Your Credit Card Rights

Manage Your Money - Know Your Credit Card Rights

Amendments to Credit Card Agreements

I think most credit card lenders would like to keep their customers in the dark about the terms and conditions of their credit agreements. And in spite of numerous federal and state laws designed to make everything so open and transparent an six year old could understand it, a lot of American credit consumers seem to be perfectly willing to let the lenders have their way.

Too many people sign legally binding credit agreements without reading them, let alone understanding what they say. They also have no clue about their credit card rights.

When you apply for a credit card, the application that you sign is also a legally binding contract laying out all the terms between you and the bank, such as the interest rate and how its calculated, the grace period, whether there’s an annual fee, etc.

While you have to agree to the terms and sign if you want the credit card and while the lender will certainly hold you to the terms, the lender doesn’t feel similarly committed.

Lenders like to constantly amend the terms, effectively changing the deal after it was made. This is one of the few industries where you can be charged significantly more than you originally agreed to pay.

One of the main reasons they’re doing this is because they are constantly checking your credit score, looking for any excuse to raise rates and thus their income.

So, even if you have never been late on any payment to any bank or utility, your credit score can raise as you’re approaching your credit limits. Or you could have missed a payment or lost your job. Lenders have any number of excuses for their actions.

Also the lenders count on the customers not reading the little inserts filled with legal jargon they slip in with your bill or mail separately, at least until it’s too late. Apparently the vast majority of card holders never look at these amendments. The issuers also hope that most of us are ignorant of our credit card rights.

Not all changes to the credit card agreement are necessarily harmful to you, although you'll rarely find one being done in your interest. Most of them change minor terms of the contract.

But Credit Card Amendments Can Contain Nasty Suprises

The problem the lender has is that the original agreement is a binding contract that the lender can’t change unilaterally. They have to give you an out. That’s why it pays to pay attention and know your credit card rights.

I once had a credit card account with the stated interest rate of 13.5%. I was financially strapped and was using more and more of my available credit. I had never missed a payment or was late to anybody for at least 10 years.

However, not paying much mind to my statements, I did not know the bank sent me a notice that it would raise my rate if I used the card past a certain date.

I did and I found myself facing an interest rate of 24%. Calling the bank and complaining and threatening to take my business elsewhere had no effect.

After that I started to pay more attention to those little slips of paper. Twice more different lenders tried to do the same thing. But, finally learning my credit card rights, I followed the directions on the amendments to the credit agreement and wrote the bank within the time frame given, telling them to cancel my account.

[Bank of America has been in the news lately for doing this to a large number of good customers. They gave the card holders an out, but you had to write to a specific address by a specific date to opt out of the increase.]

You must no longer use the card afterward. If you do, you’ve accepted the new terms in spite of your letter and you’re stuck with them.

If you have any automatic charges being made to the card, including things like credit insurance that the lender itself sells you, make sure they are cancelled in writing before the cutoff date.

One little automatic charge will also constitute an acceptance of the changes in the credit terms. The bottom line is that the lender will consider any little slip in its favor and hit you with the higher rate.

As long as you continue to pay your bill under the terms of the original agreement, the bank can do nothing about it. You can pay off the bill at whatever pace you see fit, as long as you make the minimum payment.

I consider the lenders’ actions as akin to kicking you while you’re down. Most people wouldn’t be using up their available credit unless they were already struggling. My credit card payments went up $46 per month on that card. I saved thousands by refusing to go along with other proposed increases.

The issuer of one of my cards that I have carried a zero balance on for several years has been periodically raising the rate to where it is about 25%.

Know your credit card rights and fight back. If you’ve haven’t gone completely over the financial edge yet, you might find a lender willing to work with you.

One credit card issuer that I highly recommend is Pulaski Bank, rated by Consumer Reports Magazine as a Top Ten consumer friendly bank. Not only does it consistently charge one of the lowest APR's in the country, it does not use the "universal default clause" which gives rise to a lot of the problems described in this article.

Credit Agreements are Changing

I guess more people are reading their credit card inserts and educating themselves about their credit card rights than I thought.

So some credit card issuers are now giving themselves the option of changing terms unilaterally with no way out for the customer.

Do yourself a favor. Read your credit card agreements and amendments and if your lender has done this, close the account now - in writing, before they do anything to you.

If you have a balance, you still have to pay it off, but the lender should not have the ability to change the terms unilaterally anymore.

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