Many consumers open credit cards when they are offering promotional rate of interest is and other beneficial offers. Owing to the lapse of the promotional offer or due to other factors such as the change in the policy of the company may result in the credit card company changing the rate of interest to a higher one. If this has happened to you you might be wondering if it is a better idea to close the credit card account or to keep it open. The general advice is to keep the credit card account opened after having paid of the balance and to avoid using it further if the interest rate seems to be too much. This is especially true if you are the kind of consumer that purchases on the credit card and then makes partial payments on it every month rather than paying down the balance in full. Keeping the credit card account open ensures that your credit limit stays up and your debt utilization ratio stays low.
As it has been stated often in the previous columns the calculation of your credit score will depend upon other information present in your credit history as well. Opening and closing of a credit card account will not have much impact if you have plenty of other long-term positive data present in your credit report. For people who are suffering from debt, credit score should not really be a concern as they should concentrate the most on paying of that debt. As the balances on the credit cards reduce the credit score will improve automatically.
While it is advised to not open credit cards with services that charge a high rate of interest must credit card account is opened and changes its terms and conditions to a higher rate of interest, the best thing to do is pay down the balance and avoid using it in the future while keeping the account open.
You should also consider as to why exactly the credit card company chose to increase the interest rate. If it is a matter of the lapse of a promotional interest-rate and the implementation of the regular credit rate then it’s all right. But if the interest-rate was increased due to the history of non-payment and display of high-risk credit behavior then you should Endeavour to address those deep seated issues as well by taking counseling and using budgeting to avoid sundry and excessive expenditure that may be beyond your means.