Interest rate cuts, but credit card rates still rising

Most credit cards with variable rates have their rates tied to the prime interest rate. That rate has been going down, but consumers are still seeing their credit card interest rates rising. How can that be?

For consumers with good credit, their credit card rates will usually fall as the prime interest rate falls. But those consumers whose credit is suffering will not see the same benefit. Particularly if they are behind on their debts or doing other things that negatively impact their credit scores, they will likely see an increase in credit card rates.

So if you've got a credit score of 700 or above, expect to see your interest rates on your credit cards go down. If your score is lower or you've been experiencing debt troubles, watch your rates carefully. They're likely to be on the rise, which could put you even deeper into trouble. You typically have the right to refuse the rate increase, but you'll have to pay off the account and close it. Play the credit card game wisely.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.