If your credit card has a variable interest rate, it’s likely gone up in the last year, maybe even without any notice from your lender.

Credit card interest rates have been on the rise since the Federal Reserve began raising interest rates in March 2022 to fight inflation. In fact, 34 percent of consumers who have added to their credit card debt in the last year say it’s because of rising interest rates, according to a recent CreditCards.com survey (like Bankrate, CreditCards.com is owned by Red Ventures).

That’s because these rate changes are tied to the prime rate index that moves with the Fed’s target interest rate raises. The Fed’s actions increase the cost of borrowing money overall, causing the issuer to respond. And when your card issuer raises rates due to the Federal Reserve’s rate changes, it is not required to provide you advance notice that your card interest rate will go up.

There are other situations in which your card issuer can raise your interest rate at its own discretion, but only after giving you advance notice of its intention. The Credit Card Accountability Responsibility and Disclosure Act (CARD Act) of 2009 lays down how card issuers should handle rate raises.

Will you get advance notification of a card rate hike?

An issuer cannot generally raise your card interest rate within one year of your getting the card, except in a few cases:

  • You make a late payment
  • You don’t keep up with the terms of a workout agreement (a negotiation between you and your issuer)
  • The rate goes up because a promotional period ends
  • An index rate (like the prime rate, which changes with the Fed funds rate) to which your card’s rate is tied goes up

After one year, your issuer may raise your rate, but it generally must give you 45 days’ notice. This rate increase would generally only apply to new purchases on your credit card (those you make after more than 14 days from the notice date). Any balances you already carry before you get the notification will retain the previous rate.

There are exceptions here too, though. No advance notification is required if your interest rate rises after a promotional period ends (such as a 0 percent intro APR offer), though you should know in advance that your rate will go up if you take up these offers.

And when your rate moves because of a change in an index to which the rate is tied, your issuer isn’t required to give notice. This may have been the case if your card’s rate went up following the Fed’s interest rate hikes in the past year.

Do interest rate changes apply to existing balances?

While interest rate changes typically apply to new charges made after you’re notified of the change, there are some cases in which the issuer’s rate increase can also apply to your existing balances:

  • A promotional interest rate period of at least six months ends and you were given advance notification that the rate would go up after that (this is how balance transfer offers typically work, for example)
  • Your minimum payment is at least 60 days late
  • You have entered into a workout agreement with the issuer but haven’t made the necessary payments
  • The increase is tied to a rise in an index off which your interest rate is based

In some cases, you may be able to get your rate lowered again. For example, if your issuer raised your interest rate as penalty for making a late minimum payment, you can return to the lower rate once you are current with your payments for six consecutive months after the issuer raised the rate.

Can you decline a higher interest rate?

If you don’t want to accept the new interest rate your issuer offers, you can negotiate against the changed terms. However, if you don’t accept the change, the issuer can shut down your account.

You can also cancel your account before the new rate kicks in. The issuer will notify you that you have 45 days from the notice date to cancel your account if you don’t accept the new rate. However, the new interest rate will take effect 14 days from the notice date (which means you can only make purchases at your old rate for up to 14 days after you receive notice).

The issuer doesn’t have to give you a notice about your right to cancel your account if it raises rates on new transactions (and not existing balances) or if the interest rate change took place because you were at least 60 days late with your minimum payment.

When you cancel your card account or the issuer closes it because you don’t accept the new rate, the issuer can ask you to pay off your balance within a five-year period, and raise your minimum monthly payment required.

Explore your options for a lower interest rate

If you get notification from your card issuer about its intention to raise your interest rate, you do have some options.

First of all, you could try negotiating with the issuer. If it wants to retain your business, it might cooperate with you.

Also, you could consider transferring your card balance to another card with a lower interest rate. You should consider cards that offer zero percent balance transfer promotional rates. You won’t pay any interest during the promotional period with these cards, but you should aim to pay off as much as possible before the balance transfer period ends.

A debt consolidation personal loan with a lower interest rate is another option if you’re looking to pay off your existing card balance. These loans typically offer a fixed interest rate and payment period.

The bottom line

Card issuers generally can’t raise your card’s interest rate within the first year of account opening. After a year, they can raise your rate after giving you 45 days’ advance notification. If you don’t receive notice, your rate may have increased for an eligible reason — such as the Federal Reserve’s interest rates rising and impacting all variable rates.

If you don’t accept an interest rate change, your issuer can cancel your account and you will have to pay off your existing balance.

Don’t be afraid to keep your options open, too. If your new interest rate doesn’t align with your financial goals, consider your options, such as transferring the balance to a new card or personal loan to get a better rate.