Credit card companies raising interest rates

[Anonymous]

HI.

Just a quick question.  My partner and I have each received notice from different cc companies saying , basically, they are raising interest rates because oif the economy and to recoup losses.  They say  we can either accept the rate increase or close out our account. We've never been late in over 7 years and teh rate increase is about 6 - 10%.  My score is 728 and his is 752. I owe 600 on a 4000 limit and he owes 1200 on a 10000 limit.  What should we do?  I was thinking of just paying off the balances and keeping the cards open, but if we close them based on the economy, will we still get hit with lower FICO scores?  It really doesn't seem fair, punishing good members becasue we don't carry large balances.  Do the powers that be who compute FICO scores take this into account or are numbers just numbers??  Any ideas? Thanks in advance for your time. 

[llecs]

If you do nothing, your FICO score will still remain the same, but you'd get hit with higher interest. If you were to pay these down, while still keeping it open, you'll avoid the interest and see a boost in your FICO score.

Many companies are increasing rates. It is happening with amny CCCs. The best course of action in this economy is to hve zero CC debt.

[Anonymous]

thanks, The only thing I'm worried about with paying off the card in full is we had 2 or 3 accounts, BEst buy, Ashley Furniture and Empire (GE credit) that were 0 balances and when we tried to use them they said they were closed becasue we hadn't used in a year, but we could reapply to reopen them.  We would then take a double hit becasue they closed the account and then another credit inq. to reopen. There has to be somethign we can do  

[llecs]

Keep the CCs open. You could always use it to buy a cup of coffee or whatever then PIF by the next statement. You can use it without paying any interest. Now other accounts like Ashley would eventually close. There's only so much furniture you can buy.

[Anonymous]

I can do that, but have experienced int he past having a 0 balance on that capital one card.  charging 67 dolalrs which caused a drop in my fico score, even though I PIF the next month.  and the score never went back up after PIF.  Is there any info or sheet available which shows exactly how scores are calulated.  It would seem they should be held accountable if they are controlling our financial lives.

[llecs]

You have to time your CC usage around the reporting dates of the CCs. For example, HSBC and Orchard cards report the balance that you had on the last day of the month. If I want my HSBC card to report $0, I need to have $0 reporting on that day, even though the due date is mid-month. If I relied on the due date and PIF, a balance still would report if I used the card between then and month's end. It is a timing issue. Now most cards aren't as wacky as HSBC, but my BofA was due last week. There's a one week lapse in between the due date and the reporting date. If I PIF by the due date and use the CC that following week, the usage will report.

The question isn't how the scores are calculated per CCs, but rather: when does the CC report and how do I work around that to my advantage?

[Anonymous]

With 728 and 752 FICO scores, you really have to ask yourself how much you pay versus how much you could pay.

How much you pay, in interest, now with $600 on a $4,000 limit and $1,200 on a $10,000 limit, is real dollars and cents. Also, your util is 15% and 12% respectively, and you'd do better with 0% util, or ideally 1% to 9% util.

How much you could pay, in the future, on a theorhetical purchase. 0% util beats 15% for FICO scoring, and by charging a cup of coffee and then PIF each month, you'll keep the card from lapsing.

Finally, if a card is really giving you such fits, consider opening and regularly using a different card. Not saying close the old card, but just PIF the old card to keep it active.

[Anonymous]

Thanks for your insight