Question about Credit Cards?
September 16th, 2009 | by admin |Im 21 and have been told I have pretty good credit (I know it was somewhere around 750 back in April, and I haven’t made any late payments or anything). I have had a few store credit cards that I’ve canceled probably about 3 years ago (Victoria’s Secret, Gap, and Sears). I currently have 2 credit cards now that I’ve been maintaining since the beginning of me having credit. One of them I KNOW wont drop the interest rate, I’ve asked (it’s 19% for purchases above $250…it’s a student starter card. I have a $6000 limit). The other, I’m not sure about yet, that has a 13% interest rate and I have yet to ask if they can drop it, that has a $5000 limit.
I also have a Best Buy card with $2000 charged if that matters with $2500 limit that I recently opened for a laptop. I also have a student loan in deferment while I’m in school, that’s ~ $8000.
Recently because of emergencies I’ve had to charge ~ $2000 on each credit card. I was thinking of applying for a new credit card with a lower rate and transferring the total $4000 and just having that one card. Will the switching of cards hurt my credit score? Should I just have ONE card or stay with 2 like I have been? I haven’t been using these cards, just paying them off a few hundred $$’s at a time. Should I wait to pay these off, then apply for new cards and cancel these?
Will canceling my 2 cards hurt my credit if I transfer balances?
If I can’t get a limit to cover both, I’d at least like to get rid of my student starter card that has a 19% APR.
I haven’t been constantly spending randomly to get these as high as they are. There were a bunch of expensive things that came up all at once. I’ll be having some money coming to me soon as well because my work pays for school and the semester is almost over, and also my bonus for work which will at least cut them both in half.
4 Responses to “Question about Credit Cards?”
By Jarrett E on Sep 18, 2009 | Reply
Keep your current accounts. The good history, length of history, and the credit limits help you. It will hurt you slightly to apply for a new card. Switching accounts will not hurt you. If you can find one of those 0% iintroductory offers go for it. Just make sure that the fee is not going to be more than the interest you are currently paying. I consolidated earlier this year and it really helped me financially and it helped my credit rating. I think the fee was 3% and is 0% for 18 months. Depending on your income you may or may not be able to get a card with a high enough limit to transfer all balances to it.
Add: As I said above, if you cancel the cards that you have an established history with it will only hurt you. If you add one more card the only damage will be from the application. It may look bad to you to have that high interest rate card, but it does not look bad to creditors. If you do not want to use it you can always cut it up and keep the account open. I would recommend not using the other accounts at all. Keep all use on one account. It is easier to track and pay. Get a rewards card if you can. Once you get it paid off use it for everything and pay it off every month. Make them pay you for using their money.
By George P on Sep 19, 2009 | Reply
If you can get a card that has a lower interest rate, transfer the balance on the other cards to that one. It won’t hurt your credit by having one card. Actually, it will help because you pad off two cards, or whatever you decide.
Just be careful about the deferred loans, eventually you will have to pay them off, and then you will be hurting financially.
By Sgt Big Red on Sep 19, 2009 | Reply
Sorry to say but NO switching to a new account to pay off those other cards will lower your score.
Reason #1 applying for new credit
Reason #2 you no doubt have gone far and above the 30% ratio of total debt to total available credit ratio. This causes ones score to drop, the more you owe, the more it drops. That Best-Buy card alone places you well above the threshold. This is what FICO considers higher risk of default.
You should just continue to pay down the cards you currently have. Those interest rates are not that bad compared to some who are at 29.99%. Also with the credit crunch many credit card companies are lowering the credit limit on many accounts. Watch your monthly statements and keep an eye on your credit limit. Many have gone to use their card only to be denied because their limit was lowered and they did not notice it. The FCRA believes that just posting a short paragraph on ones credit card statement informing them of a reduction in credit limit is sufficient.
Hope this answer is of help to you
LEGAL DISCLAIMER: The answer provided here is intended for informational purposes only. It is not intended nor presumed to be legal counsel or professional legal advice
By Floyito on Sep 20, 2009 | Reply
Jarrett and SGT are both correct! You owe too much to get another card and if you try and get turned down, that will hurt your credit. If you could get a balance transfer, it would depend upon how long it would take you to pay it off and how much lower the rate is as to whether it should be done. Never cancel your old cards with high available credit lines unless you need credit somewhere else like to purchase a new home but that is a case by case example. Cut these cards up and do not use them and they will help bolster your score because you will not be using that % of your available credit. That is a positive. You need to pay down debt and be ready to start paying your deferred loan. In other words, stop charging and pay off debt and then find a card with a better rate. To bad we (society via schools) do not teach you this before you get yourself into such a spot. As a side note, the best way to use a credit card is to find one that pays you for using it and pay it off monthly. You will have a year end balance sheet of the $ you have spent and you can make a little extra $ at the same time. As soon as you start carrying a balance, you loose.