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Susan Tompor: How do you pay off all that credit card debt?

Susan Tompor, Detroit Free Press on

Published in Home and Consumer News

Don't just toss any notices or mail from your credit card issuer. You might discover that you're looking at a rate increase on your card. Read your monthly statements.

Under the law, your card issuer in many cases must provide you with a written 45-day noticeof an increase in a rate or other significant changes.

A "significant change" would include an increase in the minimum payment and other changes, including the late payment fee.

What happens if you receive a 45-day notice of a rate increase? You might consider whether you can afford to pay off that balance and close the account before the rate hike becomes effective, according to Sandra Barker, a senior policy analyst for the Federal Deposit Insurance Corp.

Or if paying off that balance in full isn't an option, you could look into transferring the balance to a lower-rate credit card.

Watch out, you do not always get an advance notice of a rate hike

You're not getting a 45-day heads-up if rates edge higher after a Fed rate hike.

Most credit cards do not have fixed rates, so interest rates would go up quickly on your variable-rate cards after a Fed rate hike. Rate increases because of Fed rate hikes apply to outstanding balances, too -- not just future balances.

The Fed has raised rates five times since late 2015 -- and some expect two or three more Fed rate hikes in 2018.

The next bump up in interest rates is expected to take place as soon as the Federal Reserve policy meeting March 21.

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