Retroactive Interest Rate Increase
Definition of 'Retroactive Interest Rate Increase'A common practice used in the credit card industry to increase interest rates on purchases made in the past. A retroactive interest rate increase will affect your outstanding balance. This is often viewed as an unfair lending practice because consumers likely purchased the item in the past based on the assumption they were receiving a fixed interest rate.Because of this perceived unfairness, the Obama administration introduced the Credit Card Accountability, Responsibility and Disclosure Act in 2009, aimed at protecting against arbitrary interest rate increases, misleading terms, excessive fees and other unsavory credit card company practices. |
|
Investopedia explains 'Retroactive Interest Rate Increase'One of the key elements in the Act is the ban on arbitrary interest rate increases, including retroactive rate increases. This means that banks cannot raise rates on your existing outstanding balance unless you have failed to make payments for 60 days or more.Of course, banks will still be allowed to increase rates if it was agreed to in your contract. For example, an introductory rate can be increased after an agreed-upon amount of time, but that amount of time has to be a minimum of six months, under the new law. |
Related Definitions
Articles Of Interest
-
Take Control Of Your Credit Cards
The plastic in your wallet doesn't have to hurt your finances. Learn how to manage it responsibly. -
Understanding Credit Card Interest
Paying these rates can impact your disposable income and your investment returns. -
Identity Theft: How To Avoid It
Don't be a victim of this disturbing crime. Get insight into how perpetrators commit this form of fraud. -
Top 7 Most Common Financial Mistakes
Choose fortune over disaster by avoiding these money traps. -
4 Reasons Why Your Credit Card Company Thinks Your Card Is Stolen
Find out the most common reasons the bank will fear your credit card has been stolen ... even when it hasn't. -
5 Secrets Credit Card Companies Don’t Want You To Know
Find out some of the ways you can lessen your interest payments and avoid other unnecessary penalties that lurk in the fine print. -
Can't Get A Bank Loan? Turn To Your Neighbor
Peer-to-peer lending can be an inexpensive way to gain access to credit when banks are restricting lending -- but you need to understand the entire deal first before jumping in. -
What's On A Consumer Credit Report?
A look at the various components and considerations that go into one's credit report and credit score. -
7 Unconventional Ways Businesses Can Borrow Money
Find out how your business can get the money it needs - even when the bank says "no". -
Taxable Rewards To Be Aware Of
Find which benefits from reward programs count as income in the eyes of the IRS.
Free Annual Reports