Rate-Jacking: How To Beat Credit Card Interest Rises

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Have you been on the receiving end of a rate-jacking bombshell? It’s hard enough finding the money to pay back your credit card debt and unwanted interest hikes don’t help. What is rate-jacking and how can you stop the increases to your credit card interest rates?

Rate-jacking explained

What is rate-jacking? Quite simply, it’s an increase in the interest you pay on your credit cards. The increases vary from company to company but some card holders have been hit with hikes as large as 10%.

In most cases, the increases are unleashed by individual lenders and not across the board. Lenders use a ‘rate-for-risk’ table to work out the charges customers will pay and is based on your credit rating. What this means is that, even if you’ve been a good customer and never missed a payment you could still be penalised for doing nothing wrong.

Why are the lenders jacking up your rates?

Hope in the TARDIS and travel back in time a few years and we land somewhere in the early 2000’s. Times were good; money flowed from the banks to your pockets like a raging torrent. Credit card lenders desperately wanted a piece of the action and they made up for lost time by handing out cards like sweets.

Once the good times stopped rolling and the recession set in the lenders panicked. Some applicants are being rejected out of hand. Existing card holders are being slapped with rates not seen since the house price crash of the 1980’s.

Basically, even if you already have a card, if the lenders decide you’re a bad risk then they will hike your rates.

How do you know if you’ve been rate-jacked?

Your lender will tell you. You should receive a letter which outlines exactly how much you interest rate is going to rise.

How to beat rate-jacking

Like any number of the guides we’ve written here on http://moneysavingzone.co.uk we always recommend you ask first. Simply call your lender and ask them not to raise your interest rates. Even if it doesn’t work at least you tried.

If this fails, it’s time to get serious:

Move your balance to another lender

If you can find a new lender, simply move your existing debt to a new a card. If you have a poor credit rating there are credit cards out there for you so there’s no need to panic. This article also gives you some advice on how to repair your credit rating.

If your credit rating is in a good condition you’ll have a lot more options open to you. For a full list of 0% balance transfer cards take a look at moneysupermarket.com.

Tip: if you have a poor credit rating and you’re turned down for a new card don’t – stop! Repeated failed attempts at getting credit will be flagged on your credit report. This will make it harder for you to get any type of credit.

If you’re already struggling with your other bills forget getting another card. Speak to a debt counselling agency such as www.cccs.co.uk or www.capuk.org.

Late payment penalties

0% balance transfer cards are one of the most popular forms of credit in the UK. But some lenders are less than compassionate. Cards with a low balance transfer rate normally have some pretty strict terms and conditions. Miss a single payment and, in most cases, you’ll be fined as well as having your interest rate applied (and you could be rate-jacked as well).

Moving your debts to a new card is a quick way to solve your problems but it may not be your best approach. Simply phoning your card supplier and explaining why you missed a payment (and how you will ensure it doesn’t happen again) may work. If they agree and reinstate your 0% rate set up direct debit payments from your bank account asap.

How to force your lender to stop the rate hike

Do you know that you can actually prevent your lender from raising interest rates?

Back in 2008 the government got together with heads of the finance industry. During this gathering, lenders were told, in no uncertain terms, to toe the line and start treating customers fairly.

How does this affect you? An agreement was reached whereby lenders guaranteed to freeze interest rates. The full details of the agreement can be found in the Lending Code.

If you think your lender is breaking the rules make sure you don’t let them off the hook. Take the following steps:

  1. Call your lender and ask them to review you case and remove the rate hike. If this fails…
  2. Write a letter of complaint to you lender. If your lender still rejects your complaint or doesn’t answer your letter…
  3. Fill out a complaint form. This can be found here.
  4. But if all of this fails you need to…

Get help with your debt

If all else fails then it’s time to get some help with your debt. Getting yourself out of a financial pit is no easy task and the more help you can get the better. Tightening your belt may hurt in the short term but it beats years of living on the edge, in constant fear of losing everything.

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