Credit card companies can change the terms of your account at any time. One of our readers, Jack, asked this question about consumer rights:

Hello,

I had a few things I wanted to inquire regarding Michael’s question. I know people are being taken advantage of everyday over the phone and with refinancing due to the “We reserve the right” fine print, are there ways to fight these transfers or agreements due to being misconstrued, unlawfulness, or being misinterpreted?

Would there be any reason to pursue BBB, FTC, State Attorney’s Office, Small Claims Court, or Arbitration, etc., or would this just be a waste of time, money, and effort? Would this actually get me anywhere if I was to make claims against them?

I understand it’s more of a my word versus theirs but would it matter? Does this ever happen and does anyone other then the credit card companies ever win?

I know that on several occasions balance transfers for myself and others that the terms change and they balance transfer your accounts without anything ever being signed other than the original agreement and you just default to whatever terms and percentages they fell like you should get, but is there any sort of protection for the consumers? Anywhere?

Thank You,
Jack

Thank you for your question Jack.

Most credit card companies have their cardholder agreements locked down - this means that they have so much legal terminology in them that it covers most any situation.

We have some very smart readers, and one of them, Shaam, actually gave the best solution as an answer to Michael’s question. Here’s what he suggested:

One thing that you do always have the right to do is to refuse the changes to your account.

For example: If you had balance transferred your debt onto a card that was supposed to be 0% interest for a year, and then the credit card company changed the terms to 5% interest, you can refuse the change to your account.

You would refuse the change to your account by sending the credit card company a certified letter saying that you refuse the changes to your account.

Typically the credit card company will close your account when you do this, but you will get to keep the better interest rate and your original agreement.

One word of advice though - if you refuse the changes to your credit card account, and they close your acount, you can never make a late payment. If you do most credit card companies will default you to the highest interest rate possible. If that happens your best bet is to balance transfer to a new account to avoid the permanently high interest rate.

Re-Opening Credit Accounts:

Does re-opening your old, closed-out credit accounts really help your credit score? A reader, BlueJeans, had this question for us:

Thank you Mr. CC for your article,

I have a question that relates to J’s question and your response. Since our credit score is 30% debt ratio on open accounts and closing those accounts can hurt our credit score, would opening them back up improve our score? (If it is allowed by those companies.)

I had several credit cards in the past that I paid off and closed before I realized how that action was not helping my credit score. It would be cool to think that the opposite would help improve my credit score.

Thank you for your time,
BlueJeans

Thanks for your question BlueJeans.

Technically re-opening closed credit accounts would benefit you. However in practice this is not always possible. If you have credit accounts that have been closed for a long time, most credit card companies prefer to open new accounts rather than re-open the old ones. It is possible to do this, just not common.

As far as your credit score is concerned:

This image from FICO.com explains it best. Your debt to credit ratio falls under “Amounts owed” (30% of your credit score).

Now, re-opening closed accounts would actually impact several areas of your credit score.

In my opinion, re-opening old accounts is a good strategy for anyone who is running close to their total credit limits (as long as they do not charge anything on their re-opened accounts and use them only to offset their debt to credit ratio).

Otherwise, it’s probably more trouble than it’s worth. Especially if the accounts end up being “New accounts” and not re-opened old ones.That’s just my opinion though. I am sure there are other situations where re-opening old accounts could conceivably be a benefit.

For more information on how your FICO score is calculated, you can check out this article:

If you do choose to re-open old accounts it would be helpful to monitor your credit score and reports to see how it impacts everything. FICO scores are complex (to put it politely) and sometimes it is hard to see exactly how any action you take may affect them.

As far as monitoring services go, I recommend Identity Guard by Equifax. There is also another company that I am currently investigating called Credit Karma. I’ll do a full review of them soon, but it’s worth checking out.

Have a question for us? Leave a comment below!

Carnival Links:

I wanted to take a moment and thank the following carnivals for featuring our articles this week:

• MoneyHacks Carnival–Frugalista Style! @ Little Miss Know It All
• Carnival of Money Stories No. 94 @ The Sun’s Financial Diary
• The Carnival of Financial Planning @ The Skilled Investor’s Blog
• The Carnival of Debt Reduction & The 21th Bankruptcy & Debt Carnival @ Bankruptcy Access
• Corporate Vigilance Jan. 25th Edition @ Corporate Vigilance
• Carnival of Consumer Credit #5 @ Arrive Financial
• Book Marketing Blog Carnival - January 28, 2009 @ Selling Books