I have $11,000 in credit card debt and I recently missed two payments. Now my interest rate has soared. Why am I having a hard time getting them to lower my interest rate? I usually pay my bills on time.
I wish I had better news for you but you are probably out of luck. According to a recent study by the Center for American Progress, in the first quarter of 2008, banks charged off 4.7 percent of their credit card loans. This represents a 33 percent increase from the first quarter of 2006.
There is no question that banks are feeling the pinch and they are doing whatever they can to reduce risk and and raise cash. Most often, banks have been systematically lowering cardholder's credit limits and raising fees. And, as you have recently learned, they are increasing interest rates at the very first sign of trouble. One missed payment can send your interest rate to the maximum permitted under the terms of your cardholder agreement. By raising your interest rate, the bank is hoping to scare you into paying down the debt.
You can always try to call the credit card company and plead for a lower rate -- sometimes persistence does pay off. In my opinion, that avenue is always worth a try. If there was a specific reason you missed two payments, try explaining your particular situation. If you have been a lifelong customer with a solid payment history, throw those facts in as well.
At the end of the day, however, you might not have any choice but to accept the higher rate and try to pay off the debt as aggressively as you can. You might have some success moving the balance to another card but even that would be a longshot now that you have missed two payments.
For more information on this topic, check out this interesting post on msnbc.com, it details how a new policy at American Express allows that firm to penalize cardholders based on where they shop and which bank holds their mortgage.
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