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Should I close my credit card if I have a high interest rate?

Using a credit card with a high interest rate can become costly if you don't pay off your balance. Here's when you should and shouldn't close it.

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If you have a credit card with a high interest rate, or APR, you may be wondering if it's worth holding onto.

And you have a valid point. Interest rate fees can add up quickly on credit cards and make them harder to pay off. Take the below as an example:

If you only make the $35 minimum payment each month on a 22.74% APR credit card with a $1,000 balance, it will take you over three years (about 42 months) to pay off your balance — costing you an additional $453 in interest charges.

But before you close a credit card just because it has a high interest rate, there are a few things to consider. Below, CNBC Select has some recommendations depending on your situation.

Situation 1: You have a high interest credit card but always pay the balance off on time and in full 

If this is you, keep up the good work — and no, there's no pressing need to close your card. You only pay interest on a credit card when you carry a balance, so you don't need to worry about your interest rate (no matter how high) if you feel absolutely comfortable paying your balance in full and on time each billing cycle.

"If you pay your balance in full every month, then the interest rate on the credit card is irrelevant to your situation," Roger Ma, a certified financial planner at lifelaidout® and author of "Work Your Money, Not Your Life," tells CNBC Select. "And if the card is a great fit otherwise, then certainly hold on to it."

This is particularly true if that high-interest card comes with great rewards, as is often the case.

For example, both the Alliant Cashback Visa® Signature Credit Card and the Capital One® SavorOne® Cash Rewards Credit Card ranked on CNBC Select's list of the best cash-back credit cards. Whereas the Alliant Cashback card has a regular 12.24% to 22.24% variable APR, the Capital One SavorOne card has a higher 15.49% to 25.49% variable APR. Your credit score will determine what APR you have in those ranges, but it's worth noting that the one with the overall higher interest rate has a few extra premium rewards.

The Capital One SavorOne Cash Rewards Credit Card has a well-rounded cash-back program offering 3% cash back on dining and entertainment, 2% at grocery stores and 1% on all other purchases. It also has a generous welcome bonus of $150 with a low spending requirement of $500 in your first three months.

In addition to these rewards and bonuses, the Capital One SavorOne Cash Rewards Credit Card comes with opportunities to access VIP tickets, five-star meals and other fun experiences, whereas the Alliant Cashback Visa Signature is much more straightforward.

The Alliant Cashback Visa Signature is an easy-to-use rewards card, offering 2.5% cash back on all purchases (up to $250 per billing cycle). The cash back is quite generous, but this card doesn't have all the other bells and whistles that come with the Capital One SavorOne Cash Rewards Credit Card.

Situation 2: You have a high interest credit card and sometimes (but not always) pay the balance off on time and in full 

You may not always be able to pay off your balance on time or in full, especially during a time like the coronavirus pandemic. But there are some steps you can take to avoid racking up debt on your high-interest credit card without having to close it.

First, call your credit card issuer and see how they can help you.

"If you don't pay off your full balance each month and have a high interest rate on your card, it may first make sense to try to negotiate with the card issuer for a lower interest rate," Ma says. 

Certainly now, credit card issuers are more flexible when it comes to offering relief to their cardholders. They also may be willing to downgrade your current card to a lower interest card or one with no interest at all. This way, you don't have to technically "close" your high-interest card, which can lower your overall credit limit and increase your credit utilization rate. A decrease in your credit utilization rate will bring down your credit score.

Situation 3: You have a high interest credit card and are always carrying a balance month to month

If you're in this situation, know that you aren't alone. On average, Americans carry $6,194 in credit card debt. But it's certainly costly — and a reason to maybe close your high-interest credit card, says Ma.

If you carry a balance on a credit card charging you high interest, consider transferring that debt to a balance transfer credit card which gives you time to pay down your principal without accruing interest. To qualify for the longer interest-free periods, you will most likely need to have good or excellent credit (scores 670 and above), but there are options available for fair credit as well.

Whether you then close your high-interest credit card after you make the transfer will depend on just how much you are allowed to transfer. Your credit score will also determine the amount of debt you can transfer (either a percentage of your total credit limit or a set dollar amount). 

If you can't transfer the whole amount of your balance, you will need to keep what's left over on your high-interest card. In that case, you'll want to pay off the debt on your high-interest card before paying off the balance on your balance transfer card since the latter isn't charging you interest for a period of time.

The Citi Simplicity® Card ranked on CNBC Select's best balance transfer credit cards because of its long balance transfer period. The card offers one of the longest stretches of interest-free time to pay off your debt with a 0% APR for the first 21 months on balance transfers (after, 14.74% to 24.74% variable APR). 

Be aware that most balance transfer cards usually require a 2% to 5% fee (or a $5 minimum) for each transfer, there are some balance transfer cards with no fee. The Amex EveryDay® Credit Card has a shorter timeline than other balance transfer cards at 0% APR for the first 15 months (after 12.99% to 23.99% variable APR), but it has no fee on balance transfers.

The one big rule with balance transfer credit cards is that you'll want to commit to paying off your balance before the introductory 0% APR period ends, so you don't end up accruing interest on that new balance.

Bottom line

If you can afford to pay your credit card balance on your high-interest credit card in full by its due date, you absolutely should to maintain a good credit score. Paying interest (especially at a high rate) would otherwise be a waste of money.

For those carrying a balance on a high-interest card month to month, you don't have to struggle with debt forever. Talk to your credit card issuer and ask them to lower your rate. If that doesn't work ask to downgrade to a lower interest rate card. If your credit has improved since you first received the card, mention that to your issuer.

Information about the Alliant Cashback Visa® Signature Credit Card, Capital One® SavorOne® Cash Rewards Credit Card and Amex EveryDay® Credit Card has been collected independently by CNBC and has not been reviewed or provided by the issuer of the card prior to publication.

For rates and fees of the Amex EveryDay® Credit Card, click here.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the CNBC Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.