. Paying it off sooner because of a simple error will result in significant savings. I will save far more than ever, even with the $25 late payment fee, and you can too.
My account is still in good standing, and the error will not show up on my credit report since the payment was less than 30 days late. Demanding the closure of the account would make me feel great momentarily, but it would only hurt my credit rating. I plan to keep the account open, but I will never use it again. I will vent my frustrations by shredding the card and throwing it away. It is GE Money Bank that lost in the end.
Source: Personal Finance Experience