I got a letter from Chase saying that they were changing my Terms of Service. The biggie is that they are bumping up my interest rate. The letter says that I can write a letter to respond by Feb 21.
So can I refuse the changes and keep my current interest rate?
Well, no. You can pay off any balance you have remaining and switch to a different, lower rate card though.
I think you can usually keep the rate if you stop using the card for new purchases. Otherwise, you’re SOL. Read all the fine print in the notice.
You can try writing them a letter saying you reject the change but still want to keep your card. Actually, in the corporate world, it is not uncommon for two companies to each send each other mutually contradictory letters modifying the terms of their agreement, but neither one terminating the relationship. Later, if the two companies have a falling out or sue one another, a judge looks through these conflicting forms and decides which terms most honor the original spirit of the agreement.
Some legal experts have speculated that, in principle, consumers have the same rights with regards to their credit cards. That is, you could send the credit card company a form which states that, in fact, you are keeping your interest rate the way it is. At that point, the company will almost certainly terminate your credit card agreement, and you owe them any unpaid balance. But what if they didn’t? What if through oversight or an unwillingness to lose a customer, they never canceled your card? In that case, I think you would have a valid case in later civil proceedings to claim that, in fact, you never agreed to the rise in interest rate and you only owe money calculated at the original rate.
IANAL, and I can’t remember where I read all this. I’m almost certain no case like this has ever gone to court so there’s no precedent, so this is pure hypothetical. If you don’t like the new rate, you should call and negotiate by phone, not by mailing a form, that way if they don’t agree you can just cancel right away, etc. That’s my real advice. If you make a serious threat to cancel on the phone they will often work with you on the terms.
Is it the credit card issuers contention that the new rate applies to the entire balance of the loan?
I think you don’t have to pay off the balance all at once though. You just need to make payments per the original agreement and you can’t use the card any more.
Good question. I’ll have to take a look at the letter again.
They are raising the rate from %7.99 to %9.99 on purchases. I probably don’t want to have the card canceled since even at the higher rate, it’s pretty reasonable if I have to keep a balance on it due to an emergency. But if I can prevent the higher rate from being applied AND keep the account open, then I’ll be very happy.
Another reason that I don’t want it canceled: I plan on buying a house in a couple of years and I hear that closing accounts and opening up new ones is not the best thing for credit ratings.
Sounds like you need them as much as they need you. You could try calling up and cancelling, the retention department (not the frontline customer service agents) will probably keep you at 7.99% in order to keep the account open
Emphasis added.
The fact you are not a lawyer should have caused you to pause before even answering. Not being able to cite a source was the second clue to stop typing.
If you look at the agreement you entered into with the credit card company, you will find that it states specifically that the company can alter the terms of service upon appropriate notice. There will usually be rules governing the type and timing of that notice, rules set by both federal law and by state law (often Delaware’s law, since much of the credit card business is now run out of that state). You will also notice that there is no part of the agreement that allows the card user to alter the terms of the agreement; no real shock there.
Insurance policies are often worded with similar language, to allow changes to the policies mid-stream.
Here is a sample application, which, of course, is part of the contract you enter into. Note the weasel words about the ability of the terms to change. If I get sufficiently motivated, I’ll dig up one of my old agreements that got sent to me with the card and exerpt the appropriate amendment language.
Take a close look at the changes in TOS. I recently received a notice from Chase which, to me, implies that there will no longer be a grace period on new purchases even if you have no existing balance. I need to call them to ask if I can cancel my three Chase accounts (damn all these bank mergers!) over the phone or whether they’ll need a letter; I imagine they’ll clarify the point for me during that call.
I’m still unclear - is it legal for CC companies to change the terms of the entire outstanding balance loan retroactively?
Ahhhhh, a whole different question from that posed by the OP. 
To know the answer, either:
See an attorney who specializes in the relevant law, or
Do some research into the law of the US and the relevant state regarding when and how interest rates on credit can change, and hope you get it right. 