Q. Carmen, I watched your show for the first time the night the conversation was about credit card companys. One letter from one credit card company is raising the APR rate due the economy. Another stated that due to the higher cost of doing business and the challenging economic environment they too are raising the APR from the prime rate + 9.74%.
At this rate it will take many people twice as long to pay their credit cards off. I have the option to close my accounts at the current rate and my question is if it would be a good or bad choice to do so?
Please, any advise will be appreciated. Thank you for your time. -Pat, CO
A. It's a modern Catch-22. Cards are telling you that if you want to keep a low interest rate, you have to 'opt out' of the card, close the account and take a hit to your credit score. The alternative is to keep your credit score as is but pay the price of a much higher interest rate.
To make a decision, how long will you be keeping a balance on the card? If it's for more than six months it may make more sense for you to take the lower rate and the hit to your credit score will go away over time, countered by your paying off the balance. If you can pay off the balance very soon, accept the higher rate, pay the card off and don't carry a balance again.
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Carmen Wong Ulrich is the host of On The Money