Credit Tips: High Interest Credit Card Review

Posted On: December 1, 2005

Author: Cathy
Posted: Wed Jun 30, 2004 8:09 pm
Post subject: High Interest Credit Card Review
8/5/2002 2:21 pm CDT

Hi all! I was wondering if anyone else has had MBNA recently jack up their rate inspite of no degrogatories with them or anyone else. I have a sprint mastercard with them, and was informed via their last statment they will be raising the rate from 13.99 to 19.99%. Their excuse, I mean reason has to do with my equifax report. Granted I do have ballances but i’m currently in dispute for a lot of it. The ironic thing is, at&t mastercard recently upgraded me to the cashback card, hense a LOWER rate then I had previously. MBNA has given me two options 1) Accept the raise in rates or 2) “reject” the new terms, effectively closing my account and paying it off at the current rate. Not sure what I should do but they said my “reply” should be received by Aug 20.

Author: Verne
Posted: Wed Jun 30, 2004 8:10 pm
Post subject: High Interest Credit Card Review

8/5/2002 4:53 pm CDT

Hi Cathy,

If you can move the balance with MBNA to a card with a lower interest rate that would be best. Move it, call them, and they may offer you an even lower rate if you threaten to close the account.

If you can’t move the balance, but could move it within a couple months, keep the account open but don’t use it.

If you have to keep a balance with MBNA for the long haul, you should consider rejecting their new terms and locking the interest rate at the lower rate. The problem with the change in terms is that it will apply to your pre-existing balance and not just to new purchases.

The possible drawback with rejecting new terms and closing an account with a balance is that it skews your overall debt balance to available credit ratio. This could, in turn, trigger the same kind of new terms and higher interest rates from other card companies.

I’ve been there. A few years ago I doubled my debt in ten months due to some extraordinary legal expenses, and in spite of a perfect payment history, high FICO score, and no adverse information on the credit reports, I was hit with a change in terms by 3 out of 5 credit cards.

After 15 years of responsible credit card use, this happened to me when I was in a temporary bind. When I had used about 80% of my available credit I triggered a change in terms.

They don’t care about your history with them, your FICO score or the lack of adverse information on your credit report. It’s all about the debt balance to available credit ratio. If you look “maxed out” or trapped they go in for the kill.

I chose to “opt out”, reject the new terms in writing, and close all three accounts. In one case, they later pleaded with me not to close the account.

Although I didn’t want or need more credit, new offers from credit card companies stopped coming after I closed the accounts. Which is fine, in that, this is a game I’m getting out of.

I now have a healthy mistrust for the credit card industry and plan to have just one card I can trust for travel, mail orders, and emergencies.