Can My Credit Card Company Do That to Me?

Can My Credit Card Company Do That to Me?

August 18, 2020         Written By Tracy Farnsworth

There’s nothing more disheartening than finding your credit card company is increasing your interest rate, increasing fees, or reducing your credit limit. Those sudden changes have the power to wreck your finances and create a hardship, which makes you wonder if they can do this. The short answer is, “yes, they can.” This is why reading the terms and conditions is the most important thing you can do before you accept a credit card offer.

Every change a credit card company can make is listed in the fine print. Credit card companies have to list the rules and obligations you’re bound by when you apply for a credit card and agree to the offer they make. It includes things like what the promotional interest rate is, what it will rise to after the promotional period ends, and what the fees are. It will cover how interest is calculated and added to your charges, how to resolve disputes, and how to contact customer support. It’s so important to read the terms and conditions and any update notices that are sent out to cardholders. It’s tedious, sure, but it’s critical to understand the rules. Experts recommend that you always read the terms and conditions to ensure you’re never caught unaware.

Frequently Asked Questions Regarding What Credit Card Companies Can and Cannot Do

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You may have questions regarding what credit card companies are allowed to do. Here are some of the FAQs consumers ask.

 

“Can My Credit Card Company Change My Fixed Rate to a Variable Rate?”

Credit card companies can change interest rates from fixed rates to variable rates. Even if the rate was fixed for a lifetime, terms are often conditional. The credit card companies cannot change rates for the first year, after that, they may switch rates to avoid being locked into a fixed rate agreement. They do have to give you 45 days’ notice. You have the right to refuse the change. At that point, the credit card company would close your account, and you’d have to repay any balance that’s due.

 

“Can They Increase My Minimum Payment?”

Credit card companies can change minimum payments. It happened a while back when Bank of America opted to change minimum payments from 2% to 5%. While it is better for cardholders as it pays down a balance faster, it also strained some people’s budgets. If this happens to you and it will cause financial strain, talk to the bank to work out a payment plan that is within your budget.

 

“Can They Lower My Credit Line?”

If a credit card company has concerns that you may not be able to pay if you maxed out your card, they may drop your credit line to a level they feel is more appropriate. This can happen if you file a bankruptcy or miss several payments.

A lowered credit line can hurt your credit score. If you had a $4,000 credit limit and had $1,000 in charges, you’d used 25% of your available credit. That’s a favorable percentage when it comes to your credit score. If the company drops your credit limit to $2,000, you now have used 50% of your available credit, which is well over the preferred 30%. Your credit score could take a substantial hit. If your credit line is lowered, it may be beneficial to find a new credit card with free balance transfers. If that’s not possible, pay down the balance you owe as quickly as you can. Micropayments (payments made each week instead of once a month) may help you pay down the balance faster.

 

“Can They Increase My APR or Fees?”

Credit card companies can increase your APR, but the Credit CARD Act of 2009 added a level of protection. They cannot retroactively increase your credit card APR. They must give you 45 days’ advance notice. If the rate was introductory, such as a 0% APR for six months, they cannot raise it before the six months is up. If you’re a new cardholder, they cannot change your APR within the first year.

  • There’s an exception to credit card APR increases. If they are trying to raise your APR because you paid another credit card late or defaulted on another credit card, they cannot hold that against you. Universal Default is banned under the Credit CARD Act. Your history with that credit card is the only thing they can use to raise your interest rate.
  • There are protections when it comes to fees. The bank cannot charge you more than 25% of your credit limit for an activation, annual fee, and/or processing fee. If you have a $1,000 credit limit, fees charged to open your account cannot total more than $250.
  • Over-the-limit fees are not allowed anymore unless the cardholder has agreed to them. Only one over-the-limit fee can be charged per billing cycle. Fees cannot be charged if you make your payment over the phone or online unless you request an expedited payment.
  • Finally, late fees cannot be more than $25 unless you’ve missed a payment in the past six months. At that point, the late fee charged can be as high as $35. Like APR increases, you’ll be notified regarding changes to fees.

 

“Can They Change My Payment Due Date?”

Have you had a credit card company announce they are changing your due date? It’s not common, but it has happened. If your due date is suddenly changed, laws protect you. You have 21 days to pay from the date the bill is mailed. They cannot change the payment to try to trap you into missing a payment. If you’ve paid your bill that’s due on the 15th, you can’t receive a bill a week later that announces they’re changing the due date to the 25th effective that month. You haven’t had 21 days’ notice.

 

“Can They Close My Account? If so, Can They Require Me to Pay the Balance Owed?”

A credit card company can close your account. It’s often reserved for cards that haven’t been used for a long time and appear to have been abandoned. Before it’s closed, the credit card company may send you a notice asking you to confirm your address or to verify you want the card to remain active. Watch for these notifications.

If you have stopped making payments, you usually have 31 days before the collections calls start. If that time passes and you’re still dodging the credit card company, they may freeze your account to keep you from accruing more debt. Many credit card companies try to collect for the next six months. At that point, your unpaid debt is often sold and transferred to a debt collection company that tries to collect what you owe. Your account may be closed down without notice. If it is, you are obligated to pay off what you owe. Keep making payments as promised. Usually, your payments follow the terms and conditions that were active when your account was closed. Your bank’s customer service department can help you if you have questions.

 

“Can They Change or Cancel My Rewards Program?”

Some credit card issuers do change rewards program terms. For example, American Express changed its rewards program to match consumers’ changing shopping habits by adding or improving rewards in categories like streaming services and food delivery.

To make sure you’re current on what rewards are offered and at what rates, log in to your rewards program and look for notifications alerting you to changes. You may not be able to stop them from making these changes, but at least you’ll be aware and have the power to decide if the rewards card is still best for you or if there may be a better program out there.

“Can They Move My Account to a Different Bank or Company?”

What can you do if you learn your credit card company moved your account to another bank or credit card company? This happens with store credit cards. For example, as stores like Sears shut down, you may find your store card becomes a Citi Rewards Card. If that happens, you should be kept at the same APR and terms, but it may not always be the case. Watch for the updated TOS to make sure you agree with the changes.

 

What Do You Do If You Disagree With the Terms?

You have the right to opt-out of changes. In most cases, your account is closed and you continue paying off any balance that’s due. You may be able to transfer your balance to a competitor’s credit card that has better terms and free balance transfers or an introductory 0% APR offer. If you qualify for these promotions, it’s better than tolerating changes that take extra money from your wallet.

Compare Credit Card Offers pre-qualify if possible, and narrow down your choices. It’s the smart way to make sure your credit card company isn’t taking advantage of you. Once you know which credit card is best for your needs, fill out an application, and transfer your balance from the less favorable credit card company to the much better offer.

If you need help finding the right credit card, use the Low Cards Credit Card Selection Tool to get started. The process only takes a few seconds, and we’ll match you with the best credit card offers to meet your needs.

The information contained within this article was accurate as of August 18, 2020. For up-to-date information on any of the terms, cards or offers mentioned above, visit the issuer's website. Many of the offers on this article are from our affiliate partners, and LowCards.com may be compensated if you take action with any of our affiliate partners.

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tracy

About Tracy Farnsworth

Tracy Farnsworth went straight from a business track in high school to a full-time job in mortgage banking in Burlington, Vermont. After having children, she built a freelance career in content writing and took online classes as time allowed. She completed Social Media Marketing and Digital Marketing certificate programs with Ireland's online Shaw Academy and completed several courses in SEO and analytics. In her free time, she's the “mom” to a very clingy rat terrier, and the pair walk at least a mile every day. She's also a novice baker who is trying to master the art of sourdough bread.