If you just got a letter from your credit card company informing you of a new, higher interest rate, you've got some decisions to make. You have the option of not accepting the new rate, though your credit card company will probably cancel your card. If this happens, you can probably save some money, but you could also damage your credit score.
Notification of Interest Rate Increase
The Credit CARD Act of 2009 requires credit card companies to notify you at least 45 days before making changes to your account, including your interest rate. If your interest rate goes up, you have the right to not accept the increase and pay off your card at the same interest rate that you currently have.
Opt-out Option
If you choose the opt-out option, your credit card company is likely to cancel your credit card. If this happens, you'll still be able to pay your balance off at your old interest rate, but you won't be able to use the card any more.
Credit Score Consequences
If your credit card company closes your account, your total available credit decreases, harming your debt-to-available credit ratio. This can end up hurting your credit score. If you plan to make a major purchase some time soon, you may not want to opt-out of the interest rate increase but find another way to pay off your balance quickly.
Increased Monthly Payments
Once your credit card company cancels your account, it can raise your monthly payment in order to get your card paid off as soon as possible. For example, under the Credit CARD Act, the credit card company can raise your monthly payments so that you pay off the card in five years. Find out what your monthly payment will be if you opt-out: You don't want to end up with a payment that you can no longer afford.
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