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  Dear
Debt Adviser,
I have a large balance on a credit card,
which I have been paying down faithfully every month. I've
never been late and stopped using this card about seven months
ago. Last month I paid $2,000 on this card. I just got this
month's bill and the bank has increased my finance charge
from 10.99 percent to 30 percent!!! When I called them, they
said they reviewed my credit rating and noticed I have other
debt. I can't pay this card off at this huge interest rate.
This is a purely greedy action on their end. Do you have any
advice on how best to deal with this?
-- Linda
 Dear
Linda,
Don't despair. The card holder agreement or contract that binds
you as the card holder to pay as agreed also binds the issuer
of the card, in this case your bank, to the original terms of
the contract. The catch is that due to a clause in most card
holder agreements called "universal default." This
allows the issuer to change the rules midstream unless you say
no. The issuer then has the right to close the account; while
you have the right to pay off the remaining balance under the
original agreement.
In your bill this month or perhaps in a separate
mailing you may have received some type of written notification
of the change in account agreement (the increased interest
rate) along with instructions on how to contact the issuer
to let them know if you do not accept the new terms.
You do not have much time to contact them regarding
your non-acceptance of the new terms of your card holder agreement.
Typically you must respond in writing within 30 days of the
notification by the issuer of the card holder agreement revisions.
Simply write your bank a letter stating you
wish to continue under your original card holder agreement.
I would send it certified mail, return receipt requested.
Because the account will be closed, you will not be able to
use the account to charge any new purchases, but it doesn't
sound like you need that card or to be adding anything to
your debt anyway.
One other possible negative of closing the account
is that closing lines may affect your credit score if this
causes the debt-outstanding ratio to the credit-available
ratio to change past what is considered optimum. For example,
if you have $10,000 of available credit on several credit
cards and owe a total of $1,000, you have used 10 percent
of your available credit. However, if you close accounts with
$9,000 of available credit, you now have used 100 percent
of your available credit and that isn't good for your credit
score.
Don't feel like you are being targeted for this
type of treatment from your bank, you are not alone. Complaints
from card holders about increased interest rates on accounts
where they have paid faithfully what was due and on time only
to have their interest rates increased dramatically because
of their payment history on a different line of credit, are
increasing daily.
Unfortunately, "universal default" is here to stay,
so paying your bills on time is even more important than ever.
An unintentional late payment to your utility company could
end up costing you hundreds of dollars in interest payments
on your credit card accounts.
Big Brother is watching! Good luck
The Debt Adviser, Steve Bucci, is the president
of Consumer Credit Counseling Service of Southern New England.
Visit CCCS
for additional debt
advice or click
here to ask a debt question.
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