THANK YOU for a very clear summarization !
As I said, there is a lot of misinformation out there. I guess the general advice not to close a card assumes no balance on it, but when you have a card with a high balance and the company raises the rate to an unacceptable level, at least the opt out may not be a bad move all other things considered.
I would rather close a card than take a huge APR hit, imagine how much interest would need to be paid on $16,000 @ 29 %.
Some people have successfully managed to stop the APR increase by a call to the CC company. I would imagine a lot depends on your personal credit situation, if they will work with you or not.
BOA closed my 2 accounts with them. They still report the CL and current balance, so it has not really been that detrimental to me. I don't know how ugly this looks to other lenders, but I don't really care. I don't really need anymore credit ATM, and probably won't be applying for anything until after these cards are paid off.
JUST TO LET EVERYONE KNOW I WAS ABLE TO GET THE 15,000 BALANCE ON MY CARD TO A 10.99 INTREST RATE WITH CITI CARD.
OK, to clarify, I found out what happens if the lender cuts the reported CL on a closed card to $0 (I was wrong up above):
If a closed card with a balance reports a $0 CL, it will be ignored entirely for util calculations. It will look ugly as heck to other lenders, I assume, so I'd hate to have that on my reports, but it won't hurt your FICO score.
What would still be bad is if they started chasing the balance, lowering the reported CL every time you made a payment, so that you were perennially maxed out.
So, to summarize:
Closed card, has balance, has original CL: will factor into your util as if it were still open. You'll have one less open tradeline, which might hurt you elsewhere, though.
Closed card, has balance, CL now reported as $0: will NOT factor into your util, since it has a $0 CL. It will look ugly, though.
Closed card, has balance, CL is dropped to a little above the current balance and keeps dropping as you pay (chasing the balance): ouch. It will report as a maxed-out card until you have it paid off.
Sorry for any confusion I might have created with the $0 CL thing. This is definitely one of the odder twists of FICO scoring.
HTSU, that's the best I've seen it explained on any credit board or blog. Marcus over at the (now inactive) Credit Matters Blog interviewed someone from Fair Isaac and discussed utilization about a year ago, and he stated the same thing...that a closed CC with a balance does not affect utilization. But he never went into the specific scenarios and didn't break it down like you did. Very, very well done. This will make a great reference for future questions on this subject.