American Express Is Raising Interest Rates: Who Cares!

amex card

So major media recently reported that American Express is raising interest rates after discovering that its APRs were “significantly lower than market rates.”

They have already begun sending out letters to customers who are affected by the change.

The move apparently affects a “small percentage” of the company’s 55-million strong customer base, with the average rate increase around 2.5%.

In other words, if your interest rate was 19.99% before, it might climb to 22.49%. That means you’ll pay more interest if you carry a balance month to month.

The key phrase is “if you carry a balance.” If you don’t carry a balance, and instead pay off your credit card in full each month, it really wouldn’t matter if your interest rate were 20% or 2000%.

What You Can Do to Avoid Paying More

If you happen to be one of the unlucky customers targeted by this new campaign, you’ve got several options.

The first option, as I just alluded to, is to pay your credit card balance in full each and every month. Assuming you do that, the change will effectively be meaningless because no interest will be charged.

Just pay the full balance within your grace period and you’re good to go no matter the APR.

If that isn’t possible, perhaps you’ve got too much debt, you can consider moving the balance to a new credit card with a lower APR.

I always opt for 0% APR credit cards as opposed to low interest rate cards because why pay anything at all?

This is especially true when there are no fee balance transfer offers available like the Chase Slate card, which offers 0% APR on balance transfers for 15 months with no fee.

It’s pretty much a no-brainer if you’ve got credit card debt subject to ultra-high interest rates. You can move it for free and pay it down over time with zero interest. Pretty straightforward win there.

Another option is to be on the lookout for balance transfer checks, which are usually perceived as those annoying mailers you have to constantly rip up about once a week.

Recently, I received a pretty solid offer from my Barclaycard Arrival Plus. They sent me some convenience checks that allow me to deposit money into my checking account for just a 1% transaction fee.

And the APR is 0% until mid-2016. So if I were to have outstanding credit card debt subject to costly finance charges, I could fill out one of those checks and cash it.

For example, I could get $5,000 at a cost of $50, use it to pay off my other debt, and then slowly pay off the new balance until mid-2016 interest-free.

As you can see, there are plenty of methods to avoid credit card interest entirely. So you shouldn’t really fret if your card issuer is raising rates. In reality, you should never pay any interest if you use credit cards properly.

The caveat is that you need decent credit in order to take advantage of 0% APR deals and the like. Yet another reason to treat your credit with extreme care.

By Colin Robertson

Colin created this blog after spending several years in a job that required him to scour credit reports on a daily basis. His goal is to help individuals better understand their credit and get the most out of credit cards.

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