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6 credit card benefits and terms issuers can change without notice

Card issuers can make many changes to your credit card's benefits and terms without notice, which may come as a surprise. Below we list six, so you can be prepared and potentially avoid these situations.

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Any time you open a credit card, you'll receive an extensive cardholder agreement, stating the various terms of your account. Most people simply skim this paperwork, since there's a lot of jargon and fine print.

But as credit card issuers waive payments, forgive late fees and temporarily pause payments to help borrowers stay afloat during coronavirus, you may want to review your agreements more closely to find out what other changes can be made without your knowledge.

According to your agreements and federal regulations, card issuers can add, modify or delete benefits or services at their discretion. Your card issuer can change many features of your card, such as rewards rates and interest rates, for a variety of reasons.

Below, we list six benefits and terms that card issuers can change without notice and how you can potentially avoid these situations.

These benefit and term changes do not require advance notice

  1. Rewards rate and redemption changes
  2. Credit limit increase or decrease
  3. Variable APR increase or decrease per prime rate
  4. Penalty APR taking effect
  5. Promotional rate ends
  6. Eligible account closures

1. Rewards rate and redemption changes

Many people open credit cards for the rewards in common spending categories, such as dining, grocery, gas and travel, as well as the various redemption options, such as statement credits, gift cards and travel bookings. However, the rewards rates and available redemption options can change at any time.

Sometimes these changes can be beneficial for all cardholders, such as when the American Express® Green Card boosted its rewards program last October from 2X Membership Rewards® points per dollar on travel booked at Amextravel.com to 3X points on eligible travel, transit and at restaurants worldwide.

And more recently, Chase added select streaming services to the Chase Freedom® cash-back calendar for April to June in response to changing spending habits due to the coronavirus.

However, there are times when these changes may be less desirable. For instance, Citi announced a variety of new rewards and benefits for the Citi Premier® Card that, on a whole, were positive, but may devalue the card for some users. One change that may affect the redemption choices of Citi Premier® Card holders is that the card will no longer offer 25% more value on points redeemed for airfare, hotels, cruises and car rentals through the ThankYou Travel Center after April 9, 2021.

While these changes don't require notice, many card issuers will send updates to cardholders months in advance as a courtesy.

2. Credit limit increase or decrease

When you open a credit card, you'll be assigned a credit limit based on a number of factors, including a review of your credit report and credit score, income and payment history. This amount can be a couple hundred of dollars to thousands, but may not always be the same.

You have the option to request a credit limit increase, and sometimes your issuer may automatically increase your line of credit. Your issuer also has the right to lower your credit limit at any time, without notice. 

Reasons for a credit limit decrease may include missed or late payments and/or spending too much or too little on your card. You may also notice credit limit decreases during a recession as banks opt to limit potential losses from cardholders defaulting on their debt.

While card issuers can change your credit limit without notice, they'll typically send a notification after the change has been made. And you usually have some time to adjust to the changes since card issuers can't charge an over-the-limit fee or penalty APR for the first 45 days after you've been notified about a lower credit limit.

For instance, if you had a $4,000 credit limit and received notice on April 1 that it was reduced to $2,000, you could spend up to $4,000 until May 16 without penalty.

3. Variable APR increase or decrease per prime rate

Most credit card annual percentage rates (APRs) vary with the prime rate, which is the best interest rate lenders charge consumers. If you open a variable rate credit card, your interest rate can fluctuate along with the prime rate.

For example, if the Fed decreases the federal funds rate, the prime rate decreases and your credit card APR will likely follow the same pattern. Card issuers don't have to disclose interest rate changes due to the prime rate and can implement them as soon as the next billing cycle after the prime rate changes. The best way to see if you've been affected by a rate change is to keep an eye on your billing statement

4. Penalty APR taking effect

If you miss a payment or pay late by more than 60 days, your card issuer can hit you with an interest rate that's significantly higher than your regular interest rate. Known as your penalty APR, card issuers don't have to provide advance notice of a spike in your interest rate.

For example, if you have a 12.99% APR but pay 60 days late, you may be penalized with an APR around 29%.

While a penalty APR can last indefinitely, you can typically have it reverted back to your regular APR after you make consecutive on-time payments for six months, under CARD Act regulations.

To avoid a penalty APR, make at least the minimum payment on your bill.

5. Promotional rate ending

If you take advantage of an intro 0% APR credit card, you may receive no interest for a period of time ranging from six to 21 months. Once the intro 0% APR period ends, your APR will increase to the regular purchase APR outlined in your cardmember agreement.

Your card issuer isn't required to notify you when the 0% APR ends, so it's up to you to keep track of the date. And if you opt-in to a hardship program, such as forbearance, that offers a lower interest rate for a period of time, you'll also have to be aware of when the program ends.

However, card issuers often send along courtesy emails when a special financing period is near expiration to help you keep track. You can also review your credit card statement or call your card issuer for more details. It's a good idea to set a notification one month prior to the promo rate ending so you can pay off any balances and be prepared for an increased interest rate.

6. Eligible account closures

Card issuers can close your credit card account without notice for a number of reasons, such as inactivity, default or delinquency. If you haven't used your account within a certain period of time — often over a year — your card issuer may close your account. To avoid an account closure due to inactivity, put a small recurring charge on your card, such as a monthly streaming subscription.

In order to keep your account in good standing and avoid debt and/or delinquency (such as missed payments), only spend within your means and pay your bill on time and in full. If you can't always pay in full, make at least the minimum payment. Setting up autopay for the minimum due is a great safety net.

These benefit and term changes do require advance notice

There are some benefit and term changes that card issuers must provide advanced notice of, including annual fee changes and APR changes that differ from the ones outlined above. Card issuers must provide at least a 45-day notice before changing these terms, according to the CARD Act.

Earlier this year, Chase announced a $100 annual fee increase, from $450 to $550, for the popular Chase Sapphire Reserve®. This change was announced roughly four months before existing cardholders were to incur the higher fee, granting them plenty of time to reevaluate whether the card is still worthwhile. (Learn how Chase Sapphire Reserve cardholders may receive a $100 annual fee credit amid coronavirus.)

If your card issuer wants to change your APR for reasons not mentioned above, such as a decrease in your credit score, it will have to notify you 45 days in advance. Once you receive notice, you can opt-out of the new interest rate, but beware your account may be closed as a result. 

Take note, if your interest rate increases due to a drop in your credit score, the change will only apply to new purchases, not pre-existing balances. And your card issuer is required to review your account six months after the change to see if your interest rate can be reverted, according to the CARD Act.

Don't miss: Here's the difference between a credit card network and card issuer

For rates and fees of the American Express® Green Card, click here.

Information about the American Express® Green Card and Chase Freedom® has been collected independently by CNBC and has not been reviewed or provided by the issuers of the cards prior to publication.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.