Three things you should know about credit card rates

Tips that could help you save time and money

Change is a fact of life. But some changes you can control, or at least plan for. When it comes to credit cards, understanding the when and how of rate changes can save money — and a lot of frustration.

Your rate-management toolbox.
Everything you need to know about your rates can be found using:

• Your account agreement: You’ll receive a copy of this in the mail when you get your new card. It details all of your interest rates that apply when the account is opened, and what circumstances might cause them to change.
• Your statement: Both online and paper statements list your current rates.
• Your mailbox: If there is a change, you’ll be notified either in a separate letter or in an insert that comes with your statement. Always check everything that comes from your credit card issuer.
• The customer service phone number on the back of your card: If you can’t find an answer anywhere else, call and ask. That’s what they’re there for.

Use these tools to find out:

1. What’s what with promotional rates.
Promotional rates are temporary rates that entice you to use your card. That’s why they’re sometimes called “teaser” rates. These rates can be offered as a special deal with an existing card, or as an introductory rate when you apply for a new card.

Promotional rates can be a great way to save — as long as you’ve checked out the details. The terms of the promotional or introductory rate should accompany the offer. Make sure to find out:

• The expiration date. If you’re trying to pay off your debt while the rate is low, be sure you know exactly how long you have.
• What the rate will be after the promotional rate ends. That will be the standard rate — see #2 below. 
• How payments are allocated. If you have balances with different rates, credit card issuers are required to apply any amount you pay above your minimum payment toward balances with higher rates, but they are permitted to apply your minimum payment to the balance with the lowest rate first.  Check your account agreement to see how your credit card issuer allocates minimum payments. 

2. The everyday bottom line.
Standard or contract rates are your regular rates. They’re part of the contract you agree to when you accept a credit card, and they’re listed on your monthly statement. But the agreement also says that these rates can change:

• The up and down of variable rates. Variable rates are tied to an index like the U.S. Prime Rate and can go up or down if the index changes, depending on how often your issuer updates the rates. Check your account agreement to see if your rates may update quarterly or monthly.
• If your rate is non-variable — that is, not tied to an index — it may still change. Issuers generally reserve the right to change rates based on your credit history, market conditions, or other reasons. If your rate changes, your issuer will notify you first. They’ll explain the reason for the increase and let you know about your options, including whether you can opt out of the rate increase.

3. How to stay out of the penalty box.
Paying on time is your best defense against a penalty rate. Check your account agreement to see if your issuer may impose a penalty rate — and if so, what you need to do to stay out of the “penalty box.”

If you get hit with an increased rate, there's good news: not all penalty rates last forever. Issuers are required to review your account periodically to determine if the Penalty APR can be reduced.

The more you know, the better you can plan.
Don’t let yourself be blindsided by rate changes. Understanding and tracking your credit card rates can help you keep better control of your finances.

What's next? The benefits of your credit card