Credit card APRs

Figuring out credit card interest rates can be confusing. Most of us know that if we’re late with a payment or otherwise mess up, our interest rates are bound to go up. But many consumers who haven’t done anything wrong also are seeing their credit card interest rates go through the roof.

Here are some of the tricks that credit card issuers use to raise their rates.

But first -- a quick primer on credit card annual percentage rates, or APRs. The APR can be calculated many different ways. Usually, the APR for a cash advance is higher, and sometimes lower APRs are offered on balance transfers. Some credit cards have different APRs for different levels of outstanding balances -- for example, you’ll have a 16 percent APR on balances of $1 to $500, but a 17 percent APR on balances higher than $500. Typically, when you send in your monthly payment, it will go toward the lowest rate balance first. So unless you pay off your balance in full each month, those high-interest charges will stay on and keep racking up charges in the meantime.

Now for the tricks. Here are some ways that consumers have seen their credit card APRs jump dramatically -- sometimes up to 27 percent and higher.

-- Variable rate cards and "teaser rates." If your APR is tied to another interest rate such as the prime rate or Treasury bill rate, it can zoom up. Also be careful of low, introductory rates that are only in effect for a couple months.

-- “Universal default” clauses. Sometimes when you’re late on another bill -- such as your electric bill -- a credit card issuer will use that as a reason to raise your interest rate on the assumption that you’re a bad risk. Similarly, some credit issuers will say that if you take out a loan elsewhere, you’ve become overextended and they’ll raise your APR.

-- The changing due date trick. The issuer will inform you that they are changing your payment due date, for example, from the 30th of the month to the 25th of the month. If you don't notice this, when you pay late they’ll sock you with late charges and an increased APR.

-- The “do-whatever-we-want” clause. The fine print for some cards states that the credit issuer can raise the rate any time, for whatever reason.

-- The gift that keeps on taking. The Fixer column ran an item about a reader whose credit issuer offered a “perk” for cardholders around Christmastime -- telling them they could be late with their payment as long as they made new purchases with the card. But she didn’t realize that by accepting the offer, she was letting them raise her APR to 29.99 percent.

-- Sneaky mailings. Bank of America drew criticism when it sent a letter to cardholders telling them it was increasing their rates to as much as 27.99 percent. Consumers had a chance to "opt-out" and pay off their account on the old rate, as long as they didn’t continue using the card. However, if you didn’t see the letter or blew it off, you were stuck.

The bottom line for all this is read all the fine print. Make sure you know about any changes.

If your APR goes up, call the credit card issuer and ask that they lower it. It sounds silly, but this often works -- especially if they think you’ll transfer your balance elsewhere.

Also, ask the credit issuer why they are raising your rate. If it was because of “adverse information,” make sure they tell your where they got their info. Check your credit report and try to fight the increase if you feel it was based on incorrect information.

Whatever you do, don’t get so angry that you close an account that still has a balance on it. That will hurt your credit score and take away your negotiating power. Instead, pay it down while exploring transferring options.

There are lots of Web sites with good information about credit cards. Two of our favorites are credit.com and bankrate.com.