Dear Liz: My credit card interest rate recently went from 11% to 24%. I have excellent credit and a history of paying off any balance. I have never missed a payment or paid late. When I asked why the rate was hiked, I was given a story about the issuer’s rising costs. Should I switch my balance to a card from my local bank? The balance is small and the interest rate is one-third of what my current credit card company is demanding. I can pay the balance off in four months.
Answer: The credit card issuers that are being the most aggressive about raising rates and cutting limits are hoping you’ll passively accept the changes. But when you have good credit, you have choices. You can take your business elsewhere.
If you can pay the balance off quickly, though, you might want to do the math on whether a switch makes sense. If you have to pay a 3% to 4% fee for the transfer, which you typically do, that cost may offset any interest rate savings. Plus, applying for a new card can ding your credit.
You might want to make the change anyway, of course, just to make the point to your issuer that you won’t stand for arbitrary rate increases.
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