7 little-known facts about your credit card - No.1: Your credit card interest can change

You've applied for a classy credit card and are thrilled with the low APR it offers. A frightening, little-known reality is that many card issuers have the power to hike interest rates as high as they like.

The top ten credit card-issuing banks are federally chartered, which exempts them from state regulations that cap interest rates. As a result, they are allowed to set interest rates as high as they like.

According to the CARD Act, which stands for the Credit Card Accountability, Responsibility and Disclosure Act, your interest rate is only guaranteed for the first year of your card's use (or the first six months if it's a teaser rate). Furthermore, that protection is also lost if a payment is late by 60 days.

The majority of credit cards have variable rates, which are linked to an index and may rise along with the index. Nevertheless, just because your credit card has a fixed rate today doesn't ensure it will in the future.

According to John Ulzheimer, head of consumer education at SmartCredit.com, card issuers have the ability to alter not only your interest rate but also the formula used to determine it. Hence, he explains, a card with a fixed rate may change to a variable-rate card in the future.

The CARD Act provides two warnings: The issuer must give you 45 days' notice before increasing interest rates, and it will only affect future charges (your current debt will continue to be billed at the previous rate).

The good news is that your increased rate might not remain forever. Your rate can decrease if your issuer increased it following two consecutive months of late or nonexistent payments.

The issuer is required by the CARD Act to examine your account after six months. The issuer may reset the APR to your pre-penalty rate if you've been good.

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