0.0% rate credit cards are an extremely enticing promotion to get consumers to sign up for lines of credit they need. But after a period of time, like all good things this freebie must come to an end. If the cardholders are not prepared they can get hit with a large variable interest rate increase and that jump can negatively affect ones credit score.
The credit card industry is loosely regulated and throughout the business creditors can raise the consumer interest rates at will and without any warning. With the current credit crunch in play, lenders are increasing rates at a hurried pace to try to make up for the financial losses they have been experience in the guise of default and reduced spending by consumers.
Since most credit cards come with a variable interest rate, cardholders need to be aware that these changes could occur at any time. Barry Paperno, consumer operations manager for Fair Isaac Corporation, a Minneapolis-based company that developed the FICO scoring formula, warns consumers that when the rate jumps, they may not be able to pay their balance in full. Ultimately that could lower their consumer credit score.
Before individuals commit to any credit card, they should read all the fine print and confirm the card has a variable interest rate. If that is the case, they should then see what the maximum interest rate would be. Additionally, consumers need to review all material regarding any changes to their credit card account. That way if the variable interest rate is about to increase, they can brace themselves for the change.
