Did you know that your bank isn’t allowed to just raise interest rates on your credit card as they wish? Did you even know that you have legal rights when it comes to credit card interest rates?
The Credit CARD Act of 2009 greatly improved consumer rights when it comes to credit card companies. Even though the CARD Act was passed back in 2009, many consumers still aren’t aware of those rights.
This is a problem because credit card companies do sometimes infringe upon these rights, whether knowingly or by accident. Recently, an announcement made by Citigroup stated that they had accidentally been charging unfairly high interest rates to 1.75 million credit card accounts for seven years. After finally catching the mistake, they refunded cardholders for a whopping $335 million in overcharges.
It makes you wonder how many credit card companies are making mistakes and not catching them. Here are the rights you should know when it comes to your credit card so you can avoid being overcharged, or worse.
- There are no legal limits on credit card interest rates
Unless you bank with a credit union, which is limited to charging a maximum APR of 18%, there are currently no federal laws in place that limit the interest rate that banks can charge on credit cards.
The only thing that prevents banks from charging sky-high interest rates is consumers. After all, if a credit card company were to charge a 79.99% APR, there would be almost no demand for their product. Credit card companies also compete with each other for customers, and in theory, the credit card with the best terms and lowest interest rates will win the most customers.
In practice, this is only true if consumers are informed. If you don’t bother to do your research before applying for credit cards and racking up debt, credit cards can charge any interest rate they please. This is why it’s important to do research and compare cards to get the lowest interest rate available to you.