Credit card rate hikes can hit in 15 days, not 45

NEW YORK — If you get a notice that your credit card interest rate is going up, don't rush to charge your summer vacation before the rate hike kicks in.

Under the credit card regulations that took effect last year, banks must notify customers about rate hikes 45 days in advance. But the 45 days applies to when the customer must pay for the higher rate, not when banks can start assessing it.

The Loophole

A little-known provision of the law allows the higher rate to be applied to new purchases just 14 days after the notification is sent. So if a bank mails a letter on the first day of the month informing a customer about a rate hike, it can start charging that higher rate on the 15th day of the month.

The customer has 45 days to refuse the hike and choose to pay off their balance at their old rate, but any charges made after the 15th may be subject to the higher rate.

"This is just a very important detail that really should have been made clear," said Beverly Harzog, a credit card expert at Credit.com, who discovered the loophole while perusing the website www.helpwithmybank.gov , which is operated by the Treasury Department. "Consumers need to know all the details when it affects their pocketbook."

Among the top card issuers in the country, only Bank of America waits the full 45 days before hiking rates on new purchases, Harzog said.

Another Catch

Consumers should also beware of penalty rates. Banks generally can no longer change the rates on existing balances. The exception is if the customer has been late with a payment by 60 days or more.

If the rate is increasing because of late payments, the entire balance may be subject to the higher rate. And that rate may be extraordinarily high; some banks charge penalty rates of 29.99 percent or above.