UP, UP…

The next correspondence you receive from your credit card company may not be a bill or some special plea to cash in your frequent flier miles for some overpriced vacation package.  They might just sneak another out in your direction–and it could include some nasty news.

Dear Valued Customer,

Thanks for your business.  While it might be less painful for us to whack your left temple with a tire iron, we have made the seemingly unconscionable decision to jack up your card’s interest rate to levels approximating usury.

Good luck,

Your Credit Card Company

Okay, that’s not what they really say.  It’s my interpretation.  But I’m not far off.  In the face of a slightly more hardnosed regulatory environment and with the kind of corporate greed we all know and love, the credit card companies are boosting interest rates left and right.

The latest player to sign on to the higher rates team was no other than American Express.  Amex just hiked their rates, contributing to an overall increase in average APR for all creditors in the industry.  That average, by the way, has hopped upwards for three of the last four weeks.

American Express isn’t doing anything new or radical, they’re just joining the club.  In an article profiling one woman who got hit with a near doubling of the interest rate on a card with a rather sizable balance, The Daily Press hinted at the scope of the rate hops:

Ann joined millions of credit card users across the U.S. who have been told their interest rates are rising. They are being told to deal with it or get kicked to the credit card curb.

That’s MILLIONS–with an “M”.

Kathy Sweeney at KFVS, a southeast Missouri CBS affiliate, reports “Many companies plan to adjust interest rates for certain customers before the end of the year.”  In other words we can look forward to more of the same.  Those rates aren’t coming down any time soon.

…AND AWAY!

All of that consumer-friendly credit card regulation we’ve been hearing about does include provisions designed to protect us from those rate increases.  Unfortunately, the cure for getting slapped with a higher rate may very well be just as bad as suffering through it for some people.

You see, already-implemented regulatory reforms give credit card customers the right to decline the rate increases.  That’s right, you can just tell American Express, “No, I’m not interested in paying more interest.”

There’s a catch, though.  If you decline the lender’s rate increase, they can just shut down your account.  You’ll be responsible for paying off the balance at your existing rate.  That protects you from the increase, but at the expense of having access to the credit line.

Losing the ability to charge to the card is only part of the story, however.  If you decide to reject the rate increase and to allow that account closure, the information will show up on your credit report faster than Usain Bolt can run a 40 yard dash.

It’s the Sopie’s Choice of interest rates:  Get knocked around at a stomach-turning interest rate or lose the access while punishing your FICO score.  While undoubtedly well-intended, the protection provided by recent changes doesn’t really provide much meaningful help.

TIME TO GO SHOPPING?

With rates on the upswing and no real good way to avoid it, what should a credit consumer do?  Well, it might not be a bad idea to go shopping.  No, don’t hit the stores to charge up the balance on your existing cards–go shopping for another card that will offer you an interest rate that isn’t quite as punishing as your newly announced rate.  Sure, that new company may end up pumping the APR up in awhile, but at least you’ll be able to avoid the beatdown for awhile longer.