USBANK Rate Jack, Oldest/Largest Tradeline, Should I Opt Out?, Advice appreciated! Options

[Riled]

There is also an argument to be made for opting out to preserve the credit limit. Closed, with a balance, the $13,000 credit limit still counts towards utilization as you pay it down, until you pay it off entirely. If you opt out, keep the lower rate, eventually get down to $500 or so and then make $15 minimum payments from there until you get the rest of your cards under control you can still keep the $13,000 credit limit in the utilization mix for years to come. If the card is almost maxed, you have high debt elsewhere, you accept the high rate and then pay it down, who's to say you won't get balance chased and wind up worse off utilization wise than if you had closed it? Balance chasing is all the rage these days for people with high utilization and high revolving debt. I just closed my Discover at $7,700 limit and $7,650 balance when they lowered my limit to $50 above my balance. If I had been smart enough to close it last month, it would still be a $9,000 limit and $7,650 balance. Which is better for utilization? I closed it now at $7,700 limit to prevent it from becoming a $5,700 limit and $5,650 balance when I pay down another $2,000 this month. I think closing accounts that are prime candidates for balance chasing just for the purpose of preserving the credit limit is a prudent move. ESPECIALLY if it avoids a rate jack.

At your debt level you need to worry about APR, APR, and APR. Not having more credit available to you. Unless you can find more credit at a lower APR, due to your overriding need to focus on APR. Your score wont go up if you accept the higher rate and wont go down if you opt out. There is no tangible benefit WHATSOEVER that I can see for accepting that RJ. If anyone can point out a benefit that I am missing I will be happy to listen but I can't see it. If you can easily PIF, accepting a rate jack may be no big deal and help you keep up your FICO score but accepting RJ on cards with large balances HURTS your FICO score because it will take longer to pay down and therefore prolong your high utilization while at the same time leaving you vulnerable to balance chasing.

[Googie]

[frank22]

As hdporter suggested I am heavily thinking on getting a consolidation loan from my wife's credit union. They are offering a loan right now ($2500 minimum to $35,000 maximum) that is meant for debt consolidation. The APR will vary on credit worthiness starting at 7.99% and going up. Unfortunately I am no longer part of the 700 club LOL, easy come easy go, myfico notifed me it fell to 691, sucks because I'm probably not going to get a decent APR when I apply. So that being said here are some of my APRs and balances for all you credit gurus:

USBANK - 12500 (currently at 9.99%, will be 14.99% on Dec. 1)
Chase - 7500 (currently at 20.99% from 17.99% due to rate hike)
Juniper - 5000 (currently at 20.99% from 14.99% fixed due to rate hike)
Discover - 5000 (currently at 9.99%, not raising rates until next yet)
Wal*Mart - 4500 (currently at 20.99% from 17.99% due to rate hike)

Jeez, when you type it all up and lay it out in front for all to see this makes me feel like crap because all of those high balances/utilization (all are mostly maxed). A lot of my undergraduate and graduate school career,a state to state move, and a wedding was put on these cards and to be honest coming out of college before the economy tanked I figured I would have a job that I could make really hefty payments with these cards. Didn't really come to pass, so I'm paying them down slowly but surely and haven't missed a payment always paying above the minimum.

So in order to pay more of my principal do you think I should get a consolidation loan from this credit union we use? Is there a downside if I consolidate and then box the cards making small purchases every so often to keep the tradelines open? Should I try to pay them all off in full, get them down to 50% or 30%? Any suggestions would be welcome.....and yes I have learned my lesson from credit cards and don't ever plan on getting into this situation again.

You seem to be still trying to balancing out your score with your costs. I think you should just focus on costs, the lower the rate, the quicker you will be able to pay off everything. Let the score do what it may. And again, when you pay this off it looks to me like your score is going to be in the high 700's, tweaking it a little is going to be a waste of time.

It all really depends on the rate the CU gives you about what you should do. If you do this of course your scores will go way up because an installment loan is not part of your utilization. Your score won't be any better by keeping 30% on your CC and will cost more. If the rate is lower at the CU I would pay everything off and be done with carrying a balance ever on your cards. The peace of mind is priceless.

At that point what you do with your cards matters so little, but of course you shouldn't cancel any. What I do is I only use two, everything else I believe is closed, but my report shows some open accounts for some reason. I can tell that you are going to want more for what I believe is an imagined belief that it looks good or whatever, it won't hurt I guess. I really think I benefit though by just using two exclusively, the high use means the accounts I have a more are profitable to the banks, so I have not suffered a CLD, but have even had CLI's. I think under a manual review if I want credit they are going to like to see only a few active accounts. Banks are looking for profit and I would think they not want to see people with many accounts with 0 balances. They might think why are do you want theirs? Are you going to use it? I am in the strict minority here, and I don't think it matters from your perspective what you do after you have paid off the cards, I just like to rant about this, cause I think you guys is crazy worrying about it. But if you are going to PIF, trying to keep 5 cards active is just going to diminish your value to everyone and be a pain in the neck.

