Credit Card Companies Are Raising Your APR – Here’s Why & What You Can Do

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Isn’t it always a blessing to come home, check the mail, and be greeted by a handful of bills!  Don’t you just love that?

The Problem

Today I had the pleasure of getting an extra special treat from Capital One; one of my ever so thoughtful credit card providers.  Here is the letter I received from them:


According to the literature, Capital One is raising my APR by nearly 7% due to “the challenging economic environment”.  This is an incredibly steep increase in interest that has been implemented in order to pass the brunt of these tough economic times from the shoulders of a credit card company over to my shoulders!  I suppose they assume I have broad, strong, healthy, able shoulders!

I Tried Negotiating

Of course being the extremely frugal chap that I am, I called the powers that be and not only attempted to halt the increase, but actually tried to have my rate lowered from the original amount of 16.24%.  In order to be successful I knew I was going to have to strategically maneuver my way through the carefully constructed deterrents of the CC company’s convoluted phone system before finally getting connected with a “customer service rep” who could “help” me.  Enter Melissa.  Melissa was a charming young lady who most likely has a couple credit cards of her own.  My wife & I tried to imagine what Melissa was like outside of the scope of her CSR job.  Here are some of the things we came up with:

  • She probably brings in around $7-$10/hour to sit on the phone all day and field calls from disgruntle Capital One “customers” such as myself all while worrying about her 6 kids and whether her 1989 Chevy Suburban would break down on the way home from work today.
  • For this measly pay she takes the brunt of the grief for the corporate policy setters a.k.a. “leaders” who are doing one of two things:
    • Sipping brandy and smoking fine cigars on their yachts – or –
    • Finalizing the terms of their corporate “bailout” program compliments of the Federal Government

I digress…

In reality, as expected Melissa did have a script she was expected to follow, so I immediately switched into CSR communication guy and worked to create a distinction between the CSR and the company in an attempt to get her on my side and perhaps increase the chances of getting my rate lowered.  It didn’t work this time.  Melissa was thoroughly unable to help me lower my APR.  The only thing she could offer me was a Balance Transfer at 0% APR for six months, but even that would have cost me 3% of the transfer with a $50 minimum, so I graciously passed.

When I directly asked her why Capital One was raising my Annual Percentage Rate by a total of 7%, she only had this answer:  “Capital One is doing this as a benefit to our customers.  During these tough economic times we need to raise our rates so we can continue to be around and serve our you our customers.”

What??  Uhghh, yack, che heh heh uhhhal…

Sorry I just threw up in my mouth a little there.  If you’re going to blatantly raise my rates from 16% to 23%, at least have the decency to elude to the fact that I’m getting screwed over.  Don’t condescend me or insult my intelligence!  **RANT OVER**

So What’s The Answer?

There are only two options we have at this point:

  • “You can choose to decline the changes to your rates and close your account.” – As stated in the wonderful mailing I received.  Going this route will terminate the card and forfeit any rewards you had accumulated.  Another potential negative is the effect this could have on your credit score.  Normally if you pay down the balance of a credit card to zero, it is in your best interest to leave that card open which will help boost your score.  If the card is closed, you are not provided that opportunity.
  • If possible just pay off any remaining balance on the card before the rate goes up. This is the option I will be pursuing.  Because I am able to eliminate my existing balance within the next 2 months, I will pursue this route which will end up having a positive effect on my credit score.  The bible advises us to, “Owe no man any thing, but to love one another: for he that loveth another hath fulfilled the law.”  Romans 13:8 –  This is good advice and we would be wise to heed and follow it.


There you have it folks, one more reason we should be doing all we can to eliminate our debt and spend less than we earn, thus granting us freedom from the likes of companies and situations like this!

DFA is passionately dedicated to helping others break the bondage of debt using biblical principles.

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1 Mike

These kind of changes really make me sick. The best defense against them is to make them completely irrelevant by always paying your balance in full. Do that and the interest rate doesn’t matter.

2 Matt Jabs

I’m with you on that Mike, my plan is to have it paid off within the next few months…then never again will I pay Capital One another penny of interest! 🙂

3 Lakita

Wow, this is unbelievable! Though I’ve been hearing that it would start to happen! Glad you are going to have it paid off before the rate hike! This is just further encouragement to get mine paid off as SOON as possible!!!!

Thanks for sharing. I don’t have a Capital One card and NEVER WILL!


