A credit card company can adjust the APR (annual percentage rate) under specific conditions, including:
- When a promotional or introductory rate ends, typically after 6 to 12 months, and the regular APR applies thereafter.
- If the cardholder misses a payment or has a payment that is more than 60 days late, the issuer can impose a penalty APR, often higher.
- When there is a significant drop in the cardholder's credit score.
- If the APR is variable and tied to an index like the U.S. Prime Rate, changes in this rate (e.g., Federal Reserve rate changes) can cause the APR to adjust up or down.
- After the first year with the card, because issuers usually cannot raise the APR for new purchases within the first 12 months without notice.
- When the issuer changes its pricing structure or terms, with at least 45 days advance notice to the cardholder for most rate increases (except for some exceptions like expiration of promotional rates).
The issuer must generally give the cardholder 45 days’ notice before increasing the interest rate on new purchases. There are exceptions when the APR increase can apply immediately to existing balances, such as penalty APRs after late payments or expiration of temporary rates. After rate increases triggered by late payments, the issuer is often required to revert to the previous APR if the cardholder makes six consecutive on-time payments. These rules ensure that credit card APR changes are regulated and that cardholders have some protections and notice before rate adjustments occur.
