Credit

Ask Jean Thursday: Interest Rate Insights

Posted by Jean

QUESTION: This morning on your segment, you said we as consumers can opt out of any new interest rate set by the credit card companies as long as we close the account and simply pay off the balance. This theory is correct on four out of five accounts of mine. One company told me there was no opt out options and I would HAVE to pay their new, higher percentage rate. Is this illegal on their part? What can I do?

-Brad, South Dakota

ANSWER: Thanks to new credit card reform laws, it’s becoming easier to opt out when you’re hit with a higher interest rate. However, the date in which the notice reflecting your change in terms was mailed will affect whether or not you’re able to opt out of the new interest rate you’re asking about.

If your notice was mailed before August 20th, 2009, then you may be out of luck. This is due to the fact that the portion of the Credit CARD Act of 2009 that outlined the rules for disclosure of contractual changes went into effect on that day. As the law stands now, your credit card company must give you at least 45 days notice in advance of any interest rate hikes. This wasn’t always so. Before the reform took effect on the 20th, the time frame was just 15 days. With the new law, if you don’t like the change, you can close the account and pay off the balance at your original interest rate. Before, the 20th, opting out of a higher interest rate wasn’t a consumer right and credit card issuers offered opt-out options at their own discretion.

How can you avoid an inability to opt out of higher interest rates in the future? One of the most important things to do is to follow the instructions for opting out very carefully. “Simply closing the account and not using it will not be sufficient.” says Credit.com’s Gerri Detweiler. What should you do? “You typically have to respond in writing as instructed in your notice. I recommend sending your opt out notice with delivery confirmation and keeping a copy for your records,” advises Detweiler.