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New Member
dallasdad
Posts: 4
Registered: ‎12-15-2008
0

closing high balance acct vs keeping it open

my Exp FICO is 730  I have a card I've had a long time going from 5.5% to 14%.  It's balance is about 21k and limit of 25k.  I can close account (I don't use it anymore.  just used it for balance transfers) and keep paying 5.5% on it until paid off then  lose the credit and utilization factor or i can keep it open at higher rate.

 

Not sure which to do 

Valued Contributor
Jazzzy
Posts: 2,679
Registered: ‎07-29-2009
0

Re: closing high balance acct vs keeping it open

Hi, it would help if you gave the forum members a bit more information.

 

What is your total credit card utilization percentage? What other cards do you have and what is owed on them?

 

Do you have other credit available if you close this card?

 

That is a rate jack that is going to hurt.

New Member
dallasdad
Posts: 4
Registered: ‎12-15-2008
0

Re: closing high balance acct vs keeping it open

credit utilization is 40%.  I don't use the cards for monthly spending.  just paying them down.  I have other credit available.  
Mega Contributor
RobertEG
Posts: 18,434
Registered: ‎03-19-2007
0

Re: closing high balance acct vs keeping it open

[ Edited ]

Why would you possibly want to close a revolving account, in good standing, with a 25K credit limit?

You have to pay the balance, open or closed.

Dont close it,  Pay it down, and then the APR becomes meaningless.   5.5% of zero is the same as 14% of zero.

If you close it, you will instantly lose $25K in CL, and thus increase your overall % util of revolving credit.

If you have had the card for a long time, you want to retain its age.  And you never know when an emergency will strike, and you can call on existing credit.

I see no reason whatsoever to close this account.

Message Edited by RobertEG on 10-24-2009 07:43 PM
Senior Contributor
creditwherecreditisdue
Posts: 4,923
Registered: ‎04-19-2009
0

Re: closing high balance acct vs keeping it open

Are you saying the $21K is a balance transfer and locked in at 5.5%? If so for how long? Or do you have to opt out to lock in the 5.5% rate? How quickly can you pay off this balance? This is really going to be an economic decision for you based on how much finance charge you project paying at the new and old APR's.

 

The good news is that closing the card will not effect your UTIL. Both the CL and the balance are included in the UTIL calculation until the balance reaches zero, UTIL changes should not be your concern here - just the finance charges.

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Epic Contributor
haulingthescoreup
Posts: 28,098
Registered: ‎04-01-2007
0

Re: closing high balance acct vs keeping it open

How long would it take to pay it off? In other words, how many months at the additional 9% or so interest? That's roughly an additional $157.50/ month over the 5.5%, less as the balance goes down, of course.

I wouldn't like to walk away from a $25K CL and especially from a long-history account, but it's true that that's a chunk of change.

Yes, your total util will still include the $25K until either the credit limit or the balance is $0, and yes, it will still count in your history as long as it remains on your reports, generally up to 10 years. But once they're gone, they're gone.
* Credit is a wonderful servant, but a terrible master. * Who's the boss --you or your credit?
FICO's: EQ 781 - TU 793 - EX 779 (from PSECU) - Done credit hunting; having fun with credit gardening. - EQ 590 on 5/14/2007
New Member
dallasdad
Posts: 4
Registered: ‎12-15-2008
0

Re: closing high balance acct vs keeping it open

it can be paid off in 24-36 months.  I can also use balance transfers with existing CL available.  I don't use the cards anymore so it doesnt impact monthly cash flow.

 

So it seems your expert advice is to keep the card open and this the 25k credit util 

Regular Contributor
johnson_long
Posts: 163
Registered: ‎08-27-2008
0

Re: closing high balance acct vs keeping it open

So it seems your expert advice is to keep the card open and this the 25k credit util 

 

We just had a discussion on closing a card with a balance and it turns out closing the card wont hurt your UTI,  As long the issuer continues to report your CL, it and the outstanding balance are still figured in your FICO score and once the balance is paid, It is no longer factored at that point, 

 

If I were you I'd verify that info to your satisfaction and close the card and pay it off, 14% interest is pretty steep, Also moving that kind of balance around would trash your scores for a couple months as transferring the balances would likey show you with 80% UTI until they report your card PIF,

 

 

 

 

 

New Member
dallasdad
Posts: 4
Registered: ‎12-15-2008
0

Re: closing high balance acct vs keeping it open

thank you

 

can you tell me where that discussion is?

   

Senior Contributor
creditwherecreditisdue
Posts: 4,923
Registered: ‎04-19-2009
0

Re: closing high balance acct vs keeping it open


dallasdad wrote:

thank you

 

can you tell me where that discussion is?


What discussion?

 

Best thing for you to do is calculate what the diffrence will be in the total interest you will pay if you keep the card open vs closing the card. You will then know the exact cost of not opt'ing out and can determine whether you want to keep the card active or not. If you do close the card the CL will continue to be included in your UTIL calculation until the balance becomes zero.


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