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Bankrate has partnerships with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. SHARE: VP Photo Studio/Shutterstock.com December 23, 2021 Checkmark Bankrate logo How is this page expert verified? At Bankrate, we take the accuracy of our content seriously. "Expert verified" means that our Financial Review Board thoroughly evaluated the article for accuracy and clarity. The Review Board comprises a panel of financial experts whose objective is to ensure that our content is always objective and balanced. Their reviews hold us accountable for publishing high-quality and trustworthy content. Poonkulali Thangavelu is a senior writer and columnist at CreditCards.com and Bankrate, addressing debt and credit card-related legal and regulatory issues. Bankrate logo The Bankrate promise
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation for how we make money. The content on this page is accurate as of the posting date; however, some of the offers mentioned may have expired. Terms apply to the offers listed on this page. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any card issuer. Bankrate logo The Bankrate promise
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You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. If you are one of the many Americans that carry a balance on your credit card, you should keep an eye on your card’s interest rate to manage how much you pay your issuer for the privilege of using the card. What you may not know is that, on a federal level, there is no maximum interest a credit card company can charge. However, cardholders can find a bit of security in the CARD Act and usury laws, which set interest rate limits on a state-by-state basis. Is there a maximum interest rate for credit cards
The short answer to this question is “no.” However, the longer answer is “it’s complicated.” This is because of the , otherwise known as the CARD act. The CARD Act was signed into law in 2009. The law was put in place to provide card users with protections and greater disclosures relating to billing statements, interest rates, due dates and penalties for credit cards. The CARD Act made it so that card issuers have to be more transparent about introductory interest rates, mandating that they be offered to the consumer for at least six months. The CARD Act also obliges card issuers to give cardholders at least 21 days’ notice before a bill’s due date and 45 days if their interest rate or fees will increase. Another big change the CARD Act made was that card issuers have to get a cardholder’s permission to process a transaction that takes the cardholder over their spending limit in a way that would incur a fee. The CARD Act definitely offers cardholders a bit more security, but it doesn’t control interest rates or how high they may reach. What it does is oblige your card issuer to notify you at least 45 days ahead of time that a change will come. This notification will give you the option to cancel your card if you are not agreeable to the rate increase. That said, you can always ask your issuer for a lower interest rate. It’s important to note, however, that this may trigger a into your credit report and there are no guarantees that the rate will be lowered. The CARD Act does, however, require card issuers to review interest rate increases every six months and reduce a cardholder’s rate if it is appropriate. Also, the rate review does not extend to increases in your rate due to penalties. What is usury law
Usury law sets a limit on the amount of interest that can be charged on different kinds of loans. Most states have usury laws, however, national banks can charge the highest interest rate allowed in the bank’s home state—not the cardholder’s. So while you may live in Arkansas where the maximum interest rate is 17 percent, your card issuer can charge you a higher amount if it has its headquarters in a different state with a higher maximum rate. And if your issuer is based in a state like Maine, which has no usury laws, you have even less protection. In some circumstances, a national bank can even take recourse to the higher interest rate of a state where it has branches, rather than using the rate in the state where it is based, irrespective of the state where the consumer lives. According to Christopher L. Peterson, a professor of law at the University of Utah in Salt Lake City and usury law expert, “In effect, what that really meant is that there are virtually no interest rate limits that are applicable to any type of bank, anywhere in the country, anymore.” Usury laws in different states
Usury refers to the practice of charging a very high interest rate that is deemed unreasonable. Each state has a different approach to usury law. For instance, if you’re in , the legal maximum rate of interest is set at 8.75 percent, but at 18 percent for credit card debt. However, usury law is not always so black and white. Many states defer to contract law instead of usury law. For example, in Hawaii the usury law sets the interest maximum at 10 percent, but a written contract can override that maximum. This is also the case in other states, including Arizona, Utah and Texas. Another bit of fine print to check for is exemptions, since credit card lending may not be bound by usury laws. For example, in the maximum interest rate is set at 10 percent, however, the law states that banks and similar institutions are exempt. This is also the case in Florida, Minnesota, and New Jersey, among others. And then there is where a rate above 45 percent is deemed usurious for non-consumer loans. However, the rate for consumer loans is capped at 12 percent unless they are “supervised loans,” which includes credit card debt, made by a “supervised lender.” If you want to know what the usury law is for your state, there are that offer state-specific information. Just keep in mind that your card issuer is not obliged to follow the usury law for your home state. Protections for military personnel
There are also laws that , and their dependents, from high interest rates. The Military Lending Act caps credit card interest rates at 36 percent for those who enjoy this law’s protections. Pending legislation, called the “” seeks to extend that protection to all consumers. And the Servicemembers Civil Relief Act caps interest rates on any credit card debt incurred by an active servicemember prior to entering military service at 6 percent. What to do about high interest rates
If you are dealing with a high interest rate, there are some things you can do to help ease your burden. For starters, you can talk to your issuer to . If this doesn’t work out, there is also the possibility of to a card with a lower interest rate. Just remember that balance transfers are great tools, but they aren’t magic. A repayment plan and budget go hand-in-hand with balance transfers. If you want help figuring out your repayment plan, you can use Bankrate’s and to crunch the numbers. If trying to figure out how you’ll pay off your high-interest debt seems out of your reach, you can also seek help from a debt counselor. There are debt management organizations out there that can step in to negotiate on your behalf with your credit issuer, many of which are non-profit groups. The is a great resource to find debt management services in your area. And there are other steps you can take to better manage and , including consolidating the debt. The bottom line
If you are a cardholder carrying a balance, it is in your interest to keep an eye on the finance charges you are paying your card issuer. There is no federal regulation on the maximum interest rate that your issuer can charge you, though each state has its own approach to limiting interest rates. There are state usury laws that dictate the highest interest rate on loans but these often don’t apply to credit card loans. If you are facing the burden of high rates, you could negotiate with your lender or take other steps to better manage your credit card debt. SHARE: Poonkulali Thangavelu is a senior writer and columnist at CreditCards.com and Bankrate, addressing debt and credit card-related legal and regulatory issues. Related Articles