Dealing with an interest rate raise
It is not often that you sign an agreement and then see the terms of the agreement change along the way, but this scenario
happens with credit card agreements. Many people receive letters from their credit card issuer notifying them of an impending
change to the terms, which usually includes an increase in the interest rate and it doesn't just apply to new debt, it will also
apply to debt you have already accumulated on the card. Balance transfer debt may be excluded depending on the deal agreed upon.
Likely cause
The most likely cause of an interest rate increase is a change in your credit rating; credit reference agencies regularly
update the credit ratings of people they have in their databases. If your credit rating goes down, your credit card provider
might decide that you have become riskier than before, therefore they try to negate this by adjusting your interest rate.
What you can do
The stated reason above isn't the only possible reason for an interest rate raise, the only way to be sure is to call your card provider and ask why your interest rate went up. If they say it's a result of a drop in your credit rating, it might be worth your time to check your credit files with the credit reference agencies; this will not only allow you to confirm whether your credit rating really went down, but it will also help you decide what to do next:
Negotiate
If the drop is small and you have been a good customer, you might be able to convince them to reverse the decision to
raise your interest; sometimes a card provider will compromise to avoid loosing a valuable customer.
Opting out
If negotiating doesn't work and you're unwilling to pay the new interest rate, you can opt out of the new terms:
When your card provider sends you the letter notifying you of an impending change to your interest rate, it will also tell you that you can opt out and give you instructions as to how.
If you choose to opt out, what normally happens is the account is frozen; the interest rate remains the same on existing balance but you're unable to use your card for new purchases or anything else. After the balance has been paid off the account would be closed.
Temporary freeze
Opting out means you can't use your card anymore, but what if you want to keep your card for future use?
You can make the freeze temporary by opting out now, and re-activating the card once the debt is paid down significantly:
Normally you have the option to re-activate your account at a future date if you change your mind about having the account closed (if the letter doesn't mention this, call and ask whether it's possible).
If this option is available to you, have the account frozen, this way you keep paying off your balance at the lower interest rate. Just before the balance has cleared, call the card issuer and ask to have the account re-activated.
It's worth remembering that after the card is re-activated the new interest rate will apply to remaining and future balance on the account.