Dear Dr. Don,
My credit card rate of interest is 7.9 percent, but on the statement it says that the annual percentage rate for this billing period is 22.89 percent. What does this mean and how does it apply to my credit card interest rate? If it doesn’t mean anything, why is it there?
— Bonnie Bump
It most likely means that you’re not at the 7.9 percent rate anymore. The credit card company doesn’t randomly print rates on your billing statement that don’t relate to the statement. A possible exception could be a notification of the APR for cash advances or the default APR.
When a card provider raises the interest rate for reasons other than your credit history, it has to provide notification and give you an opportunity close the account to new charges and pay off the existing balance at the old rate. When it’s your credit history that brings about an interest rate change, you don’t have the same option.
A rate increase from 7.9 percent to 22.89 percent probably resulted from something related to the payment history on your credit report. The lender can change rates to a “default APR” when you haven’t met the terms of the card agreement.
Some card providers use universal default provisions so that a late payment on any account can trigger the default APR on this account. The Bankrate feature, “Universal default’ rules explained,” provides greater depth on the topic.
Call the credit card company to ask what’s going on with the interest rate on your credit card. If it does relate to your payment history, you’ll want to review your credit report and see if the report is accurate.
You can dispute inaccurate information. The Bankrate feature, “Checking and reading your credit report,” provides all the information you’ll need.