USBANK Rate Jack, Oldest/Largest Tradeline, Should I Opt Out?

[Umbrella_Inc]

Hello everyone, I need advice. I have a US BANK Gold Card that has a $13,000 credit line that has all but $500 used ( I know I know, to much utilization but I have been paying down other accounts because I always thought I would keep US BANK). It is my oldest and largest account by far and they have always been good to me. Today I received a letter that states:

 

CHANGE IN TERMS TO YOUR CARD MEMBER AGREEMENT - ADVERSE ACTION

 

"Variable Rate for Purchases and Balance Transfers: We are increasing your variable APR for Purchases and Balances Transfers to the Index plus 11.74% (Daily Periodic Rate of .03216%) subject to a minimum APR of 14.99 (DPR of .04107%). "

 

My current APR is 9.99% and I pay $100 a month interest on the account. This would increase the interest payments at least $50 a month for the foreseeable future until I can start making sizable payments on the account. The way I see it is I have two choices:

 

#1 Opt out, have them close the account and pay under current terms and loose my largest and oldest tradeline and HOPE this doesn't have a domino effect with other accounts rate jacking me.

 

#2 Bite the bullet and pay the extra $50 a month minimum on the new interest rate, I am just scared that it might go even higher than that since they say 14.99% MINIMUM. That would spell doom if that happened and I didn't opt out.

 

Bad situation, also by the way I just joined the 700 club with the FICO score for reference. Any advice is appreciated. Thanks in advance.

[cmw45]

Hmmm...I think the responses are going to be mixed. There are a lot of people on here who operate on the basis that they don't pay interest or pay AFs to keep a card and they might close an account before accepting a rate jackage...however, those same folks tend to PIF and not carry balances.

 

Personally, I think I need a little more information from you. Are you done paying off the other accounts? Not to use a DR word but are you snowballing? Can you start making more sizeable payments? How much older is this tradeline than your second oldest and how much larger is it?

 

Unless this tradeline was significantly older (i.e. 5+ years) and larger (at least +1K) than my next card I would opt out. There are just too many variables. What if you lose your job? What if there was an emergency? IDK. Also, if the card is already maxed out, it seems like you've already taken the ding to your FICO and are still floating in the 700 club. Congrats on that by the way.

[frank22]

I think it is worth the $50 to cancel. It won't change your score much, the details are in these links. Basically you don't have to worry about the age of the account for scores for 10 years, and by then you will have more. The only other thing is utilization, but it only changes after you pay down the card totally off, and by then yours will be less than it is now, so your score should go up.

 

 

 

 

http://ficoforums.myfico.com/fico/board/me...hread.id=117125

 

http://online.wsj.com/article/SB1000142405...personalfinance

[chanaz]

Just one mans opinion. But I wouldn't carry a $13K balance on a 15% card. What about a BT? If that wasn't a possibility, I would take the opt out. But everyones situation is different. I don't know how long it would take you to pay it off, your financial situation, or any of the other personal things that make decisions unique.

[chanaz]

I think it is worth the $50 to cancel. It won't change your score much, the details are in these links. Basically you don't have to worry about the age of the account for scores for 10 years, and by then you will have more. The only other thing is utilization, but it only changes after you pay down the card totally off, and by then yours will be less than it is now, so your score should go up.

 

 

 

 

http://ficoforums.myfico.com/fico/board/me...hread.id=117125

 

http://online.wsj.com/article/SB1000142405...personalfinance

 

 

???????HUH?????

[vintagespeed]

...It is my oldest and largest account by far and they have always been good to me....

 

i'd be inclined to keep it even at a higher rate. (hey it's not 29.99%) it seems like they're being relatively "nice" in trying to collect what's owed them?

 

now, if they jack you again or you aren't able to pay this monthly, then you have little choice but to close.

[cocomad]

I would opt out as you will still have the TL and pay it down. You can always re-apply later once you have gotten your utilization down.

[frank22]

...It is my oldest and largest account by far and they have always been good to me....

 

i'd be inclined to keep it even at a higher rate. (hey it's not 29.99%) it seems like they're being relatively "nice" in trying to collect what's owed them?

 

now, if they jack you again or you aren't able to pay this monthly, then you have little choice but to close.

 

It would cost $600 extra a year, more with if you include compounding that you are not paying to your cards. This would cost thousands in the years it may take to pay this off? I don't know the pay off time. So you have the cost itself, plus the extra time it will take to pay off the card.

Edited November 4, 2009 by frank22

[vintagespeed]

It would cost $600 extra a year, more with if you include compounding that you are not paying to your cards. This would cost thousands in the years it may take to pay this off? I don't know the pay off time. So you have the cost itself, plus the extra time it will take to pay off the card.

 

sure, and what would it have cost if paid at the original APR? was the card used without the inclination of ever paying interest on the money borrowed?

 

i just dont get that logic. IF you can afford to pay the higher rate, keep your oldest and highest credit line.

