Dear Debt Adviser,
I have a bank credit card tied to rewards for a cruise line that I got a few years ago. I transferred a balance to this reward card. It has a balance of around $3,000. My problem is that approximately a year and three months ago I was ONE day late on my payment and the bank increased my interest rate to 30 percent. It was the first and only time I have been late. I have called many times and they will not lower it and keep telling me to give it more time. It is getting to the point where I am having a hard time paying it because the interest is so high that I am just swimming in circles. Are there any suggestions on how to get them to lower it? Or is it even legal for them to do this after one late payment?
Talk about piracy on the high seas! I guess the Somali pirates don’t have a monopoly on hijacking for ransom. Consumer protection from the eye-patched crowd in financial services took a big step forward when the Credit Card Accountability, Responsibility and Disclosure Act of 2009, or CARD Act, was passed and is gradually being implemented. More help might be on the way with the creation of the Consumer Financial Protection Agency, which was called for in the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Unfortunately, your one-day late payment occurred before the consumer protections provided for in the CARD Act went into effect. Before the CARD Act, yes, the pirate bank could legally raise the Jolly Roger and your interest rate to the default rate for just one late payment, even a payment that was only one day late. However, drum roll please, they cannot do so any longer.
The CARD Act protects consumers from interest rate increases on existing balances unless your payment is more than 60 days late. Now, the only interest rate which creditors are allowed to raise for being one day late is the interest rate for new purchases and transactions. The rate on old balances stays the same.
Furthermore, if you make a payment that is more than 60 days late, you can only be charged the default interest rate on existing and future balances until you comply with the bank’s ‘cure’ policy. This is generally six consecutive on-time payments, but details vary by bank. So be sure you understand what you have to do to get relief. Once you meet the ‘cure’ criteria, the creditor must reinstate your previous non-default interest rate. If you want to read the nitty-gritty details of the CARD Act, be warned: it’s not for the faint of heart as it is 270 pages long.
For you to get the new protections under the CARD Act, I recommend that you transfer the balance from your current bank card to another lower-rate credit card. Once your balance is on a new card, the protections of the CARD Act will apply. Be sure to shop around for the card that has the best terms for your specific needs.
When you’ve transferred the balance to another card, you can decide if you would like to keep the cruise line reward card or not. If you want to keep racking up the cruise points, I suggest that you contact the issuer and ask for a competitive interest rate going forward. If they are willing to lower the interest rate to a reasonable rate, then you can go back using the card as you did previously. Otherwise I suggest that you don’t carry a balance for six months, after which the creditor will not be able to raise your interest rate for a payment that is one day late.
If you are a regular customer of the cruise line, you might take the time to write them a letter. Let them know you are unhappy with the way the bank they use for their rewards program treats its cruise customers.
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