The secret trick you can use against your credit card provider

Find out how you can fight back against credit card rate-jacking...

The only way is up, or it is when it comes to credit cards. If you don’t believe me, just ask anyone who has recently been caught by a rate-jacking credit card provider.

For those not in know, rate-jacking is when a provider ups the interest rate on your credit card or store card – sometimes by up to 10%.

And the bad news is that the current fragile economic state means that more and more credit card providers are beginning to dabble in this dark art. So if you’ve got a sketchy credit history but still managed to get a credit card at the height of the economic boom you could soon find your card provider upping your interest rate.

These hikes are as irresponsible as they are unfair. Credit card providers have no official mandate for rate hikes as the Bank of England Base Rate has been at 0.5% for almost two years now. What’s worse is that by subjecting customers with dodgy credit histories to inflated interest rates, card providers will be squeezing many people who are already struggling to make ends meet.

But you can still fight back against them...

Ditch!

New rules mean that credit card providers must give you 60 days (it used to be 30) to accept or reject rate hikes. If you do choose to reject the rate increase you can either pay off the outstanding balance in full, or clear it in instalments within a ‘reasonable period’ at your current interest rate.

Now, obviously what constitutes a ‘reasonable period’ is up for debate. But generally if you’re prepared to argue your case, while still showing your bank that you are prepared to clear the balance, you should be able to retain your current rate.

That said, if you’ve been paying off a hefty sum of your balance each month, the bank won’t allow you to switch to minimum payments to clear the rest of your balance. And likewise, if you’ve been making minimum payments on a large balance, you’ll probably have to step up the amount you clear off each month in order to clear the balance in a ‘reasonable period’.

If you do reach an agreement to pay off the balance in regular instalments, make sure you set up a direct debit to make the payment each month. Otherwise, if you forget one month, the credit card provider will probably turn round and up your rate immediately.

But if you can’t clear the whole balance in one lump sum or in regular instalments, there is another option...

Switch!

Moving your credit card burden over from the rate-jacked card to a 0% balance transfer card will mean you can avoid interest rate hikes - for a set period, anyway. In fact, it will actually save you money, as won’t pay any interest on the debt after you’ve shifted it.

Barclaycard is currently offering 0% on balance transfers for 17 months and MBNA and Virgin aren’t far behind with their 16 month cards. Read A new 17 months interest-free credit card to find out more. Just remember to clear your balance in full before the interest-free period comes to an end.

You should also note that Barclays and Bank of America (which issues the MBNA and Virgin cards) will not accept balance transfers from other cards they issue. But then again, if they rate-jacked you it’s unlikely that you’d want to keep giving them your business anyway!

Fortunately there are plenty of other 0% balance transfer cards not issued by these banks – read 20 top 0% balance transfer cards for a full run down of them. Or head over to our credit card comparison centre to view all all of the cards currently on offer and get the best deal.

Other rights

When it comes to credit cards you do have a fair few rights. Yes, you have spent the bank's money – but this doesn’t mean that they should be able to exploit you. So make sure you fight your corner if you believe you’re being treated unfairly.

Card providers are not allowed to increase your interest rate in the first 12 months of your contract, unless they have informed you about it in the original terms and conditions. After this period, your rate can go up, but only once every six months.

As we reported in Stop rate hikes on your credit card it’s also worth kicking up a fuss if you believe the interest hike is completely unfair. Demand an explanation as to why your rate is increasing and if they give you a vague or unsatisfactory answer complain to the Financial Ombudsman. Read our guide to complaining for some more tips.

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