Credit card will be raising interest rate on balance. Should I close it so I can pay it off at the lower rate

Question

I have two credit cards from the same company - one is an older account with a higher interest rate, the other is a newer account with a better interest rate. Both cards have balances that will take some time to pay off, and both charge an annual fee.

I recently received a notice that the newer, lower-rate card's interest rate will be going up to match the rate of the older card. I'm trying to get both balances paid off, but the rate going up will make it tougher to do this. The notice said that I can 'decline' the higher rate by closing the account. Closing the account would save me money from additional interest and from the annual fee.

Is there any downside to closing the account, and if so how does that weigh against the additional money not closing it will cost me?

Any serious advice is greatly appreciated - thanks!

Answer 1

First off, this is a note to everyone: if you have two cards with the same bank you ABSOLUTELY can consolidate both accounts, make the better one the new, main account. I used to do this 50 times a day when I worked for MBNA. (now BoA) You simply ask a rep over the phone. It's not rocket science people. Account A wats account b. Your credit line and balance are simply transfered over.

Reasons why rates go up: end of promotion, late payments, small sized payment (it shows that you're not paying the funds lent to you - meaning risk in having you as a customer is increased) problems with your bureau. Credit card companies review accounts and credit files all the time accessing risk. Ever notice an increase on your credit line? That's because when you file was reviewed, you qualified for the auto increase. Sometimes credit card companies give you an auto increase and an apr increase at the same time. It still means you are risky, but they want to make more money off you.

Closing the account(s) will not put you in a better position until those funds are off those accounts. A closed account will still be subject to the higher interest rate until the balance is zero, not a moment before. Closing your credit line before it's paid off is actually not very smart - if there are any problems, the credit card company is less inclined to be gracious because you've already told them you don't want to do business with them.

I think a good bet would be to transfer your balance to a new
Promotional rate card. Look around, every company offers promotions to start. Look for something over 9 months - and keep that promotion in place by paying on time and finding out all the terms and conditions. If you are smart with the promotion, you can knock off majority of your debt and help set yourself up for a brighter credit future.

Answer 2

Try to pay much more than the minimum payment when you get the monthly bill. Also you can call the credit card company and try to have them reduce the interest rate. If you have had an account for a while, I think they would consider it. But do not close your account without paying off the balance, this will go against your good credit. Even if it means to get a part time job to pay up most of what you owe is better.

Answer 3

In order to close the account, you must pay the balance in full. Transferring the existing loan to the other card is pointless since it has the same rate. Keep both open, pay them off as quickly as you can to build up credit and apply for a better credit card with a lower interest rate.

Answer 4

I think the agreement you signed with Chase calls for a fixed interest rate on the balance you borrowed for the life of that balance, as part of the promotion. But they can change the interest on the card. (Not your promotional rate) Thing is, that cards can have multiple interest rates on various kinds of balances. If, for instance, you were to charge something on this card, your payments would likely go to the balance of the promotional interest rate, before the (usually) higher rate balance. If you do not make additional purchases on this card you should be fine until the promotional balance is paid off. Don't miss a payment due date though, because if you do, then they can change the promotional interest rate. j

Answer 5

Read thru that notice very carefully. Closing the account could result in the interest rate going to the default rate, which is normally what happens when you close an account that still has a balance.

Pick one card (normally the highest interest rate) and pay every extra penny you can squeeze out of your budget on that card, while making minimum payments on the rest.

Answer 6

Under those conditions, I can't see any downside to closing the account, if you will be spared the higher interest rate and the annual fee, too. Closing an account does not adversely affect your credit rating, so long as you remain current in the payments.

Answer 7

Why don't you find a credit card with a lower rate and transfer the balances of the two you have to it? That way you can continue to use the card. There are alot of credit cards out there that have really low rates and no annual fees.

Answer 8

Close the new account and keep (only) the old account open.

Q. Should I close it so I can pay it off at the lower rate
A. Yes

Q. Is there any downside to closing the account
A. No, if you close only the new account and keep the old account open.

Answer 9

Sometimes credit card companies periodically raise your rate because they can. Every so many months I call them and ask if I am eligible to lower my rate. If you pay on time and stay in good standing with them, then you may be eligible for lower rating. But the key is to ASK. Those who do not ask will not receive.... believe me all you have to lose is a little time asking.

Answer 10

Do you ever heard that people invest their credit card balance and still make good return, to pay off their balance and still have money left to keep for profit.

Research and read about it, just be careful about scam if you involve other party than yourself.

Let hear more if you find out and need to know more!