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Question for the Money Doctors

Question submitted on Apr 15, 2010.


Three years ago my credit card debt reached a total of $30K and during that period my interest rate has gone from 10.9% to 24.9% on two cards despite an excellent credit rating. I have tried negotiating but been stonewalled. What can you do to help me? I am now unemployed and 68 years old.


Hello Wisconsin! One of my favorite places to travel to is beautiful Wisconsin in the summer, particularly the areas around Fish Creek.

The credit issues you describe unfortunately are a topic of frequent conversation around coffee tables across the country. Although your credit report may indicate that your credit score is favorable, the way a financial institution charges interest on your current credit card is not based on your credit score, but rather, based on how you fulfill your requirements under your credit card agreement. The agreement that you originally signed most likely changed through amendments that were sent to you along with your credit card statement or separately. You should go online and read your current credit card agreement and focus on the sections that apply to why your credit card company would raise your interest rate.

Credit card companies typically raise interest rates because your payment was received after the due date. There is a common misperception that if you mail it by the due date that the credit card company counts it as received by that date. The financial institutions generally count a credit card payment as received when they post it to your account. I advise everyone with a credit card to monitor their credit accounts online and pay online when the payment due date begins to get close.

Before our current crisis, it was common advice to shop around and secure a new credit card offer at a favorable interest rate from another company. However, in this new reality of companies cutting credit card limits and restricted offering of credit, it makes that strategy more of a challenge. In your case, you may want to shop around to see how much of a competitive rate you can receive and transfer the balance of a portion or all of your credit card balance to another credit card. On your remaining balance, read the language of your credit card agreement carefully, and work with your financial institutions to determine how you can have them lower their rate.

Many institutions will raise your credit card rate after two late payments. They may offer an option to lower the rate somewhat after the card holder makes 12 timely payments. Since the credit card companies have shortened the time between the statement issuance date and due date, it can be difficult to make a timely payment by using the mail.

Also, given that the credit card interest that you are currently paying is over $600 per month, you will want to consider options to pay off the credit balance over time.

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