A credit card company can adjust the APR (Annual Percentage Rate) under several conditions, including:
- When a promotional interest rate expires, such as a 0% APR offer ending after its typical 6 to 12 months period.
- When the prime interest rate (such as the U.S. Prime Rate) tied to the credit card variable APR changes due to economic conditions.
- If the cardholder misses a payment or makes a late payment (e.g., failing to make a minimum payment within 60 days past due).
- If there is a change in the cardholder’s credit score or creditworthiness.
- After the first year of having the card, unless the APR adjustment is due to a special promotion's expiration, since credit card issuers generally cannot increase the rate within the first year of account opening without specific provisions.
- If the credit card company changes its pricing structure.
Credit card companies must typically provide at least 45 days’ advance notice before raising the APR for new purchases (except for expiring promotional rates). They are also generally restricted from increasing the interest rate on existing balances except in specific cases such as those mentioned above. Additionally, if your interest rate increases due to a late payment, the company may reinstate your previous lower rate if you make six consecutive on- time payments after the increase. In summary, credit card APR adjustments typically happen due to promotional rate expirations, changes in the prime rate, late payments, credit score changes, and pricing changes by the issuer, all usually accompanied by advance notice requirements depending on the circumstance.
