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Credit Cards: Opting Out Issues - Articles Surfing


Some credit card users may begin to notice what are called opting out policies on the back of their credit card statements. These opt out notices are being delivered to some credit card users who are in jeopardy of having their interest rate increased by the credit card issuer. There are several reasons why a credit card issuer may decide to increase the interest rate on a consumer. This article deals with a few of them.

Some consumers may be surprised to learn that if their credit score should drop, for any reason at all, some credit card companies will use that as an indicator that the consumer is more at risk of defaulting on credit obligations and will increase the interest rate for that consumer in turn. The US Congress is looking into this practice, but as of yet there are no restrictions in place to keep credit card companies from using it.

However, the majority of credit card companies who are using this policy must notify the customer in advance that they are planning to increase the interest rate. They must also give the customer a chance to pay off the balance and to opt out of the credit card altogether. What is not always clear to consumers who get these notices is the reason why they are being moved up into a higher interest rate category. The language of the notice may state the "additional information" or some other vague term has led the creditor to decide on the increase. The notice will usually contain some type of instructions that the consumer can follow to get more insight into the cause. In some cases, the consumer is simply led toward the credit reporting agencies.

Those consumers who get these types of notices should read them carefully. Of particular importance is the policy that the company will use on the balance if the consumer does not opt out. Some credit card companies have decided that the entire previous balance will be charged the new, higher interest rate, even if new purchases are not placed on the card. In other words, for those consumers with a balance of, say, $1000 at 18 percent would have a new bill for a balance of $1000 at 29 percent, or whatever percent the company decides to increase to. This can mean a huge increase per month for a balance that has not changed.

Two important issues concerning opting out from these plans are first, consumers only have a certain amount of time to do so before the company will assume that the consumer does not want to opt out and they will begin assessing the higher interest rate. In other words, silence is not golden. The other issue is that some credit card companies have strict rules on how the consumer must follow up should he or she decide to opt out. Usually, this means a written letter sent to the company. Those individuals who receive one of these notices and wish to opt out should follow the instructions to the letter in order to avoid future problems.


Submitted by:

Peter Kenny



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