Your options if your card issuer changes your agreement

By Michael Lloyd

If you've ever missed a payment or gone over your credit limit on a 0% balance transfer card, you're most likely all-too-aware of the fact that lenders reserve the right to withdraw promotional offers if you breach your contract. However, seeing the terms and conditions of your credit agreement altered for no apparent reason is quite another thing, especially if the changes in question are not going to work in your favour.

Credit card lenders can alter the terms and conditions of your account whenever they see fit. In some cases they're required to give you notice and provide a reason, but this won't help you much if the changes are going to leave you out of pocket.

It is important to know your rights in this situation and the limited actions you can take.   changing-terms-and-conditions

Credit limit
Lenders can -- and do -- lower credit limits, sometimes without warning. Take a close look at the fine print in your card contract; you'll see that your lender has the right to slash your credit limit as it sees fit.

In some cases, a credit limit cut might not have anything to do with the
way you've managed your account, or your credit score. Lenders sometimes cut customer credit limits in bulk as a way to limit their
potential exposure. If you don't use your account for everyday spending and are just carrying a balance on it, this might not seem like too much of a problem. However, your credit score could take a hit if a limit reduction affects your credit utilisation ratio (ideally, you won't use more than 30% of your available credit).

If your credit utilisation ratio is affected, applying for an additional card to add to your available credit under these circumstances may be a good solution -- if you keep the balance at or near zero.

If a limit cut is going to leave you in financial difficulty, call your lender to discuss the situation. Assuming your account is in good order, you may be able to ask your lender to reinstate your initial limit. The lender gets the final say, though.

Interest rate
There are certain voluntary industry principles  lenders should follow before raising interest rates, but not many. For example, The UK Cards Association states that, provided your account is in good standing, your interest rate should not be increased within 12 months of the date you opened your account. Your account should also not be re-priced more than once every six months.

Other than that, card issuers can move your rate about as they please. Not happy with the rate change? You do have some recourse.

"Lenders are required to treat customers fairly and provide 30 days' notice of an interest rate hike," says Andrew Johnson, a money expert at the Money Advice Service. "Customers who are not happy should reject the change, hand in their cards and pay off any remaining debt on the existing terms."

If you decide to do this, you will lose your credit facility and will need to continue to pay down your balance as you were before the rate increase.

You have 60 days from the date you were informed of a rate rise to reject the increase.

Customers who are two months or more in arrears should not have their rate increased, according The UK Cards Association guidelines.

Account closure
In some cases, lenders can close accounts for no apparent reason. This might be because the issuer changed its lending criteria, and the information you provided when you initially applied for your account would not qualify you for acceptance under the new rules.

As with an interest rate hike, you have the right to continue to pay down your balance as you had been doing before your account closed.

If your lender alters the terms and conditions of your account, don't take it too personally. Many times, these decisions are made by computer algorithm and have little to do with the way you manage your account. Your lender is obliged to give you only minimal information about changes to your terms and conditions, so other than a quick call to your card issuer to see if a decision can be reversed, it's not something that's worth getting too upset about.

See related: Prepare now for predicted interest rate hikes, Bank rules may allow rejected claims of account fraud

Published: 11 November 2014