Money Talk: Credit Card Issuers Can Change Future Rates Any Time
Question: I have had a certain credit card for over five years. I just received a letter stating that my interest rate was going to be raised from 10.24 percent to 12.24 percent. My FICO score is 819 and I have never had late payments on any of my cards.
I called the issuer to complain about this change but they will not reduce the rate. The letter states that they obtained my FICO score of 819 from Experian and used the score to make the decision to raise my APR. They told me that they are raising rates across the board for customers with FICO scores over 800.
Why are credit card companies allowed to do this? It is so unfair.
Answer: Credit card companies are no longer allowed to raise interest rates arbitrarily on individuals’ existing balances, as they could — and often did — before the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009.
Now card issuers are allowed to raise your interest rate on an existing balance only if you’re 60 days or more late with your payment, a promotional rate has expired or the index to which a variable-rate card is linked has gone up.
Credit card companies can, however, raise your interest rate going forward for pretty much any reason they want, and new balances will accrue at the higher rate.
Also, the CARD Act’s restrictions apply only to consumer credit cards; business credit cards aren’t covered by the law.
Changeable rates are just one of the reasons why it’s not smart to carry credit card balances. Since you have high credit scores, though, it should be easy for you to find another card with a low promotional rate. Some cards now offer a 0 percent rate for 12, 15 or 18 months, although you’ll typically pay a balance transfer fee of around 3 percent. Sites such as CreditCards.com, NerdWallet and LowCards.com, among others, list these competitive offers.
Once you get the new card, you should work to pay off the entire balance before the promotional rate expires.
Question: Can my 63-year-old ex-husband, who was a slacker who never worked, collect on my Social Security?
I am 59 and happily remarried. He hasn’t remarried. We were married for 25 years before I left him.
Answer: Since you were married for more than 10 years, your former husband can apply for spousal benefits based on your work record.
He can’t do so, however, until you’re old enough to get retirement benefits, which means he has to wait another three years until you’re 62.
If you were still married, he would have to wait until you actually applied for your own retirement benefits to get a spousal benefit. That requirement is waived for divorced spouses to keep a vengeful ex from deliberately withholding the right to benefits.
His ability to claim spousal benefits on your work record would end if he remarried.
Any spousal checks he gets won’t affect or reduce your benefit or any benefits claimed by your current spouse. Should you die first, both your current and your former husbands could claim survivors’ benefits — again, without affecting each other’s checks.
Question: You told a reader to be suspicious of a bank’s offer to waive early withdrawal penalties on a certificate of deposit. But several credit unions allow early withdrawals from five-year CDs after the account holder turns 591/2. These credit unions will even allow you to get higher-interest CDs at other credit unions with no penalty after 591/2.
My husband and I and sister did this for many years until just a few years ago. I even do Roth conversions every year and take money from five-year CDs with no penalty and go to the place with the highest interest rate.
There are many rewards and unexpected privileges at credit unions. When my husband passed and I disclaimed his traditional IRAs, the children were allowed to keep the 6 percent interest on those CDs until they matured, even after they were changed to inherited IRAs.
Answer: Credit unions, which are owned by their members, often have better rates and terms than banks, although some banks also offer to waive early withdrawal penalties after 591/2 on certain CDs.
But no one should rely on a verbal assurance that a fee will be waived. The offer to waive the fee should be in writing and kept with other financial documentation.
Liz Weston is the author of The 10 Commandments of Money: Survive and Thrive in the New Economy . Questions for possible inclusion in her column may be sent to 3940 Laurel Canyon, No. 238, Studio City, Calif. 91604, or by email at email@example.com. Distributed by No More Red Inc.