4 Miss T

Citibank did this to me a few months ago – they raised my rate from 6.9 to 16.9% – what?!?! So I called, they said it was due to recent “Economic Conditions”. Well, my economic status was just fine so I figured it was better to come up with a different plan. I explained I have great credit and I’m never late on my payments. The rep said I could decline but they would not renew my card when it expired – in JANUARY 2011! LOL! I said “Sure, decline, and in a year and a half we’ll say our goodbyes.”

Gotta love them for trying…keep checking those APR’s!

5 Matt Jabs

This is exactly what happened to me. I would do what you did but Capital One said if I do decline, they will close my account right away and I will no longer be able to use the card.

I do not want to do this because I want the card to stay open for awhile after I pay it off…as to benefit my credit score.

So…I’m just going to pay off the $1,500 left on it over the next 2 months and leave it open w/the higher rate. At that point the rate won’t matter because I do not plan on using the card, and I will still realize the benefit a paid off card gives your credit score.

6 Kreestee

The same thing happened to us! From 6.9% to over 14%. We’re trying the same thing – decline the option – and ours runs out in April of 2010. We’re going to try to pay down the balance as much as possible in that time, but I wonder what they’re going to do to try to retain our business. This card is the first one I got suckered with in college.

7 Matt Jabs

That was the route we were taking before just recently deciding to get a consolidation loan through Lending Club that covered our remaining credit card debt, and our one remaining auto loan.

Look for a post coming out early next week that details our experience (hint: it has been a VERY positive experience so far)!

8 Enemy of Debt

“There you have it folks, one more reason we should be doing all we can to eliminate our debt and spend less than we earn, thus granting us freedom from the likes of companies and situations like this!”

Well said and I agree 100%! First of all it does seem unfair for them to do this but they are also worried about the rule changes coming next July 2010. With that said I still can’t understand why they would let someone who pays them SO MUCH money even at only 8% to go away over this.

Personally I haven’t used a credit card in over a year and do not plan to ever use one again. All the rewards and brownie points aren’t worth the risk! Even for those that pay it off monthly do not seem to consider that they are likely to spend 12%-18% more just for swiping the card because of the huge disconnect emotionally. The credit card companies don’t offer those rewards because they want to give people free hats, they offer them because they are smarter than the people who think they are benefiting! They know you will still spend more regardless of how much you tell yourself you won’t!

Cut up the plastic and live completely debt free!

9 Matt Jabs

Ahhh…interesting point you raise concerning whether or not people who use credit cards by paying off balances each month still purchase more because of a disconnection to their money.

I’m interested in hearing more about that.

I always thought they offered the rewards as a way to get people to apply, knowing that most people will never utilize the card in order to receive the benefits because they do not use it properly. Instead, the card usually ends up costing most people interest costs.

10 nickel

Matt: That 12-18% is bandied about all the time. Unfortunately, it’s surprisingly hard to find actual data to back up that claim. Most people heard it from Dave Ramsey, but I’ve had a hard time substantiating it. Honestly, I think it’s highly variable — I know that I’m personally more prone to blow a pocketful of cash on little things here or there, mainly because it feels weird to swipe a credit card for a buck or two.

11 Matt Jabs

Yeah, those numbers would be totally different based on personal spending habits and history. I suppose it could be true in averages…

If you have wads of cash burning holes in your pockets, I could use some help w/this Capital One balance! 😉

12 JT

There’s a reason why Proverbs says the borrower is servant to the lender. They basically do what they want. It’s good to see some legislation coming down the pike to help consumers, but at some point consumers have to take responsibility for their spending habits.

Let’s wipe out that debt!!


13 Matt Jabs

Hey JT, thanks for stopping by.

It’s funny that you mention “consumers have to take responsibility for their spending habits”. Check out this Personal Responsibility post I wrote on that addresses that very fact!

14 Ben D.

I agree with @nickel about cash vs. credit cards. For me, it comes down to using for personal finance. All of my spending accounts — checking account, credit cards, even paypal — show up in one place in Mint, so it really doesn’t make any difference to me whether I’m using my debit card or my credit card for a particular purchase. It’s all tracked the same way.

And it’s precisely *because* I pay my balances off every month that I don’t ever trick myself into thinking that credit-card spending is not “real” spending. I know it’s coming out of my checking account within the next 30 days.

Loose cash, on the other hand… look out. It’s already out of my checking account, and Mint doesn’t track cash — so, guess what, neither do I! Or at least not very well.

15 Matt Jabs

Good points Ben!

I hold pretty much the same views. I use Mint for everything, and as soon as I get my credit cards paid down (in about 4-5 months) if I use them, I too will pay them off at the end of each month.

Cash is easy to blow, but I believe if we have a disciplined approach to it, just as we do our checking accounts…it can be controlled just as well.

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