Credit card opting out issues - March 4, 2008
On the back of their credit card statements some credit card users may notice something what is called opting out policies. These opt out notices are delivered to some credit card users who are in jeopardy of having their interest rate increased by the credit card issuer. There are several reasons why a credit card issuer may decide to increase the interest rate on a consumer.
Some credit card companies will use a credit score drop as an indicator that the consumer is more at risk of defaulting on credit obligations. In turn the will increase the interest rate for that customer. Yet there are no legal restrictions in place to keep credit card companies from using this practice.
The majority of credit card companies must however notify the customer in advance that they are planning to increase the interest rate. They must also give the customer a chance to pay off the balance and opt out of the credit card. Customers are not always clear of the reasons why they are moved up into a higher interest rate category when they receive these notices. “Additional information” or some other vague terms are stated as the reason why the credit decided to increase the interest rate. There are usually also some instructions for the customer to get more insight into the cause. In some cases the customer is simply led toward the credit reporting agencies.
Consumers who get these types of notices should read them carefully. Very important is the policy used if the consumer doesn’t opt out. The entire previous balance might be charged the new and higher interest rate even if there are no new purchases placed on the card. This can mean a huge increase per month for a balance that hasn’t changed.
Silence is not golden if you receive such a notice as customers only have a certain amount of time to opt out before the company will assume that the customer does not want to opt out at all. Then they will begin to assess the higher interest rate. Also some credit card companies have very strict rules on how the consumer must follow up if he or she decides to opt out. A written letter is suitable in most cases. If you receive one of these notices and wish to opt out you should closely follow the instructions on the letter in order to avoid future problems.
Leave a Reply