Ask Dr. Don
By Don Taylor, Ph.D., CFA • Bankrate.com
Today, Dr. Don discusses closing
a credit card account and getting credit after bankruptcy.
Closing a credit card account
Dr. Don,
Does closing a credit card prevent the bank from increasing the
interest rate if the bank was notified before the new rate went
into effect? There still is a balance on the card.
Seeing Red Sonia
Dear Sonia,
If you're still carrying a balance on the credit card then
you haven't closed the account. If the company's credit terms allow
raising the rate with customer notification, or if action on your
part triggered a rate increase, there's not much to be done about
the increased rate. Call customer service to get an explanation,
but it's unlikely that the company raised your rate in violation
of the credit terms you agreed to when you took out the card. Your
best out is to transfer the balance and close the account. If that
isn't possible, make a concerted effort to pay down the balance
as quickly as you can.
If you are able to transfer balances, this site
has a page that presents the cards
with the lowest introductory rates, and another that looks at
the
lowest rates after the introductory period has expired.
Credit in bankruptcy
Dr. Don,
I filed for bankruptcy in 1998. Now I would like to have just one
credit card to help with my car repairs and maintenance. I don't
want to have any more inquiries than I need to on my already bad
credit report. Can you name a few companies that would be willing
to give me a chance for sure? I would like to get the best rate,
annual fee, etc. that I can. I would also like to know if a secured
card is the only way for me to obtain credit.
Tami Transmission
Dear Tami,
Even coming off of a bankruptcy you can get credit, and it doesn't
have to be a secured card. The downside is that it's going to be
expensive. Libby Wells wrote an article
for Bankrate.com showing that while high-risk borrowers face sky-high
rates, these credit cards can be used to improve your credit rating.
Aspire Visa specializes in granting credit to higher risk customers.
The Aspire credit card carries an interest rate from 17.25 percent
to 27.25 percent depending on your credit history. The card is not
available to residents of Iowa, Maine and Wisconsin.
As you point out, a secured card is your other
option. With a secured card the customer puts down a deposit to
back up the credit line. This site has a comprehensive listing
of companies issuing secured cards so you can find the card
that best meets your needs. For "10 questions to ask before getting
a secured credit card" see Pat
Curry's article.
I like the secured card approach because it
reduces the probability that you'll get in over your head. The problem
is raising the deposit. If you don't think you'll be able to raise
the deposit, then go with the unsecured line of credit but limit
its use to financial emergencies.
Bankrate.com writers base
their answers on our editorial content and advice of financial professionals.
We make no claims or representations about the accuracy, timeliness or completeness
of such content, advice or the answers provided to you. Our content, advice
and answers are intended only to assist you with your financial decisions. However,
by its nature such information is broad in scope. Your financial situation is
unique, and our content, advice and answers may not be appropriate for your
situation. Accordingly, we recommend that you get different opinions and seek
the advice of your accountant and other financial advisers before making any
final decisions or implementing any financial or investment strategy.
-- Posted: March 31, 2000
|
