Thursday, Nov. 5
Posted 11 a.m. EST
The tripling of APRs for some credit card holders must be ramping up, as we have been receiving daily e-mails from readers who have received these notices. They're given the opt-out choice -- pay off the balance at the current single-digit rate and the card will be closed -- and most have told us they're taking that. But all are concerned with the effect this will have on their credit scores.
Opting out of a rate hike could hurt your credit since it raises your credit utilization ratio. But if you had very low utilization to begin with or lowered your other balances, the effect might be minimal. You won't lose your payment history on that card for up to 10 years if the account was in good standing when it was closed.
I've been wondering for a while if lenders -- who use credit scores to judge creditworthiness -- are viewing these forced account closures differently than they would have prior to these widespread rate hikes. Do they realize the consumer hasn't done anything wrong, that it's the issuers who are forcing them to close accounts? Is the credit score a proper measure of credit risk these days?
The House moved yesterday to speed up the effective date of the Credit CARD Act so that issuers will have to comply with the new rules now, instead of February 2010. However, it seems unlikely the Senate will approve this change. Fed Chairman Ben Bernanke has already said he does not support the early implementation.
So keep opening every piece of mail that comes your way and read it to see what terms and rates might be changing on your cards.
Compare credit union cards and bank cards on Bankrate.com.
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