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Rate jacking: credit cards on the receiving end

Last Edit: 10/08/18

Well, let's start with the basics: each credit card has a rate of interest borrowers have to repay on money borrowed with their credit card -- unless they repay the whole balance each month. The rate of interest -- on credit provided by credit cards -- is stated as the APR of the credit card: Annual Percentage Rate (APR).

In 2007-2008, the 'credit crisis' struck banks across the globe and in the United Kingdom, prior to the crisis consumers found it relatively easy to apply for and be accepted for a credit card. However, when a range of banks needed to be bailed out by the tax payer, the banks had to tighten their belts and became more risk averse. This resulted in it becoming harder for many people -- particularly those who were viewed as a credit risk -- to be accepted for a credit card.

Another problem that banks had were customers who they now viewed as a "credit risk" but had already been accepted for a credit card. The solution the banks had was to raise the rate of interest on cards they could legally do so on, a practice that was referred to as "rate jacking"; i.e. jacking up the rate of interest on the credit card.

There is little that customers can do about being rate-jacked, the credit card companies have the legal right to alter the APR on many cards -- typically variable-rate cards -- which means the card provider can change the interest rate 'on a whim'. An example of a card holder being rate-jacked: they had an APR of 15% in 2008, they now have an APR of 25% in 2013. Credit card companies should have sent a letter/email/text notifying customers that their APR has been altered, or, rate jacked.