Alternatives To Cutting Off Credit Cards That Hiked Their Rates

April 10th, 2009

cutcreditcardWith so many credit cards just raising their rates with little notice and sense (up to 30% interest, in some cases), it’s tempting to just close off those accounts.  Why not just stick it to those clowns who want to make your life harder, right?

Unfortunately, closing off a revolving credit card has a bit more repercussions than severing your ties with the credit card issuer.  Once you take this account off your pool of available credit, your score immediately suffers and a bad credit rating can be disastrous during economic times such as now.  I

As with everything else, try to work out the rate with the bank.  Even if they don’t acquiesce, at least you tried.  There’s no harm in trying to work out a better deal.  You can also keep the card, in the meantime, and just hold off on using it, if you need your credit scores to remain even for the next few months.  Of course, you’ll still have to pay the annual fees, but that should be better than seeing your credit score go from “fair” to “poor.”

Things get even tougher when you’re keeping a balance on the card.  Even when you do cancel the account, you’ll still have to pay it off at the current rate.   As such, try to see if you can get a low-rate balance transfer card to move the current debt to, before doing anything else.

Some people, acting emotionally to the hike, simply decide to default on the offending cards. This is the worst thing you can do.  If you own three credit cards, for instance, defaulting on just one of those will automatically activate the universal default clause, potentially prompting the other issuers to raise your interest rates as well.  Avoid it at all costs.

noel Posted in Credit Card Guides

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