Situations Where Opting Out of Credit Cards May Not Be the Best Idea
Interest hike is probably is one of the most obvious bane that all cardholders face periodically.
Of course, cardholders are given the choice to opt out in the event that they cannot take part in the new interest rate.
Opting out means you are can decline the new rate and pay off your credit balance at the lower interest rate.
However, once you decline the new rate, your credit company can close your credit cards.
Depending on the credit card company you belong to, some close accounts immediately, others will wait until all card balance are paid off and there are those that just wait until the card expires.
While paying credit balance at lower interest rate is best, closing an account can actually wreak havoc on your credit score.
Interest rate hike is understandably frustrating especially for people who maintained great payment history and excellent credit scores.
However, the fact remains that closing an account can hurt a person's credit score.
Lower score can cause other interest rates to increase as well.
In this article, we will discuss several situations where opting out may not be the best option for you.
If You Pay Your balance In Full Each Month While it can certainly be bothersome to carry a card with high interest rate, people who consistently pay their balance in full each month are exempted from this problem.
Not carrying a balance each month means you are not affected in any way with the high interest rates.
Therefore, there is no reason for you to opt out.
Remember, closing your account when you are not even affected by the rates can only hurt your credit score.
You Do Not Have Other Cards If you do not have any other card except for the one you want closed, you will be left with no contributor to your credit score at all.
Closing your only card can not only cut short your credit age, your credit score will stall because you will have nothing left to report on your credit.
Note that payment history takes up 35% of your credit history and the best way to get excellent credit score is to make timely payments.
Your Back-Up Card Is Already Maxed Out Know that the higher your utilization, the lower your score will be.
The level of debt accounts for 30% of your credit score.
If you close an account while carrying large amount of debt on your back up cards, your credit utilization, will increase.
In turn, this will cause your credit score to plummet.
The best way to remedy this is to pay off your outstanding from the other card before you opt out.
This is the only way to protect your score.
Of course, cardholders are given the choice to opt out in the event that they cannot take part in the new interest rate.
Opting out means you are can decline the new rate and pay off your credit balance at the lower interest rate.
However, once you decline the new rate, your credit company can close your credit cards.
Depending on the credit card company you belong to, some close accounts immediately, others will wait until all card balance are paid off and there are those that just wait until the card expires.
While paying credit balance at lower interest rate is best, closing an account can actually wreak havoc on your credit score.
Interest rate hike is understandably frustrating especially for people who maintained great payment history and excellent credit scores.
However, the fact remains that closing an account can hurt a person's credit score.
Lower score can cause other interest rates to increase as well.
In this article, we will discuss several situations where opting out may not be the best option for you.
If You Pay Your balance In Full Each Month While it can certainly be bothersome to carry a card with high interest rate, people who consistently pay their balance in full each month are exempted from this problem.
Not carrying a balance each month means you are not affected in any way with the high interest rates.
Therefore, there is no reason for you to opt out.
Remember, closing your account when you are not even affected by the rates can only hurt your credit score.
You Do Not Have Other Cards If you do not have any other card except for the one you want closed, you will be left with no contributor to your credit score at all.
Closing your only card can not only cut short your credit age, your credit score will stall because you will have nothing left to report on your credit.
Note that payment history takes up 35% of your credit history and the best way to get excellent credit score is to make timely payments.
Your Back-Up Card Is Already Maxed Out Know that the higher your utilization, the lower your score will be.
The level of debt accounts for 30% of your credit score.
If you close an account while carrying large amount of debt on your back up cards, your credit utilization, will increase.
In turn, this will cause your credit score to plummet.
The best way to remedy this is to pay off your outstanding from the other card before you opt out.
This is the only way to protect your score.