Millions of Americans have received letters in the past few months notifying them of changes to their credit card terms and interest rates. Many of those people have concerns about what to do when this happens. In the past, if you were in good credit standing a quick call to your credit card company’s customer service would yield an offer to lower your interest rate in order to keep you as a customer. This is no longer the case.
Credit card issuers are responding to the upcoming implementation of new federal rules scheduled to go into effect early next year. Since these rules are likely to drastically cut into the bank’s profit margins, the banks are pre-empting anticipated losses by making changes to the accounts of all current credit card users to increase their profit. The cardholder is given 45 days from the date of notification of changes to reject the new terms. At this point, the account will be closed and the cardholder will continue to pay off the existing balance under the previous terms.
The main concern for some people is whether they will be able to get a reputable credit card that carries more favorable terms. This could present some difficulties, especially if the person has a less than perfect credit record or an already high amount of credit card debt. The decision has to be carefully made and in many cases, it may be better to accept the change and be more prudent about credit card usage.
Another concern is what effect canceling an existing account will have on one’s credit rating. It’s often been said that canceling accounts does not reflect well on a person’s credit rating but this is only so if that person has many credit cards or large balances on other accounts. A ratio of how much credit a person is using compared to how much credit is available to that person is used to calculate you credit rating. If you don’t have a high amount of debt, or have very few credit accounts, opting out of changes in terms may be the reasonable alternative to paying higher interest rates.