[Umbrella_Inc]

ADDITIONAL INFORMATION:

 

I knew the responses would be varied but I want as many peoples opinions as possible before I make the final decision. Here is some additional information for you:

 

1. I am not done paying off my other accounts, more like maintaining them or paying twice the minimum but saving my heavy payments for one account per month. Currently this month I am working on getting my Paypal Buyer Credit down to under 30% utilization since they are now charging 21% APR, after I get it down to that percentage I am going to move on to Discover. I'm not snoballing per se but my method of paying down is very similar but since most of my cards are similar APRs I'm just trying to get the smaller cards to a plateau of 75% utilization, the several months later 50%, etc with paying above the minimum on all cards and a heavy payment on one account per month.

 

2. I can make sizable payments of up to $1000 a month but that will take away from me paying above the minimum on other cards with higher APR's....even with this rate jack it will still be my lowest APR card if it maintains 14.99% which I admit is fair, as another post said at least it's not 29.99% but 13,000 is a sizable balance and that extra 50 would be great to use on other cards....but having an available balance on US BANK to us in hard times would be great to instead of closing the account.

 

3. The US BANK is about 2 years older than any of my other tradeslines and is $3000 higher that my other highest trade line of $10000 on a Best Buy Card and is $4500 higher than my other highest revolving credit trade line of $8500 on Chase.

 

4. I recently got married and have two fairly secure incomes coming in paying on these accounts, that is how I can make large payments per month on one account. Emergencies make me nervous as I have a fairly old car and it could go any day but I can't do anything about that....could establish a $500 rainy day fund in cash but that is sort of why I maintain at least $500 on all my tradelines in the event of a emergency.

 

5. Yeah this card was under 10k several months ago before I got married, then we used it in part to pay for the wedding and US BANK so generously upped my credit limit 1500 at that point....have been getting regular credit limit increases from them. One time when I noticed a discrepency they returned a huge amount of interest I had paid to my account and even lowered my APR so I could make more progress on the principal...thats why I hate giving them up.

[frank22]

It would cost $600 extra a year, more with if you include compounding that you are not paying to your cards. This would cost thousands in the years it may take to pay this off? I don't know the pay off time. So you have the cost itself, plus the extra time it will take to pay off the card.

 

sure, and what would it have cost if paid at the original APR? was the card used without the inclination of ever paying interest on the money borrowed?

 

i just dont get that logic. IF you can afford to pay the higher rate, keep your oldest and highest credit line.

 

 

He thought it was worth $100 a month but not $150. Seems logical.

 

I don't see the logic in keeping a high rate card and paying so much extra just for an older account and a high limit. Both will come back and grow in other accounts as time goes on. Paying a lower rate allows one to pay more towards the balance and makes it much easier to pay off the card quicker. This will open up many more opportunities.

[frank22]

3. The US BANK is about 2 years older than any of my other tradeslines and is $3000 higher that my other highest trade line of $10000 on a Best Buy Card and is $4500 higher than my other highest revolving credit trade line of $8500 on Chase

.

 

As far as age, and even to some extent limits, the difference is not that big and your other cards will age and grow as time goes on. You saw how the age will stay on your reports for 10 years?

 

The worst thing from my point of view is closing an account you like. All I can say is they probably like you too and they will be happy to do business with you in the future, but by paying off the cards and having a good score it won't really matter. You will be able to pick the banks you want. Age and utilization won't matter(and you utilization will be minuscule)

 

I think with so many people closing accounts on strong good customers, there is going to come a point when the banks try to get them back. It might take a while, but I think you are going to be with them a while still.

 

Many are planning to defect to CU's once we straighten ourselves out. Come with us.

[Umbrella_Inc]

Perhaps I should also add this...

 

I have these accounts currently:

 

Store Credit:

 

1. Wal*Mart

2. Paypal

3. Best Buy

 

Revolving Credit:

 

1. USBANK

2. Chase

3. Juniper

4. Discover

 

Once I get them all paid off I plan on canceling Wal*Mart, Juniper, and Chase......I planned on keeping USBANK (currently up in the air) and Discover for Revolving and Paypal and Bestbuy for Store Credit. For reference my wife also has USBANK and is her favorite card.

[frank22]

I wouldn't cancel any of the other cards without looking at the effect they will have on age, utilization, and product mix. I think your file is young enough and small enough that it might matter. You can keep them open and they won't cost you anything. I know that doesn't reconcile with what I said before, one of the differences is cost, the other is time, you are planning on paying off the other cards before the US Bank. If you don't need them you can let them expire, if you do you can use them every once in a while.

[Umbrella_Inc]

So if I do decide to opt out of this new APR and US BANK closes this account, could this have a HUGE impact on my credit score potentially making my other creditors nervous and making them raise my APR's on their respective cards more than they already have? That is my biggest fear.

[vintagespeed]

He thought it was worth $100 a month but not $150. Seems logical.

