Not sure whether to opt out or stay in...

[Anonymous]

I have two credit cards with Citibank. They are the cards that I have had the longest. Recently, I received letters for both stating that they are significantly raising my APR, but will reimburse some of the interest should I spend $500 or more each month on each card. I no longer use credit cards, but do carry a balance on both that I'm trying to pay down. An additional complication is that my fiance and I are currently looking to buy a house and a new car. Which will hurt my credit score less, opting out or staying in with a huge APR?

[Uborrow-Upay]

IMO, neither of those things will hurt your credit score, as you are still carrying a balance.  The total credit lines will be counted in your overall utilization, even if the cards are closed, as long as you have a balance.  The history will also stay on your reports for some time, usually up to 10 years after closing them.

But keeping them open could hurt your wallet, especially if you have a high balance on those cards.  Your payments will increase, and the principle amount will go down at a much slower rate.  And the increased payment amount could impact your mortgage qualifications.

(BTW, Welcome to the forum, Katiefair1978!)

[marty56]

Unless you can't afford to make the payments, I would not not close the cards down.  Think of the APR increase as more motivation to pay them off.  Once they are PIF, you are in control.  That will make you more attractive to other lenders who might offer you better rates.  If an emergency happens, having those open lines of credit may be a lifesaver.

Another option would be to find a good BT rate at a local CU.  You get reduced interest and still have the accounts to use as well.

[laz98]

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@marty56 wrote:

Unless you can't afford to make the payments, I would not not close the cards down.  Think of the APR increase as more motivation to pay them off.  Once they are PIF, you are in control.  That will make you more attractive to other lenders who might offer you better rates.  If an emergency happens, having those open lines of credit may be a lifesaver.

Another option would be to find a good BT rate at a local CU.  You get reduced interest and still have the accounts to use as well.

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that's a really good way to look at things.  that's what we are trying to do with my gf's cards.

[paul]

I got those offers too, Citibank raised my APR from 15 to 27 should i need to keep the card. But the difference between Citi and the others is they do not close the accounts immediately, but let the current expiry date on the card be the date the credit lines will get closed. If you should buy the house before that you should be fine even if you opt out.