DISQUS

FinanceAndFat · 2 years ago

I really hope people wouldn't accept a higher interest rate for the 'privilege' of continuing to use a credit card. I would only consider that as an option if I was about to buy a house and needed the absolute best credit score I could have at that point in time.

Single Ma · 2 years ago

One other thing to note...

If an account is closed with a balance remaining, the credit limit will be reported as zero. Thus severely impacting the credit score because the TL will appear over the limit (i.e. balance/limit = utilization %, a major factor in the FICO formula).

Assuming there's no annual fee, I would leave the card open but pay the balance in full. If PIF isn't an affordable option, I'd BT to another card with a better rate.

FinanceIsPersonal.com · 2 years ago

I'd see if I could surf the balance over to a different card first, otherwise close the card. Saving actual money is a lot better than potentially saving an unknown amount of money by having a better credit score for the short term.

kitty · 2 years ago

Who cares what the interest is if you pay your balance in full? As long as they continue giving me cashbacks, they could raise my rate to 50% for all I care.

Kimberly should be paying her balance in full, then she wouldn't need to worry about the card's interest rate. If she can't, she could get one of those 0% offers, transfer balance there and pay it off before 0% expires. 9% is high too, it is certainly higher than transfer fee most of these 0% offers use. Then she can think what is convenient to do about the old card based on suggestions above.

Chris · 2 years ago

Kitty is right on the money. If you're paying interest on a credit card, you're using it wrong. Credit cards make plenty on interchange fees...anything you voluntarily give them is extra profit.

The terms she agreed to allow the card company to change the rate for any reason they please. This of course ensnares anyone who carries a balance who does not have the cash reserves to pay it in full.

Credit cards are great tools for shopping convenience, but the way that most people use them is irresponsible. Paying interest, carrying balances, is a sure sign that you are consuming beyond your means. Playing tricks with cards to grab 0% isn't going to help, as it will only put a bandaid on her underlying budget problems. As soon as THAT card hikes her rate, and it will, she will be right back where the started.

Cut up the card, spend less than you make, pay off the card ASAP. Then she can again use the card, paying off the balance each month. That is the only real solution.

IMO.

Stormblade · 1 year ago

Very Idealistic Chris and Kitty and I agree that is the way to go. Sometimes solutions to problems are simple but not easy and sometimes they seem simple to those in a position to implement them.

Stormblade · 1 year ago

Argh hit submit too early.

There are sometimes situations not quite of your making that can occur. I had 2 credit cards which I paid in full every month. Then I was laid off. I work in IT and for a long while there was nothing. I found myself using the CC for food. Later I was able to get food stamps which helped some but the CC crept up. Finally I got a part time job but of course by then the CC company had jacked up the interest and I found myself not able to make the minimum even without hardship.

So yes a simple solution of spend less than you make and cut up the card seems to be the way to go but of course not everyone is best served doing that. Without that CC I'd have been even worse off.

So yes that advice is exactly what some people need to hear but it does make an assumption. The assumption is similar to how people always assume that folks who are overweight are that way because they eat too much. Not always the case.

So as general advice I agree with the caveat that it is general and exceptions and individual circumstances may make following that advice impractical.