 

I don't see the logic in keeping a high rate card and paying so much extra just for an older account and a high limit. Both will come back and grow in other accounts as time goes on. Paying a lower rate allows one to pay more towards the balance and makes it much easier to pay off the card quicker. This will open up many more opportunities.

 

well, i think it's established that the OP is walking a fine line with his CCs. the current trend of closing an account simply because they adjusted your APR is the part that doesn't make sense to me. it's not like they're trying to insult you...

 

once we're through the new legislation and the lenders ease up (and the OP pays down some of this balance), will the OP perhaps not be able to get his APR reduced? if the account is closed, the answer will be no.

[Umbrella_Inc]

"once we're through the new legislation and the lenders ease up (and the OP pays down some of this balance), will the OP perhaps not be able to get his APR reduced? if the account is closed, the answer will be no. "

 

Good point vintagespeed, once the legislation goes through and 6 months or so from now if I do keep the account I may be able to get my APR reduced. I don't consider the 14.99% APR an insult, I just don't know if I should pay $150 a month for interest when I currently am paying $100.....but the 14.99% is minimum, it could go higher.....

 

Your right that I am walking a fine line of cutting it close with my CC"s but I am paying hefty payments per month and always more than the minimum. My family has developed a budget and we have gotten our spending habits under control, only a matter of time before we get the CC's under control. I just don't want to make the wrong decision with my oldest and largest tradeline.....

[frank22]

He thought it was worth $100 a month but not $150. Seems logical.

 

I don't see the logic in keeping a high rate card and paying so much extra just for an older account and a high limit. Both will come back and grow in other accounts as time goes on. Paying a lower rate allows one to pay more towards the balance and makes it much easier to pay off the card quicker. This will open up many more opportunities.

 

well, i think it's established that the OP is walking a fine line with his CCs. the current trend of closing an account simply because they adjusted your APR is the part that doesn't make sense to me. it's not like they're trying to insult you...

 

once we're through the new legislation and the lenders ease up (and the OP pays down some of this balance), will the OP perhaps not be able to get his APR reduced? if the account is closed, the answer will be no.

 

I don't think it is about insulting, it is more about cost. I am not sure if you would say it is a fine line, his scores are high. He has high utilization and that won't change until he pays it down. From the links I posted his score won't change and I don't see any adverse action from other cards unless they would happen anyway.

 

While opting out may close the account now, it doesn't mean that there is not an opportunity later to get a lower rate with the same bank and reopen. I would focus on the known. Especially when the future in my mind looks at least just as strong for him as he would by keeping the account.

 

One thing you could do OP is wait and see if the legislation passes on moving up reform, and then you will have more peace of mind about what other banks may do. I don't think they would do anything based on what you do, but if it gives you peace of mind, wait if you can. US Bank might also change in reaction. I have no idea, but the legislation can't hurt your position.

 

OK, I know you want other opinions, so I won't post again unless I am addressed, I made my points more than once. I wouldn't worry too much, you have good scores and your high utilization will be going down. I think they also see your big payments and that makes you look strong.

Edited November 5, 2009 by frank22

[cmw45]

Seems like what's really going on is that you know what you want to do, which is keep the account and what you are really looking for is for someone to say that you're logic makes sense. Which is okay. If you think the APR hike is fine, that you will be able to pay down the account and you like USBANK then by all means, keep the account.

[chanaz]

Jesus, Age??? What age?? the cards been open for two years. It's not like it's still not gonna age for the next 10 years even if you opt out. The difference is a 50% per month interest rate hike in actual $$. It just doesn't make economic sense. People seem to get to used to paying to keep a TL. Tortoise and the Hare folks. The account is dead to you. You have no utilization to charge. You have other accounts outstanding. It doesn't take a CPA to see that there is really no benefit to not opting out.

[chanaz]

And to the naysayers... If yo think FICO or any sane lender considers 2 years significant age. Seek therapy.

Edited November 5, 2009 by chanaz

[Umbrella_Inc]

As an FYI the account is 7 years old, my oldest tradeline.....Another poster asked me how much older it was that than my second oldest tradeline and the response was 2 years old, my second oldest is 5 years old. I only have about 9 years of credit history starting with some car loan, going to store credit cards, then finally revolving trade lines.

[hdporter]

I think first order of business should be to apply for 1 or 2 accounts with 0% promo bt terms to which to transfer this balance (ideally, keeping utilization on each to within 50% of CL). If successful, the rate hike isn't of much consequence and you can keep the USBank account for the benefit of added account age and a strong CL (and can re-negotiate the rate once you've brought your overall utilization back into line).

 

If you can't find new lenders who are willing to approve an account, closure is a backup measure.

[chanaz]

As an FYI the account is 7 years old, my oldest tradeline.....Another poster asked me how much older it was that than my second oldest tradeline and the response was 2 years old, my second oldest is 5 years old. I only have about 9 years of credit history starting with some car loan, going to store credit cards, then finally revolving trade lines.

My bad. I misread.

[Umbrella_Inc]

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.