My Credit Card Processor Raised My Rates, Now What?
Processing of credit cards is not at all cheap. However, it may not be as expensive as many business owners have thought.
If you are wondering what to do when your credit card processor raised your rates, then here’s what could work for you.
Understandably, there are a lot of circumstances wherein card issuers alter your interest rates. Here are common reasons why credit card rates increase.
Changes in interest rate
Benchmark interest rates, which include prime rates, are often used by credit card issuers to set their card rates. The decisions of the Federal Reserve also influence the increase in the prime rate.
Since the interest rate of the card is relative to the direction of interest rates in general, the interest rate on the credit card will also increase if the prime rate rises.
End of promotional rate
When the end of a promotional period is reached, the credit card rate will also increase. A particular promo for 18 months, for instance, the interest rate will automatically reset to the regular rate originally signed during the agreement.
Periodic review by the issuer
Basically, credit card companies review your financial status and eventually make changes to your account if needed. However, this can be subject to a 45-day notice, which will only affect new purchases and not the outstanding balance.
When the issuer reviews your credit again in 6 months, it is possible that the issuer will lower your rate if your score goes up.
Missed credit card payments
A penalty will be added if you fail to make your most recent card payments. A higher interest rate will be charged by many credit cards if you become delinquent on payments after 60 days.
The penalty rate will apply to outstanding balances and future purchases as opposed to rate increases due to periodic reviews. Moreover, late fees will be incurred that will affect your credit.
Periodic increase in interest rates
Some credit card companies raise credit card interest rates periodically for no reason at all. Although this is not allowed by law, particularly when the card has been acquired for less than a year.
Only those delinquent for 60 days on payments will be a cause for an increase in prime rate. Moreover, the issuer must provide notice within 45 days.
Managing increased credit card rates
While you can’t eliminate increases in the costs of credit card processing, it is important to ensure that costs only go up as much as what it’s intended to be. Thus, you can avoid unnecessary processor mark-up increases and tricky interchange padding.
Some credit card memberships provide secure pricing and lifetime rate locks. This will offer a processor mark-up lock to protect you from rising rates, monitor statements, and ensure that you are paying as low as possible for processing.
On the other hand, you can try to negotiate with the credit card company. This can be a bit challenging but still worth a shot.
However, you can also apply for a new credit card if you have a really good credit or no existing credit card debt. This will offer a much lower rate compared on the existing cards that you have.
Joyce Hope is a writer who specializes in merchant accounts. She has worked for First Card Payments since 2017.