Depending on the fine print and the type of card you choose to use, your credit card company can raise your rate at any time, and for any reason—regardless of whether you pay your bill on time every month. How your credit card company calculates your annual percentage rate, or APR, generally determines how much you pay in fees. For example, some credit cards may charge a higher fee for a larger balance, or may offer a lower APR for balance transfers. Some credit cards offer a fixed rate, which means that the APR is not likely to change as often as on variable rate cards. Variable rate cards generally are tied to other rates such as the prime rate or Treasury bill rate.

Credit card companies raise rates for a variety of reasons. Sometimes they raise APRs when a low, introductory rate period has ended, for late payments on your credit card bill or any other bill, or if you take out a loan and the company determines that you are overextended. Credit card companies have also been known to change due dates, resulting in late charges and higher APRs when people fail to notice the change and pay their bill late.

To avoid unexpected charges, it is a good idea to read the fine print on the contract before signing up for a credit card. Check your credit card agreement to find out how your company calculates your rate, how often it can change, and other terms that can affect your APR. To learn more about credit cards and APR rates, visit the Federal Reserve Board (www.federalreserve.gov) and the Federal Trade Commission (www.ftc.gov).