A letter saying your card's interest rate is rising is easy to ignore. It is worth five minutes, because you often have more options than the letter makes obvious.
1. Put the change in dollars or pounds
On a $3,000 balance, 24.9% APR is about $747 of interest a year. At 29.9% it is about $897, roughly $150 more a year, or $12.50 a month, if the balance stays the same.
2. UK: you can usually reject the increase
Card providers must give notice before raising the rate. In most cases you can reject the increase, typically within 60 days. The card is then closed for new spending, but you can repay the existing balance at the old rate. Check the letter for the exact deadline and how to tell them.
3. US: the rise usually applies to new purchases
Under the CARD Act, issuers generally need to give 45 days' notice, and the higher rate usually applies only to new transactions, not the existing balance. Common exceptions: a promotional rate ending, a variable rate following its index, or a payment more than 60 days late.
4. Options if you carry a balance
- Pay it down faster with a fixed monthly amount instead of the minimum.
- A 0% balance transfer can stop interest for a set period. Compare the transfer fee (often 3-5%) with the interest saved.
- Ask the issuer if they can keep the current rate. It costs nothing to ask.
5. If you pay in full every month
The rate does not matter much, because no interest is charged when the full statement balance is paid by the due date.
Free tools
- Credit card interest calculator: https://smartbudgetsheets.surge.sh/calculators/credit-card-interest-calculator/?utm_source=mataroa
- Balance transfer calculator: https://smartbudgetsheets.surge.sh/calculators/balance-transfer-calculator/?utm_source=mataroa
- Credit card payoff calculator: https://smartbudgetsheets.surge.sh/calculators/credit-card-payoff-calculator/?utm_source=mataroa
- Debt Payoff Planner, up to 8 debts (Payhip): https://payhip.com/b/PtBLU?utm_source=mataroa
- 42 free budget templates, pay what you want ($0 is fine): https://smartbudgetsheet.gumroad.com/l/ngpkrb?utm_source=mataroa
General information, not financial advice. Figures are rounded examples.