Keep track of your credit card APR.

One basic factor that helps determines how expensive your credit card is to use is it’s interest rate, or Annual Percentage Rate (APR). The lower you credit card APR is the lower the amount of money you are charged for using the card.

Credit card APR is very important when making your decision on what new credit card you want to apply for. Many companies offer very low rates, for an introductory period in an effort to ‘lure’ you in as a new customer. This is great for people that are applying for new cards but what about existing card holders? Why is important for you to keep an eye on your credit card APR?

The first item you should note is that when credit card companies talk about a credit card’s APR they use the word ‘variable’ enclosed in brackets and this is really important. This single word means tha tthe card issuer has the legal right to change your credit card APR amount regardless of what rate you were given when you applied. All they have to do is inform you in writing before they change your account. The informing process normally consists of a long-winded document full of special terms and conditions which might not make it immediately apparent what’s they are actually changing.

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So the question is, what’s to stop credit companies from drastically increasing their rates? Well, in recent years competition has helped in that area. The competition between credit card issuers has helped ensure that any credit card APR hikes have to be small enough so that the card holders don’t leave the credit company. It’s become way too easy for a cardholder to jump ship and go to a new company offering a lower rate if they don’t like what is going on. However, lately it isn’t quite that simple.

The recent credit crunch that we hear so much about, along with the difficulties the economy is having in general make it harder to get approved for a new credit card. Card issuers are already tightening their acceptance guidelines and the restrictions are also on the rise. Some analyst are saying that by the end of this year the average rejection rate for credit applications could be over 75%.

What this means for cardholders that already have cards is that they are going to find themselves more at the mercy of card issuers who know that most of their customers now have nowhere else to go. Combine this with dropping bank profits due to bad debts and it starts to become clear that there’ll be a temptation to increase rates to squeeze more profit out of each account coming soon, especially for customers with lower, less than perfect credit scores.

Because of these things, it is absolutely vital to pay attention to any letters that you receive from your card issuer in the mail. If they say that your APR is increasing write them back and tell them of your displeasure with what they are doing and say you are looking for a new credit card offered by one of their competitors as a matter of urgency because you cannot afford a higher credit card APR. In some cases this can cause the company to back down and leave your rate untouched. In other cases, if this doesn’t work you should then seriously consider applying for a new card with a lower rate and then transfer your outstanding balance to it (free balance transfer) before the credit crunch really starts to make it hard to control your credit.