Merrick RJ and new annual fee: worth keeping?

[Anonymous]

I need an answer to a question.  This month my husband and I were going to pay off 2 of our smaller accounts but he has a Merrick Bank Card that we have not been able to bring down for almost all of 2009.  The interest on the card has gone up to 32% and my husband has had this card for about 5 years or so.  Now they send him a letter telling him that now they are instituting an annual fee of 80.00 a year or 8.00 a month.  He would like to pay this account up and get rid of it but I really don't think he should as it is his highest credit limit that he has and he has had it for awhile but is there anything we can do about this.  I would appreciate any information anyone can give me.  Thanks.



edit: This post was split off from JoDiver's "Avoiding account closure and credit limit reduction" to form its own thread.

Message Edited by haulingthescoreup on 12-01-2009 05:33 PM

[haulingthescoreup]

Couple of questions to help the two of you analyze your options:

--How many open cards total does he have?

--What are the CL's of each, and what are the balances on each?

--What are his most recent known FICO EQ and TU scores? (please, not FAKO's, they just aren't enlightening)

--What baddies does he have that might keep him from being able to replace the Merrick card with, say, a secured CU card or something similar?

The general rule of thumb is that cards are only really worth dumping when they have an annual fee that feels exorbitant. But if you want to close it, the history should remain on his reports for ten years. It's just that he'll lose its CL, and therefore his revolving util might be affected, if he has balances on other cards.

A great resource is fused's "Closing Credit Cards." It's stickied several places, plus I've got it linked in my siggy below. It might help you think through the pros and cons.

[Anonymous]

He has 5 cards altogether.  1 has a 500 CL; another 1000, 550, 1500 and 2300 Merrick.  He owes 2000 on the Merrick which we are paying off on the 15th of this month, and this is how the balances look:

Capital One Business  1000 - owes 900

Capital One Personal    550  - 0wes 410

Merrick   2300 and owes 2019

Household  1500 -- owes 1310

Chase  - 500 - owes 325

We are going to pay off the 2019 and start to work on the others.  His MyFico score is:  606 EQ and I don't know what the others are. 

He has 2 collections on his credit report that were doctor bills from our son that the insurance did not pay off and now he has a collection.  Outside of that this is it. for baddies.  The problem is up until 4 years ago we never used a credit card but unfortunately we had to like everyone else and now we need to get them paid off.  I just don't want to see his credit score go lower because he is opting out of this card.

[honeybunnygal]

His utilization looks pretty high. From a PURELY score-based standpoint, paying Merrick completely off may ding him in the utilization department (since once it is closed & paid it no longer counts in utilization). If you're trying to raise scores for a particular purpose in the near future, pay off some of the smaller TLs to improve utilization.

I stress the above info is looking at it from a score-based view. Debt-wise, you can pay off Merrick, then start snowballing the other balances. He may get a ding as far as util but he'll have Merrick off his back.

He has the option to opt-out of the annual fee (by closing the account while still paying at the current rate), correct? A combination of the two ideas could be paying Merrick to < 9% utilization ($200), then snowballing the other balances while paying Merrick down. That way he shouldn't get the utilization ding because the low util on the closed account would factor in to utilization.

[Anonymous]

Thanks a lot.  I have been working on his credit and my idea was to pay the Merrick down to 1/2 and let them charge him the $8 a month for 10 months until his score reaches a better number and better report and then at that time see if he can get some of his other cards to increase his credit limit.  The problem with this account is that he has had it for probably 5 years now so I am leary of having him get rid of it.  I was also thinking of seeing about getting him a secrured card with the other 1000.00 with the credit union but not so sure what to do yet.  Thanks for the advice.  I use debtgoal.com and that has really helped me and I am thinking about adding him to it also.  Either way if we keep at the rate we are going we should both have our credit cards down to 0 balances by May or June of 2010.  My goal for 2010 is to get all the credit cards paid off and to then take that money and finish getting my car paid off.  I am tired of credit card companies controlling what I am doing and want to be in the driver seat instead of them.  Again thanks for the good advice.

[Jazzzy]

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@Anonymous wrote:
Thanks a lot.  I have been working on his credit and my idea was to pay the Merrick down to 1/2 and let them charge him the $8 a month for 10 months until his score reaches a better number and better report and then at that time see if he can get some of his other cards to increase his credit limit.  The problem with this account is that he has had it for probably 5 years now so I am leary of having him get rid of it.  I was also thinking of seeing about getting him a secrured card with the other 1000.00 with the credit union but not so sure what to do yet.  Thanks for the advice.  I use debtgoal.com and that has really helped me and I am thinking about adding him to it also.  Either way if we keep at the rate we are going we should both have our credit cards down to 0 balances by May or June of 2010.  My goal for 2010 is to get all the credit cards paid off and to then take that money and finish getting my car paid off.  I am tired of credit card companies controlling what I am doing and want to be in the driver seat instead of them.  Again thanks for the good advice.

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Sounds as if you're making a good effort towards getting your debt under control. As to closing this account, remember that the information will normally stay on his reports for up to 10 years. If it is his oldest account now, it will still be his oldest account even if it is closed.

Sometimes you just have to kick those high-fee cards to the curb. For now, if you can opt out and not pay the fees, that's what I would recommend. Will that keep the interest rate lower, too? If you pay the closed account down to almost nothing, and pay off that almost nothing gradually, the credit limit will still count until the balance is zero.