Keep the Rate or Keep the Card?

Ann has $10,000 in credit card debt.

She had been paying it off month by month -- always on time -- at an interest rate of 7.15 percent.

"Then all of a sudden, when I received my September statement the APR had jumped to 14.99 percent," Ann wrote to me.

This must be a mistake, Ann thought.

So like a conscientious consumer, she called the company that issued her credit card.

There was no mistake.

Ann joined millions of other cardholders across the country who have been notified that their interest rates are rising. They, like Ann, are being told to deal with it or get kicked to the curb.

"I called the credit card company," Ann said. "The gentleman said they had chosen several of their 'products' to raise the interest rate." Ann has two choices. She can accept the higher interest rate -- but says she "can't afford to pay double interest on a $10,000 balance."

Or she can reject the rate hike. "If I reject the terms, I would be able to pay the old rate on the existing balance," she said.

If Ann says "no deal," however, the credit card company will close her account.

Under the new Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009 and Federal Reserve rules, a cardholder who is notified of a change in terms on or after Aug. 20 has the right to close the account and reject that change for the existing balance. If the consumer does so, the card issuer must allow the cardholder to repay the balance on the existing terms, make minimum monthly payments that include no more than twice the percentage of the balance included before the change in terms, or pay off the balance over at least five years.

Ann is worried about her ability to get another credit card at a decent interest rate. She's also concerned that canceling the card will lower her credit scores.