You've probably heard the news that Standard & Poor’s, a credit rating agency, downgraded the US from its AAA rating to AA+. How does that affect us, you might wonder. Well, many experts believe the lower rating will cause a rise in credit card interest rates of up to five percent. This change will only affect cards with variable interest rates because the Credit CARD Act of 2009 protects against rate changes for only fixed interest rates. Here are three things you should do to protect yourself:
- Check to see: Call your credit card companies to ask if the credit card you hold has a variable or fixed interest rate.
- Put it on hold: Do your best to stop using the cards with variable interest rates or lessen your usage so you're not going to be shocked by the higher bill. You don't have to worry about the previous balance, the CARD Act will prevent banks from increasing the interest on your current balance. You just have to worry about your future transactions.
- Don't panic: Don't get swayed by emotion and immediately cancel your credit card because that may have implications for your credit score. You may want to leave the credit card open because after you close it, the account history will be left on your account for ten years or whenever the credit card's issuer decides to remove it. Long credit history shows you're reliable and increases your credit score. Another drawback to closing your card: your available credit will immediately be reduced, impacting your debt to credit ratio, which significantly affects your credit score.