Question about closing a CC

[*Meg*]

So I just found out the interest rate on one of my CC's is going up by about 19 points, it will now be 29.4% I have the option to opt out. It would close my account but I will keep my original APR until it is paid off.
How bad would it be if I chose to close the account? There is no way for me to pay it off before the date the interest rate shoots up, so it is looking like that is my only option but I want an idea of how much it will negatively effect my credit. Thanks!

[Trey]

30% of your FICO score is how much debt you have and how much open credit you have. So closing an account, especially if it has a large credit line, will affect your credit. I can't tell you how much, but the more open credit the line has, the more it will affect it.

Was it a balance transfer or special offer? Or was it just purchases? I got the same stuff for my Chase card, but when I called to talk to them, they said that promotional offers and balance transfers would keep their special rates as long as we didn't default.

[*Meg*]

That was just my regular rate. The new rate is the increase that supposedly everyone is getting. I am just so pissed because I have good credit, and I never miss a payment and now all of a sudden I am going to have this insane interest rate that I can not afford. I'm still young and a few years away from really needing my credit all that much so I guess I can afford for it to take a hit. It sucks because I have worked so hard on my credit and now its going to go down.

[*KaTuP*]

Originally Posted by *Meg* So I just found out the interest rate on one of my CC's is going up by about 19 points, it will now be 29.4% I have the option to opt out. It would close my account but I will keep my original APR until it is paid off. How bad would it be if I chose to close the account? There is no way for me to pay it off before the date the interest rate shoots up, so it is looking like that is my only option but I want an idea of how much it will negatively effect my credit. Thanks!

Just a thought... I had the same situation and "opted out" but the opt out choice let the card expire at the cards end date, not just close it right then. Have you called the number to ask about it? Then once it expires, I think you have the same interest rate til you pay it off. just a thought. Maybe you should look into it more.

I would definitely close it though!

[*KaTuP*]

Originally Posted by *Meg* That was just my regular rate. The new rate is the increase that supposedly everyone is getting. I am just so pissed because I have good credit, and I never miss a payment and now all of a sudden I am going to have this insane interest rate that I can not afford. I'm still young and a few years away from really needing my credit all that much so I guess I can afford for it to take a hit. It sucks because I have worked so hard on my credit and now its going to go down.

might i ask who is your card through? Mine was CitiBank and they did that to mine accross the boards, regardless of if you were a good credit consumer. Basically all of these companies are going broke, so uping interest rate gets them money and doesnt affect those who pay it off every month it sucks

[*Meg*]

Originally Posted by *KaTuP* might i ask who is your card through? Mine was CitiBank and they did that to mine accross the boards, regardless of if you were a good credit consumer. Basically all of these companies are going broke, so uping interest rate gets them money and doesnt affect those who pay it off every month it sucks

It is through capitol one
I do understand why they are doing it, but I really don't think it makes sense in the long run, it will make them more money right now but once I pay it off and close my account they won't get anything. If they raised it maybe 5 percent rather then 20 I would have continued to be a customer and they would have continued to make money off of me KWIM

[Rich Lunsford]

It is true that your credit score is based upon your payment history and how much of your available credit you have outstanding. Ideally, you would not have to close the account. However, if it comes down to the choice of closing the account and being able to make the required payments, or not closing the account and running the risk of not making the payment each month, then close the account without a moment’s thought. I would rather see you be at the top of your credit limit and have a clean payment history, than see you get behind on payments. It may be the lesser of two evils.

Then, begin a program to aggressively pay down the outstanding debts, build up some savings for emergencies and you’ll look back on this experience as a great learning opportunity. Keep up the good work!

Rich Lunsford is a CERTIFIED FINANCIAL PLANNERTM practitioner with USAA Financial Planning Services, one of the USAA family of companies. Rich holds the Series 7 and 66 securities licenses. Rich also holds the designations of Chartered Financial Consultant (ChFC®), Chartered Life Underwriter (CLU®), and CHARTERED RETIREMENT PLANNING COUNSELOR (CRPC®).

Certified Financial Planner Board of Standards, Inc. owns the certification marks CFP® and CERTIFIED FINANCIAL PLANNER™ in the United States, which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.