Pennsylvania residents may be concerned about the recently announced interest rate increases for American Express cardholders. While it is legal for the company to raise their rates, there are certain guidelines that credit card issuers must follow. The CARD Act, which was signed in 2009, changed the way credit card companies can do business and gave consumers several protections.
In order to increase rates for existing customers, credit card companies must provide at least 45 days of notice. Customers who accept the rate increase can continue to use their card and pay the higher rate on new purchases. Unless the higher rate is associated with a penalty for late payments or the end of a promotion, it won't apply to purchases made prior to the increase.
The CARD Act allows customers who don't wish to pay a higher interest rate to close their account and not have to worry about being charged an additional fee. However, the issuer can require the former customer to pay off the outstanding credit card debt within five years. Before closing the account over a rate increase, customers should understand that doing so might negatively impact a credit score.
Credit card accounts with high interest rates are sometimes difficult to repay. Customers with a few high-rate credit cards who lose their source of income or have another financial emergency may get relief from their debt through the bankruptcy court. An attorney may explain options for reducing debt through either Chapter 7 or Chapter 13 bankruptcy protection. These two options resolve outstanding debt in different ways. An attorney may help a client decide which one is best for his or her unique financial situation.