With the credit card reform just around the corner, you might think you’re safe from some of the most unappreciated 
practices common to most credit card companies – like interest rate hikes on new purchases for no good reason, and increased interest charges on your previous credit card balances (money you’ve already spent!) Unfortunately, many credit card lenders are trying to take advantage of the months they have left under their current legislation by increasing interest rates and changing billing due dates to their benefit.
Right now, credit card issuers must notify card holders of interest rate increases within 15 days of making the change. At that time, you have the choice to agree to pay for your balance at the higher rate; or to “opt out” in writing. Opting out doesn’t mean you get to keep your lower interest rate, though. It just means that you can no longer use the credit card to make new purchases because you close the account. You will still pay the higher interest rate on your existing balance.
Having 15 days to accept the new rate or opt out doesn’t give you much time to look around for a new credit card to transfer your balance to, either. If you don’t have a credit card available to transfer your balance and keep your interest rate low, it is likely in your best interest to opt-out, and make your payments under the new interest rate just while you’re looking for a new credit card to transfer the balance to for a lower interest rate.
Considerations For Opting-Out
While opting out will prevent you from spending additional money at the new, higher interest rate, it doesn’t come without it’s disadvantages. The most obvious disadvantage is that you’ve closed the account and eliminated your option to access the credit should you need money. When you close a credit card account for any reason, you face the possible reduction of your credit score. Closing a credit card account reduces the amount of available credit you have and increases the percentage of your debt utilization – both factors contribute to your FICO credit score.
Opting out shows the credit card company that you’re not accepting the higher interest rate, but if you don’t have any other options for credit at the moment, it may not be your best possible move. Weigh the pros and cons of the situation before making your decision.
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