This post has been edited by frank22: Nov 7 2009, 01:40 PM

[GEORGE]

"IF" you don't OPT-OUT...they can do another APR JACKAGE in the future

"IF" you don't OPT-OUT/CLOSE THE ACCOUNT...they can do additional balance chasing

[Umbrella_Inc]

Thank you all for your guidance. From what I gather the majority of you think the smartest and most economical move would be to close the account that way I can lock in the 9.99% (barring any future opt outs) and not risk a balance chase or further rate jack. It's a shame to close the account but I suppose I can always reopen later. In any case one final question. What is the best way to opt out? Phone Call, written letter, or e-mail? I have only done this once and it was several years ago. I imagine I will need some proof I opted out within the specified time frame and will be allowed to pay down at the 9.99% rate. Also do I have to mention to put on the credit report "Closed by consumer request" or not? Am I to expect hostility or them threatening to call the account in full if I opt out? As always advice is appreciated.

Thanks

[frank22]

Thank you all for your guidance. From what I gather the majority of you think the smartest and most economical move would be to close the account that way I can lock in the 9.99% (barring any future opt outs) and not risk a balance chase or further rate jack. It's a shame to close the account but I suppose I can always reopen later. In any case one final question. What is the best way to opt out? Phone Call, written letter, or e-mail? I have only done this once and it was several years ago. I imagine I will need some proof I opted out within the specified time frame and will be allowed to pay down at the 9.99% rate. Also do I have to mention to put on the credit report "Closed by consumer request" or not? Am I to expect hostility or them threatening to call the account in full if I opt out? As always advice is appreciated.

Thanks

I called Citi when I opted out and had no problems, they normally send a confirmation letter before it actually takes affect, so you can have peace of mind. You can ask if you decide to call about confirmation. On the closed by consumer, that notation does nothing to the score and I wouldn't worry about it. There is going to be so many closed accounts these days, I don't think it matters. Ask them, and see what they day just for information. I think we may have different personalities though, so...............They do not call accounts in full, they WILL honor the terms of the opt out letter, and will not be hostile, just another phone call for them.

[Riled]

Thank you all for your guidance. From what I gather the majority of you think the smartest and most economical move would be to close the account that way I can lock in the 9.99% (barring any future opt outs) and not risk a balance chase or further rate jack. It's a shame to close the account but I suppose I can always reopen later. In any case one final question. What is the best way to opt out? Phone Call, written letter, or e-mail? I have only done this once and it was several years ago. I imagine I will need some proof I opted out within the specified time frame and will be allowed to pay down at the 9.99% rate. Also do I have to mention to put on the credit report "Closed by consumer request" or not? Am I to expect hostility or them threatening to call the account in full if I opt out? As always advice is appreciated.

Thanks

I would call and ask them to eliminate the RJ or you will close the account. Ask for the supervisor and such. More than likely they would say no but if you were going to opt out anyway it cant hurt to call and offer them one last chance to keep your business. Probably not a bad idea to send a followup letter just to confirm in writing anything said on the phone but more than likely the phone call alone would be fine. They will automatically reflect "Closed by consumer request" on credit reports. Trust me, I have a bunch of "Closed by consumer request" accounts on my report. These days they are happy as hell when you close an account for some strange reason. I think the CS reps are just happy anytime an infuriated and enraged customer isn't yelling at them for what ever the last bad thing their employer has done. They would never call the account in full.

[domain311]

There is also an argument to be made for opting out to preserve the credit limit. Closed, with a balance, the $13,000 credit limit still counts towards utilization as you pay it down, until you pay it off entirely. If you opt out, keep the lower rate, eventually get down to $500 or so and then make $15 minimum payments from there until you get the rest of your cards under control you can still keep the $13,000 credit limit in the utilization mix for years to come. If the card is almost maxed, you have high debt elsewhere, you accept the high rate and then pay it down, who's to say you won't get balance chased and wind up worse off utilization wise than if you had closed it? Balance chasing is all the rage these days for people with high utilization and high revolving debt. I just closed my Discover at $7,700 limit and $7,650 balance when they lowered my limit to $50 above my balance. If I had been smart enough to close it last month, it would still be a $9,000 limit and $7,650 balance. Which is better for utilization? I closed it now at $7,700 limit to prevent it from becoming a $5,700 limit and $5,650 balance when I pay down another $2,000 this month. I think closing accounts that are prime candidates for balance chasing just for the purpose of preserving the credit limit is a prudent move. ESPECIALLY if it avoids a rate jack.

At your debt level you need to worry about APR, APR, and APR. Not having more credit available to you. Unless you can find more credit at a lower APR, due to your overriding need to focus on APR. Your score wont go up if you accept the higher rate and wont go down if you opt out. There is no tangible benefit WHATSOEVER that I can see for accepting that RJ. If anyone can point out a benefit that I am missing I will be happy to listen but I can't see it. If you can easily PIF, accepting a rate jack may be no big deal and help you keep up your FICO score but accepting RJ on cards with large balances HURTS your FICO score because it will take longer to pay down and therefore prolong your high utilization while at the same time leaving you vulnerable to balance chasing.

Thanks...been looking for some info on opting out with a balance and the affect on utilization. This clears things up for me...