How Credit Card Companies Raise Rates: Did the Credit Card Reform Act Help?

Page content

The Credit Card Reform Act of 2009 was made to help the American consumer manage debt by regulating the way credit card companies do business. Some parts of the act will offer great benefits, such as credit card companies are no longer allowed to issue cards to adults under 21 without parental consent, and other stipulations. However, the biggest coup for the act concerned credit card rates. But has the act made much difference in how credit card companies raise rates?

The Old Ways Credit Card Rates Were Raised

Many believed how credit card companies increased APR in the past was a big mystery. In reality, many of the triggers were not hidden, consumers just needed to know where to look. The terms and conditions of all credit card contracts state certain triggers that raise credit card rates. The most common ones are:

  • A missed payment - It only took one
  • Going over fixed limits - The first occurrence could raise the annual percentage rate (APR)
  • A returned payment
  • Late payments - Actually, your APR could be raised after the first late payment on your account

Some reasons were not openly discussed and often took responsible cardholders by surprise. Fluctuations in a person’s FICO score, specifically a drop in score, could result in an increased APR.

How the Credit Card Reform Act Regulates Rate Increases

One of the ways the Credit Card Act of 2009 hopes to control rate increases is by making them present terms and changes in “plain language that is in plain sight”, according to a 2009 White House press release. The Credit Card Act bans the following rate increasing tactics:

  1. Any Reason Retroactive Rate Increases - This means if your rate is raised, it is only raised on future balances not your previous balance. The credit card company is not allowed to apply the new rate retroactively.
  2. Rate Protection for First Year - New cardholders are protected from rate increases for 12 months. Promotional rates are not included in this; however, any promotional rate must last at least six months. For example, you have an introductory APR of 2.4% that becomes the standard APR of 13.48% at the end of your promotional period. The 2.4% promotional rate is guaranteed for at least six months.

Along the lines of retroactive rate increases, the Credit Card Act of 2009 only restricts (not bans) rate increases due to late payments. So if you make late payments, your rate can increase and be applied retroactively.

Are Credit Card Reforms Concerning APR Effective

New cardholders, those who obtained a new credit card account after February 22, 2010, will benefit most. They will not be subject to many of the tricks and traps existing cardholders faced over the years with credit card companies. However, the act did very little to protect existing cardholders from APR increases.

Credit card companies were given a grace period with the Credit Card Reform Act. During the nine months before the act went into full effect, credit card companies scrambled to create new ways to raise rates. Issuers such as American Express, Chase, and Wells Fargo increased rates for customers, which caused some consumers to have minimum payments that were more than double their original amount. These increases came before the opt-out provision of the Credit Card Act took effect in 2009. As a result, many cardholders had fallen victim to the very practices the act hoped to eliminate.

The Credit Card Reform Act regulates how APR increases affect past balances; future credit card balances are still subject to rate increases. The same reasons banks used to raise APRs in the past are still in effect for future balances. However, not everyone’s previous credit card balance is exempt from the ban on retroactive rate increases. Two circumstances can cause cardholders to fall victim to retroactive rate increases:

  1. Credit cards with a variable APR with a sub prime rate index are exempt. If the underlying sub prime rate increases, then this increase can still be imposed retroactively to the previous balance.
  2. If you are over 60 days late on your monthly payment, the credit card company can retroactively raise your APR. However, if you make on-time payments, then after six months the credit card company must restore your old APR.


Unfortunately, not much has changed in how credit card companies raise rates on future balances. If your credit card company raises your rates retroactively and you have a fixed APR and have not been 60 days late with your monthly payment, then you can report your issuing bank to the following people/departments:

Become more informed about rate increases by keeping up with notices sent inside your statement. Don’t allow rate hikes to catch you by surprise.


BCS Alliance. (n.d.). File a Complaint Against Your Credit Card Company. Retrieved July 7, 2010, from BCS Alliance:

Block, S. (2010, February 26). What you need to know about the new credit card reforms. Retrieved July 8, 2010, from USA Today:

Office of the White House Press Secretary. (2009, May 22). Fact Sheet: Reforms to Protect American Credit Cardholders. Retrieved July 7, 2010, from The Official Site of the United States White House:

Pierce, S. (2009, January 9). Shopping for Credit Card Debt. Retrieved July 7, 2010, from

Prater, C. (2009, November 13). Consumers gain right to opt out of credit card rate increases. Retrieved July 8, 2010, from

Yellin, J. (2009, October 9). Some credit card companies rush to act before new law. Retrieved July 8, 2010, from