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Interest rate increases can grow credit card debt

Once a Tennessee resident opens up a new credit card, he or she is bound to the terms of the credit card agreement. Usually included in the terms and conditions that one agrees to abide by are provisions related to the interest rates applicable to the card. Though credit card companies can change the interest rates that they charge card holders, they are legally bound to do so only under certain conditions.

The Credit Card Accountability, Responsibility and Disclosure Act, also known as the CARD Act, imposes rules on credit card companies regarding how they may change interest rates. While the CARD Act does not impose limits on how high those rates can go, it does demand that credit card companies give card holders enough notice about rate increases to end their credit card contracts. For example, card holders must get 45 days' notice before an interest rate increase takes place, and they must also have an opportunity to cancel their credit cards before their rates go up.

Any person who cancels a credit card due to a pending rate increase may not be penalized or have his or her balance considered in default. His or her credit card company may, however, require him or her to pay his or her credit card balance off faster with increased minimum monthly payments.

A credit card's interest rate can turn a manageable balance into a major financial burden. Interest compounds and can make it difficult for a card holder to get ahead of mounting charges. However, the CARD Act does require credit card companies to follow some rules regarding how they change credit card interest rates. Individuals who wish to learn more about getting ahead of credit card interest and managing their credit card debt can speak with bankruptcy attorneys who practice in their communities.

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