How to keep ahead of rates and lower them when your card issuer hikes them up.
NEW YORK (CNNMoney.com) -- A congressional panel turned the spotlight on what has been called "unfair" practices of credit card issuers yesterday. This is part of a broader regulatory effort to crack down on credit card practices that are deemed unfair to customers. Here's how you can fight back against rising interest rate fees.
Members of a U.S. Senate subcommittee found that some of the top credit card companies automatically increase cardholder interest rates even though people were current on their payments. The rate increase was attributed to a drop in their credit score.
In one case, a credit card interest rate increased from 8% to 23% because of a drop in a FICO credit score. Subcommittee Chairman Carl Levin, D-Mich., is aiming to pass a bill that would protect consumers from certain sudden interest rate hikes.
The Federal Reserve plans to require credit-card issuers to give customers at least 45 days' notice before raising interest rates and to provide clearer information on fees.
1. Scrutinize your statements
First, realize that your credit card issuer can change your rate at any time, for any reason. And you should receive written notification that your rate is changing.
Card issuers have to send a separate notice if it was a change in terms. But if the issuer already disclosed in the cardholder agreement that your rate could change under certain circumstances, you'll get the info in your statement. You'll need to know what rate you're paying.
And you should scrutinize every statement. The change in your interest rate may not necessarily come on a separate piece of paper. It may be buried somewhere on your bill.
2. Lower your Rate
The good news here is that you do have options. First, if you've found out your rate has been raised, but you've been making on-time payments consistently, call customer service and see if you can get your original rate. Some of the witnesses at the hearing were able to get their interest rate knocked down.
But otherwise, take heart. Two major credit card issuers - JP Morgan Chase and Citigroup have already announced they will do away with this practice or raising interest rates based on credit scores.
Chances are, you'll be able to negotiate if you pit issuer against issuer and threaten to transfer your balance to one of these other cards according to Curtis Arnold of Cardratings.com. And, chances are that these other cards will follow in Chase and Citi's lead.
3. Monitor your Credit
It seems that everyone else is checking your credit score. Now is the time to monitor your credit.
First, get your free credit score if you haven't done it this year. The website you want to go to is annualcreditreport.com.
Next, make sure you know what some of the biggest credit mistakes are. If you open up a retail store credit card for example your credit score could drop.
And charging up to your credit limit will also hurt your score. To find out what can help or hinder your score, go to myfico.com.
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