by Francis Jock

Created on: November 14, 2009   Last Updated: May 03, 2012

If you are a typical credit card carrying consumer, you have probably recently received a notice from your bank or credit union about changes in your credit card interest rate. For some consumers that have enjoyed having low interest rate cards, the interest rate is, unfortunately, going up. The institution that lends you money is going to charge you more for convenience.

In the notice, the company explains that the justification for increasing your credit care interest rate is an impending change to federal rules. What they don't tell you is that the new rules are consumer protection laws that are supposed to keep the credit card companies from making changes to your account without prior notice. There are other changes in the legislation, as well, that goes into effect in February of 2010.

In their rush to reap as much profit as possible before the new credit card rules are fully enacted, the companies are adjusting the cost of carrying a credit card. For some, the interest rate is already sufficiently high. For countless others with low-interest rate cards, the news is not good, especially if the credit card balance is over $7,000 and the interest rate is being adjusted by 3% or more.

If you have received a notice that your credit card interest rate is going to change, you can use a financial calculator to determine how much the new rate is going to cost you. All you have to do is enter the credit card balance, the current interest rate, and typically a loan term of 5 years, or 60 months. The outcome can be shocking, depending upon the current balance.

You don't have to go out and buy an expensive financial calculator to help you manage your family budget. There are plenty of financial tools available online that make complex financial calculations easy. For instance, Bankrate.com has a great selection of easy to use online financial calculators.

For budgeting purposes, let's say that you have a credit care balance of $7,500. You have a very comfortable interest rate of 5.9%, which makes payments easy to handle. If you calculate the payback on your small consumer loan, you will see that making a payment of $144.65 every month for the 5-year term of the loan, i.e. your credit card balance, will cost you $1,178.65 in interest.

Now, plug in the 3% interest rate increase you bank is planning to bestow upon you. The same credit card balance, $7,500, at an interest rate of 8.9% is going to require your to pay $155.32 a month over the same period of 5 years, with a total interest cost of $1819.44. In other words, you are going to pay $640.79 more for the same amount of money. That's money into their pockets, not yours.

You have to option of canceling your credit card and paying off the balance over a period of 5 years. If you should opt to do so, you stand to save the difference. Paying off the balance using accelerated payment methods or tapping into other resources are also money saving options, which you can calculate using a financial calculator.

Careful financial planning and managing a family budget these days requires awareness how to make money work for you, not against us. For many families, credit card debt is a tremendous financial burden, and should be managed as carefully as possible. Online financial calculators, spreadsheets, software and hand-held calculators are the most important and valuable tools to help you manage your budget.

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