Can a Standard APR on a Credit Card Change?
Credit card offers come with a wide range of terms and conditions. Of key interest to card users is the interest rates the card charges. Interest rates can be hard to understand, but card companies have to disclose the rates they charge you in the card agreement. Pay special attention to key words like "standard," "fixed" and "variable" interest to find out under what conditions your credit card interest rates can change.
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Standard and Introductory Rates
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Credit cards that offer introductory or limited-period rates also include a standard rate that applies once the introductory rate expires. For example, your credit card offer may come with a zero percent annual percentage rate, APR, for six months. After that six month period is over, however, a standard rate begins apply to all of your purchase and any balance you carry over from the introductory period. This standard rate can change depending on the kind of card you have and your behavior as a credit user.
Fixed and Variable Rates
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Fixed-rate credit cards are those in which the standard APR remains constant over the life of the credit card. A variable-rate card has an APR that changes depending on certain conditions, typically as a result of the Federal Reserve Bank's raising or lowering of the discount rate. The discount rate is the interest rate the Federal Reserve charges to banks to borrow money. Banks then use this rate as the basis for charging borrowers, so when it rises or falls, the interest rate on the variable card does as well.
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Increaing Rates
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Unless a credit card company issues a card with an introductory rate that is set to expire, or issues a variable rate card, the company can only increase the card's rate if the card company follows specific procedures. Even if you have a fixed standard rate card, your company can increase your card rate after it notifies you in writing of the change at least 45 days before increasing the rate. Also, card companies cannot increase your rate at all in the first year you own the card unless you fall at least 60 days behind on your payments.
Other Rates
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Credit card users also need to keep in mind that cards can have several standard rates that apply to them, even if the card is not a variable rate card. For example, many cards allow users to both make purchases with the card, as well as take out cash advances. These two different activities have varying interest rates that apply to them. Further, if you have a variable rate credit card, these rates can also change.
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References
- Photo Credit credit card and hand image by Warren Millar from Fotolia.com
