5 According to the Georgia Department of Law, appeals have shown that the six-year period for contracts applies to credit card debt. See Phoenix Recovery Group Inc. v. Mehta, 2008. » MORE: Does the interest rate on your credit card matter? Some credit card agreements may stipulate that the laws of the issuer`s home country, not the consumer`s, determine the essential terms and conditions of the contract. That is, if the credit card holder lives in Maine, but the issuer is located in Delaware, the Delaware statute of limitations may apply. Don`t confuse the statute of limitations with how long a debt can remain on a credit report. A bankruptcy, for example, remains on a credit file for 10 years, regardless of the statute of limitations. If a creditor successfully obtains a judgment on the payment of a debt, this information can remain on a credit report for seven years.
CreditCards.com compiled this list of statutes of limitations for credit card claims by researching the laws and court decisions of each state individually. We have linked to the law where it is available and have provided additional guidance below. But things can happen, and you may have to carry a balance and collect interest on that balance. How exactly does interest on credit cards work? This article will help you answer this question and more, including ways to pay less interest. What you may not know is that there is no maximum interest rate at the federal level that a credit card company can charge. However, cardholders may find some security in the CARD Act and usury laws that set interest rate limits from state to state. If your credit card has an APR of, say, 18%, that doesn`t mean you`ll be charged 18% interest once a year. Depending on how you manage your account, your effective interest rate may be higher or lower. It could even be 0%. This is because interest is calculated daily, not annually, and is only charged if you have month-to-month debt. According to RCW 19.52.020(1), if agreed in writing between the lender and the borrower, a lender may charge an interest rate not exceeding 12% per annum. Or a lender may charge 4% above the original hammer price for 26-week Federal Reserve Treasury bills created in the month prior to a written agreement between the lender and borrower.
A lender can use the higher interest rate – 12% or 4% above the Federal Reserve`s rate on 26-week Treasuries. Knowing how credit card interest works can help you understand how much it could cost you. However, you can reduce the amount you pay in interest by paying your balance in full each billing cycle. Some credit cards have a single APR for all customers. Others have a range — 13% to 23%, for example — and your specific rate depends on your credit score. The better your credit, the lower your rate. Interest rates and spreads themselves are usually tied to the prime rate, which is the interest rate that banks charge their biggest customers. When the prime rate increases, credit card rates usually follow with an equal increase. A credit card may offer an introductory or promotional APR for purchases and transfers. At the end of the launch or promotion period, the rate will revert to the standard APR specified in the terms and conditions of the card. This was the case in Georgia in January 2008, when a Georgia appeals court ruled (in Hill v.
American Express) that the statute of limitations for an unpaid credit card debt was six years. The Georgian code sets the limit for open accounts at four years, but the Court of Appeal applied the law on written contracts in this case to transfer debts. Another 2008 Court of Appeals decision (in Phoenix Recovery Group, Inc. v. Mehta) upheld the Hill decision and established law in the state, according to the Georgia Department of Justice. Knowing what the statute of limitations is for the state where you live and the state whose laws apply to your specific card issuer`s cardholder contracts can help you better understand your consumer rights regarding credit card debt. * Capital One says Virginia law applies unless the cardholder`s state has a longer status. If a lender sues a borrower to collect an outstanding loan (a consumer loan that is not exempt from usury law), a borrower may consider defending usury if the loan exceeded the maximum interest rate above, and the borrower can prove that the loan was obtained and used primarily for personal purposes. For family or domestic purposes. See RCW 19.52.080.
If you`re facing a high interest rate, there are a few things you can do to ease your burden. For starters, you can talk to your issuer to try to negotiate a lower interest rate. If this does not work, it is also possible to transfer your balance to a card with a lower interest rate. Remember that credit transfers are great tools, but they are not magic. A repayment schedule and budget go hand in hand with balance transfers. If you need help figuring out your repayment plan, you can use Bankrate`s credit card payment calculator and household budget calculator to decipher the numbers. Consumers should be aware of a practice known as aging old debt. The limitation period may begin again if a consumer makes a payment, even a small one, on a debt that has exceeded the limitation period or is coming to an end. The acknowledgement of an old debt can also extend the deadline for possible recovery actions. Consumer advocates are now advising debtors not to recognize old debts or debts they do not recognize as their own, to avoid accidentally pushing back the statute of limitations. “In Texas, it`s usually up to the defendant to prove guilt is time-barred,” Spector says. His advice: don`t ignore court records and get representation from a consumer advocate.
There are also laws that protect those serving in the armed forces and their dependents from high interest rates. The Military Loans Act limits credit card interest rates to 36% for those who benefit from the protection of this law. The pending legislation called the Veterans and Consumer Fair Credit Act aims to extend this protection to all consumers. And the Military Civilian Assistance Act limits interest rates to 6% on any credit card debt an active military member incurs before entering military service. And then there`s Colorado, where a rate of more than 45% for consumer credit is considered usury. However, the interest rate on consumer credit is capped at 12%, unless it is a “supervised loan”, which includes credit card debt taken out by a “supervised lender”. If you want to know what the usury law is for your state, there are databases that offer state-specific information. Keep in mind that your card issuer is not required to comply with the usury law of your home state. How closing your old credit card affects your balance 1On April 12, 2011, the Governor signed House Bill 2412. This bill amends articles 12-548 of the state code and makes the statute of limitations for credit card debt six years. However, debt collectors and consumer advocates warn that the statute of limitations (SOL) does not prevent debt collection companies from collecting debts. You simply cannot successfully sue to collect the debt – as long as the debtor appears in court to assert their rights.
Keep in mind that your APR for cash advances, balance transfers and penalties may be higher than your credit card`s APR.