Key takeaways

  • Generally, issuers may only increase your credit card interest rate a year after account opening and with a 45-day notice.
  • There are exceptions to this rule, including if the prime rate changes or your introductory APR period ends.
  • 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.
  • You have options for dealing with increased interest rates, including balance transfer cards and debt consolidation loans.

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

That’s because 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 survey (like Bankrate, is owned by Red Ventures). And the Fed announced the most recent hike during a July 2023 press conference, bringing the Fed rate to its highest level since 2001.

Why did your credit card interest rate go up?

Credit card 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 by raising credit card interest rates.

There are other situations in which your card issuer can raise your interest rate at its discretion, but only after giving you advance notice of its intention. The Credit Card Accountability Responsibility and Disclosure Act (CARD Act) of 2009 outlines how card issuers should handle rate raises. An issuer cannot generally raise your card interest rate within one year of your getting the card, except in a few cases. Here’s what can increase your credit card APR:

  • You make a late payment
  • Your credit score drops significantly
  • 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 0 percent intro APR offer 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
  • You activate a cash advance APR

In most cases, the issuer must give you 45 days’ notice before changing your rate. This rate increase would only apply to new purchases on your credit card (those you make after more than 14 days from the notice date). Any balances you carry before notification will retain the previous rate.

There are exceptions here, 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 these offers make it clear your APR will increase after a set period. And when your rate moves because of a change to the Fed rate, your issuer isn’t required to give notice. If your card’s rate went up following the Fed’s interest rate hikes in the past year, this might be why.

When do interest rate changes apply to existing balances?

Interest rate changes typically apply to new charges made after your issuer notifies you of the change. However, 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 the federal 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, the issuer can shut down your account if you don’t accept the change.

You can also cancel your account before the new rate kicks in. If you don’t accept the new rate, the issuer will notify you that you have 45 days from the notice date to cancel your account. 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 notify you about your right to cancel your account if it raises rates on new transactions (and not existing balances) or if the interest rate change occurred 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.

Finally, should the issuer increase your interest rate, you can get your rate lowered again in some cases. For example, if your issuer raised your interest rate as a 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.

Explore your options for a lower interest rate

If you get a notification from your card issuer about its intention to raise your interest rate, you have some options to avoid the increased payments.

  • ​​Call your credit card issuer and try to negotiate your interest rate down. It’s entirely possible to negotiate your rate down by calling the number on the back of your credit card. And the worst your card issuer can do is say “no.” Lowered rates are more likely to be offered if you have a long history of responsible credit use and a good relationship with your card issuer.
  • Consider a balance transfer credit card. These cards let you transfer your card balance to another card with a lower interest rate, with the best balance transfer cards on the market offering a 0 percent introductory APR for up to 21 months. You won’t pay 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.
  • Take out a debt consolidation loan. If you’re not interested in moving debt from one credit card to another, you can also look into personal loans for debt consolidation. Personal loans come with fixed interest rates considerably lower than credit card rates, as well as fixed monthly payments and a fixed repayment timeline. This set timeline means you can consolidate debt and have a clear goal of when you’ll become debt-free.
  • Pay off your credit card balance. If you have the extra funds available, consider putting money toward paying off your entire balance at once. The sooner you can eliminate that debt, the sooner you can stop worrying about ballooning interest.

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.

Don’t be afraid to keep your options open. If your new interest rate doesn’t align with your financial goals, consider other methods of paying off your credit card debt, such as transferring the balance to a new card or taking out a personal loan to get a better rate.