Q&A: What is Better for my Credit: Keeping High Fee Card Open or Closing It?

Q. I have a very low credit score (low 500's) due to charge offs in 2003/2004. I opened a credit card account to help improve my credit a few years back. The limit on the card has not increased but the interest rate has since I received the card. The credit card account has a $65 annual fee, $300 limit and 29.99% interest rate.

dont see any benefit in keeping it since the limit and interest rate are working against me and I no longer want to pay the fee. I have a $200 balance currently but I can pay it off. Is it worth it to keep the account open?

A. If your scores are still in the low 500's from charge offs that are 5 and 6 years old then you haven't done a very good job rebuilding your credit, and I'm being nice. By now you should be into the 700's and fighting off better offers with a stick.

I know that's not your question but that's a much bigger problem than deciding whether or not to keep a high interest credit card. The terms of that card are garbage but you aren't going to be able to replace it with one that has better terms because of your poor scores. If you don't need the card then close it, it's certainly not going to hurt those scores.

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John Ulzheimer is a nationally recognized credit expert, president of Consumer Education for Credit.com and contributor to On The Money. Learn more about him at CreditExpertWitness.com.