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What determines your credit card interest rates?

One thing you may have noticed about your credit card interest rate is that when one credit card raises its interest rate, it isn’t long before the others you have begin to climb up as well.  It is the nature of the beast.  You may have a credit card issued by one bank that you have always paid on time and have always paid, at the very least, the minimum payment.  And, you may have another card that you have been late paying a time or two.

It is reasonable (to you) that the card you have been late in paying may go up in interest rates.  But, you certainly didn’t expect the one you have always paid on time to raise your interest rates, too.  You should be aware that credit card companies are like one big family.  They may have offered different rates in the beginning and they may have had different terms of service.  But, if you miss a payment on one, all the others take action to raise their rates.

Consider this.  The credit card banks keep in touch with one another, each knowing how you treat the others.  Of course, they don’t email one another and say, “Hey, brother, Jane was two weeks late in paying me this month.”  Instead, they make a small note on your credit report.  And, each of the companies keeps up with how you are treating their “brothers.”

Remember when you were young and the neighborhood bully starting picking on you.  You stood up to the bully, but he still hit you.  What happened?  Your brothers and sisters took up for you.  They went after the bully who had wronged you. 

Its the same way with credit card banks.  If you are late on a payment to one, you can rest assured that they let their “brothers” and “sisters” know about it.  Within no time at all, the other banks raise their rates because you picked on one of their brothers, so to speak.

You may cry “wolf” but it will do little good.  If you read the small print on that little two page pamphlet that describes your terms of service, the one you didn’t read when it came in the mail, you will find a section that says something about sharing information and the credit card bank’s right to raise your rates as they see fit.

By using the credit card, you agreed to those terms of service. 

As you begin paying off your credit card debt, don’t get sucked into the notion that you can pay off one and ignore the others until you get to them without paying the penalty.  You have to keep everyone of them somewhat happy to keep your interest rates low.

Look at your credit card balances.  Decide which of the cards you want to eliminate first.  Pay as much as possible towards the balance on that one, but do not ignore the others.  Make the minimum payments and make them on time.