Should I opt out and close or x-fer balances

Anonymous · ‎03-18-2009

What to do:

I have a card (Card 1) that is currently going to increase from prime + .99 to prime + 4.99

that has a pretty significant balance. I want to avoid this increase by either opting

out and continuing to pay off the balance at prime + .99 (currently 4.24%) or

transfer the balance to 2 other cards and keep all three accounts open, but

this will cause the other 2 to be pretty maxed out initially. Here is the scenario

below:

3 cards

Card 1 (the one that is :

Credit Line – 39,300

Balance – 25000 (4.24 prime +.99 but going to 9.24 prime + 4.99)

Account age 10 years

Card 2:

Credit Line – 25,000

Balance – 7250 (fixed at 1.99 for life)

Current offers 0% for 12 months (3% fee)

Account age: 6 years

Card 3:

Credit Line – 9000

Balance – 0 (pay off every month)

Current offers: 2.99 for life (3 % fee)

Account age 2 years

These are the options I see, but I’m not sure which one will affect my FICO score the most. Currently at 761.

Barring a financial catastrophe, I don’t plan on adding to these balances and plan on

paying about 950 per month toward all 3 cards combined.

So should I:

1) Transfer the balances from card 1 to 2 and 3 and keep card 1 open. Card 3 offers a fixed rate of 2.99 for the balance but Card 2 would need to be addressed again in 12 months depending on how much I have managed to pay down.

2) Opt out of increase on Card 1 and close the account and continue to pay at Prime +.99

3) Other options I have not considered?

itsjustmeibe · ‎03-18-2009

It seems to me that your balances have triggered adverse action from the bank. Who are the cards with? If you pay off your 1st card, they may very well decrease your limit or close your account anyway, leaving you in a worse situation FICO wise. If it were me, I would transfer about $5,000 to the 2.99% fixed for life card. Then I would aggressively pay on the $20,000 balance. I would not opt out, and certainly not close the account with your longest history.

Out of your $950 payments, $100 to card (2), $100 to card (3), and $750 to card (1) with the 9.24% interest. At that rate, the 1st card will be paid in 2yrs, 6 months. (The total interest paid would be $2,472 which isn't that bad.

I would not under any circumstance transfer to card (2). Once the 0% rate ends, you would have to be able to pay off the entire card including the balance transfer amount receiving the 1.9% to avoid paying whatever the regular rate is on the card.

btw, transferring only a portion of the balance right now gives you a chance to see if card 1 is going to do anything negatively to you, like balance chase, or decrease limit.

my opinion only!

Anonymous · ‎03-18-2009

itsjustmeibe: Thanks for the suggestion however I see one issue with this. I still want to have a card that I can pay in full each month and this solution leaves me with 3 cards with balances.

The notice in the mail from Card 1 (Chase) was to "increase profitability". I don't think it had anything

to do with the balance. The balance was actually quite higher. I have paid off about 10grand over the past year.

The unknown is what card 1 (Chase) will do if I tranfer everything away from them.

As for not transferring to card 2 (Citi):

If I transfer to card 2 (Citi) with the 0% for 12 months, all my payments to this card would be going toward the 0% promotional balance. 11 months out I would transfer the remainder the 0% promotinal balance that I have not paid off leaving the remaining 1.99 fixed for life on this card. I realize this is a slight leap of faith that a balance transfer offer will be competitive 11 months from today, but historically these offers come in the mail quite often.

Here is some info you asked

Card 1 is Chase

Card 2 is Citi

Card 3 is Barclays (Basically a Airline Branded reward card )

Anonymous · ‎03-19-2009

Hi NSPIF!

Are any of these cards Visa Signature or World MasterCards?

EDIT: I forgot to ask--what Citi card do you have?

Message Edited by psychic on 03-19-2009 05:44 AM

smallfry · ‎03-19-2009

OP even at 0% interest it looks like it will take 3 years to pay off the current balances on those cards. You don't think this alone freaks out lenders?

Anonymous · ‎03-19-2009

Psychic:

Card 3 is a Visa Signature

The Cit (Card 2)i is a diamond preferred reward and Chase (Card 1) doesn't have any distiguishing brand name as far as i can tell.

What is the relevance might I ask?

itsjustmeibe · ‎03-19-2009

My other suggestion then is to apply for a more secure card like a credit union card, just not one that is afraid of balances like Penfed. I applied for a credit card through PSECU which is in PA. I applied for and received a personal loan for $8,000 and a credit card for $12,000. My scores were around 720 and my revolving credit ratio was 31%. You can either use the credit union card to balance transfer (3.9% until 12-2010) or as a regular PIF card.

Unfortunately if you don't find a way to qualify, you should look at other credit unions.

BTW, I have a Chase card and using $20k out of $44k limit, and have had it for 19yrs. I have not seen any CLD. The balance has been $7k-$29k in the last 2 years.

Anonymous · ‎03-19-2009

Correct me if I'm wrong but doesn't FICO ignore cards with CL of more than 30K for Utilization? Still no reason to pay a higher interest rate

Anonymous · ‎03-19-2009

@Anonymous wrote:
Psychic:

Card 3 is a Visa Signature

The Cit (Card 2)i is a diamond preferred reward and Chase (Card 1) doesn't have any distiguishing brand name as far as i can tell.

What is the relevance might I ask?

No pre-set spending limit cards such as Visa Signatures and World MasterCards often times, but not always, do not report credit limits to the CRAs. Instead, the Largest Past Balance is reported. I just wanted to get an idea of what credit limits were being reported to the CRAs.

Because of your Chase card's $39,300 credit limit, the $25,000 balance is more than likely exempt from revolving credit calculations by EX and TU. EQ will include that balance and credit line when determining utilization.

I was basically trying to determine your revolving debt and credit lines as they appear on your credit reports.