Closing a Credit Card?

Question

I have a $2000 on a credit card and they recently increased the interest rate on it. When i call them, they said they can close the account and that will eliminate the interest rate totally. However, i won't be able to use the card and still obligated to pay the remaining balance. Should i do this? will it really screw up my credit rating and effect me negatively?

Answer 1

Whoever told you that the interest rate would be eliminated totally is either wrong or you misunderstood what they were saying. What they really mean is that you can close the account and lock in your current interest rate - but you will still have to pay your balance AND the interest on that balance.

Now, to answer the second part of your question. No, you should NOT close the card. Closing the card can only hurt your FICO credit score because your available credit to used credit ratio will get worse.

Suggestions:

1. Call the company and ask them to lower your rate.
2. Call a different credit card company and ask them for a promotional balance card transfer rate (typically 0-4%)

Answer 2

Look into getting a different credit card with a lower interest rate and no yearly fees. There are tons of offers out there. Ask some of your trusted friends and family which cards they use and which card they might recommend.

Transfer your balance from the higher interest rated card to the new card and close out your old account. You'll maintain your credit rating and be able to better manage your debt.

This is important! Make SURE you close the account or it'll have a negative impact on your overall borrowing capacity. Even if you have a zero balance, in the eyes of a loans officer credit bureau or mortgage company, the lending limit counts as debt whether you use it or not.

Having one card is almost mandatory if you want to do any business these days. Just make it a card with low rates, no fees and pay it down as soon as you can.

You'll be miles ahead.

Answer 3

Shop around for another credit card with a low interest rate and transfer the balance, and close your current account. If you close the account now- owing a balance, this will look bad on your credit report. Your best bet is to pay off the balance and close the account. If you inquire on another card, read all fine print- make sure your interest rate will not go up after a year or so....

Good luck!

Answer 4

Your credit rating will go down. Closing a card that still has a balance is not a good idea. The the credit bureau, you will look like you have no self-control. Pay off the card, don't charge any more and then close it after you have a zero balance. Good luck!

Answer 5

It is not a good idea to close the account. Here's why: When you close a credit card that has a balance, your total available credit is lowered. Since you still have a balance on that credit card, it looks like you’ve it maxed out. The amount of debt you have is 30% of your credit score; so a maxed out credit card, or one that appears to be maxed out, can have a very negative impact on your credit score.

Answer 6

One of the main things that effects your credit rating is "open" credit. Meaning any amout you have left to charge on a card. If the card is closed and has a remaining balance and you continue to pay the full monthly amount it shouldn't effect your credit score at all. It looks better when you have bills and you pay them promptly versus having no open credit. Meaning you don't have anything to show that you pay your bills in full and on time. I hope that made sense. It's always better to only have one credit card with an open amount versus having 10 credit cards maxed out with no open amount. I hope this helped!