- Discussion board

I recently discovered that my credit card company (First USA Bank, NA) raised my interest rate from 16.49% to 22.49%.

I called and asked the reason the interest charges were raised and was told that I would receive an answer in the mail.

Well, I received that answer in the mail and it was this:

You received a change in terms notification for the following reasons:

High bal to credit limit
too many inquires
Too little avail credit

What does all this mean?

I am confused (to say the least) and a bit perturbed.

Is this standard practice? If so why? and if not, what can I do about it?

Thanks,
Anna

Typically, you may experience an adjustment of your interest rate when you pay late or commit some other infraction, but in your case you appear to be a good customer - carrying a balance etc..

When I look at the reasons you listed, the "too many inquires" one stands out. If you are applying for numerous credit cards or other forms of credit this may be raising a red flag for the credit card company that you are more likely to default. It seems counterintuitive that they would raise the interest rate, but statistically it probably makes up for the people who go into bankruptcy and never pay.

Maybe you should change cards..

Thanks for your reply.

That is why I am confused. I haven't applied for a card since I have received this one about 11 months ago.

Now, I have been getting pre approved credit card applications in the mail. Do these affect the "too many inquiries" section?

Can you recommend any other cards that do not abitrarily raise their rates like this?

Thanks again,

Most credit card companies have moved to risk pricing strategies. This means they adjust the rates of accounts based on the perceived risk that the account will go delinquent. They not only look at your record with them, but also with other creditors and your credit in general.

High balance to credit limit means that you are carrying close to your credit limit on your card(s). This could be a total of all your cards with all issuers.

Too little available credit is the same story.

If you believe you have no inquiries, I would definitely get a copy of the credit reports and check it out. You can dispute unauthorized inquiries on your reports.

Basically, you appear to have too much outstanding debt and too little credit available. This makes you a higher risk.

You do not have to accept the increase. If you turn it down, your account will be closed but you can pay off your balance at the prevailing rate prior to the proposed increase.

Hope this helps,
The_Insider