How to Deal with Interest Rate Penalties and Credit Card Repricing

Recent reports indicate that more than 50% of cardholders are now paying penalty interest rates on their card balance. When the interest rate applied to a credit card balance or certain transaction types is suddenly raised this is called repricing. Sadly, the majority of cardholders that are dealing with credit card repricing are not even sure why the penalty interest rate was applied in the first place. Although many times a credit card company will simply charge a one-time fee to penalize a customer for late payments or not paying the minimum amount, in some cases they may apply a permanently raised interest rate. The following paragraphs outline the common causes of interest rate penalties and credit card repricing, as well as how to prepare for and deal with repricing.


What Causes Credit Card Repricing


Credit card repricing is not always understood by cardholders that are subjected to interest rate penalties, but sometimes the cause of the penalty can be disputed with success. In most cases, credit card companies will hike the interest rate due to a late, insufficient, or missed repayment. However, it is also possible for repricing to be caused by regional economic factors, such as bank interest rates. All credit card companies and lenders have the right to raise interest rates at any time as long as they provide at least 14 days notice to the cardholder or borrower. Thus, it is important to check your mail on a regular basis and be on the lookout for notifications from your card company, so that you may dispute repricing as soon as it becomes evident.


Preparing for Repricing

Fortunately, it is possible to adequately prepare for credit card repricing and minimize the possibility of incurring unnecessary debt by understanding the terms and conditions of promotional periods, interest rates, and repayment requirements. It is important to know the expiration date of the promotional period, as this will help you prevent the possibility of being caught off guard and conducting a lot of transactions while you’re under the false assumption that your balance is incurring the 0% introductory interest rate. It is also important to note that some transaction types automatically carry different interest rates than general purchases. For example, a cash advance can carry interest rates as high as 20% APR or more, even if the same card has a 0% APR introductory rate for balance transfers and other transaction types. It is becoming increasingly difficult to avoid penalty interest rates due to the universal default clause, which allows credit card companies to apply penalties to cardholders for defaulting or making late payments on any of their credit cards.


How to Dispute Penalty Interest Rates

It is imperative to dispute any unexpected repricing or interest rate penalties as soon as they’re noticed, especially if you’re not sure why the interest rate has been changed. The first step to disputing penalty interest rates is determining the cause by submitting an inquiry to your credit card company either via e-mail or phone. Anyone that frequently utilizes one or more lines of credit should closely examine their monthly statements and always strive to understand any changes in their account status or interest rates. If you find that your card’s interest rates have been risen unjustifiably it is best to write a formal letter or e-mail to request that the rates be returned to the standard or introductory APR if possible. Before zealously disputing a penalty interest rates caused by a late payment, it is important to realize that credit card companies penalize cardholders based on when a payment is processed.